Case 15-01145

Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 1 of 212 Exhibit A EFTA01091533 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 2 of 212 I CM! WI] Official Committee of Second Priority Noteholders, derivatively on behalf of CAESARS ENTERTAINMENT OPERATING COMPANY, INC., and its debtor subsidiaries, Plaintiff, VS. CAESARS ENTERTAINMENT CORPORATION; CAESARS ACQUISITION COMPANY; CAESARS GROWTH PARTNERS, LLC; CAESARS ENTERTAINMENT RESORT PROPERTIES, LLC; CAESARS ENTERPRISE SERVICES, LLC; CAESARS INTERACTIVE ENTERTAINMENT, INC.; APOLLO GLOBAL MANAGEMENT, LLC; TPG CAPITAL, LP; HAMLET HOLDINGS LLC; DAVID BONDERMAN; ROBERT BRIMMER; MICHAEL COHEN; KELVIN L. DAVIS; JONATHAN HALKYARD; ERIC HESSION; FRED J. KLEISNER; GARY W. LOVEMAN; MARC C. ROWAN; DAVID B. SAMBUR; CHATHAM ASSET MANAGEMENT LLC; 3535 LV CORP.; 3535 LV NEWCO, LLC; BALLY'S LV, LLC; CAESARS GROWTH BALLY'S LV, LLC; CAESARS GROWTH BALTIMORE FEE, LLC; CAESARS GROWTH CROMWELL, LLC; CAESARS GROWTH HARRAH'S NEW ORLEANS, LLC; CAESARS GROWTH LAUNDRY, LLC; CAESARS GROWTH PH, LLC; CAESARS GROWTH PH FEE, LLC; CAESARS GROWTH QUAD, LLC; CAESARS LINQ, LLC; CAESARS TOURNAMENT, LLC; CORNER INVESTMENT COMPANY, LLC; FLAMINGO CERP MANAGER, LLC; FLAMINGO LAS VEGAS OPERATING COMPANY, LLC; FLAMINGO LAS VEGAS PROPCO, LLC; HAC CERP MANAGER, LLC; HARRAH'S ATLANTIC CITY OPERATING COMPANY LLC; HARRAH'S ATLANTIC CITY PROPCO, LLC; HARRAH'S LAS VEGAS, LLC; HARRAH'S LAS VEGAS PROPCO, LLC; HARRAH'S LAUGHLIN Case No. EFTA01091534 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 3 of 212 PROPCO, LLC; HARRAH'S LAUGHLIN, LLC; HIE HOLDINGS, INC.; HIE HOLDINGS TOPCO, INC.; HLV CERP MANAGER, LLC; LAUGHLIN CERP MANAGER, LLC; PARBALL NEWCO, LLC; PARIS CERP MANAGER, LLC; PARIS LAS VEGAS OPERATING COMPANY, LLC; PARIS LAS VEGAS PROPCO, LLC; PHWLV, LLC; Rio CERP MANAGER, LLC; RIO PROPCO, LLC; RIO PROPERTIES, LLC; JAZZ CASINO COMPANY, LLC; LAUNDRY NEWCO, LLC; LVH NEWCO, LLC; FLAMINGO-LAUGHLIN NEWCO, LLC; FHR NEWCO, LLC; PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP; and FRIEDMAN KAPLAN SEILER & ADELMAN LLP, Defendants, and CAESARS ENTERTAINMENT OPERATING COMPANY, INC., and its debtor subsidiaries, Nominal Defendants. COMPLAINT Plaintiff Official Committee of Second Priority Noteholders brings this action derivatively on behalf of Caesars Entertainment Operating Company, Inc. ("CEOC") and its debtor subsidiaries (together with CEOC, "Debtors") against CEOC's controlling shareholder, Caesars Entertainment Corporation ("CEC"); several of CEOC's present and past directors and officers; several of CEC's present and past directors and officers; Caesars Acquisition Company; Caesars Growth Partners, LLC; Caesars Entertainment Resort Properties, LLC; Caesars Enterprise Services, LLC; Caesars Interactive Entertainment, Inc.; Apollo Global Management, LLC; and TPG Capital, LP; Chatham Asset Management LLC; affiliates of CEC that were transferees of assets fraudulently transferred from CEOC; the law firm of Paul, Weiss, Rifkind, 2 EFTA01091535 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 4 of 212 Wharton & Garrison LLP; and the law firm of Friedman Kaplan Seiler & Adelman for (a) recovery of fraudulent transfers and the return to CEOC of valuable assets that were wrongly taken from CEOC by the actions of its directors, its controlling shareholder, and others, (b) monetary damages and/or rescission for breaches of fiduciary duties, unjust enrichment, aiding and abetting breaches of fiduciary duties, civil conspiracy, misappropriation of corporate opportunity, and waste of corporate assets, in a sum no less than the range of $8.1 billion to $12.6 billion, (c) imposition of a constructive trust or equitable lien over the transferred assets, and (d) disgorgement of legal fees paid by CEOC to Paul Weiss and Friedman Kaplan for their representation of CEOC despite conflicts of interest. INTRODUCTION 1. This action arises from a series of self-dealing transactions between CEOC — at all relevant times an insolvent corporation — and entities controlled by CEC, or under common control with CEC. Each of these transactions involved transfers that were made for inadequate consideration and less than reasonably equivalent value and that were made with the intent to hinder or delay CEOC's creditors. These transactions were conceived, crafted, and implemented by Apollo Global Management, TPG Capital, CEC, Paul Weiss, and individuals connected with these entities. The transactions were effectuated through a series of complex agreements that enabled Apollo, TPG and CEC to gain control of CEOC's high-growth assets, unencumbered by CEOC debt, and to remove those assets beyond the reach of CEOC's creditors. Later, CEC and defendants who were also CEOC directors, with the assistance of Paul Weiss and Friedman Kaplan, even went so far as to file a lawsuit seeking declaratory relief sanctioning these asset transfers and insulating CEC, Apollo, TPG, and their affiliates from fraudulent transfer claims and other legal liabilities. 3 EFTA01091536 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 5 of 212 2. In January 2008, Apollo and TPG, using a vehicle called Hamlet Holdings LLC ("Hamlet"), acquired the company then known as Harrah's Entertainment Inc. — and now known as CEC — in a highly leveraged $30.7 billion buyout (the "LBO"). Through Hamlet, Apollo and TPG (with Hamlet, the "Sponsors") continue to own 60% of the common stock of CEC and control all aspects of CEOC's governance and operations. 3. At the time of the buyout, Harrah's operated primarily through a wholly-owned subsidiary then known as Harrah's Operating Company, Inc. — now known as CEOC — and it was this operating company that incurred most of the debt used to fund the LBO.1 Harrah's owned and operated a network of casinos in regional markets throughout the country, as well as a significant number of casinos in destination markets — at that time, primarily Las Vegas and New Orleans. 4. Harrah's used its customer loyalty program to encourage customers in its regional markets to give Harrah's a greater share of their local gaming wallet so that they earned more reward credits to use at other Harrah's properties, particularly Harrah's destination properties in Las Vegas and New Orleans. Many of these regional casinos were only modestly profitable in their own right, but they provided Harrah's with the critical ability to interact with customers in their home markets. Harrah's portfolio of regional and destination properties created a hub-and- spoke business model that let the company capture customers on a regional basis and feed them to its destination properties. 5. Harrah's also developed synergies within Las Vegas. Through various acquisitions preceding the LBO transaction, Harrah's developed a dominant and concentrated For purposes of simplicity, this Complaint sometimes refers to the collective operations of CEC and its subsidiaries as "Caesars" and, where appropriate, refers to the two Harrah's entities by their Caesars names. 4 EFTA01091537 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 6 of 212 presence in the center of the Las Vegas Strip, including properties such as Caesars Palace, Paris Las Vegas, Bally's Las Vegas, The Flamingo Las Vegas, Rio Las Vegas, The Cromwell (formerly Bill's Gambling Hall & Saloon), Harrah's Las Vegas, and The Quad Resort & Casino (then known as the Imperial Palace), as well as parcels of undeveloped land near the Las Vegas Strip. Control of these contiguous casinos, hotels, restaurants, and entertainment locations was intended to assure that, once brought to Las Vegas, Harrah's customers would remain within the Harrah's system. 6. In 1998, Harrah's hired Harvard Business School professor Gary Loveman to refine, develop, and expand Harrah's customer loyalty program. That program, known as Total Rewards, pioneered the use of data analytics and behavioral tracking to maximize play and profitability throughout the Harrah's casino network. As a result of Loveman's innovative approach and the success of Total Rewards, Harrah's became one of the premier operators of casino properties in the world. Loveman was promoted to Harrah's Chief Executive Officer in 2003. 7. Within months of the Harrah's LBO, the global financial crisis and ensuing recession crippled the gaming industry. CEOC was especially hard hit as the revenues needed to service its massive debt fell short. At first, CEOC and the Sponsors responded to CEOC's unsustainable capital structure with exchange offers for CEOC's distressed debt and with credit facility amendments, which reduced some of CEOC's indebtedness and extended the maturity of much of the rest. 8. Soon, though, the Sponsors and CEC realized that CEOC would never be able to repay its enormous debt and embarked upon a new strategy. Beginning in 2009, the Sponsors and CEC devised a plan to salvage their multibillion-dollar investment in CEC by stripping 5 EFTA01091538 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 7 of 212 CEOC of valuable assets and moving them to affiliates of CEC that the Sponsors and CEC controlled and which were not liable for CEOC's massive debts. In implementing this plan, the Sponsors' role went beyond mere governance and supervision of CEC and CEOC. Instead, partners and officers from those firms — in particular, Apollo — played an active role in the day- to-day management of CEOC, in determining the specifics of CEOC's corporate strategy, in choosing which assets would be transferred, in deciding which CEC affiliates would receive the assets, in selecting CEOC's financial and legal advisors, in negotiating for (and, simultaneously, against) CEOC, and in determining the prices to be paid for assets. Often this was done with little evident input from the management of CEOC itself, who were relegated to staffing the strategic initiatives the Sponsors, CEC, and their advisors devised. 9. In the course of these transfers, the Sponsors, CEC, and their advisors created a profusion of affiliates, holding companies, intermediate entities, and special purpose vehicles. In 2009, they created an affiliate named Harrah's Interactive Entertainment — now known as Caesars Interactive Entertainment ("CIE") — which was owned by two layers of holding companies, each with multiple classes of stock. In 2013, they created Caesars Entertainment Resort Properties, LLC ("CERP") which, with various affiliated entities, took ownership of six existing properties indirectly owned by CEC (the "CMBS Properties") and two CEOC properties. Also in 2013, the Sponsors, CEC, and their advisors created an entity called Caesars Acquisition Corporation and a subsidiary, Caesars Growth Partners, to receive the transfer of properties from CEOC. In 2014, they created a "services company" called Caesars Enterprise Services, which, among other things, took control of CEOC's Total Rewards program, its enterprise services (including most of its employee workforce built over many years, and predating the LBO), and its property management business. Each of these affiliates was directly 6 EFTA01091539 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 8 of 212 or indirectly controlled by CEC and the Sponsors, and each was created for the purpose of transferring assets beyond the reach of CEOC's creditors. In fact, in some cases, the Sponsors and CEC openly characterized these affiliates as "bankruptcy remote", that is, remote from the CEOC bankruptcy case they knew was coming. 10. In May 2009, the Sponsors and CEC engineered the transfer of CEOC's online gaming business, including CEOC's World Series of Poker trademarks and intellectual property rights, to Caesars Interactive Entertainment. In August 2010, the Sponsors and CEC ordered CEOC to transfer its intellectual property rights in the CMBS Properties to affiliates that managed those properties and, later, to transfer those rights to CERP. In September 2011, CEC and the Sponsors forced CEOC to sell CIE its rights to hold World Series of Poker tournaments. In October 2013, CEC and the Sponsors caused CEOC to convey two of CEOC's significant Las Vegas properties to CERP. The next month, CEOC was instructed to transfer two other valuable properties to Growth Partners, along with valuable management fee streams. In March 2014, the Sponsors and CEC engineered CEOC's sale of four of its most important remaining properties to Growth Partners, along with valuable management fee streams and 31 acres of undeveloped land. As part of that same transaction, CEOC transferred its rights in Total Rewards to a vehicle controlled by CERP and Growth Partners. II. In mid-2014, the Sponsors and CEC announced, in rapid fire fashion, a number of further initiatives designed to enrich CEC and the Sponsors at the expense of CEOC and its creditors. In May 2014, the Sponsors orchestrated what they described as a sale of 5% of CEOC's common stock in an attempt to extricate CEC from its guarantee of CEOC's bond debt. Also in May 2014, the Sponsors and CEC launched a tender offer for CEOC's 5.625% Senior Notes due June 2015 and 10% Second Priority Notes due 2015. Although those notes had been 7 EFTA01091540 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 9 of 212 trading at a significant discount to their face value, the Sponsors and CEC had CEOC spend over $1 billion to redeem them at par, plus a premium, plus accrued interest, largely from Growth Partners and a hedge fund that had been secretly cooperating with Apollo. A few weeks later, the Sponsors ordered CEOC to repay all amounts remaining under an intercompany revolver facility between CEC and CEOC, exhausting another $261.8 million of CEOC's dwindling cash. In June 2014, the Sponsors and CEC caused CEOC to announce the closure of its modestly profitable Showboat Atlantic City property and to direct its VIP customers to a casino owned by CERP. In August 2014, the Sponsors, CEC, and CEOC filed a collusive lawsuit in New York seeking a declaratory judgment that none of their fraudulent transfers and other acts had been illegal. In December 2014, on the eve of its bankruptcy filing, CEOC entered into a Restructuring Support Agreement which, for very little consideration, would have released the Sponsors, CEC, the transferees of CEOC's assets, CEC's directors, CEOC's directors, and a host of officers, advisors, and others from any liability to CEOC for their role in these transfers. 12. The Sponsors and CEC's strategy had several purposes. The first, obviously, was to move CEOC's most valuable assets into new entities that would be insulated from CEOC's inevitable bankruptcy and improve the otherwise dismal prospects for the Sponsors' investment in CEC. The net effect was to divide Caesars' business into two segments — one a "Good Caesars," consisting of CIE, Growth Partners, CERP, and CES, that owned and controlled the prime assets formerly belonging to CEOC, and the other, a "Bad Caesars," consisting of CEOC, which remains burdened by substantial debt and whose remaining properties consist primarily of underperforming regional casinos. Only the "Bad Caesars" remains liable for the vast majority of the debts incurred in the 2008 LBO. 8 EFTA01091541 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 10 of 212 13. But there also was a second, and equally crucial, objective: once the principal benefits of the synergies of the Caesars' network of properties and control of the Total Rewards customer loyalty program had been transferred to the Sponsors and CEC, CEOC's remaining regional assets would have greatly reduced value to any potential third-party purchaser. And by severing CEOC from its assets and from the core enterprise functions that it previously performed, the Sponsors and CEC were able to create legal and regulatory hurdles that they knew would inhibit the ability of CEOC's creditors to restore the Caesars network without the cooperation of the Sponsors or CEC. Thus, when the long-expected bankruptcy came, the Sponsors and CEC could acquire cheaply the assets that remained in CEOC and recreate the synergistic Caesars network without CEOC's troublesome debt.2 14. This second objective was, in essence, the willful destruction of CEOC's value. Ordinarily, such efforts would have been prevented by CEOC's board, which owed fiduciary duties to the company and, because CEOC was insolvent, had a duty to maximize CEOC's value for the benefit of its creditors, who were its ultimate stakeholders. However, CEOC's board at the time was completely dominated by CEC and the Sponsors: indeed, at most times, it consisted of only two directors, both of whom were officers or directors of CEC and neither of whom was independent. (In fact, CEOC had no outside directors until June 2014.) In addition, CEOC did not have, and was not afforded, separate legal counsel or financial advisors to advise it on the transfers; CEOC's board did not create special committees of disinterested directors to assess the 2 And this, of course, is precisely what eventually happened. CEC engineered a new-value bankruptcy plan where it proposed to buy CEOC's assets for very little money. See CEOC 8-K filed on Dec. 31, 2014. Almost simultaneously, CEC announced its plans to merge with Caesars Acquisition Corporation, thus recapturing the properties CEOC had transferred to Growth Partners. See CEC 8-K filed on December 22, 2014. As part of the proposed plan, the Sponsors proposed that CEOC would grant all persons and entities involved in the transfers sweeping general releases from any claims CEOC might have against them. 9 EFTA01091542 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 11 of 212 proposed transfers; there was no market process to assure that CEOC received reasonably equivalent value for the assets it transferred; and, in virtually all cases, the board did not ask for or receive independent fairness opinions. 15. A third objective — admitted by the Sponsors — was to strengthen the Sponsors' hand in restructuring negotiations with CEOC's creditors. With CEOC's valuable assets stripped from CEOC and now firmly under the Sponsors' control, the Sponsors would enjoy leverage in their negotiations to force creditors to write down their debt. If creditors balked at a restructuring, the Sponsors would have nonetheless created — in their words — a "war chest" to use against the creditors in CEOC's inevitable bankruptcy. In the meantime, CEOC's ever- shrinking pool of assets would weaken the creditors and [TO BE INSERTED]. 16. Because the consideration received by CEOC for these transfers was woefully inadequate and because the transfers were intended to enrich CEC and the Sponsors at the expense of CEOC and its creditors, the transfers were unlawful and avoidable. 17. In addition, the transfers were made with actual intent to hinder, delay, or defraud its creditors and thus the transfers should be avoided or the value of the property transferred must be returned to CEOC. Defendants also are liable for monetary damages for their role in these transactions. 18. CEC, as CEOC's controlling shareholder, CEC's directors (by virtue of their domination over CEOC and its board), and CEOC's directors and officers owed fiduciary duties to CEOC. Because CEOC was insolvent at all relevant times, these defendants had a duty to maximize CEOC's value for the benefit of its creditors, who were CEOC's ultimate 10 EFTA01091543 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 12 of 212 stakeholders. Defendants breached their fiduciary duties or aided and abetted others in breaching fiduciary duties, and are therefore liable for damages to CEOC. 19. The conduct of the defendants named in this lawsuit has already been the subject of a comprehensive investigation conducted by a court-appointed examiner, Richard Davis (the "Examiner"). As summarized by the Examiner at the outset of his 930-page report: The principal question being investigated was whether in structuring and implementing these transactions assets were removed from CEOC to the detriment of CEOC and its creditors. The simple answer to this question is "yes." As a result, claims of varying strength arise out of these transactions for constructive fraudulent transfers, actual fraudulent transfers (based on intent to hinder or delay creditors) and breaches of fiduciary duty by CEOC directors and officers and CEC. Aiding and abetting breach of fiduciary duty claims, again of varying strength, exist against the Sponsors and certain of CEC's directors. The Examiner concluded that "[t]he potential damages from those claims considered reasonable or strong range from $3.6 billion to $5.1 billion." The Examiner defined "strong" claims as those "having a high likelihood of success" and "reasonable" claims as those "having a reasonable, or better than 50/50, chance of success." Importantly, that range of potential damages excluded other claims that were characterized by the Examiner as viable, albeit with a less than a 50/50 chance of success. Nor did the Examiner's range include several categories of damages that were determined by the Examiner to be available on the strong and reasonable claims, but that the Examiner did not quantify. Such amounts, if quantified and included, would increase the damages to a figure in excess of $10 billion. JURISDICTION AND VENUE 20. This Court has subject matter jurisdiction over the claims for relief in this adversary proceeding pursuant to 28 U.S.C. § 1334(b). 11 EFTA01091544 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 13 of 212 21. Venue for this adversary proceeding properly lies in this judicial district pursuant to 28 U.S.C. § 1409. PARTIES A. Plaintiffs 22. Plaintiff Official Committee of Second Priority Noteholders ("Noteholder Committee") was appointed by the Office of the United States Trustee for the Northern District of Illinois Eastern Division on February 5, 2015, to represent the interests of all holders of more than $5.2 billion in principal amount of Second Priority Notes issued by CEOC under three indentures executed in 2008, 2009, and 2010, who are the primary beneficiaries of the claims asserted in this Complaint. The Noteholder Committee is vested with, among other things, the powers described in Bankruptcy Code § 1103, including the power to investigate the acts, conduct, assets, liabilities, and financial condition of the Debtors, and to perform such services as are in the interest of those represented. 23. The Noteholder Committee asserts the claims in this Complaint derivatively on behalf of nominal defendants CEOC and 172 of its subsidiaries (collectively, the "Debtors") who filed voluntary chapter 11 petitions under the Bankruptcy Code. CEOC is a Delaware corporation that owns, operates, and manages casinos and other entertainment properties in Las Vegas and elsewhere in the United States. CEOC's headquarters are located at One Caesars Palace Drive, Las Vegas, Nevada 89109. Standing to commence this action was granted on , 2016, by order of the United States Bankruptcy Court for the Northern District of Illinois. B. Corporate Defendants 24. Defendant Caesars Entertainment Corporation ("CEC") is a Delaware corporation that, through subsidiaries, joint ventures, and other arrangements, owns, operates, and manages 12 EFTA01091545 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 14 of 212 gambling casinos and properties in the United States and foreign countries. CEC's offices are located at One Caesars Palace Drive, Las Vegas, Nevada. The Sponsors own approximately 60% of the voting stock of CEC and have the right to appoint CEC's entire board of directors. 25. Defendant Caesars Acquisition Company ("CAC") is a Delaware corporation CEC formed in 2013 to make an equity investment in Growth Partners. CAC is a public company whose stock is listed and traded on NASDAQ. 66% of the voting stock of CAC is owned by affiliates of the Sponsors. The Sponsors also control CAC pursuant to an Omnibus Voting Agreement that gives them the right to appoint CAC's entire board of directors. CAC's offices are located at One Caesars Palace Drive, Las Vegas, Nevada. 26. Defendant Caesars Growth Partners, LLC ("Growth Partners") is a Delaware limited liability company that was formed in 2013 as a joint venture between CEC and CAC to acquire assets from CEOC and CEC. All of the voting units of Growth Partners are owned by CAC. All of the non-voting units of Growth Partners are owned by CEC or its subsidiaries and affiliates. Upon information and belief, Growth Partners' offices are located at One Caesars Palace Drive, Las Vegas, Nevada.3 27. Defendant Caesars Entertainment Resort Properties, LLC ("CERP") is a Delaware limited liability company that was formed in October 2013 as a wholly-owned subsidiary of CEC for the purpose of acquiring, holding, and operating certain Caesars properties. CERP's offices are located at One Caesars Palace Drive, Las Vegas, Nevada.4 3 For purposes of this Complaint, Growth Partners is defined to include all of the direct and indirect subsidiaries, affiliates, holding companies, and other entities owned by, controlled by, or under common ownership or control with Growth Partners that received assets or ownership interests in conjunction with any of the relevant transfers. 4 For purposes of this Complaint, CERP is defined to include all of the direct and indirect subsidiaries, affiliates, holding companies, and other entities owned by, controlled by, or 13 EFTA01091546 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 15 of 212 28. Defendant Caesars Enterprise Services, LLC ("CES") is a Delaware limited liability company that was formed on April 4, 2014, for the purpose of acquiring and managing the enterprise-wide assets of CEOC for the benefit of CEC, CEOC, Growth Partners, and CERP. Upon information and belief, CEC's offices are located at One Caesars Palace Drive, Las Vegas, Nevada. 29. Caesars Interactive Entertainment, Inc. ("CIE") is a Delaware corporation formed in April 2009 by CEC. CIE operates an online gaming business that includes so-called "play for fun" games as well as "real money" games in certain jurisdictions. In addition, CIE owns the World Series of Poker tournaments and brand. The majority of the voting stock of CIE is owned by Growth Partners. Upon information and belief, CIE's offices are located at 1411 Peel, Montreal, Canada. 30. The following chart illustrates the Caesars organizational structure following the creation of Growth Partners and CERP in 2013, the purported transfer by CEC of 11% of its equity stake in CEOC beginning in May 2014, and the creation of CES: Apollo, we and Co- Investers 443% Pablo Shareholders Apollo. TPG and Co-Investors 337% 60 )% Cars Aosulaltlen Company (CAC) 21% 00% wing sass O%.era0 Caesars Growth Partners (COP) Public Shareholder1 3t. Caesars Entertainment Corp. (GEC' toe V% 2: 21 1. I ' - ITotal Rewards/. : Caesars Entertainment Resort Properties (CERP) (continued...) Caesars Enterprise Sendeas (CES) CEOC I enownin S OM Third Party Inv st'OrS Caesars Entertainment Operating Company (CEOC) under common ownership or control with CERP that received assets or ownership interests in conjunction with any of the relevant transfers. 14 EFTA01091547 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 16 of 212 31. CEC, CEOC, CERP, CAC, and Growth Partners have created and do business through dozens of direct and indirect subsidiaries, affiliates, holding companies, and other entities, all of which are owned or controlled by these companies or by the Sponsors. CEC, CEOC, CERP, CAC, and Growth Partners frequently create new such entities, or abandon older ones, for purposes of avoiding taxes, circumventing contractual requirements, or concealing the nature or details of transfers. Because these entities are owned, controlled, and dominated by the Sponsors, CEC, CEOC, CERP, CAC, or Growth Partners, and have been used for improper purposes, their independent identities should be disregarded and they should be treated as alter egos of their ultimate owners. 32. Apollo Global Management, LLC is a Delaware limited liability company formed on July 3, 2007. Apollo's global headquarters are located at 9 West 57ih Street, New York, New York. For purposes of this Complaint, Apollo is defined to include all of its funds, subsidiaries, or vehicles that have invested in CEC or any of its affiliates. 33. TPG Capital, LP is a Delaware limited partnership formed on November 15, 2011. Upon information and belief, TPG's global headquarters are located at 345 California Street, San Francisco, California. For purposes of this Complaint, TPG is defined to include all of its funds and/or subsidiaries that invested in Caesars. 34. Hamlet Holdings LLC ("Hamlet") is a Delaware limited liability company. Upon information and belief, Hamlet was formed in 2002 and is headquartered in Fort Worth, Texas. Hamlet and affiliates of Hamlet are the vehicles by which the Sponsors raised money to invest in and execute the LBO, now control CEC, and invest in and control CAC. According to SEC filings, Hamlet's members consist of five persons from Apollo and TPG. The Sponsors, together with investment vehicles they created, at all relevant times owned approximately 60% of the 15 EFTA01091548 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 17 of 212 voting common stock of CEC and 66% of the voting common stock of CAC. According to SEC filings, Apollo and TPG gave an irrevocable proxy to defendant Hamlet under which Hamlet has sole voting and sole dispositive power with respect to these shares of CEC and CAC. C. Individual Defendants 35. David Bonderman was at all relevant times a director of CEC and is currently a director of CEOC. Bonderman is a founding partner of TPG and, upon information and belief, stood to benefit personally from some or all of the transactions described in this Complaint. 36. Robert Brimmer is an officer of CEC. In February 2014, Brimmer was the head of Caesars' Planning and Analysis group, and he later was promoted to the position of CEC's Director, Corporate Finance. 37. Michael Cohen worked in CEC's legal department from February 2006 to April 2014. From November 2011 to April 2014, Cohen served as Senior Vice President, Deputy General Counsel, and Corporate Secretary of CEC. In addition, Cohen was a director of CEOC from July 2012 to April 2014. In April 2014, Cohen became Senior Vice President, Corporate Development, General Counsel, and Corporate Secretary of CAC and Senior Vice President, General Counsel, and Corporate Secretary of CIE. 38. Kelvin L. Davis was at all relevant times a director of CEC and is currently a director of CEOC. Davis is a senior partner of TPG and, upon information and belief, stood to benefit personally from some or all of the transactions described in this Complaint. 39. Jonathan Halkyard was the Chief Financial Officer of CEC from August 2006 to May 2012. In addition, upon information and belief, Halkyard was a director of CEOC from at least April 2009 until his departure in May 2012. 40. Eric Hession was a CEOC director from May 2014 until June 27, 2014. Upon information and belief, Hession also served as Vice President of Finance of CEC and CEOC 16 EFTA01091549 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 18 of 212 from February 2011 to November 2011 and as Senior Vice President of Finance of CEC and CEOC from November 2011 until he became Chief Financial Officer and Executive Vice President of CEC on January 1, 2015. 41. Fred J. Kleisner became a member of the CEC board in July 2013. Upon information and belief, Kleisner stood to benefit personally from some or all of the transactions described in this Complaint. 42. Gary Loveman was at all relevant times the Chairman and a director of CEC and CEOC. Loveman also was the Chief Executive and President of CEC and CEOC until June 30, 2015. Upon information and belief, Loveman stood to benefit personally from some or all of the transactions described in this Complaint. 43. Marc C. Rowan was at all relevant times a director of CEC and from June 2014 to March 2016 was a director of CEOC. Rowan is a founding partner of Apollo and, upon information and belief, stood to benefit personally from some or all of the transactions described in this Complaint. 44. David B. Sambur has been a director of CEC since 2010 and a director of CEOC since June 2014. Sambur is a partner of Apollo and, upon information and belief, stood to benefit personally from some or all of the transactions described in this Complaint. 45. According to CEC's proxy statements, CEC does not consider Messrs. Loveman, Bonderman, Davis, Rowan, or Sambur to be independent directors because of their relationships with affiliates of the Sponsors or other relationships with CEC. D. Other Defendants 46. Chatham Asset Management LLC is an asset management company with its principal place of business at 26 Main Street, Chatham Township, New Jersey. Chatham is a limited liability company organized under the laws of Delaware. 17 EFTA01091550 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 19 of 212 47. Paul, Weiss, Rifkind, Wharton & Garrison LLP is a law firm organized as a limited liability partnership under the laws of New York, with its principal place of business at 1285 Avenue of the Americas, New York, New York. At all relevant times Paul Weiss simultaneously served as counsel to Apollo, CEC, and CEOC. Upon information and belief, between 2009 and 2016, Paul Weiss collected tens of millions in fees for its work representing and advising CEC, CEOC, and other Caesars entities and interests. 48. Friedman Kaplan Seiler & Adelman LLP is law firm organized as a limited liability partnership under the laws of New York, with its principal place of business at 7 Times Square, New York, New York. Friedman Kaplan simultaneously served as counsel to CEC and CEOC in the preparation, filing, and advocacy of the action filed in New York styled Caesars Entertainment Operating Company, Inc. and Caesars Entertainment Corporation v. Appaloosa Investment Limited Partnership I, et aL, Sup. Ct. •. Co., Index No. 652392/2014. Upon information and belief, CEOC has paid over $1 million to Friedman Kaplan for its work on that lawsuit. E. Transferee Defendants 49. In addition to CIE, CEC, CERP, CAC, and Growth Partners, the Sponsors and CEC formed numerous entities that received transfers of real property, tangible and personal property, intellectual property, and other assets from CEOC and from affiliates of CEOC. Upon information and belief and unless otherwise indicated, the offices and premises of each of these defendants are located at the same Las Vegas address as CEC. 50. The "2009 Transferees" are the entities that received assets and business CEOC transferred from its online gaming business. These include the following defendants: a. CEC and CIE; b. HIE Holdings Topco, Inc., a Delaware corporation; 18 EFTA01091551 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 20 of 212 c. HIE Holdings, Inc., a Delaware corporation; d. Caesars Tournament, LLC, a Delaware limited liability company; and e. Rio Properties, LLC, a Nevada limited liability company. 51. The "CMBS PropCos" are the entities that received assets CEOC transferred in 2010 as a result of the CMBS Loan Agreement Amendment and Trademarks Transfer. These include the following defendants: a. CEC; b. Rio PropCo, LLC, a Delaware limited liability company; c. Harrah's Las Vegas PropCo, LLC, a Delaware limited liability company; d. Harrah's Atlantic City PropCo, LLC, a Delaware limited liability company; e. Harrah's Laughlin PropCo, LLC, a Delaware limited liability company; f. Flamingo Las Vegas Propco, LLC, a Delaware limited liability company; and g. Paris Las Vegas PropCo, LLC, a Delaware limited liability company. 52. The "WSOP Transaction Transferees" are the entities that received assets CEOC transferred in 2011 as a result of the WSOP Transaction. These include the following defendants: a. CEC; b. CIE; c. Caesars Tournament, LLC; and d. Rio Properties, LLC. 53. The "Linq/Octavius Transferees" are the entities that received assets CEOC transferred in 2013 as a result of the Linq and Octavius transfers. These included defendants CEC and Rio Properties, LLC. 19 EFTA01091552 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 21 of 212 54. The "2013 Transferees" are the entities that received assets CEOC transferred in 2013 as a result of the 2013 Transaction Agreement. These include the following defendants: a. CEC, CAC, and Growth Partners; b. Caesars Growth PH Fee, LLC, a Delaware limited liability company; c. Caesars Growth Baltimore Fee, LLC, a Delaware limited liability company; d. PHWLV, LLC, a Nevada limited liability company; and e. Caesars Growth PH, LLC, a Delaware limited liability company. 55. The "Services Transferees" are the entities that received management services from CEOC and access to CEOC's Total Rewards program pursuant to the 2010 Shared Services Agreement, the 2013 Shared Services Agreement, and the Management Services Agreements. These include the following defendants: a. CMBS PropCos, CEC, CERP, and Growth Partners; b. Flamingo Las Vegas Operating Company, LLC, a Nevada limited liability company; c. Paris Las Vegas Operating Company, LLC, a Nevada limited liability company; d. Harrah's Laughlin, LLC, a Nevada limited liability company; e. Rio CERP Manager, LLC, a Nevada limited liability company; f. Paris CERP Manager, LLC, a Nevada limited liability company; g. Laughlin CERP Manager, LLC, a Nevada limited liability company; h. HLV CERP Manager, LLC, a Nevada limited liability company; i. HAC CERP Manager, LLC, a New Jersey limited liability company; j. Harrah's Las Vegas, LLC, a Nevada limited liability company; k. Flamingo CERP Manager, LLC, a Nevada limited liability company; I. 3535 LV Newco, LLC, a Delaware limited liability company; m. Parball NewCo, LLC, a Delaware limited liability company; 20 EFTA01091553 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 22 of 212 n. Corner Investment Company, LLC, a Nevada limited liability company; and o. Jazz Casino Company, LLC, a Louisiana limited liability company. 56. The "2014 Transferees" are the entities that received properties from CEOC as a result of the 2014 Transaction Agreement. These include the following defendants: a. CEC, CAC, Growth Partners, 3535 LV Newco, LLC, Parball NewCo, LLC, and Corner Investment Company, LLC; b. Caesars Growth Bally's LV, LLC, a Delaware limited liability company; c. Caesars Growth Quad, LLC, a Delaware limited liability company; d. Caesars Growth Cromwell, LLC, a Delaware limited liability company; e. Caesars Growth Harrah's New Orleans, LLC, a Delaware limited liability company; f. Caesars Linq, LLC, a Delaware limited liability company; g. Caesars Growth Laundry, LLC, a Delaware limited liability company; h. FHR NewCo, LLC, a Delaware limited liability company; i. Flamingo-Laughlin NewCo, LLC, a Delaware limited liability company; j. LVH NewCo, LLC, a Delaware limited liability company; and k. Laundry NewCo, LLC, a Delaware limited liability company. 57. The "Easement Transferees" are the entities that were granted easements in 2011 on four lots of unimproved real estate, comprising approximately 25.8 acres, directly east of various Caesars properties. These include the following defendants: a. Flamingo Las Vegas Propco, LLC and Caesars Linq, LLC, each of whom is identified above; and b. 3535 LV Corp. (formerly known as the Imperial Palace Corporation), a Nevada corporation. 21 EFTA01091554 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 23 of 212 58. The "Total Rewards Transferees" are the entities that received access to or rights in Total Rewards as a result of the 2014 Transaction Agreement and the formation of CES. These include the following defendants: a. CEC, CERP, Growth Partners, and CES; b. Caesars Growth Bally's LV LLC, a Delaware company; c. Flamingo Las Vegas Operating Company, LLC; d. Harrah's Las Vegas, LLC; e. Harrah's Laughlin, LLC; f. Paris Las Vegas Operating Company, LLC; g. Rio CERP Manager, LLC; h. Paris CERP Manager, LLC; i. Laughlin CERP Manager, LLC; j. HLV CERP Manager, LLC; k. HAC CERP Manager, LLC; and I. Flamingo CERP Manager, LLC. STANDING 59. Standing to commence this action was granted on , 2016, by order of the United States Bankruptcy Court for the Northern District of Illinois. 60. The Internal Revenue Service ("IRS") serves as a "Golden Creditor" pursuant to section 544(b) of the Bankruptcy Code because it held claims against CEOC both at the time of the LBO on January 28, 2008 and on the Petition Date. Moreover, the IRS is not bound by the statute of limitations found in state fraudulent transfer laws and is instead subject to a federal 10- year statute of limitations, measured from the date of assessment. Because the LBO occurred fewer than 10 years before the Petition Date, the IRS's fraudulent transfer claims are timely. 22 EFTA01091555 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 24 of 212 CEOC is thus able to step into the shoes of the IRS to bring and prosecute the IRS's fraudulent transfer actions and to bring causes of action to avoid the transactions or obligations for the benefit of all creditors. 61. Wilmington Savings Fund Society ("WSFS"), as successor indenture trustee, serves as a creditor pursuant to section 544(b) of the Bankruptcy Code with respect to each of the transactions that form the basis of this Complaint, because WSFS, or its predecessor, has held claims against CEOC and the Debtors since April 2009, and because WSFS filed a lawsuit in Delaware Chancery Court on August 4, 2014 asserting many of the claims set forth in this Complaint, thereby preserving any claims as to which the statute of limitations had not expired as of that date. BACKGROUND A. CEC. 62. In January 2008, the Sponsors acquired CEC in a $30.7 billion leveraged buyout. The acquisition was financed with approximately $24 billion of new debt, more than two thirds of which was issued by its subsidiary Harrah's Entertainment Operating Company, the forerunner to CEOC. Most of this debt was guaranteed by the parent pursuant to language in various indentures. The Sponsors and other investors contributed approximately $6.1 billion in cash, and the balance of the LBO was funded through other borrowings. B. CEOC. 63. From 2008 until at least 2013, CEOC was CEC's principal operating subsidiary. At all relevant times, CEOC has been completely dominated and controlled by CEC. Until May 2014, CEC owned all of CEOC's stock, and it continues to own at least 89% of CEOC's stock. 23 EFTA01091556 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 25 of 212 64. Before the transfers described in this Complaint, CEOC owned and operated five of Caesars' nine highly profitable casinos in Las Vegas,5 as well as five casinos on the east coast and 17 casinos elsewhere in the United States. In addition, CEOC owns or manages 20 other casinos in the United States and in other countries. 65. The Sponsors' leveraged buyout of CEC occurred approximately six months before the onset of the financial crisis in 2008. The ensuing recession seriously damaged CEOC's business, especially among its regional casinos. From year-end 2007 to year-end 2009, enterprise-wide net revenues decreased from $12.7 billion to $10.3 billion and adjusted EBITDA decreased from $2.1 billion to $1.7 billion. Indeed, the only properties that have generated material positive operating income and operating margins in recent years have been CEOC's five casinos in Las Vegas and its casino in New Orleans, all but one of which have since been transferred to entities under CEC's control. The following chart shows, by region, CEOC's gross revenues: Net Revenue 2008 2009 2010 2011 2012 2013 2014 2015 Las Vegas 53254.2 32,698.0 52,834.8 $3,013.1 $3,029.9 $3,070.4 $3,072.2 S3,194.1 Mamie coast 2,316.8 2,025.9 1,899.9 1,839.1 1,681.3 1,520.9 1,321.7 1,359.4 Other U.S. 3,986.8 3,646.7 3,274.0 3,080.6 3,048.8 2,924.0 2,794.1 2,713.0 Notably, the "Other U.S." region includes the casino in New Orleans, a "super regional," which, on information and belief, generated operating income and accounts for a substantial portion of the net revenues shown for the "Other U.S." region. 5 CEOC also has owned a tenth Caesars property, named Hot Spot, in Las Vegas that offers limited gaming. However, Hot Spot is so small (1,000 square feet containing fifteen slot machines, and no table games) that Caesars has not considered it to be a "casino". 24 EFTA01091557 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 26 of 212 C. INSOLVENCY. 66. CEOC has been insolvent for a number of years dating back to at least December 31, 2008, and possibly earlier. CEOC fails every test of solvency. First, the fair market value of CEOC's assets has been substantially less than its liabilities. Since 2008, the face amount of CEOC's interest-bearing debt (excluding intercompany debt) has not been less than $17.3 billion. During this same period, the value of CEOC's enterprise was substantially less, resulting in a negative equity value. 67. Throughout the 2008 to 2014 time period, CEOC's balance sheet consistently reflected negative equity, meaning the book value of its liabilities exceeded the book value of its assets. This deficit increased substantially if goodwill were excluded from the calculation of CEOC's assets. In addition, over this period, CEOC took financial reporting impairment charges on various assets which reduced the carrying value of CEOC's assets by over $4.8 billion. 68. Second, CEOC fails both the cash flow and capital adequacy tests for solvency. CEOC has had a cash flow deficit each year since 2008. During this time, CEOC failed to generate sufficient operating cash flow to pay its operating expenses. One reason for CEOC's cash flow deficit — although by no means the only reason — has been the debt service obligations left over from the 2008 LBO. CEOC is the issuer of $19.7 billion of CEC's overall debt, and it had debt service obligations in 2014 of just under $2 billion. 69. CEOC's statements of cash flows throughout this time period consistently reported a cash flow deficit from operations, steadily deteriorating from negative $98 million in 2009 to negative $841 million in 2014. CEOC was unable to generate sufficient EBITDA to service the interest on its funded debt — much less accumulate sufficient cash to pay debt principal upon maturity — and was able to pay its operating expenses only through a combination 25 EFTA01091558 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 27 of 212 of asset sales and additional borrowing. For the years 2008 through 2014, CEOC's EBITDA was sufficient to fund only an average of 62 cents of every dollar of interest expense. 70. CEC's financial disclosures admitted the insufficiency of CEOC's cash flow to service its outstanding debt. Starting with its year-end 2008 10-K, CEC's yearly filings conceded that CEC "may not be able to generate sufficient cash to service all of our indebtedness, and may be forced to take other actions to satisfy our obligations under our indebtedness that may not be successful." As noted below, in 2011 and thereafter, CEC's warning became more severe. 71. Starting in 2009, Caesars' long-range plans — which included its projected EBITDA for the next five- to seven-year period — predicted negative free cash flow for the foreseeable future. When adjusted to account for interest expense and capital expenditures, the long-range plan prepared at year-end 2009 projected negative cash flow at CEOC of $799 million in 2010, negative $914 million in 2011, and continuing negative figures for the remainder of the forecast period. The long-range plan prepared at year-end 2010 was worse. It forecast CEOC's cash flow as negative $1.133 million for 2011, negative $931 million for 2012, and continuing negative figures throughout the forecast period. Similarly, the long-range plan CEOC prepared at year-end 2011 projected negative cash flow of $862 million for 2012, negative $588 million for 2013, and continuing negative figures throughout the forecast period. 72. By early 2012, CEC began to admit that it did not expect to be able to pay its debts. CEC's 10-K for 2011, for example, disclosed: As of December 31, 2011, $11.1 billion face value of our indebtedness is scheduled to mature in 2015 (assuming the extension options with respect to the CMBS Financing and PHW Las Vegas senior secured loan are exercised), representing 49% of the total face value of our debt .... We do not expect that our cash flow from operations will be sufficient to repay this indebtedness. 26 EFTA01091559 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 28 of 212 CEC's 10-K filings for 2012, 2013, and 2014 included similar language. 73. By this point, the market had taken notice of CEOC's precarious situation and adjudged it to be insolvent. CEOC's debt was trading at a significant discount, a clear indication that the market did not believe CEOC would be able to fully repay its debt. CEC, in fact, purchased $5.9 million of CEOC debt in 2012 at a discount of 46%. In August 2012, Barclays stated, "Caesars is the most highly levered company in our coverage universe, which not only limits its financial flexibility, but also keeps the risk of bankruptcy high, in our view." Barclays, Patiently Waiting; Initiating Coverage at UW (Aug. 22, 2012). 74. In February 2013, RBC Capital Markets concluded that Caesars would "effectively run out of cash by the end of 2014." RBC Capital Markets Report, Q4 Results Uninspiring; Maintaining Underperform (Feb. 26, 2013). In May 2013, RBC opined that Caesars' asset sales were "short-term solutions" that would "only buy them time until 2015," when "a contentious debt-for-equity exchange or distressed debt exchange will need to be consummated." RBC Capital Markets Report, QI Results Did Little to Change Our View (May 2, 2013). In June 2013, Deutsche Bank sent the Sponsors an analysis indicating CEOC's equity value was negative $5.8 billion and predicting that CEOC would not be able to pay debt holders. 75. The transfers of valuable assets from CEOC to CEC and its affiliates only deepened CEOC's insolvency. Although touted as measures that would improve CEOC's liquidity, the transfers stripped CEOC of its chief sources of material and incremental EBITDA, making it even harder for CEOC to service its debt load with the remaining, lower growth and lower margin regional casinos. D. THE CONFLICTED BOARDS OF DIRECTORS. 76. At all relevant times, the Sponsors have owned a controlling interest in CEC. Moreover, pursuant to a January 28, 2008 stockholders' agreement, the Sponsors control the 27 EFTA01091560 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 29 of 212 makeup of the nine-person CEC board, with four members designated by Apollo and four members by TPG. Through this control, the Sponsors also control the management, business decisions, and operations of each of CEC's subsidiaries, including CEOC. Although others sometimes joined or left the CEC board, the core group of directors on the CEC board at all relevant times consisted of defendants Loveman, Bonderman, Davis, Rowan, and Sambur. Loveman was CEC's Chairman and CEO; Rowan and Sambur were partners of Apollo; and Bonderman and Davis were partners of TPG. 77. CEOC was a wholly-owned subsidiary of CEC until at least May 2014, when CEC purported to sell a 5% interest in CEOC to a group of hedge funds. However, at all times CEC owned the controlling interest in CEOC and appointed all members of CEOC's board. Between 2009 and June 2014, CEOC's board consisted of only two directors. Defendant Loveman was a director at all times and the other director was either CEC's incumbent CFO, which was either defendants Hession or Halkyard, or CEC's Deputy General Counsel, defendant Cohen. Upon information and belief, the following chart depicts the composition of CEOC's board at the times relevant to this Complaint: Date Range CEOC Inside Directors CEOC Outside Directors April 2009-May 2012 Loveman, Halkyard None July 2012-April 2014 Loveman, Cohen None May 2014-June 27, 2014 Loveman, Hession None June 27, 2014-January 2015 Loveman, Rowan, Sambur, Bonderman, Davis Stauber, Winograd 78. In addition, it was generally understood that Apollo directly supervised the strategic direction of CEOC, including decisions about financing, divestments, and restructuring. Defendant Sambur, an Apollo partner served, in effect, as CEOC's Chief Financial Officer. Defendant Rowan, similarly, often acted as CEOC's de facto CEO. 28 EFTA01091561 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 30 of 212 79. Many of the CEC and CEOC directors stood to benefit financially from the transactions that they approved or caused CEOC to approve. Rowan and Sambur each had interests in the Apollo-sponsored private investment fund that, through affiliates, owned a significant percentage of CEC and CAC. Upon information and belief, defendants Bonderman and Davis had similar equity interests in CEC and CAC through investment vehicles sponsored by TPG. Upon information and belief, Loveman and Halkyard also participated in a management incentive plan that rewarded them with grants of options on CEC's stock. Additionally, Loveman and Hession were shareholders of CAC, which had a significant equity interest in Growth Properties, which was the transferee of many of the transferred CEOC assets, held one-third of the voting rights in CES, and owned approximately 84.4% of CIE. 80. CEOC was at all relevant times, in fact or substance, owned, controlled, and dominated by CEC and the Sponsors or individuals related to them. CEOC was also, at all relevant times, insolvent. Thus, all of the transactions identified in this Complaint between CEOC and CEC, CIE, CERP, CAC, Growth Partners, or other subsidiaries or affiliates of CEC were self-dealing transactions. As a result, the consideration CEOC received for each transfer, the negotiation process that led to each transaction's terms and conditions, and the governance process that resulted in each transaction's approval by the CEOC board are subject to the test of their entire fairness to CEOC. The burden of establishing entire fairness is one defendants bear. 81. Although it is common in self-dealing transactions for the affected parties to form special board committees to negotiate the transactions, that did not happen here. CEOC had no outside directors from April 2009 until June 2014 and no special committee of CEOC's board was formed at any time in that period to review the terms, conditions, consideration, or substance of any of the asset transfers that took place. In fact, while CEC's public filings stated at various 29 EFTA01091562 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 31 of 212 times that special board committees had been formed to review particular transactions, in each case those committees were committees of CEC's board, not CEOC's. Similarly, while CEC disclosed that it had solicited or received opinions from outside advisors about the fairness of transactions from a financial point of view, those opinions concerned the fairness of the transactions to CEC or to the transferees of the assets, were prepared by financial advisors retained by CEC or the Sponsors, or were manipulated to align with the goals of CEC and the Sponsors. In no case did CEOC receive an independent fairness opinion. 82. Throughout this period, CEOC was compelled to transfer to CEC or affiliates of CEC CEOC's most valuable assets without the benefit of a non-conflicted board, without independent legal advisors, without independent financial advisors, without independent fairness opinions, and without the benefit of the most rudimentary elements of fair process. Instead, the Sponsors and CEC conspired to deprive CEOC of the most basic principles of corporate governance so that the Sponsors and CEC could loot the company with impunity. E. PAUL WEISS. 83. One reason CEOC's legal protections and rights were ignored was that the lawyers representing CEOC in these transactions — the law firm of Paul Weiss — also served, simultaneously, as the lawyers for CEC and the CEC affiliates who were taking the assets from CEOC. 84. Paul Weiss was involved in virtually all aspects of almost every asset transfer. Paul Weiss lawyers sat with Apollo and CEC to develop the legal strategy underpinning the removal of assets from CEOC; arranged for the organization of the CEC affiliates needed to receive the assets from CEOC; devised means of removing CEC's guarantees of CEOC's debts; came up with schemes to protect the transferees from the claims of CEOC's creditors; prepared 30 EFTA01091563 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 32 of 212 transactional documents; rendered legal advice about the structure, timing, character and execution of the transfers described in this Complaint; determined the legal terms and conditions of the transfers; looked for ways for CEC and the transferees to avoid fraudulent transfer liability; assessed bankruptcy risks; assisted the Sponsors and CEC's efforts to reduce the consideration paid to CEOC in the transactions; advised the boards of CEC and CEOC of their fiduciary duties; handled the closings of the deals; represented CEC in negotiations surrounding the Restructuring Support Agreement to obtain releases of liability from CEOC for CEC, CAC, CERP, CES, Growth Partners, CEC's directors, Apollo, TPG, and Paul Weiss itself; and even drafted the complaint filed by CEC (using another law firm Paul Weiss located) seeking a declaratory judgment that CEC had no liability to CEOC for the fraudulent transfers. 85. It is difficult to imagine one law firm fulfilling so many roles that were obviously in such conflict. Yet Paul Weiss - possibly because Apollo ranks among its leading clients — had no compunction about doing so. These conflicts were so profound as to be beyond that class of representations where a single law firm, even with informed written consent, could represent competing interests. Paul Weiss chose to represent competing interests in a zero-sum game. Upon information and belief, Paul Weiss was paid tens of millions of dollars for its work for CEC and CEOC. E. THE CONSPIRACY. 86. By no later than late 2011, it had become clear that CEOC would never repay its debts at anything close to face value, a fact CEC conceded a few months later in its 10-K filing. By June 2012, Apollo had prepared an analysis that projected CEOC's projected 2012 cash flow would be nearly SI billion in the red and further concluded that CEOC would be billions of dollars short if it were forced to pay debts as they became due. 31 EFTA01091564 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 33 of 212 87. At this point, a core group of individuals — affiliated with CEC and the Sponsors and who at that time controlled and implemented every significant aspect of Caesars' strategic direction — agreed upon and conspired in a multi-faceted scheme to strip CEOC of valuable assets, to compel CEOC to enter into damaging financial transactions, and to otherwise position CEC and the Sponsors to benefit from CEOC's inevitable bankruptcy or major restructuring. This core group of individuals included the conflicted members of the CEC and CEOC boards - CEC's Loveman, Cohen, and Hession; Apollo's Rowan and Sambur; and TPG's Bonderman and Davis (collectively, the "Conflicted Directors") — who stood to benefit financially from the transactions they conceived, implemented, and approved. Paul Weiss assisted and participated in the Conflicted Directors' scheme. 88. A presentation that Apollo prepared and circulated to its co-conspirators in October 2012 described the plan. That presentation proposed what would become the transfer of CEOC's Planet Hollywood and CEOC's interest in the Baltimore Horseshoe casino, and it called for the creation of a new entity outside of CEC and CEOC — owned and controlled by CEC and the Sponsors but unburdened by CEOC's crushing debts — to take ownership of the assets. The presentation pointed out that CEC and the Sponsors could use this new entity to purchase a "controlling stake in strategically valuable unencumbered assets." It also observed that the transaction provided "ancillary benefits in the event of a restructuring," including the ability to "strengthen our hand in a potential restructuring with as little capital outlay as possible." Even more candidly, it admitted that a "transaction like this is the only way we see it to 'have our cake and eat it too'." 89. The conspirators implemented their plan over the ensuing two years. In that period, they stripped CEOC almost entirely of its valuable properties in Las Vegas, transferred 32 EFTA01091565 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 34 of 212 control over CEOC's invaluable intellectual property and property management business to a "bankruptcy remote" entity, forced CEOC to repay the entirety of its intercompany revolver with CEC, and engaged CEOC in financial transactions aimed to benefit CEC and the Sponsors. As detailed throughout this Complaint, the conspirators performed countless overt acts in furtherance of their scheme, from the transactions themselves to repeated efforts to reduce the consideration paid to CEOC; used a variety of machinations to obtain valuation opinions from financial advisors with terms and ranges beneficial to CEC and the Sponsors; made misrepresentations concerning the origins of the transactions; and concealed material information that contradicted their goals. 90. Throughout the course of their scheme, the conspirators knew that CEOC's insolvency complicated their efforts to take assets from CEOC. The October 2012 presentation observed that a "[n]ovel transaction like this is more difficult to do should things get more dire" and that the "legal analysis gets more difficult with passage of time." From the inception of their scheme, Paul Weiss researched — and discussed with the other conspirators — the bankruptcy and litigation risks raised by their asset transfer schemes, as well as the conflicts of interest posed by the fact that the same individuals served on both the CEC and CEOC boards and that Paul Weiss represented parties with divergent interests. 91. Despite — or, perhaps, because of— this knowledge, an indispensible feature of the conspirators' scheme was to ensure that they completely controlled the process by which the asset transfers and financial transactions were structured, evaluated, and approved. They selected the assets to be transferred and they initiated the financial transactions. They suggested, established, and negotiated the financial terms of the transactions. They chose and controlled the financial advisors and any special committees used to evaluate the consideration to be paid to 33 EFTA01091566 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 35 of 212 CEOC. The conspirators made certain that there were no meaningful controls in place to advocate for and protect CEOC's independent interests. They assured that CEOC, despite its insolvency and divergent interests from CEC, would have no role in the negotiation of financial terms, no independent legal or financial advisors, and no independent board members. As a result, CEOC had no one to negotiate the fair value of the properties or challenge the specious arguments, counter-factual assumptions, and misinformation that the conspirators advanced to implement their plan. F. THE SECOND PRIORITY NOTES AND THE INDENTURES. 92. On December 24, 2008, pursuant to an indenture of even date among CEOC, CEC, and U.S. Bank National Association, as trustee (as supplemented or amended, the "2008 Indenture"), CEOC issued $214.8 million aggregate principal amount of 10.00% second-priority senior secured notes due 2015 and $847.6 million aggregate principal amount of 10.00% second- priority senior secured notes due 2018. On that same day, CEOC and certain of its subsidiaries entered into a Second Lien Collateral Agreement, whereby CEOC and those subsidiaries granted liens on substantially all of their assets to secure the obligations under the 2008 Indenture. In addition, pursuant to the 2008 Indenture, CEC guaranteed CEOC's obligations under the 2008 Indenture and the notes issued pursuant to the 2008 Indenture (with other CEC guarantees of CEOC's notes, the "Bond Guarantees"). 93. On April 15, 2009, CEOC issued $3.71 billion aggregate principal amount of 10.00% second-priority senior secured notes due 2018, pursuant to an indenture of that date (the "2009 Indenture") among CEOC, CEC, and U.S. Bank, in its capacities as predecessor trustee and collateral agent. The obligations under the 2009 Indenture are secured by liens against substantially all of CEOC's assets and certain of its subsidiaries' assets pursuant to the Second 34 EFTA01091567 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 36 of 212 Lien Collateral Agreement. Under to the 2009 Indenture, CEC also guaranteed CEOC's obligations to the noteholders. 94. On April 16, 2010, CEOC issued $750 million aggregate principal amount of 12.75% second-priority senior secured notes due 2018, pursuant to an indenture, dated as of that date, among CEOC, CEC, and U.S. Bank, as trustee and collateral agent (as supplemented or amended, the "2010 Indenture" and, collectively with the 2008 Indenture and the 2009 Indenture, the "Indentures"). The obligations under the 2010 Indenture are also secured by liens against substantially all of CEOC's and certain of its subsidiaries' assets pursuant to the Second Lien Collateral Agreement. Pursuant to the 2010 Indenture, CEC guaranteed CEOC's obligations to the noteholders. 95. On February 5, 2015, the Official Committee of Second Lien Noteholders was appointed by the Office of the United States Trustee to represent the interests of all holders of the notes (the "Second Priority Notes") issued by CEOC under the Indentures. G. CAESARS' BUSINESS PLAN. 1. Caesars' Success Is Driven By Synergies. 96. Commercial gaming is built on a business model that is attractive to investors. At its most basic level, thanks to the law of large numbers, gaming is a business where the customer buys a dollar worth of chips with the expectation over time of receiving (I) entertainment value and (2) 80-90 cents in return. Thus, the more time a casino can keep its customers gaming (or shopping, staying, eating, and drinking) in its properties the better. Caesars, in its form at the time of the LBO transaction, largely had been structured to maximize the amount of time its customers spent in Caesars' properties, both on an absolute basis and relative to the properties of its competitors. Caesars did this by capitalizing on three key categories of synergies. 35 EFTA01091568 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 37 of 212 97. The first was the synergies created by the structure of Caesars itself— in particular, the sheer scale of the company and its geographic diversity. Over the course of many years, Caesars had developed a network of local and regional casinos that extended its brand into global markets, including properties in virtually every gaming market of significance in the United States. Many of these local and regional casinos were only modestly profitable in their own right; however, they provided Caesars with the critical ability to interact with potential customers of its destination Las Vegas properties in their home markets. This hub-and-spoke system increased Caesars' revenues by incentivizing Caesars' large international and domestic customer base to patronize its Las Vegas casinos when customers visited there. The system also benefited the regional properties, whose affiliation with the Las Vegas properties encouraged customers to visit local Caesars properties rather than competitors' properties. 98. The second category was the synergies created by Caesars' assemblage of properties on the Las Vegas Strip. Over time and through a number of acquisitions preceding the LBO transaction, Caesars developed a dominant and concentrated presence in the center of the Las Vegas Strip (which it called "the 50 yard line"), including properties such as Caesars Palace, Paris Las Vegas, Bally's Las Vegas, The Cromwell, Harrah's Las Vegas, and The Quad, as well as surrounding undeveloped land. After the LBO, Caesars continued to build this presence through the acquisition of the Planet Hollywood casino and the development of the Linq retail and entertainment venue. Caesars' strategy to anchor its business model at the key intersection of Flamingo Road and Las Vegas Boulevard was intended to assure that, once brought to Las Vegas, customers would stay within the Caesars system. 99. The third category of synergies was Caesars' Total Rewards customer loyalty program. Total Rewards was the brainchild of defendant Gary Loveman, an academic who holds 36 EFTA01091569 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 38 of 212 a doctorate in economics and taught at Harvard Business School. Loveman was an expert in loyalty management programs, having implemented them for such companies as Disney, McDonald's, and American Airlines in the 1990s. In 1998, Harrah's hired him to become its Chief Operating Officer. 2. Total Rewards: "The Key To The Empire." 100. Total Rewards serves several functions, the foremost of which is to incentivize every Caesars customer to focus his or her gaming and entertainment spend exclusively on Caesars properties. It is, at once, the system by which Caesars observes and records the preferences, activity, and spending of individual customers; compiles data about customer preferences and interests; optimizes its promotional offerings to customers; creates incentives for customers to spend money at its properties; keeps customers within the Caesars casino, hotel, entertainment, and retail ecosystem; and serves as a communication channel between Caesars and its customers. In so doing, Total Rewards is the engine that drives and optimizes the synergies of Caesars' broad network of properties. It is, as CEC itself has claimed, "The Key to the Empire." 101. Total Rewards currently boasts 46 million customers, and Caesars estimates that seven million customers are active at any given time. Upon joining Total Rewards, Caesars customers are issued a membership card, which they swipe whenever they gamble, drink, dine, or shop at a Caesars property. In return, customers receive Rewards Credits they can redeem for food, lodging, and other purposes at all of Caesars properties, as well as for perks through partner organizations. Total Rewards sets consistent and transparent earnings rates for Reward Credits and recognizes a member's status consistently across properties. According to its 37 EFTA01091570 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 39 of 212 members, the most valuable feature of Total Rewards is that its members can redeem Reward Credits at any Caesars property, regardless of where the Reward Credits were earned. 102. Underlying Total Rewards is an extensive database containing information about Caesars' customers, which the program collects as customers use their cards. This data — "big data" — reveals useful information about customer spending, such as the days of the week and the times of days customers patronize CEOC properties; what they spend money on and where they spend it; what sort of dining, shopping, and gambling they prefer; what CEOC properties they frequent; and, most fundamentally, how much money they spend, or can be expected to spend. 103. Caesars' software tracks its customers' activities on both an individual and a general level. Caesars then tailors its product offerings and business strategy accordingly. In particular, Caesars uses Total Rewards to target selected customers with marketing promotions, to drive traffic to specific properties or particular products, and as a way to reach its customers by direct mail, social media, and other means. Total Rewards also employs sophisticated prediction models to compare actual customer behavior with predicted behavior. 104. Through these advanced analytics, Total Rewards has improved the "win per position" at the casinos in its network. For example, in the twelve months preceding June 30, 2013, CEC had a 15% and 21% fair share premium in its destination and regional markets, respectively, versus competitors. As a result, with virtually identical gaming machines or tables, and presumably a very similar cost structure, CEC properties generated significant incremental gaming revenue per position, per day, across its portfolio of properties compared to its competitors. 105. It was this system that allowed Caesars to build its extensive network of properties and realize its plan to collect customers nationwide and drive them to its marquis 38 EFTA01091571 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 40 of 212 properties in Las Vegas. And when those customers do travel to Las Vegas, promotional offers encourage them to stay in Caesars hotels, dine at Caesars restaurants, entertain themselves at Caesars venues, and gamble at Caesars casinos. Caesars thus generates significant cross-market play, or "cross play," as customers move from one casino to another. The Sponsors and Caesars have repeatedly credited Total Rewards as the key to its business success. In a 2013 offering memorandum, for example, CEC disclosed: Caesars Entertainment revolutionized the approach the gaming industry takes with respect to marketing by introducing the Total Rewards loyalty program in 1997. Continual improvements have been made throughout the years enabling the system to remain the most effective in the industry and enabling Caesars Entertainment to grow and sustain revenues more efficiently than its largest competitors and generate cross-market play, which is defined as play by a guest in one of Caesars Entertainment's properties outside its home market, which is where the guest signed up for Total Rewards. To support the Total Rewards loyalty program, Caesars Entertainment created the Winner's Information Network, or WINet, the industry's first sophisticated nationwide customer database. In combination, these systems supported the first technology-based customer relationship management strategy implemented in the gaming industry and have enabled Caesars Entertainment's management teams to enhance overall operating results at its properties. CERP Preliminary Offering Memorandum, dated September 24, 2013, at 2, available at CEC 8- K (Sept. 24, 2013). 106. After coming to Harrah's as its Chief Operating Officer in 1998, Loveman became its Chief Executive Officer in 2003 and its Chairman in 2005. Loveman has consistently extolled the importance of Total Rewards to Caesars' business. In a 2003 Harvard Business Review article, Loveman wrote that "we've come out on top in the casino wars by mining our customer data deeply, running marketing experiments, and using the results to develop and implement finely tuned marketing and service-delivery strategies that keep our customers 39 EFTA01091572 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 41 of 212 coming back." Gary W. Loveman, Diamonds in the Data Mine, Ham Bus. Rev. (May 2003). As Loveman explained, the depth of the database that he created, coupled with the ability to use Total Rewards at multiple properties, was critical to its effectiveness: "It's important to note that our database strategy hinged on our ability to combine data from all of our properties, so customers could use their reward cards in multiple locations. Combining transactional data from all our sites was so important that we developed and ultimately patented the technology to do it." Id. 107. Total Rewards has unquestionably driven Caesars' growth and profits. For example, in its first year of operations as part of the Caesars network, the revenues at Planet Hollywood increased by 24%. Likewise, when Harrah's Chester opened in Pennsylvania in 2007 as the second casino in the area and in a less desirable location than its competitors, its first-year revenue still outperformed its competitors by 6%. Caesars attributed that success to leveraging its Total Rewards program and its preexisting relationships with members in the area. By contrast, after Harrah's East Chicago, Indiana casino was sold, and thus taken out of the Total Rewards program, there was a material drop in its gross gaming revenue; tellingly, there also was a corresponding increase in play at Harrah's other properties from Total Rewards members who had exclusively patronized the East Chicago casino before it was sold. CEOC'S UNLAWFUL TRANSFERS 108. At the direction of the Sponsors and with the help of Paul Weiss and other advisors, CEC's board undertook a series of transactions between 2009 and 2014 to reorganize Caesars into a "Good Caesars" and a "Bad Caesars." The plan was to transfer CEOC's more valuable, higher-growth properties to affiliates owned and controlled by the Sponsors and CEC (the "Good Caesars"), while leaving the low-growth or no-growth (and, often, money-losing) 40 EFTA01091573 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 42 of 212 properties and massive acquisition debt at CEOC (the "Bad Caesars"). Freed from the demands of debt service, "Good Caesars" would prosper. Meanwhile, CEOC — the "Bad Caesars" — would flounder until its creditors agreed to restructure their debt or CEOC simply erased its debt in a bankruptcy filing. 109. At the heart of the Sponsors' plan was the strategy of transferring to the Good Caesars those CEOC assets with a promising future. This included its burgeoning online gaming business, its well-known World Series of Poker franchise, CEOC's valuable Las Vegas properties, and its strategic and irreplaceable Total Rewards program. This was planned as a series of steps, with a new transfer being undertaken after the last one closed. Under the pretext of creating "liquidity" for CEOC or "extending the runway," the Sponsors and CEC were, in truth, simply stealing CEOC's assets and hastening its demise. 110. The transfer of these key assets meant, among other things, that the synergies of the Caesars hub-and-spoke system and the economies of scale and marketing advantages arising from the contiguous properties CEOC had assembled were moved from CEOC to affiliates of CEC, such as CIE, CERP, Growth Partners, and Caesars Enterprise Services. In terms of particular casinos, CEOC was left with only Caesars Palace in Las Vegas (and because the conjoined Octavius Tower is no longer owned by CEOC, in reality CEOC now has only part of Caesars Palace) and local and regional casinos that primarily served to drive traffic to CEOC's Las Vegas properties — which now were not CEOC's anymore. These critical assets were transferred for inadequate consideration and for less than reasonably equivalent value. Completely lacking independence, CEOC's board rubber-stamped the transfers, usually without even bothering to have a board meeting. 41 EFTA01091574 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 43 of 212 Ill. The divestment of CEOC's Las Vegas properties changed the character of CEOC itself. Previously, CEOC was an enterprise centered on its Las Vegas properties and was valued by the multiples of EBITDA commonly used for Las Vegas-based gaming companies. Today, though, CEOC has only one significant property in Las Vegas. As a result, CEOC is now generally viewed simply as a regional gaming company. Accordingly, it is valued by the market at a lower multiple of EBITDA than it would have been but for the asset transfers. A. TRANSFER OF CAESARS' ONLINE GAMING BUSINESS. 112. One of CEOC's most promising corporate opportunities was the advent of online gaming, which included both the opportunity for online customers to play for fun ("PFF") and, if and when permitted by state gaming laws, "real money" games. Even before the LBO, Caesars had begun to explore online gaming opportunities, established an internal working group, and retained the consulting firm of Booz Allen Hamilton to advise it about online business opportunities. A January 2008 Booz Allen report contemplated that meaningful revenue would be earned from PFF and found that CEOC's online business already had 45,000 unique monthly visitors, each playing an average of thirteen games. A September 2009 presentation to the CEC board estimated that PFF could produce $10 million to $15 million in EBITDA. That spring and summer, a Caesars management internal working group and representatives of the Sponsors studied how to expand CEOC's online gaming business. Moreover, upon information and belief, during this time frame, CEOC was already entering into partnerships that gave its brands a presence in social and mobile gaming 113. CEOC already had a ready advantage in this online market because of its long- time sponsorship of the well-known World Series of Poker ("WSOP") and its ownership, control, and licensing of the intellectual property associated with WSOP. Although it was 42 EFTA01091575 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 44 of 212 uncertain if and when Congress or state legislatures would legalize "real money" online gaming, the enormous revenue potential was obvious. [TO BE INSERTED] An October 2012 presentation prepared by Apollo described expanded online poker as one of the "[c]ompelling upside opportunities." 114. In any event, not long after the LBO, the Sponsors and CEC decided to usurp the corporate opportunities and considered a variety of options and structures to help them do so. In 2008, Caesars hired Mitch Garber, an entrepreneur experienced in the online gaming market, to help them enter the market. Garber became a full-time Caesars employee in January 2009. 115. Ultimately, CEC and the Sponsors decided that the online gaming business should be moved to CEC, with a significant equity stake also going to Garber and other executives of the business. In April 2009, CEC formed Harrah's Interactive Entertainment ("HIE") — now known as Caesars Interactive Entertainment ("CIE") — as a subsidiary of CEC.6 The sole purpose of CIE was to receive this intellectual property from CEOC and exploit the opportunities in online gaming. 116. The CEC board approved the transfer of CEOC's online gaming business at a board meeting held on April 30, 2009. [TO BE INSERTED] The two-person CEOC board — which consisted of Loveman and Halkyard — approved the transfer by signing a boilerplate written consent that same day. Loveman and Halkyard gave no meaningful consideration to the transaction and, in fact, did not even bother to hold a board meeting. 117. On May I, 2009, in a series of back-to-back transactions, CEOC transferred its ownership in the WSOP trademark, related intellectual property, and all of its sponsorship, 6 CEC failed to disclose that CIE was a subsidiary of CEC until March 15, 2012, when the formation of Acquisition and Growth Partners was announced. Even then, that "disclosure" was buried in notes to CEC's financial statements. 43 EFTA01091576 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 45 of 212 media, and licensing contracts to CEC. CEC accomplished this by having CEOC transfer these assets to a newly formed, CEC-owned holding company, HIE Holdings Topco ("TopCo"), with a license back to CEOC of rights to use the intellectual property in WSOP events held on CEOC's own properties. TopCo then transferred the assets to an intermediate holding company, HIE Holdings, which then transferred the assets to CIE. In return, CEOC received 150,000 shares of preferred stock and 1,000 shares of common stock of TopCo, which in turn held 150,000 preferred shares in HIE Holdings. However, CEC had all of the voting stock and 90,000 preferred shares in HIE Holdings, which in turn owned 87.1% of HIE. 118. A sloppy, hurried, and deeply-flawed opinion from Duff & Phelps on April 30, 2009, valued the rights CEOC transferred (net of the license back) at $15 million, although the dilution CEOC suffered in the three-tiered CIE holding company structure meant that CEOC received substantially less. Duff & Phelps' method of valuing CEOC's intellectual property was improper. Duff & Phelps relied upon projections provided by a member of Garber's team, who had a motive to undervalue CEOC's contribution since he himself would be getting equity in CIE. The projections were inconsistent with and materially below the projections Caesars had prepared and used in the ordinary course of its business. Duff & Phelps also ignored other evidence of the value of the WSOP intellectual property and used an exaggerated discount rate. Moreover, Duff & Phelps did not take into consideration any of the enormous upside that featured so prominently in the multiple valuations and analyses previously prepared by Caesars and its consultants, including the potential legalization of online gambling and PFF gaming. 119. There was no reason why this corporate opportunity could not have stayed with, and been exploited by, CEOC. CEOC already controlled the WSOP trademark and associated intellectual property and, of course, was prominent in the gaming space overall. Moreover, 44 EFTA01091577 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 46 of 212 while CEOC was financially pressed by 2009, it had the financial resources to support its entry into the online gaming space, as shown by its ability to fund other business initiatives. 120. The lack of process in the transfer of WSOP's intellectual property and Caesars' online gaming business is striking. The price of the WSOP rights was not negotiated at arm's length; in fact, there is no evidence that anyone actually negotiated the $15 million price at all, and certainly no one negotiated it on behalf of CEOC. None of the intellectual property transferred was offered to any third-party buyer or investor and none was subject to any marketing process to ensure that CEOC could maximize the value of the transferred assets. There was no special committee of independent directors formed from CEOC's board to review the deal (and, in fact, CEOC had no independent directors). CEOC did not have independent lawyers or advisors to represent it, and no analysis was done of CEOC's solvency. Similarly, the CEOC board gave no consideration to whether CEOC should have received any value for the potential upside of its online gaming business, whether CEOC should have had a means in sharing in CIE's upside, or even whether the TopCo preferred stock CEOC received really was worth $15 million. 121. Instead, the entire process was dominated by CEC and the Sponsors. It was they who conceived of the idea of transferring CEOC's intellectual property to an entity which they controlled, who retained Duff & Phelps to value the assets, who decided upon the deal structure, and who set the price for the transfer. All of the transaction documents on behalf of every single Caesars entity, including CIE and CEOC, were signed by one person, CEC's CFO Jonathan Halkyard. 122. The consideration CEOC received for the transfer of its WSOP intellectual property was grossly inadequate. Although nominally worth $15 million, the TopCo preferred 45 EFTA01091578 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 47 of 212 stock CEOC received probably was worth less than $12 million. By contrast, the value of the assets CEOC transferred — even ignoring their enormous upside potential — easily exceeded $60 million. More fundamentally, the transaction CEC and the Sponsors engineered was designed to usurp the valuable future corporate opportunity CEOC expected in the online gaming space. Even before the Sponsors had completed the LBO in 2008, CEOC had been exploring these opportunities, using PFF to expand into broader forms of social gaming and online real money games and leveraging its existing franchise in the WSOP. However, those opportunities were diverted to CIE which, in turn, is mainly owned by CEC. Upon information and belief, the damages to CEOC from this usurpation of corporate opportunity exceed $1 billion. B. CEOC INTERCOMPANY LOAN TO CEC. 123. In 2009, CEOC borrowed $235 million and made an intercompany loan of that amount to CEC. CEC did not pay any interest on this loan, despite the fact that CEOC itself had paid about $5.8 million in interest to borrow the money to lend to CEC. 124. There is no evidence that CEOC received anything of value in return for its interest-free loan to CEC, that the CEOC board did anything to consider the reasonableness of the loan, or that CEOC's board even approved it. C. 2010 CMBS LOAN AGREEMENT AMENDMENT AND TRADEMARKS TRANSFER. 125. At the time of the 2008 LBO, CEOC transferred six properties (the Flamingo Las Vegas, Paris Las Vegas, Rio Las Vegas, Harrah's Las Vegas, Harrah's Atlantic City, and Harrah's Laughlin (collectively the "CMBS Properties")) to CEC to facilitate CEC's efforts to raise $6.5 billion in debt secured by the properties. Both before and after the transfer, the CMBS Properties used intellectual property assets, such as their trademarks and other intellectual property associated with the properties' casinos, restaurants, shops, and other activities (the 46 EFTA01091579 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 48 of 212 "CMBS IF') in the course of their business. The CMBS IP was held and owned by a CEOC subsidiary known as Caesars License Company, LLC ("CLC"). 126. Upon information and belief, CLC had no operations or premises independent from those of CEOC and was formed solely to serve as the nominal holder of intellectual property owned by CEOC. Upon information and belief, CEOC was the sole member of CLC, appointed all of its officers and dominated all aspects of CLC's business and operations. Accordingly, CEOC and CLC are appropriately viewed as alter egos and the acts, decisions, and assets of CLC should be viewed as the acts, decisions, and assets of CEOC itself. 127. In the years after the LBO, the Sponsors and the CMBS lenders discussed possibly restructuring the CMBS loans. Among other things, the CMBS lenders sought to improve their position in the event they decided to foreclose on a CMBS property by obtaining either the right to require Caesars to continue to operate the properties after foreclosure or the right to withdraw the properties from the Caesars system but have the continuing ability to use the CMBS IP. This latter option would require CEOC to give the CMBS lenders a license to the CMBS IP. 128. CEOC, through CLC, owned the CMBS IP and should have had the right to charge a substantial amount for any license to use it. However, the negotiations with the CMBS lenders were handled by David Sambur of Apollo, not by anyone representing CEOC. As a result, these assets were taken from CEOC for almost nothing. 129. Because CLC was not a party to the CMBS loan documents, a complicated structure was used to transfer the CMBS IP from CLC to each of the CMBS PropCos. This was done by amending existing licenses and executing assignments of CLC's rights. Specifically, on August 31, 2010, CLC executed intellectual property assignment agreements with each CMBS 47 EFTA01091580 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 49 of 212 PropCo by which CLC assigned all of its right, title, and interest in the relevant CMBS IP to the PropCo. In return, CLC received $100 from each PropCo. Simultaneously, the parties executed Amended and Restated License Agreements, in which each of the CMBS PropCos granted to both CLC and CEOC non-exclusive, limited-use, royalty-free, and nontransferable licenses to the CMBS intellectual property in exchange for $100. The Amended and Restated License Agreements also contained a reversionary clause providing that, if and when the CMBS debt was repaid, the CMBS PropCos would give CLC an exclusive royalty-free, irrevocable, transferable, and sublicensable license to use the CMBS IP. 130. The effect of these agreements, then, was (a) to have the CMBS PropCos each pay CLC $100 for the wholesale transfer of CLC's intellectual property rights, (b) to have CLC and CEOC repay each PropCo the $100 for limited licenses to that same intellectual property, and (c) to arrange for CLC to have a reversionary interest in the intellectual property when the CMBS loans were repaid. Put another way, CLC conveyed its intellectual property rights to the CMBS Properties for the term of the loans for no consideration. The amendment to the CMBS Loan Agreement and the transfer of the CMBS IP closed on August 31, 2010. 131. The CMBS Trademarks were, and are, extremely valuable. The book value of the intellectual property has been calculated as high as $320.9 million, and even conservative analyses value the trademarks at no less than $42 million and probably far more. 132. As with other asset transfers, CEOC and its wholly owned subsidiary, CLC, did not have the benefit of independent directors, independent lawyers, independent advisors, or a fair and open process. Nor was a fairness opinion solicited or received on CEOC's or CLC's behalf. Instead, the transfers were decided upon, negotiated, and documented by Sambur, the Sponsors, CEC, and advisors to CEC and the CMBS PropCos. In fact, CEOC and CLC were so 48 EFTA01091581 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 50 of 212 far removed from the process that there is no evidence that the boards of CEOC or CLC even executed approvals, consents, or authorizations for the transfers. D. TAX REFUND. 133. For the taxable years 2005 through 2008, CEOC was a member of the CEC consolidated group for tax purposes ("CEC Group"). In 2009, the CEC Group reported a net operating loss ("NOL") and carried it back to the 2006 and 2008 tax years by filing a tentative refund claim on Form 1139 Corporation Application for Tentative Refund in October 2010. The 2009 NOL carryback generated a Federal income tax refund ("2009 Refund") based in part upon a comparison between the CEC Group NOL and the amount of income taxes reported by the CEC Group from 2005 to 2008, some of which was attributable to CEOC. 134. In March 2011, CEOC was credited with $220.8 million, the cash amount of the 2009 Refund provided to the CEC Group. CEOC, however, was owed $55.8 million above and beyond that credit. CEC did not credit or otherwise pay CEOC this amount and failed to provide any justification for failing to do so. Moreover, there is no indication that CEOC was even aware of its right to any portion of the 2009 Refund until March 17, 2011, when CEC filed its 2010 Form 10-K. 135. In addition to the 2009 Refund, CEC did not fairly compensate CEOC for CEC's use of the NOLs that CEOC and the other Debtors generated. Non-debtors, including CEC, used approximately $4.02 billion of the NOLs without any compensation to CEOC or recognition that — had these NOLs not been used by the non-Debtors — they would have been available to the Debtors to be applied against future taxable income. 49 EFTA01091582 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 51 of 212 136. Because the non-Debtors, including CEC, never paid CEOC or the other Debtors for use of these NOLs, CEOC is entitled to the value of the lost economic benefit from the utilization of these NOLs by the non-Debtors. E. 2011 EASEMENT ON UNDEVELOPED LAND. 137. In 2011, various CEOC affiliates granted affiliates of CEC easements over four lots of unimproved Las Vegas real estate, comprising approximately 25.8 acres, directly east of The Linq, The Cromwell, and the Flamingo Las Vegas Hotel & Casino. The transferees — the "Easement Transferees" — were Flamingo Las Vegas Propco, LLC, Imperial Palace Corporation (now known as 3535 LV Corp.), and Caesars Linq, LLC. 138. Two of the transferees make an annual payment to CEOC for granting the easements of about $1.7 million, subject to annual 3% increases; however, a third transferee — Flamingo Las Vegas PropCo — has paid nothing for the easement granted to it. Granting the easement diminished CEOC's value by as much as $60 million, and correspondingly increased the value of the transferees. 139. There is no evidence that CEOC followed any governance process in reaching the decision to grant the easement, that it used any marketing process to price or sell the easements, that it offered the easements to any third party on an arm's-length basis, that the decision to grant the easement was made by disinterested directors of CEOC, that CEOC engaged independent financial or legal advisors to review the granting of the easement, or that CEOC requested or received a fairness opinion about the transfer. In fact, there is no evidence that CEOC's board was even asked to consider or approve the transfer, or did. 50 EFTA01091583 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 52 of 212 F. 2011 WSOP TRANSACTION. 140. The 2009 transfer of CEOC's WSOP intellectual property rights left CEOC with a residual business of hosting live, in-person WSOP tournaments ("WSOP Tournament Rights"). In 2011, however, CEC and the Sponsors, with the help of Paul Weiss, decided that the time had come to take these assets, too, away from CEOC. 141. Planning for this transfer began in mid-2010. As with the May 2009 transfer of WSOP's trademarks and intellectual property and CEOC's online gaming business, the negotiations essentially were between CEC and CIE, even though the assets being sold belonged to CEOC. Moreover, since CEC owned the vast majority of CIE equity, the discussions basically involved CEC talking with itself. Over a year and a half of discussion, the price CIE contemplated paying CEOC for its WSOP Tournament Rights steadily fell from as much as $55 million to $38 million to $30 million to $25 million, finally dropping to $20.5 million. 142. The 2011 WSOP Transaction, which closed on September 1, 2011, consisted of a series of interrelated transfers. First, CEC created a new wholly-owned subsidiary called Caesars Tournament, LLC ("Cr), which "paid" CEOC $20.5 million for its rights to host the WSOP tournament. CT then sublicensed those rights to CEC for five years for a yearly license fee of $2 million. Next, CIE purchased the rights from CT for $20.5 million and replaced the sublicense between CT and CEC with one directly between CIE and CEC for the same term of years and same annual license fee. CEC then granted CERP's Rio Las Vegas property the right to operate the WSOP tournaments for $2 million per year. Finally, CIE granted CEC the right to operate certain live WSOP tournament events for a per-event fee. 143. Lost in all of this complexity was any legitimate negotiation with CEOC, any meaningful board process, or any tangible economic benefit to CEOC. No independent law firm 51 EFTA01091584 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 53 of 212 represented CEOC: instead, the firm of Paul Weiss represented all of the entities - CEC, CEOC, CIE, and CT — involved in the deal. CEOC's board consisted of two inside directors — Loveman and Halkyard, who were the CEO and CFO, respectively, of CEC. Both were clearly conflicted, and neither reviewed the transaction in his capacity as a CEOC director. Upon information and belief, this transaction was never presented to the CEOC board for review or approval; it was instead approved by CEC's board alone. Halkyard signed the numerous transaction agreements on behalf of all non-CIE entities to the transactions, including CEOC, CEC, and CT. 144. As with the earlier transfer of WSOP's trademarks and intellectual property and CEOC's online gaming business, the transfer of the WSOP Tournament Rights was one-sided and unfair to CEOC. The price, terms, and conditions were not negotiated at arm's-length. The Tournament Rights were not offered to any true third-party buyers or investors and it was not subject to any marketing process to ensure that CEOC could maximize the value of the transferred assets. There was no special committee of independent directors formed of CEOC's board to review the deal, nor did CEOC ask for or receive a fairness opinion. The process was initiated by CEC, managed by CEC, negotiated by CEC, priced by CEC, and structured by CEC to assure that there would be no serious outside review of the transaction or its economics. 145. Although the CEC board engaged a financial advisor named Valuation Research Corporation ("VRC") to issue an opinion about the transaction, VRC's analysis was superficial and useless. Among other things, VRC inexplicably reduced forecasted revenues by speculating that the tournament would be moved to an unattractive location, failed to account for gaming revenues tied to entrants in WSOP, subtracted an EBITDA adjustment from hotel revenues, ignored non-financial benefits in valuing the WSOP Tournament Rights, used an unsourced 52 EFTA01091585 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 54 of 212 percentage to calculate incremental gaming revenue, and failed to include revenue from spectators at the events. 146. As a result of this one-sided process, CEOC received the nominal consideration of $20.5 million for surrendering the right to host the world's leading poker tournament. And, in fact, CEOC did not actually receive $20.5 million in cash — or any cash at all — for the asset; instead, CEC simply wrote down the balance of CEOC's $310 million intercompany debt to CEC by this amount, leaving a balance of $289.5 million. This amount does not constitute reasonably equivalent value, as the asset was worth at least $50 million at the time of the transfer. G. LINQ AND OCTAVIUS TRANSFERS. 147. At the time of the 2008 LBO, Caesars borrowed $6.5 billion secured upon the CMBS Properties (the "CMBS Debt"). To make the properties available as security for these loans, CEC had CEOC transfer them to CEC, which then placed them into Rio Properties, a CEC subsidiary. 148. In late 2012, CEC decided to refinance the CMBS Debt. During the ongoing recession, among other things, credit conditions changed and the credit markets required lower loan to value ratios, creating an "equity gap" that had to be filled before lenders would consent to a refinancing. Unwilling to invest their own money in this effort, CEC and the Sponsors decided to plug the equity gap by simply taking properties from CEOC. 149. The two CEOC properties CEC and the Sponsors focused on were both recently built (or not yet completed) properties in Las Vegas. One was Project Linq — pronounced "link" — a dining, entertainment, and retail development corridor that connected Caesars' Flamingo Casino and The Quad Resort & Casino on the east side of the Las Vegas Strip. Linq was 53 EFTA01091586 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 55 of 212 especially important to Caesars because of its location at the heart of the Strip across the street from Caesars Palace and in the midst of six other Caesars properties. Linq was the conduit connecting the assemblage of Caesars properties in Las Vegas, reinforcing the physical synergies CEOC had patiently developed over the years. 150. The other property was the Octavius Tower, a 23-story, VIP luxury hotel complex that featured 662 guest rooms, 60 suites, and six villas. Octavius was the newest of the six hotel towers that comprise the Las Vegas Caesars Palace complex, and it was located immediately next to, and structurally integrated into, the Caesars Palace casino itself. Control of Octavius would give its owner significant ability to influence access to Caesars Palace and its value, future, and use. 151. Linq and Octavius were enormously valuable. By the fall of 2013, CEOC had spent $878 million building Linq and Octavius, and CEOC projected that Linq alone would generate between $68 million and $103 million annually in EBITDA. In addition, Linq and Octavius were integral to CEOC's synergies in Las Vegas, since Linq would be a conduit connecting several CEOC properties and Octavius was the newest part of the Caesars Palace complex. Thus, the Sponsors and CEC knew all too well that selling the properties would undermine CEOC's value. In fact, TPG's Bonderman wrote Rowan in 2009 that "alienating the [Octavius] Tower by selling it or leasing it to someone else for long term is likely to turn out to be a bad idea. The Octavius Tower was planned and built as an integral part of our core property, and I suspect that losing control of that will be value destructive over time." 152. CEOC, of course, was not an obligor on the CMBS Debt and had no reason to contribute assets to plug the CMBS equity gap. In fact, the Sponsors' plan would actually be detrimental to CEOC. In addition to taking two valuable properties away from CEOC, CEC 54 EFTA01091587 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 56 of 212 intended as part of the refinancing to create a new entity — Caesars Entertainment Resort Properties, LLC ("CERP") — that would ultimately own Linq and Octavius as well as the existing CMBS Properties. Six of these eight properties were in Las Vegas, creating in essence a formidable standalone competitor to CEOC. 153. It was Apollo that conceived of, planned, structured, and executed the strategy. From the beginning, Apollo partners Rowan and Sambur struggled to find ways to take Linq and Octavius from CEOC without paying CEOC anything of value in return. These included inventing farfetched theories of valuation, making up scenarios where CEOC purportedly would benefit from the refinancing (and thus receive valuable consideration by helping the refinancing effort by selling Linq and Octavius cheaply), offering implausible assumptions about CEOC's business and the future of Linq and Octavius, using constantly changing and internally inconsistent valuation standards and, when confronted by experts who rejected Apollo's tactics, simply devising new and equally flimsy excuses to pay CEOC far less than what the two properties were worth. Helping Apollo, Paul Weiss was intimately involved in every stage of the deal. 154. With no alternative but to admit that CEC was in a position of hopeless conflict, Apollo and Paul Weiss arranged to have CEC get an opinion that CEOC was receiving "reasonably equivalent" value for the transfer of the two properties to CERP. Apollo and Paul Weiss chose Perella Weinberg Partners ("Perella") to provide the opinion. However, throughout this process, it was Apollo and Paul Weiss — and not CEOC — who dealt with Perella. 155. Apollo's goal was to avoid paying CEOC any tangible consideration. Through and with the assistance of Paul Weiss, Apollo proposed a succession of specious arguments to justify this outcome. One argument hinged on the fact that the CMBS Properties paid CEOC for 55 EFTA01091588 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 57 of 212 certain shared service expenses ("allocated CMBS expenses") relating to the CMBS Properties. Apollo argued that — if the CMBS Debt were not refinanced — the CMBS Properties might go bankrupt and then stop paying their share of these expenses, leaving CEOC with the full burden of some, if not all, of these expenses. Thus, Apollo maintained, CEOC would receive an intangible benefit from the refinancing by eliminating this risk, the value of which could be calculated by applying a multiple to the amount of expense reimbursements that were in jeopardy. 156. A second theory was even more ridiculous. CEC had guaranteed CEOC's debts and also guaranteed the CMBS operating companies' lease obligations to CEOC. Under the proposed refinancing, CEC would be released from its guarantees of the CMBS lease payments, which would improve CEC's financial health and, in turn, would make CEC a more reliable guarantor of CEOC's debt. Apollo argued that this was a multi-billion dollar benefit to CEOC. 157. The final consideration for Linq and Octavius was a basket of securities, debt forgiveness, cash, and intangible benefits. This included $69.5 million of CEOC debt securities, $80.7 million in cash, and forgiveness of $450 million of debt CEOC had incurred in the construction of Octavius and Linq. In addition, there was the intangible benefit relating to protection of CEOC's continued receipt of the allocated CMBS expenses, which Perella valued at $378 million. Although Apollo and Paul Weiss continued to urge that there was value in the release of the CEC lease guarantee, Perella gave no value to it. 158. Even without the CEC lease guarantee, Perella found that this consideration was "reasonably equivalent" to the value of Linq and Octavius. In reaching that conclusion, Perella valued Octavius between $162 million and $203 million; the RDE Casino (which was part of Linq) between $67 million and $83 million; the Linq High Roller Observation wheel between $265 and $346 million; and the Linq retail areas between $252 million and $303 million. 56 EFTA01091589 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 58 of 212 Combined, Perella's valuation of these properties totaled between $197.8 million and $386.2 million, net of debt, which itself exceeded, by a large margin on the high end, the $150.2 million in cash and notes paid to CEOC. However, Perella then tacked on $378 million in value attributed to additional costs that Perella assumed would have otherwise been allocated to CEOC if the refinancing did not occur and the lenders foreclosed on the assets. Based on that purported value of $378 million, Perella concluded that CEOC received value in excess of the value of the transferred assets. 159. Perella's analysis was based upon information provided to Perella by Apollo and Paul Weiss. Much of this information was inaccurate, untrue, and misleading. For example: a. Perella's valuations of Linq and Octavius were based upon the owners' rights to receive lease payments from CEOC under the existing operating leases, which were $15 million per year for the RDE Casino and $35 million annually for Octavius. At Apollo's direction, Perella used several wrong assumptions, including the assumption that these were fair market value leases when, in fact, the RDE Casino lease payments had been based upon outdated assumptions from the earnings of a previous casino and the Octavius lease had been created to provide credit support for the Linq/Octavius debt. b. As to the High Roller Ferris wheel, Perella assumed that there would be flat cash flow from the operation, instead of recognizing that receipts would, at a minimum, reflect inflation. 160. Perella also relied upon false assumptions in ascribing a $378 million value to the ostensible protections CEOC received from the risk that the CMBS Properties would default someday on the allocated CMBS expenses. Apollo's theory was that, absent a refinancing, the 57 EFTA01091590 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 59 of 212 CMBS Properties were likely to default on their loans, which would cause the CMBS lenders to foreclose on the properties, then remove them from CEOC's management, and then stop paying the allocated CMBS expenses. But each of these assumptions was wrong. First, there was no evidence that the refinancing was at risk; instead, both sides viewed a foreclosure as "mutually destructive." Second, there was little evidence that the CMBS lenders would have foreclosed, or that Apollo would have allowed them to foreclose. Third, there was even less evidence that the CMBS lenders, upon foreclosure, would have removed the properties from the CEOC system. In fact, as described above, in 2010 the lenders had specifically negotiated for, and won, the right to keep the properties under CEOC's management in the event of foreclosure. Thus, under no plausible scenario was CEOC at risk of losing this payment stream. 161. The effect of this misinformation was that Perella substantially undervalued Linq and Octavius and materially overvalued the consideration CEOC received in the transactions. Conversely, by giving any value at all to the possibility that the refinancing had assured CEOC the continued payment of the allocated CMBS expenses, Perella concluded that the transaction provided CEOC with a net benefit of about $230 million. 162. Perella also overlooked the reduction in value CEOC suffered from the transfer of Octavius. Octavius had over 650 of the most modem and expensive rooms and villas in the Caesars Palace complex. By moving the property out of CEOC, Apollo effectively gave CERP (and, thus, CEC) significant leverage in renegotiating lease terms as well as a seat at the table in any potential sale or other disposition of Caesars Palace. Thus, there was a control premium attached to this transfer that Perella should have, but failed to, consider. 163. Paul Weiss was involved at every step. Paul Weiss purported to represent both CEC and CEOC in the transaction, notwithstanding the obvious conflict between them. It was 58 EFTA01091591 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 60 of 212 Paul Weiss that initially contacted Perella about rendering an opinion about the transfers, that negotiated Perella's engagement letter, that negotiated the form of opinion Perella would render, and that negotiated with Perella about what the range of the value of the consideration would be in the letter. 164. Paul Weiss also joined Apollo in urging unrealistic assumptions on Perella. This included the argument that CEOC would benefit from billions in value if CEC were removed as a guarantor of the CMBS lease payments because it would improve CEC's standing as a guarantor of CEOC's own debt. However, Paul Weiss did not disclose to Perella or anyone else that it had separately taken the position that these CEC Bond Guarantees were simply "guarantees of convenience" that were not binding on CEC to begin with. 165. Paul Weiss similarly played a central role in communicating information to Perella, in resisting when Perella refused to follow some of Apollo's suggestions, and in reviewing drafts of the Perella opinion. When Perella asked who was negotiating the price of the transfer of Linq and Octavius as a matter of process, Paul Weiss dissimulated and changed the subject. Paul Weiss attended the meeting of CEOC's board of directors where the transfers were approved and discussed the transaction with the directors. 166. The officers and directors of CEOC played no meaningful role in the negotiations about the sale of Linq and Octavius to CERP. Instead, the negotiations were between Sambur and Paul Weiss on the one hand and Perella on the other. Even then, the negotiations were not about what CERP would be willing to pay or what CEOC would be willing to accept. Instead, the subject of the discussions was what it would take before Perella would sign a letter giving the opinion that CEOC was receiving reasonably equivalent value for the assets. Thus, although Sambur was officially negotiating on the "buy side," he was also controlling decisions on the 59 EFTA01091592 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 61 of 212 "sell side." Relying upon false and misleading information from Apollo and Paul Weiss, Perella finally agreed to issue its opinion — which included edits provided directly by Paul Weiss. 167. The CEOC board consisted of two inside directors, Gary Loveman and Michael Cohen. Neither was disinterested. Loveman was the CEO and Chairman of CEC. Cohen was a senior vice president, deputy general counsel, and corporate secretary of CEC. 168. Loveman and Cohen received materials about the transaction the night before their board meeting. The board meeting, held at 6:30 M. local time, was telephonic and lasted 45 minutes. In that short time, Loveman and Cohen received Perella's opinion, heard a description of the transaction from Paul Weiss, and considered and approved the sale. There was no apparent discussion whether the sale was a fraudulent transfer, whether CEOC was insolvent, whether there were bankruptcy-related litigation risks, or whether the consideration was adequate. Instead, Lovernan and Cohen quickly rubber-stamped the deal. 169. The transaction closed on October 11, 2013. The transfer of Linq and Octavius from CEOC to CERP violated every principle of corporate governance. The transaction was conceived and implemented by one of CEOC's controlling shareholders, without input from or involvement by officers or directors of CEOC. Although the transfer was a related party transaction and CEOC was insolvent, no independent committee of the CEOC board was constituted to oversee it and, in fact, CEOC had no independent directors at the time. Nor was any thought given to offering Linq and Octavius to a third party, or to use any sort of a marketing process to maximize the price CEOC would receive for the properties. There was no meaningful negotiation over the price of the transfers. Instead the consideration for the transaction was negotiated among Apollo and Paul Weiss and Perella, based on false and misleading information 60 EFTA01091593 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 62 of 212 Apollo and Paul Weiss provided to Perella. Approval of the transfers was made by a CEOC board that was conflicted, uninformed, hurried, and poorly advised. 170. Not surprisingly, the consideration CEOC received for these two properties was far below their fair market value. Octavius and the RDE Casino were soon conveyed to CERP in a sale-leaseback under which CERP received lease payments of $35 million for Octavius and $15 million for RDE for a 15-year term. Using standard valuation methods, this indicates that the purchase price should have been at least $213 million for Octavius and at least $87 million for RDE. If more realistic assumptions are used, moreover, the value of Octavius and RDE would be even greater. 171. Linq was similarly undervalued. As already described, misinformation and erroneous assumptions used by Perella undervalued the RDE Casino by millions of dollars. Likewise, unrealistic assumptions about the High Roller Observation Wheel resulted in an excessive range of value for the asset (of $265 million to $346 million) that materially understated the midpoint of its real value, which was around $340 million or greater. In sum, excluding the false consideration in the form of "indirect benefits" and faulty valuation assumptions, the actual equity value of these properties (net of debt) was at least $325 million and likely more than $425 million. H. TRANSFER OF PLANET HOLLYWOOD AND HORSESHOE BALTIMORE CASINO. 172. At about the same time as the Linq and Octavius transfers, the Sponsors and CEC were also arranging for CEOC to transfer two valuable casino properties to a newly-formed CEC affiliate named Caesars Growth Partners. The purpose of the transfers was to take profitable, irreplaceable, and promising assets from CEOC and place them in an entity that would be 61 EFTA01091594 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 63 of 212 removed from the claims of CEOC's creditors and that would capture the assets' value for the Sponsors and CEC. 1. The Creation of CAC and Growth Partners. 173. The Sponsors, CEC, and their advisors started by creating the affiliates they would need to take ownership of the CEOC assets. First, they formed a holding company named Caesars Acquisition Company ("CAC") to serve as the vehicle for the Sponsors' investment in the scheme. CEC capitalized CAC by distributing subscription rights to CAC's common stock to CEC's existing shareholders. Because the Sponsors and their affiliates owned most of CEC's common stock, they ended up with most of the CAC stock as well, investing $457.8 million for 66.3% of CAC Class A common stock. 174. Paul Weiss then formed an operating company named Caesars Growth Partners. On October 21, 2013, CAC used the $1.17 billion in proceeds from the CAC rights offering to purchase a 42.47% equity interest in Growth Partners. Simultaneously, CEC acquired 57.6% of the equity interest in Growth Partners by contributing its interest in CIE and its holdings of CEOC 5.625% Senior Notes due June 2015. Although these notes had a face value of $1.1 billion, CEC and the Sponsors valued them at only $750 million because of CEOC's insolvency. That same day, the Sponsors entered into an Omnibus Voting Agreement with CEC and CAC that gave the Sponsors absolute control of CAC's board of directors. 175. At the end of the day, the Sponsors owned slightly more than half of CAC and CAC owned 42.4% of Growth Partners. CEC owned the other 57.6% of Growth Partners, and the Sponsors owned 60% of CEC. Adding it all up, this meant that the Sponsors had a 60% interest in Growth Partners, as well as complete control of CAC's board and, thus, Growth Partners' management and operations. 62 EFTA01091595 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 64 of 212 176. As noted before, the purpose of these entities was to remove CEOC assets from the reach of creditors. [TO BE INSERTED] Even better from the Sponsors' point of view, the value of these assets would flow to the Sponsors, and not CEOC or its creditors. 2. Planet Hollywood and Horseshoe Baltimore Transfers. 177. On October 21, 2013, CEC, CAC, and Growth Partners entered into an agreement (the "2013 Transaction Agreement") with CEOC that required CEOC to transfer to Growth Partners CEOC's interests in the Planet Hollywood Resort and Casino in Las Vegas and the Horseshoe Baltimore Casino, as well as 50% of the stream of management fees CEOC would earn from managing those two properties. In addition, the Agreement contemplated that CEOC would enter into a Management Services Agreement with CEOC, Growth Partners, and CAC that would profoundly redefine the economic relationship between CEOC and CEC. 178. CEOC had acquired Planet Hollywood in 2010. Planet Hollywood occupied 35 acres adjacent to other Caesars properties on the Las Vegas Strip. It had 2,500 guest rooms, an outdoor pool, 9 restaurants, 6 bars, and a 64,500 square foot casino. Planet Hollywood had generated significant free cash flow, partly because CEOC had invested substantial amounts in it each year. In fact, between 2010 and 2012, Planet Hollywood revenue increased by 27% and EBITDA by 186%. 179. Horseshoe Baltimore, which opened in August 2014, is a casino with a 122,000 square foot gaming floor, 2,500 slot machines, 150 video poker machines, a 25-table WSOP Poker room, and 150 table games. In October 2012, Caesars entered into a joint venture agreement with Rock Gaming and three local partners to build this casino. 180. The plan to transfer Planet Hollywood and Horseshoe Baltimore was hatched by the Sponsors and Paul Weiss in 2012. The specific purpose of the transaction was to strengthen 63 EFTA01091596 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 65 of 212 the Sponsors' hand in negotiations with creditors in a potential restructuring, maintain the Sponsors and CEC's ownership of the assets for future upside potential, and create a CEC "war chest" in the event of a potential restructuring. According to Bonderman, the Sponsors selected properties with excess cash flow in order to achieve precisely those goals. 181. A first step was to deal with the obvious conflicts inherent in the transaction. Although the most egregious of the conflicts was the fact that the transfer of Planet Hollywood and Horseshoe Baltimore from CEOC to Growth Partners was a related party transaction, the Sponsors and CEC turned a blind eye to that problem. But they were troubled by another fact, namely, that CEC (the ultimate owner of CEOC) and CAC (the ultimate owner of Growth Partners) had different sets of public shareholders, while the Sponsors were on both sides of the deal, creating the possibility of litigation from the public shareholders of CEC and CAC. 182. Michael Cohen, who was the general counsel of both CEOC and CEC, asked Paul Weiss for its thoughts and was told that no valuation committee or any other heightened process was required. Rejecting this, Cohen then went to another law firm — Wilson Sonsini — for advice. Unlike Paul Weiss, Wilson Sonsini did see a conflict and advised Cohen that CEC should form a Valuation Committee to opine whether the transaction was fair to CEC. Ironically, even though CEOC was obviously insolvent — indeed, it was the very fact of CEOC's insolvency that motivated the Sponsors and CEC to undertake the transaction — neither Cohen nor anyone thought to protect CEOC's interests by constituting a special committee to assure fairness to CEOC. 183. The Sponsors directly represented CAC in the negotiations. On November 14, 2012, the CEC board created the Valuation Committee to negotiate with the Sponsors, and the Valuation Committee soon hired Evercore Partners as its financial advisor to review and opine 64 EFTA01091597 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 66 of 212 on the structure of the transaction and the fairness of the price from CEC's perspective. But the CEC Valuation Committee and Evercore were acting on behalf of CEC and CEC alone; neither they nor anyone else negotiated on behalf of CEOC or reviewed the transaction from CEOC's vantage point. And, as with other transfers of CEOC assets, the Sponsors controlled the process: in fact, the Evercore's compensation was contingent upon the transaction being consummated as the Sponsors envisioned. [TO BE INSERTED] 184. Although the CEC Valuation Committee was supposed to assure that CEC got a fair price for the Planet Hollywood and Horseshoe Baltimore, in practice the Committee allowed the Sponsors to manipulate the valuation process to artificially depress the price of the assets. As one example, Caesars management did not provide Evercore with updated projections for Planet Hollywood revenue, even though Caesars had recent sets of projections and Evercore had specifically asked for them. 185. The Sponsors also manipulated projections in other ways. At the time of the transaction, Planet Hollywood was on the verge of signing the entertainer Britney Spears to a multi-year deal to perform at Planet Hollywood and renovating the show's venue. CEOC projected that this would substantially increase Planet Hollywood's EBITDA. But those forecasts never made it to Evercore. Instead, the Sponsors told Evercore that the Spears contract would have no material impact on Planet Hollywood's EBITDA or value. The Sponsors' desire to depress the price for Planet Hollywood was so strong that a TPG officer, Greg ICranias, at one point objected to entering into the agreement with Britney Spears at all because the deal would be too profitable for Planet Hollywood, thus raising the price Growth Partners would have to pay for the property. 65 EFTA01091598 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 67 of 212 186. In the end, the Spears contract was more successful than even CEOC had hoped. Her tickets went at twice the rate of other successful shows, and VIP packages for the shows quickly sold out. By then, though, Planet Hollywood was in the hands of Growth Partners and it was Growth Partners, not CEOC, that reaped the benefits of Planet Hollywood's success. 187. In addition to the Sponsors' conscious manipulation of projections and information, the Evercore opinion was riddled with errors that lowered the valuation of both properties. In valuing Planet Hollywood, for example, Evercore treated Planet Hollywood as a regional property despite its prime location on the Las Vegas Strip. As a result, Evercore used the wrong multiple of EBITDA to calculate Planet Hollywood's value. Evercore also used an incorrect EBITDA value in its projections and failed to apply a forward-looking multiple to account for Planet Hollywood's significant expected growth. 188. In valuing CEOC's joint venture interest in the Horseshoe Baltimore, Evercore simply misunderstood how much of the joint venture CEOC owned. Evercore valued CEOC's interest in the Horseshoe Baltimore by assuming that CEOC owned 40.9% of the venture. In fact, CEOC had 51.8%. Evercore's mistake arose from the faulty assumption that CEOC would sell some of its equity in the property to its venture partners in the fourth quarter of 2013. In fact, the sale did not occur then, and CEOC's ownership interest was still 51.8% at the time Horseshoe Baltimore was transferred. Although CEOC later did sell some of its interest in the casino to its partners, the sale happened in February 2014; by then, Growth Partners owned the property, so the proceeds went to Growth Partners, not CEOC. 189. Relying upon manipulated data, outdated projections, and numerous other mistakes, Evercore gave the opinion that consideration "reasonably equivalent to the fair market value of each such asset" was a cash payment of $360 million, constituting $210 million for 66 EFTA01091599 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 68 of 212 Planet Hollywood, $70 million for the Planet Hollywood management fees, and $80 million for the Baltimore casino and management fees. Additionally, a subsidiary of Growth Partners assumed $513 million of debt secured by Planet Hollywood, although this was offset by roughly $40 million in restricted cash on deposit and as much as another $175 million in unrestricted cash held by the holding company that owned Planet Hollywood. 190. In light of these errors, it is no surprise that this valuation was deficient by at least $437 million, and probably much more. Contemporaneous indicators of value confirm that Planet Hollywood and Horseshoe Baltimore were worth significantly more than the consideration CEOC received. [TO BE INSERTED] TPG reached a similar estimate of $830 million for Planet Hollywood's value in December 2012, using the same management projections that had served as the basis for Evercore's opinion. Shortly after the Planet Hollywood and Horseshoe Baltimore transfers were closed, Apollo estimated that, by 2016, these properties would be worth $579 million and $260 million, respectively. 191. A reason for this disparity, of course, was that the Planet Hollywood and Horseshoe Baltimore transfers were one-sided and unfair to CEOC. The sale was not negotiated at arm's length, the assets were not offered to any third-party buyers or investors, and no marketing process was used to help CEOC maximize the value of the transferred assets. CEOC did not have independent legal or financial advisors or any other form of unconflicted representation in the negotiations. 192. The CEC board approved the Planet Hollywood and Horseshoe Baltimore transaction at a board meeting held on October 21, 2013, and attended by defendants Bonderman, Davis, Loveman, Rowan, and Sambur. 67 EFTA01091600 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 69 of 212 193. The CEOC board at the time consisted of two interested directors, Gary Loveman and Michael Cohen. Both were senior executives of CEC, and Loveman owned stock in CAC. There was no special committee of independent directors formed of CEOC's board to review the deal, nor did CEOC ask for or receive a fairness opinion. The deal was presented to Loveman and Cohen for approval only after all of its terms had been finalized. Loveman and Cohen did not hold a meeting to consider the transaction, but instead approved the deal on October 21, 2013, by signing a standard written consent. I. CMBS, CERP, AND GROWTH PARTNERS ACCESS' TO TOTAL REWARDS AND PROPERTY MANAGEMENT SERVICES. 194. As part of the 2010 CMBS Loan Agreement Amendment, CEC directed CEOC to enter into a contract with the CMBS PropCos called the Shared Services Agreement. The purpose of the Shared Services Agreement was to give the CMBS lenders the power to compel CEOC to continue to manage the CMBS Properties in the event of a foreclosure. Among other things, the Shared Services Agreement stated that CEOC would supply each property with a complete accounting system, offer access to the property's books and records, and prepare financial statements. More fundamentally, CEOC was required to provide the CMBS Properties with access to the Total Rewards program. As part of this agreement, the CMBS Properties paid CEC for CEOC's services. CEOC, by contrast, received nothing from the CMBS PropCos except for a payment reimbursing CEOC for the "allocated" cost of providing these management services and 30% of CEOC's "unallocated" corporate overhead expenses. 195. In October 2013, when the CMBS Properties were transferred to the newly- formed CERP and Octavius Tower and Project Linq were taken from CEOC and given to CERP, a new Shared Services Agreement was executed and CEOC was required to provide these same services to CERP on the same basis as it had previously provided them to the CMBS Properties. 68 EFTA01091601 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 70 of 212 196. On October 21, 2013, pursuant to the 2013 Transaction Agreement, CEOC entered into a Management Services Agreement that required CEOC to continue to perform management duties for the two properties and also to provide the properties with access to Total Rewards. CEOC's compensation under the Management Services Agreement was minimal: reimbursement of its actual out-of-pocket costs, a 10% "profit margin" on certain costs, and management fees tied to the properties' performance. 197. Notwithstanding the enormous value of Total Rewards and CEOC's property management services, CEOC was paid little or nothing under these contracts. This failure to compensate CEOC for its services to CEC, CERP, and Growth Partners was yet another instance where the Sponsors and CEC took assets — in this case, services and access to its intellectual property — of value from CEOC for inadequate consideration. 198. And, as before, CEOC's directors and senior officers were conflicted because they were also directors or officers of CEC, CERP, CAC, Growth Partners, or other CEC affiliates and, in some cases, had a personal economic stake in CEC or these affiliates. CEOC's board approved the 2010 Shared Services Agreement with the CMBS Properties, the 2013 Shared Services Agreement with CERP, and the 2013 Management Services Agreement with Growth Partners without analyzing what consideration CEOC was receiving, or should receive, in return for the transfer of its rights in Total Rewards and the provision of property management services. At no point in this period did CEOC have independent directors who would have been in a position to consider the fairness of these transactions to CEOC, nor the benefit of any independent legal or financial advisors. Similarly, no fairness opinion was solicited, received, or considered in connection with any of these transactions. 69 EFTA01091602 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 71 of 212 J. ASSET TRANSFERS OF MAY AND JUNE 2014. 199. By no later than the beginning of 2014 (if not long before then), CEOC's liquidity had certainly reached the point where it would have to reach an out of court restructuring with its creditors or file for bankruptcy. With time running out, the Sponsors and CEC embarked upon a course of wholesale asset transfers, refinancings, and related transactions to strengthen the Sponsors' hand in negotiations with creditors and ready CEOC for bankruptcy. The overall purpose and effect of these transactions was to place CEOC assets in entities that the Sponsors and CEC owned and controlled and that were beyond the reach of creditors, to capture all of the synergies of the Caesars system for the Sponsors and CEC, and to intentionally diminish the value of CEOC. Destroying CEOC's value, and the threat of more destruction to come, reduced the creditors' leverage in any restructuring negotiations and, if a bankruptcy followed, simplified the Sponsors and CEC's plan to buy cheaply the assets of the "Bad Caesars" and re-create the original Caesars system. 200. The extraordinary measures the Sponsors and CEC took in the first half of 2014 were divided into separate transactions, but in truth they were part and parcel of a single overarching plan. The plan involved the transfer to Growth Partners of four more irreplaceable CEOC properties in Las Vegas and New Orleans, siphoning money out of CEOC and into Growth Partners, transferring highly valuable undeveloped real estate to Growth Partners, moving control of Total Rewards to a "bankruptcy-remote" entity that Growth Partners and CERP would govern, taking CEOC's property management business away from it, attempting to remove CEC's guarantee of CEOC's bond debt, having CEOC take on new first lien bank debt to garner the first lien banks' support for a restructuring of CEOC, and amending CEOC's credit agreements to change CEC's guarantee of CEOC's first lien bank debt from a guarantee of 70 EFTA01091603 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 72 of 212 payment to a guarantee of collection. Once the Sponsors and CEC completed these steps, they reconstituted CEOC's board, placing partners of Apollo and TPG in the majority. For the first time, the Sponsors also added to the CEOC board two hand-picked outside directors, both of whom they knew from other business connections and neither of whom truly was independent. 1. The 2014 Transaction Agreement 201. On March 1, 2014, CEOC entered into a Transaction Agreement (the "2014 Transaction Agreement") that required CEOC to transfer four of its premier assets to Growth Partners. It also required CEOC to license Total Rewards and most of its other intellectual property to a new joint venture controlled by Growth Partners and CERP called Caesars Enterprise Services ("CES"). The total consideration to CEOC for these transfers included $1.815 billion in cash and the assumption of $185 million in debt, far less than the value of the properties. CEOC received no consideration at all in return for ceding control over Total Rewards and its intellectual property to the joint venture. 2. The Four Properties Transaction. 202. The 2014 Transaction Agreement required CEOC to sell three of its Las Vegas casinos and its flagship New Orleans casino to Growth Partners. In addition, CEOC was required to relinquish 50% of the stream of management fees CEOC would have earned from managing the four properties. 203. The three Las Vegas properties were located at the center of the Las Vegas Strip. They occupied two of the four corners of the central intersection and were uniquely positioned to take advantage of synergies from the other, nearby Caesars properties. The three casinos also benefitted from substantial foot traffic, which would increase when Linq was completed. 71 EFTA01091604 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 73 of 212 a. Bally's Las Vegas had been a staple of the Las Vegas Strip since 1973, with a large customer base and a substantial convention business. In 2013, CEOC funded a full renovation of its South Tower and, in late 2013, a third party began development of the Grand Bazaar, a retail venue there. b. CEOC had acquired The Cromwell (then known as the Barbary Coast) in 2007. In February 2013, CEOC shut the property for 15 months to redevelop and rebrand it with funds CEOC had raised. When The Cromwell reopened in April 2014, it had fully remodeled hotel rooms, an extension of the rooftop for a pool and nightclub, a renovated facade, and a new restaurant and parking garage. c. In 2005, Caesars acquired The Quad, then known as Imperial Palace. In December 2012, it underwent a $90 million, year-long renovation. Shortly thereafter, a second renovation began, which included improvements to the hotel towers, pool, and entertainment venues. This second phase of the renovation took more than a year and cost over $200 million. 204. The fourth property was Harrah's New Orleans, which had opened in 1999. Harrah's is the largest casino in Louisiana and the only land-based casino in New Orleans. Harrah's was located in downtown New Orleans and drew both tourists and locals as customers. CEC described Harrah's as a "large asset in a stable market with no near-term new competition." 205. The Sponsors and Paul Weiss began their work on the Four Properties Transaction in 2013. As before, Apollo conceptualized the transaction, selected the properties to be transferred, decided whom they would be sold to and, with Paul Weiss' help, limned the structure and details of the sale. The proposal was presented to the CEC board on November 26, 2013. 72 EFTA01091605 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 74 of 212 206. CEC and the Sponsors were again in a position of conflict. The Sponsors controlled both CEC and CAC which, respectively, owned the seller of the assets and the buyer of the assets. Nevertheless, CEC and CAC each also had public shareholders, whose interests were opposed. Thus, CEC and CAC each formed a Special Committee to structure and negotiate the price of the transfers. The CEC Special Committee first hired Centerview Partners LLC as its financial advisor. Later, it retained Duff & Phelps to provide it a fairness opinion that the Four Properties Transaction was "on terms no less favorable to CEOC . . . than would be obtained in a comparable arm's-length transaction with a person that is not an affiliate of [CEC]." The CAC Special Committee engaged Lazard as its financial advisor. 207. However, neither of these Special Committees nor their advisors protected CEOC's interests or negotiated on behalf of CEOC, and no special committee of the CEOC board was formed at all. Nor did CEOC's board ask for or receive an independent fairness opinion. 208. [TO BE INSERTED] 209. Negotiations over the price and terms of the Four Properties Transaction occurred primarily between one of the CEC independent directors, Fred Kleisner, and one of the CAC independent directors, Marc Beilinson. CEOC was not involved or represented in any capacity. Ultimately, Kleisner and Beilinson agreed that CEOC should convey the four properties and its rights in the stream of management fees from those properties for consideration of $1.815 billion in cash and the assumption of $185 million in debt. 210. On February 24, 2014, Centerview issued its fairness opinion to the CEC Special Committee and the CEC board, concluding (1) that the Four Properties Transaction was "fair, from a financial point of view" to CEC and (2) that the consideration was "reasonably equivalent 73 EFTA01091606 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 75 of 212 to the aggregate of the enterprise value" of the Four Properties and to the management fee stream. On February 25, 2014, Lazard issued its fairness opinion to the CAC Board and the CAC Special Committee, concluding that the Four Properties Transaction was "fair, from a financial point of view, to COP." On March 1, 2014, Duff & Phelps issued its fairness opinion to the CEC Special Committee and the Boards of CEC and CEOC, concluding that the Four Properties Transaction "is on terms that are no less favorable to CEOC or such relevant restricted subsidiary, as applicable, than would be obtained in a comparable arm's-length transaction with a person that is not an affiliate." Centerview and Duff & Phelps updated their opinions, with substantially identical language, on May 5, 2014, the date of the closing of the three Las Vegas properties, and May 19, 2014, the date of the closing of Harrah's New Orleans. 211. None of these opinions properly advised CEOC of the fairness of the Four Properties Transaction to CEOC. The Centerview opinion addressed whether the Four Properties Transaction was fair to CEC, and the Lazard opinion concluded only that the transaction was fair to CAC. The Duff & Phelps opinion — which at least purported to look at the transaction from CEOC's point of view — did not consider the fairness of the deal, but instead concluded only that its terms were no less favorable to CEOC than an arm's-length negotiation would have produced. Duff & Phelps was not retained by CEOC to independently assess the fairness of the consideration to CEOC because Sambur opposed it. 212. Moreover, the Duff & Phelps opinion was defective because Duff & Phelps was instructed to rely upon inaccurate information. CEOC had projections — called the "January Business Plan" — that it prepared in the ordinary course of its business and which set forth the forecasted EBITDA for the four properties. Although the CEC board previously had approved the January Business Plan, the CEC Special Committee instructed Centerview and Duff & 74 EFTA01091607 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 76 of 212 Phelps to use a different set of projections — known as the "February Business Plan" — in valuing the assets. The February Business Plan was not a forecast reflecting CEOC management's best judgment about the future of its business; instead, upon information and belief, it was created by two CEC executives — Eric Hession and Robert Brimmer — at the behest of Kleisner and Beilinson and was never used for any purpose other than valuing the Four Properties. 213. [TO BE INSERTED] 214. CAC paid CEOC $1.815 billion in cash and assumed $185 million in debt related to the four properties. Because this price was based on manipulated projections, it was materially below the assets' true value. Moreover, CAC did not actually pay this much for the properties because of offsets. First, there was a cost item known as "Remaining Cromwell Costs" which were needed to reopen The Cromwell, and the funds to pay this already were on deposit and were transferred from CEOC to Growth Partners as part of the deal. Second, CEOC was required to indemnify Growth Partners for up to $33.465 million in cost overruns that might occur at The Quad. And third, CEOC was obligated to indemnify Growth Partners for additional, still unquantified liabilities under multiemployer benefit plans based on facts and circumstances which already were known. 215. There was a complete lack of fair process to protect CEOC. CEOC was not directly represented in the negotiations with CAC, did not have a special committee from its own board to negotiate or review the transaction, did not have independent legal or financial advisors, and did not ask for or receive an independent fairness opinion. In fact, although outside directors for CEOC were recruited as early as February 2014, the Sponsors instructed them to wait to join the CEOC board until after the completion of the Four Properties Transaction. There was no marketing process for the assets or any effort to solicit potential third-party buyers for bids on 75 EFTA01091608 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 77 of 212 them. And this was by design: the CEC Special Committee lacked the authority to market these assets to third parties primarily because the Sponsors had decided that the properties should stay within the Caesars structure. 3. Transfer Of Undeveloped Las Vegas Real Estate. 216. In addition to its other Las Vegas assets, CEOC owned a substantial assemblage of prime undeveloped land to the east of several Caesars properties. CEOC purchased these parcels in the early 2000's as a way of protecting its ability to grow in Las Vegas. Upon information and belief, CEOC paid as much as $1 billion to buy these properties. 217. As part of the Four Properties Transaction, CEOC transferred 31 acres of this land to Growth Partners. Despite the substantial value of the land, it was conveyed to Growth Partners for no consideration whatever, and no value was attributed to this land in CEOC's internal analysis, CEC's internal analysis, or in the Centerview, Lazard, or Duff & Phelps opinions about the Four Properties Transaction. The Special Committees, too, apparently did not know about it. In fact, upon information and belief, neither Centerview, Lazard, Duff & Phelps, Kleisner, Beilinson, nor Loveman was even aware that the undeveloped land was included in the transaction. Similarly, the land's transfer was not mentioned in CEC's March 3, 2014 announcement of the Four Properties Transaction or in the May 6, 2014 8-K's filed by CEC, CEOC and CAC, which disclosed and described the Four Properties Transaction. Upon information and belief, the Sponsors, including Rowan and Sambur, and Paul Weiss, knew that the Four Properties Transaction included provisions for the transfer of undeveloped land for no consideration, but failed to bring this to the attention of the CEC or CEOC boards. 218. This transfer of 31 acres of CEOC's undeveloped Las Vegas land was not made for adequate consideration or reasonably equivalent value and was never offered to a true third- 76 EFTA01091609 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 78 of 212 party buyer or subject to any marketing process. In addition, the transfer also materially reduced the value of the 42 remaining acres of land that CEOC retained. The sale of the 31 acres cut off any direct access across CEOC-owned land between this remaining parcel and the Las Vegas Strip and reduced the parcel's value for future development by removing its contiguousness with CEOC's other properties. 4. Degradation of CEOC Enterprise Value 219. The structure of the CEOC enterprise had been designed to create a nationwide hub-and-spoke system of regional and destination casinos. However, the successive property transfers in 2013 and 2014 stripped away from CEOC almost all of its Las Vegas casinos as well as the Harrah's New Orleans Hotel and Casino. Thus, after the transfer of Octavius Tower, Project Linq, and Planet Hollywood in 2013 and the 2014 transfers of The Cromwell, The Quad Resort & Casino, Bally's Las Vegas, Harrah's New Orleans Hotel and Casino, and CEOC's undeveloped land in Las Vegas, CEOC was relegated to having a single casino-hotel in Las Vegas — part, but not all of, Caesars Palace — and no longer credibly could be considered to be a Las Vegas-based gaming company. 220. Because of the higher profitability of Las Vegas properties, gaming companies with a strong Las Vegas presence are valued at higher multiples of EBITDA than the multiples commanded by gaming companies that are predominantly regional. In 2014, for example, the former enjoyed EBITDA multiples of 12.4 compared to 8.4 for regional operators. This, of course, was a fact well known to the Sponsors, CEC, CEOC's board and their financial advisors, since all were intimately familiar with the gaming industry and since the entire purpose of constructing the CEOC system was to maximize revenues at its Las Vegas properties. 77 EFTA01091610 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 79 of 212 221. The transfers of CEOC's Las Vegas properties in 2013 and 2014 reduced CEOC's EBITDA from its Las Vegas operations by nearly $330 million. In percentage terms, CEOC's EBITDA from Las Vegas operations fell from 41% to 28%. Applying standard multiples to this shift in EBITDA indicates that the enterprise value of CEOC fell by billions of dollars. 222. This destruction of value was no accident. The Sponsors and CEC conceived of, planned and executed these transactions precisely because they wished to transfer CEOC's value to CERP, Growth Partners, and CEC itself. Apart from removing assets from the reach of creditors, the transfers had the purpose and effect of increasing the Sponsors and CEC's leverage against CEOC's creditors when restructuring negotiations began and preordaining that the creditors would have no option but to accept a CEC-sponsored plan of reorganization if and when CEOC entered bankruptcy. K. THE B-7 TRANSACTION. 223. In addition to its bond debt, CEOC also had substantial borrowings from banks. At the beginning of 2014, this amounted to $4.4 billion and was secured by first liens upon CEOC's assets. The bank debt was governed by a 2008 First Lien Credit Agreement, and was guaranteed by CEC (the "Bank Guarantee"). This Bank Guarantee was a guarantee of payment, meaning that CEC would be required by the first lien banks immediately to make good on CEOC's bank debt in the event of a default. In practice, this meant that a CEOC bankruptcy would immediately lead to a CEC bankruptcy. 224. In late 2013, CEC began thinking of an amendment to the First Lien Credit Agreement. One reason was that CEC wanted an excuse to move cash out of CEOC and into Growth Partners. Another was that CEC hoped to convert its Bank Guarantee into a guarantee of collection, which would allow CEC to postpone paying on the guarantee until CEOC emerged 78 EFTA01091611 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 80 of 212 from bankruptcy. A third was that a refinancing of CEOC's bank debt, and part of its bond debt, would provide a cover for other transactions CEC had in mind, such as its plan to remove its Bond Guarantees. And all of these measures would serve CEC's overriding goal of weakening the bargaining position of CEOC's creditors and strengthening the Sponsors' hand in the restructuring negotiations that were to start in a few months. 225. As before, Sambur led the efforts of CEC and the Sponsors, who with the assistance of Paul Weiss, conceived, designed, and structured this transaction, including the details of the amendment of CEOC's bank loans and the attendant modification of CEC's Bank Guarantee, the redemption of the 2015 Notes, and the timing, structure, pricing, and implementation of the transaction. 226. The B-7 Transaction had several elements: a. The first was an amendment to the First Lien Credit Agreement to modify CEC's Bank Guarantee from a guarantee of payment to a guarantee of collection. CEC needed the consent of a majority of the bank lenders to obtain this, which CEC obtained by arranging for two backstop lenders, GSO and BlackRock, to lend $1.1 billion under the First Lien Credit Agreement and, thus, give CEC a majority of favorable votes. b. Second, the B-7 Transaction was intended to replace term loans (denominated B-1, B-3, B-4, B-5, and B-6) that would mature between 2015 and 2017. The new B-7 term loans would amount to $1.75 billion, have first priority liens, and bear interest at a rate of 9.75% per annum. c. Third, CEOC had two issues of its bond debt, the 5.625% Senior Notes due 2015 and the 10% Second Priority Notes due 2015 (together, the "2015 Notes"), 79 EFTA01091612 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 81 of 212 which were scheduled to mature in 2015. As part of the B-7 Transaction, CEOC was to redeem both issues of notes. The B-7 Transaction also was part of other initiatives CEC was pursuing at the same time. For example, the modification of CEC's Bank Guarantee was conditioned upon CEC's success in selling a portion of its CEOC stock, to promote CEC's goal of removing the Bond Guarantees. Similarly, CEC used the redemption of the 2015 Notes as a method of rewarding Chatham Asset Management for joining in the stock purchase that CEC used as the excuse to claim it had removed the Bond Guarantees. The B-7 Transaction also took place at the same time as a financing that Apollo and CEC were arranging for Growth Partners to pay for the Four Properties Transaction, and parties such as Chatham participated in both. Finally, CEC and CEOC used the redemption of the 2015 Notes as a means to shift hundreds of millions of dollars from CEOC to Growth Partners, providing Growth Partners with working capital needed to operate the casinos and hotels it was about to acquire in the selfsame Four Properties Transaction. 227. Ostensibly, the B-7 Transaction was undertaken to improve CEOC's liquidity, extend the maturities of its funded debt, and provide CEOC with a "runway" to recover from its insolvency. In fact, the B-7 Transaction was intended to, and accomplished, exactly the opposite. More than $219 million went to pay the fees and expenses of the transaction. About $795 million was used to roll over existing B-1, B-3, B-4, B-5, and B-6 term loans. Over $1 billion was paid to redeem the 2015 Notes. These amounts, of course, exceeded the $1.75 billion CEOC borrowed in the B-7 Transaction. As desperately short of cash as CEOC was, it was required to come up with $315 million to cover the shortfall. Thus, at a time when the Sponsors and CEC were championing the notion of raising cash by selling CEOC assets, the B-7 Transaction 80 EFTA01091613 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 82 of 212 required CEOC to burn up $315 million of its scarce cash, increased its bank debt, and raised the interest rate CEOC was paying for that debt. 228. CEC's true motivation for this was to set the stage for the restructuring the Sponsors and CEC intended to impose on CEOC's creditors and, if that failed, to protect CEC when CEOC filed for bankruptcy. Almost every feature of the B-7 Transaction was intended to benefit the Sponsors and CEC, if not to intentionally inflict damage upon CEOC. For example: a. The $129 million in fees paid to GSO and BlackRock were not necessary to help CEOC. Instead, those were the fees GSO and BlackRock charged for the backstop facility, the purpose of which was to allow CEC to marshal the votes it needed to change the terms of its Bank Guarantee to a guarantee of collection. b. There was no need to roll over the B-4, B-5, and B-6 term loans. None was due any earlier than 2016, and all had interest rates below the 9.75% rate of the new B-7 loans. In fact, none of the term loans was due in 2014 and only $29.1 million was due in 2015. The purpose of rolling over the term loans was to justify the trouble and expense of undertaking the B-7 Transaction in the first place, and as a further inducement to the lenders to approve the change of the Bank Guarantee to a guarantee of collection. c. There was no need to redeem the 2015 Notes. The purpose of the redemption was to funnel cash into Growth Partners as a device to remove the cash from the reach of CEOC's creditors and to improve Growth Partners' liquidity. Similarly, the reason Chatham's notes were redeemed was to compensate Chatham for its agreement to pay $4 million to purchase CEOC stock — which even Apollo 81 EFTA01091614 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 83 of 212 conceded was worthless — in order to help CEC renounce its obligations under the Bond Guarantees. d. Although the 2015 Notes were trading at a substantial discount to their face value, the Sponsors and CEC made no effort to negotiate the best price for their repurchase. Instead, CEOC was required to redeem the notes at par, plus a premium, plus accrued interest. This is in stark contrast to CEC's earlier practice of always negotiating the best price when it repurchased CEOC's distressed debt. Moreover, only seven months before — when the Sponsors and CEC capitalized Growth Partners — those same notes had been valued at [TO BE INSERTED] of their face amount and CEOC's financial condition had only deteriorated since then. e. $452 million went to buy 2015 Notes from Growth Partners, which had received them from CEC only eight months before. Originally, Growth Partners had agreed to put this money back into CEOC by participating in the B-7 financing. However, when the financing was oversubscribed, Growth Partners was relieved of this obligation and simply kept the money. The obvious purpose of this redemption was to siphon cash out of CEOC to protect it from claims of CEOC's creditors. f. Over $400 million was paid to buy 2015 Notes from Chatham which, in turn, agreed to buy worthless CEOC stock from CEC. Chatham made almost [TO BE INSERTED] million from this quid pro quo. L. CEOC BOARD APPROVAL OF THE 2014 TRANSACTION AGREEMENT AND THE B-7 TRANSACTION. 229. It is difficult to overstate the significance of the 2014 Transaction Agreement, the Four Properties Transaction, and the B-7 Transaction. At the end of the day, the transactions resulted in CEOC losing four of its remaining five destination properties; increasing its level of 82 EFTA01091615 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 84 of 212 indebtedness; paying off over $750 million of bank loans that were not yet due and borrowing the money to do so at a substantially higher interest rate; redeeming over $1 billion of notes that were not yet due, and doing so at a substantial premium to the notes' market value; repaying the balances on its intercompany revolver, which also were not yet due; paying $129 million in fees to GSO and BlackRock for a financing facility CEOC did not need; and dipping into its scarce cash reserves to find an additional $315 million to pay for it all. Obviously, CEC's purpose was not to help CEOC. 230. Both transactions were approved on May 5, 2014, by CEOC's two-man board. The two directors were Loveman and Hession, neither of whom was independent and both of whom were profoundly conflicted. Loveman, of course, was and remained CEC's Chairman and Chief Executive Officer, and enjoyed an incentive plan that would reward him with CEC stock if the company succeeded. Hession was CEC's Chief Financial Officer. Both Loveman and Hession also owned stock in CAC and, therefore, stood to benefit personally from the below- market price at which CEOC had sold the four properties to Growth Partners and from CEOC's purchase of 2015 Notes from Growth Partners at above-market prices. 231. The CEOC board followed no processes at all. There was no effort to bring independent directors aboard to consider the transactions; no special committee of the board was considered or constituted; the CEOC board did not ask for or have independent financial or legal advisors; the board did not ask for or receive a fairness opinion on the transactions; and the board did not seem to be aware that it also was giving away 31 acres of prime undeveloped Las Vegas land. In fact, the CEOC board did not even bother to hold a meeting. Instead, Loveman and Hession signed a boilerplate "unanimous consent" approving the 2014 Transaction Agreement and another for the B-7 Transaction. [TO BE INSERTED] 83 EFTA01091616 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 85 of 212 232. The CEC board both convened a series of meetings and signed written consents to approve the 2014 Transaction Agreement and the B-7 Transaction. After the CEC board approved the 2014 Transaction Agreement on February 24, 2014, it met again on April 21, 2014, to preliminarily approve the B-7 Transaction, and again on April 28, 2014, to give final approval for the B-7 Transaction and related financial transactions. [TO BE INSERTED] Finally, on May 19, 2014, Loveman signed a written consent on behalf of the CEC board approving the Amended & Restated CES LLC Agreement and the Omnibus Agreement. M. TRANSFER OF TOTAL REWARDS. 233. The 2014 Transaction Agreement also contemplated the creation of a new, CEOC bankruptcy remote entity that would assume control and dominion over CEOC's most important intellectual property, including Total Rewards. The new joint venture, which was characterized as a "shared services company," was a concept formulated by Apollo and Paul Weiss in late 2013 and was designed to keep Total Rewards out of the reach of CEOC's creditors and to allow all Caesars entities, including Growth, CERP, and their subsidiaries, to have continued access to CEOC's management services and intellectual property when CEOC entered bankruptcy. Paul Weiss and Apollo both actively participated in crafting the documents and agreements governing this shared services company and in implementing terms that were beneficial to CEC, Growth Partners, CERP, and the Sponsors at the expense of CEOC. The Sponsors did not share these underlying goals with anyone at CEOC. 1. Creation of Caesars Enterprise Services LLC. 234. The new company was called Caesars Enterprise Services LLC ("CES"). CES was formed on May 20, 2014, pursuant to a limited liability company agreement (the "LLC Agreement") among CEOC, CERP, and a wholly-owned, indirect subsidiary of Growth Partners 84 EFTA01091617 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 86 of 212 called Growth Properties.' That same day, CEOC, CERP, and Growth Properties, as well as CES, Caesars License Company, LLC, and Caesars World, Inc., executed an "Omnibus License and Enterprise Services Agreement" (the "Omnibus Agreement" and, collectively with the LLC Agreement, the "Services LLC Agreements"). 2. The Omnibus and Services LLC Agreements. 235. The Omnibus Agreement granted CES a "non-exclusive, irrevocable, world-wide, royalty-free license" to of all of CEOC's intellectual property, including Total Rewards. CES, in turn, sublicensed this intellectual property to CERP, Growth Partners, and other subsidiaries or affiliates of CEC. Effectively, this meant that CERP and Growth Partners obtained the nearly unlimited right to use — for a small fraction of its value — the Total Rewards software, database, know-how, algorithms, analytical tools, and accumulated knowledge that has made the Caesars system so successful for nearly 20 years. In return, CEOC received a 69% ownership stake in CES, but only one-third of the voting rights. CERP and Growth Properties shared the rest of CES' equity and each had 33% of the voting rights. 236. These Agreements contained a series of carefully drafted provisions that transferred effective control of Total Rewards to CERP and Growth Partners, enriching them at CEOC's direct expense. These wide-ranging grants included the following: a. CES was governed by a three-person Steering Committee consisting of one member each from CEOC, Growth Properties, and CERP. Even though CERP and Growth Partners owned only 31% of CES, they had two-thirds of the voting 7 The LLC Agreement referred to CEOC, CERP, and Growth Properties as the "Members" of the joint venture. Because Growth Properties was a wholly-owned indirect subsidiary of Growth Partners, CEC and others often referred to Growth Partners and Growth Properties interchangeably. 85 EFTA01091618 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 87 of 212 rights. Moreover, under the original LLC Agreement, CEOC would lose its governance rights if it filed for bankruptcy. b. Without the consent of Growth Partners and CERP, CEOC could not assign its interest in CES, withdraw from CES, monetize its interest in Total Rewards, or offer continued access to Total Rewards if it sold a casino to a third party. c. CEOC assigned to CES its rights to manage, maintain, protect, enforce, defend, license, and sublicense CEOC's intellectual property. d. CEOC was compelled to transfer most of its employees to CES, thus removing management and operation of Total Rewards from CEOC altogether. e. The Omnibus Agreement granted three licenses to CES. The first, known as License A, was a sweeping grant of CEOC's intellectual property to CES, including any intellectual property CEOC acquired down the road! License A explicitly granted a license to CES to create derivative works; thus, CEOC has no control over new versions or uses of its intellectual property that are created by CES, CERP, Growth Partners, or any other current or future sublicensees. f. CES granted irrevocable sublicenses to Growth Partners, CERP, and their subsidiaries and properties without CEOC's consent and for no consideration. g. Although CEOC technically will continue to own the intellectual property, CEOC has no right to possess the tangible subject matter developed in conjunction with, and instrumental to using, its intellectual property. h. In addition, it is now CES, and not CEOC, that owns the know-how that is at the heart of the Total Rewards program. 8 [TO BE INSERTED] 86 EFTA01091619 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 88 of 212 237. The effect of the CES Agreements is to take control of Total Rewards away from CEOC. This prevented CEOC from leveraging any of the value of Total Rewards to generate funds to operate the business or pay its debts. In return, CEOC received nothing but a 69% equity share in CES, an entity that is intended to have very limited earnings and which CEOC does not and never will be able to control. 3. Allocation of CES Expenses. 238. Ownership in CES was allocated among CEOC, CERP, and Growth Partners, with CEOC receiving 69% ownership, CERP 20.2% and Growth Partners 10.8%. Pursuant to the LLC agreement, costs were allocated 70% to CEOC and 30% to CERP and Growth Partners together. This allocation was intended to reflect the historical shares of the revenue each entity contributed to the Caesars enterprise. 239. However, after the Four Properties Transaction closed in May 2014, CEOC's share of this revenue declined to about 53%, while the share enjoyed by CERP and Growth Partners correspondingly increased. Nevertheless, the cost allocation method was not changed, resulting in CEOC paying more than its share of CES' costs. It is estimated that, for the period June 2014 to December 2015, CEOC has overpaid the expenses of CES by roughly $14.5 million compared to its share of Caesars revenues in that period. 4. Lack of Fair Process. 240. The same lack of process that tainted the transfer of the Four Properties and the B-7 Transaction impugned the transfer of Total Rewards and the creation of CES. The negotiations over the sale of the asset was a negotiation only between CEC and CAC; CEOC did not have a seat at the table. CEC and CAC each formed a Special Committee, but neither Committee nor their advisors protected CEOC's interests or negotiated on behalf of CEOC. 87 EFTA01091620 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 89 of 212 Although each Special Committee hired independent financial and legal advisors to advise it on the entire transaction, CEOC had no independent directors, legal counsel, or financial advisors to review the transfer. CEOC did not ask for or receive a fairness opinion, and there was no analysis done — by anyone — of CEOC's solvency. And, as with other CEOC asset transfers, Total Rewards was never offered to any true third-party buyers or subject to any marketing process to ensure that CEOC could get the best price. 241. The CEC Special Committee does not seem to have considered the fact that CEC and CEOC had divergent interests or that the Committee itself had a fiduciary duty to protect CEOC because of CEOC's insolvency. The Special Committee also never considered whether CEOC should retain control over Total Rewards, even though there would be obvious long-term consequences to CEOC if management of Total Rewards were transferred to entities the Sponsors controlled. 242. The terms of the Services LLC Agreements were drafted by Paul Weiss and Apollo in early 2014, revised by TPG along the way, and only presented to the CEC and CAC Special Committees after the terms had been decided upon. This process ensured that not even the CEC and CAC Special Committees could meaningfully weigh in on the transfer to a bankruptcy remote entity of a strategic and irreplaceable asset. Indeed, there were no material changes to the term sheets after Paul Weiss and the Sponsors sent them to the Special Committees for their review and approval. 243. At the time of the transfers, the only CEOC directors were Loveman and Hession, both of whom were senior executives at CEC and shareholders of CAC, Growth Partners' parent. Loveman and Hession never convened a board meeting to discuss the transfer of Total Rewards, 88 EFTA01091621 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 90 of 212 nor gave the subject any serious attention. Instead, they approved the transfer of "the key to the empire" in a simple written consent. 5. Loss of Value. 244. Total Rewards had independent, standalone value even apart from the earnings boost it gave to the CERP and Growth Partners properties. One indicator of its worth is the valuation Caesars' independent accountants, KPMG, performed of the Total Rewards trademark and customer relationships in a Purchase Price Allocation performed as part of the Sponsors buy- out of Harrah's in January 2008 ("2008 PPA"). According to the 2008 PPA, the fair value of the Total Rewards trademark alone was $495.1 million at the time of the sale. KPMG reasoned that the trademark was so valuable because "[t]he majority of Harrah's trade names [including Total Rewards] are highly recognizable in the casino entertainment industry and carry a reputation for products and service, strong customer recognition, and positive consumer perception. These perceptions are supported by internal analyses we reviewed. As such, the trade names are valuable assets." 245. The PPA valued the Rated Customer Relationships within Total Rewards at approximately $1.455 billion. According to KPMG, "[r]ated player relationships represent a key intangible asset that has a separate and distinct value apart from both the purchased tangible assets and goodwill. Over time, Harrah's has increased its name recognition and, cultivated relationships with rated players ... through the Total Rewards program." Like other assets, these customer relationships were deemed to have a finite lifespan. As of December 31, 2014, the carrying value of the acquired customer relationships had depreciated to $529 million. Because this amount does not take into account any new customer relationships developed after the 2008 PPA, this $529 million value is the floor of the current accounting value of the 89 EFTA01091622 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 91 of 212 customer relationships. There is no reason to think that the value of Total Rewards has fallen since KPMG performed its valuation, and there is every reason to believe that it has risen. Since 2008, CEOC has invested enormous amounts in Total Rewards, expanded the program, and rolled out a new version of its software. Given these enhancements, the customer relationships CEOC has developed since 2008 are now worth hundreds of millions of dollars more than those identified in the 2008 PPA. 6. Redemption of Total Rewards Credits. 246. CEOC also has been injured by CEC's requirement that it use an unfair method to allocate costs when a customer redeemed Total Rewards credits. Total Rewards customer credits are allocated as an expense to the property where the credits were earned. Thus, CEOC shoulders the cost when customers from its regional casinos spend their credits in Las Vegas or New Orleans. Originally, this had little overall effect upon CEOC, since it owed these destination properties as well as the regional properties where the credits arose. However, after the loss of most of CEOC's Las Vegas properties, this meant that CEOC has been bearing the costs of Total Rewards incentives without reaping the benefits. This has become, at bottom, simply another means of subsidizing CEC, CERP, and Growth Partners. N. TRANSFER OF CEOC'S PROPERTY MANAGEMENT BUSINESS, WORKFORCE, AND ENTERPRISE SERVICES. 247. A material source of CEOC's income came from the fees it earned for managing its properties and, later, the CMBS and CERP properties. In connection with the Four Properties Transaction, however, CEOC was compelled to assign its portfolio of property management agreements to CES, which took over the business. 248. The property management contracts were unquestionably valuable. Upon information and belief, CEOC had earned many millions from managing Planet Hollywood and 90 EFTA01091623 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 92 of 212 Horseshoe Baltimore for Growth Partners, and also should have earned substantial fees for managing the CMBS Properties and the CERP properties. Moreover, upon information and belief, the fees CEOC could have expected in future years from managing the properties would have amounted to hundreds of millions of dollars. Nevertheless, CEOC was paid virtually nothing by CES or anyone else for assigning its interests in these valuable contracts. Instead, CEOC was given a 69% equity interest (but only a one-third share of the voting interests) in CES, an entity that was intentionally structured to have no profits. 249. As with the rest of the transactions in the spring of 2014, at no point did CEC, the Sponsors, CEC's board or CEOC's board give any thought to the question whether CEOC was receiving, or should receive, reasonably equivalent consideration in return for the transfer of its property management business. Nor at any point in this period did CEOC have independent directors who would have been in a position to consider the fairness of these transactions to CEOC or have the benefit of any independent legal or financial advisors. Similarly, no fairness opinion was solicited, received, or considered in connection with any of these transfers. 250. Even more troubling is the fact that — although the 2014 Transaction Agreement was executed in March 2014 — the actual transfers of Total Rewards, the enterprise services including most of CEOC's workforce built over decades, and CEOC's portfolio of property management agreements did not take place until later in the year. By then, CEOC did finally have outside directors and a Special Governance Committee ("SGC"), and the SGC was investigating the array of fraudulent transfers that had been inflicted upon CEOC. Despite the fact that the transfer of Total Rewards, the transfer of the workforce and enterprise services, and the transfer of CEOC's property management agreements were obviously fraudulent transfers, the SGC did nothing to stop, disavow, or reject them. Instead, the Committee stood by and did 91 EFTA01091624 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 93 of 212 nothing while CEOC's conflicted directors sought regulatory approvals and approved ongoing transfers, notwithstanding the fact that it had the means to prevent these transfers from being taking place. According to CEOC, those transfers left CEOC at the mercy of the Sponsors and eliminated any meaningful alternatives to settlement with the Sponsors and CEC on terms grossly unfavorable to CEOC, such as a standalone plan that preserved the litigation claims. The Committee's two members may well have been outside directors, but their conduct and their inactivity as to matters squarely within the purview of the SPG demonstrates that they were far from independent of the Sponsors and CEC. 251. In summary, under the 2014 Transaction Agreement and the resultant Four Properties Transaction and CES Agreements, CEOC (i) transferred four of its most valuable properties and undeveloped land to Growth Partners, (ii) gifted control of its most valuable intangible asset to CES, and (iii) was stripped of its property management contracts. As a result, Growth Partners and CERP now effectively own most of the "hub" of the Caesars enterprise, leaving CEOC with the "spokes" that are located in deteriorating markets and that exist largely to feed profitable business to CERP and Growth Partners. 252. The enormous transfer of value from CEOC to CAC and Growth Partners is reflected in the dramatic increase in the price of CAC's publicly traded stock after the terms of the 2014 Transaction Agreement were disclosed. In the five trading days following the March 3, 2014 announcement of the deal, CAC's stock price increased 17.4%, from $13.63 to $16.00. During that same period, the stock prices of comparable gaming companies did not experience similar increases. Obviously, the market concluded that Growth Partners got more value than it had paid for. 92 EFTA01091625 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 94 of 212 253. The 2014 Transaction Agreement not only was made while CEOC was insolvent, but also further deepened CEOC's insolvency. The announcement of the 2014 Transaction Agreement led to the immediate downgrade of CEOC's credit rating. On March 28, 2014, Moody's lowered CEOC's credit rating to Caa3 and of the Second-Lien Notes from Caa3 to Ca. Moody's wrote: The proposed sale comes on the heels of the sale of Planet Hollywood, sale of its interest in a casino development in Baltimore, and the sale of Octavius Tower and Project Linq in Las Vegas, NV in late 2013. Moody's estimates that on a pro- forma basis, the proposed sale of the four casinos along with the previous sale of Planet Hollywood will reduce CEOC's annual EBITDA (which included Planet Hollywood for three quarters) in the range of $250 - $300 million, representing about 21% of CEOC's 2013 adjusted EBITDA. As a result, debt/EBITDA will rise above the estimated 16x at year-end 2013. Additionally, assuming an 8x multiple for valuation purposes, Moody's estimates bondholders will lose value in the range of $2.0 billion to $2.4 billion. Caesars—PR 295963. On April 8, 2014, Standard & Poor's followed suit, lowering its recovery rating on CEOC's first lien debt to "3" (50% to 70% recovery) and its issue-level rating to CCC. O. PURPORTED RELEASE OF THE BOND GUARANTEES. 254. Mother element in the transactions the Sponsors, Paul Weiss, and CEC engineered in these months was an effort to purport to release — for no consideration — the guarantees CEC made of $14.75 billion of CEOC's debt to bondholders and noteholders (the "Bond Guarantees"). The Bond Guarantees, set forth in the indentures CEOC had issued over the years, provided credit support for CEOC's funded debt. The Bond Guarantees also served a larger purpose, namely, to disincentivize CEC from stripping CEOC of assets, since the guarantees kept CEC on the hook for the repayment of CEOC's debts. 93 EFTA01091626 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 95 of 212 255. CEC's guarantees of CEOC's debt were plainly set forth in the bond indentures, which themselves were carefully-written, sophisticated legal documents that followed decades of precedent. Although the indentures specified methods by which the CEC guarantees could be released, the conditions for release were narrow. In addition, certain of the methods for releasing the guarantees required an affirmative election by CEOC itself. 1. CEC's Sale of CEOC Stock. 256. The bond indentures provided that the Bond Guarantees could be released if all of three separate and independent conditions were met, one of which was that CEOC ceased to be a wholly-owned subsidiary of CEC. [TO BE INSERTED] Ultimately, Paul Weiss devised an argument — premised on the nonintuitive idea that the word "and" does not mean "and," but actually means "or" — that CEC could escape its Bond Guarantees if CEC sold some of its CEOC stock, thus ending CEOC's status as a wholly-owned CEC subsidiary. (The other two conditions specified in the indentures were not, and never have been, met.) Paul Weiss' reading of the indenture is patent nonsense, since "and" means "and," and the indentures' requirements for the removal of the Bond Guarantees were separate, cumulative, and conjunctive. Thus, even if CEOC did cease to be a wholly-owned subsidiary of CEC, the other two requirements would still have to be met. Nonetheless, with Paul Weiss' advice, the Sponsors ordered CEC to sell a 5% interest in CEOC to support their argument that the Bond Guarantees could be revoked. 257. The CEOC stock was worthless because of CEOC's crushing debts. CEC's financial advisor, Blackstone, determined that, if traditional valuation methods were used, CEOC stock had a negative value. And even Apollo's Sambur equated the shares' value to "pixie dust." 258. Sambur solved this problem, in part, by turning to two hedge funds that already owned stock in CEC. One was Paulson & Co., which owned 9.9% of the common voting stock 94 EFTA01091627 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 96 of 212 of CEC pursuant to a debt-for-equity swap it had closed a few years before. The second was Scoggin LLC. Even though the CEOC stock was worthless, both Paulson and Scoggin were willing to buy it because, upon information and belief, [TO BE INSERTED]. Once the Bond Guarantees were purportedly released, the potential liability would disappear and CEC's stock price would increase, more than compensating Paulson and Scoggin for the cost of the worthless CEOC stock. 2. Apollo's Side Deal with Chatham Asset Management 259. Sambur also began negotiations with a third possible buyer of the CEOC stock, Chatham Asset Management, a New Jersey-based asset manager with whom he had previous dealings and was in frequent contact. Unlike Paulson and Scoggin, Chatham did not own CEC stock. However, Chatham had accumulated a substantial position in CEOC's 2015 Notes. 260. Chatham also was a member of the syndicate that loaned money to Growth Partners in connection with the Four Properties Transaction in 2014. At some point, someone let Chatham in on the Sponsors' strategy to strip profitable assets out of CEOC and place them in entities that the Sponsors and CEC themselves owned and controlled on the side. [TO BE INSERTED] 261. This, of course, should have troubled Chatham, which was a major holder of the very debt Apollo was trying to debase. Instead, upon learning of Apollo's plans, Chatham steadily increased the amount of the 2015 Notes it held. [TO BE INSERTED] Upon information and belief, the majority of these new holdings were purchased on April 29 and 30, 2014. By that point, Chatham's interest in Caesars amounted to a substantial percentage of all of Chatham's investments. 95 EFTA01091628 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 97 of 212 262. Upon information and belief, the reason for this increase was that Chatham and Sambur were discussing a proposal under which the Sponsors would have CEOC redeem the 2015 Notes as a means of shifting cash to Growth Partners. Chatham also was a member of the syndicate that loaned money to Growth Partners in connection with the Four Properties Transaction in 2014. At some point, someone let Chatham in on the Sponsors' strategy to strip profitable assets out of CEOC and place them in entities that the Sponsors and CEC themselves owned and controlled on the side. [TO BE INSERTED] 263. [TO BE INSERTED] Apollo did, in fact, arrange a secured financing to raise money to buy the 2015 Notes. Although Sambur had previously bought CEOC's distressed debt only at a discount, in the B-7 Transaction, he had CEOC pay par, plus a premium, for the 2015 Notes. Finally, this was indeed a device to get cash into CAC's subsidiary Growth Partners. 264. As the B-7 Transaction took form, another element of Apollo's quid pro quo with Chatham became apparent. Although Chatham had no reason to purchase the worthless CEOC stock from CEC, [TO BE INSERTED]. Chatham, of course, lost money on the stock purchase, as it knew it would, given CEOC's obvious insolvency and defendants' scheme to strip valuable assets from CEOC. 265. [TO BE INSERTED] 266. One reason Chatham was able to reap this windfall, of course, was that Chatham knew about — and the market did not — Apollo's plan to redeem the 2015 Notes. [TO BE INSERTED] 267. [TO BE INSERTED] 268. Chatham, Paulson, and Scoggin paid CEC $6.1 million for the CEOC stock. Even though the stock was all but worthless, each of the three funds profited handsomely. 96 EFTA01091629 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 98 of 212 Chatham, of course, made a killing on its holdings of 2015 Notes. Paulson and Scoggin did well, too. In the hours after CEC announced its claim that the Bond Guarantees had been removed, their CEC stock rose 14%, while CEOC's 9% Senior Secured Notes due 2020 fell 10%. 3. Purported Removal of CEC's Bond Guarantees. 269. CEOC, of course, received nothing from the proceeds of the stock sale. Nevertheless, on or about June 2, 2014, CEOC CFO Donald Colvin delivered to the indenture trustee for the 2009 indenture a certificate stating that CEOC "elects to automatically release the Parent Guarantee pursuant to the last paragraph of Section 12.02(c) of the 2009 Indenture." On information and belief, similar certificates also were delivered to the indenture trustees for the other indentures governing the Second Priority Notes. 270. CEOC received no consideration in return for delivering this certificate and releasing its legal rights. However, CEOC's purported exercises of its elections under the Bond Guarantees were unquestionably valuable, a fact proven by the jump in CEC's stock price when the purported removal of the Bond Guarantees was announced. 271. As usual, upon information and belief, CEOC followed no governance process in its decision to relinquish this asset. It did not have independent legal or financial advisors or an independent committee of its board, and it did not ask for or receive a fairness opinion or other valuation of the asset. Nor does it appear that its board ever considered or approved of CEOC's election to remove the Bond Guarantees. 97 EFTA01091630 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 99 of 212 P. INTERCOMPANY REVOLVER. 272. In August 2008, CEC extended CEOC an unsecured credit facility called the Intercompany Revolver under which CEC would lend money to CEOC up to a maximum principal amount of $200 million. The maturity date of the Intercompany Revolver was January 29, 2014, which later was extended to November 2017. 273. Apollo, not CEC or CEOC, governed the use of the Revolver. CEOC followed the practice of notifying Apollo of its use of the Intercompany Revolver, and Apollo monitored CEOC's borrowings and repayments under the facility. At all relevant times, Apollo was aware of and controlled CEOC's use of the Intercompany Revolver, including decisions to repay amounts owing under the Revolver. 274. In December 2010, the Intercompany Revolver was amended to increase its maximum principal amount to $500 million. The facility was increased again in February 2011. In November 2012, the Intercompany Revolver was amended and increased to $1 billion. However, at the same time, the Revolver was changed from a committed facility to an uncommitted facility. Moreover, under the amendment, CEOC now was required to make solvency representations to request funds, something that — as CEC and Apollo well knew — it would not be able to do. 275. Between November 2012 and May 2014, CEOC repaid CEC principal and interest totaling $400.7 million. CEC used $320 million of this to benefit CEC's CMBS Properties, either by repurchasing CMBS Debt in the market at a discount or by providing necessary cage cash to CMBS Properties. After CEOC received the proceeds from the Four Properties Transaction, the Sponsors — led by Sambur — instructed CEOC to repay all amounts 98 EFTA01091631 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 100 of 212 remaining under the Intercompany Revolver. On May 30, 2014, CEOC's board complied with this instruction and approved the repayment of the $261.8 million outstanding on the Revolver. 276. Altogether, CEOC borrowed, and repaid, about $1.8 billion under the facility over the years, as well as $47 million in interest. Of this, CEOC made $289.0 million in payments of principal and interest to CEC in the year prior to its Petition Date and $546.5 million in the two years before the Petition Date. The maximum outstanding balance on the Intercompany Revolver was $644.2 million, which was reached on November 14, 2012. CEOC paid $18.3 million in interest with respect to that balance. NEW YORK LAWSUIT. 277. By mid-2014, CEOC was preparing to file for bankruptcy. In June and July, it retained the firm of Kirkland & Ellis as restructuring counsel, brought aboard two outside directors that it designated as "independent," created a Special Governance Committee ("SGC"), and formed a Restructuring Committee of its board. The SGC, using Kirkland to provide legal advice and Mesirow Financial as its advisors, began investigating the various asset transfers and other transactions, in part to determine what claims CEOC had against the Sponsors, CEC, directors of CEC and CEOC, and others in connection with the looting of CEOC. 278. Simultaneously, the persons and entities whom the SGC was charged with investigating began working with Paul Weiss to devise a means of defeating the SGC's work before it even started. Upon information and belief, in July 2014, Paul Weiss began drafting a complaint to be filed jointly by CEC and CEOC against an array of CEOC's creditors. Among other things, the complaint sought a declaratory judgment that Paul Weiss' client CEC was not liable to Paul Weiss' client CEOC for the fraudulent transfers CEC had engineered with Paul Weiss' help. 99 EFTA01091632 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 101 of 212 279. Upon information and belief, Paul Weiss determined that it could not file the lawsuit itself— not because of the obvious conflict between CEOC and CEC, but rather because Paul Weiss separately represented some of the putative defendants in unrelated matters. Paul Weiss then had CEC and CEOC engage the firm of Friedman Kaplan Seiler & Adelman to complete the complaint and bring the lawsuit. But, in bringing the case, Friedman Kaplan was little more than a front for Paul Weiss. Upon information and belief, Friedman Kaplan never discussed the substance of the lawsuit with the boards of CEC or CEOC before the complaint was filed and did not attend the board meetings where the lawsuit was approved. Similarly, Friedman Kaplan did not meet with or have discussions with the SGC or Mesirow Financial during the drafting of the complaint. 280. The decision whether to file the case went before the boards of CEC and CEOC on August 3, 2014. The two boards were largely interlocking, and their meetings were held in quick succession that evening. Despite the gravity of the matter — that is, the filing of a lawsuit that could erase billions of dollars in claims CEOC had against CEC — the CEOC board meeting was a mere formality, held over the phone and lasting only 13 minutes. 281. The declaratory relief sought by the lawsuit was intended to prevent CEOC's newly-formed SGC from conducting a meaningful investigation, since a main purpose of the lawsuit was to obtain a declaration that CEC was not liable to CEOC for the very transactions that the SGC was directed to investigate. Possibly for this reason, the two directors on the CEOC board that were designated as independent abstained from the vote approving the filing of the lawsuit. Instead, the filing of the lawsuit was approved by [TO BE INSERTED], each one of whom was also a director of CEC, a partner or officer of Apollo or TPG, and a putative defendant, and thus completely conflicted. 100 EFTA01091633 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 102 of 212 282. Friedman Kaplan filed the lawsuit in the New York state courts on the morning of August 5, 2014. The two plaintiffs were CEC and CEOC, and Friedman Kaplan represented them both. The complaint's prayer for relief, among other things, asked for "[a] judicial declaration stating that ... plaintiffs have not breached their fiduciary duties or engaged in fraudulent transfers, or otherwise engaged in any violation of law." On September 15, 2014, Friedman Kaplan filed an amended complaint repeating the prayer for this same relief. R. PIK NOTES TRANSACTION. 283. On February 1, 2008, CEOC issued about $18 million of so-called PIK or "toggle" notes, under which CEOC had the option of paying interest either in cash or in kind until the notes matured in 2018. 284. CEC had guaranteed the PIK Notes. By late 2014, CEOC was in default, and noteholders were threatening to sue CEC on its guarantee. Even worse from CEC's point of view was the fact that CEC's guarantee of the notes was a guarantee of payment, and not of collection. The previous June, CEC had negotiated an amendment to its credit agreement with bank lenders changing the Bank Guarantee from a guarantee of payment to a guarantee of collection; however, that amendment had a "most favored nations" clause that would have given the banks the benefit of any form of guarantee CEC provided to anyone else that was more favorable than the guarantee of collection CEC had just negotiated with them. Thus, if CEC were required to pay the holders of the PIK Notes under its guarantee of payment, it would trigger the most favored nations clause and CEC's Bank Guarantee would once again be one of payment, not collection. Since CEOC was on the verge of filing its bankruptcy petition, this put CEC in immediate jeopardy. 101 EFTA01091634 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 103 of 212 285. CEC decided once again to help itself to CEOC's money. Despite the fact that the PIK Notes were trading at a fraction of their face value, CEC directed CEOC to redeem the Notes at 103.583% of par. CEOC had, by then, directors that had been designated as independent and its board had formed the Special Governance Committee to address self-dealing transactions. Yet the SGC and its two members were ignored. Instead, on October 2, 2014, the CEOC board's Executive Committee, which consisted of Rowan, Davis and Loveman, approved the redemption of the PIK Notes. 286. The redemption was a windfall to holders of the PIK Notes. CEOC was obviously insolvent, and it was widely known that CEOC was preparing for bankruptcy. (In fact one provision of the note purchase agreement that was drawn up between CEOC and the noteholders stipulated that the noteholders would be paid directly by the indenture trustee and paid before the expiration of the indenture's 30-day waiting period to avoid the Bankruptcy Code's 90-day preference period.) Thus, since the notes were not due until 2018, the main — if not the sole — purpose of the redemption was to protect CEC from the implications of its Bank Guarantees. 287. CEC itself participated in this windfall. It owned $4.3 million in face amount of the PIK Notes, and it received $4.7 million when its notes were redeemed. The amounts reaped by the other PIK noteholders were unconscionable: the notes were redeemed at a 627% premium to their imputed market price. 288. The lack of fair process was astonishing. The three members of CEOC's executive committee who approved the redemption all were also directors of CEC. In voting to redeem the PIK Notes above par, they did not bother to investigate the prices at which the notes had been trading. No independent legal or financial advisers were engaged to guide the 102 EFTA01091635 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 104 of 212 Executive Committee's deliberations, and there was no opinion rendered that the transaction was fair to CEOC in any way. Altogether, CEOC paid $17.7 million to redeem the PIK Notes. S. PAUL WEISS' ROLE IN NEGOTIATION OF THE RSA. 289. Beginning in August 2014, the Reorganization Committee of CEOC's board began negotiating a prepackaged bankruptcy plan, which was described in a Restructuring Support Agreement ("RSA"), dated December 19, 2014. The RSA purported to set forth a CEOC reorganization under which CEC would contribute new value to CEOC in return for continued control of CEOC and sweeping general releases of liability for CEC, the Sponsors, CEC and CEOC directors, advisors, and countless others. Although touted as a plan where CEC would make a "substantial contribution" to CEOC, in truth the value CEC would have contributed for the benefit of CEOC creditors was as little as $75 million. 290. Throughout the negotiation of the RSA, Paul Weiss represented the interests of CEC, the Sponsors, CEC and CEOC directors, and itself. In so doing, Paul Weiss was again in a position of conflict, since it was taking positions directly adverse to CEOC in matters substantially related to matters in which Paul Weiss had represented CEOC. Moreover, Paul Weiss' conflict extended beyond its representation of CEC, the Sponsors, and the others. Since Paul Weiss itself was jointly liable with CEC, Apollo, TPG, and the directors of CEC and CEOC for the fraudulent transfers and other transactions, Paul Weiss had an active conflict even in representing those parties and individuals. T. PREEMPTION OF THE RESTRUCTURING PROCESS. 291. The campaign of asset transfers and intentional encumbrance of CEOC's business was undertaken by the Sponsors and CEC for the admitted purpose of strengthening their leverage over CEOC's creditors. The cumulative effect of the transfers was to spread Caesars' 103 EFTA01091636 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 105 of 212 synergies among CEC, CAC, Growth Partners, CERP, CIE, CES, and other affiliates in order to defeat any effort by creditors — or even by the Bankruptcy Court — to remedy the dozens of fraudulent transfers. A dividend of this behavior was to give the Sponsors and CEC the whip hand over the bankruptcy proceeding in formulating a CEOC plan of reorganization. 292. And this, of course, is precisely what has happened. In December 2014, CEC and CAC announced a plan to merge, recombining in CEC the properties that had been systematically stripped away from CEOC. And the timing was no accident. By then, CEOC was one month away from filing for bankruptcy. The merger of CEC and CAC was intended to present creditors and the Bankruptcy Court with a fait accompli about which both would be helpless to forestall. 293. The passage of time has only underscored this fact. In a bankruptcy court Disclosure Statement filed on April 4, 2016, CEOC championed a new value plan under which CEC would contribute cash in return for CEOC's assets and — more fundamentally — general releases of CEC, Apollo, TPG, Paul Weiss, Gary Loveman, Marc Rowan, David Sambur, Eric Hession, Jonathan Halkyard, Michael Cohen, Fred Kleisner, and the entire cast of tortfeasors who conspired to destroy CEOC in the first place. 294. The Disclosure Statement — ostensibly a CEOC document — also was revealing in its admission that CEOC had few options in its reorganization because of the effectiveness of the asset transfers. CEOC maintained, for example, that the bargain-basement contribution the Sponsors and CEC would make to the reorganization was the best it could do because, otherwise, it no longer would have "benefits of the Debtors' important Total Rewards® loyalty program and inclusion in the broader Caesars property network, which drive enhanced operating and financial performance." Similarly, because CEC created — in CERP and Growth Partners — a 104 EFTA01091637 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 106 of 212 huge standalone competitor to CEOC — a competitor that now has the software, know-how, and databases of Total Rewards - CEOC is cornered. CEOC contends it now has no option but to submit to an unattractive offer from CEC: [A proposed] Standalone Plan assumes that Total Rewards will become a "CEOC-only" rewards program, with participation from casinos owned by CERP and CGP terminated as of the Effective Date. In addition to transition and potential litigation costs associated with terminating CGP and CERP's access to the Total Rewards program, the Debtors anticipate that CGP and CERP properties will either develop their own customer loyalty program or affiliate with an alternative existing program to compete with the Debtors and that the Debtors' customers will no longer earn Total Rewards credits at CGP or CERP properties. The result will be incremental gross margin compression, particularly in the Las Vegas market, as CEOC and non-CEOC properties compete for existing Total Rewards customers and spend more on marketing to these customers. The Disclosure Statement further stated: "As the Total Rewards network shrinks in Las Vegas and Atlantic City in the Standalone Plan scenario, the options available to the Debtors' customers to leverage Total Rewards benefits (earning and redeeming) are also reduced." 295. Equally revealing is CEOC's contention that, despite the magnitude of the assault against it by those who were entrusted to be its protectors, CEOC must let them get away with it. Because CEOC's crucial synergies now are in the hands of the Sponsors and CEC, no one but CEC is willing to come up with the money to fund a plan. But this comes at a price: For obvious reasons, the cash and credit support contemplated by the proposed Plan simply will not work if claims against the credit parties (i.e., CEC and CAC) are not released. And not surprisingly, CEC and its affiliates have conditioned their substantial financial and credit support for any proposed plan on securing releases of such claims. Put simply, CEC and its affiliates will not voluntarily make a multi-billion dollar contribution to the Debtors' restructuring efforts without obtaining these releases. See Disclosure Statement, at 4. By deliberately putting CEOC over a proverbial barrel, the Sponsors and CEC gained enormous leverage over CEOC and its creditors and, with this leverage, the Sponsors and CEC now demand exoneration from CEOC for their misconduct. Unfortunately, the SGC allowed the final, critical stages of the scheme to happen under their noses, even though they were purportedly charged with investigating the very claims, by virtue 105 EFTA01091638 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 107 of 212 of the transfers of the workforce and enterprise services that occurred in the latter half of 2014, the SGC now insists must be settled on terms that are less favorable than could otherwise be obtained. CAUSES OF ACTION 296. Plaintiff has been injured by defendants' wrongful conduct. This includes injury that is irreparable and which can only be remedied by the return of assets that were wrongfully taken. In addition, plaintiffs are entitled to money damages. 297. Defendants' wrongful conduct includes constructive and actual fraudulent transfers, waste of corporate assets, breaches of fiduciary duties, aiding & abetting breaches of fiduciary duties, and conspiracy. These are alleged below in plaintiffs' specific claims against defendants. Certain elements of defendants' wrongful conduct, though, are common to many of these claims. CEC's Breach Of Fiduciary Duty 298. CEOC was a wholly-owned subsidiary of CEC at all times until May and June 2014, when 11% of CEC's stock in CEOC was sold or transferred to others as part of the scheme by the Sponsors and CEC to purportedly release CEC from its Bond Guarantees. At all times, CEC dominated the affairs of CEOC and appointed every member of CEOC's board, and, at all relevant times, CEOC was insolvent. As a result, CEC owed fiduciary duties to CEOC to maximize CEOC's value for the benefit of its creditors, who were CEOC's ultimate stakeholders. 299. As a fiduciary to CEOC, CEC was required to place the interests of CEOC ahead of CEC's own interests and to not engage in conduct that benefited CEC to the detriment of CEOC. 106 EFTA01091639 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 108 of 212 300. In addition, because CEC itself was dominated and controlled by the Sponsors, CEC was required to place the interests of CEOC ahead of the Sponsors' interests and to not engage in conduct that benefited the Sponsors to the detriment of CEOC. 301. As a fiduciary to an insolvent CEOC, CEC was required to avoid self-dealing transactions with respect to CEOC, unless those transactions met the standard of entire fairness. The standard of entire fairness required that any self-dealing transaction between CEC and CEOC must be entirely fair to CEOC as to price and also entirely fair to CEOC as to the process followed in timing, initiating, structuring, negotiating, and disclosing the transaction and in obtaining approval of the transaction by CEOC's directors. 302. It was not possible for a self-dealing transaction between CEC and CEOC to be fair as to process unless CEOC had the benefit of independent governance and advice. This meant, among other things, that CEOC was required to have independent directors on its board, to have independent financial advisors, to have independent legal counsel, and to be fully informed of the price, terms, and conditions of any transaction between CEC and CEOC. In addition, it required that CEOC have the opportunity to study and review all aspects of any transaction between CEC and CEOC. 303. Throughout this period, CEC deprived CEOC of these basic safeguards. At no point until June 2014 did CEC appoint any outside director to the CEOC board; instead, the CEOC board consisted at all times of Gary Loveman — CEC's Chairman and CEO — and a senior CEC officer. Similarly, throughout this period, CEC did nothing to assure that CEOC had independent financial or legal advisors and, in fact, proceeded to negotiate, structure, and execute transfers of CEOC assets with full knowledge that CEOC did not have independent advisors. Finally, CEOC often was excluded from negotiations about the transfer of CEOC 107 EFTA01091640 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 109 of 212 assets; learned of the prices, terms, and conditions of the transfers only after the negotiations had been completed; and was given no time or opportunity to critically review those prices, terms, and conditions. As a result, all of these transfers were unfair to CEOC as to process. Breaches Of Fiduciary Duties By The Conflicted Directors of CEC 304. Although it would have been possible for CEOC to have had a functioning board at this time, defendants Loveman, Rowan, Sambur, Bonderman, and Davis (collectively, the "CEC Conflicted Directors") decided to prevent that from happening. Instead, the CEC Conflicted Directors determined that Loveman and another CEC officer, both beholden to the CEC board, would be CEOC's sole board members. 305. The CEC Conflicted Directors also acted as the directors-in-fact of CEOC. Among other things, they determined which assets CEOC would sell, and to whom CEOC would sell them; they handled the negotiations of the sale by themselves, without the involvement of CEOC management; they decided the timing, price, terms, and conditions of each sale; they decided which financial and legal advisers would be called upon to assist in the transactions and, conversely, decided that CEOC would have no independent advisers of its own; they reviewed and approved the transactions at their own board meetings; and they relegated the CEOC board to a role of rubber-stamping the decisions the CEC board already had made. 306. The CEC Conflicted Directors intentionally and systematically supplanted the CEOC board so that they could implement, unimpeded, their plan to loot CEOC. In preempting the responsibilities and authority of the CEOC board, the CEC Conflicted Directors also succeeded to the fiduciary duties of that board. As a result, the CEC Conflicted Directors each had a fiduciary duty to avoid self-dealing transactions with an insolvent CEOC that were not entirely fair to CEOC as to price and process. 108 EFTA01091641 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 110 of 212 307. In addition, the CEC Conflicted Directors treated CEC and CEOC as one and the same company. This is shown by the fact that, throughout the relevant period, CEC did not appoint outside directors to the CEC board; CEOC did not have a special committee of its board to consider or approve the transactions; CEC was represented by the same law firm that represented CEOC; CEC and CEOC used the same financial advisers; and CEC and CEOC often held joint board meetings. There was, therefore, only one true board and it was CEC's board; thus, every member of that board had a fiduciary duty to the entire enterprise. This included a fiduciary duty to avoid self-dealing transactions with CEOC that did not meet the standard of entire fairness. 308. Furthermore, given CEOC's insolvency and their domination and control over CEOC and its board, the CEC Conflicted Directors owed fiduciary duties to maximize CEOC's value for the benefit of its creditors, who were CEOC's ultimate stakeholders. 309. As a result, the breaches of fiduciary duties complained of in this Complaint also were breaches of fiduciary duty by the directors of CEC. 310. In the alternative, by directing and knowingly participating in breaches of fiduciary by CEC and CEOC's directors and officers, the CEC Conflicted Directors are liable for aiding and abetting breaches of fiduciary duties owed to CEOC. Liability of Apollo and TPG 311. Apollo and TPG each are liable for breaches of fiduciary duties by CEC and by the CEC Conflicted Directors, who were their agents. Through Hamlet, Apollo and TPG owned the majority of the stock of CEC and had the right to — and did — appoint CEC's entire board. 109 EFTA01091642 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 111 of 212 312. Because the Apollo and TPG partners or officers who served on the CEC board did so for the benefit of and to further the interests of Apollo, TPG and Hamlet, they were agents of Apollo, TPG and Hamlet, and Apollo, TPG and Hamlet are liable for their conduct. 313. Similarly, individual partners or officers of Apollo, TPG and Hamlet took affirmative steps to aid and abet breaches of fiduciary duties by CEC, CEOC, and their directors. The Sponsors are thus liable for this conduct of their agents as well. Breaches Of Fiduciary Duty By CEOC Directors 314. CEOC's directors owed fiduciary duties to CEOC. Because CEOC was insolvent, CEOC's directors had a duty to maximize CEOC's value for the benefit of CEOC's ultimate stakeholders, its creditors. However, at all relevant times, the directors of CEOC were conflicted and did not exercise independent judgment. Until late June 2014, CEOC's board consisted of two directors. One was Gary Loveman, who also was chairman and CEO of CEC. The other was either Jonathan Halkyard, Michael Cohen, or Eric Hession, each of whom was, during his time of service on the CEOC board, an officer of CEC. 315. CEOC's directors owed fiduciary duties to CEOC. This included both a duty of loyalty and a duty of care. 316. The duty of loyalty required the directors to avoid self-dealing transactions with respect to an insolvent CEOC, unless those transactions met the standard of entire fairness. As set forth herein, CEOC's directors breached their duty of loyalty by approving self-dealing transactions between CEC and CEOC that were not entirely fair to CEOC. In addition, CEOC's directors breached their fiduciary duties by approving transactions in which they had a personal interest and by participating in a process that was incapable of being a fair process. 110 EFTA01091643 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 112 of 212 317. The duty of care required CEOC's directors to apprise themselves of all information relevant to their decisions and to carefully and critically consider that information. CEOC's directors breached that duty of care by failing to have sufficient knowledge of the matters they approved; by approving the price, terms, and conditions of transfers without having the benefit of independent financial and legal advice; by approving transactions without receiving fairness opinions and without conducting an analysis of CEOC's solvency; by failing to hold board meetings or by having meetings that were mere formalities; and by failing to assure that certain transfers of CEOC assets were even brought to the board for approval. Breaches Of Fiduciary Duty By Paul Weiss 318. Beginning in the late spring of 2011, Paul Weiss served as counsel to, legal advisors of, and lawyers for CEOC. Paul Weiss represented CEOC as CEOC's counsel in virtually every one of the transactions described in this Complaint. As counsel to CEOC, Paul Weiss owed CEOC fiduciary duties. These included a duty of loyalty to represent CEOC's interests only. 319. CEOC was insolvent at all relevant times. Therefore, Paul Weiss was required to consider, advocate, and protect the interests of CEOC's creditors, who were CEOC's ultimate stakeholders. 320. Simultaneously, in connection with virtually every one of the transactions described in this Complaint, Paul Weiss also represented and advised CEC and affiliates of CEC, which had interests opposite to those of CEOC. Paul Weiss' work for CEC almost entirely overlapped the matters in which it was advising and representing CEOC. 321. Paul Weiss was in a position of obvious conflict in each of these matters. Paul Weiss' representation of CEOC obligated Paul Weiss to render independent and unclouded 111 EFTA01091644 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 113 of 212 advice to CEOC on the terms and conditions of transactions, the legal implications of the transactions, alternatives to the transactions, and the risks attendant to the transactions. Because of its simultaneous representation of parties who had opposing interests to CEOC's on those very matters, Paul Weiss could not and did not serve CEOC with undivided loyalty. 322. Paul Weiss breached its fiduciary duties to CEOC, and CEOC was injured thereby. Liability For Aiding & Abetting Breaches Of Fiduciary Duties 323. In addition to breaching the fiduciary duties that they directly owed to CEOC, the CEC Conflicted Directors, the Sponsors, the Sponsors' officers and agents, and Paul Weiss aided and abetted others in breaching fiduciary duties owed to CEOC. These individuals and entities did so with knowledge that CEOC was owed fiduciary duties by its directors and, because CEOC was insolvent, that CEOC also was owed fiduciary duties by CEC and CEC's directors. These defendants also had knowledge that those fiduciary duties were being breached by the transactions, transfers and actions described in this Complaint. Because CEOC was injured by the participation of these individuals and entities in breaches of fiduciary duties, these defendants are liable to CEOC as aiders and abettors. Civil Conspiracy 324. The essential elements of a civil conspiracy are (a) an agreement between two or more persons to do an unlawful act; (b) intentional participation in the plan or purpose; (c) an overt act in furtherance of the conspiracy; and (d) causation and damages. 325. As set forth above, the Conflicted Directors, a core group of individuals who sat on the boards of CEC and/or CEOC, who were affiliated with CEC and the Sponsors, and who were bound together by overlapping corporate positions and shared financial interests, controlled 112 EFTA01091645 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 114 of 212 every significant aspect of Caesars' overall strategic direction, assisted by Paul Weiss at every turn. 326. By no later than mid-2012, the Conflicted Directors and Paul Weiss realized that CEOC was insolvent and would never be able to repay its debts at anything close to face value. At that time, the Conflicted Directors and Paul Weiss agreed and conspired on a multi-step scheme to strip CEOC of valuable assets and otherwise position CEC and the Sponsors for CEOC's inevitable restructuring or bankruptcy. The Conflicted Directors and Paul Weiss agreed and conspired to commit unlawful acts, including to fraudulently transfer CEOC's valuable assets, breach fiduciary duties owed to CEOC, engage CEOC in harmful financial transactions, and otherwise delay, hinder, and defraud CEOC and its creditors. The Conflicted Directors and Paul Weiss intentionally participated in the scheme. 327. The Conflicted Directors and Paul Weiss performed numerous overt acts designed to further and carry out their conspiracy. Those overt acts include a number of the transactions and transfers complained of in this suit, including the Linq and Octavius transfers; the transfer of Planet Hollywood and Horseshoe Baltimore; the transfer of Bally's Las Vegas, The Cromwell, The Quad and Harrah's New Orleans; the transfer of undeveloped land in Las Vegas; the Transfer of Total Rewards; the transfer of CEOC's property management business; the B-7 Transaction; and the purported release of CEC's Bond Guarantees. The overt acts also include independent actions taken in connection with creating, structuring, negotiating, evaluating, and approving the aforementioned transactions and transfers, as more fully detailed herein. 113 EFTA01091646 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 115 of 212 CLAIM I TRANSFER OF CEOC'S ONLINE GAMING BUSINESS (Nev. Rev. Stat. §§ 112.180, 112.190, 112.210; 6 Del. C. §§ 1304, 1305, 1307; and 11 U.S.C. §§ 544, 550) (Fraudulent Transfer, Breach Of Fiduciary Duty, Aiding & Abetting Breach Of Fiduciary Duty) 2009 Transferees, CEC, Sponsors, CEC Conflicted Directors, Loveman, Halkyard 328. Plaintiffs repeat and reallege paragraphs 1 through 327. Fraudulent Transfer 329. At all relevant times, CEOC has been insolvent. 330. Throughout the relevant period, CEC, the directors of CEC, and the Sponsors completely dominated and controlled CEOC and all of CEOC's subsidiaries and affiliates. 331. In 2009, one of CEOC's promising corporate opportunities was the development and expansion of its online gaming business. As set forth in detail above, it was clear in 2009 that online gaming was a logical extension of CEOC's existing business and CEOC already was well-positioned in the online gaming market. 332. On April 30, 2009, CEC formed defendant Caesars Interactive Entertainment, then known as a Harrah's Interactive Entertainment, as a subsidiary of CEC. The next day CEC directed CEOC to transfer CEOC's ownership of the World Series of Poker trademark, related intellectual property, and all of its existing sponsorship, media, and licensing contracts to a CEC- owned holding company (HIE Holdings TopCo), which then transferred them to an intermediate holding company (HIE Holdings), which in turn transferred them to Harrah's Interactive Entertainment. This constituted a wholesale transfer of CEOC's online gaming assets and online gaming business. 114 EFTA01091647 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 116 of 212 333. CEOC received preferred securities of TopCo in exchange for this transfer. Although nominally valued at $15 million, the TopCo securities were worth much less. 334. The assets CEOC transferred to TopCo were worth over $60 million. 335. In addition, the corporate opportunity that CEC and the 2009 Transferees usurped and CEOC forewent exceeded $1 billion in value at a time when CEOC was insolvent. 336. The transfer of CEOC's online gaming assets and business was a constructive fraudulent transfer because CEOC received inadequate consideration and less than reasonably equivalent value for them. 337. In addition, the transfer of CEOC's online gaming assets and business was an actual fraudulent transfer because the purpose and effect of the transfers was to hinder or delay CEOC's creditors by placing critical and valuable assets beyond their reach. Evidence of fraudulent intent includes the facts that: a) the Sponsors, and Apollo in particular, conceived of the transaction and identified the assets to be transferred; b) the transaction was designed and intended to allow CEC and the Sponsors to take control of CEOC's online assets that were thought to have significant potential, transfer those assets beyond the reach of CEOC's creditors, and otherwise better position CEC and the Sponsors in CEOC's restructuring or bankruptcy; c) CEOC, CEC, the Sponsors, the 2009 Transferees, and the individual defendants knew that CEOC was insolvent on and after the date of each transfer, as shown, inter alia, by the fact that the CEC board was explicitly advised of the legal definition of insolvency in conjunction with this transfer and that Caesars' long- range plans predicted that CEOC would have substantially negative free cash flows for the foreseeable future; d) despite their knowledge that CEC and CEOC had divergent interests, CEC, the Sponsors, Paul Weiss, and the 2009 Transferees proposed, negotiated, structured, evaluated, and approved the transfers through a process that failed to involve CEOC or protect its interests; e) the transfers were to newly created affiliates of CEC, owned and controlled by the Sponsors and CEC; 115 EFTA01091648 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 117 of 212 CEC formed CIE as a subsidiary of CEC rather than CEOC for the express purpose of exploiting the valuable online gaming business that CEOC had created; g) CEC and the Sponsors retained control and ownership of the assets; h) the price for CEOC's online gaming business and assets was not negotiated and was instead determined by the Sponsors; i) the value of the consideration received by CEOC was not reasonably equivalent to the value of the assets transferred; j) the transfer substantially impaired CEOC's future ability to service its debt; k) the Sponsors and CEC retained Duff & Phelps to value the assets and decided upon the deal structure; I) the fairness opinion rendered by Duff & Phelps relied upon inconsistent projections that were performed by an interested party and were not made in the ordinary course of business; m) the fairness opinion rendered by Duff & Phelps did not consider the future upside potential of the assets transferred; and n) the CEOC board approved the transfer without giving it serious or critical consideration. 338. The transfer of CEOC's online gaming assets and business is avoidable and recoverable, and the 2009 Transferees are liable based upon the constructive and actual fraudulent transfer of CEOC's online gaming assets and business. Breaches Of Fiduciary Duty By CEC And CEC's Directors 339. At the time of the transfers of CEOC's online gaming assets and business, the 2009 Transferees were direct or indirect subsidiaries or affiliates of CEC. Thus, the transfer of CEOC's online gaming assets and business to the 2009 Transferees was a related party transaction and involved self-dealing. 340. The price paid to CEOC for transferring the assets was far below the value of those assets and was not entirely fair to CEOC. 341. The process by which CEC initiated, structured, negotiated, and disclosed the transaction was not entirely fair to CEOC. CEOC was given no say in deciding whether to sell 116 EFTA01091649 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 118 of 212 these assets, how the transaction was structured, or when and how it was disclosed. CEOC had no role in the negotiations of the transaction and was not even represented in the negotiations. CEC used its dominance and control over CEOC to assure that CEOC lacked independent directors, financial advisors, and legal counsel necessary to fairly evaluate the transaction and proposed the transaction to CEOC knowing that CEOC lacked the independent governance or resources to fairly evaluate the transaction. 342. Online gaming was an important corporate opportunity for CEOC. The transfer of CEOC's online gaming assets and business took this opportunity away from CEOC and gave it to CIE, which was majority owned by the Sponsors and CEC. 343. CEC breached its fiduciary duties to CEOC. 344. The CEC Conflicted Directors, who individually owed fiduciary duties to CEOC, breached those fiduciary duties. Breaches Of Fiduciary Duty By CEOC's Directors 345. At the time of the transfer of CEOC's online gaming assets and business, CEOC's only directors were Gary Loveman and Jonathan Halkyard. Loveman was CEC's Chairman and Chief Executive Officer, and Halkyard was its Chief Financial Officer. Neither Loveman nor Halkyard was independent of CEC in making decisions affecting CEOC. 346. Loveman and Halkyard breached their fiduciary duties to CEOC by approving, authorizing, and facilitating a transaction that was not in the best interests of CEOC. 347. Loveman and Halkyard also breached their fiduciary duties to CEOC by failing to ensure that CEOC received a fair price for these assets or that a fair process was followed. Loveman and Halkyard made no effort to convene or create a special committee of independent directors to review the transaction; did not consider using a marketing process for the sale of these assets; made no effort to solicit any third-party bids, offers, or proposals; did not retain 117 EFTA01091650 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 119 of 212 independent lawyers or advisors to represent CEOC; made no analysis of CEOC's solvency; gave no consideration whether CEOC should have received any value for the potential upside of its online gaming business; did not consider whether CEOC should have had a means by which to share in CIE's upside; or even attempt to determine if the TopCo preferred stock CEOC received really was worth $15 million. Instead, Loveman and Halkyard approved the transaction by signing a routine written consent. Aiding & Abetting Breaches Of Fiduciary Duty 348. The CEC Conflicted Directors, the Sponsors, and the Sponsors' officers and agents knew that CEC, as CEOC's controlling stockholder, and the boards of CEC and CEOC owed fiduciary duties to CEOC. The CEC Conflicted Directors, the Sponsors, and the Sponsors' officers and agents knew or should have known that CEC and the boards of CEC and CEOC breached those fiduciary duties by compelling CEOC to enter into transactions that were against CEOC's interests, benefited CEC at CEOC's expense, did not provide a fair price to CEOC, and did not result from a fair process. 349. The CEC Conflicted Directors, the Sponsors, and the Sponsors' officers and agents knowingly participated in those breaches of fiduciary in the following ways: a) by virtue of their power to appoint the entire board of CEC and the fact that a majority of the directors of CEC's board were officers of Apollo and TPG, the Sponsors dominated and controlled the actions of CEC's board and CEOC's board; b) the Sponsors conceived, designed, and structured the transaction, including the selection of CEOC online assets to be sold and the creation of new entities that would hold the assets for the benefit of CEC and the Sponsors; c) the CEC Conflicted Directors, the Sponsors, and the Sponsors' officers and agents directly instructed Paul Weiss to negotiate and implement the transaction, even though it was not in CEOC's best interests; d) CEC and the Sponsors retained Duff & Phelps to value the assets, encouraged Duff & Phelps to accept incomplete and misleading information, and knew that Duff & Phelps' opinion on the transaction was a deeply flawed and contradicted 118 EFTA01091651 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 120 of 212 projections that Caesars had prepared and used in the ordinary course of its business; e) although the Sponsors designed the transaction to transfer ownership and control of CEOC's online business and its valuable WSOP assets to the Sponsors and CEC, place those assets beyond the reach of CEOC's creditors, and better position CEC and the Sponsors for CEOC's restructuring or bankruptcy, they did not disclose their intentions to CEC's board or CEOC's board; 0 despite their knowledge that CEC and CEOC had divergent interests, the Sponsors exploited the CEOC board members' conflicts of interest; and the Sponsors determined the consideration to be paid to CEOC for its online gaming business, which did not provide reasonably equivalent value for the transferred assets. g) 350. The CEC Conflicted Directors and the Sponsors are liable for aiding and abetting breaches of fiduciary duty in connection with the transfer of CEOC's online gaming assets and business. 351. CEOC has been injured by these breaches of fiduciary duties in an amount to be determined. CLAIM II CEOC INTERCOMPANY LOAN TO CEC (Nev. Rev. Stat. §§ 112.180, 112.190, 112.210; 6 Del. C. §§ 1304, 1305, 1307; and 11 U.S.C. §§ 544, 550) (Fraudulent Transfer, Unjust Enrichment) CEC 352. Plaintiffs repeat and reallege paragraphs 1 through 351. 353. In 2009, CEOC borrowed $235 million at market rates and loaned that amount to CEC. CEC did not pay interest on this loan. 354. During the term of its loan to CEC, CEOC paid $5.8 million in interest on the $235 million it had borrowed. 355. CEOC received nothing of value in return for making this loan to CEC. 119 EFTA01091652 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 121 of 212 356. In June 2010, CEC repaid the principal amount of the loan, but did not pay CEOC interest upon the loan. 357. CEOC was insolvent at the time it made this loan to CEC. 358. CEC's failure to pay interest upon the loan is avoidable as a constructive fraudulent transfer because CEOC did not receive reasonably equivalent value for the money it loaned to CEC. 359. CEC has been unjustly enriched at CEOC's expense because of its interest-free loan. 360. CEC should be ordered to pay CEOC for the value of the property that was fraudulently transferred, in an amount no less than $5.8 million, plus interest from June 2010 to the present. CLAIM III 2010 CMBS LOAN AGREEMENT AMENDMENT AND TRADEMARKS TRANSFER (Nev. Rev. Stat. §§ 112.180, 112.190, 112.210; 6 Del. C. §§ 1304, 1305, 1307; and 11 U.S.C. §§ 544, 550) (Fraudulent Transfer, Breach Of Fiduciary Duty, Aiding & Abetting Breach Of Fiduciary Duty) CMBS PropCos, Sponsors, Loveman, Halkyard, Sambur 361. Plaintiffs repeat and reallege paragraphs 1 through 360. Fraudulent Transfer 362. At all relevant times, CEOC has been insolvent. 363. Throughout the relevant period, CEC, the directors of CEC, and the Sponsors completely dominated and controlled CEOC and all of CEOC's subsidiaries and affiliates. 364. At the time of the 2008 LBO, CEOC transferred the six CMBS Properties to the CMBS PropCos. In addition to their physical assets, the CMBS Properties used intellectual 120 EFTA01091653 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 122 of 212 property assets, such as their trademarks and trade dress associated with the properties' casinos, restaurants, shops, and other activities (the "CMBS IP"). The CMBS IP was owned by Caesars License Company, LLC ("CLC"). 365. CEOC and CLC were alter-egos. CEOC owned all of the equity of CLC and used CLC solely as an entity to hold title to certain intellectual property assets. 366. At the direction of CEC, on August 31, 2010, CLC assigned all of its right, title and interest in the CMBS IP to the CMBS PropCos. CLC received $100 per property for that assignment, but immediately paid each CMBS PropCo $100 for a limited license back of that same property. In the end, CLC received little or no overall consideration for this assignment of its intellectual property rights for the term of the loans made to the CMBS PropCos. 367. These intellectual property rights were extremely valuable. 368. The transfer of these intellectual property rights was a constructive fraudulent transfer because CEOC received inadequate consideration and less than reasonably equivalent value for them. 369. The transfer of the CMBS intellectual property rights is avoidable and recoverable, and the CMBS PropCos are liable for the constructive fraudulent transfer of the CMBS intellectual property rights. Breach Of Fiduciary Duty 370. At the time of the transfers of CEOC's CMBS IP, the CMBS PropCos were direct or indirect subsidiaries or affiliates of CEC. Thus, the transfer of CEOC's CMBS IP to the CMBS PropCos was a self-dealing transaction. 371. The price paid to CEOC for transferring the assets was far below the value of those assets and was not entirely fair to CEOC. 121 EFTA01091654 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 123 of 212 372. The process by which CEC initiated, structured, negotiated, and disclosed the transaction was not entirely fair to CEOC. CEOC was given no say in deciding whether to sell these assets, or how the transaction was structured. CEOC had no role in the negotiations of the transaction, and was not even represented in the negotiations. Instead, the entire process was dominated by CEC and the Sponsors. Moreover, CEC used its dominance and control over CEOC to assure that CEOC lacked independent directors, financial advisors, and legal counsel necessary to fairly evaluate the transaction, and proposed the transaction to CEOC knowing that CEOC lacked the independent governance or resources to fairly evaluate the transaction. 373. CEC breached its fiduciary duties to CEOC. 374. CEC's directors, who individually owed fiduciary duties to CEOC, breached those fiduciary duties. Breaches Of Fiduciary Duty By CEOC's Directors 375. At the time of the transfer of the CMBS IP, CEOC's only directors were Gary Loveman and Jonathan Halkyard. Loveman was the Chairman and Chief Executive Officer of CEC, and Halkyard was CEC's Chief Financial Officer. As a result, neither Loveman nor Halkyard was independent of CEC in making decisions affecting CEOC. 376. Loveman and Halkyard breached their fiduciary duties to CEOC by approving, authorizing, and facilitating a transaction that was not in the best interests of CEOC. 377. Loveman and Halkyard also breached their fiduciary duties to CEOC by failing to ensure that CEOC received a fair price for these assets or that a fair process was followed. Loveman and Halkyard made no effort to convene or create a special committee of independent directors to review the transaction; did not ask for or receive an opinion about the fairness of the transaction to CEOC; did not consider using a marketing process for the sale of these assets; made no effort to solicit any third-party bids, offers, or proposals; did not retain independent 122 EFTA01091655 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 124 of 212 lawyers or advisors to represent CEOC; and made no analysis of CEOC's solvency. In fact, CEOC and CLC were so far removed from the process that there is no evidence Loveman and Halkyard even executed approvals, consents, or authorizations for the transfers. Aiding & Abetting Breaches Of Fiduciary Duty 378. The Sponsors and the Sponsors' officers and agents knew that CEC, as CEOC's controlling stockholder, and the boards of CEC and CEOC owed fiduciary duties to CEOC. The CEC Conflicted Directors, the Sponsors, and the Sponsors' officers and agents knew or should have known that CEC and the boards of CEC and CEOC breached those fiduciary duties by compelling CEOC to enter into transactions that were against CEOC's interests, benefited CEC at CEOC's expense, did not provide a fair price to CEOC, and did not result from a fair process. 379. The Sponsors and the Sponsors' officers and agents knowingly participated in those breaches of fiduciary in the following ways: a) by virtue of their power to appoint the entire board of CEC and the fact that a majority of the directors of CEC's board were officers of Apollo and TPG, the Sponsors dominated and controlled the actions of CEC's board and CEOC's board; b) the Sponsors, and Apollo in particular, led the efforts to conceive of, design, and structure the transfer of the CMBS IP; c) the CEC Conflicted Directors, the Sponsors, and the Sponsors' officers and agents directly instructed Paul Weiss to negotiate and implement the transaction, even though it was not in CEOC's best interests; d) although the Sponsors understood that the transaction was designed to allow CEC and the Sponsors to take the valuable CMBS IP for nominal consideration, transfer the CMBS IP beyond the reach of CEOC's creditors, and otherwise better position CEC and the Sponsors for CEOC's restructuring or bankruptcy, they did not disclose these intentions to CEC's board or CEOC's board; e) despite their knowledge that CEC and CEOC had divergent interests, the Sponsors exploited the conflicts of interest of CEOC board members who sat on CEC's board or were officers of CEC; 0 Apollo, through Sambur, led the negotiations with the CMBS lenders; g) the Sponsors negotiated financial terms which did not provide CEOC reasonably equivalent value for the transferred assets; 123 EFTA01091656 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 125 of 212 h) despite their knowledge that CEC and CEOC had divergent interests, the Sponsors exploited the CEOC board members conflicts of interest; and i) the Sponsors used their control of CEOC to structure the transaction in a manner that benefitted the Sponsors without presenting it to the CEOC board for its review or approval. 380. The Sponsors and Sambur are liable for aiding and abetting breaches of fiduciary duty in connection with the transfer of the CMBS intellectual property rights. 381. CEOC has been injured by these breaches of fiduciary duties in an amount to be determined. CLAIM IV TAX REFUND (Nev. Rev. Stat. §§ 112.180, 112.190, 112.210; 6 Del. C. §§ 1304, 1305, 1307; and 11 U.S.C. §§ 542, 544, 548(a)(I)(A),(B), 550) (Fraudulent Transfer, Turnover, Unjust Enrichment) CEC 382. Plaintiffs repeat and reallege paragraphs 1 through 381. 383. For the taxable years 2005 through 2008, CEOC was a member of the CEC consolidated group for tax purposes ("CEC Group"). In 2009, the CEC Group reported a net operating loss ("NOL") and carried it back to the 2006 and 2008 tax years by filing a tentative refund claim. 384. In March 2011, CEOC was credited $220.8 million, which was the cash amount of the 2009 Refund provided to the CEC Group. CEOC, however, was owed $55.8 million above and beyond that cash payment. CEC did not credit or otherwise pay CEOC this amount and has failed to provide any justification for failing to do so. 385. In addition to the 2009 Refund, CEC did not fairly compensate CEOC for CEC's use of the Net Operating Losses ("NOLs") that were generated by CEOC and those of its subsidiaries that later filed for bankruptcy. Non-debtors, including CEC, used approximately 124 EFTA01091657 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 126 of 212 $4.02 billion of the NOLs without any compensation to CEOC or recognition that -- had these NOLs not been used by the non-Debtors — they would have been available to the Debtors to be applied against future taxable income. 386. CEOC received no value from CEC or anyone else for the use of these NOLs. 387. CEOC received inadequate consideration and less than reasonably equivalent value for this asset. 388. As a result, CEC's use of CEOC's NOLs is a fraudulent transfer that is avoidable and recoverable. 389. The economic benefit of the NOLs is an asset of CEOC that CEC and affiliates of CEC should turn over to CEOC. 390. CEC has been unjustly enriched to the detriment of CEOC by CEC's use of the NOLs. Equity and fairness require that CEC make immediate restitution for the value of the lost economic benefit from the utilization of the NOLs by the non-Debtors. 391. In addition, CEC breached its fiduciary duties to CEOC by failing to properly compensate CEOC for CEC's use of the NOLs and instead taking the benefit of the NOLs for itself. CLAIM V 2011 WSOP TRANSACTION (Nev. Rev. Stat. §§ 112.180, 112.190, 112.210; 6 Del. C. §§ 1304, 1305, 1307; and 11 U.S.C. §§ 544, 550) (Fraudulent Transfer, Breach Of Fiduciary Duty, Aiding & Abetting Breach Of Fiduciary Duty) WSOP Transaction Transferees, Sponsors, CEC, CEC Conflicted Directors, Loveman, Halkyard, Paul Weiss 392. Plaintiffs repeat and reallege paragraphs 1 through 391. 125 EFTA01091658 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 127 of 212 Fraudulent Transfer 393. At all relevant times, CEOC has been insolvent. 394. Throughout the relevant period, CEC, the directors of CEC, and the Sponsors completely dominated and controlled CEOC and all of CEOC's subsidiaries and affiliates. 395. Among CEOC's profitable operations was its business of hosting live, in-person tournaments as part of its World Series of Poker franchise. The World Series of Poker was, and remains, the premier poker tournament in the world. CEOC's rights to host and profit from the World Series of Poker (the "WSOP Tournament Rights") were immensely valuable. 396. In 2010, CEC began negotiations with CIE to transfer of CEOC's WSOP Tournament Rights from CEOC to CIE. Since CEC owned all of the voting stock of CEOC and most of the equity of CIE, these negotiations essentially were negotiations CEC had with itself. 397. On September I, 2011, CEC closed a multi-step transaction CIE (the "2011 WSOP Transaction") pursuant to which CEOC transferred its WSOP Tournament Rights to CIE. The transfer of CEOC's WSOP Tournament Rights was a constructive fraudulent transfer because CEOC received inadequate consideration and less than reasonably equivalent value for the asset. 398. In addition, the transfer of CEOC's WSOP Tournament Rights was an actual fraudulent transfer because the purpose and effect of the transfer was to hinder or delay CEOC's creditors by placing critical and valuable assets beyond their reach. Evidence of fraudulent intent includes the facts that: a) the Sponsors, and Apollo in particular, conceived of the transaction and identified the assets to be transferred; b) the transaction was designed and intended to allow CEC and the Sponsors to take control of CEOC's WSOP Tournament Rights, transfer those Rights beyond the reach of CEOC's creditors, and otherwise better position CEC and the Sponsors for CEOC's restructuring or bankruptcy; 126 EFTA01091659 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 128 of 212 c) CEOC, CEC, the Sponsors, Paul Weiss, and the individual defendants understood that CEOC was insolvent on and after the date of the transfer; d) despite their knowledge that CEC and CEOC had divergent interests CEC, the Sponsors, Paul Weiss, and the WSOP Transaction Transferees proposed, negotiated, structured, evaluated, and approved the transfers through a process that failed to involve CEOC or protect its interests; e) CEC and the Sponsors retained control and ownership of the assets; f) the Sponsors, negotiating on behalf of CEC and CIE, actively attempted to reduce the consideration to be received by CEOC, which was initially set at $55 million, to $20.5 million; g) the value of the consideration received by CEOC was not reasonably equivalent to the value of the WSOP Tournament Rights; h) the Sponsors and CEC proceeded with the transaction with full knowledge that CEOC had not received a fairness opinion and that the fairness opinion prepared by Valuation Research Corporation for the CEC board was flawed in numerous ways; i) the Sponsors and CEC proceeded with the transaction with full knowledge that the Tournament Rights were not offered to any true third-party buyers or subject to any marketing process; j) the transfer substantially impaired CEOC's future ability to service its debt; and k) this transfer was never presented to the CEOC board for review or approval and was instead approved by CEC's board alone. 399. The transfer of the WSOP Tournament Rights is avoidable and recoverable, and the WSOP Transaction Transferees are liable for the constructive and actual fraudulent transfer of the WSOP Tournament Rights. Breaches Of Fiduciary Duty By CEC And CEC's Directors 400. At the time of the 2011 WSOP Transaction, the WSOP Transaction Transferees were direct or indirect subsidiaries or affiliates of CEC. Thus, the transfer of CEOC's WSOP Tournament Rights to the WSOP Transaction Transferees was a self-dealing transaction. 401. The price paid to CEOC for transferring the assets was far below the value of those assets and was not entirely fair to CEOC. 127 EFTA01091660 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 129 of 212 402. The process by which CEC initiated, structured, negotiated, and disclosed the transaction was not entirely fair to CEOC. CEOC was given no say in deciding whether to sell these assets, how the transaction was structured, or when and how it was disclosed. CEOC had no role in the negotiations of the transaction and was not even represented in the negotiations. Instead, the entire process was dominated by CEC and the Sponsors. Moreover, CEC used its dominance and control over CEOC to assure that CEOC lacked independent directors, financial advisors, and legal counsel necessary to fairly evaluate the transaction and proposed the transaction to CEOC knowing that CEOC lacked the independent governance or resources to fairly evaluate the transaction. 403. CEC breached its fiduciary duties to CEOC. 404. The CEC Conflicted Directors, who individually owed fiduciary duties to CEOC, breached those fiduciary duties. Breaches Of Fiduciary Duty By CEOC's Directors 405. At the time of the transfer of WSOP Tournament Rights, CEOC's only directors were Gary Loveman and Jonathan Halkyard. Loveman was the Chairman and Chief Executive Officer of CEC and Halkyard was CEC's Chief Financial Officer. As a result, neither Loveman nor Halkyard was independent of CEC in making decisions affecting CEOC. 406. Loveman and Halkyard breached their fiduciary duties to CEOC by approving, authorizing, and facilitating a transaction that was not in the best interests of CEOC. 407. Loveman and Halkyard also breached their fiduciary duties to CEOC by failing to insure that CEOC received a fair price for these assets or that a fair process was followed. Loveman and Halkyard did not consider using a marketing process for the sale of these assets; made no effort to solicit any third-party bids, offers, or proposals; made no effort to convene or create a special committee of independent directors to review the transaction; did not ask for or 128 EFTA01091661 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 130 of 212 receive an opinion about the fairness of the transaction to CEOC; did not retain independent lawyers or advisors to represent CEOC; and made no analysis of CEOC's solvency. Upon information and belief, Loveman and Halkyard did not even review, consider, or approve this, but instead allowed for it to occur without any effort to review its substance or merits. Halkyard signed the numerous transaction agreements on behalf of all non-CIE entities to the transactions, including CEOC, CEC, and CT. Breaches of Fiduciary Duty By Paul Weiss 408. Paul Weiss represented CEOC in connection with the transfer of the WSOP Tournament Rights. Simultaneously, Paul Weiss also represented CEC and affiliates of CEC, which had interests directly opposite to those of CEOC. 409. As counsel to CEOC, Paul Weiss owed CEOC fiduciary duties. These included a duty of loyalty to represent CEOC's interests only. 410. Paul Weiss' representation of CEOC obligated Paul Weiss to render independent and unclouded advice to CEOC on the terms and conditions of the transaction, the legal implications of the transaction, alternatives to the transaction, and the risks attendant to the transaction. Because of its simultaneous representation of parties who had opposing interests to CEOC's on this very matter, Paul Weiss could not and did not serve CEOC with undivided loyalty. 411. Paul Weiss breached its fiduciary duties to CEOC and CEOC was injured thereby. Aiding & Abetting Breaches Of Fiduciary Duty 412. The CEC Conflicted Directors, the Sponsors, the Sponsors' officers and agents, and Paul Weiss knew that CEC, as CEOC's controlling stockholder, and the boards of CEC and CEOC owed fiduciary duties to CEOC. The CEC Conflicted Directors, the Sponsors, the 129 EFTA01091662 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 131 of 212 Sponsors' officers and agents knew, and Paul Weiss knew or should have known that CEC and the boards of CEC and CEOC breached those fiduciary duties by compelling CEOC to enter into transactions that were against CEOC's interests, benefited CEC at CEOC's expense, did not provide a fair price to CEOC, and did not result from a fair process. 413. The CEC Conflicted Directors, the Sponsors, the Sponsors' officers and agents, and Paul Weiss knowingly participated in those breaches of fiduciary in the following ways: a) by virtue of their power to appoint the entire board of CEC and the fact that a majority of the directors of CEC's board were officers of Apollo and TPG, the Sponsors dominated and controlled the actions of CEC's board and CEOC's board; b) the plan to transfer CEOC's WSOP Tournament Rights to CIE was conceived, designed, and structured by Apollo, with the help of Paul Weiss; c) the CEC Conflicted Directors, the Sponsors, and the Sponsors' officers and agents directly instructed Paul Weiss to negotiate and implement the transfer of CEOC's WSOP Tournament Rights, even though it was not in CEOC's best interests; d) although the Sponsors and Paul Weiss understood that the transaction was designed to allow CEC and the Sponsors to take control of CEOC's WSOP Tournament Rights, transfer those assets beyond the reach of CEOC's creditors, and better position CEC and the Sponsors for CEOC's restructuring or bankruptcy, they did not disclose these intentions to CEC's board or CEOC's board; e) despite their knowledge that CEC and CEOC had divergent interests, the CEC Conflicted Directors, the Sponsors, the Sponsors' officers and agents, and Paul Weiss exploited the CEOC board members' conflicts of interest who sat on CEC's board or were officers of CEC; f) Paul Weiss represented all entities involved in the deal, including CEC, CEOC, CIE, and CT, thus depriving CEOC of independent legal counsel and facilitating the Sponsors and CEC's scheme to deprive CEOC of fair price and fair process; the Sponsors knew that CEC negotiated the financial terms of the transaction, which did not provide CEOC reasonably equivalent value for the transferred assets; and h) the Sponsors used their control of CEOC to structure the transaction in a manner that benefitted the Sponsors without presenting it to the CEOC board for its review or approval. g) 130 EFTA01091663 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 132 of 212 414. The CEC Conflicted Directors, the Sponsors, the Sponsors' officers and agents, and Paul Weiss are liable for aiding and abetting breaches of fiduciary duty in connection with the transfer of the WSOP Tournament Rights. 415. CEOC has been injured by these breaches of fiduciary duties in an amount to be determined. CLAIM VI LINQ AND OCTAVIUS TRANSFERS (Nev. Rev. Stat. §§ 112.180, 112.190, 112.210; 6 Del. C. §§ 1304, 1305, 1307; and 11 U.S.C. §§ 544, 548(a)(1)(A),(B), 550) (Fraudulent Transfer, Breach Of Fiduciary Duty, Aiding & Abetting Breach Of Fiduciary Duty, Civil Conspiracy) Linq/Octavius Transferees, CEC, Sponsors, CEC Conflicted Directors, Loveman, Cohen, Sambur, Rowan, Paul Weiss 416. Plaintiffs repeat and reallege paragraphs 1 through 415. Fraudulent Transfer 417. At all relevant times, CEOC has been insolvent. 418. Throughout the relevant period, CEC, the directors of CEC, and the Sponsors completely dominated and controlled CEOC and all of CEOC's subsidiaries and affiliates. 419. CEC and the Sponsors owned, controlled, and dominated the Linq/Octavius Transferees. 420. In connection with the refinancing of the CMBS Debt in late 2012, CEOC transferred Project Linq and the Octavius Tower to the Linq/Octavius Transferees. The transfer of Project Linq and the Octavius Tower was a constructive fraudulent transfer because CEOC received inadequate consideration and less than reasonably equivalent value for them. 421. In addition, the transfer of Linq and Octavius was an actual fraudulent transfer because the purpose and effect of the transfers was to hinder or delay CEOC's creditors by 131 EFTA01091664 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 133 of 212 placing critical and valuable assets beyond their reach. Evidence of fraudulent intent includes the facts that: a) the Sponsors, and Apollo in particular, conceived the transaction and identified the properties to be transferred; b) the transaction did not serve any interest of CEOC's, but instead filled an "equity gap" that hindered the refinancing of debt issued by a different Caesars' subsidiary; c) in addition to filling the "equity gap," the transaction was designed and intended to allow CEC and the Sponsors to take control of CEOC assets with significant growth potential, transfer those assets beyond the reach of CEOC's creditors, and better position CEC and the Sponsors for CEOC's restructuring or bankruptcy; d) CEOC, CEC, the Sponsors, Paul Weiss, the 2013 Transferees, and the individual defendants understood that CEOC was insolvent on and after the date of each transfer evidenced by, inter alia, Paul Weiss' analyses and communications with CEC and the Sponsors on the implications of CEOC's insolvency on the transaction, multiple analyses indicating that CEOC had a negative equity value and would be unable to repay its debts, and the decision to create bankruptcy remote entities to receive and hold valuable CEOC assets; e) despite their knowledge that CEC and CEOC had divergent interests, CEOC, CEC, the Sponsors, Paul Weiss, the 2013 Transferees, and the individual defendants proposed, negotiated, structured, evaluated, and approved the transfers through a process that failed to involve or protect the interests of CEOC; ft the transferred properties were never offered to any true third-party buyer or subject to any marketing process; g) the transfers were to newly created affiliates of CEC, owned and controlled by CEC and the Sponsors; h) CEC and the Sponsors retained control and ownership of the assets; i) the value of the consideration received by CEOC was not reasonably equivalent to the value of the assets transferred; j) the transfer substantially impaired CEOC's future ability to service its debt; k) the transfer of Octavius reduced the value of Caesars' Palace by giving CERP (and, thus CEC) significant leverage in renegotiating lease terms and the ability to influence the terms of any future disposition of, or improvements to, Caesars' Palace; I) Apollo, who along with TPG and CEC stood on both sides of the transaction, made repeated efforts to reduce the consideration to be paid CEOC; m) Apollo made internally inconsistent and manipulative revisions to its own valuations in order to eliminate or reduce the consideration paid to CEOC; 132 EFTA01091665 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 134 of 212 n) Apollo and Paul Weiss selected Perella Weinberg Partners to provide a fairness opinion because Perella had a long-term relationship with Paul Weiss and indicated that it had "flexibility" on the amount of consideration necessary to reach a fairness conclusion; o) Apollo and Paul Weiss knowingly advanced specious arguments to eliminate or reduce the consideration to be paid by CEOC for the assets; Apollo directed Perella to make false assumptions, including assumptions relating to the impact of a failure to successfully refinance the CMBS Debt on CEOC's share of corporate expenses, the fair market value of existing lease payments made to Linq and Octavius, and the future earnings of the High Roller Observation wheel; Apollo and Paul Weiss pressured Perella into removing language from its fairness opinion that called into question whether the avoidance of costs was a legally cognizable form of consideration; and r) the final consideration provided to CEOC, $69.5 million of CEOC debt and $80.722 million in cash, was much less than the $250 million Perella initially suggested was appropriate. 422. The transfer of Linq and Octavius is avoidable and recoverable, and the Linq/Octavius Transferees are liable for the constructive and actual fraudulent transfer of Linq and Octavius. Breaches Of Fiduciary Duty By CEC And CEC's Directors 423. At the time of the transfers of Linq and Octavius, the Linq/Octavius Transferees were direct or indirect subsidiaries of CEC. Thus, the transfers of Linq and Octavius to the Linq/Octavius Transferees were self-dealing transactions. 424. The price paid to CEOC for transferring Linq and Octavius was far below the value of those assets and was not entirely fair to CEOC. 425. The process by which CEC initiated, structured, negotiated, and disclosed the transaction was not entirely fair to CEOC. CEOC was given no say in deciding whether to sell these assets, how the transaction was structured, or when and how it was disclosed. CEOC had no role in the negotiations of the transaction, and was not even represented in the negotiations. Instead, the entire process was dominated by CEC and the Sponsors. Moreover, CEC used its p) q) 133 EFTA01091666 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 135 of 212 dominance and control over CEOC to assure that CEOC lacked independent directors, financial advisors, and legal counsel necessary to fairly evaluate the transaction and proposed the transaction to CEOC knowing that CEOC lacked the independent governance or resources to fairly evaluate the transaction. 426. CEC breached its fiduciary duties to CEOC. 427. The CEC Conflicted Directors, who individually owed fiduciary duties to CEOC, breached those fiduciary duties. Breaches Of Fiduciary Duty By CEOC's Directors 428. At the time of the transfer of Linq and Octavius, CEOC's only directors were Gary Loveman and Michael Cohen. Loveman was the Chairman and Chief Executive Officer of CEC, and Cohen was a senior vice president, deputy general counsel, and corporate secretary of CEC. As a result, neither Loveman nor Cohen was independent of CEC in making decisions affecting CEOC. 429. Loveman and Cohen breached their fiduciary duties to CEOC by approving, authorizing, and facilitating a transaction that was not in the best interests of CEOC. 430. Loveman and Cohen breached their fiduciary duties to CEOC by failing to ensure that CEOC received a fair price for these assets or that a fair process was followed. Loveman and Cohen did not consider using a marketing process for the sale of these assets; made no effort to solicit any third-party bids, offers, or proposals; made no effort to convene or create a special committee of independent directors to review the transaction; did not retain independent lawyers or advisors to represent CEOC; made no analysis of CEOC's solvency; and conducted no meaningful review of the fairness of the transaction to CEOC. Instead, Loveman and Cohen approved the transaction upon inadequate information in a short telephonic board meeting. 134 EFTA01091667 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 136 of 212 Breaches of Fiduciary Duty By Paul Weiss 431. Paul Weiss represented CEOC in connection with the transfer of Linq and Octavius. Simultaneously, Paul Weiss also represented CEC and affiliates of CEC, which had interests directly opposite to those of CEOC. 432. As counsel to CEOC, Paul Weiss owed CEOC fiduciary duties. These included a duty of loyalty to represent CEOC's interests only. 433. Paul Weiss' representation of CEOC obligated Paul Weiss to render independent and unclouded advice to CEOC on the terms and conditions of the transaction, the legal implications of the transaction, alternatives to the transaction, and the risks attendant to the transaction. Because of its simultaneous representation of parties who had opposing interests to CEOC's on this very matter, Paul Weiss could not and did not serve CEOC with undivided loyalty. 434. Paul Weiss breached its fiduciary duties to CEOC and CEOC was injured thereby. Aiding & Abetting Breaches Of Fiduciary Duty 435. The CEC Conflicted Directors, the Sponsors, the Sponsors' officers and agents, and Paul Weiss knew that CEC, as CEOC's controlling stockholder, and the boards of CEC and CEOC owed fiduciary duties to CEOC. The CEC Conflicted Directors, the Sponsors, the Sponsors' officers and agents, and Paul Weiss knew or should have known that CEC and the boards of CEC and CEOC breached those fiduciary duties by compelling CEOC to enter into transactions that were against CEOC's interests, benefited CEC at CEOC's expense, did not provide a fair price to CEOC, and did not result from a fair process. 436. The CEC Conflicted Directors, the Sponsors, the Sponsors' officers and agents, and Paul Weiss knowingly participated in those breaches of fiduciary in the following ways: 135 EFTA01091668 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 137 of 212 j) a) by virtue their power to appoint the entire board of CEC and the fact that a majority of the directors of CEC's board were officers of Apollo and TPG, the Sponsors dominated and controlled the actions of CEC's board and CEOC's board; b) the Sponsors, Paul Weiss, and members of CEC's management conceived of the plan to transfer Linq and Octavius to CERP and designed, and structured the transaction to benefit CEC and the Sponsors; c) the CEC Conflicted Directors, the Sponsors, and the Sponsors' officers and agents directly instructed Paul Weiss to negotiate and implement the transaction, even though it was not in CEOC's best interests; d) although the Sponsors and Paul Weiss understood that the transfer of Linq and Octavius was designed to allow CEC and the Sponsors to maintain control of CEOC assets with significant growth potential, place those assets beyond the reach of CEOC's creditors, and better position CEC and the Sponsors for CEOC's restructuring or bankruptcy, they did not disclose these intentions to CEC's board or CEOC's board; e) despite their knowledge that CEC and CEOC had divergent interests the Sponsors exploited the conflicts of interest of CEOC board members who sat on CEC's board or were officers of CEC; 0 despite knowing that CEC and CEOC had divergent interests, Paul Weiss represented both CEC and CEOC in the transaction, thus depriving CEOC of independent legal counsel and facilitating the Sponsors and CEC's scheme to deprive CEOC of fair price and fair process; g) Apollo and Paul Weiss appointed a valuation firm, Perella Weinberg Partners with a long-term relationship with Paul Weiss, and formally engaged Perella only after the opinion was completed and after Perella agreed to accept certain assumptions urged by Apollo and Paul Weiss; h) Apollo made repeated efforts to reduce the consideration to be paid CEOC; i) Apollo made internally inconsistent and manipulative revisions to its own valuations in order to reduce the consideration paid to CEOC; Apollo and Paul Weiss advanced specious arguments to eliminate or reduce the consideration to be paid by CEOC for the assets; k) Apollo directed Perella to make several false assumptions, including assumptions relating to the impact of a failure to successfully refinance the CMBS Debt on CEOC's share of corporate expenses, the fair market value of existing lease payments made to Linq and Octavius, and the future earnings of the High Roller Ferris wheel; and I) Apollo and Paul Weiss pressured Perella into removing language from its fairness opinion that called into question whether the avoidance of costs was a legally cognizable form of consideration. 136 EFTA01091669 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 138 of 212 437. The CEC Conflicted Directors, the Sponsors, and Paul Weiss are liable for aiding and abetting breaches of fiduciary duty in connection with the Linq and Octavius transfer. 438. CEOC has been injured by these breaches of fiduciary duties in an amount to be determined. Civil Conspiracy 439. Starting in mid-2012, the Conflicted Directors and Paul Weiss agreed and conspired to commit unlawful acts, including to fraudulently transfer CEOC's valuable assets, breach fiduciary duties owed to CEOC, engage CEOC in damaging financial transactions, and otherwise delay, hinder, and defraud CEOC and its creditors. Each of the conspirators intentionally participated in this scheme. The transfer of Linq and Octavius was an overt act taken in furtherance of the conspirators' unlawful scheme. The conspirators' actions in creating, structuring, negotiating, evaluating, and approving the transfer, as more fully detailed herein, constitute further overt acts taken in furtherance of their unlawful scheme. 440. The Linq and Octavius Transfers, the conspirators' overt acts in furtherance of that transfer, and the conspirators' overall scheme and agreement to fraudulently transfer CEOC's valuable assets, breach fiduciary duties owed to CEOC, engage CEOC in damaging financial transactions, and otherwise delay, hinder, and defraud CEOC and its creditors caused damages to CEOC in an amount to be determined. CLAIM VII TRANSFER OF PLANET HOLLYWOOD AND HORSESHOE BALTIMORE (Nev. Rev. Stat. §§ 112.180, 112.190, 112.210; 6 Del. C. §§ 1304, 1305, 1307; and 11 U.S.C. §§ 544, 548(a)(1)(A),(B), 550) (Fraudulent Transfer, Breach Of Fiduciary Duty, Aiding & Abetting Breach Of Fiduciary Duty, Civil Conspiracy) 2013 Transferees, CEC, Sponsors, CEC Conflicted Directors, Loveman, Cohen, Rowan, Sambur, Paul Weiss 137 EFTA01091670 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 139 of 212 441. Plaintiffs repeat and reallege paragraphs 1 through 440. Fraudulent Transfer 442. At all relevant times, CEOC has been insolvent. 443. Throughout the relevant period, CEC, the directors of CEC, and the Sponsors completely dominated and controlled CEOC and all of CEOC's subsidiaries and affiliates. 444. At all relevant times, CEC and the Sponsors owned, controlled, and dominated the 2013 Transferees. 445. On October 21, 2013, CEC, CEOC, and the 2013 Transferees entered into the 2013 Transaction Agreement, pursuant to which CEOC transferred the Planet Hollywood Resort and Casino in Las Vegas and interest in the Horseshoe Baltimore Casino, as well as 50% of the stream of management fees CEOC would earn from managing those properties to the 2013 Transferees (collectively, the "2013 Transfers"). In addition, the 2013 Transaction Agreement required CEOC to enter into a Management Services Agreement with CEOC, Growth Partners, and CAC that profoundly redefined the economic relationship between CEOC and CEC. 446. The consideration to CEOC for these transfers was a cash payment of $210 million for Planet Hollywood, $70 million for the Planet Hollywood management fees, and $80 million for the Baltimore casino and management fees. Additionally, a subsidiary of Growth Partners assumed $513 million of debt secured by Planet Hollywood, although this was offset by roughly $40 million in restricted cash on deposit and as much as another $175 million in unrestricted cash held by the holding company that owned Planet Hollywood. 447. The 2013 Transfers were constructive fraudulent transfers because CEOC received inadequate consideration and less than reasonably equivalent value for the assets transferred. 138 EFTA01091671 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 140 of 212 448. In addition, the 2013 Transfers were actual fraudulent transfers because the purpose and effect of the transfers was to hinder or delay CEOC's creditors by placing critical and valuable assets beyond their reach. Evidence of fraudulent intent includes the facts that: a) the Sponsors, and Apollo in particular, and Paul Weiss conceived the transaction and identified the properties to be transferred; b) the transaction was designed and intended to allow CEC and the Sponsors to take control of CEOC assets with significant growth potential, transfer those assets beyond the reach of CEOC's creditors, and better position CEC and the Sponsors for CEOC's restructuring or bankruptcy; c) CEOC, CEC, the Sponsors, Paul Weiss, the 2013 Transferees, and the individual defendants understood that CEOC was insolvent on and after the date of each transfer; d) despite their knowledge that CEC and CEOC had divergent interests CEOC, CEC, the Sponsors, Paul Weiss, the 2013 Transferees proposed, negotiated, structured, evaluated, and approved the transfers through a process that failed to involve CEOC or protect the interests of CEOC; e) the transferred properties were never offered to any true third-party buyer or subject to any marketing process; f) the transfers were to newly created affiliates of CEC, owned and controlled by CEC and the Sponsors; g) CEC and the Sponsors retained control and ownership of the assets; h) the Sponsors, actively attempted to reduce the consideration to be received by CEOC; i) the value of the consideration received by CEOC was not reasonably equivalent to the value of the assets transferred, as evidenced by analyses performed by the Sponsors immediately after the closing of the transaction; j) the transfer substantially impaired CEOC's future ability to service its debt; k) despite repeated requests for updated EBITDA projections for the properties to be transferred, the Sponsors and CEC withheld the latest projections from Evercore; I) the Sponsors used their power and influence over the management of CEC and CEOC to cause them to misrepresent to Evercore and others the projected revenue and EBITDA CEOC forecast it would receive as a result of its multi-year contract with entertainer Britney Spears; m) the Sponsors and CEC misrepresented or failed to correct misleading information relied upon by Evercore as to the timing of the sale of a portion of CEOC's ownership interest in the Horseshoe Baltimore casino; n) the fee for the fairness opinion rendered by Evercore was largely contingent upon consummation of the transaction; and 139 EFTA01091672 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 141 of 212 o) the putative purpose of the transfer — to provide CEOC with short-term liquidity — was inconsistent with efforts, taken during the time the transaction was developed, to transfer cash from CEOC to CEC through repayments of the intercompany revolver. 449. The 2013 Transfers are avoidable and recoverable, and the 2013 Transferees are liable for the constructive and actual fraudulent transfer of Planet Hollywood and Baltimore Horseshoe and others assets included in the 2013 Transfers. Breaches Of Fiduciary Duty By CEC And CEC's Directors 450. At the time of the 2013 Transfers, the 2013 Transferees were direct or indirect subsidiaries or affiliates of CEC. Thus, the 2013 Transfers were self-dealing transactions. 451. The price paid to CEOC for the 2013 Transfers was far below the value of the assets and was not entirely fair to CEOC. 452. The process by which CEC initiated, structured, negotiated, and disclosed the transaction was not entirely fair to CEOC. CEC misrepresented to Evercore Planet Hollywood's earnings and prospects and the percentage of CEOC's ownership interest in the Horseshoe Baltimore. 453. CEC dominated and chose the board of directors of CEOC. Although CEC was fully aware that transactions between CEC (or affiliates of CEC) and CEOC would be self- dealing transactions that would require fair process, CEC failed to appoint to the CEOC board any directors who were independent of CEC. CEC thus deprived CEOC of fair process by preventing CEOC from having directors who would be able to independently consider the fairness of the transaction. Similarly, CEC deprived CEOC of fair process by proceeding with the transfers with knowledge that CEOC did not have independent financial advisors or independent legal advisors. 140 EFTA01091673 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 142 of 212 454. CEOC was given no say in deciding whether to sell these assets, how the transaction was structured, or when and how it was disclosed. CEOC had no role in the negotiations of the transaction, and was not even represented in the negotiations. Instead, the entire process was dominated by CEC and the Sponsors. Moreover, CEC used its dominance and control over CEOC to assure that CEOC lacked independent directors, financial advisors, and legal counsel necessary to fairly evaluate the transaction and proposed the transaction to CEOC knowing that CEOC lacked the independent governance or resources to fairly evaluate the transaction. 455. CEC breached its fiduciary duties to CEOC. 456. The CEC Conflicted Directors, who individually owed fiduciary duties to CEOC, breached those fiduciary duties. Breaches Of Fiduciary Duty By CEOC's Directors 457. At the time of the transfer of Planet Hollywood and CEOC's interest in the Horseshoe Baltimore, CEOC's only directors were Gary Loveman and Michael Cohen. Loveman was the Chairman and Chief Executive Officer of CEC and Cohen was a senior vice president, deputy general counsel, and corporate secretary of CEC. As a result, neither Loveman nor Cohen was independent of CEC in making decisions affecting CEOC. 458. Loveman and Cohen breached their fiduciary duties to CEOC by approving, authorizing, and facilitating a transaction that was not in the best interests of CEOC. 459. Loveman and Cohen also breached their fiduciary duties to CEOC by approving the transfer of Planet Hollywood and CEOC's interest in the Horseshoe Baltimore when they had disqualifying conflicts of interest and by failing to insure that CEOC received a fair price for these assets or that a fair process was followed. Loveman and Cohen made no effort to have 141 EFTA01091674 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 143 of 212 CEOC represented in the negotiations of the transfers; did not consider using a marketing process for the sale of these assets; made no effort to solicit any third-party bids, offers or proposals; made no effort to convene or create a special committee of independent directors to review the transaction; did not ask for or receive an opinion about the fairness of the transaction to CEOC; did not retain independent lawyers or advisors to represent CEOC; made no analysis of CEOC's solvency; and conducted no meaningful review of the fairness of the transaction to CEOC. Instead, Loveman and Cohen approved the transaction upon inadequate information by a routine written consent. Breaches of Fiduciary Duty By Paul Weiss 460. Paul Weiss represented CEOC in connection with the transfer of Planet Hollywood and Horseshoe Baltimore. Simultaneously, Paul Weiss also represented CEC and affiliates of CEC, which had interests directly opposite to those of CEOC. 461. As counsel to CEOC, Paul Weiss owed CEOC fiduciary duties. These included a duty of loyalty to represent CEOC's interests only. 462. Paul Weiss' representation of CEOC obligated Paul Weiss to render independent and unclouded advice to CEOC on the terms and conditions of the transaction, the legal implications of the transaction, alternatives to the transaction, and the risks attendant to the transaction. Because of its simultaneous representation of parties who had opposing interests to CEOC's on this very matter, Paul Weiss could not and did not serve CEOC with undivided loyalty. 463. Paul Weiss breached its fiduciary duties to CEOC and CEOC was injured thereby. 142 EFTA01091675 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 144 of 212 Aiding & Abetting Breaches Of Fiduciary Duty 464. The CEC Conflicted Directors, the Sponsors, the Sponsors' officers and agents, and Paul Weiss knew that CEC, as CEOC's controlling stockholder, and CEOC's boards of CEC and CEOC owed fiduciary duties to CEOC. The CEC Conflicted Directors, the Sponsors, the Sponsors' officers and agents, and Paul Weiss knew or should have known that CEC and the boards of CEC and CEOC breached those fiduciary duties by compelling CEOC to enter into transactions that were against CEOC's interests, benefited CEC at CEOC's expense, did not provide a fair price to CEOC, and did not result from a fair process. 465. The CEC Conflicted Directors, the Sponsors, the Sponsors' officers and agents, and Paul Weiss knowingly participated in those breaches of fiduciary in the following ways: a) by virtue of their power to appoint the entire board of CEC and the fact that a majority of the directors of CEC's board were officers of Apollo and TPG, the Sponsors dominated and controlled the actions of CEC's board and CEOC's board; b) Apollo and Paul Weiss conceived, designed, and structured the transaction, including the selection of CEOC assets to be sold and the creation of CAC and Growth Partners, to receive and hold the properties for the benefit of CEC and the Sponsors; c) although the Sponsors and Paul Weiss understood that the transaction was designed to allow CEC and the Sponsors to maintain control of CEOC assets with significant growth potential, transfer those assets beyond the reach of CEOC's creditors, and better position CEC and the Sponsors for CEOC's restructuring or bankruptcy, they did not disclose these intentions to CEC's board or CEOC's board; d) Paul Weiss and Apollo prepared a script used to present the proposed transaction to the CEC board in November 2012, which outlined numerous expected benefits of the transaction but omitted any reference to CEOC's insolvency, the litigation and bankruptcy-related risks of the transaction, and the underlying goals of the transaction; e) despite their knowledge that CEC and CEOC had divergent interests, the Sponsors exploited the conflicts of interest of CEOC board members who sat on CEC's board or were officers of CEC; 0 despite having full knowledge that CEC and CEOC had divergent interests, Paul Weiss represented both CEC and CEOC in the transaction, thus depriving CEOC 143 EFTA01091676 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 145 of 212 g) of independent legal counsel and facilitating the Sponsors and CEC's scheme to deprive CEOC of fair price and fair process; the Sponsors negotiated financial terms which did not provide CEOC reasonably equivalent value for the transferred assets; h) the Sponsors manipulated the valuation process by, among other things, withholding updated projections, providing or instructing others to provide misleading and incomplete information regarding the impact of the Britney Spears contract, and instructing or allowing Evercore to use incorrect ownership assumptions regarding the percentage of CEOC's interest in the Horseshoe Baltimore; and i) the CEC Conflicted Directors, the Sponsors, the Sponsors' officers and agents, and Paul Weiss falsely represented that the purpose of the transaction was to increase CEOC's liquidity, when in truth a central purpose of the transaction was to fund CEOC's repayment of over $400 million to CEC under the Intercompany Revolver during the same time the transaction was being developed. 466. The CEC Conflicted Directors, the Sponsors, and Paul Weiss are liable for aiding and abetting breaches of fiduciary duty in connection with the 2013 Transfers. 467. CEOC has been injured by these breaches of fiduciary duties in an amount to be determined. Civil Conspiracy 468. Starting in mid-2012, the Conflicted Directors and Paul Weiss agreed and conspired to commit unlawful acts, including to fraudulently transfer CEOC's valuable assets, breach fiduciary duties owed to CEOC, engage CEOC in damaging financial transactions, and otherwise delay, hinder, and defraud CEOC and its creditors. Each of the conspirators intentionally participated in this scheme. The 2013 Transfers constitute an overt act taken in furtherance of the conspirators' unlawful scheme. The conspirators' actions in creating, structuring, negotiating, evaluating, and approving the transfer, as more fully detailed herein, constitute further overt acts taken in furtherance of their unlawful scheme. 469. The 2013 Transfers including the transfer of Planet Hollywood and Baltimore Horseshoe, the conspirators' overt acts in furtherance of that transfer, and the conspirators' 144 EFTA01091677 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 146 of 212 overall scheme and agreement to fraudulently transfer CEOC's valuable assets, breach fiduciary duties owed to CEOC, engage CEOC in damaging financial transactions, and otherwise delay, hinder, and defraud CEOC and its creditors caused damages to CEOC in an amount to be determined. CLAIM VIII ACCESS TO TOTAL REWARDS AND CEOC'S PROPERTY MANAGEMENT SERVICES (Nev. Rev. Stat. §§ 112.180, 112.190, 112.210; 6 Del. C. §§ 1304, 1305, 1307; and 11 U.S.C. §§ 544, 548(a)(1)(A),(B), 550) (Fraudulent Transfer, Breach Of Fiduciary Duty, Aiding & Abetting Breach Of Fiduciary Duty) Services Transferees, CEC, Sponsors, CEC Conflicted Directors, Loveman, Halkyard, Cohen 470. Plaintiffs repeat and reallege paragraphs 1 through 469. Fraudulent transfer 471. At all relevant times, CEOC has been insolvent. 472. Throughout the relevant period, CEC, the directors of CEC, and the Sponsors completely dominated and controlled CEOC and all of CEOC's subsidiaries and affiliates. 473. At all relevant times, CEC and the Sponsors owned, controlled, and dominated the CMBS Properties, CERP, and Growth Partners. 474. As part of the 2010 CMBS Loan Agreement Amendment, CEC directed CEOC to enter into the Shared Services Agreement with the CMBS PropCos under which CEOC would provide management services and access to Total Rewards to the CMBS Properties for no consideration. In October 2013, a new Shared Services Agreement was executed, which required CEOC to provide these same services to CERP on the same basis. That same month, CEC had CEOC enter into the Management Services Agreement, which required CEOC to 145 EFTA01091678 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 147 of 212 continue to provide management services for Planet Hollywood and Horseshoe Baltimore, as well as to provide Growth Partners' properties with access to Total Rewards. 475. The 2010 Shared Services Agreement, the 2013 Shared Services Agreement, and the Management Services Agreement were constructive fraudulent transfers because CEOC received inadequate consideration and less than reasonably equivalent value for the services it was required to perform and for the access it was required to give to its Total Rewards program. 476. In addition, the 2010 Shared Services Agreement, the 2013 Shared Services Agreement, and the Management Services Agreement were actual fraudulent transfers. Evidence of fraudulent intent includes the facts that: a) these agreements were designed and intended to benefit CEC and the Sponsors by allowing properties they owned or controlled to access Total Rewards free of charge and to obtain property management services for little to no consideration; b) these agreements were designed and intended to better position CEC and the Sponsors for CEOC's restructuring or bankruptcy by assuring them that properties they owned or controlled would have continued access to Total Rewards and to CEOC's property management services and that CEOC itself would not control these irreplaceable strategic assets; c) CEOC, CEC, the Sponsors, the Service Transferees, and the individual defendants understood that CEOC was insolvent on and after the date of each agreement, as evidenced by, inter alia, multiple CEC and Sponsor analyses indicating CEOC had a negative equity value and would be unable to repay its debts, and the decision to create bankruptcy remote entities to receive and hold valuable CEOC assets; d) despite the fact that CEC and CEOC had divergent interests, the transfers were proposed, negotiated, structured, evaluated, and approved through a process that failed to involve or protect the interests of CEOC; e) the agreements benefitted CAC, Growth Partners, CES and other newly created entities that were owned and controlled by CEC and the Sponsors; f) the value of the consideration received by CEOC was not reasonably equivalent to the value of the benefit conferred; although it was CEOC that performed the services under the 2010 and 2013 Shared Services Agreements, payment for this work was made to CEC, with CEOC receiving only reimbursement for its allocated cost of providing these services and 30% of unallocated corporate expenses; g) 146 EFTA01091679 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 148 of 212 h) under the Management Services Agreement, CEOC received minimal compensation, including reimbursement of out-of-pocket costs, a 10% profit margin on certain costs, and management fees tied to the properties' performance; and i) the agreements substantially impaired CEOC's future ability to service its debt. 477. The transfers of the 2010 Shared Services Agreement, the 2013 Shared Services Agreement and the Management Services Agreement are avoidable and recoverable, and the Services Transferees are liable for the constructive and actual fraudulent transfer of the 2010 Shared Services Agreement, the 2013 Shared Services Agreement, and the Management Services Agreement. Breaches Of Fiduciary Duty By CEC And CEC's Directors 478. At the time of the 2010 Shared Services Agreement, the 2013 Shared Services Agreement, and the Management Services Agreement, the CMBS PropCos, CERP and Growth Partners were direct or indirect subsidiaries or affiliates of CEC. Thus, these contracts were self- dealing transactions. 479. The price paid to CEOC for the services it was to perform for the CMBS PropCos, CERP, and Growth Partners and for the access CEOC was to provide to Total Rewards was far below the value of those services, and that access and was not entirely fair to CEOC. 480. The process by which CEC initiated, structured, and negotiated the transaction was not entirely fair to CEOC. CEC conceived of the approach of having CEOC enter into the 2010 Shared Services Agreement, the 2013 Shared Services Agreement, and the Management Services Agreement as a means of benefiting the CMBS PropCos, CERP, and Growth Partners, and decided upon the general terms and conditions of those contracts. There were no meaningful negotiations between CEOC and the CMBS PropCos, CERP, and Growth Partners about the price, terms or conditions of the contracts, and CEC took no steps to assure the contracts' 147 EFTA01091680 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 149 of 212 fairness to CEOC. Moreover, CEC used its dominance and control over CEOC to assure that CEOC lacked independent directors, financial advisors and legal counsel necessary to fairly evaluate the transactions, and CEC proposed the transactions to CEOC knowing that CEOC lacked the independent governance or resources to fairly evaluate the transactions. 481. CEC breached its fiduciary duties to CEOC. 482. The CEC Conflicted Directors, who individually owed fiduciary duties to CEOC, breached those fiduciary duties. Breaches Of Fiduciary Duty By CEOC's Directors 483. At the time the 2010 Shared Services Agreement was executed, Loveman and Halkyard were the only directors of CEOC. Loveman and Cohen were CEOC's only directors at the time the 2013 Shared Services Agreement and the Management Services Agreement contracts were executed. 484. Loveman, Halkyard, and Cohen breached their fiduciary duties to CEOC by approving, authorizing, and facilitating a transaction that was not in the best interests of CEOC. 485. Notwithstanding their fiduciary duties to CEOC, at no point did Loveman, Halkyard, or Cohen constitute a committee of independent directors to consider the transactions, ask for or receive an opinion about the fairness of the contracts to CEOC, or take any steps to consider the fairness of the contracts to CEOC. Loveman, Halkyard, and Cohen breached their fiduciary duties to CEOC by approving the 2010 Shared Services Agreement, the 2013 Shared Services Agreement, and the Management Services Agreement when they had disqualifying conflicts of interest, and by failing to observe the governance processes that were required when considering a self-dealing transaction. 486. CEOC has been injured by these breaches of fiduciary duties in an amount to be determined. 148 EFTA01091681 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 150 of 212 CLAIM IX TRANSFER OF BALLY'S LAS VEGAS, THE CROMWELL, THE QUAD & HARRAH'S NEW ORLEANS (Nev. Rev. Stat. §§ 112.180, 112.190, 112.210; 6 Del. C. §§ 1304, 1305, 1307; and 11 U.S.C. §§ 544, 548(a)(1)(A),(B), 550) (Fraudulent Transfer, Breach Of Fiduciary Duty, Aiding & Abetting Breach Of Fiduciary Duty, Civil Conspiracy) 2014 Transferees, CEC, Sponsors, CEC Conflicted Directors, Kleisner, Loveman, Hession, Brimmer, Rowan, Sambur, Paul Weiss 487. Plaintiffs repeat and reallege paragraphs 1 through 486. Fraudulent Transfer 488. At all relevant times, CEOC has been insolvent. 489. Throughout the relevant period, CEC, the directors of CEC, and the Sponsors completely dominated and controlled CEOC and all of CEOC's subsidiaries and affiliates. 490. On March 1, 2014, CEOC entered into the 2014 Transaction Agreement that required CEOC to transfer Bally's Las Vegas, The Cromwell, The Quad, and Harrah's New Orleans, along with 50% of the management fees payable to CEOC by those properties (together, the "Four Properties") to Growth Partners and entities affiliated with Growth Partners (the "2014 Transferees"). 491. At all relevant times, CEC and the Sponsors owned, controlled, and dominated the 2014 Transferees. 492. The consideration for the transfers was $1.815 billion in cash and the assumption of $185 million in debt. 493. The Four Properties Transfer was a constructive fraudulent transfer because CEOC received inadequate consideration and less than reasonably equivalent value for them. 149 EFTA01091682 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 151 of 212 494. In addition, the Four Properties Transfer was an actual fraudulent transfer because the purpose and effect of the transfers was to hinder or delay CEOC's creditors by placing critical and valuable assets beyond their reach. Evidence of fraudulent intent includes the facts that: a) CEC and the Sponsors conceived of the transaction and identified the properties to be transferred; b) CEC and the Sponsors selected four of CEOC's most valuable properties to transfer to Growth Partners, including three Las Vegas properties located at the center of the Las Vegas Strip and its flagship New Orleans casino; c) the proposal to sell these properties was presented to the CEC board as a management proposal, even though it had been conceived by the Sponsors; d) the transaction was designed and intended to allow CEC and the Sponsors to take control of CEOC assets with significant growth potential, transfer those assets beyond the reach of CEOC's creditors, and better position CEC and the Sponsors for CEOC's restructuring or bankruptcy; e) CEOC, CEC, the Sponsors, Paul Weiss, the 2014 Transferees, and the individual defendants understood that CEOC was insolvent on and after the date of each transfer, as evidenced by, inter alia, multiple CEC and Sponsor analyses indicating CEOC had a negative equity value and would be unable to repay its debts, the creation of bankruptcy remote entities to receive and hold valuable CEOC assets, and the CEC Special Committee's refusal to provide a representation that CEOC was solvent, as requested by the CAC Special Committee in connection with the transaction; f) despite the fact that CEC and CEOC had divergent interests, the transfers were proposed, negotiated, structured, evaluated, and approved through a process that failed to involve or protect the separate interests of CEOC; the Sponsors recruited outside directors for CEOC in February 2014, but instructed them to delay joining the CEOC board until the transfer of the assets to Growth Partners was complete; h) the CEC Special Committee lacked the authority to market any of these assets to third parties; i) the transfers were to newly created affiliates of CEC, owned and controlled by CEC and the Sponsors; j) CEC and the Sponsors retained control and ownership of the assets; k) CEC and the Sponsors retained Duff & Phelps to provide an opinion that the transaction was "on terms no less favorable to CEOC . . . than would be obtained in a comparable arm's-length transaction with a person that is not an affiliate of g) 150 EFTA01091683 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 152 of 212 [CEC]," but did not ask Duff & Phelps to opine whether the transaction was fair to CEOC; I) With the knowledge and encouragement of the Sponsors, CEC and members of the CEC board, officers of CEC prepared false and misleading projections of EBITDA for the four properties and conveyed them to Duff & Phelps with the knowledge and expectation that Duff & Phelps would rely upon them and consequently issue an opinion that the consideration CEOC was to receive in the transaction was comparable to that CEOC would have received in an arm's-length transaction; m) [TO BE INSERTED]; n) negotiations over the price of the transfer occurred between CEC director Kleisner and CAC director Beilinson, without any participation from CEOC; o) the value of the consideration received by CEOC was not reasonably equivalent to the value of the assets transferred; p) the transfer substantially impaired CEOC's future ability to service its debt; and q) the putative purpose of the transfer — to provide CEOC with short-term liquidity — is inconsistent with efforts, taken during the time the transfer was developed, to transfer cash from CEOC to CEC and Growth Partners. 495. The Four Properties Transfer is avoidable and recoverable, and the 2014 Transferees are liable for the constructive and fraudulent transfer of the Four Properties. Breaches Of Fiduciary Duty By CEC And CEC's Directors 496. At the time of the Four Properties Transfer, the 2014 Transferees were direct or indirect subsidiaries or affiliates of CEC. Thus, the Four Properties Transfers were self-dealing transactions. 497. The price paid to CEOC for the Four Properties Transfer was far below the value of the assets and was not entirely fair to CEOC. 498. In addition, CEC knew that transferring the four properties from CEOC to Growth Partners and the other 2014 Transferees would make it even more difficult for CEOC to pay its debts and would hasten CEOC's bankruptcy. 151 EFTA01091684 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 153 of 212 499. Notwithstanding CEC's fiduciary duties to CEOC, CEC conceived of, structured, priced, closed, and implemented the Four Properties Transfer to further CEC's own interests to the direct injury of CEOC. 500. The process by which CEC initiated, structured, negotiated and disclosed the transaction was not entirely fair to CEOC. Although CEC and CAC both formed special committees of their boards to structure and negotiate the price of the transaction, those committees represented the interests of CEC and CAC, and not the interests of CEOC. Similarly, although both of those special committees hired financial advisors to assist them, no independent advisors were retained to represent or assist CEOC, and CEOC did not ask for or receive an independent fairness opinion. Nor did CEOC have independent legal advisors. In fact, the law firm representing CEOC on the four properties transactions was Paul Weiss, the same law firm that represented CEC. 501. CEC breached its fiduciary duties to CEOC. 502. The CEC Conflicted Directors, who individually owed fiduciary duties to CEOC, breached those fiduciary duties. 503. CEC director Kleisner was negotiating the price of the four properties with one of the directors of CAC. Kleisner was a fiduciary of CEOC because he was a CEC director and the CEC board had taken over the functions of the CEOC board. In addition, Kleisner was a fiduciary of CEOC because he was an agent expressly acting on CEOC's behalf with the responsibility of negotiating the price and terms and conditions upon which the four properties would be sold to Growth Partners. 504. Kleisner was aware that Duff & Phelps would rely upon projections of EBITDA for the four properties in reaching its opinion and that CEOC had developed such projections in 152 EFTA01091685 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 154 of 212 the ordinary course of its business. In violation of his fiduciary duties, Kleisner directed members of CEC's financial staff — Brimmer and Hession — to prepare a set of inaccurate projections known as the February Business Plan that materially understated the projected EBITDA for the four properties. Kleisner knew that the February Business Plan was inaccurate and misleading, but nonetheless had the CEC financial staff provide it to Duff & Phelps with the intention Duff & Phelps would rely upon it. Duff & Phelps did so, with the result that the four properties were significantly undervalued. 505. Kleisner breached his fiduciary duties in directing Brimmer and Hession to prepare the February Business Plan and to provide it to Duff & Phelps. Breaches Of Fiduciary Duty By CEOC's Directors 506. Although the four properties were some of CEOC's most valuable assets, CEOC itself was not party to the negotiations about the transaction or the amount of money it would be paid for these assets. Instead, CEC and the Sponsors excluded CEOC from those discussions, which occurred between one of the CEC directors (Kleisner) and one of the CAC directors (Beilinson). 507. The CEC special committee hired Duff & Phelps as its financial advisor to render an opinion whether the terms of the transaction were no less favorable to CEOC than an arm's- length negotiation would have produced. However, members of that committee, representatives from Apollo, and others provided Duff & Phelps with false and misleading information about the business and prospect of the four properties. In particular, they concocted a misleading set of projections called the February Business Plan that provided inaccurate, depressed forecasts for the future earnings of the four properties. As a result, Duff & Phelps was misled into believing that the consideration being paid for the assets was equivalent to that CEOC would have received in a true arm's-length transaction. 153 EFTA01091686 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 155 of 212 508. There was no marketing process for the sale of these assets. While these four properties were enormously valuable, no effort was made by CEC, CEOC or anyone else to solicit any third-party bids, offers or proposals for buying the properties. 509. At the time of the Four Properties Transfer, CEOC's board — consisting solely of Loveman and Hession — approved the transaction by signing a boilerplate written consent. Both Loveman and Hession were profoundly conflicted. Loveman was CEC's Chairman and Chief Executive Officer. Hession was CEC's Chief Financial Officer. Both Loveman and Hession owned stock in CAC and, therefore, stood to benefit personally from the below-market price at which CEOC had sold the four properties to Growth Partners. 510. Loveman and Hession breached their fiduciary duties to CEOC by approving, authorizing, and facilitating a transaction that was not in the best interests of CEOC. 511. Loveman and Hession also breached their fiduciary duties to CEOC by failing to ensure that CEOC received a fair price for these assets or that a fair process was followed. Loveman and Hession did not consider using a marketing process for the sale of these assets; made no effort to solicit any third-party bids, offers, or proposals; made no effort to convene or create a special committee of independent directors to review the transaction; did not ask for or receive an independent opinion about the fairness of the transaction to CEOC; did not retain independent lawyers or advisors to represent CEOC; and made no analysis of CEOC's solvency. 512. CEOC's board did not hold a meeting to consider the sale of the four properties. Instead, Loveman and Hession approved the transaction by signing a boilerplate written consent. In failing to reach an informed opinion, in ignoring basic principles of governance, and in voting to approve the four properties transaction while they had disqualifying conflicts of interest, both Loveman and Hession breached their fiduciary duties to CEOC. 154 EFTA01091687 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 156 of 212 Breaches of Fiduciary Duty By Paul Weiss 513. Paul Weiss represented CEOC in connection with the Four Properties Transfer. Simultaneously, Paul Weiss also represented CEC and affiliates of CEC, which had interests directly opposite to those of CEOC. 514. As counsel to CEOC, Paul Weiss owed CEOC fiduciary duties. These included a duty of loyalty to represent CEOC's interests only. 515. Paul Weiss' representation of CEOC obligated Paul Weiss to render independent and unclouded advice to CEOC on the terms and conditions of the transaction, the legal implications of the transaction, alternatives to the transaction, and the risks attendant to the transaction. Because of its simultaneous representation of parties who had opposing interests to CEOC's on this very matter, Paul Weiss could not and did not serve CEOC with undivided loyalty. 516. Paul Weiss breached its fiduciary duties to CEOC and CEOC was injured thereby. Aiding & Abetting Breaches Of Fiduciary Duty Brimmer and Hession 517. Brimmer and Hession were members of CEC's financial staff. At the time of the Four Properties Transaction, Brimmer was the head of Caesars' Planning and Analysis group, and Hession was CEC's CFO. 518. Brimmer and Hession were aware that Kleisner was a director of CEC and that CEC and CEC's board were fiduciaries to CEOC. Brimmer and Hession also knew that (a) the value CEOC would receive in the Four Properties Transaction would depend in part upon the opinion to be rendered by Duff & Phelps, (b) Duff & Phelps would rely upon projections of 155 EFTA01091688 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 157 of 212 CEOC's EBITDA for the four properties in reaching its opinion, and (c) that CEOC had projections of that EBITDA that it had prepared in the ordinary course of its business. 519. Kleisner instructed Brimmer and Hession to prepare a competing set of projections that came to be known as the February Business Plan. Brimmer and Hession prepared the February Business Plan, which set forth projections of EBITDA materially lower than those contained in CEOC's projections. Brimmer and Hession knew that Kleisner's purpose in instructing them to prepare the February Business Plan was to prepare projections that would result in CEOC receiving a lower price for the four properties it was to sell. Brimmer and Hession knew that Kleisner breached his fiduciary duties in directing and using the preparation of the February Business Plan. Nevertheless, Brimmer and Hession prepared the February Business Plan and provided it to Duff & Phelps with full knowledge of Kleisner's purposes. 520. Duff & Phelps did, in fact, rely upon the February Business Plan and issued an opinion that the Four Properties Transaction was "on terms no less favorable to CEOC . . . than would be obtained in a comparable arm's-length transaction with a person that is not an affiliate of [CEC]." As a result, CEOC received less for the four properties than it would have received if Duff & Phelps had been provided with truthful projections. 521. Brimmer and Hession aided and abetted Kleisner's breach of his fiduciary duties to CEOC, which also was a breach of CEC's fiduciary duties to CEOC. 522. The February Business Plan was not a forecast reflecting CEOC management's best judgment about the future of its business; instead, it was created by Hession and Brimmer at the behest of Kleisner and was never used for any purpose other than valuing the Four Properties. 156 EFTA01091689 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 158 of 212 The CEC Conflicted Directors, the Sponsors. the Sponsors' Officers and Agents, and Paul Weiss 523. The CEC Conflicted Directors, the Sponsors, the Sponsors' officers and agents, and Paul Weiss knew that CEC, as CEOC's controlling stockholder, and the boards of CEC and CEOC owed fiduciary duties to CEOC. The CEC Conflicted Directors, the Sponsors, the Sponsors' officers and agents, and Paul Weiss knew or should have known that CEC and the boards of CEC and CEOC breached those fiduciary duties by compelling CEOC to enter into transactions that were against CEOC's interests, benefited CEC at CEOC's expense, did not provide a fair price to CEOC, and did not result from a fair process. 524. The CEC Conflicted Directors, the Sponsors, the Sponsors' officers and agents, and Paul Weiss knowingly participated in those breaches of fiduciary duty in the following ways: a) by virtue of their power to appoint the entire board of CEC and the fact that a majority of the directors of CEC's board were officers of Apollo and TPG, the Sponsors dominated and controlled the actions of CEC's board and CEOC's board; b) Apollo conceived, designed, and structured the transaction, including the selection of CEOC assets to be sold; c) the CEC Conflicted Directors, the Sponsors, and the Sponsors' officers and agents directly instructed Paul Weiss to negotiate and implement the transaction, even though it was not in CEOC's best interests; d) the Sponsors and Paul Weiss selected four of CEOC's most valuable properties to transfer to Growth Partners, including three Las Vegas properties located at the center of the Las Vegas Strip and its flagship New Orleans casino; e) although the Sponsors and Paul Weiss understood that the transaction was designed to allow CEC and the Sponsors to take control of CEOC assets with significant growth potential, transfer those assets beyond the reach of CEOC's creditors, and better position CEC and the Sponsors for CEOC's restructuring or bankruptcy, they did not disclose these intentions to CEC's board or CEOC's board; 0 the Sponsors caused the CEC board to instruct CEOC to sell assets on the pretext of improving CEOC's ability to service its debt, even though they fully knew that selling the highly profitable Bally's Las Vegas, Cromwell, Quad and Harrah's New Orleans would reduce CEOC's earnings materially and make it more difficult for CEOC to service its debt; 157 EFTA01091690 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 159 of 212 j) g) The Sponsors made the decision that CEOC should use the proceeds of the sale to pay off the balances on its Intercompany Revolver with CEC, even though CEOC was desperately short of cash and the repayment would benefit CEC to the detriment of CEC's creditors; h) the transaction was presented to the CEC board as a management proposal, even though it had been conceived by the Sponsors; i) the proposal, which was crafted by Paul Weiss and the Sponsors, omitted any discussion of CEOC's insolvency, the litigation and bankruptcy-related risks of the transaction, and the underlying goals of the transaction; despite their knowledge that CEC and CEOC had divergent interests, the Sponsors exploited the conflicts of interest of CEOC board members who sat on CEC's board or were officers of CEC; k) the Sponsors and Paul Weiss understood that CEOC was insolvent on and after the date of each transfer, as evidenced by, inter (ilia, multiple analyses the Sponsors had prepared or seen indicating CEOC had a negative equity value and would be unable to repay its debts, the creation of bankruptcy remote entities to receive and hold valuable CEOC assets, and the CEC Special Committee's refusal to provide a representation that CEOC was solvent, as requested by the CAC Special Committee in connection with the transaction; I) the Sponsors recruited outside directors for CEOC in February 2014, but instructed them to delay joining the CEOC board until the transfer of the assets to Growth Partners was complete; m) the Sponsors determined that the properties would not be marketed to any third parties and would stay within the Caesars enterprise; n) the Sponsors retained Duff & Phelps to provide an opinion that the transaction was "on terms no less favorable to CEOC ... than would be obtained in a comparable arm's-length transaction with a person that is not an affiliate of [CEC]" but did not ask Duff & Phelps to opine as to whether the transaction was fair to CEOC; o) upon information and belief, the Sponsors were aware that Duff & Phelps had been instructed to rely upon incomplete and misleading financial projections, yet did nothing to assure that correct information was given to them instead; officers of the Sponsors attended the CEC board meetings where the Four Properties Transaction was discussed, and voted to approve the transaction notwithstanding the fact that it was a breach of CEC's fiduciary duties to CEOC; and q) [TO BE INSERTED]. 158 EFTA01091691 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 160 of 212 525. Brimmer, Hession, the CEC Conflicted Directors, the Sponsors, and Paul Weiss are liable for aiding and abetting breaches of fiduciary duties relating to the transfer of the Four Properties. Civil Conspiracy 526. Starting in mid-2012, the Conflicted Directors and Paul Weiss agreed and conspired to commit unlawful acts, including to fraudulently transfer CEOC's valuable assets, breach fiduciary duties owed to CEOC, engage CEOC in damaging financial transactions, and otherwise delay, hinder, and defraud CEOC and its creditors. Each of the conspirators intentionally participated in this scheme. The Four Properties Transfer constitutes an overt act taken in furtherance of the conspirators' unlawful scheme. The conspirators' actions in creating, structuring, negotiating, evaluating, and approving the transfer, as more fully detailed herein, constitute further overt acts taken in furtherance of their unlawful scheme. 527. The Four Properties Transfer, the conspirators' overt acts in furtherance of that transfer, and the conspirators' overall scheme and agreement to fraudulently transfer CEOC's valuable assets, breach fiduciary duties owed to CEOC, engage CEOC in damaging financial transactions, and otherwise delay, hinder, and defraud CEOC and its creditors caused damages to CEOC in an amount to be determined. CLAIM X 2011 EASEMENT ON UNDEVELOPED LAND (Nev. Rev. Stat. §§ 112.180, 112.190, 112.210; 6 Del. C. §§ 1304, 1305, 1307; and 11 U.S.C. §§ 544, 550) (Fraudulent Transfer, Breach of Fiduciary Duty) CEC, Easement Transferees 528. Plaintiffs repeat and reallege paragraphs 1 through 527. 159 EFTA01091692 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 161 of 212 Fraudulent Transfer 529. At all relevant times, CEOC has been insolvent. 530. In 2011, various CEOC affiliates granted easements to the Easement Transferees, all of which were affiliates of CEC, on four lots of unimproved Las Vegas real estate (the "Easement Transfer"). 531. Two of the Easement Transferees make an annual payment to CEOC for granting the easements of about $1.7 million, subject to annual 3% increases; however, a third Easement Transferee — Flamingo Las Vegas PropCo — has paid nothing for the easement granted to it. Granting the easement diminished CEOC's value by as much as $60 million, and correspondingly increased the value received by the Easement Transferees. 532. At all relevant times, CEC and the Sponsors owned, controlled, and dominated the Easement Transferees. 533. The Easement Transfer was a constructive fraudulent transfer because CEOC received inadequate consideration and less than reasonably equivalent value for the easements. 534. The Easement Transfer is avoidable and recoverable, and the Easement Transferees are liable for the constructive fraudulent transfer of the aforementioned easements. Breaches Of Fiduciary Duty By CEC And CEC's Directors 535. At the time of the granting of the easements, the Easement Transferees were direct or indirect subsidiaries or affiliates of CEC. Thus, the granting of the easements was a self-dealing transaction. 536. The price paid to CEOC for the granting of the easements was far below the value of the asset and was not entirely fair to CEOC. 160 EFTA01091693 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 162 of 212 537. The process by which CEC initiated, structured, negotiated, and disclosed the transaction was not entirely fair to CEOC. There is no evidence that CEOC was even consulted in connection with CEC's decision to have the easements granted. 538. CEC breached its fiduciary duties to CEOC. 539. The CEC Conflicted Directors, who individually owed fiduciary duties to CEOC, breached those fiduciary duties. Breaches Of Fiduciary Duty By CEOC's Directors 540. At the time the easements were granted, CEOC's only directors were Gary Loveman and Jonathan Halkyard. Loveman was the Chairman and Chief Executive Officer of CEC, and Halkyard was CEC's Chief Financial Officer. As a result, neither Loveman nor Halkyard was independent of CEC in making decisions affecting CEOC. 541. Loveman and Halkyard breached their fiduciary duties to CEOC by approving, authorizing, and facilitating a transaction that was not in the best interests of CEOC. 542. There is no evidence that CEOC followed any governance process in reaching the decision to grant the easement, that it used any marketing process, that it offered the easements to any third party on an arm's-length basis, that the decision to grant the easement was made by disinterested directors of CEOC, that CEOC engaged independent financial or legal advisors to review the granting of the easement, or that CEOC requested or received a fairness opinion about the transfer. As a result, the process by which the easements were granted was not fair to CEOC. 543. In addition, and upon information and belief, Loveman and Halkyard breached their duty of care to CEOC by failing to inform themselves of transfers of assets from CEOC to CEC or affiliates of CEC, thus allowing the granting of the easements to take place without CEOC receiving adequate compensation for the easements. 161 EFTA01091694 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 163 of 212 544. CEOC has been injured by these breaches of fiduciary duties in an amount to be determined. CLAIM XI TRANSFER OF UNDEVELOPED LAND IN LAS VEGAS (Nev. Rev. Stat. §§ 112.180, 112.190, 112.210; 6 Del. C. §§ 1304, 1305, 1307; and 11 U.S.C. §§ 544, 548(a)(I)(A),(B), 550) (Fraudulent Transfer, Breach Of Fiduciary Duty, Aiding & Abetting Breach Of Fiduciary Duty, Civil Conspiracy) 2014 Transferees, CEC, Sponsors, Loveman, Hession, CEC Conflicted Directors Rowan, Sambur, Paul Weiss 545. Plaintiffs repeat and reallege paragraphs 1 through 544. Fraudulent Transfer 546. At all relevant times, CEOC has been insolvent. 547. Throughout the relevant period, CEC, the directors of CEC, and the Sponsors completely dominated and controlled CEOC and all of CEOC's subsidiaries and affiliates. 548. On March 1, 2014, CEOC entered into the 2014 Transaction Agreement which, among other things, required CEOC to transfer to Growth Partners and entities affiliated with Growth Partners (the "2014 Transferees") 31 acres of undeveloped land in Las Vegas. 549. At all relevant times, CEC and the Sponsors owned, controlled, and dominated the 2014 Transferees. 550. CEOC was paid no cash consideration for the transfer of this undeveloped land and, upon information and belief, was paid no consideration at all for it. 551. The transfer of the undeveloped land was a constructive fraudulent transfer because CEOC received inadequate consideration and less than reasonably equivalent value for it. 162 EFTA01091695 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 164 of 212 j) 552. In addition, the transfer of the undeveloped land was an actual fraudulent transfer because the purpose and effect of the transfer was to hinder or delay CEOC's creditors by placing critical and valuable assets beyond their reach. Evidence of fraudulent intent includes the facts that: a) the Sponsors, and Apollo in particular, conceived of the transaction and identified the land to be transferred; b) the transaction was designed and intended to allow CEC and the Sponsors to take control of CEOC assets with significant growth potential, transfer those assets beyond the reach of CEOC's creditors, and better position CEC and the Sponsors for CEOC's restructuring or bankruptcy; c) CEOC, CEC, the Sponsors, Paul Weiss, the 2014 Transferees, and the individual defendants understood that CEOC was insolvent on and after the date of each transfer, as evidenced by, inter alia, analyses prepared by CEC and the Sponsors indicating that CEOC had a negative equity value and would be unable to repay its debts, the creation of bankruptcy remote entities to receive and hold valuable CEOC assets, and the CEC Special Committee's refusal to provide a representation that CEOC was solvent, as requested by the CAC Special Committee in connection with the transaction; d) despite having knowledge that CEC and CEOC had divergent interests, CEC, Growth Partners, the CEC board, and the Sponsors arranged for and executed the land transfer without any negotiations with CEOC; e) the land transferred was never offered to a true third-party buyer or subject to any marketing process; f) the transfers were to newly created affiliates of CEC, owned and controlled by CEC and the Sponsors; g) CEC and the Sponsors retained control and ownership of the assets; h) CEOC did not receive any consideration for this land, and no value was attributed to this land in CEOC's internal analysis, CEC's internal analysis, or in the Centerview, Lazard, or Duff & Phelps opinions; i) neither Centerview, Lazard, Duff & Phelps, Kleisner, Beilinson, nor Loveman was aware that the undeveloped land was being transferred; the transfer of the land was not disclosed in the March 3, 2014 disclosure of the Four Properties Transaction or in the May 6, 2014 8-Ks; and k) the transfer impaired CEOC's future ability to service its debt. 163 EFTA01091696 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 165 of 212 553. The transfer of the undeveloped land in Las Vegas is avoidable and recoverable, and the 2014 Transferees are liable for the constructive and fraudulent transfer of undeveloped land in Las Vegas. Breaches Of Fiduciary Duty By CEC And CEC's Directors 554. At the time of the transfers of the undeveloped land, the 2014 Transferees were direct or indirect subsidiaries or affiliates of CEC. Thus, the transfer of the undeveloped land was a self-dealing transaction. 555. The price paid to CEOC for the transfer of the undeveloped land was far below the value of the asset and was not entirely fair to CEOC. 556. The process by which CEC initiated, structured, negotiated and disclosed the transaction was not entirely fair to CEOC. Although CEC and CAC both formed special committees of their boards to structure and negotiate the price of the transactions that surrounded the transfer of the undeveloped land, those committees represented the interests of CEC and CAC, and not the interests of CEOC. Similarly, although both of those special committees hired financial advisors to assist them, no independent advisors were retained to represent or assist CEOC, and CEOC did not ask for or receive a fairness opinion. Nor did CEOC have independent legal advisors. In fact, the law firm representing CEOC on the transaction was Paul Weiss, the same law firm that represented CEC. 557. CEC breached its fiduciary duties to CEOC. 558. The CEC Conflicted Directors, who individually owed fiduciary duties to CEOC, breached those fiduciary duties. Breaches Of Fiduciary Duty By CEOC's Directors 559. Although the undeveloped land was a valuable CEOC asset, CEOC itself was not party to the negotiations about the transaction. Instead, CEC and the Sponsors excluded CEOC 164 EFTA01091697 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 166 of 212 from those discussions which, upon information and belief, occurred between one of the CEC directors and one of the CAC directors. 560. There was no marketing process for the sale of these assets. While the undeveloped land was enormously valuable, no effort was made by CEC, CEOC, or anyone else to solicit any third-party bids, offers or proposals for buying the property. 561. At the time the undeveloped land was transferred, CEOC's only two directors were Loveman and Hession. Neither Loveman nor Hession was an independent director, and both had interests adverse to CEOC's. Loveman was CEC's Chairman and Chief Executive Officer, Hession was CEC's Chief Financial Officer, and both Loveman and Hession owned stock in CAC and, therefore, stood to benefit personally from the transfer of the undeveloped land. 562. Loveman and Hession breached their fiduciary duties to CEOC by approving, authorizing, and facilitating a transaction that was not in the best interests of CEOC. 563. The transfer of the undeveloped land to Growth Partners and the other 2014 Transferees was approved by the CEOC board when it approved the 2014 Transaction Agreement. However, there was no presentation to the board about the transfer of the undeveloped land or the fact that CEOC was receiving nothing for it. Moreover, the CEOC board did not hold a meeting to discuss the transfer of the undeveloped land, or even to discuss its approval of the 2014 Transaction Agreement. Instead, CEOC's two directors — Loveman and Hession — approved the transaction by signing a boilerplate written consent. In failing to reach an informed opinion, in ignoring basic principles of governance, and in voting to approve the 2014 Transaction Agreement while they had disqualifying conflicts of interest, both Loveman and Hession breached their fiduciary duties to CEOC. In addition, and upon information and 165 EFTA01091698 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 167 of 212 belief, Loveman and Hession breached their duty of care to CEOC by failing to inform themselves of transfers of assets from CEOC to CEC or affiliates of CEC, thus allowing the transfer of the undeveloped land to take place without CEOC receiving adequate consideration for it. Breaches of Fiduciary Duty By Paul Weiss 564. Paul Weiss represented CEOC in connection with the transfer of undeveloped land in Las Vegas. Simultaneously, Paul Weiss also represented CEC and affiliates of CEC, which had interests directly opposite to those of CEOC. 565. As counsel to CEOC, Paul Weiss owed CEOC fiduciary duties. These included a duty of loyalty to represent CEOC's interests only. 566. Paul Weiss' representation of CEOC obligated Paul Weiss to render independent and unclouded advice to CEOC on the terms and conditions of the transaction, the legal implications of the transaction, alternatives to the transaction, and the risks attendant to the transaction. Because of its simultaneous representation of parties who had opposing interests to CEOC's on this very matter, Paul Weiss could not and did not serve CEOC with undivided loyalty. 567. Paul Weiss breached its fiduciary duties to CEOC and CEOC was injured thereby. Aiding & Abetting Breaches Of Fiduciary Duty 568. The CEC Conflicted Directors, the Sponsors, the Sponsors' officers and agents, and Paul Weiss knew that CEC, as CEOC's controlling stockholder, and the boards of CEC and CEOC owed fiduciary duties to CEOC. The CEC Conflicted Directors, the Sponsors, the Sponsors' officers and agents, and Paul Weiss knew or should have known that CEC and the boards of CEC and CEOC breached those fiduciary duties by compelling CEOC to enter into 166 EFTA01091699 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 168 of 212 transactions that were against CEOC's interests, benefited CEC at CEOC's expense, did not provide a fair price to CEOC, and did not result from a fair process. 569. The CEC Conflicted Directors, the Sponsors, the Sponsors' officers and agents, and Paul Weiss knowingly participated in those breaches of fiduciary in the following ways: a) by virtue of their power to appoint the entire board of CEC and the fact that a majority of the directors of CEC's board were officers of Apollo and TPG, the Sponsors dominated and controlled the actions of CEC's board and CEOC's board; b) the CEC Conflicted Directors, the Sponsors, and the Sponsors' officers and agents directly instructed Paul Weiss to negotiate and implement the transaction, even though it was not in CEOC's best interests; c) Apollo conceived, designed, and structured the transaction, including the selection of CEOC assets to be sold; d) although the Sponsors and Paul Weiss understood that the transaction was designed to allow CEC and the Sponsors to take control of CEOC assets with significant growth potential, transfer those assets beyond the reach of CEOC's creditors, and better position CEC and the Sponsors for CEOC's restructuring or bankruptcy, they did not disclose these intentions to CEC's board or CEOC's board; e) despite their knowledge that CEC and CEOC had divergent interests, the Sponsors exploited the conflicts of interest of CEOC board members who sat on CEC's board or were officers of CEC; and 0 Upon information and belief, Rowan and Sambur knew that the 2014 Transaction Agreement included provisions for the transfer of the undeveloped land from CEOC to Growth Partners and the other 2014 Transferees for no additional consideration but failed to bring to the attention of the full CEC board that this transfer was taking place. 570. The CEC Conflicted Directors, the Sponsors, and Paul Weiss are liable for aiding and abetting breaches of fiduciary duty in connection with the transfer of undeveloped land in Las Vegas. 571. CEOC has been injured by these breaches of fiduciary duties in an amount to be determined. 167 EFTA01091700 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 169 of 212 Civil Conspiracy 572. Starting in mid-2012, the Conflicted Directors and Paul Weiss agreed and conspired to commit unlawful acts, including to fraudulently transfer CEOC's valuable assets, breach fiduciary duties owed to CEOC, engage CEOC in damaging financial transactions, and otherwise delay, hinder, and defraud CEOC and its creditors. Each of the conspirators intentionally participated in this scheme. The Transfer of Undeveloped Land in Las Vegas constitutes an overt act taken in furtherance of the conspirators' unlawful scheme. The conspirators' actions in creating, structuring, negotiating, evaluating, and approving the transfer, as more fully detailed herein, constitute further overt acts taken in furtherance of their unlawful scheme. 573. The Transfer of Undeveloped Land in Las Vegas, the conspirators' overt acts in furtherance of that transfer, and the conspirators' overall scheme and agreement to fraudulently transfer CEOC's valuable assets, breach fiduciary duties owed to CEOC, engage CEOC in damaging financial transactions, and otherwise delay, hinder, and defraud CEOC and its creditors caused damages to CEOC in an amount to be determined. CLAIM XII DEGRADATION OF CEOC's ENTERPRISE VALUE (Breach of Fiduciary Duty) CEC, Sponsors, CEC Conflicted Directors, Loveman, Halkyard, Cohen, Hessian 574. Plaintiffs repeat and reallege paragraphs 1 through 573. Breaches Of Fiduciary Duty By CEOC's Directors 575. At all relevant times, CEOC has been insolvent. 168 EFTA01091701 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 170 of 212 576. At all relevant times, CEOC had a two person board, consisting of Loveman and either Halkyard, Cohen, or Hession. CEOC's directors owed fiduciary duties to CEOC and to CEOC's ultimate stakeholders. 577. The structure of the CEOC enterprise had been designed to create a nationwide system of regional casinos that would identify customers and, through the use of CEOC's Total Rewards program, feed those customers to CEOC's high-value casinos in Las Vegas and its super-regional casino in New Orleans. As a result, CEOC was valued as a Las Vegas-based gaming enterprise instead of a gaming company that was principally regional in nature. 578. This difference was significant because valuations for gaming enterprises that are concentrated in Las Vegas are materially higher than those for regional gaming companies. 579. At the direction of the Sponsors and CEC, all but one of CEOC's Las Vegas properties was transferred to affiliates of CEC, including CERP and Growth Partners. 580. Because the Sponsors and CEC directly and indirectly controlled CERP, Growth Partners, and the other transferees, each of these was a self-dealing transaction that was required to meet the standard of entire fairness as to the consideration paid to CEOC for the assets and the process followed in timing, initiating, structuring, negotiating, and disclosing the transaction and in obtaining approval of the transaction by CEOC's directors. 581. None of the transfers of CEOC's Las Vegas properties met this standard. In each case, the consideration CEOC received for the property was far below the value of those assets and was not entirely fair to CEOC. Similarly, the processes used by CEC, Loveman, Halkyard, Cohen, and Hession were not fair to CEOC. Breaches Of Fiduciary Duty By CEC And CEC's Directors 582. CEC dominated and chose the board of directors of CEOC. Although CEC was fully aware that transactions between CEC (or affiliates of CEC) and CEOC would be self- 169 EFTA01091702 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 171 of 212 dealing transactions that would require fair process, CEC failed to appoint to the CEOC board any directors who were independent of CEC. CEC thus deprived CEOC of fair process by preventing CEOC from having directors who would be able to independently consider the fairness of the transaction. Similarly, CEC deprived CEOC of fair process by proceeding with the transfers with knowledge that CEOC did not have independent financial advisors or independent legal advisors. By transferring from CEOC its signature properties in Las Vegas and its Harrah's New Orleans casino, CEC relegated CEOC to the status of a regional gaming company and, correspondingly, reduced the enterprise value of CEOC. 583. CEC breached its fiduciary duties to CEOC. 584. The CEC Conflicted Directors, who individually owed fiduciary duties to CEOC, breached those fiduciary duties. 585. CEOC has been injured by these breaches of fiduciary duties in an amount to be determined. CLAIM XIII TRANSFER OF TOTAL REWARDS (Nev. Rev. Stat. §§ 112.180, 112.190, 112.210; 6 Del. C. §§ 1304, 1305, 1307; and 11 U.S.C. §§ 544, 548(a)(1)(A),(B), 550) (Fraudulent Transfer, Breach Of Fiduciary Duty, Aiding & Abetting Breach Of Fiduciary Duty, Civil Conspiracy) Total Rewards Transferees, CEC, Sponsors, CEC Conflicted Directors, Loveman, Hession, Rowan, Sambur, Paul Weiss 586. Plaintiffs repeat and reallege paragraphs 1 through 585. Fraudulent Transfer 587. At all relevant times, CEOC has been insolvent. 588. Throughout the relevant period, CEC, the directors of CEC, and the Sponsors completely dominated and controlled CEOC and all of CEOC's subsidiaries and affiliates. 170 EFTA01091703 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 172 of 212 589. The 2014 Transaction Agreement required CEOC to transfer to a newly-formed company named Caesars Enterprise Services LW ("CES"), most of its intellectual property, including its rights to the Total Rewards program and the intangible and tangible intellectual property that comprised that program (collectively, "Total Rewards"). Total Rewards was of enormous value to CEOC. 590. CEOC received no consideration in return for transferring Total Rewards to CES other than a 69% ownership stake in CES. However, CES was designed to be a flow-through entity that was intentionally structured to have no profits. 591. The other owners of CES were CERP and Growth Partners. A three-person Steering Committee makes all major decisions for CES. CEOC, CERP and Growth Partners each has a seat on the Steering Committee. 592. At all relevant times, CEC and the Sponsors owned, controlled, and dominated CERP and Growth Partners. 593. Pursuant to a series of agreements and licenses between CEOC and CES, CEOC conveyed to CES all of the rights and powers that usually accompany ownership of intellectual property. Thus, as a practical matter, it is CES, and not CEOC, that controls Total Rewards. 594. Because of the governance structure of CES, CEOC has no control over the governance of CES. Instead, CERP and Growth Partners hold a majority of the votes. 595. The transfer of Total Rewards to CES was a constructive fraudulent transfer because CEOC received inadequate consideration and less than reasonably equivalent value for Total Rewards. 596. In addition, the transfer of Total Rewards was an actual fraudulent transfer because the purpose and effect of the transfer was to hinder or delay CEOC's creditors by 171 EFTA01091704 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 173 of 212 placing critical and valuable assets beyond their reach. Evidence of fraudulent intent includes the facts that: a) Paul Weiss and the Sponsors conceived of the transfer of Total Rewards to a bankruptcy-remote entity in late 2013; b) the transfer of Total Rewards was designed and intended to give CEC and the Sponsors control and dominion of CEOC's valuable intellectual property, transfer assets beyond the reach of CEOC's creditors, allow other Caesars entities to have continued access to CEOC's intellectual property if CEOC entered bankruptcy, and better position CEC and the Sponsors for CEOC's restructuring or bankruptcy; c) as part of the Services LLC Agreements, CES sublicensed its intellectual property to CERP, Growth Partners, and many other subsidiaries or affiliates of CEC, which meant that CERP and Growth Partners obtained a nearly unlimited right to use the Total Rewards program and related intellectual property free of charge; d) CEOC, CEC, the Sponsors, Paul Weiss, the 2014 Transferees, and the individual defendants understood that CEOC was insolvent on and after the date of each transfer, as evidenced by, inter alia, analyses CEC and Sponsor had seen or prepared that showed that CEOC had a negative equity value and would be unable to repay its debts, the creation of bankruptcy remote entities to receive and hold valuable CEOC assets, and the CEC Special Committee's refusal to provide a representation that CEOC was solvent, as requested by the CAC Special Committee in connection with the transaction; e) despite their knowledge that CEC and CEOC had divergent interests, the Sponsors and CEC, proposed, negotiated, structured, evaluated, and approved the transfer of Total Rewards through a process that failed to involve or protect the interests of CEOC; f) control of Total Rewards was transferred to a newly-created shared services company, controlled by CEC and the Sponsors; g) the value of the consideration received by CEOC was not reasonably equivalent to the value of the assets transferred; h) the transfer substantially impaired CEOC's future ability to service its debt; i) the Services LLC Agreements granted CEOC a 69% ownership stake but only 33% of the voting rights; the Services LLC Agreements transferred effective control of Total Rewards to CERP and Growth Partners, enriching them at CEOC's direct expense, by terminating CEOC's of governance rights in the event of its bankruptcy, prohibiting CEOC from assigning its interest in CES or withdrawing from CES without the consent of CERP and Growth Partners, requiring CEOC to transfer most of its employees to CES, requiring CEOC to transfer the know-how at the heart of Total Rewards to CES, and licensing CES and its sublicensees to create derivative works using the licensed and sublicensed intellectual property; 172 EFTA01091705 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 174 of 212 k) Paul Weiss and Apollo drafted the terms of these Services LLC Agreements; I) CEOC did not negotiate any of these terms and did not have any independent financial or legal advisors to review them; and m) the two CEOC directors who approved this transfer via written consent were senior executives at CEC and shareholders of CAC, and thus had a financial interest in the Growth Partners receipt of these benefits. 597. The transfer of Total Rewards is avoidable and recoverable, and the Total Rewards Transferees are liable for the constructive and actual fraudulent transfer of Total Rewards. Breaches Of Fiduciary Duty By CEC And CEC's Directors 598. At the time of the transfer of Total Rewards to CES, CERP and Growth Partners were direct or indirect subsidiaries or affiliates of CEC. Thus, the transaction was a related party transaction and involved self-dealing. 599. The price paid to CEOC for transferring Total Rewards was far below the value of Total Rewards and was not entirely fair to CEOC. 600. The process by which CEC initiated, structured, negotiated, and disclosed the transfer of Total Rewards to CES was not entirely fair to CEOC. CEOC was given no say in deciding whether to sell these assets, how the transaction was structured, or when and how it was disclosed. CEOC had no role in the negotiations of the transaction, and was not even represented in the negotiations. Instead, the entire process was dominated by CEC and the Sponsors. 601. Although CEC formed a special committee of its board to structure and negotiate the price of the other transactions that happened at this same time, that Committee was never advised that CEC and CEOC could have divergent interests or that the CEC Special Committee would have a fiduciary duty or other obligation to protect CEOC or its creditors due to CEOC's insolvency. The CEC Special Committee also never considered whether CEOC should retain control over Total Rewards, even though there would be evident long-term consequences to 173 EFTA01091706 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 175 of 212 CEOC and its creditors if control of Total Rewards were transferred to entities CEC and the Sponsors controlled. 602. There was no fair process. CEOC had no independent directors, legal counsel, or financial advisors to review the transfer of Total Rewards. There was no marketing process for possible sale of Total Rewards, and no third parties were solicited to determine if they might have an interest in acquiring or licensing all or part of the Total Rewards intellectual property. CEOC also did not ask for or receive a fairness opinion. 603. CEC breached its fiduciary duties to CEOC. 604. The CEC Conflicted Directors, who individually owed fiduciary duties to CEOC, breached those fiduciary duties. Breaches Of Fiduciary Duty By CEOC's Directors 605. CEOC's board at the time the transfer of Total Rewards was approved consisted solely of Loveman and Hession. Both were profoundly conflicted. Loveman, of course, was CEC's Chairman and Chief Executive Officer. Hession was CEC's Chief Financial Officer. Both Loveman and Hession owned stock in CAC and, therefore, stood to benefit personally from the below-market price at which CEOC had transferred Total Rewards to CES. 606. Loveman and Hession breached their fiduciary duties to CEOC by approving, authorizing, and facilitating a transaction that was not in the best interests of CEOC. 607. Loveman and Hession also breached their fiduciary duties to CEOC by failing to ensure that CEOC received a fair price for these assets or that a fair process was followed. Loveman and Hession did not consider using a marketing process for the sale of these assets; made no effort to solicit any third-party bids, offers, or proposals; made no effort to convene or create a special committee of independent directors to review the transaction; did not ask for or 174 EFTA01091707 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 176 of 212 receive an opinion about the fairness of the transaction to CEOC; did not retain independent lawyers or advisors to represent CEOC; and made no analysis of CEOC's solvency. 608. The transfer of Total Rewards to CES was approved by the CEOC board as part of its approval of the 2014 Transaction Agreement. However, the CEOC board did not hold a meeting to discuss the transfer of Total Rewards, or even to discuss its approval of the 2014 Transaction Agreement. Instead, CEOC's two directors — Loveman and Hession — approved the transaction by signing a boilerplate written consent. In failing to reach an informed opinion, in ignoring basic principles of governance, and in voting to approve the 2014 Transaction Agreement while they had disqualifying conflicts of interest, both Loveman and Hession breached their fiduciary duties to CEOC. Breaches of Fiduciary Duty By Paul Weiss 609. Paul Weiss represented CEOC in connection with the transfer of Total Rewards. Simultaneously, Paul Weiss also represented CEC and affiliates of CEC, which had interests directly opposite to those of CEOC. 610. As counsel to CEOC, Paul Weiss owed CEOC fiduciary duties. These included a duty of loyalty to represent CEOC's interests only. 611. Paul Weiss' representation of CEOC obligated Paul Weiss to render independent and unclouded advice to CEOC on the terms and conditions of the transaction, the legal implications of the transaction, alternatives to the transaction, and the risks attendant to the transaction. Because of its simultaneous representation of parties who had opposing interests to CEOC's on this very matter, Paul Weiss could not and did not serve CEOC with undivided loyalty. 612. Paul Weiss breached its fiduciary duties to CEOC and CEOC was injured thereby. 175 EFTA01091708 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 177 of 212 Aiding & Abetting Breaches Of Fiduciary Duty 613. The Conflicted Directors, the Sponsors, the Sponsors' officers and agents, and Paul Weiss knew that CEC, as CEOC's controlling stockholder, and the boards of CEC and CEOC owed fiduciary duties to CEOC. The CEC Conflicted Directors, the Sponsors, the Sponsors' officers and agents, and Paul Weiss knew or should have known that CEC and the boards of CEC and CEOC breached those fiduciary duties by compelling CEOC to enter into transactions that were against CEOC's interests, benefited CEC at CEOC's expense, did not provide a fair price to CEOC, and did not result from a fair process. 614. The Conflicted Directors, the Sponsors, the Sponsors' officers and agents, and Paul Weiss knowingly participated in those breaches of fiduciary in the following ways: a) by virtue of their power to appoint the entire board of CEC and the fact that a majority of the directors of CEC's board were officers of Apollo and TPG, the Sponsors dominated and controlled the actions of CEC's board and CEOC's board; b) the CEC Conflicted Directors, the Sponsors, and the Sponsors' officers and agents directly instructed Paul Weiss to negotiate and implement the transaction, even though it was not in CEOC's best interests; c) Apollo conceived, designed, and structured the transfer of Total Rewards to a bankruptcy-remote entity dominated by CERP and Growth Partners that would have complete control over Total Rewards; d) Rowan and Sambur, with Paul Weiss, prepared the first drafts of the term sheets outlining the terms, conditions, values, and structures of the transfer of Total Rewards to CES, specifically including the methods of diluting CEOC's ownership and control of Total Rewards to the benefit of CERP and Growth Partners; e) upon information and belief, TPG reviewed drafts of the term sheets and Services LLC Agreements and provided comments to Paul Weiss and Apollo; 0 Paul Weiss was pivotal in the conception, creation, and implementation of a bankruptcy-remote entity to take control of Total Rewards, in creating CES, in drafting the legal documents transferring Total Rewards to CES, in determining and preparing the array of licenses necessary to remove the incidents of ownership of Total Rewards from CEOC, in planning how CES would be governed, and in handling the details of the transaction; 176 EFTA01091709 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 178 of 212 g) the Sponsors and Paul Weiss knew and intended that the transfer of CEOC's intellectual property to CES would allow CEC and the Sponsors to maintain control of valuable CEOC assets, transfer those assets beyond the reach of CEOC's creditors, and better position CEC and the Sponsors for CEOC's restructuring or bankruptcy, they did not disclose these intentions to CEC's board or CEOC's board; h) despite their knowledge that CEC and CEOC had divergent interests, the Sponsors exploited the conflicts of interest of CEOC board members who sat on CEC's board or were officers of CEC or served as senior executives of CEC; i) the Sponsors and Paul Weiss formulated and decided upon the terms of the Services LLC Agreements that required CES to sublicense the CEOC intellectual property to CERP, Growth Partners, and other subsidiaries or affiliates of CEC, which resulted in CERP and Growth Partners obtaining the nearly unlimited right to use the Total Rewards program and related intellectual property for little or nothing; j) CEOC, CEC, the Sponsors, Paul Weiss and the individual defendants understood that CEOC was insolvent on and after the date of each transfer, as evidenced by, inter alia, the analyses CEC and Sponsor had prepared or seen that indicated CEOC had a negative equity value and would be unable to repay its debts, and the decision to create bankruptcy remote entities to receive and hold valuable CEOC assets; k) despite their knowledge that CEC and CEOC had divergent interests, the Sponsors and CEC proposed, negotiated, structured, evaluated, and approved the transfer of CEOC's intellectual property through a process that failed to involve or protect the interests of CEOC; I) Paul Weiss and the Sponsors knew that the value of the consideration received by CEOC was not reasonably equivalent to the value of the assets transferred; and m) the Sponsors and Paul Weiss intentionally structured the Services LLC Agreement to transfer effective control of Total Rewards to CERP and Growth Partners, enriching them at CEOC's direct expense and specifically provided that CEOC would lose governance rights in CES in the event of bankruptcy, that CEOC could not assign its interest in CES or withdraw from CES without the consent of CERP and Growth Partners, that the CEOC employees necessary to operate Total Rewards would be transferred to CES, that the know-how and tangible intellectual property necessary to operate and maintain Total Rewards would be transferred to CES, and that CES and its sublicensees would have control of derivative works created from CEOC's intellectual property. 615. The Conflicted Directors, the Sponsors, Rowan, Sambur, and Paul Weiss are liable for aiding and abetting breaches of fiduciary duty in connection with the transfer of Total Rewards. 177 EFTA01091710 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 179 of 212 616. CEOC has been injured by these breaches of fiduciary duties in an amount to be determined. Civil Conspiracy 617. Starting in mid-2012, the Conflicted Directors and Paul Weiss agreed and conspired to commit unlawful acts, including to fraudulently transfer CEOC's valuable assets, breach fiduciary duties owed to CEOC, engage CEOC in damaging financial transactions, and otherwise delay, hinder, and defraud CEOC and its creditors. Each of the conspirators intentionally participated in this scheme. The Transfer of Total Rewards constitutes an overt act taken in furtherance of the conspirators' unlawful scheme. The conspirators' actions in creating, structuring, negotiating, evaluating, and approving the transfers to CEOC's intellectual property, as more fully detailed herein, constitute further overt acts taken in furtherance of their unlawful scheme. 618. The Transfer of Total Rewards and other CEOC intellectual property, the conspirators' overt acts in furtherance of that transfer, and the conspirators' overall scheme and agreement to fraudulently transfer CEOC's valuable assets, breach fiduciary duties owed to CEOC, engage CEOC in damaging financial transactions, and otherwise delay, hinder, and defraud CEOC and its creditors caused damages to CEOC in an amount to be determined. CLAIM XIV TRANSFER OF CEOC'S PROPERTY MANAGEMENT BUSINESS (Nev. Rev. Stat. §§ 112.180, 112.190, 112.210; 6 Del. C. §§ 1304, 1305, 1307; and 11 U.S.C. §§ 544, 548(a)(1)(A),(B), 550) (Fraudulent Transfer, Breach Of Fiduciary Duty, Aiding & Abetting Breach Of Fiduciary Duty, Civil Conspiracy) CEC, CES, Sponsors, CEC Conflicted Directors, Loveman, Hession, Rowan, Sambur, Paul Weiss 619. Plaintiffs repeat and reallege paragraphs 1 through 618. 178 EFTA01091711 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 180 of 212 Fraudulent Transfer 620. At all relevant times, CEOC has been insolvent. 621. The 2014 Transaction Agreement required CEOC to transfer its portfolio of property management agreements, its workforce and other enterprise services to the newly- formed Caesars Enterprise Services LLC. These agreements and enterprise services were of enormous value to CEOC. 622. CEOC received no consideration in return for transferring the property management agreements to CES other than a 69% ownership stake in CES. However, CES was designed to be a flow-through entity that was intentionally structured to have no profits. 623. The other owners of CES were CERP and Growth Partners. A three-person Steering Committee makes all major decisions for CES. Each of CEOC, CERP and Growth Partners has a seat on the Steering Committee. 624. At all relevant times, CEC and the Sponsors owned, controlled, and dominated CERP and Growth Partners. 625. Because of the governance structure of CES, CEOC had no control over the governance of CES. Instead, CERP and Growth Partners hold a majority of the votes. 626. The transfer of the property management agreements to CES was a constructive fraudulent transfer because CEOC received inadequate consideration and less than reasonably equivalent value for the property management agreements. 627. In addition, the transfer of the property management agreements was an actual fraudulent transfer because the purpose and effect of the transfer was to hinder or delay CEOC's creditors by placing critical and valuable assets beyond their reach. Evidence of fraudulent intent includes the facts that: 179 EFTA01091712 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 181 of 212 a) the Sponsors, and Apollo in particular, conceived of the transaction; b) the transaction was designed and intended to allow CEC and the Sponsors to maintain control of CEOC's portfolio of management agreements, transfer those agreements beyond the reach of CEOC's creditors, and better position CEC and the Sponsors for CEOC's restructuring or bankruptcy; c) CEOC, CEC, the Sponsors, Paul Weiss, and the individual defendants understood that CEOC was insolvent on and after the date of the transfer of the management agreements, as evidenced by, inter alia, the analyses CEC and Sponsor had prepared or seen that indicated CEOC had a negative equity value and would be unable to repay its debts, the creation of bankruptcy remote entities to receive and hold valuable CEOC assets, and the CEC Special Committee's refusal to provide a representation that CEOC was solvent, as requested by the CAC Special Committee in connection with the transaction; d) despite their knowledge that CEC and CEOC had divergent interests, the Sponsors and CEC proposed, negotiated, structured, evaluated, and approved the transfer of CEOC's portfolio of property management agreements through a process that failed to involve or protect CEOC's interests; e) the transfer of the property management business was to a newly created, bankruptcy-remote shared services entity that is controlled by CEC and the Sponsors; f) CEC and the Sponsors retained control of the assets; g) the value of the consideration received by CEOC was not reasonably equivalent to the value of the assets transferred; and h) the transfer substantially impaired CEOC's future ability to service its debt. 628. The transfer of CEOC's property management business, including CEOC's workforce and enterprise services, is avoidable and recoverable, and CEC and CES are liable for the constructive and actual fraudulent transfer of CEOC's property management business. Breaches Of Fiduciary Duty By CEC And CEC's Directors 629. At all relevant times, CERP and Growth Partners were direct or indirect subsidiaries or affiliates of CEC. Thus, the transfer of CEOC's property management agreements, workforce, and enterprise services to CES was a related party transaction and involved self-dealing. 180 EFTA01091713 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 182 of 212 630. The price paid to CEOC for transferring its property management agreements, workforce and enterprise services was far below the value of those agreements and was not entirely fair to CEOC. 631. The process by which CEC initiated, structured, negotiated and disclosed the transfer of Total Rewards to CES was not entirely fair to CEOC. CEOC was given no say in deciding whether to sell these assets, how the transaction was structured or when and how it was disclosed. CEOC had no role in the negotiations of the transaction, and was not even represented in the negotiations. Instead, the entire process was dominated by CEC and the Sponsors. 632. Although CEC formed a Special Committee of its board to structure and negotiate the price of the other transactions that happened at this same time, that Committee was never advised that CEC and CEOC could have divergent interests or that the CEC Special Committee would have a fiduciary duty or other obligation to protect CEOC or its creditors due to CEOC's insolvency. The CEC Special Committee also never considered whether CEOC should retain control over the property management agreements, workforce, and enterprise services, even though there would be evident long-term consequences to CEOC and its creditors if control of the property management agreements, workforce, and enterprise services was transferred to entities CEC and the Sponsors controlled, as best evidenced by CEOC's disclosure statement which asserts that CEOC cannot propose a standalone plan as a result of such transfers having taken place, and must instead accede to the proposed settlement by the Sponsors and CEC under which those parties obtain full releases for grossly inadequate consideration. 633. CEC breached its fiduciary duties to CEOC. 634. The CEC Conflicted Directors, who individually owed fiduciary duties to CEOC, breached those fiduciary duties. 181 EFTA01091714 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 183 of 212 Breaches Of Fiduciary Duty By CEOC's Directors 635. CEOC's board at the time the transfer of the property management agreements was approved consisted solely of Loveman and Hession. Both were conflicted. Loveman was CEC's Chairman and Chief Executive Officer and Hession was CEC's Chief Financial Officer. Both Loveman and Hession owned stock in CAC and, therefore, stood to benefit personally from the below-market price at which CEOC had sold its portfolio of property management agreements to Growth Partners. 636. Loveman and Hession breached their fiduciary duties to CEOC by approving, authorizing, and facilitating a transaction that was not in the best interests of CEOC. 637. Loveman and Hession also breached their fiduciary duties to CEOC by failing to ensure that CEOC received a fair price for its portfolio of property management agreements or that a fair process was followed. Loveman and Hession did not consider using a marketing process for the sale of these assets; made no effort to solicit any third-party bids, offers, or proposals; made no effort to convene or create a special committee of independent directors to review the transaction; did not ask for or receive an opinion about the fairness of the transaction to CEOC; did not retain independent lawyers or advisors to represent CEOC; and made no analysis of CEOC's solvency 638. The transfer of the property management agreements, workforce, and enterprise services to CES was approved by the CEOC board as part of its approval of the 2014 Transaction Agreement. However, the CEOC board did not hold a meeting to discuss the transfer of the property management agreements, or even to discuss its approval of the 2014 Transaction Agreement. Instead, CEOC's two directors — Loveman and Hession — approved the transaction by signing a boilerplate written consent. In failing to reach an informed opinion, in ignoring basic principles of governance, and in voting to approve the 2014 Transaction Agreement while 182 EFTA01091715 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 184 of 212 they had disqualifying conflicts of interest, both Loveman and Hession breached their fiduciary duties to CEOC. Breaches of Fiduciary Duty By Paul Weiss 639. Paul Weiss represented CEOC in connection with the transfer of CEOC's property management business. Simultaneously, Paul Weiss also represented CEC and affiliates of CEC, which had interests directly opposite to those of CEOC. 640. As counsel to CEOC, Paul Weiss owed CEOC fiduciary duties. These included a duty of loyalty to represent CEOC's interests only. 641. Paul Weiss' representation of CEOC obligated Paul Weiss to render independent and unclouded advice to CEOC on the terms and conditions of the transaction, the legal implications of the transaction, alternatives to the transaction, and the risks attendant to the transaction. Because of its simultaneous representation of parties who had opposing interests to CEOC's on this very matter, Paul Weiss could not and did not serve CEOC with undivided loyalty. 642. Paul Weiss breached its fiduciary duties to CEOC and CEOC was injured thereby. Aiding & Abetting Breaches Of Fiduciary Duty 643. The Conflicted Directors, the Sponsors, the Sponsors' officers and agents, and Paul Weiss knew that CEC, as CEOC's controlling stockholder, and the boards of CEC and CEOC owed fiduciary duties to CEOC. The CEC Conflicted Directors, the Sponsors, the Sponsors' officers and agents, and Paul Weiss knew or should have known that CEC and the boards of CEC and CEOC breached those fiduciary duties by compelling CEOC to enter into transactions that were against CEOC's interests, benefited CEC at CEOC's expense, did not provide a fair price to CEOC, and did not result from a fair process. 183 EFTA01091716 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 185 of 212 644. The Conflicted Directors, the Sponsors, the Sponsors' officers and agents, and Paul Weiss knowingly participated in those breaches of fiduciary in the following ways: a) by virtue of their power to appoint the entire board of CEC and the fact that a majority of the directors of CEC's board were officers of Apollo and TPG, the Sponsors dominated and controlled the actions of CEC's board and CEOC's board; b) the CEC Conflicted Directors, the Sponsors, and the Sponsors' officers and agents directly instructed Paul Weiss to negotiate and implement the transaction, even though it was not in CEOC's best interests; c) Apollo conceived, designed, and structured the transaction, including the selection of CEOC assets to be sold and the creation of new entities that would hold the properties for the benefit of CEC and the Sponsors; d) although the Sponsors and Paul Weiss understood that the transaction was designed to allow CEC and the Sponsors to maintain control of valuable CEOC assets, transfer those assets beyond the reach of CEOC's creditors, and better position CEC and the Sponsors for CEOC's restructuring or bankruptcy, they did not disclose these intentions to CEC's board or CEOC's board; and e) despite their knowledge that CEC and CEOC had divergent interests, the Sponsors exploited the conflicts of interest of CEOC board members who sat on CEC's board or were officers of CEC. 645. CEOC has been injured by these breaches of fiduciary duties in an amount to be determined. 646. The Conflicted Directors, the Sponsors, and Paul Weiss are liable for aiding and abetting breaches of fiduciary duty in connection with the transfer of CEOC's property management business. Civil Conspiracy 647. Starting in mid-2012, the Conflicted Directors and Paul Weiss agreed and conspired to commit unlawful acts, including to fraudulently transfer CEOC's valuable assets, breach fiduciary duties owed to CEOC, engage CEOC in damaging financial transactions, and otherwise delay, hinder, and defraud CEOC and its creditors. Each of the conspirators intentionally participated in this scheme. The Transfer of CEOC's Property Management 184 EFTA01091717 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 186 of 212 Business constitutes an overt act taken in furtherance of the conspirators' unlawful scheme. The conspirators' actions in creating, structuring, negotiating, evaluating, and approving the transfer, as more fully detailed herein, constitute further overt acts taken in furtherance of their unlawful scheme. 648. The Transfer of CEOC's Property Management Business the conspirators' overt acts in furtherance of that transfer, and the conspirators' overall scheme and agreement to fraudulently transfer CEOC's valuable assets, breach fiduciary duties owed to CEOC, engage CEOC in damaging financial transactions, and otherwise delay, hinder, and defraud CEOC and its creditors caused damages to CEOC in an amount to be determined. CLAIM XV THE B-7 TRANSACTION (Nev. Rev. Stat. §§ 112.180, 112.190, 112.210; 6 Del. C. §§ 1304, 1305, 1307; and 11 U.S.C. §§ 544, 548(a)(1)(A),(B), 550) (Waste of Corporate Assets, Fraudulent Transfer, Breach Of Fiduciary Duty, Aiding & Abetting Breach Of Fiduciary Duty, Civil Conspiracy) CEC, Growth Partners, Sponsors, CEC Conflicted Directors, Loveman, Hession, Rowan, Sambur, Paul Weiss, Chatham 649. Plaintiffs repeat and reallege paragraphs 1 through 648. Fraudulent Transfer 650. At all relevant times, CEOC has been insolvent. 651. Throughout the relevant period, CEC, the directors of CEC, and the Sponsors completely dominated and controlled CEOC and all of CEOC's subsidiaries and affiliates. 652. On May 5, 2014, CEOC announced a transaction (the "B-7 Transaction") pursuant to which it borrowed $1.75 billion from a syndicate of banks, repaid certain bank debt, and agreed to take steps to retire bond debt that was due to mature in 2015. Ostensibly, the B-7 Transaction was undertaken to improve CEOC's liquidity, extend the maturities of its funded 185 EFTA01091718 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 187 of 212 debt, and provide CEOC with a "runway" to recovering from its insolvency. In fact, the B-7 Transaction was intended to serve the objectives of CEC and the Sponsors. 653. In each case, the payments CEOC made were constructive fraudulent transfers because CEOC received inadequate consideration and less than reasonably equivalent value for the payments. Among other things, CEOC paid over $400 million to Chatham, $452 million to Growth Partners, and $129 million in fees to GSO and BlackRock in conjunction with the B-7 Transaction. 654. In addition, certain payments CEOC made were actual fraudulent transfers because the purpose and effect of the transfer was to hinder or delay CEOC's creditors by placing critical and valuable assets beyond their reach. Evidence of fraudulent intent includes the facts that: a) the Sponsors, and Apollo in particular, conceived the transaction; b) the transaction was motivated principally by the desire of CEC and the Sponsors' desire to modify CEC's Bank Guarantee, to attempt to remove CEC's Bond Guarantees, funnel cash from CEOC to Growth Partners, and avoid receiving a qualified report from its independent accountants about 'EC's viability as a going concern; c) CEOC, CEC, the Sponsors, Paul Weiss, the 2014 Transferees, and the individual defendants understood that CEOC was insolvent at all times during the development and closing of the transaction; d) despite their knowledge that CEC and CEOC had divergent interests, the Sponsors and CEC proposed, negotiated, structured, evaluated, and approved the B-7 transaction through a process that failed to involve or protect CEOC's interests; e) the CEOC board did not meaningfully consider the transaction and instead approved the transaction through written consent; CEOC redeemed the 2015 Notes at a premium and with interest, despite the fact that the Notes were selling at a substantial discount in the marketplace; the redemption of the 2015 Notes at a premium and with interest was contrary to the past practice of CEC and Apollo of negotiating the best price when it repurchased CEOC's distressed debt; g) 186 EFTA01091719 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 188 of 212 13) q) h) only eight months before, the 2015 Notes had previously been valued at substantial discount from their face value in connection with the creation and capitalization of CAC; i) $452 million of the $1.75 billion raised through the B-7 Transaction was paid to redeem, at a premium and with interest, notes held by Growth Partners; over $400 million of $1.75 billion raised through the B-7 Transaction was paid to redeem, at a premium and with interest, notes held by Chatham, who contemporaneously agreed to purchase worthless CEOC stock to assist in CEC's efforts to remove the Bond Guarantees; k) but for the repurchase of the notes through the B-7 Transaction, the notes would have declined in value following the announcement of the release of the Bond Guarantees; I) CEC and the Sponsors arranged for CEOC to redeem 2015 Notes held by Growth Partners and Chatham, causing CEOC to enter into stand-alone note purchase agreements with Growth Partners and Chatham; m) both Growth Partners knew it was receiving a premium on the notes from an entity (CEOC) controlled by its largest shareholders; n) although Growth Partners had agreed to serve as a lender to the B-7 Transaction on a dollar-for-dollar basis for each dollar of notes repurchased by CEOC, no part of the $1.75 billion provided through the B-7 term loan came from Growth Partners; o) CEOC incurred $219.1 million of fees and expenses in connection with the B-7 Transaction, almost all of which was unnecessary; Nearly $129 million of those fees was paid to GSO and BlackRock for a backstop financing facility, which was taken solely to benefit CEC in its efforts to amend the First Lien Credit Agreement to change the terms of CEC's Bank Guarantee from a guarantee of payment to a guarantee of collection; over $795 million of the $1.75 billion raised through the B-7 Transaction was used to roll over existing B-I, B-3, B-4, B-5, and B-6 terms loans, only $29.1 million of which was due within the next year; r) the interest rate on the new B-7 term loan was materially higher than the interest rate on the existing B-1, B-3, B-4, B-5, and B-6 terms loans; s) the B-7 Transaction did not actually provide CEOC with any additional liquidity, but instead required CEOC to spend $315 million of its own cash as part of the transaction; and t) at the same time the Sponsors and CEC were representing that the purpose of the B-7 Transaction was to provide liquidity to CEOC and extend its runway, they were demanding that CEOC pay CEC the outstanding amounts on the Intercompany Revolver. 187 EFTA01091720 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 189 of 212 655. The payments and transfers made in connection with the B-7 Transaction are avoidable and recoverable, and CEC, Growth Partners, and Chatham are liable for constructive and actual fraudulent transfers in connection with the B-7 Transaction. Breaches Of Fiduciary Duty By CEC And CEC's Directors 656. At all relevant times, Growth Partners was an indirect subsidiary and affiliate of CEC. Thus, the payments CEC required CEOC to make in the B-7 Transaction were payments to third parties for the benefit of CEC and therefore were self-dealing transactions. 657. In addition, the B-7 Transaction was a waste of corporate assets because it required CEOC to borrow $1.75 billion and spend $315 million of its scarce cash to refinance bank loans, redeem notes, and pay commitment fees that did not benefit CEOC and instead were intended to benefit CEC. The amounts CEOC paid to third parties in the course of the B-7 Transaction far exceeded any benefit CEOC received. 658. In addition, CEC knew that the additional debt and additional exhaustions of CEOC's cash reserves would make it even more difficult for CEOC to pay its debts and would hasten CEOC's bankruptcy. 659. The process by which CEC initiated, structured, negotiated and disclosed the B-7 Transaction was not entirely fair to CEOC. CEOC was given no say in deciding whether to engage in the transaction, whether it needed the backstop financing from GSO and BlackRock, how the transaction should be structured, what bank loans were to be repaid, and whether and at what price the 2015 Notes would be redeemed. CEOC had no role in the negotiation of the transaction, and was not even represented in the negotiations. Instead, the entire process was dominated by CEC and the Sponsors. 188 EFTA01091721 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 190 of 212 660. Notwithstanding the fact that the B-7 Transaction required CEOC to increase the overall amount of its indebtedness, materially increase the interest rate it paid on its first lien bank debt, and spend $315 million of its scarce cash, CEOC failed to adhere to even the most rudimentary processes. CEOC had no independent directors or financial advisors to review the B-7 Transaction. Its legal counsel, Paul Weiss, was the same law firm representing CEC, which had conflicting interests. 661. CEC breached its fiduciary duties to CEOC. 662. The CEC Conflicted Directors, who individually owed fiduciary duties to CEOC, breached those fiduciary duties. Breaches Of Fiduciary Duty By CEOC's Directors 663. At the time of the B-7 Transaction, CEOC's board consisted of Loveman and Hession. Neither was independent and both had interests adverse to CEOC's. Loveman was CEC's Chairman and Chief Executive Officer, Hession was CEC's Chief Financial Officer, and both Loveman and Hession owned stock in CAC, which benefited from CEOC's redemption of Growth Partners' 2015 Notes. 664. The CEOC board gave the transaction no meaningful review. It held no face-to- face meeting but instead approved the transaction in a standard written consent. In failing to reach an informed opinion, in ignoring basic principles of governance, and in voting to approve the B-7 Transaction while they had disqualifying conflicts of interest, both Loveman and Hession breached their fiduciary duties to CEOC. 189 EFTA01091722 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 191 of 212 Breaches of Fiduciary Duty By Paul Weiss 665. Paul Weiss represented CEOC in connection with the B-7 Transaction. Simultaneously, Paul Weiss also represented CEC and affiliates of CEC, which had interests directly opposite to those of CEOC. 666. As counsel to CEOC, Paul Weiss owed CEOC fiduciary duties. These included a duty of loyalty to represent CEOC's interests only. 667. Paul Weiss' representation of CEOC obligated Paul Weiss to render independent and unclouded advice to CEOC on the terms and conditions of the transaction, the legal implications of the transaction, alternatives to the transaction, and the risks attendant to the transaction. Because of its simultaneous representation of parties who had opposing interests to CEOC's on this very matter, Paul Weiss could not and did not serve CEOC with undivided loyalty. 668. Paul Weiss breached its fiduciary duties to CEOC and CEOC was injured thereby. Aiding & Abetting Breach Of Fiduciary Duty The CEC Conflicted Directors, the Sponsors. the Sponsors' Officers and Agents, and Paul Weiss 669. The CEC Conflicted Directors, the Sponsors, the Sponsors' officers and agents, and Paul Weiss knew that CEC, as CEOC's controlling stockholder, and the boards of CEC and CEOC owed fiduciary duties to CEOC. The CEC Conflicted Directors, the Sponsors, the Sponsors' officers and agents, and Paul Weiss knew or should have known that CEC and the boards of CEC and CEOC breached those fiduciary duties by compelling CEOC to enter into transactions that were against CEOC's interests, benefited CEC at CEOC's expense, did not provide a fair price to CEOC, and did not result from a fair process. 190 EFTA01091723 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 192 of 212 j) 670. The CEC Conflicted Directors, the Sponsors, the Sponsors' officers and agents, and Paul Weiss knowingly participated in those breaches of fiduciary in the following ways: a) by virtue of their power to appoint the entire board of CEC and the fact that a majority of the directors of CEC's board were officers of Apollo and TPG, the Sponsors dominated and controlled the actions of CEC's board and CEOC's board; b) the CEC Conflicted Directors, the Sponsors, and the Sponsors' officers and agents directly instructed Paul Weiss to negotiate and implement the transaction, even though it was not in CEOC's best interests b) Apollo and Paul Weiss conceived, designed, and structured the B-7 Transaction, including the details of the amendment of CEOC's bank loans, the modification of CEC's Bank Guarantee, the redemption of the 2015 Notes, and the timing, structure, pricing and implementation of the transaction; c) Apollo decided to redeem the 2015 Notes at a premium, despite the fact that the notes were selling at a substantial discount in the marketplace; d) Apollo determined or agreed to the exorbitant fees associated with the B-7 Transaction; e) Apollo arranged for CEC to sell 5% of the equity of CEOC to Scoggin, Chatham, and Paulson, which Apollo claimed was a necessary condition to close the B-7 Transaction; 1) Apollo made a side deal with Chatham under which the Sponsors would cause CEOC to redeem Chatham's 2015 Notes at par plus a premium in exchange for Chatham's agreement to assist the Sponsors and CEC in their efforts to release the Bond Guarantees by purchasing worthless CEOC stock; Apollo utilized the B-7 Transaction as an after-the-fact excuse to justify its intentions and actions in attempting to release the Bond Guarantees, contending that the B-7 lenders had insisted on a release of the Bond Guarantees as a condition of the financing; h) Paul Weiss prepared all of the transaction documents necessary to implement the B-7 Transaction, including the transaction documents with Scoggin, Chatham, and Paulson, the offering materials necessary to sell CEOC's stock, the note purchase agreements with Growth Partners and Chatham, and the lending documents; i) Paul Weiss prepared bullet points for the CEC board on the release of the Bond Guarantees which stated, without a good faith basis, that the release of the Bond Guarantees was a positive development for CEOC; Paul Weiss provided legal assurances that the sale of CEOC stock would putatively result in releasing the Bond Guarantees; g) 191 EFTA01091724 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 193 of 212 k) although the Sponsors and Paul Weiss believed that the B-7 transaction would result in a release of the Bond Guarantees and planned to have CEOC redeem the notes held by Growth Partners at a substantial premium, they failed to implement procedures to assure that the process used to approve the transaction was entirely fair to CEOC; and I) despite their knowledge that CEC and CEOC had divergent interests, the Sponsors exploited the conflicts of interest of CEOC board members who sat on CEC's board or were officers of CEC. 671. The Conflicted Directors, the Sponsors, and Paul Weiss are liable for aiding and abetting breaches of fiduciary duty in connection with the B-7 Transaction. Civil Conspiracy 672. Starting in mid-2012, the Conflicted Directors and Paul Weiss agreed and conspired to commit unlawful acts, including to fraudulently transfer CEOC's valuable assets, breach fiduciary duties owed to CEOC, engage CEOC in damaging financial transactions, and otherwise delay, hinder, and defraud CEOC and its creditors. Each of the conspirators intentionally participated in this scheme. The B-7 Transaction constitutes an overt act taken in furtherance of the conspirators' unlawful scheme. The conspirators' actions in creating, structuring, negotiating, evaluating, and approving the transaction, as more fully detailed herein, constitute further overt acts taken in furtherance of their unlawful scheme. 673. With respect to the B-7 Transaction and the release of the CEC Bond Guarantees, the conspirators also agreed and conspired among themselves and with others to devise and implement a set of interrelated financial transactions that served to damage CEOC and hinder, delay, and defraud creditors. As part of the scheme, the Sponsors agreed to cause CEOC to redeem Chatham's 2015 Notes at par plus a premium in connection with the B-7 Transaction in exchange for its agreement to assist the Sponsors in releasing the Bond Guarantees by purchasing worthless CEOC stock. 192 EFTA01091725 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 194 of 212 674. The B-7 Transaction, the conspirators' overt acts in furtherance of that transaction, and the conspirators' overall scheme and agreement to fraudulently transfer CEOC's valuable assets, breach fiduciary duties owed to CEOC, engage CEOC in damaging financial transactions, and otherwise delay, hinder, and defraud CEOC and its creditors caused damages to CEOC in an amount to be determined. CLAIM XVI PURPORTED RELEASE OF CEC'S BOND GUARANTEES (Waste of Corporate Assets Breach Of Fiduciary Duty, Aiding & Abetting Breach Of Fiduciary Duty, Civil Conspiracy) CEC, Sponsors, CEC Conflicted Directors, Loveman, Hession, Rowan, Sambur, Paul Weiss 675. Plaintiffs repeat and reallege paragraphs 1 through 674. Breaches Of Fiduciary Duty By CEC And CEC's Directors 676. At all relevant times, CEOC was insolvent and CEC, as CEOC's controlling stockholder, and CEC's Directors, through their domination of CEOC's board, owed fiduciary duties to CEOC. 677. On May 5, 2014, CEC sold 5% of the equity in CEOC to Scoggin, Chatham, and Paulson in privately negotiated transactions. CEC received a total of $6.15 million. That same day, CEC announced that the sale of CEOC stock had served to release CEC from its Bond Guarantees. On June 2, 2014, CEC caused CEOC's CFO Donald Colvin to deliver to the indenture trustee for the 2009 bond indenture a certificate stating that CEOC "elects to automatically release the Parent Guarantee pursuant to the last paragraph of Section 12.02(c) of the 2009 Indenture." On information and belief, similar certificates were delivered to the 193 EFTA01091726 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 195 of 212 indenture trustees for the other indentures governing the Second Priority Notes. Upon information and belief, Paul Weiss prepared the certificates sent to the indenture trustees. 678. The transactions that CEC used to purportedly release its Bond Guarantees were self-dealing transactions and were not entirely fair to CEOC. 679. The Bond Guarantees and CEOC's legal rights in respect of the Bond Guarantees, set forth in indentures CEOC had issued over the years, provided credit support for CEOC's funded debt. The Bond Guarantees also served to disincentivize CEC from stripping CEOC of assets, since the guarantees kept CEC on the hook for the repayment of CEOC's debts. In addition, certain of the methods for removal of the Bond Guarantees required consents from CEOC. Accordingly, the Bond Guarantees and CEOC's purported right to elect to release the Bond Guarantees had substantial value to CEC, as evidenced by the fact that CEC's stock price rose materially after the announcement that the Bond Guarantees had been purportedly released, while the value of CEOC's notes plummeted. Despite the substantial value of the Bond Guarantees to CEC, CEOC received no consideration in return for delivering these certificates and purportedly releasing its legal rights. 680. The process by which CEC initiated, structured, negotiated and disclosed the purported release of the Bond Guarantees was not entirely fair to CEOC. CEOC was given no say in deciding whether to engage in the transaction and whether and to what extent it should receive consideration "electing" to release the Bond Guarantees. CEOC had no role in the negotiations of the transaction, and was not even represented in the negotiations. Instead, the entire process was dominated by CEC and the Sponsors. CEOC had no independent directors or financial advisors to review the purported release of the Bond Guarantees. 681. CEC breached its fiduciary duties to CEOC. 194 EFTA01091727 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 196 of 212 682. The CEC Conflicted Directors, who individually owed fiduciary duties to CEOC, breached those fiduciary duties. Breaches Of Fiduciary Duty By CEOC's Directors 683. At the time that CEC purportedly was released from the Bond Guarantees, CEOC's board consisted of Loveman and Hession. Neither was independent and both had interests adverse to CEOC's. Loveman was CEC's Chairman and Chief Executive Officer, Hession was CEC's Chief Financial Officer, and both Loveman and Hession owned stock in CAC, which benefited from the purported release of the Bond Guarantees. 684. The CEOC board gave no meaningful review to the purported release of CEC's Bond Guarantee. Breaches of Fiduciary Duty By Paul Weiss 685. Paul Weiss represented CEOC in connection with actions taken in an attempt to release the Bond Guarantees. Simultaneously, Paul Weiss also represented CEC and affiliates of CEC, which had interests directly opposite to those of CEOC. 686. As counsel to CEOC, Paul Weiss owed CEOC fiduciary duties. These included a duty of loyalty to represent CEOC's interests only. 687. Paul Weiss' representation of CEOC obligated Paul Weiss to render independent and unclouded advice to CEOC on the terms and conditions of the transaction, the legal implications of the transaction, alternatives to the transaction, and the risks attendant to the transaction. Because of its simultaneous representation of parties who had opposing interests to CEOC's on this very matter, Paul Weiss could not and did not serve CEOC with undivided loyalty. 688. Paul Weiss breached its fiduciary duties to CEOC and CEOC was injured thereby. 195 EFTA01091728 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 197 of 212 Aiding & Abetting Breach Of Fiduciary Duty The CEC Conflicted Directors, the Sponsors, the Sponsors' Officers and Agents and Paul Weiss 689. The CEC Conflicted Directors, the Sponsors, the Sponsors' officers and agents, and Paul Weiss knew that CEC, as CEOC's controlling stockholder, and the boards of CEC and CEOC owed fiduciary duties to CEOC. The CEC Conflicted Directors, the Sponsors, the Sponsors' officers and agents, and Paul Weiss knew or should have known that CEC and the boards of CEC and CEOC breached those fiduciary duties by compelling CEOC to enter into transactions that were against CEOC's interests, benefited CEC at CEOC's expense, did not provide a fair price to CEOC, and did not result from a fair process. 690. The CEC Conflicted Directors, the Sponsors, the Sponsors' officers and agents, and Paul Weiss knowingly participated in those breaches of fiduciary in the following ways: a) by virtue of their power to appoint the entire board of CEC and the fact that a majority of the directors of CEC's board were officers of Apollo and TPG, the Sponsors dominated and controlled the actions of CEC's board and CEOC's board; b) the CEC Conflicted Directors, the Sponsors, and the Sponsors' officers and agents directly instructed Paul Weiss to negotiate and implement the transaction purportedly releasing the Bond Guarantees, even though it was not in CEOC's best interests; c) with the assistance of Paul Weiss, Apollo formulated, planned and implemented the steps taken purportedly to release the Bond Guarantees; d) Apollo arranged the sale of CEOC's stock to Scoggin, Chatham, and Paulson; e) Apollo made a side deal with Chatham under which the Sponsors would cause CEOC to redeem Chatham's 2015 Notes at a premium in connection with the B-7 Transaction in exchange for Chatham's agreement to assist the Sponsors in their efforts to release the Bond Guarantees by purchasing worthless CEOC stock; Paul Weiss prepared all of the transaction documents necessary to release the Bond Guarantees, including the transaction documents with Scoggin, Chatham, and Paulson and the offering materials necessary to sell CEOC's stock; Paul Weiss prepared the certificates sent to indenture trustees through which CEOC elected to release the Bond Guarantees; g) 196 EFTA01091729 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 198 of 212 h) Paul Weiss prepared bullet points for the CEC board on the attempt to release of the Bond Guarantees which stated, without a good faith basis, that the release of the Bond Guarantees would be a positive development for CEOC; i) Paul Weiss provided assurances that the sale of CEOC stock would result in releasing the Bond Guarantees; although the Sponsors and Paul Weiss understood that the transaction would result in a release of an asset of CEOC, they failed to implement procedures to assure that the process used to approve the transaction was entirely fair to CEOC; and k) despite their knowledge that CEC and CEOC had divergent interests, the Sponsors exploited the conflicts of interest of CEOC board members who sat on CEC's board or were officers of CEC. 691. The CEC Conflicted Directors, the Sponsors, the Sponsors' officers and agents, and Paul Weiss are liable for aiding and abetting breaches of fiduciary duty in connection with the purported release of the Bond Guarantees. Civil Conspiracy 692. Starting in mid-2012, the Conflicted Directors and Paul Weiss agreed and conspired to commit unlawful acts, including to breach fiduciary duties owed to CEOC, and engage CEOC in damaging financial transactions. Each of the conspirators intentionally participated in this scheme. The purported release of the Bond Guarantees constitutes an overt act taken in furtherance of the conspirators' unlawful scheme. The conspirators' actions in creating, structuring, negotiating, evaluating, and approving the purported release of the Bond Guarantees, as more fully detailed herein, constitute further overt acts taken in furtherance of their unlawful scheme. 693. With respect to the B-7 Transaction and the purported release of the Bond Guarantees, the conspirators also agreed and conspired among themselves and with others to devise and implement a set of interrelated financial transactions that served to damage CEOC and its creditors. As part of the scheme, the Sponsors agreed to cause CEOC to redeem 197 EFTA01091730 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 199 of 212 Chatham's 2015 Notes at par plus a premium in connection with the B-7 Transaction in exchange for its agreement to assist the Sponsors in releasing the Bond Guarantees by purchasing worthless CEOC stock. 694. The purported release of the Bond Guarantees, the conspirators' overt acts in furtherance of that transaction, and the conspirators' overall scheme and agreement to breach fiduciary duties owed to CEOC, and engage CEOC in damaging financial transactions, caused damages to CEOC in an amount to be determined. CLAIM XVII REPAYMENT OF INTERCOMPANY REVOLVER (11 U.S.C. §§ 544, 547, 548(a)(1)(A),(B), 550), Nev. Rev. Stat. §§ 112.180, 112.190, 112.210, 6 Del. C. §§ 1304, 1305, 1307) (Preference, Fraudulent Transfer) CEC 695. Plaintiffs repeat and reallege paragraphs 1 through 694. Preference 696. From 2008 onwards, CEC and CEOC had agreed upon an unsecured credit facility ("the Intercompany Revolver") pursuant to which CEOC could borrow money from CEC. By the fourth quarter of 2012, CEOC had borrowed $644.2 under the Intercompany Revolver. 697. Throughout the relevant period, CEOC was entirely or almost entirely owned by CEC, and CEC controlled and dominated CEOC. CEC thus was an insider with respect to CEOC. 698. CEOC voluntarily filed for bankruptcy on January 15, 2015, and was the subject of an involuntary petition filed on January 12, 2015. Under either petition date, in the twelve 198 EFTA01091731 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 200 of 212 months preceding CEOC's bankruptcy filing, CEOC repaid $289 million under the Intercompany Revolver. Fraudulent Transfer 699. In the four years preceding CEOC's bankruptcy filing, CEOC paid CEC $662.5 million, including interest, with respect to the Intercompany Revolver. 700. In addition, these payments to CEC were actual fraudulent transfers because the purpose and effect of the transfer was to hinder or delay CEOC's creditors by placing critical and valuable assets beyond their reach. Evidence of fraudulent intent includes the facts that: a) the transfers were to CEOC; b) the shareholders of CEOC retained control of the property after the transfers; and c) CEOC was insolvent on and after the date of each transfer. 701. Although the Intercompany Revolver was an agreement between CEC and CEOC, officers of the Sponsors took an active role in monitoring CEOC's use of the Intercompany Revolver and undertook years before CEOC entered bankruptcy to have CEOC repay the loan. In fact, one reason CEC and the Sponsors forced CEOC to sell assets in 2013 and 2014 and to engage in the B-7 Transaction was to raise money to repay the Intercompany Revolver. 702. The payments of the Intercompany Revolver are avoidable and recoverable, and CEC is liable for the constructive and actual fraudulent transfers resulting of the payments made under the Intercompany Revolver during the four year period preceding the petition date of CEOC's bankruptcy case. 199 EFTA01091732 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 201 of 212 CLAIM XVIII REDEMPTION OF PIK NOTES (Waste of Corporate Assets, Breach Of Fiduciary Duty) CEC, Davis, Loveman, Rowan 703. Plaintiffs repeat and reallege paragraphs 1 through 702. 704. On October 2, 2014, the Executive Committee of CEOC's board voted to redeem CEOC's so-called PIK Notes at 103.583% of par. The notes were not due to mature until 2018 and were trading at a substantial discount to their face amount. 705. CEC was a holder of $4.3 million in face amount of PIK Notes and had other reasons to have the notes redeemed. Therefore, redemption of the notes was a self-dealing transaction. 706. Although CEOC had, by then, two outside directors on its board and had constituted the Special Governance Committee to address self-dealing transactions, the two outside directors and the SGC were not consulted about the decision to have CEOC redeem the notes. Instead, the decision was made by Rowan, Davis and Loveman, each of whom was a director of CEC. Loveman also was CEC's board chairman and CEO. 707. Redemption of the notes was not in CEOC's interest. CEOC had no need to redeem the notes, already was preparing for bankruptcy, and was running out of cash. 708. The purpose of having CEOC redeem the PIK notes was to protect CEC from claims that its guarantee of CEOC's bank debt would revert to a guarantee of payment, instead of a guarantee of collection, in the event the PIK notes went into default. To protect CEC, Rowan, Davis and Loveman decided to have CEOC redeem the notes. 709. Redemption of the notes was a windfall to investors. By some calculations. the notes were redeemed at a premium of 627% to their market price. 200 EFTA01091733 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 202 of 212 710. CEC itself received $4.7 million for the PIK notes that it held. 711. Having CEOC redeem the PIK notes at a premium to their market price was a waste of corporate assets, especially in view of the fact that the notes were not due until 2018 and it was public knowledge that CEOC soon would be entering bankruptcy. 712. In addition, it was a breach of fiduciary duty for Rowan, Davis and Lovernan to have CEOC redeem the PIK notes because the redemption was not in CEOC's interest. 713. In addition, the transaction was not fair to CEOC. The price of the transaction was not fair because CEOC paid far more for the notes than they were worth. The process was unfair because Rowan, Davis and Loveman deliberately circumvented the by-laws of the CEOC board governing self-dealing transactions and reached their decision in an arbitrary manner. 714. CEOC has been injured in an amount to be determined. CLAIM XIX COSTS OF TOTAL REWARDS CREDITS (Unjust Enrichment) CEC, CERP, CAC, Growth Partners 715. Plaintiffs repeat and reallege paragraphs I through 714. 716. As described above, CEOC been injured by CEC's requirement that it use an unfair method to allocate costs when a customer redeems Total Rewards credits. Requiring that CEOC shoulder the cost of the credits, while receiving little of the benefit of those credits, serves as a de facto subsidiary from CEOC to CEC, CERP, CAC, and Growth Partners. 717. CEC, CERP, CAC, and Growth Partners have been unjustly enriched at CEOC's expense as a result of this de facto subsidy. 718. CEC, CERP, CAC, and Growth partners should be ordered pay the cost of the Total Rewards credits redeemed at their properties. 201 EFTA01091734 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 203 of 212 CLAIM XX ALLOCATION OF CEC COSTS (Unjust Enrichment) CEC, CERP, CAC, Growth Partners, CES 719. Plaintiffs repeat and reallege paragraphs 1 through 718. 720. As described above, subsequent to the closing of the Four Properties Transaction, CEOC has paid more than its fair share of CES' costs. The failure to update the cost allocation methodology to align with the properties' share of revenues has resulted in another de facto subsidy from CEOC to CEC, CERP, CAC, Growth Partners, and CES. 721. CEC, CERP, CAC, Growth Partners, and CES have been unjustly enriched at CEOC's expense as a result of this de facto subsidy. 722. CEC, CERP, CAC, and Growth Partners should be ordered pay their fair share of CES' costs, consistent with the properties' share of revenues, and/or CES should return to CEOC the extent to which CEOC has been overcharged for its share of CES' costs. CLAIM XXI DISGORGEMENT Paul Weiss 723. Plaintiffs repeat and reallege paragraphs 1 through 722. 724. Beginning in the late spring of 2011, Paul Weiss served as counsel to, legal advisors of, and lawyers for CEOC. Paul Weiss represented CEOC as CEOC's counsel in virtually every one of the transactions described in this Complaint, including without limitation the transfer of Linq and Octavius to CERP; the transfer of Planet Hollywood and Horseshoe Baltimore to Growth Partners; the 2013 Shared Services Agreement; the 2013 Management Services Agreement; the 2014 Transaction Agreement; the transfer of Bally's Las Vegas, The 202 EFTA01091735 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 204 of 212 Cromwell, The Quad and Harrah's New Orleans in 2014; the transfer of undeveloped land in Las Vegas to non-Debtor entities including 3535 LV NewCo LLC, Caesars Linq LLC and Parball NewCo LLC; the formation of CES and the transfer of Total Rewards to CES; the B-7 Transaction; and CEOC's purported release of the Bond Guarantees. Paul Weiss' advice included reviewing legal issues, structuring transactions, preparing legal documentation, handling the closings of the transactions, executing the transfers, and rendering advice to CEOC's board. 725. Simultaneously, in each of these transactions Paul Weiss also represented and advised CEC and affiliates of CEC, which had directly opposite interests to those of CEOC. Paul Weiss' work for CEC and its affiliates almost entirely overlapped the matters in which it was advising and representing CEOC. Paul Weiss was, quite literally, on both sides of each of these transactions. 726. As counsel to CEOC, Paul Weiss owed CEOC fiduciary duties. These included a duty of loyalty to represent CEOC's interests only. Paul Weiss was obligated to render independent and unclouded advice to CEOC on the terms and conditions of transactions, the legal implications of transactions, alternatives to transactions, and the risks attendant to transactions. 727. CEOC was insolvent at all relevant times. Therefore, Paul Weiss was required to consider, advocate, and protect the interests of CEOC and its creditors, the ultimate stakeholders in CEOC. 728. Paul Weiss was in a position of obvious conflict in each of the matters in which it represented an insolvent CEOC, on one hand, and CEC and affiliates of CEC with interests directly opposite those of CEOC, on the other hand. Because of its simultaneous representation 203 EFTA01091736 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 205 of 212 of parties who had opposing interests to CEOC's on those very matters, Paul Weiss could not and did not serve CEOC with undivided loyalty. 729. In addition, even after it became apparent that CEOC had legal claims against CEC and affiliates of CEC arising from or related to the transactions, Paul Weiss advised CEC with respect to a lawsuit (the "New York lawsuit") that was designed, in part, to defeat CEOC's legal rights. Upon information and belief, Paul Weiss participated in the drafting of a complaint; solicited and collected comments upon the complaint from CEC, the Sponsors, and others; and, when it became apparent that Paul Weiss could not appear as counsel of record in the case, located and engaged substitute counsel to bring the lawsuit. At all relevant times, Paul Weiss not only continued to represent CEOC, but also advised CEOC to join that lawsuit even though a purpose of the action was to defeat CEOC's legal rights. 730. Paul Weiss breached its fiduciary duties to CEOC and CEOC was injured thereby. 731. Paul Weiss breached its professional obligations to CEOC and CEOC was injured thereby. 732. In the course of its representation of CEOC, Paul Weiss was paid many millions of dollars in legal fees by CEOC. 733. CEOC is entitled to disgorgement of all fees and amounts paid to Paul Weiss in connection with Paul Weiss' representation of CEOC. CLAIM XXII DISGORGEMENT Friedman Kaplan 734. Plaintiffs repeat and reallege paragraphs 1 through 733. 204 EFTA01091737 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 206 of 212 735. In 2014, Friedman Kaplan was engaged by CEC and CEOC to represent both companies in a lawsuit to be filed in the state courts of New York (the "New York lawsuit"). 736. At the time Friedman Kaplan was engaged, CEOC was aware that it had legal claims against CEC and affiliates of CEC arising from or related to the transfers of assets described in this Complaint. As a result, CEC and CEOC's interests were opposed to one another. 737. Notwithstanding this conflict, Friedman Kaplan agreed to, and did, represent both CEC and CEOC in the New York lawsuit. However, in so doing, Friedman Kaplan was following Paul Weiss' directions. Upon information and belief, Friedman Kaplan never discussed the substance of the lawsuit with the boards of CEC or CEOC before the complaint was filed and did not attend the board meetings where the lawsuit was approved. CEOC had recently formed a Special Governance Committee (the "SGC") consisting of the two newly- appointed outside directors on its board, but upon information and belief Friedman Kaplan did not meet or consult with the SGC about bring the lawsuit. Similarly, upon information and belief, Friedman Kaplan did not meet with the SGC's advisors about the lawsuit. 738. The declaratory relief sought by the lawsuit was intended to prevent the SGC from conducting a meaningful investigation into the fraudulent transfers of assets that CEC had compelled CEOC to make by obtaining a declaration that CEC was not liable to CEOC for those very transfers. Possibly for this reason, the two outside directors on the CEOC board abstained from the vote approving the filing of the lawsuit. Instead, the lawsuit was approved by the remaining directors, every one of whom was also a director of CEC and a partner or officer of Apollo or TPG, and thus completely conflicted. 205 EFTA01091738 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 207 of 212 739. On August 5, 2014, Friedman Kaplan filed the complaint in the New York lawsuit, which was styled Caesars Entertainment Operating Company, Inc. and Caesars Entertainment Corporation v. Appaloosa Investment Limited Partnership I, et al., Sup. Ct. M. Co., Index No. 652392/2014. The two plaintiffs were CEC and CEOC, and Friedman Kaplan represented them both. The complaint's prayer for relief, among other things, asked for "[a] judicial declaration stating that ... plaintiffs have not breached their fiduciary duties or engaged in fraudulent transfers, or otherwise engaged in any violation of law." 740. Friedman Kaplan filed an amended complaint on September 15, 2014. Like the original complaint, the amended complaint had CEC and CEOC as plaintiffs and asked for the same declaratory relief that "plaintiffs have not breached their fiduciary duties or engaged in fraudulent transfers, or otherwise engaged in any violation of law." 741. As counsel to CEOC, Friedman Kaplan owed CEOC fiduciary duties. These included a duty of loyalty to represent CEOC's interests only. 742. CEOC was insolvent at all relevant times. Friedman Kaplan's fiduciary duties therefore ran to CEOC's ultimate stakeholders, which were CEOC's creditors. 743. Friedman Kaplan was in a position of obvious conflict in representing both CEC and CEOC in the New York lawsuit. 744. Friedman Kaplan breached its fiduciary duties to CEOC and CEOC was injured thereby. 745. Friedman Kaplan breached its professional obligations to CEOC and CEOC was injured thereby. 746. In the course of its representation of CEOC, Friedman Kaplan was paid millions of dollars in legal fees by CEOC. 206 EFTA01091739 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 208 of 212 747. CEOC is entitled to disgorgement of all fees and amounts paid to Friedman Kaplan in connection with its representation of CEOC. WHEREFORE, Plaintiff prays that the Court enter judgment on each of Plaintiff's claims in favor of Plaintiff, and against each of the Defendants jointly and severally, and further enter an order: (a) Awarding money damages to Plaintiff, in an amount no less than the range of $8.1 billion to $12.6 billion, against the Sponsors, CEC, CIE, CAC, Growth Partners, CERP, CES, Paul Weiss, the transferees of fraudulent transfers, individual defendants, and others in an amount to be determined for fraudulent transfer, breach of fiduciary duty, usurpation of corporate opportunity, waste of corporate assets, aiding and abetting breaches of fiduciary duty, civil conspiracy, unjust enrichment, and other causes; (b) Avoiding the following transfers (collectively, the "Contested Transfers") and ordering that all documents, consents, and actions relating to them are rescinded and of no force and effect: I) Transfer of Caesars' online gaming business to the 2009 Transferees (2009); 2) Transfer of CMBS IP to CEC and the CMBS PropCos (2010); 3) Granting of easements on undeveloped Las Vegas land to the Easement Transferees (2011); 4) WSOP Transaction to the WSOP Transaction Transferees (2011); 5) Transfer of Linq And Octavius to CERP to the Linq/Octavius Transferees (2013); 207 EFTA01091740 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 209 of 212 6) Transfer Of Planet Hollywood and Horseshoe Baltimore Casino to the 2013 Transferees (2013); 7) Transfer of Bally's Las Vegas, The Cromwell, Harrah's New Orleans and The Quad to the 2014 Transferees (2014); 8) Transfer of undeveloped Las Vegas real estate to the 2014 Transferees (2014); 9) Transfer of Total Rewards to the Total Rewards Transferees (2014); and 10) Transfer of CEOC's property management business to CEC and CES (2014); II) Transfer of rights to CEOC's intellectual property, tangible property and services pursuant to 2013 and 2014 Transaction Agreements, the Services LLC Agreements, and the Management Services Agreement to the CMBS PropCos and Services Transferees (2010, 2013, 2014); 12) Transfer of money and proceeds of the B-7 Transaction to CEC, Growth Partners, and Chatham; and 13) Transfer of CEOC's rights to release the Bond Guarantees to CEC. (c) Enjoining CEC, CAC and Growth Partners to, or to cause those of their affiliates that were the ultimate recipients of the assets transferred in the Contested Transfers to return such assets to the original transferor, free and clear of all liens and other encumbrances, such that each of the transferred assets shall be recovered, owned and controlled by CEOC and its affiliates; (d) In the event avoidance or rescission of the Contested Transfers, or any of them, is not practicable, award Plaintiff monetary damages in an amount sufficient to 208 EFTA01091741 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 210 of 212 compensate Plaintiffs for the loss of the transferred assets in an amount equal, as to each asset transfer, to the greater of: (i) the value of each such asset transferred as of the date of entry of judgment, or (ii) the value of each such asset transferred as of the date of such transfer; (e) Enjoining CEC to return to CEOC all amounts CEOC paid to CEC since January 1, 2009 to the filing of CEOC's bankruptcy petition, including all amounts CEOC paid to CEC under the Intercompany Revolver in that period; (0 Awarding Plaintiff money damages as follows: I) against CEC for CEC's failure to remit to CEOC no less than $55.8 million in tax refunds owing to CEOC but wrongfully kept by CEC 2) against the CEC Group for the CEC Groups use of CEOC's NOLs; 3) against CEC for its failure to pay interest upon the intercompany loan CEOC made to CEC from 2009 onwards; 4) against CEC, CES, CERP, CAC, and Growth Partners for the allocation to CEOC of an excessive and improper share of the expenses of CES; 5) against CEC, Growth Partners, CERP, and CES for the shifting to CEOC the cost of redeeming Total Rewards credits in properties owned or operated by those defendants; 6) against CEC for the injury CEOC suffered as a result of the B-7 Transaction, including without limitation the cost of fees paid to GSO and Blackrock; the added interest expense of the B-7 loans; and the cost of redeeming the 2015 Notes; 209 EFTA01091742 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 211 of 212 7) against CEC, Davis, Loveman, and Rowan for the injury CEC suffered as a result of the redemption of the PIK notes; 8) against CEC for the release of the Bond Guarantees; and 9) against Chatham Asset Management for excessive amounts paid to Chatham in connection with the redemption of the 2015 Notes; and 10) against all defendants for their breaches of fiduciary duties, aiding and abetting breaches of fiduciary duty, conspiratorial acts, and other wrongdoing, as set forth in this Complaint. (g) Enjoining Paul Weiss and Friedman Kaplan to disgorge all fees and amounts paid to them by or on behalf of CEOC, together with interest thereon; (h) Awarding money damages to Plaintiff in the amount of all profits realized by or accruing to defendants, and any of their affiliates, from the Contested Transfers during the period of time from the respective dates of each of the Contested Transfers through and include the date of entry of judgment; (i) Imposing a constructive trust and/or equitable lien on the assets transferred in the Contested Transfers; (j) Awarding Plaintiff punitive damages with respect to all breaches of fiduciary duties and other intentional torts; (k) Awarding Plaintiff the costs of this action, including attorneys' fees, together with pre- and post-judgment interest; and (1) Awarding Plaintiff such other relief as the Court deems just and proper. 210 EFTA01091743 Case 15-01145 Doc 3694-2 Filed 05/13/16 Entered 05/13/16 16:04:00 Desc Exhibit A Page 212 of 212 Dated: May _, 2016 Respectfully submitted, Timothy W. Hoffmann (No. 6289756) JONES DAY 77 West Wacker Chicago, IL 60601-1692 Telephone: Facsimile: -and- Bruce Bennett James O. Johnston Sidney P. Levinson Joshua M. Mester Jones Day 555 South Flower Street, 50th Floor Los Angeles, CA 90071-2452 Telephone: Facsimile: Counsel for Official Committee of Second Priority Noteholders 211 EFTA01091744