News Column

CAESARS ACQUISITION CO - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations

August 14, 2014

The following discussion and analysis of the financial position and operating results of Caesars Acquisition Company (the "Company," "CAC," "we," "our" and "us") and Caesars Growth Partners, LLC ("CGP LLC") for the three and six months ended June 30, 2014 and the assets and entities that were acquired by or contributed to CGP LLC in connection with the transactions described in Item 1 - Business of our Annual Report on Form 10-K for the year ended December 31, 2013 as well as the assets and entities that were acquired by or contributed to indirect subsidiaries of CGP LLC in connection with the transactions described in Note 1 - Description of Business and Summary of Significant Accounting Policies of the combined condensed financial statements of Predecessor Growth Partners in Item 1 of this Quarterly Report on Form 10-Q for the three and six months ended June 30, 2013 should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations presented in the Company's Annual Report on Form 10-K for the year ended December 31, 2013. The assets and entities that were acquired by or contributed to CGP LLC in connection with these transactions (collectively referred to as "Predecessor Growth Partners" for periods presented prior to October 21, 2013) are considered to be the predecessor to CAC. Basis of Presentation and Discussion CAC was incorporated under the laws of the State of Delaware on February 25, 2013 and was formed to directly own 100% of the voting membership units in CGP LLC, a joint venture between CAC and subsidiaries of Caesars Entertainment Corporation ("CEC" or "Caesars Entertainment"). On October 21, 2013, the joint venture was formed between subsidiaries of Caesars Entertainment and CAC. Following consummation of those transactions, CAC serves as CGP LLC's managing member and sole holder of all of its outstanding voting units, and subsidiaries of Caesars Entertainment hold all of CGP LLC's outstanding non-voting units. However, based upon the structure of CGP LLC and the related economics, CGP LLC has been determined to be a variable interest entity of which Caesars Entertainment is the primary beneficiary. Therefore, CAC does not consolidate CGP LLC into its financial statements. Instead, CAC accounts for its investment in CGP LLC using a balance sheet approach to the equity method of accounting, referred to as hypothetical liquidation at book value ("HLBV") accounting. CAC's only material asset is its membership interest in CGP LLC. Predecessor Growth Partners is considered to be the predecessor to CAC. The combined condensed historical financial statements of Predecessor Growth Partners have been prepared on a stand-alone basis and, as transactions between CGP LLC and Caesars Entertainment and its subsidiaries are considered to be reorganizations of entities under common control, have been derived from the historical accounting records and consolidated financial statements of Caesars Entertainment. The combined condensed financial statements reflect the results of operations and cash flows of the businesses and assets contributed to or acquired by CGP LLC and its subsidiaries in the transactions described previously as if those businesses were combined into a reporting entity for the period presented. As our investment in CGP LLC is considered to be significant, CGP LLC's annual financial statements are required to be included as an exhibit to each CAC Annual Report on Form 10-K in accordance with Securities and Exchange Commission ("SEC") Rule 3-09 of Regulation S-X. Given the significance of this investment to the financial position and results of operations of CAC, we have elected to include selected financial information of CGP LLC in this Quarterly Report on Form 10ญQ. As the basis of presentation for all items other than income taxes, non-controlling interests and senior notes returned to Caesars Entertainment related to the subscription right restoration is the same between Predecessor Growth Partners and CGP LLC, and because we believe that the comparative information for CAC's investment in CGP LLC is material to investors in CAC, we have presented information for both CGP LLC and Predecessor Growth Partners in this management's discussion and analysis of financial condition and results of operations. CAESARS ACQUISITION COMPANY Operating Results Income from Equity Method Investment For the three and six months ended June 30, 2014, CAC recognized $21.3 million and $30.6 million of income from the equity method investment in CGP LLC, which equals the amount of income that CAC was entitled to under its minimum guaranteed return. The increase in minimum guaranteed return for the three months ended June 30, 2014 is primarily a result of capital deployed in connection with the May 2014 acquisitions of JCC Holding Company II, LLC and its subsidiaries (collectively known as "Harrah's New Orleans"), 3535 LV Corporation ("The Quad"), Parball Corporation and its subsidiaries (collectively known as "Bally's Las Vegas") and Corner Investment Company, LLC and its subsidiaries, (collectively known as "Cromwell") by indirect subsidiaries of CGP LLC. Other Expenses In addition to its income from equity method investment, CAC incurred direct expenses of $8.2 million and $14.1 million, respectively, during the three and six months ended June 30, 2014 primarily related to professional services fees, predominantly in preparation for the Acquired Properties Transaction and Harrah's Transaction as described below within this 35 -------------------------------------------------------------------------------- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, as well as general liability insurance, licenses and fees. Provision for income taxes The provision for income taxes for the three and six months ended June 30, 2014 was $4.7 million and $5.9 million, respectively. The provision for income taxes for the periods presented differ from the expected federal tax rate of 35% applied to CAC's pre-tax income primarily due to state taxes. Liquidity and Capital Resources Capital Spending CAC has not incurred, nor is it expected to incur, material capital expenditures in the normal course of business or to pursue acquisition opportunities other than through CGP LLC. See Liquidity and Capital Resources for CGP LLC and Predecessor Growth Partners below. Capital Resources CAC's sole source of funds is distributions from CGP LLC. To the extent that CAC requires additional funds, CAC may borrow funds or issue additional equity. However, as CAC does not have operations of its own, it is expected that CAC will not have a significant need for additional liquidity. CAC's expenses incurred in the normal course of business, most significantly income tax obligations, are expected to be paid by CGP LLC on behalf of CAC. These transactions are accounted for as distributions from CGP LLC to CAC. Liquidity Pursuant to the certificate of incorporation of CAC and the CGP Operating Agreement, after October 21, 2016 Caesars Entertainment and/or its subsidiaries will have the right, which it may assign to any of its affiliates or to any transferee of all non-voting units of CGP LLC held by subsidiaries of Caesars Entertainment, to acquire all or a portion of the voting units of CGP LLC (or, at the election of CAC, shares of CAC's Class A common stock) not otherwise owned by Caesars Entertainment and/or its subsidiaries at such time. Following October 21, 2018 and until April 21, 2022, our Board of Directors (the "Board") will have the right to cause a liquidation of CGP LLC, including the sale or winding up of CGP LLC, or other monetization of all of its assets and the distribution of the proceeds remaining after satisfaction of all liabilities of CGP LLC to the holders of CGP LLC's units according to the terms of the CGP Operating Agreement. On April 21, 2022 (unless otherwise agreed by Caesars Entertainment and CAC), if our Board has not previously exercised its liquidation right, the CGP Operating Agreement provides that CGP LLC shall, and our Board shall cause CGP LLC to, effect a liquidation. Off- Balance Sheet Arrangements CAC did not have any off-balance sheet arrangements at June 30, 2014 or December 31, 2013. Critical Accounting Policies and Estimates Stock-based Compensation CAC grants stock-based compensation awards in CAC Class A common stock, par value $0.001 per share (the "Common Stock") to certain officers, employees, directors, individual consultants and advisers of the Company and its subsidiaries under the Caesars Acquisition Company 2014 Performance Incentive Plan ("the PIP Plan") which is intended to promote the success of the Company and to increase stockholder value by providing an additional means, through the grant of awards, to attract, motivate, retain and reward employees and other eligible persons. The PIP Plan provides for the plan to be administered by the Human Resources Committee of the Board of Directors of Caesars Acquisition Company (the "Committee"). CAC has granted restricted stock units ("RSUs") to certain of its employees. The RSUs are classified as equity-classified instruments and are therefore measured at their fair value at their date of grant. A description of the components of the PIP Plan is provided in Note 8 - Stock-Based Compensation. Restricted Stock Units On May 8, 2014, certain eligible individuals were granted RSUs in accordance with the PIP Plan, which are subject to five month, three and a half, or four year vesting periods. RSUs subject to a five month period vest on October 9, 2014. RSUs subject to a three and one half year vesting period vest 25% on October 21 in each year 2014, 2015, 2016 and 2017. RSUs subject to a four year vesting period vest 25% on April 9 in each year 2015, 2016, 2017 and 2018. The awards are considered equity-based awards, and will be recognized as a component of Additional paid-in capital in the Condensed Balance Sheets. 36 --------------------------------------------------------------------------------



The following is a summary of CAC's RSU activity for the period January 1, 2014 through June 30, 2014:

Shares Fair Value Outstanding at January 1, 2014 - $ - Granted (RSUs) 628,802 $ 13.50 Canceled (RSUs) - $ - Outstanding at June 30, 2014 628,802 $ 13.50 As of June 30, 2014, there was approximately $7.8 million of total unrecognized compensation cost related to RSUs granted under the PIP Plan, which is expected to be recognized over a weighted average remaining period of 3.3 years using the straight-line method. For the period May 8, 2014 through June 30, 2014, total compensation expense that was recorded in earnings for RSUs granted under the PIP Plan was $0.6 million. This expense is included in Operating expenses in the Condensed Statements of Comprehensive Income. Recent Accounting Pronouncements Caesars Acquisition Company has assessed recently issued guidance and has determined there are no recently issued accounting pronouncements that will have a material impact on their results of operations, cash flows or statement of position. CAESARS GROWTH PARTNERS, LLC AND PREDECESSOR GROWTH PARTNERS Overview On May 5, 2014, CGP LLC contributed the equity interests of PHWLV, LLC ("PHWLV"), which holds Planet Hollywood Resort and Casino ("Planet Hollywood") and a 50% interest in the management fee revenues of PHW Manager, LLC to Caesars Growth Properties Holdings, LLC an indirect, wholly-owned subsidiary of CGP LLC. Harrah's New Orleans, The Quad, Bally's Las Vegas and Cromwell were direct wholly-owned subsidiaries of Caesars Entertainment Operating Company, Inc. ("CEOC"), which is a direct wholly-owned subsidiary of CEC. On May 5, 2014, Caesars Growth Properties Holdings, LLC (the "Borrower" or "CGPH") through one or more subsidiaries acquired (i) Cromwell, The Quad, and Bally's Las Vegas, (ii) 50% of the ongoing management fees and any termination fees payable under the property management agreements entered between a property manager and the owners of each of these properties, and (iii) certain intellectual property that is specific to each of these properties. On May 20, 2014, CGPH through one or more subsidiaries acquired (i) Harrah's New Orleans, (ii) 50% of the ongoing management fees and any termination fees payable under the Louisiana Property Management Agreement, and (iii) certain intellectual property that is specific to Harrah's New Orleans ("Second Closing"). The acquisitions of Harrah's New Orleans, The Quad, Bally's Las Vegas and Cromwell and the contribution of Planet Hollywood to CGPH are herein referred to as the "Acquired Properties." Presentation The financial information for the three and six months ending June 30, 2014 reflects the financial statements of CGP LLC on a consolidated basis, giving regard to all impacts of the October 21, 2013 formation transactions. The financial information for the three and six months ended June 30, 2013 does not reflect the impacts of those transactions, including the recording of non-controlling interest or the determination of taxes in accordance with the LLC structure of CGP LLC. Instead, this financial information, referred to herein as Predecessor Growth Partners, presents the combination of those assets and entities that were purchased by or contributed to CGP LLC, as the financial information was derived from the historical accounting records and consolidated financial statements of Caesars Entertainment. As a result of the transactions in May 2014 described above, one or more indirect subsidiaries of CGP LLC acquired Bally's Las Vegas, The Cromwell, The Quad Resort & Casino, and Harrah's New Orleans from CEOC. Because these acquisitions were accounted for as transactions among entities under common control, the financial information herein includes the financial results for these properties as if those businesses were combined into the CGP LLC reporting entity for all periods presented for both years. Therefore, the financial information contained herein provides comparable results for all periods presented. 37 -------------------------------------------------------------------------------- Segment Description For financial reporting purposes, CGP LLC has two reportable segments: (1) Interactive Entertainment and (2) Casino Properties and Developments. CGP LLC'sInteractive Entertainment segment consists of Caesars Interactive Entertainment, Inc. ("CIE" or "Caesars Interactive"), which is comprised of three distinct, but complementary businesses that reinforce, cross-promote and build upon each other: social and mobile games, the World Series of Poker ("WSOP") and regulated online real money gaming. CGP LLC's Casino Properties and Developments segment consists of Planet Hollywood, Caesars Baltimore Investment Company, LLC, the entity that indirectly holds interests in the joint venture owner (the "Maryland Joint Venture") of the Horseshoe Baltimore Casino ("Horseshoe Baltimore"), a licensed casino development project expected to open in the third quarter of 2014, Harrah's New Orleans, The Quad, Bally's Las Vegas and Cromwell. The Horseshoe Baltimore is under construction and is expected to open in the third quarter of 2014. Therefore, the results of operations for Horseshoe Baltimore are primarily comprised of pre-opening and financing-related activities. Operating Results of CGP LLC and Predecessor Growth Partners Predecessor Growth Predecessor Growth CGP LLC Partners CGP LLC Partners Three Months Ended June 30, Six Months Ended June 30, (In millions) 2014 2013 Change 2014 2013 Change Net revenues $ 438.7 $ 332.9 $ 105.8$ 854.9 $ 669.5 $ 185.4 Income/(loss) from operations 28.9 51.6 (22.7 ) (7.9 ) 54.2 (62.1 ) Adjusted EBITDA(1) 104.9 88.1 16.8 206.0 175.3 30.7



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(1) See Reconciliations of Net (Loss)/Income to Adjusted Segment EBITDA for a reconciliation of net (loss)/income to Adjusted Segment Earnings before Interest Income/Expense, Income Taxes, Depreciation and Amortization ("EBITDA"). Three months ended June 30, 2014 compared to June 30, 2013 Net revenues for the second quarter 2014 increased by $105.8 million or 31.8% compared with 2013, driven by strong performance in both operating segments, the opening of Cromwell in May 2014 and by CIE's first quarter 2014 acquisition of Pacific Interactive UK Limited ("Pacific Interactive"), a company based in the United Kingdom. Income from operations for the second quarter 2014 was $28.9 million as compared to income from operations of $51.6 million for the same period in 2013. The decrease in income from operations is primarily attributable to an increase in the fair value of contingent consideration from previous acquisitions, increased expenses at The Quad primarily due to the O'Sheas lease expense, and increased pre-opening expenses associated with the construction of the Horseshoe Baltimore. The adverse impacts on income from operations were partially offset by the income impact of increased revenues. Adjusted EBITDA increased $16.8 million or 19.1% in the second quarter 2014 as compared with the second quarter 2013, primarily driven by the income impact of increased revenues. Six months ended June 30, 2014 compared to June 30, 2013 Revenues for the six months ended June 30, 2014 increased by $185.4 million or 27.7% compared with six months ended June 30, 2013, driven by organic growth in both operating segments, and by CIE's first quarter 2014 acquisition of Pacific Interactive as well as the opening of Cromwell's gaming floor on April 21, 2014 and its 188 hotel rooms on May 21, 2014. Loss from operations for the six months ended June 30, 2014 was $7.9 million as compared to Income from operations of $54.2 million for the same period in 2013. This decrease in Income from operations is primarily attributable to an increase in the fair value of contingently issuable non-voting membership units, the impairment of goodwill and intangible assets related to the disposition of one of CIE's development studios, increased pre-opening expenses associated with the Horseshoe Baltimore, as well as Cromwell and increased operating expenses at The Quad primarily due to the O'Sheas lease expense. These adverse impacts on income from operations were partially offset by the income impact of increased revenues. The increase in fair value of contingently issuable non-voting membership units is not a component of Adjusted EBITDA; therefore, Adjusted EBITDA increased $30.7 million or 17.5% in the first half of 2014 as compared with the first half of 2013. 38 -------------------------------------------------------------------------------- Reportable Segments Operating Results Interactive Entertainment Predecessor Growth Predecessor Growth CGP LLC Partners CGP LLC Partners Three Months Ended June 30, Six Months Ended June 30, (In millions) 2014 2013 Change 2014 2013 Change Net revenues $ 144.6 $ 74.0 $ 70.6$ 268.8$ 142.1$ 126.7 Income/(loss) from operations (20.5 ) 10.8 (31.3 ) (16.0 ) (27.1 ) 11.1 Adjusted Segment EBITDA(1) 44.0 20.1 23.9 74.3 41.3 33.0



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(1) See Reconciliations of Net (Loss)/Income to Adjusted Segment EBITDA for a reconciliation of net (loss)/income to Adjusted Segment EBITDA

Three months ended June 30, 2014 compared to June 30, 2013

Interactive Entertainment's net revenues increased by $70.6 million for second quarter 2014 compared to the same period in 2013, as a result of the combination of the first quarter 2014 acquisition of Pacific Interactive and overall strong performance in the social and mobile games business. Loss from operations for the three months ended June 30, 2014 was $20.5 million, compared with an Income from operations of $10.8 million for the three months ended June 30, 2013. Loss from operations for the three months ended June 30, 2014 includes an expense of $31.9 million associated with the increase in fair value of contingent consideration and an impairment charge of $15.5 million associated with the impairment of intangible assets related to the disposition of one of CIE's development studios. Absent these charges, Income from operations would have increased, primarily attributable to the income impact of increased revenues. Adjusted Segment EBITDA increased in the second quarter 2014 as compared with the second quarter of 2013, driven by the income impact of increased revenues, partially offset by increased marketing expenses. Six months ended June 30, 2014 compared to June 30, 2013Interactive Entertainment's revenues increased by $126.7 million for the six months ended June 30, 2014 compared to the same period in 2013, as a result of organic growth and the Pacific Interactive acquisition further discussed below. Loss from operations for the six months ended June 30, 2014 and 2013 was $16.0 million and $27.1 million, respectively. The decrease in Loss from operations is primarily attributable to the income impact of increased revenues, partially offset by an increase in stock compensation expense, the impairment of intangible assets related to the disposition of one of CIE's development studios and marketing expenses associated with New Jersey online gaming. Adjusted Segment EBITDA increased in the first half of 2014 as compared with the first half of 2013, driven by the income impact of increased revenues, partially offset by the increase in marketing expenses. Key Performance Indicators ("KPIs") For the three and six months ended June 30, 2014, the CIE business generated approximately 92.9% and 93.0%, respectively, of its revenues from its social and mobile games business. CIE measures the performance of its social and mobile games business by using financial metrics, including revenue, and operating metrics, including Daily Active Users, Monthly Active Users, Monthly Unique Users, Average Revenue per User and Monthly Unique Payers. These operating metrics help CIE to understand and measure the engagement levels of its players, the size of its audience and its reach. In December 2012, CIE consummated the acquisition of substantially all of the assets of Buffalo Studios LLC ("Buffalo Studios"), a social and mobile games developer based in Santa Monica, California. Aggregate cash consideration paid at the time of the acquisition was $45.2 million and contingent consideration of $58.5 million was paid in April 2014. In May 2013, CIE acquired the WSOP social and mobile game assets and intellectual property from Electronic Arts, Inc. In August 2013, CIE acquired an online game development business based in the Ukraine and in October 2013, CIE acquired the workforce, assets and intellectual property of an online gaming development group. Assets acquired and liabilities assumed in these transactions were not material to the financial statements of Predecessor Growth Partners or CGP LLC. In February 2014, CIE announced the acquisition of Pacific Interactive, and the assets of various affiliates of Pacific Interactive, creator of House of Fun, which is among the leading social and mobile casino-themed games on Facebook, iOS, Android and the Amazon marketplace. House of Fun, which was launched in 2011, is free to play and boasts industry-leading KPIs. 39 -------------------------------------------------------------------------------- The table below shows the results of CIE's social and mobile games business, using the financial and operating metrics referred to above, for the periods indicated. Revenues are presented in millions of dollars; user statistics are presented in thousands of users, and average revenues per user is presented in dollars. For the Three Months Ended June 30, March 31, December 31, September 30, June 30, March 31, 2014 2014(1) 2013(2) 2013 2013 2013 Net revenues $ 134.4$ 115.7 $ 90.7 $ 74.7 $ 70.7$ 66.6 Average Daily Active Users (3) 5,681 5,704 4,639 4,803 4,952 5,259 Average Monthly Active Users (3) 18,575 19,597 15,914 16,354 16,962 17,695 Average Monthly Unique Users (3) 16,794 17,370 13,908 14,615 14,941 16,052 Average Monthly Unique Payers (3) 539 511 322 293 279 292 Average Revenue per User $ 0.26$ 0.24 $ 0.21 $ 0.17 $ 0.16$ 0.14



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(1) Operating metrics include numbers from Pacific Interactive only after its February 2014 acquisition by CIE. (2) Presents the aggregate of Predecessor Growth Partners for the period from October 1 through October 21, 2013, and CGP LLC for the period from October 22 through December 31, 2013. (3) CIE systems cannot always distinguish unique individuals playing games in multiple sessions in the same day or in a 30-day period ending with the measurement date, playing the same game across multiple platforms, or playing different titles offered by CIE. Thus, users who play multiple titles or multiple platforms may be counted as more than one user within the respective operating metrics. Consistent with the social and mobile business model, only a small portion of CIE's social and mobile games players pay for virtual goods. During the three months ended June 30, 2014, CIE's social and mobile games business had approximately 539 thousand average Monthly Unique Payers, or 3.2% of the total number of average Monthly Unique Users on the social and mobile platforms during this period, purchase virtual goods. Because the opportunity for social interactions and player generated promotion through playing platforms increases as the overall number of players increases, CIE believes that maintaining and growing its total number of players, including the number of players who may not purchase virtual goods, is important to the success of its business. The sale of virtual goods, however, constitutes the primary source of revenue for CIE's social and mobile games business. The degree to which game-players choose to pay for virtual goods in the games is driven by CIE's ability to create content that enhances the game-play experience. CIE's revenue and overall financial performance are affected by the number of players and the effectiveness of its monetization of players through the sale of virtual goods. CIE's user metrics are impacted by several factors that cause them to fluctuate on a quarterly basis. Future growth in audience and engagement will depend on CIE's ability to retain current players, attract new players, launch new games and expand into new markets and distribution platforms. The table below shows the revenue generated from CIE's social and mobile games business by geographic region for the periods presented and assumes that deferred revenues are spread proportionately across all geographies. For the Three Months Ended June 30, March 31, December 31, September 30, June 30, March 31, (In millions) 2014 2014 2013(1) 2013 2013 2013 North America $ 92.8$ 80.2 $ 60.9 $ 50.1 $ 47.8$ 43.2 South America 1.0 0.7 0.6 0.6 0.6 0.4 Europe 11.8 10.0 8.9 8.1 7.8 8.7 Asia/Pacific 28.2 24.3 20.0 15.7 14.3 14.0 Africa and Rest of the World 0.6 0.5 0.3 0.2 0.2 0.3 $ 134.4$ 115.7 $ 90.7 $ 74.7 $ 70.7$ 66.6



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(1) Presents the aggregate of Predecessor Growth Partners for the period from

October 1 through October 21, 2013, and CGP LLC for the period from October

22 through December 31, 2013. 40

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Casino Properties and Developments

Predecessor Growth Predecessor Growth CGP LLC Partners CGP LLC Partners Three Months Ended June 30, Six Months Ended June 30, (In millions) 2014 2013 Change 2014 2013 Change Net revenues $ 294.1 $ 258.9 $ 35.2$ 586.1 $ 527.4 $ 58.7 Income from operations 31.7 40.8 (9.1 ) 67.5 81.3 (13.8 ) Adjusted Segment EBITDA(1) 66.6 68.0 (1.4 ) 138.2 134.0 4.2



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(1) See Reconciliations of Net (Loss)/Income to Adjusted Segment EBITDA for a reconciliation of net (loss)/income to Adjusted Segment EBITDA Three months ended June 30, 2014 compared to June 30, 2013

Casino Properties and Developments net revenues for the second quarter of 2014 increased by $35.2 million when compared with 2013. Gaming revenues increased to $175.7 million in the second quarter 2014 from $161.1 million in the second quarter 2013 due to the opening of Cromwell in May 2014 and stronger organic results in both slot and table win. Food and beverage revenues for the three months ended June 30, 2014 and 2013 were $57.1 million and $49.6 million, respectively. This increase in revenues was driven largely by new offerings that opened in 2014 such as Giada at Cromwell, O'Sheas at The Quad and Pinup Pizza at Planet Hollywood. Other revenues increased 65.7% in second quarter 2014 when compared to 2013 primarily due to the opening of Drai's at Cromwell and enhanced entertainment options at the new Axis Theater at Planet Hollywood. Income from operations decreased to $31.7 million in second quarter 2014, compared with $40.8 million in 2013 as the income impact of increased revenues was more than offset by the combination of increased expenses at The Quad, primarily due to the O'Sheas lease expense, and increased pre-opening expenses associated with the Horseshoe Baltimore. Six months ended June 30, 2014 compared to June 30, 2013 Revenues for the six months ended June 30, 2014 and 2013 were $586.1 million and $527.4 million, respectively. This increase in revenues was driven by largely the ramp up of the Gordon Ramsay BurGR restaurant that opened in 2012, Axis Bar inside the new Axis theater, the new Pinup Pizza takeout restaurant, and Shiver frozen daiquiri bar in Planet Hollywood which all opened after the first quarter of 2013, as well as Giada and Drai's at Cromwell, and O'Sheas at The Quad which all opened in 2014. Income from operations decreased in the six months ended June 30, 2014 when compared with 2013 as the income impact of increased revenues was more than offset by the combination of increased pre-opening expenses associated with the Horseshoe Baltimore, as well as Cromwell and increased operating expenses at The Quad, primarily due to the O'Sheas lease expense. Certain pre-opening expenses are not a component of Adjusted Segment EBITDA, therefore Adjusted Segment EBITDA increased for 2014 when compared with 2013. CGP LLC often provides incentives for customers to stay and play at their properties. CGP LLC provides such incentives to customers based on a number of factors such as marketing plans, competitive factors, economic conditions, and regulations. These incentives come in a variety of different forms including free and discounted product, gaming credits, food and beverage, hotel room credits, and other forms. The retail value of accommodations, food and beverage, and other services furnished to casino guests is included in gross revenue and then deducted as promotional allowances. Hence, net revenues as discussed above exclude all promotional allowances. CGP LLC believes the allocation of promotional allowances to be within industry standards and appropriate for the various brands and the competitive environment. Key Performance Indicators Performance of the Casino Properties and Developments segment is measured in part through tracking of trips by rated customers, which means a customer whose gaming activity is tracked through Caesars Entertainment's Total Rewards system, referred to as "trips," and spend per rated customer trip, referred to as "spend per trip." A trip is created by a Total Rewards card holder engaging in one or more of the following activities while at CGP LLC's properties (1) hotel stay, (2) gaming activity or (3) a comp redemption, which means the receipt of a complimentary item given out by the casino. Lodgers are guests registered with the total rewards program who stay at the property and non-lodgers are guests registered with the total rewards program not staying at the property. Customer spend means the cumulative rated theoretical spend (which is the amount of money expected to be retained by the casino based upon the mathematics underlying the particular game as a fraction of the amount of money wagered by the customer) across all game types for a specific customer. The average combined gross hold is the percentage of the amount wagered across all game types (including table games and slot machines) that the casino retained. 41 -------------------------------------------------------------------------------- During the three and six months ended June 30, 2014, total trips increased by approximately 11.0% and 9.0% from the three and six months ended June 30, 2013, driven by 14.0% and 13.0% increases in trips by non-lodgers, respectively, partially offset by decreases in trips by lodgers in each period. Total spend per trip decreased by 1.0% and 3.0% in the three and six months ended June 30, 2014, respectively, versus the same periods in 2013, driven by decrease in spend per trip from non-lodgers. Gross casino hold increased slightly from 11.2% and 11.4%, respectively, in the three and six months ended June 30, 2013 to 11.5% and 11.5%, respectively, in the three and six months ended June 30, 2014. Cash average daily room rates for the three months ended June 30, 2014 increased to $108, or approximately 22.7%, when compared to $88 for the same period in 2013, primarily due to the new tower that opened in the fourth quarter of 2013 at Bally's Las Vegas. Average daily occupancy was 92.8% in the three months ended June 30, 2014 and 91.4% in the three months ended June 30, 2013. Revenue per available room ("RevPar") for the three months ended June 30, 2014 and 2013 was $102 and $86, respectively. The revenue impact of favorable trends in room metrics was mostly offset by a lower number of rooms available due to room renovations at The Quad. Other Factors Affecting Net Income Predecessor Growth Predecessor Growth CGP LLC Partners CGP LLC Partners Three Months Ended June 30, Six Months Ended June 30, (In millions) 2014 2013 Change 2014 2013 Change Interest expense, net of interest capitalized $ (62.4 )$ (17.1 )$ (45.3 )$ (79.6 )$ (34.6 )$ (45.0 ) Interest income - - - 1.0 - 1.0 Interest income - related party 51.3 42.5 8.8 100.1 83.1 17.0 Loss on early extinguishment of debt (23.2 ) (0.2 ) (23.0 ) (23.8 ) (0.2 ) (23.6 ) Other income/ (expense), net - 0.2 (0.2 ) - 0.5 (0.5 ) Benefit from/(provision for) income taxes (1) 15.3 (24.3 ) 39.6 6.1 (33.6 ) 39.7 Net loss/ (income) attributed to non-controlling interests (2) 2.9 (0.6 ) 3.5 9.4 1.2 8.2



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(1) CGP LLC's provision for income taxes represents the income taxes from its

corporate subsidiary, CIE, which is taxed as a corporation for federal,

state and foreign income tax purposes. CGP LLC's provision for income taxes

also includes the allocated income taxes from the consolidated Caesars Entertainment provision for income taxes for the period up to the date of acquisition by CGP LLC for the properties acquired from Caesars Entertainment in the second quarter of 2014. CGP LLC does not record a provision for income taxes for its Casino Properties and Developments



segment which were acquired by CGP LLC in 2013 as all entities within this

segment are pass-through entities for income tax purposes. Predecessor

Growth Partners' provision for income taxes represent the allocated income

taxes from the consolidated Caesars Entertainment provision for income taxes

as if Predecessor Growth Partners filed separate United States ("US") federal, state and foreign income tax returns, and does not recognize the pass through entity structure of CGP LLC.



(2) CGP LLC's non-controlling interest reflects the non-controlling interest

associated with consolidating CIE and the Baltimore Joint Venture into CGP LLC. As the financial statements of Predecessor Growth Partners were prepared on a combined basis rather than a consolidated basis, the non-controlling interest associated with CIE is not included within the financial statements of Predecessor Growth Partners. Interest expense, net of interest capitalized Interest expense associated with the Planet Hollywood secured loan decreased from $9.7 million in the three months ended June 30, 2013, to $5.3 million in the three months ended June 30, 2014 and from $19.2 million in the six months ended June 30, 2013 to $14.9 million in the six months ended June 30, 2014. Decreases to the expense in both periods resulted from the repayment of the Planet Hollywood Loan Agreement, as defined below, in conjunction with the Second Closing. In July 2013, CBAC Borrower LLC ("CBAC Borrower") entered into a credit agreement (the "Baltimore Credit Facility"). Interest expense associated with this facility was $0.6 million during the three months ended June 30, 2014 which consisted of $5.9 million of interest expense offset by $5.3 million of capitalized interest for related construction of the facility. Additional Interest expense, net of interest capitalized, totaled $56.5 million and $7.4 million for the three months ended June 30, 2014 and 2013, respectively, and $62.5 million and $15.4 million for the six months ended June 30, 2014 and 2013, respectively. The increase in both periods was primarily due to the debt incurred to fund the transfers by CEOC to subsidiaries of CGPH of Cromwell, The Quad, and Bally's Las Vegas (together, the "Acquired Properties Transaction") and from CGP LLC to a subsidiary of CGPH of Planet Hollywood. Interest expense associated with capital lease obligations was not material to any period presented. Interest income Interest income for the three and six months ended June 30, 2014 and 2013 was not material to the respective periods. 42 -------------------------------------------------------------------------------- Interest income - related party CGP LLC receives interest income on its portfolio of approximately $1.1 billion face value of aggregate principal amount of notes received from CEOC in the transactions described in Item 1 - Business of our Annual Report on Form 10-K for the year ended December 31, 2013 ("CEOC Notes"). The CEOC Notes have fixed interest rates ranging from 5.625% to 6.50% and maturities ranging from 2015 to 2017. Interest income - related party increased in the three months ended June 30, 2014 when compared to the same period in 2013 as well as in the six months ended June 30, 2014 when compared with the six months ended June 30, 2013. In each case, the increase is primarily the result of increased accretion of discount originally recorded as a result of purchasing the senior notes at market prices significantly below face value. Subsequent to the end of the quarter, CGP LLC received $451.9 million in connection with the CEOC notes purchase transaction. Loss on early extinguishment of debt The Planet Hollywood secured loan contained excess cash flow provisions which require mandatory prepayment of debt when certain conditions are met. These prepayments are recorded in Loss on early extinguishment of debt in the Combined and Consolidated Condensed Statements of Operations of CGP LLC and Combined Condensed Statements of Operations for Predecessor Growth Partners. Inclusive of the impact of the loan payoff in conjunction with the Second Lien Intercreditor Agreement, as defined in the Intercreditor Agreement and Collateral Agreements section below, Loss on extinguishment of debt for the three and six months ended June 30, 2014 increased to $23.2 million and $23.8 million, respectively, from $0.2 million for both the three and six months ended June 30, 2013. Other income/ (expense), net Other income/ (expense), net for the six months ended June 30, 2014 and 2013 was not material to the respective periods. Provision for income taxes CGP LLC The provision for income taxes for CGP LLC for 2014 represents the income taxes from its corporate subsidiary, CIE, which is taxed as a corporation for federal, state and foreign income tax purposes. CGP LLC's provision for income taxes also includes the allocated income taxes from the consolidated Caesars Entertainment provision for income taxes for the period up to the date of acquisition by CGP LLC for the properties acquired from Caesars Entertainment in the second quarter of 2014. No provision for income taxes is reported for the portion of the Casino Properties and Developments segment of CGP LLC which was acquired in 2013 as this segment is taxed as a partnership for federal and state income tax purposes whereby any income or losses were allocated to the CGP LLC owners and taxed by each owner. The provision for income taxes for CGP LLC differs from the expected federal tax rate of 35% primarily due to CGP LLC income not taxed at the CGP LLC entity level. Predecessor Growth Partners Provision for income taxes represents the allocated income taxes from the consolidated Caesars Entertainment provision for income taxes as if Predecessor Growth Partners filed separate US federal, state, and foreign income tax returns. The provision for income taxes for the period presented differs from expected federal tax rate of 35% primarily due to tax benefits from foreign operations partially offset by an increase in federal valuation allowance and the tax cost of non-deductible stock-based compensation and other non-deductible expenses. Net loss/ (income) attributed to non-controlling interests CGP LLCCaesars Interactive Entertainment For the three months ended June 30, 2014, Net loss of $0.2 million was attributable to non-controlling interests in CIE. Due to the offsetting net income attributable to non-controlling interests in the first quarter of 2014, there was a net zero impact on a year to date basis. 43 -------------------------------------------------------------------------------- Maryland Joint Venture For the three and six months ended June 30, 2014 net losses of $2.7 million and $9.4 million, respectively, was attributable to non-controlling interests in the Maryland Joint Venture. In February 2014, CGP LLC's joint venture with Rock Gaming LLC which is the majority member CR Baltimore Holdings ("CRBH"), sold a portion of its interest in CBAC Gaming LLC ("CBAC Gaming"), to an existing joint venture partner, Caves Valley Partners ("CVP"). CGP LLC received $12.8 million of the proceeds from the sale. After consideration of this transaction, CRBH owns approximately 70% of CBAC Gaming. Predecessor Growth PartnersCaesars Interactive Entertainment As a result of the acquisition of a 51% controlling equity interest in Playtika Ltd. ("Playtika") in May 2011, CIE began consolidating the results of Playtika subsequent to the acquisition date, recording net income attributed to non-controlling interest of $8.0 million for the 49% equity interest not owned during that period. CIE acquired the remaining 49% equity interest in Playtika in December 2011. However, as the financial statements of Predecessor Growth Partners were prepared on a combined basis rather than a consolidated basis, the non-controlling interest associated with CIE is not included within the financial statements of Predecessor Growth Partners. Maryland Joint Venture For the three and six months ended June 30, 2013, net loss attributed to non-controlling interests in the Maryland Joint Venture was $0.8 million and $1.2 million, respectively. Reconciliations of Net (Loss)/Income to Adjusted Segment EBITDA CGP LLC and Predecessor Growth Partners use Adjusted Segment EBITDA as a supplemental measure of its performance. EBITDA is comprised of net income before (i) interest expense, net of capitalized interest, (ii) interest income, (iii) provision for income taxes, and (iv) depreciation and amortization expense. Adjusted Segment EBITDA is comprised of EBITDA, further adjusted for certain items that CGP LLC and Predecessor Growth Partners do not consider indicative of its ongoing operating performance. The unaudited financial statements are prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). Adjusted EBITDA is a non-GAAP financial measure that is defined and reconciled to its most comparable GAAP measure below. Adjusted EBITDA is included because management believes that Adjusted EBITDA provides investors with additional information that allows a better understanding of the results of operational activities separate from the financial impact of capital investment decisions made for the long-term benefit of CGP LLC and Predecessor Growth Partners. 44 -------------------------------------------------------------------------------- Because not all companies use identical calculations, the presentation of CGP LLC's and Predecessor Growth Partners' segment EBITDA and Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. For the Three Months Ended June 30, 2014 Casino Properties and (In millions) Interactive Entertainment Developments Other Total Net (loss)/income $ (2.4 ) $ (4.2 ) $ 16.5$ 9.9 (Benefit from)/provision for income taxes (19.4 ) 4.1 - (15.3 ) (Loss)/income before income taxes (21.8 ) (0.1 ) 16.5 (5.4 ) Interest expense, net of interest capitalized 1.3 8.6 52.5 62.4 Interest income, including related party - - (51.3 ) (51.3 ) Depreciation and amortization 7.5 25.2 0.1 32.8 Segment EBITDA (13.0 ) 33.7 17.8 38.5 Loss on early extinguishments of debt (a) - 23.2 - 23.2 Write-downs, reserves, and project opening costs, net of recoveries (b) - 8.4 - 8.4 Change in fair value of contingently issuable non-voting membership units (c) - - (27.6 ) (27.6 ) Change in fair value of contingent consideration (d) 31.9 - - 31.9 Acquisition and integration costs 0.6 1.1 4.1 5.8 Impairment of goodwill and 15.5 - - 15.5 intangible assets Stock-based compensation (e) 8.1 - - 8.1 Other (f) 0.9 0.2 - 1.1 Adjusted EBITDA $ 44.0 $ 66.6 $ (5.7 )$ 104.9 For the Three Months Ended June 30, 2013 Casino Properties and (In millions) Interactive Entertainment Developments Other Total Net income $ 9.5 $ 15.6 $ 27.6$ 52.7 Provision for income taxes 0.8 8.6 14.9 24.3 Income before income taxes 10.3 24.2 42.5 77.0 Interest expense, net of interest capitalized 0.5 16.6 - 17.1 Interest income, including related party - - (42.5 ) (42.5 ) Depreciation and amortization 3.9 20.7 - 24.6 Segment EBITDA 14.7 61.5 - 76.2 Other income, net - (0.2 ) - (0.2 ) Loss on early extinguishments of debt (a) - 0.2 - 0.2 Write-downs, reserves, and project opening costs, net of recoveries (b) - 6.4 - 6.4 Change in fair value of contingent consideration (d) (3.5 ) - - (3.5 ) Acquisition and integration costs 0.2 - - 0.2 Stock-based compensation (e) 7.9 - - 7.9 Other (f) 0.8 0.1 - 0.9 Adjusted EBITDA $ 20.1 $ 68.0 $ - $ 88.1



_____________________________________________________

(a) - (f) See footnotes on next page

45 --------------------------------------------------------------------------------

For the Six Months Ended June 30, 2014 Casino Properties and (In millions) Interactive Entertainment Developments Other Total Net (loss)/income $ (0.3 ) $ 7.0 $ (10.8 )$ (4.1 ) (Benefit from)/provision for income taxes (17.7 ) 11.6 - (6.1 ) (Loss)/income before income taxes (18.0 ) 18.6 (10.8 ) (10.2 ) Interest expense, net of interest capitalized 2.0 25.1 52.5 79.6 Interest income, including related party - - (101.1 ) (101.1 ) Depreciation and amortization 13.6 47.3 0.1 61.0 Segment EBITDA (2.4 ) 91.0 (59.3 ) 29.3 Loss on early extinguishments of debt (a) - 23.8 - 23.8 Write-downs, reserves, and project opening costs, net of recoveries (b) - 22.0 - 22.0 Change in fair value of contingently issuable non-voting membership units (c) - - 48.5 48.5 Change in fair value of contingent consideration (d) 32.6 - - 32.6 Acquisition and integration cost 0.6 1.1 4.3 6.0 Impairment of goodwill and 15.5 - - 15.5 intangible assets Stock-based compensation (e) 26.4 - - 26.4 Other (f) 1.6 0.3 - 1.9 Adjusted EBITDA $ 74.3 $ 138.2 $ (6.5 )$ 206.0 For the Six Months Ended June 30, 2013 Interactive Casino Properties and (In millions) Entertainment Developments Other Total Net (loss)/income $ (14.9 ) $ 30.3 $ 54.0$ 69.4 (Benefit from)/Provision for income taxes (13.2 ) 17.7 29.1 33.6 (Loss)/income before income taxes (28.1 ) 48.0 83.1 103.0 Interest expense, net of interest capitalized 1.1 33.5 - 34.6 Interest income, including related party - - (83.1 ) (83.1 ) Depreciation and amortization 7.8 41.4 - 49.2 Segment EBITDA (19.2 ) 122.9 - 103.7 Other income, net (0.1 ) (0.4 ) - (0.5 ) Loss on early extinguishments of debt (a) - 0.2 - 0.2 Write-downs, reserves, and project opening costs, net of recoveries (b) - 11.0 - 11.0 Change in fair value of contingent consideration (d) 48.9 - - 48.9 Acquisition and integration cost 0.2 - - 0.2 Stock-based compensation (e) 10.4 0.1 - 10.5 Other (f) 1.1 0.2 - 1.3 Adjusted EBITDA $ 41.3 $ 134.0 $ - $ 175.3



_____________________________________________________

(a) Amounts represent the difference between the fair value of consideration

paid and the book value, net of deferred financing costs, of debt retired

through debt extinguishment transactions, which are capital structure-related, rather than operational-type costs.



(b) Amounts primarily represent development costs related to the construction

and planned casino operations of Horseshoe Baltimore and the construction of

Cromwell. (c) Amount represents the change in fair value of contingently issuable



membership units associated with the CIE earn-out calculation related to the

transactions establishing CGP LLC. The total liability represents the

estimated fair value of CGP LLC non-voting membership units to be issued to

a subsidiary of Caesars Entertainment. (d) Amounts represent the change in fair value of contingent consideration for CIE acquisitions.



(e) Amounts represent non-cash stock-based compensation expense related to stock

options and restricted stock units. (f) Amounts represent other add-backs and deductions to arrive at Adjusted EBITDA but not separately identified such as lobbying expenses. 46

-------------------------------------------------------------------------------- Liquidity and Capital Resources Capital Spending CGP LLC incurs capital expenditures in the normal course of business, performs ongoing refurbishment and maintenance at its existing casino entertainment facilities and performs ongoing maintenance and enhancements to its social and mobile games to maintain their quality standards. CGP LLC may also pursue development and acquisition opportunities for additional businesses or social or mobile games that meet its strategic and return on investment criteria. Cash used for capital expenditures in the normal course of business is typically made available from cash flows generated by operating activities while cash used for development projects is typically funded from established debt programs, specific project financing, and additional debt offerings. CGP LLC's planned development projects, if they go forward, individually and in the aggregate, will require significant capital commitments and, if completed, may result in significant additional revenues. The commitment of capital, the timing of completion, and the commencement of operations of development projects are contingent upon, among other things, negotiation of final agreements and receipt of requisite approvals from the applicable political and regulatory bodies. Excluding amounts spent for the purchases of businesses, CGP LLC's cash used for capital spending for the three and six months ended June 30, 2014 was $220.6 million and $310.4 million, respectively. The majority of the 2014 and 2013 capital spending relates to Horseshoe Baltimore which is scheduled to be completed in the third quarter of 2014 and Cromwell which was completed in the second quarter of 2014. Estimated total capital expenditures for the remainder of 2014 are expected to be between approximately $240.0 million and $330.0 million. CGP LLC's near term residual capital requirements for Horseshoe Baltimore are expected to be funded by the Baltimore Credit Facility, as further discussed in the Capital Resources section below. Liquidity CGPH and Caesars Growth Properties Finance, Inc. (together, the "Issuers"), issued $675.0 million aggregate principal amount of their 9.375% second-priority senior secured notes due 2022 (the "2022 Notes") pursuant to an indenture dated as of April 17, 2014, among the Issuers and US Bank National Association, as trustee (the "Indenture"). On May 8, 2014, CGPH closed on $1.175 billion of term loans (the "Term Loan") pursuant to a credit agreement. CGP LLC's primary sources of liquidity include currently available cash and cash equivalents, cash flows generated from its operations, interest income generated from its investments in the CEOC Notes, borrowings under CIE's credit facility with Caesars Entertainment, the Senior Secured Credit Facilities as defined below, the 2022 Notes and the Term Loan. CGP LLC's cash and cash equivalents totaled $495.6 million and $1,032.0 million at June 30, 2014 and December 31, 2013, respectively. Payments of short-term debt obligations and other commitments are expected to be made from operating cash flows. Long-term obligations are expected to be paid through operating cash flows, refinancing of existing debt or the issuance of new debt, or, if necessary, additional investments from its equity holders. CGP LLC's operating cash inflows are used for operating expenses, debt service costs, working capital needs and capital expenditures in the normal course of business. CGP LLC's Restricted cash totaled $115.5 million and $359.8 million at June 30, 2014 and December 31, 2013, respectively. Restricted cash and cash equivalents include amounts restricted under the terms of the Baltimore Credit Facility and Cromwell Credit Facility, as defined below, at both June 30, 2014 and December 31, 2013 as well as the Planet Hollywood debt agreement at December 31, 2013. The Cromwell Credit Facility had no financial covenants required under the note. The Planet Hollywood debt agreement required that CGP LLC and Predecessor Growth Partners maintain certain reserves for payment of property taxes, insurance, interest and ongoing furniture, fixtures and equipment purchases, or property development. In connection with the Second Closing the Planet Hollywood debt agreement was paid in full. For each, classification between current and long-term is dependent upon the intended use of each particular reserve. At June 30, 2014 and December 31, 2013, Caesars Interactive had cash balances in its subsidiary located in Israel of $17.1 million and $24.4 million, respectively. Additionally, the subsidiary had $15.0 million in short-term investments at December 31, 2013 and no short-term investments at June 30, 2014. CIE may use the cash in the Playtika subsidiary to repay debt payable to related parties, fund operations at Playtika, pursue international acquisitions or repatriate the cash to CIE. As of both June 30, 2014 and December 31, 2013, CIE had $39.8 million of book value of indebtedness outstanding and payable to Caesars Entertainment, the Horseshoe Baltimore had $256.0 million and $217.7 million, respectively, and Cromwell had $180.0 million and $179.8 million, respectively, of book value of indebtedness outstanding to third-party lenders for the same periods. At December 31, 2013, Planet Hollywood had $462.5 million of book value of indebtedness outstanding and payable to third-party lenders. Cash paid for interest for the six months ended June 30, 2014 and 2013 was $42.9 million and $20.3 million, respectively. Long-term obligations are expected to be paid through refinancing of debt, although CGP LLC's ability to accomplish this will depend upon numerous factors such as financial performance, and the limitations applicable to such transactions under CGP LLC's and its subsidiaries financing documents. Additionally, CGP LLC's ability to fund operations, pay debt obligations, 47 -------------------------------------------------------------------------------- and fund planned capital expenditures depends, in part, upon economic and other factors that are beyond CGP LLC's control, and disruptions in capital markets and restrictive covenants related to CGP LLC's existing debt could impact CGP LLC's ability to fund liquidity needs, pay indebtedness and secure additional funds through financing activities. CGP LLC believes that its cash and cash equivalents balance and its cash flows from operations will be sufficient to meet its normal operating and debt service requirements during the next 12 months and the foreseeable future and to fund capital expenditures expected to be incurred in the normal course of business. As of June 30, 2014, the assets of Harrah's New Orleans, Bally's Las Vegas, Planet Hollywood and The Quad were pledged as collateral for certain of CGPH's outstanding debt securities. Intercreditor Agreement and Collateral Agreements On May 20, 2014, in connection with the Second Closing, US Bank National Association, as trustee under the 2022 Notes (in such capacity, the "Trustee"), entered into a second lien intercreditor agreement (the "Second Lien Intercreditor Agreement") with Credit Suisse AG, Cayman Islands Branch, as collateral agent under the First Lien Collateral Agreement (as defined below) (in such capacity, the "First Lien Collateral Agent") that establishes the subordination of the liens securing the 2022 Notes to the liens securing first priority lien obligations, including the $1.325 billion senior secured credit facilities (the "Senior Secured Credit Facilities"), which consist of the Term Loans and the Revolving Credit Facility, each as defined below, and certain other matters relating to the administration of security interests. On May 20, 2014, the Borrower, the subsidiary guarantors and the First Lien Collateral Agent also entered into the collateral agreement (first lien) (the "First Lien Collateral Agreement") and other security documents defining the terms of the security interests that secure the Senior Secured Credit Facilities, the related guarantees and Other First Priority Lien Obligations (as defined therein). These security interests will secure the payment and performance when due of all of the obligations of the Borrower and the subsidiary guarantors under the Senior Secured Credit Facilities, the related guarantees and the security documents. Additionally, the Issuers, the subsidiary guarantors and the Trustee also entered into the collateral agreement (second lien) (the "Second Lien Collateral Agreement") and other security documents defining the terms of the security interests that secure the 2022 Notes, the related guarantees and Other Second Lien Obligations (as defined therein). These security interests will secure the payment and performance when due of all of the obligations of the Issuers and the subsidiary guarantors under the 2022 Notes, the related guarantees, the indenture governing the 2022 Notes and the security documents. Subject to the terms of the security documents described above, including the First Lien Collateral Agreement and the Second Lien Collateral Agreement, the Borrower (or Issuers, as applicable) and the subsidiary guarantors have the right to remain in possession and retain exclusive control of the collateral securing the 2022 Notes and the Senior Secured Credit Facilities (other than any cash, securities, obligations and cash equivalents constituting part of the collateral and deposited with the First Lien Collateral Agent in accordance with the provisions of the security documents and other than as set forth in such security documents), to freely operate the collateral and to collect, invest and dispose of any income therefrom. 48 --------------------------------------------------------------------------------



Debt

The following is a description of the components of Predecessor Growth Partners' and CGP LLC's debt:

Rates at Face Value at Book Value at (In millions) Final Maturity June 30, 2014 June 30, 2014 June 30, 2014 December 31, 2013 Secured debt Caesars Growth Properties Holdings Term Loan 2021 6.25% $ 1,175.0$ 1,141.8 $ - Caesars Growth Properties Holdings 2022 Notes 2022 9.375% 675.0 660.1 - Planet Hollywood Loan Agreement 2015 -% - - 462.5 Baltimore Credit Facility 2020 8.25% 262.5 252.6 214.4 Cromwell Credit Facility 2019 11.00% 185.0 180.0 179.8 Capital lease obligations 2016 Various 4.7 4.7 2.1 Unsecured debt Special Improvement District Bonds 2037 5.30% 14.5 14.5 14.8 Other financing obligations 2016-2018 0.00% - 6.00% 10.3 9.0 10.0 Total debt 2,327.0 2,262.7 883.6 Current portion of long-term debt (17.7 ) (17.7 ) (4.0 ) Long-term debt $ 2,309.3$ 2,245.0 $ 879.6



Caesars Growth Properties Holdings Term Facility

The purchase price of the acquisition of Cromwell, The Quad Resort & Casino, Bally's Las Vegas, 50% of the ongoing management fees and any termination fees payable for each of these properties, and certain intellectual property that is specific to each of these properties (collectively referred to as the "First Closing") was funded by CGPH with cash on hand contributed by CGP LLC and the proceeds of $700.0 million of term loans (the "First Closing Term Loan"). CGPH closed on the First Closing Term Loan on May 5, 2014. CGPH repaid in full the First Closing Term Loan in connection with the Second Closing as described in Escrow Release below. Caesars Growth Properties Holdings Term Loan On May 8, 2014, Caesars Growth Properties Holdings, LLC (the "Borrower") closed on $1.175 billion of term loans (the "Term Loan") pursuant to a First Lien Credit Agreement among Caesars Growth Properties Parent, LLC ("Parent"), the Borrower, the lenders party thereto, Credit Suisse AG, Cayman Islands Branch, as Administrative Agent (the "Administrative Agent"), and Credit Suisse Securities (USA) LLC, Citigroup Global Markets Inc., Deutsche Bank Securities Inc., UBS Securities LLC, J.P Morgan Securities LLC, Morgan Stanley & Co. LLC, Macquarie Capital (USA) Inc. and Nomura Securities International, Inc., as Co-Lead Arrangers and Bookrunners (the "Credit Agreement"). The Credit Agreement also provides for a $150.0 million revolving credit agreement (the "Revolving Credit Facility"), which was undrawn at the closing of the Term Loan. Pursuant to an escrow agreement, dated as of May 8, 2014, among US Bank National Association, as escrow agent and securities intermediary, the Administrative Agent and the Borrower, the Borrower deposited the gross proceeds of the Term Loan, together with additional amounts necessary to repay the First Closing Term Loan, if applicable, into a segregated escrow account until they were satisfied on May 20, 2014. Full details of this transaction, including additional information on the terms of the Term Loan and Revolving Credit Facility can be obtained from the Form 8-K filed with the SEC on May 9, 2014. The CGPH Term Loans also contain certain customary affirmative covenants and require that CGPH maintains a senior secured leverage ratio ("SSLR") of no more than 6.0 to 1.0, which is the ratio of first lien senior secured net debt to earnings before interest, taxes, depreciation and amortization, adjusted as defined ("CGPH Adjusted EBITDA"). Caesars Growth Properties Holdings Notes CGPH and Caesars Growth Properties Finance, Inc. (together, the "Issuers"), issued $675.0 million aggregate principal amount of 9.375% second-priority senior secured notes due 2022 (the "2022 Notes") pursuant to an indenture dated as of April 17, 2014, among the Issuers and US Bank National Association, as trustee (the "Indenture"). The Issuers deposited the gross proceeds of the offering of the 2022 Notes, together with additional amounts necessary to redeem the 2022 Notes, if applicable, into a segregated escrow account until the escrow conditions were satisfied on May 20, 2014. 49 -------------------------------------------------------------------------------- Planet Hollywood Loan Agreement In connection with the acquisition of Planet Hollywood by Caesars Entertainment in 2010 and the assumption of debt, PHW Las Vegas, LLC entered into the Amended and Restated Loan Agreement (the "Planet Hollywood Loan Agreement") with Wells Fargo Bank, N.A., as trustee for The Credit Suisse First Boston Mortgage Securities Corp. Commercial Mortgage Pass-Through Certificates, Series 2007-TFL2. On October 26, 2011, Caesars exercised its option to extend the Planet Hollywood senior secured loan to 2013. On December 5, 2013 the loan maturity was again extended to April 2015. The book value of outstanding debt under the Planet Hollywood Loan Agreement was $462.5 million at December 31, 2013 and bore interest on the unpaid principal balance at a rate per annum equal to London Inter-Bank Offered Rate ("LIBOR") plus 2.859%. In connection with the Second Closing in May 2014, the $476.9 million senior secured term loan of PHWLV was paid in full. CIE Credit Facility Caesars Interactive has entered into an unsecured credit facility with Caesars Entertainment (the "Credit Facility") whereby Caesars Entertainment provided to Caesars Interactive unsecured intercompany loans as requested by CIE and approved by Caesars Entertainment on an individual transaction basis. No principal payments are required on the unsecured intercompany loans until their maturity date of November 29, 2016. The unsecured intercompany loans bear interest on the unpaid principal amounts at a rate per annum equal to LIBOR plus 5%. This credit facility does not have any restrictive or affirmative covenants. The outstanding balance on the credit facility was $39.8 million as of June 30, 2014. Rock Promissory Notes In March 2012, Rock Gaming LLC ("Rock") and CIE entered into an agreement pursuant to which Rock purchased approximately 6,155 shares of CIE common stock for $30.4 million in cash and agreed to purchase additional shares of CIE common stock on or before July 2, 2012. CIE used the proceeds from this sale to prepay a portion of the then outstanding balance on the credit facility. In June 2012, CIE and Rock modified the agreement with Rock such that CIE issued to Rock approximately 382 shares of CIE common stock and a promissory note for $28.5 million in exchange for $30.4 million in cash. The promissory note is convertible into approximately 5,773 shares of CIE common stock. In November 2012, CIE issued to Rock an additional promissory note for $19.2 million in exchange for $19.2 million in cash. The additional promissory note is convertible into approximately 3,140 shares of CIE common stock. The ability to convert the promissory notes into shares is subject to the satisfaction of certain specified criteria. Both promissory notes automatically convert into shares of CIE common stock in November 2014, unless both parties agree to amend the notes. As the notes are expected to be converted into equity, both promissory notes are classified as long-term in CGP LLC's Combined and Consolidated Condensed Balance Sheets at June 30, 2014 and December 31, 2013. Baltimore Credit Facility CBAC Borrower, a joint venture among Caesars Baltimore Investment Company, LLC ("CBIC"), Rock Gaming Mothership LLC, CVPR Gaming Holdings, LLC, STRON-MD Limited Partnership and PRT Two, LLC, entered into the Baltimore Credit Facility to finance the acquisition of land in Baltimore, Maryland and the construction of the Horseshoe Baltimore. The Baltimore Credit Facility provides for (i) a $300.0 million senior secured term facility with a seven-year maturity, which is comprised of a $225.0 million facility that was funded upon the closing of the Baltimore Credit Facility, a $37.5 million delayed draw facility available from the closing of the Baltimore Credit Facility until July 2014, which was drawn in June 2014 in accordance with the agreement, and a $37.5 million delayed draw facility available until January 2015 and (ii) a $10.0 million senior secured revolving facility with a five-year maturity. The Baltimore Credit Facility is secured by substantially all material assets of CBAC Gaming and its wholly-owned domestic subsidiaries. In connection with the foregoing, CBIC and the other joint venture partners each provided, on a several and not joint basis, a completion guarantee with respect to the Horseshoe Baltimore, which guarantees completion of the construction of the Horseshoe Baltimore, availability of contemplated working capital and the discharge, bonding or insuring over of certain liens in connection with the Horseshoe Baltimore. The maximum liability of CBIC under its completion guarantee is approximately $9 million. Concurrently with the closing of the Baltimore Credit Facility, CBAC Borrower entered into an equipment financing term loan facility for up to $30.0 million (the "Baltimore FF&E Facility"). Under the Baltimore FF&E Facility, CBAC Gaming, LLC and CBAC Borrower, LLC, which is wholly-owned by CBAC Gaming, LLC (collectively, "CBAC") may use funds from the facility to finance or reimburse the purchase price and certain related costs of furniture, furnishings, and equipment (referred to as "FF&E") to be used in the Horseshoe Baltimore. Proceeds of the Baltimore FF&E Facility will also be available to refinance the purchase price of FF&E purchased with other amounts available to CBAC. Draws under the Baltimore FF&E Facility may be made after the closing date and prior to January 2015, provided that a final draw of the unused commitment amount will be deposited into an escrow account pledged to the collateral agent for the Baltimore FF&E Facility at the end of the commitment period, and such funds will be available for subsequent financing of FF&E purchases. CBAC is not permitted to 50 -------------------------------------------------------------------------------- reduce the commitments under the FF&E Facility, however it remained undrawn as of June 30, 2014. The Baltimore FF&E Facility will mature in January 2019. The Baltimore FF&E Facility has covenants and events of default substantially consistent with the Baltimore Credit Facility, and other restrictive covenants customary for FF&E facilities of this type. Cromwell Credit Facility In November 2012, Cromwell entered into a $185.0 million, seven-year senior secured credit facility bearing interest at LIBOR plus 9.75% with a LIBOR floor of 1.25% (the "Cromwell Credit Facility") to fund the renovation of the former Bill's Gamblin' Hall and Saloon into a boutique lifestyle hotel, rebranded as Cromwell. The renovation included a complete remodeling of the guest rooms, casino floor, and common areas, the addition of a second floor restaurant, and the construction of an approximately 65,000 square foot rooftop pool and dayclub/nightclub. Cromwell owns the property and manages the casino, hotel, and food and beverage operations, and the dayclub/nightclub is leased to a third party. The proceeds of the Cromwell Credit Facility were funded during the fourth quarter of 2012 and are included as Restricted cash on the Combined and Consolidated Condensed Balance Sheets until drawn to pay for costs incurred in the renovation. Cromwell's gaming floor opened on April 21, 2014 and its 188 hotel rooms became available to guests starting on May 21, 2014. Capital Leases CGP LLC has entered into multiple capital leases for gaming and wireless internet equipment. The leases have an outstanding liability balance of $4.7 million as of June 30, 2014 and are included in Land, property and equipment, net in CGP LLC's Combined and Consolidated Condensed Balance Sheet. Special Improvement District Bonds In 2008 Bally's Las Vegas entered into a District Financing Agreement with Clark County, Nevada (the "County"). In accordance with the agreement, the County issued Special Improvement District Bonds to finance land improvements at Bally's Las Vegas and at an affiliate casino property, Caesars Palace. Of the total bonds issued by the county, $16.5 million was related to Bally's Las Vegas. These bonds bear interest at 5.30% have principal and interest payments on June 1st of every year and interest only payments on December 1st of every year. The Special Improvement District Bonds mature on August 1, 2037. Harrah's New Orleans and Cromwell Promissory Notes In December 2002, Harrah's New Orleans entered into a $123.7 million unsecured promissory note, payable on demand to CEOC bearing interest at 8% with no scheduled repayment terms. There were no financial covenants required under the note. Any amount of principal and interest not paid when due bore additional interest at 2%. Accrued interest was settled on a monthly basis with charges to transactions with parents and affiliates, net. In November 2013, Cromwell entered into a $15.5 million unsecured promissory note, payable to Caesars Entertainment, bearing interest at 11%. Interest payments were made semi-annually in June and December. There were no financial covenants required under the note. On March 31, 2014, all existing related party debt, including accrued interest, was settled with CEOC. The settlement was accounted for as a net equity contribution from CEOC in the amount of $139.9 million. Escrow Release In connection with the Second Closing, CGPH repaid in full the $700.0 million First Closing Term Loan and the $476.9 million senior secured term loan of PHWLV. The purchase price of the Second Closing and the repayment of the debt noted in the prior sentence were funded by the Borrower with the proceeds of the 2022 Notes and Term Loans of the Borrower, which were previously held in escrow. The terms of the indenture for the 2022 Notes and credit agreement for the Term Loans are as described in CAC's Current Reports on Form 8-K filed on April 17, 2014 and May 9, 2014, respectively. As previously disclosed, the Issuers were, prior to the release of such proceeds from escrow, not in compliance with the covenant in the indenture governing the 2022 Notes stating that they will not own, hold or otherwise have any interest in any assets other than the escrow account and cash or cash equivalents prior to the expiration of the Escrow Period (as defined in the indenture governing the 2022 Notes). Upon the release of the proceeds of the 2022 Notes from escrow, the Issuers cured such default. Contingently issuable non-voting membership units Pursuant to the terms of the CGP Operating Agreement, in conjunction with CGP LLC's acquisition of CIE from Caesars Entertainment, CGP LLC is obligated to issue additional non-voting membership units to Caesars Entertainment to the extent that the earnings from CIE's social and mobile games business exceeds a specified threshold amount in 2015. The number of units to be issued is capped at a value of $225 million divided by the value of the non-voting units on October 21, 2013. Therefore, on October 21, 2013, CGP LLC recorded a liability of $167.8 million representing the estimated fair value of 51 -------------------------------------------------------------------------------- additional non-voting membership units contingently issuable to Caesars Entertainment in 2016. The contingently issuable non-voting membership units' estimated fair value is based upon a multiple of EBITDA for the calendar year 2015 in excess of a specified minimum threshold and includes a maximum payout threshold. The estimated fair value of the contingently issuable non-voting membership units at June 30, 2014 and December 31, 2013 was $355.0 million and $306.5 million, respectively. The change in fair value of $48.5 million is reported within the CGP LLC Combined and Consolidated Condensed Statements of Operations. Other Obligations and Commitments Material changes to CGP LLC's aggregate indebtedness are described in Debt above. As of June 30, 2014, debt payments and estimated interest payments are as follows: Payments Due by Period 1-3 4-5 After 5 (In millions) Total Remainder of 2014 years years years Debt payable to related parties, $ 39.8 face value $ - $ 39.8 $ - $ - Debt payable to third parties, 2,327.0 face value(1) 8.4 55.1 214.2 2,049.3 Estimated interest payments to 5.7 related parties(2) 1.0 4.7 - - Estimated interest payments to 1,385.6 third parties(2) 98.6 567.1 412.6 307.3 Convertible note, face value(3) 47.7 47.7 - - -



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

(1) Includes a capital lease obligation of $4.7 million. (2) Estimated interest for variable rate debt included in this table is based on rates at June 30, 2014. (3) CGP LLC intends to settle the convertible note through the issuance of Caesars Interactive common stock. Off- Balance Sheet Arrangements CGP LLC did not have any off-balance sheet arrangements at June 30, 2014 or December 31, 2013. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board issued updated guidance related to revenue recognition which affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The guidance requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance is effective for CGP LLC starting on January 1, 2017. CGP LLC is currently evaluating the impact this guidance will have on its combined and condensed financial position, results of operations and cash flows. Other Items CIE share repurchase During the first quarter of 2014, 2,394 shares of CIE stock were issued pursuant to the exercise of stock options, and those shares were subsequently repurchased by CIE. The transaction resulted in a $3.9 million decrease in equity, which is the net difference between the gross repurchase amount of $19.1 million and the aggregate of $3.8 million in exercise proceeds and $11.4 million related to the fair value of liability-based awards reclassified to equity upon exercise. Net cash outflow for the share repurchase was $15.3 million. During the second quarter of 2014, CIE issued 1,416 shares and repurchased 1,168 resulting in a $1.3 million increase in equity. Net cash outflow for the share repurchase was $6.3 million. Share-based Payments to Non-Employees of CAC or CGP LLC On April 9, 2014, the Board approved the CAC Equity-Based Compensation Plan for officers, employees, directors, individual consultants and advisers of the Company and its subsidiaries (the "Equity Plan"). CEC will administer the Equity Plan. Under the Equity Plan, CEC is authorized to grant stock options, stock appreciation rights, stock bonuses, restricted stock, performance stock, stock units, phantom stock, dividend equivalents, cash awards, rights to purchase or acquire shares or similar securities in the form of or with a value related to our Common Stock to officers, employees, directors, individual consultants and advisers of CEC and its subsidiaries. The Equity Plan will terminate ten years after approval by the Board. Subject to adjustments in connection with certain changes in capitalization, the maximum value of the shares of our Common Stock that may be delivered pursuant to awards under the Equity Plan is $25.0 million. On May 8, 2014, CEC granted awards to officers, employees, directors, individual consultants and advisers of the CEC and its subsidiaries in accordance with the Equity Plan to reward and provide incentive for services provided in their 52 -------------------------------------------------------------------------------- capacity, promote the success of CGP LLC, and more closely align the interests of such individuals with those of the stockholders of the Company. Awards under this plan vest one-third on each of October 21, 2014, 2015 and 2016. Expense associated with the vesting of such awards is recorded as management fee expense by CGP LLC, totaling $2.7 million for the three months ended June 30, 2014. Upon issuance of shares pursuant to this plan, such shares will be contributed to CGP LLC by CAC as additional investment into that entity, at which time CGP LLC will settle its management fee obligation with CEC and its subsidiaries through a distribution of such shares to CEC. Also upon issuance of shares pursuant to this plan, CGP LLC will issue an equivalent number of voting units in CGP LLC and distribute those units to CAC. As CAC will receive voting units in CGP LLC in exchange for the shares of CAC issued pursuant to this plan, there is no expected dilutive impact to CAC's EPS (see Note 4 - Stockholders' Equity and Earnings per Share). Formation of Caesars Enterprise Services, LLC On May 20, 2014, CEC, CEOC, Caesars Entertainment Resort Properties, LLC ("CERP"), and CGPH (together with CERP and CEOC, the "Members" and each a "Member") entered into a services joint venture, Caesars Enterprise Services, LLC ("CES"). Upon regulatory approval, CES will manage certain Enterprise Assets (as defined hereafter) and the other assets it will own, license or control, and employ the corresponding employees and other employees who will provide services to CEOC, CERP and CGPH, their affiliates and their respective properties and systems under each property's corresponding property management agreement, subject to required regulatory approvals. Corporate expenses that are not allocated to properties will be allocated to CEOC, CERP, and CGPH by CES according to their allocation percentages (initially 70.0%, 24.6%, and 5.4%, respectively), subject to annual review. Operating expenses will be allocated to each Member with respect to their respective properties serviced by CES in accordance with historical allocation methodologies, subject to annual revisions and certain prefunding requirements. Omnibus License and Enterprise Services Agreement On May 20, 2014, the Members entered into an Omnibus License and Enterprise Services Agreement (the "Omnibus Agreement"), which will grant licenses to the Members and certain of their affiliates in connection with the formation of CES upon implementation of the Services joint venture described above and receipt of regulatory approvals. Initial contributions by the Members will include cash contributions by CERP and CGPH of $42.5 million and $22.5 million, respectively. CEOC will transition certain CEOC executives and employees to CES and the services of such employees will be available as part of CES's provision of services to the Members and certain of their affiliates that own properties that require CES services under the Omnibus Agreement. Upon approval, under the Omnibus Agreement, CEOC, Caesars License Company, LLC ("CLC"), Caesars World, Inc. ("CWI") and subsidiaries of CEOC that are the owners of the CEOC properties will grant CES a non-exclusive, irrevocable, worldwide, royalty-free license in and to all intellectual property owned or used by such licensors, including all intellectual property (a) currently used, or contemplated to be used, in connection with the properties owned by the Members and their respective affiliates, including any and all intellectual property related to the Total Rewardsฎ program, and (b) necessary for the provision of services contemplated by the Omnibus Agreement and by the applicable management agreement for any such property collectively, the "Enterprise Assets"). CEOC, CLC and CWI also will grant CES licenses to certain other intellectual property, including intellectual property that is specific to properties controlled by CEOC or its subsidiaries. CES will grant to the properties owned or controlled by the Members and their respective affiliates non-exclusive licenses to the Enterprise Assets, and with respect to the Harrah's New Orleans and Bally's Las Vegas managed facilities, an exclusive (subject to geographic restrictions) license in and to the "Harrah's" and "Bally's" names. CES will also grant to CEOC, CLC, CWI and the properties owned or controlled by the Members, licenses to any intellectual property that CES develops or acquires that is not derivative of the intellectual property licensed to it. CES will also grant to CEOC, CLC and CWI a non-exclusive license to intellectual property specific to the properties controlled by CGPH, CERP and their subsidiaries for any uses consistent with the uses made by CEOC, CLC and CWI with respect to such intellectual property prior to the date of the Omnibus Agreement. Recent Developments and Subsequent Events for CGP LLC Proposed Development of Woodbury Casino, LLC On June 30, 2014, CGP submitted its application to the New York State Gaming Facility Location Board for a gaming license to develop Caesars New York, an $880.0 million casino resort in Woodbury, NY. The property will be managed by Caesars Entertainment and its affiliates. The proposed resort will include approximately 300 hotel rooms, suites and villas, 2,560 slot machines, 190 table games and 50 poker tables. Caesars New York will also include entertainment space, suited for business meetings, celebrations, entertainment and WSOP circuit events. In addition, the resort will feature various food and beverage options that are similar to those at existing CGP LLC properties. 53 -------------------------------------------------------------------------------- Caesars Interactive Entertainment, Inc. Liquidity Plan On July 30, 2014, the Committee approved the repurchase of approximately $13.2 million in shares underlying stock options and owned shares. The offer to purchase shares/vested options of CIE is expected to close in August 2014. Purchase of Bonds by CEOC On May 5, 2014CGP LLC entered into a note purchase agreement to sell certain bonds held by a subsidiary of CGP LLC. On July 29, 2014, CGP LLC received $451.9 million of consideration (including accrued and unpaid interest) in connection with the CEOC notes purchase transaction. Dividend Distribution On August 6, 2014, CGP LLC effectuated a distribution of 100% of the Senior Notes as a dividend to its members, pro rata based upon each member's ownership percentage in CGP LLC (the "Notes Distribution"). CAC, as a member of CGP LLC and the holder of 42.4% of the economic interests in CGP LLC, received in connection with the Notes Distribution $137,457,000 in aggregate principal amount of the 6.50% Senior Notes and $151,443,000 in aggregate principal amount of the 5.75% Senior Notes. First and Second Lien note Holder Litigation On August 4, 2014, Wilmington Savings Fund Society, FSB, solely in its capacity as successor Indenture Trustee for the 10% Second-Priority Senior Secured Notes due 2018 (the "Notes"), on behalf of itself and, it alleges, derivatively on behalf of CEOC, filed a lawsuit in the Court of Chancery in the State of Delaware against CAC, CGP LLC, CEC, CEOC, CERP, CES, Eric Hession, Gary Loveman, Jeffrey D. Benjamin, David Bonderman, Kelvin L. Davis, Marc C. Rowan, David B. Sambur, and Eric Press. The lawsuit alleges claims for breach of contract, intentional and constructive fraudulent transfer, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, and corporate waste. The lawsuit seeks (i) an award of money damages; (ii) to void certain transfers, the earliest of which dates back to 2010; (iii) an injunction directing the recipients of the assets in these transactions to return them to CEOC; (iv) a declaration that CEC remains liable under the parent guarantee formerly applicable to the Notes; (v) to impose a constructive trust or equitable lien on the transferred assets; and (vi) an award to plaintiffs for their attorneys' fees and costs. CAC believes this lawsuit is without merit and will defend itself vigorously. On August 5, 2014, CEC along with CEOC filed a lawsuit in the Supreme Court of the State of New York, County of New York, against certain institutional first and second lien note holders. The complaint states that such institutional first and second lien note holders have acted against the best interests of CEOC and other creditors, including for the purpose of inflating the value of their credit default swap positions or improving other unique securities positions. The complaint asserts claims for tortious interference with prospective economic advantage, declaratory judgment and breach of contract and seeks, among other things, (i) money damages (ii) a declaration that no default or event of default has occurred or is occurring and CEC and CEOC have not breached their fiduciary duties or engaged in fraudulent transfers or other violation of law, and (iii) a preliminary and permanent injunction prohibiting the defendants from taking further actions to damage CEC or CEOC. CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This Form 10-Q contains or may contain "forward-looking statements" intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. You can identify these statements by the fact that they do not relate strictly to historical or current facts. These statements contain words such as "may," "will," "project," "might," "expect," "believe," "anticipate," "intend," "could," "would," "estimate," "continue," or "pursue," or the negative of these words or other words or expressions of similar meaning may identify forward-looking statements and are found at various places throughout this Form 10-Q. These forward-looking statements, including, without limitation, those relating to future actions, new projects, strategies, future performance, the outcome of contingencies such as legal proceedings, and future financial results, wherever they occur in this Form 10-Q, are based on our current expectations about future events and are necessarily estimates reflecting the best judgment of management and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. 54 -------------------------------------------------------------------------------- Investors are cautioned that forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that cannot be predicted or quantified, and, consequently, the actual performance of CAC and CGP LLC may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to, the following factors, as well as other factors described from time to time in the Company's reports filed with the Securities and Exchange Commission (including the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained therein): • construction factors, including delays, increased costs of labor and materials, availability of labor and materials, zoning issues, environmental restrictions, soil and water conditions, weather and other hazards, site access matters, and building permit issues, including the renovation of The Quad; • CAC and CGP LLC's dependence on Caesars Entertainment and its subsidiaries to provide support and services, as well as CGP LLC's dependence on Caesars Entertainment's senior management's



expertise

and its participation in Caesars Entertainment's Total Rewards loyalty program; • the adverse effects if Caesars Entertainment or any of its subsidiaries were to default on certain debt obligations; • the adverse effects if Caesars Entertainment or any of its subsidiaries were to file for bankruptcy or be subjected to an involuntary bankruptcy by its creditors; • Caesars Entertainment's interests may conflict with CGP LLC's interests and Caesars Entertainment may possibly keep all



potential

development opportunities for itself; • the effects if a third-party successfully challenges Caesars Entertainment or its affiliates ownership of, or right to use, the intellectual property owned or used by subsidiaries of Caesars Entertainment, which CIE licenses for use in its businesses; • CIE's reliance on its affiliate relationship with subsidiaries of Caesars Entertainment to obtain and/or maintain online gaming



licenses

by virtue of such subsidiaries ownership of a physical gaming



facility

in certain jurisdictions, such as New Jersey;



• the difficulty of operating CGP LLC's business separately from Caesars

Entertainment and managing that process effectively could take up a significant amount of management's time;



• CGP LLC's business model and short operating history;

• CGP LLC's ability to realize the anticipated benefits of current or

potential future acquisitions and the ability to timely and cost-effectively integrate assets and companies that CGP LLC acquires into its operations; • the adverse effects of extensive governmental regulation and taxation policies, which are applicable to CGP LLC, are enforced; • the effects of local and national economic, credit and capital market conditions on the economy in general, and on the gaming industry in particular;



• the sensitivity of CGP LLC's business to reductions in discretionary

consumer spending; • the rapidly growing and changing industry in which CGP LLC operates, such as CIE's social and mobile games business and internet gaming business;



• any failure to protect CGP LLC's trademarks or other intellectual

property, such as CIE's ownership of the WSOP trademark; • abnormal gaming holds ("gaming hold" is the amount of money that is retained by the casino from wagers by customers); • the effects of competition, including locations of competitors and operating and market competition, particularly the intense



competition

our Las Vegas assets face from other hotel casino resorts in Las Vegas and the competition Horseshoe Baltimore will face from other regional casinos and resorts;



• the uncertainty surrounding whether CIE's games, such as Slotomania,

will retain their popularity;



• CIE's ability to launch new games on new and emerging platforms;

• CIE's reliance on a small portion of its total players for nearly all

of its revenue from its social and mobile games; • CGP LLC's ability to expand into international markets in light of additional business, regulatory, operational, financial and economic risks associated with such expansion; 55

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• evolving regulations concerning the social and mobile games industry as well as data privacy, including, but not limited to, the effect of US and foreign laws, some of which are unsettled and still

developing; • the low barriers to entry and intense competition of social and mobile

games industry could have adverse effect on CIE and CGP LLC; • evolving US and foreign laws could subject CIE to claims and prevent CIE from providing its current games to players or to modify its games; • the effect on CGP LLC's business strategy if real money online poker is not legalized in states other than Delaware, Nevada or New Jersey in the United States or is legalized in an unfavorable manner; and



• political and economic uncertainty created by terrorist attacks and

other acts of war or hostility. Any forward-looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995 and, as such, speak only as of the date made. CAC disclaims any obligation to update the forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated or, if no date is stated, as of the date of this Form 10-Q. 56



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