1997 Unit Option Plan of Horseshoe Gaming, L.L.C.

HORSESHOE GAMING, L.L.C.


1997 UNIT OPTION PLAN


Section 1. Description of Plan. This is the 1997 Unit Option Plan (the "Plan") of Horseshoe Gaming, L.L.C., a Delaware limited liability company (the "Company"). Under the Plan, officers and key employees of and consultants to the Company and/or of any directly or indirectly majority or wholly owned entities of the Company (individually, a "Subsidiary" and collectively, the "Subsidiaries") and/or of any member or manager of the Company and/or of any entity that directly or indirectly owns a majority of the Company's equity interests (individually, a "Related Entity" and collectively, the "Related Entities") may be granted options ("Options") to receive equity interests in the Company constituted as Units in the Company's Limited Liability Company Agreement (herein, the "Units").


Section 2. Purpose of Plan. The purpose of the Plan and of granting Options to specified persons is to further the growth, development and financial success of the Company and its Subsidiaries and Related Entities by providing additional incentives to certain officers and key employees and consultants. By assisting such persons in acquiring Units, the Company can ensure that such persons will themselves benefit directly from the Company's and its Subsidiaries' and Related Entities' growth, development and financial success.


Section 3. Eligibility. The persons who shall be eligible to receive grants of Options under the Plan shall be the officers and key employees of and consultants to the Company, its Subsidiaries and Related Entities. A person who holds an Option is herein referred to as a "Participant," and more than one Option may be granted to any Participant.


Section 4. Administration.


(a) The Plan shall be administered by the Company's manager (the
"Manager") or, at the Manager's option, by a compensation committee
established by the Manager (the Manager and such committee,
collectively, the "Committee").


(b) The Committee is authorized and empowered to administer the
Plan and, subject to the provisions of the Plan, (i) to select the
participants, to select the Participants, to determine the number of
Units which may be purchased under any given Option and the purchase
price therefor; (ii) to determine the dates upon which Options shall be
granted and the terms and conditions thereof in a manner consistent with
the Plan, which terms and conditions need not be identical as to the
various Options granted; (iii) to interpret the Plan; (iv) to prescribe,
amend and rescind rules relating to the Plan; (v) to authorize any
person to execute on behalf of the Company any instrument required to
effectuate the grant of an Option previously granted by the Committee;
(vi) to determine the rights and obligations of Participants under the
Plan; (vii) to accelerate the time during which an Option may be
exercised in accordance with the provisions of Section 14 hereof, and to
otherwise accelerate the time during which an Option may be exercised,
in each


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case notwithstanding the provisions in the Option Agreement (as defined
in Section 11) stating the time during which it may be exercised; and
(viii) to make all other determinations deemed necessary or advisable
for the administration of the Plan. The good faith interpretation and
construction by the Committee of any provision of the Plan or of any
Option granted under it shall be final, conclusive and binding. No
Manager, director, officer or employee of any Manager or member of the
Committee shall be liable for any action or determination made with
respect to the Plan or any Option granted hereunder.


Section 5. Units Subject to Plan. The aggregate number of Units for which Options may be granted pursuant to the Plan shall be 631,225 Units. The number of Units which may be purchased by a Participant upon exercise of each Option shall be determined by the Committee and set forth in each Option Agreement. Upon the expiration or termination, in whole or in part, for any reason of an outstanding Option or any portion thereof which shall not have vested or shall not have been exercised in full or in the event that any Units acquired pursuant to the Plan are reacquired by the Company, (a) any Units which have not been purchased or (b) the Units reacquired, as the case may be, shall again become available for the granting of additional Options under the Plan.


Section 6. Restrictions on Grants; Vesting of Options. Notwithstanding any other provisions set forth herein or in any Option Agreement, no Options may be granted under the Plan subsequent to ten (10) years from the date hereof. The Committee shall determine the vesting schedule applicable to each Option or group of Options, which schedule shall be filed with the records of the Committee and set forth in each Option Agreement to which the same applies. The vesting schedule need not be identical for all Options granted hereunder.


Section 7. Exercise of Options. To the extent it has vested, an Option may be exercised by the Participant by given written notice to the Company specifying the number of Units to be purchased and accompanied by payment of the full purchase price therefor in cash, by check or in such other form of lawful consideration as the Committee may approve from time to time. An Option may only be exercised by the Participant or in the event of death of the Participant, by the person or persons (including the deceased Participant's estate) to whom the deceased Participant's rights under such Option shall have passed by will or the laws of descent and distribution. Notwithstanding the immediately preceding sentence, in the event of disability (within the meaning of Section 105 (d) (4) of the Internal Revenue Code of 1986, as amended) of a Participant, a designee of the Participant (or the legal representative of the Participant if the Participant has no designee) may exercise the Option on behalf of such Participant (provided such Option would have been exercisable by such Participant) until the right to exercise such Option expires, as set forth in such Participant's particular Option Agreement.


Section 8. Issuance of Units. The Company's obligation to issue its Units upon exercise of an Option is expressly conditioned upon the compliance by the Company with any registration or other qualification obligations with respect to such Units under any state and/or federal law or rulings and regulations of any government regulatory body, including without limitation and all applicable gaming regulatory authorities of the states in which the Company's


2 3 Subsidiaries operate or intend to operate, and/or the filing by Participant of any background applications required by such gaming authorities; and/or the making of such investment representations or other representations and undertakings by the Participant (or the Participant's designee, legal representative, heir of legatee, as the case may be) in order to comply with the requirements of any exemption from any such registration or other qualification obligations with respect to such Units which the Company in its sole discretion shall deem necessary or advisable. Such required representations and undertakings may include representations and agreements that such Participant (or the Participant's designee, legal representative, heir or legatee): (a) is purchasing such Units for investment and not with any present intention of selling or otherwise disposing of such Units; and (b) agrees to have a legend placed upon the face and reverse of any certificates evidencing such Units (or, if applicable, an appropriate data entry made in the ownership records of the Company) setting forth (i) any representations and undertakings which such Participant has given to the Company or a reference ther ...