AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER
30, 1995.
REGISTRATION NO. 33-62163
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
RIO HOTEL & CASINO, INC.
(Exact name of registrant as specified in its charter)
NEVADA 7011 95-3671082
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code
organization) Number)
3700 WEST FLAMINGO ROAD
LAS VEGAS, NEVADA 89103
(702) 252-7733
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
RIO PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
(Guarantor of 10 5/8% Senior Subordinated Notes Due 2005)
NEVADA 7011 88-0288115
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code
organization) Number)
3700 WEST FLAMINGO ROAD
LAS VEGAS, NEVADA 89103
(702) 252-7733
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
JAMES A. BARRETT, JR.
RIO HOTEL & CASINO, INC.
3700 WEST FLAMINGO ROAD
LAS VEGAS, NEVADA 89103
(702) 252-7733
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
PLEASE SEND COPIES OF ALL CORRESPONDENCE TO:
MICHAEL J. BONNER
SHERWOOD N. COOK
KUMMER KAEMPFER BONNER & RENSHAW
3800 HOWARD HUGHES PARKWAY
SEVENTH FLOOR
LAS VEGAS, NEVADA 89109
(702) 792-7000
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES
EFFECTIVE.
If the securities being registered on this Form are being
offered in connection with the formation of a holding company and
there is compliance with General Instruction G, check the
following box. []
<PAGE>
The Registrants hereby amend this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrants shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Securities and
Exchange Commission, acting pursuant to said Section 8(a), may
determine. A Registration Statement relating to these securities
has been filed with the Securities and Exchange Commission.
These securities may not be sold nor may offers to buy be
accepted prior to the time the Registration Statement becomes
effective. This Registration Statement shall not constitute an
offer to sell or the solicitation of an offer to buy nor shall
there be any sale of these securities in any state in which such
offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any
such state.
<PAGE>
RIO HOTEL & CASINO, INC.
CROSS-REFERENCE TABLE
PURSUANT TO RULE 404(A) AND ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM NO. FORM S-4 CAPTION PROSPECTUS CAPTION
<S> <C> <C>
Item 1 Forepart of the Registration Statement and Outside Front Cover Page of
Outside Front Cover Page of Prospectus Prospectus
Item 2 Inside Front and Outside Back Cover Pages of Inside Front Cover Pages of
Prospectus Prospectus
Item 3 Risk Factors, Ratio of Earnings to Fixed Charges Prospectus Summary; Risk Factors;
and Other Information Selected Consolidated Financial
Data
Item 4 Terms of the Transaction Prospectus Summary; The Exchange
Offer; Description of New Notes;
Certain U.S. Federal Tax
Consequences
Item 5 Pro Forma Financial Information Not Applicable
Item 6 Material Contacts with the Company Being Not Applicable
Acquired
Item 7 Additional Information Required for Reoffering Not Applicable
by Persons and Parties Deemed to be
Underwriters
Item 8 Interests of Named Experts and Counsel Legal Matters; Experts
Item 9 Disclosure of Commission Position on Certain Relationships and Related
Indemnification for Securities Act Liabilities Transactions
Item 10 Information with Respect to S-3 Registrants Prospectus Summary; Risk Factors;
Capitalization; Management's
Discussion and Analysis of
Financial Condition and Results of
Operations; Business
Item 11 Incorporation of Certain Information by Incorporation of Certain Documents
Reference by Reference
Item 12 Information with Respect to S-2 or S-3 Not Applicable
Registrants
Item 13 Incorporation of Certain Information by Incorporation of Certain Documents
Reference by Reference
Item 14 Information with Respect to Registrants Other Not Applicable
than S-3 or S-2 Registrants
Item 15 Information with Respect to S-3 Companies Not Applicable
Item 16 Information with Respect to S-2 or S-3 Companies Not Applicable
Item 17 Information with Respect to Companies Other than Not Applicable
S-3 or S-2 Companies
Item 18 Information if Proxies, Consents or Not Applicable
Authorizations are to be Solicited
Item 19 Information if Proxies, Consents or Management; Incorporation of Certain
Authorizations are not to be Solicited or in an Documents by Reference
Exchange Offer
</TABLE>
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 30, 1995
RIO HOTEL & CASINO, INC.
OFFER TO EXCHANGE
ALL OUTSTANDING
10 5/8% SENIOR SUBORDINATED NOTES DUE 2005
AGGREGATE PRINCIPAL AMOUNT OF $100,000,000 OUTSTANDING
FOR
10 5/8% SENIOR SUBORDINATED NOTES DUE 2005
_________________________
PAYMENT OF PRINCIPAL AND INTEREST IS FULLY
AND UNCONDITIONALLY GUARANTEED BY RIO PROPERTIES, INC.
_________________________
This exchange offer and withdrawal rights will expire at
5:00 p.m., New York City time, on _______________, 1995 (as such
date may be extended, the "Expiration Date").
Rio Hotel & Casino, Inc. (the "Company") hereby offers (the
"Exchange Offer"), upon the terms and subject to the conditions
set forth in this Prospectus and the accompanying letter of
transmittal (the "Letter of Transmittal"), to exchange $1,000 in
principal amount of its 10 5/8% Senior Subordinated Notes due
2005 (the "New Notes") for each $1,000 in principal amount of its
outstanding 10 5/8% Senior Subordinated Notes due 2005 (the "Old
Notes") (the Old Notes and the New Notes are collectively
referred to herein as the "Notes") of which an aggregate
principal amount of $100,000,000 is outstanding.
The Company will accept for exchange any and all Old Notes
that are validly tendered prior to 5:00 p.m., New York City time,
on the Expiration Date. Tenders of Old Notes may be withdrawn at
any time prior to 5:00 p.m., New York City time, on the
Expiration Date. The Exchange Offer is not conditioned upon any
minimum principal amount of the Old Notes being tendered for
exchange. However, the Exchange Offer is subject to the terms
and provisions of the Registration Agreement dated as of July 18,
1995 (the "Registration Agreement") among the Company; Rio
Properties, Inc., a subsidiary of the Company that has agreed to
guarantee the Notes (the "Guarantor"); and Salomon Brothers Inc
and Montgomery Securities (the "Initial Purchasers"). The Old
Notes may be tendered only in multiples of $1,000. See "The
Exchange Offer."
The Old Notes were issued in a transaction (the "Offering")
pursuant to which the Company issued an aggregate of $100 million
principal amount of the Old Notes. The Old Notes were sold by
the Company to the Initial Purchasers on July 21, 1995 (the
"Closing Date") pursuant to a Purchase Agreement dated July 18,
1995 (the "Purchase Agreement") among the Company, the Guarantor
and the Initial Purchasers. The Initial Purchasers subsequently
resold the Old Notes in reliance on Rule 144A and certain other
exemptions under the Securities Act of 1933, as amended (the
"Securities Act"). The Company and the Initial Purchasers also
entered into the Registration Agreement, pursuant to which the
Company granted certain registration rights for the benefit of
the holders ("Holders") of the Old Notes. The Exchange Offer is
intended to satisfy certain of the Company's obligations under
the Registration Agreement with respect to the Old Notes. See
"The Exchange Offer - Purpose and Effect."
The Old Notes were, and the New Notes will be, issued under
the Indenture dated as of July 21, 1995 (the "Indenture") among
the Company, the Guarantor and IBJ Schroder Bank & Trust Company
as Trustee (in such capacity, the "Trustee"). The form and terms
of the New Notes will be identical in all material respects to
the form and terms of the Old Notes, except that (i) the New
Notes have been registered under the Securities Act and,
therefore, will not bear legends restricting the transfer
thereof, (ii) holders of New Notes will not be entitled to
special interest otherwise payable under the Registration
Agreement in respect of Old Notes held by such holders during any
period in which a registration statement has not been filed
and/or is not effective and (iii) holders of New Notes will not
be, and upon the consummation of the Exchange Offer, holders of
Old Notes will no longer be, entitled to certain rights under the
Registration Agreement intended for the holders of unregistered
securities; provided, however, that purchasers of the Old Notes
shall have the right to require the Company to file a shelf
registration statement pursuant to Rule 415 under the Securities
Act solely for the benefit of such purchasers and will be
entitled to receive special interest if such shelf registration
statement is not declared effective on or prior to the 150th day
following the date of original issuance of the Old Notes. The
Exchange Offer shall be deemed consummated upon the occurrence of
the delivery by the Company to the Registrar under the Indenture
of New Notes in the same aggregate principal amount as the
aggregate principal amount of Old Notes that were tendered by
holders thereof pursuant to the Exchange Offer. See "The
Exchange Offer - Termination of Certain Rights" and "- Procedures
for Tendering Old Notes" and "Description of New Notes."
(continued on next page)
SEE "RISK FACTORS" ON PAGES 14 THROUGH 19 FOR INFORMATION THAT
SHOULD BE CONSIDERED BY HOLDERS IN EVALUATING THE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OF OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS _____________, 1995
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT.
A REGISTRATION STATEMENT RELATING TO THESE SECURITES HAS BEEN FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITES MAY
NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL
NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN
WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO
THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
SUCH STATE.(The preceeding text appears vertically in the left
margin of the prospectus cover page.)
<PAGE>
NEITHER THE NEVADA GAMING COMMISSION NOR THE NEVADA STATE GAMING
CONTROL BOARD HAS PASSED UPON THE ADEQUACY OR ACCURACY OF THIS
PROSPECTUS OR THE INVESTMENT MERITS OF THE SECURITIES OFFERED
HEREBY. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
______________
The New Notes will bear interest at a rate equal to 10 5/8%
per annum from and including their date of issuance. Interest on
the New Notes is payable semiannually on each January 15 and
July 15 (each, an "Interest Payment Date"). Holders whose Old
Notes are accepted for exchange will have the right to receive
interest accrued thereon from the date of their original issuance
or the last Interest Payment Date, as applicable to, but not
including, the date of issuance of the New Notes, such interest
to be payable with the first interest payment on the New Notes.
Interest on the Old Notes accepted for exchange will cease to
accrue on the day prior to the issuance of the New Notes. The
New Notes will mature on July 15, 2005. See "Description of New
Notes - General."
The New Notes will not be redeemable, in whole or in part,
prior to July 15, 2000. Thereafter, the New Notes will be
redeemable at the redemption prices set forth herein, plus
accrued and unpaid interest to the redemption date. Upon the
occurrence of a Change of Control (as defined on page 64), each
holder of New Notes will have the right to require the Company to
purchase all or a portion of such holder's New Notes at 101% of
the principal amount thereof, plus accrued and unpaid interest to
the repurchase date.
The New Notes will be general unsecured obligations of the
Company and will be fully and unconditionally guaranteed by the
Guarantor (the "Rio Guarantee"). The Rio Guarantee will be a
general unsecured obligation of the Guarantor, subordinated in
right of payment to all present and future Senior Indebtedness
(as defined on page 71) and Senior Indebtedness of Guarantor (as
defined on page 72), respectively. The New Notes will be
structurally subordinated to all liabilities of the Company's
subsidiaries and the Rio Guarantee will be structurally
subordinated to all liabilities of the Guarantor's subsidiaries.
As of July 31, 1995, there was no outstanding Senior Indebtedness
of Guarantor to which the Rio Guarantee was subordinated. There
are no significant outstanding liabilities of subsidiaries of the
Guarantor.
Based on an interpretation by the staff of the Securities
and Exchange Commission (the "Commission") set forth in no-action
letters issued to third parties, the Company believes that the
New Notes issued pursuant to the Exchange Offer to a Holder in
exchange for Old Notes may be offered for resale, resold and
otherwise transferred by such Holder (other than (i) a broker-
dealer who purchased Old Notes directly from the Company for
resale pursuant to Rule 144A under the Securities Act or any
other available exemption under the Securities Act or (ii) a
person who is an affiliate of the Company within the meaning of
Rule 405 of the Securities Act), without compliance with the
registration and prospectus delivery provisions of the Securities
Act, provided that the Holder is acquiring the New Notes in the
ordinary course of business and is not participating, and has no
arrangement or understanding with any person to participate, in a
distribution of the New Notes. Holders wishing to accept the
Exchange Offer must represent to the Company, as required by the
Registration Agreement, that such conditions have been met. Each
broker-dealer that receives New Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired by
such broker-dealer as a result of market-making or other trading
activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. See "The Exchange
Offer - Resales of the New Notes." This Prospectus, as it may be
amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in
exchange for Old Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making or other trading
activities.
The Company will not receive any proceeds from any sale of
New Notes by broker-dealers. New Notes received by any broker-
dealer may be sold from time to time in one or more transactions
in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination
of such methods of resale, at market prices prevailing at the
time of resale, at prices related to such prevailing market
prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who
may receive compensation in the form of commissions or
concessions from any such broker-dealers and/or the purchasers of
any such New Notes. Any broker-dealer that resells New Notes
that were received by it for its own account pursuant to the
Exchange Offer and any
2
<PAGE>
broker-dealer that participates in a distribution of such
New Notes may be deemed to be an "underwriter" within the
meaning of the Securities Act and any profit on any such
resale of New Notes and any commissions or concessions received
by any such persons may be deemed to be underwriting
compensation under the Securities Act. Each broker-dealer that
receives New Notes for its own account pursuant to the Exchange
Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering
a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities
Act. This Prospectus, as it may be amended or supplemented
from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Old Notes
where such New Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities.
The Company has agreed that, starting on the Expiration Date and
ending on the close of business on the first anniversary of the
Expiration Date, it will make this Prospectus available to any
broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
As of July 31, 1995, Cede & Co. ("Cede"), as nominee for The
Depository Trust Company, New York, New York ("DTC"), was a
registered Holder of the Old Notes, holding Old Notes for its
participants, and 36 other Holders held Old Notes directly. The
Company believes that only one Holder, Marnell Corrao Associates,
Inc., is an affiliate (as such term is defined in Rule 405 under
the Securities Act) of the Company. There has previously been
only a limited secondary market and no public market for the Old
Notes. The Old Notes are eligible for trading in the Private
Offering, Resales and Trading through Automatic Linkages
("PORTAL") market. In addition, the Initial Purchasers have
advised the Company that they currently intend to make a market
in the New Notes; however, neither is obligated to do so and any
market making activities may be discontinued by either of the
Initial Purchasers at any time. Therefore, there can be no
assurance that an active market for the New Notes will develop.
If such a trading market develops for the New Notes, future
trading prices will depend on many factors, including, among
other things, prevailing interest rates, the Company's results of
operations and the market for similar securities. Depending on
such factors, the New Notes may trade at a discount from their
face value. See "Risk Factors - Absence of Public Trading
Market."
The Company will not receive any proceeds from this Exchange
Offer, but, pursuant to the Registration Agreement, the Company
will bear certain registration expenses. No underwriter is being
utilized in connection with the Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE
COMPANY ACCEPT SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES
IN ANY JURISDICTION IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE
THEREOF WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES OR BLUE
SKY LAWS OF SUCH JURISDICTION. IN ADDITION, HOLDERS OF THE NEW
NOTES FOLLOWING THE EXCHANGE OFFER SHALL BE PROHIBITED FROM
SELLING THE NEW NOTES TO NON-INSTITUTIONAL BUYERS IN THE STATES
OF ALABAMA, CALIFORNIA AND WISCONSIN IN THE ABSENCE OF
REGISTRATION OF THE NEW NOTES (OR A VALID EXEMPTION THEREFROM)
UNDER THE SECURITIES LAWS OF SUCH STATES.
The Old Notes were issued originally in both global form
(the "Global Old Note") and in the form of 36 physical
certificates. The Global Old Note was deposited with, or on
behalf of, DTC, as the initial depository with respect to the Old
Notes (in such capacity, the "Depository"). The Global Old Note
is registered in the name of Cede, as nominee of DTC, and
beneficial interests in the Global Old Note are shown on, and
transfers thereof are effected only through, records maintained
by the Depository and its participants. The use of the Global
Old Note to represent certain of the Old Notes permits the
Depository's participants, and anyone holding a beneficial
interest in an Old Note registered in the name of such a
participant, to transfer interests in the Old Notes
electronically in accordance with the Depository's established
procedures without the need to transfer a physical certificate.
Except as provided below, the New Notes will also be issued
initially as a note in global form (the "Global New Note," and
together with the Global Old Note, the "Global Notes") and
deposited with, or on behalf of, the Depository. Notwithstanding
the foregoing, holders of Old Notes that were held, at any time,
by a person that is not a qualified institutional buyer under
Rule 144A (a "QIB"), and any Holder that is not a QIB that
exchanges Old Notes in the Exchange Offer, will receive the New
Notes in certificated form and is not, and will not be, able to
trade such securities through the Depository unless the New
Notes are resold to a QIB. After the initial issuance of the
Global New Note, New Notes in certificated form will be issued
in exchange for a holder's proportionate interest in the Global
New Note only as set forth in the Indenture.
3
<PAGE>
TABLE OF CONTENTS
PAGE
AVAILABLE INFORMATION 4
PROSPECTUS SUMMARY 6
RISK FACTORS 14
THE EXCHANGE OFFER 20
CAPITALIZATION 27
SELECTED CONSOLIDATED FINANCIAL DATA 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 30
BUSINESS 39
MANAGEMENT 50
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 51
PRINCIPAL STOCKHOLDERS 55
DESCRIPTION OF NEW NOTES 57
CERTAIN U.S. FEDERAL TAX CONSEQUENCES 82
PLAN OF DISTRIBUTION 84
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE 85
LEGAL MATTERS 85
EXPERTS 85
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS F-1
AVAILABLE INFORMATION
The Company has filed a registration statement on Form S-4
(together with any amendments thereto, the "Registration
Statement") with the Commission under the Securities Act with
respect to the New Notes. This Prospectus, which constitutes a
part of the Registration Statement, omits certain information
contained in the Registration Statement and reference is made to
the Registration Statement and the exhibits and schedules thereto
for further information with respect to the Company and the New
Notes offered hereby. This Prospectus contains summaries of the
material terms and provisions of certain documents and in each
instance reference is made to the copy of such document filed as
an exhibit to the Registration Statement. Each such summary is
qualified in its entirety by such reference.
The Company is subject to the informational reporting
requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith files reports,
proxy and information statements and other information with the
Commission. In addition, upon registration of the Rio Guarantee
in connection with the Exchange Offer, the Guarantor will also be
subject to the reporting requirements of the Exchange Act so long
as the Rio Guarantee remains outstanding. Upon effectiveness of
the Registration Statement, the Guarantor will be subject to the
reporting requirements of the Exchange Act and the
interpretations issued thereunder by the Commission staff. The
Registration Statement (including the exhibits and schedules
thereto) and the periodic reports, proxy and information
statements and other information may be inspected and copied at
the public reference facilities of the Commission, Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
as well as at the following Regional Offices: 7 World Trade
Center, Suite 1300, New York, New York 10048 and Suite 1400,
Citicorp Center, 500 West Madison Street, Chicago, Illinois
60661. Copies of such material can be obtained from the
Commission by mail at prescribed rates. Requests should be
directed to the Commission's Public Reference Section,
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
4
<PAGE>
Washington, D.C. 20549. The Company's Common Stock, $.01 par
value per share (the "Common Stock") is listed on the Nasdaq
National Market and traded under the symbol "RIOH." Material
filed by the Company can be inspected at the offices of
the National Association of Securities Dealers, Inc., 1735
K Street N.W., Washington, D.C. 20006. In addition, for so
long as any of the Notes remains outstanding, the Company
has agreed to make available to any prospective purchaser of
the Notes or beneficial owner of the Notes in connection
with any sale thereof the information required by Rule
144A(d)(4) under the Securities Act.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THE COMPANY WILL
PROVIDE A COPY OF ANY AND ALL SUCH DOCUMENTS WITHOUT CHARGE TO
EACH PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS
PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST TO JAMES A.
BARRETT, JR., PRESIDENT AND CHIEF OPERATING OFFICER, RIO HOTEL &
CASINO, INC., 3700 W. FLAMINGO ROAD, LAS VEGAS, NEVADA 89103,
(702) 252-7733. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE NO LATER THAN FIVE BUSINESS
DAYS PRIOR TO THE EXPIRATION DATE.
ALL DOCUMENTS FILED BY THE COMPANY AND THE GUARANTOR
PURSUANT TO SECTION 13(A), 13(C), 14 OR 15(D) OF THE EXCHANGE ACT
SUBSEQUENT TO THE DATE OF THIS PROSPECTUS AND PRIOR TO THE
TERMINATION OF THE EXCHANGE OFFER TO WHICH THIS PROSPECTUS
RELATES SHALL BE DEEMED TO BE INCORPORATED BY REFERENCE HEREIN
AND TO BE A PART HEREOF FROM THE DATE OF THE FILING OF SUCH
REPORTS AND DOCUMENTS. THE COMPANY WILL PROVIDE A COPY OF ANY
AND ALL OF SUCH DOCUMENTS (EXCLUSIVE OF EXHIBITS UNLESS SUCH
EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE THEREIN)
WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER, TO
WHOM A COPY OF THIS PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL
REQUEST TO JAMES A. BARRETT, JR., PRESIDENT AND CHIEF OPERATING
OFFICER, RIO HOTEL & CASINO, INC., 3700 W. FLAMINGO ROAD, LAS
VEGAS, NEVADA 89103, (702) 252-7733.
5
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE
MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS APPEARING
ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, OR THE
CONTEXT OTHERWISE REQUIRES, THE TERM "COMPANY" REFERS TO RIO
HOTEL & CASINO, INC., A NEVADA CORPORATION, AND ITS SUBSIDIARIES.
SEE "RISK FACTORS" FOR CERTAIN FACTORS A PROSPECTIVE INVESTOR
SHOULD CONSIDER IN EVALUATING THE COMPANY BEFORE PURCHASING THE
NOTES.
THE COMPANY
Rio Hotel & Casino, Inc., a Nevada corporation, owns and
operates the country's only all-suite hotel-casino, the Rio Suite
Hotel & Casino (the "Rio") in Las Vegas, Nevada. The Rio, a 21-
story hotel utilizing a colorful Brazilian Carnival and rain
forest theme, features 1,410 suites, 89,000 square feet of casino
space, eight restaurants, 2,200 slot machines, 65 table games and
other related amenities. The Rio is situated on a 45-acre
elevated site near the Las Vegas Strip and adjacent to a major
exit from Interstate 15, the freeway linking Las Vegas with
Southern California. The Company markets to both local residents
and Las Vegas visitors. Management believes that the Rio's
unique all-suite concept, diverse high quality dining and easy
access provide an attractive alternative to the Strip and a fun
and comfortable environment in which to enjoy gaming, dining and
entertainment.
The Rio originally opened in January 1990 with 424 suites
and 44,000 square feet of casino space. Within the past three
years the Rio has been expanded to its present configuration in
three major phases in accordance with its original master plan.
The Company is currently in the process of adding 144 additional
suites, expanding its meeting room facilities, doubling the
capacity of its Buzios Restaurant from 92 seats to approximately
184 seats and adding a new health club and salon facility ("the
"Phase IV Expansion"). See "Business-Expansion Strategy."
Completion of the Phase IV Expansion is expected to occur in
stages through the end of 1995 and will bring the Rio's total
number of hotel suites to 1,554 suites. In addition, the Company
announced in May 1995 that its Board of Directors had approved a
three-phased expansion and development plan to be implemented
over the next several years. The plan consists of an expansion of
the Rio (the "Phase V Expansion"), acquisition of approximately
22 acres of land adjacent to the Rio to be master-planned for the
development of another hotel-casino property and the purchase of
approximately 64 acres southeast of Las Vegas for possible future
hotel-casino development.
The approximately $185 million Phase V Expansion is planned
to include 120,000 square feet of public space containing a
casino expansion with 600 slot machines and 27 table games, new
retail and entertainment space, and additional restaurants, as
well as an expanded pool and beach area and additional parking
facilities. The Phase V Expansion will center around a dramatic
40-story hotel tower containing approximately 1,000 new suites
located immediately southeast of the existing towers. The public
area expansion will be based on a Brazilian Carnival Mardi Gras
theme and will include a variety of owned and leased retail and
restaurant outlets. Construction commenced in September 1995 and
opening is expected to occur in the spring of 1997.
The Company's business strategy focuses on attracting and
fostering repeat business from customers in the local resident
and tourist markets. To implement its business strategy, the
Company capitalizes on its unique all-suite concept, strategic
location and fun-filled Brazilian Carnival theme. The Company
strives to provide a quality, affordable gaming and entertainment
experience in order to generate high customer satisfaction and
loyalty. The Company's location at Interstate 15 and Flamingo
Road helps to attract both of its target market segments. The
Rio's value-priced suites provide an attractive alternative to
conventional Las Vegas rooms for visitors who desire to avoid the
crowds and congestion of the Strip. The Rio's suites offer
approximately 50% more space than other comparably priced Las
Vegas hotel rooms. Management believes that it must offer
consistent quality, a comfortable and fun atmosphere and, most
importantly, friendly service at affordable prices to provide a
high value experience to its customers.
The success of the Company's business strategy is evidenced
by the large number of awards the Rio has received. In March
1995, the Rio won recognition through 10 "Best of Las Vegas"
awards in an annual readers' survey published by Nevada's largest
daily newspaper. Among others, these distinctions included: "Best
Buffet," "Best Italian Restaurant," "Best Coffee Shop,"
"Best Steakhouse," "Friendliest Employees" and "Most
Efficient Service." In addition, the Rio
6
<PAGE>
received recognition in the 1995 Zagat U.S. HOTELS, RESORTS &
SPAS SURVEY for "Best Rooms," "Best Dining," "Best Service"
and "Best Overall" in Las Vegas. Since these awards, however,
are based upon subjective criteria, prospective holders of the
New Notes should not attribute undue significance to these awards.
Management believes that these awards exemplify the Company's
reputation for quality and value.
ISSUANCE OF THE OLD NOTES
The outstanding 10 5/8% Senior Subordinated Notes Due 2005
(the "Old Notes") were sold by the Company to Salomon Brothers
Inc and Montgomery Securities (the "Initial Purchasers") on
July 21, 1995 (the "Closing Date") pursuant to the Purchase
Agreement dated July 18, 1995 (the "Purchase Agreement"), among
the Company, the Guarantor, and the Initial Purchasers. The
Initial Purchasers subsequently resold the Old Notes in reliance
on Rule 144A under the Securities Act and other available
exemptions under the Securities Act. The Company and the Initial
Purchasers also entered into the Registration Agreement dated
July 18, 1995 (the "Registration Agreement"), among the Company,
the Guarantor, and the Initial Purchasers, pursuant to which the
Company granted certain registration rights for the benefit of
the holders of the Old Notes. The Exchange Offer is intended to
satisfy certain of the Company's obligations under the
Registration Agreement with respect to the Old Notes. See "The
Exchange Offer - Purpose and Effect."
<TABLE>
<CAPTION>
THE EXCHANGE OFFER
<S> <C>
The Exchange Offer................. The Company is offering upon the terms and subject to the
conditions set forth herein and in the accompanying
letter of transmittal (the "Letter of Transmittal"), to
exchange $1,000 in principal amount of its 10 5/8% Senior
Subordinated Notes Due 2005 (the "New Notes," with the
Old Notes and the New Notes collectively referred to
herein as the "Notes") for each $1,000 in principal
amount of the outstanding Old Notes (the "Exchange
Offer"). As of the date of this Prospectus, $100 million
in aggregate principal amount of the Old Notes is
outstanding, the maximum amount authorized by the
Indenture for all Notes. As of July 31, 1995, there were
37 registered Holders of the Old Notes; Cede & Co.
("Cede"), which held the Old Notes for its participants,
and holders of 36 physical certificates. See "The
Exchange Offer - Terms of the Exchange Offer."
Expiration Date................... 5:00 p.m., New York City time, on _______________, 1995
as the same may be extended. See "The Exchange Offer -
Expiration Date; Extensions; Amendments."
Termination of Certain Rights..... Pursuant to the Registration Agreement and the Old Notes,
Holders of Old Notes have rights to receive special
interest upon the nonoccurrence of certain events. If a
registration statement for the Exchange Offer is not
(i) filed within 45 days after the date of original
issuance of the Old Notes or (ii) declared effective
within 120 days after the date of original issuance of
the Old Notes, special interest will accrue and be
payable semiannually until such time as a registration
statement for the Exchange Offer is filed or becomes
effective, as the case may be. In addition, if an
exchange offer is not consummated or a resale shelf
registration statement is not declared effective within
150 days after the date of original issuance of the
Notes, special interest will accrue and be payable
semiannually until such time as an exchange offer is
consummated or a resale shelf registration is declared
effective, as the case may be. Holders of New Notes,
and, upon consummation of the
7
<PAGE>
Exchange Offer or declaration of effectiveness of a shelf
registration statement provided it remains effective for
the requisite period of time, Holders of Old Notes, will
no longer be entitled to special interest upon
consummation of the Exchange Offer.
Accrued Interest on the Old Notes.. The New Notes will bear interest at a rate equal to
10 5/8% per annum from and including their date of
issuance. Holders whose Old Notes are accepted for
exchange will have the right to receive interest accrued
thereon from the date of their original issuance or the
last Interest Payment Date, as applicable, to, but not
including, the date of issuance of the New Notes, such
interest to be payable with the first interest payment on
the New Notes. Interest on the Old Notes accepted for
exchange, which accrued at the rate of 10 5/8% per annum,
will cease to accrue on, the day prior to the issuance of
the New Notes.
Procedures for Tendering Old Notes. Unless a tender of Old Notes is effected pursuant to the
procedures for book-entry transfer as provided herein,
each Holder desiring to accept the Exchange Offer must
complete and sign the Letter of Transmittal, have the
signature thereon guaranteed if received by the Letter of
Transmittal, and mail or deliver the Letter of
Transmittal, together with the Old Notes or a Notice of
Guaranteed Delivery and any other required documents
(such as evidence of authority to act, if the Letter of
Transmittal is signed by someone acting in a fiduciary or
representative capacity), to the Exchange Agent (as
defined on page 9) at the address set forth on the back
cover page of this Prospectus prior to 5:00 p.m., New
York City time, on the Expiration Date. Any Beneficial
Owner (as defined on page 22) of the Old Notes whose Old
Notes are registered in the name of a nominee, such as a
broker, dealer, commercial bank or trust company and who
wishes to tender Old Notes in the Exchange Offer, should
instruct such entity or person to promptly tender on such
Beneficial Owner's behalf. See "The Exchange Offer -
Procedures for Tendering Old Notes."
Consequences of Failure to Tender Holders who do not tender their Old Notes by the
Old Notes by Expiration Date....... Expiration Date will be unable to exchange Old Notes for
New Notes pursuant to the Exchange Offer. Holders who
acquired Old Notes pursuant to the Offering and who do
not participate in the Exchange Offer can require the
Company to file as promptly as practicable after so
requested a shelf registration statement relating to the
Old Notes and cause such shelf registration statement to
be declared effective by the 150th day following original
issuance of the Old Notes. Old Notes held by Holders who
do not tender their Old Notes pursuant to the Exchange
Offer or who do not request that a shelf registration
statement be filed with respect to such Old Notes may not
be offered or sold in the United States or to, or for the
account or benefit of, U.S. persons except in accordance
with an applicable exemption from the registration
requirements thereof.
Guaranteed Delivery Procedures..... Holders of Old Notes who wish to tender their Old Notes
and (i) whose Old Notes are not immediately available or
(ii) who cannot deliver their Old Notes or any other
documents required by the Letter of Transmittal to the
Exchange Agent prior to the Expiration Date (or complete
the procedure for book-entry transfer on a timely basis),
may tender their Old Notes according to the guaranteed
delivery procedures set forth in the Letter of
Transmittal. See "The Exchange Offer - Guaranteed
8
<PAGE>
Delivery Procedures."
Acceptance of Old Notes and Delivery Upon satisfaction or waiver of all conditions of the
of New Notes....................... Exchange Offer, the Company will accept any and all Old
Notes that are properly tendered in the Exchange Offer
prior to 5:00 p.m., New York City time, on the Expiration
Date. The New Notes issued pursuant to the Exchange
Offer will be delivered promptly after acceptance of the
Old Notes. See "The Exchange Offer - Acceptance of Old
Notes for Exchange; Delivery of New Notes."
Withdrawal Rights.................. Tenders of Old Notes may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the Expiration Date.
See "The Exchange Offer - Withdrawal Rights."
The Exchange Agent................. IBJ Schroder Bank & Trust Company is the exchange agent
(in such capacity, the "Exchange Agent"). The address
and telephone number of the Exchange Agent are set forth
in "The Exchange Offer - The Exchange Agent; Assistance."
Fees and Expenses.................. All expenses incident to the Company's consummation of
the Exchange Offer and compliance with the Registration
Agreement will be borne by the Company. The Company will
also pay certain transfer taxes applicable to the
Exchange Offer. See "The Exchange Offer - Fees and
Expenses."
Resales of the New Notes........... Based on an interpretation by the staff of the Commission
set forth in no-action letters issued to third parties,
the Company believes that New Notes issued pursuant to
the Exchange Offer to a Holder in exchange for Old Notes
may be offered for resale, resold and otherwise
transferred by such Holder (other than (i) a broker-
dealer who purchased Old Notes directly from the Company
for resale pursuant to Rule 144A under the Securities Act
or any other available exemption under the Securities
Act, or (ii) a person that is an affiliate of the Company
(within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and
prospectus delivery provisions of the Securities Act,
provided that the Holder is acquiring the New Notes in
the ordinary course of business and is not participating,
and has no arrangement or understanding with any person
to participate, in a distribution of the New Notes. Each
broker-dealer that receives New Notes for its own account
in exchange for Old Notes, where such Old Notes were
acquired by such broker-dealer as a result of market-
making or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any
resale of such New Notes. See "The Exchange
Offer-Resales of the New Notes" and "Plan of
Distribution."
</TABLE>
DESCRIPTION OF NEW NOTES
The form and terms of the New Notes will be identical in all
material respects to the form and terms of the Old Notes, except
that (i) the New Notes have been registered under the Securities
Act and, therefore, will not bear legends restricting the
transfer thereof, (ii) holders of the New Notes will not be
entitled to special interest and (iii) holders of the New Notes
will not be, and upon consummation of the Exchange Offer, Holders
of the Old Notes will no longer be, entitled to certain rights
under the Registration Agreement intended for the holders of
unregistered securities, except in certain limited circumstances.
See "Exchange Offer-Termination of Certain Rights." The Exchange
Offer shall be
9
<PAGE>
deemed consummated upon the occurrence of the delivery by the
Company to the Registrar under the Indenture in the same
aggregate principal amount as the aggregate principal amount of
Old Notes that were tendered by holders thereof pursuant to the
Exchange Offer. See "The Exchange Offer - Termination of Certain
Rights" and "- Procedures for Tendering Old Notes;" and
"Description of New Notes."
<TABLE>
<S> <C>
New Notes......................... $100 million in aggregate principal amount of 10 5/8%
Senior Subordinated Notes Due 2005 (the "New Notes").
Maturity Date...................... July 15, 2005.
Interest Payment Dates............. January 15 and July 15, commencing January 15, 1996.
Rio Guarantee...................... The New Notes are unconditionally guaranteed (the "Rio
Guarantee") on a senior subordinated basis by Rio
Properties, Inc. ("Rio Properties" or the "Guarantor"),
the Company's principal operating subsidiary.
Subordination of Notes............. The New Notes are subordinated in right of payment to all
existing and future Senior Indebtedness (as defined on
page 71) of the Company and are structurally subordinated
to all existing and future indebtedness and other
liabilities (including trade payables) of the Company's
subsidiaries. As of July 31, 1995, after giving effect
to the Offering and application of the net proceeds
thereof, there were no current liabilities of the
Company's subsidiaries outstanding ranking senior to the
Notes. There was outstanding no indebtedness or other
liabilities of the Company's subsidiaries ranking senior
to the New Notes. The Company has outstanding no senior
subordinated indebtedness or Senior Indebtedness
(excluding the Company's guarantee of the Rio Bank Loan).
See "Description of New Notes - Subordination of Notes."
Subordination of Rio Guarantee..... The Rio Guarantee is subordinated in right of payment to
all existing and future Senior Indebtedness of Guarantor
(as defined on page 72) and is structurally subordinated
to all existing and future indebtedness and other
liabilities (including trade payables) of the Guarantor's
subsidiaries. As of July 31, 1995, there was outstanding
no Senior Indebtedness of Guarantor to which the Rio
Guarantee would be subordinated. Assuming the subsequent
incurrence by the Guarantor of the full $175 million of
its available bank borrowings under the Rio Bank Loan,
the Rio Guarantee would be subordinated to that amount of
Senior Indebtedness of Guarantor. There are no
significant outstanding liabilities of subsidiaries of
the Guarantor. See "Description of New Notes -
Subordination of Rio Guarantee."
Mandatory Sinking Fund............. None.
Optional Redemption................ The New Notes may be redeemed at the option of the
Company, in whole or in part, at any time on or after
July 15, 2000, at the redemption prices set forth herein,
plus accrued and unpaid interest, if any, through the
redemption date. The New Notes are subordinated in right
of payment to all existing and future Senior Indebtedness
of the Company and are structurally subordinated to all
existing and future indebtedness and other liabilities,
including trade payables, of the Company's subsidiaries,
and the Rio Guarantee is subordinated in right of payment
to all existing and future Senior Indebtedness of the
Guarantor and is structurally subordinated to all
existing and future indebtedness and
10
<PAGE>
other liabilities, including trade payables, of the
Guarantor's subsidiaries. Under certain circumstances,
holders of Senior Indebtedness of the Company or
holders of Senior Indebtedness of the Guarantor
may prohibit payments on the New Notes or under the Rio
Guarantee, respectively. See "Description of New Notes
- Optional Redemption" and "Risk Factors -
Subordination."
Regulatory Redemption.............. If any holder or beneficial owner of New Notes is
required to be found suitable and is not found suitable
by the Nevada Gaming Commission (the "Nevada
Commission"), (i) the holder shall, upon request of the
Company, dispose of such holder's New Notes within 30
days or within the time prescribed by the Nevada
Commission, whichever is earlier, or (ii) the Company
may, at its option, redeem the holder's New Notes at the
lesser of (x) the principal amount thereof, (y) the
Current Market Price (as defined on page 66) or (z) the
price at which the New Notes were acquired by the holder,
without, in any case, accrued and unpaid interest to the
date of the finding of unsuitability by the Nevada
Commission, unless payment of such interest is permitted
by the Nevada Commission. See "Business - Regulation and
Licensing" and "Description of New Notes - Mandatory
Disposition or Redemption Pursuant to Gaming Laws."
Change of Control.................. Upon a Change of Control (as defined on page 64), each
holder of New Notes will have the right to require the
Company to repurchase all or part of such holder's New
Notes at a price equal to 101% of the aggregate principal
amount thereof, plus accrued and unpaid interest, if any,
to the date of repurchase. The Company's Board of
Directors does not have the ability to waive or modify
the right of holders of the New Notes to require the
Company to repurchase the New Notes upon a Change of
Control nor will such right have limited applicability in
the event of a leveraged buy out of the Company initiated
or supported by the Company, the Company's management, an
affiliate of the Company within the meaning of Rule 405
of the Securities Act, or an affiliate of the Company's
management. The New Notes are subordinated in right of
payment to all existing and future Senior Indebtedness of
the Company and are structurally subordinated to all
existing and future indebtedness and other liabilities,
including trade payables, of the Company's subsidiaries,
and the Rio Guarantee is subordinated in right of payment
to all existing and future Senior Indebtedness of the
Guarantor and is structurally subordinated to all
existing and future indebtedness and other liabilities,
including trade payables, of the Guarantor's
subsidiaries. In order for the Company to repurchase the
New Notes as a result of a Change of Control, it will be
necessary for the Company either to obtain the consent of
the Lenders under the Rio Bank Loan or to repay the Rio
Bank Loan in full. The Company's obligation to
repurchase the New Notes is guaranteed on a senior
subordinated basis by the Guarantor. See "Description of
New Notes --- Change of Control" and "Risk Factors -
Subordination."
Principal Covenants................ The indenture pursuant to which the New Notes will be
issued (the "Indenture") contains certain covenants that,
among other things, limit the ability of the Company and
its Restricted Subsidiaries (as defined on page 71) to
incur additional indebtedness, pay dividends or make
other distributions, make investments, repurchase
subordinated obligations or
11
<PAGE>
capital stock, create certain liens (except,
among others, liens securing Senior
Indebtedness), enter into certain transactions with
affiliates, sell assets of the Company or its
subsidiaries, issue or sell subsidiary stock, create or
permit to exist restrictions on distributions from
subsidiaries, or enter into certain mergers and
consolidations. See "Description of New Notes - Certain
Covenants."
Risk Factors....................... See "Risk Factors" for a discussion of certain factors
that should be considered by Holders of the Old Notes.
Absence of a Public Market for the The New Notes are a new issue of securities with no
New Notes.......................... established market. Accordingly, there can be no
assurance as to the development or liquidity of any
market for the New Notes. The Initial Purchasers have
advised the Company that they currently intend to make a
market in the New Notes. However, neither Initial
Purchaser is obligated to do so, and any market making
with respect to the New Notes may be discontinued at any
time without notice. The Company does not intend to
apply for listing of the New Notes on a securities
exchange or to seek the admission thereof to trading in
the Nasdaq National Market.
</TABLE>
12
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
THE SUMMARY CONSOLIDATED FINANCIAL DATA SET FORTH BELOW ARE
QUALIFIED IN THEIR ENTIRETY BY, AND SHOULD BE READ IN CONJUNCTION
WITH, "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" AND THE CONSOLIDATED
FINANCIAL STATEMENTS, THE NOTES THERETO AND OTHER FINANCIAL AND
STATISTICAL INFORMATION INCLUDED ELSEWHERE IN THIS PROSPECTUS.
OPERATING RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 1995 ARE
UNAUDITED AND ARE NOT NECESSARILY INDICATIVE OF THE RESULTS THAT
MAY BE EXPECTED FOR FUTURE PERIODS, INCLUDING FOR THE ENTIRE YEAR
ENDED DECEMBER 31, 1995.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
1995 1994 1994 1993 1992 1991 1990
(DOLLARS IN THOUSANDS)
STATEMENTS OF
INCOME DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues $91,784 $70,217 $146,299 $109,982 $82,475 $65,784 $55,884
Operating profit (loss) 17,738 13,545 25,802 20,232 12,296 4,884 (1,921)
Interest (expense), net (2,783) (846) (1,798) (1,767) (3,643) (5,295) (4,834)
Net income (loss) 9,426 8,759 15,966 10,649 6,308 119 (3,847)
Ratio of earnings to fixed
charges (1) 5.68x 15.34x 10.64x 8.80x 3.19x 1.13x 0.48x
<CAPTION>
OTHER DATA: (2)
Average daily room rate (3) $73.00 $62.20 $63.80 $62.60 $64.09 $67.22 $73.40
Average daily hotel occupancy 95.7% 96.3% 95.9% 96.8% 96.5% 93.5% 78.3%
Hotel rooms 1,410 861 861 861 424 424 424
Casino square footage 89,000 79,000 89,000 79,000 54,000 44,000 44,000
Slot machines 2,163 1,945 2,200 1,950 1,450 1,043 850
Table games 65 44 53 44 31 31 42
Restaurant seats 2,440 2,254 2,440 1,843 1,209 955 937
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1995
ACTUAL AS ADJUSTED(4)
BALANCE SHEET DATA:
<S> <C> <C>
Cash and cash equivalents $20,669 $27,254
Total assets 273,690 283,475
Long-term debt, including current maturities 90,215 100,000(5)
Stockholders' equity 156,631 156,631
</TABLE>
(1) The ratio of earnings to fixed charges is determined by
dividing (i) earnings before income taxes and fixed charges by
(ii) fixed charges. Fixed charges consist of total interest
expense.
(2) Other data relating to hotel rooms, casino square
footage, slot machines, table games and restaurant seats
represent amounts as of the end of the period.
(3) Average daily room rate figures are actual rates
expressed in dollars.
(4) As adjusted amounts give effect to the Offering and the
application of the net proceeds therefrom as if such
transaction had been consummated on June 30, 1995. See
"Capitalization."
(5) In addition, the Company will have $175 million of
borrowing availability under the Rio Bank Loan (as defined on
page 14).
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<PAGE>
RISK FACTORS
HOLDERS SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS IN
ADDITION TO THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS
BEFORE MAKING AN INVESTMENT IN THE NEW NOTES OFFERED HEREBY.
LEVERAGE AND DEBT SERVICE
Upon the closing of the Offering, the Company had
significant interest expense and principal repayment obligations
under the Old Notes and the Company's other indebtedness. To the
extent that borrowings are drawn under the Company's $175 million
revolving credit facility (the "Rio Bank Loan"), Rio Properties,
Inc. ("Rio Properties"), the Company's principal operating
subsidiary, will have significant interest expense and principal
repayment obligations thereunder, which obligations are
guaranteed by the Company. As of June 30, 1995, after giving
effect to the Offering and the application of the net proceeds
thereof, the Company's consolidated long-term indebtedness was
$100 million, representing the Offering, and stockholders' equity
was $156.6 million. Assuming the subsequent incurrence by Rio
Properties of the full $175 million of its available bank
borrowings under the Rio Bank Loan, the Company's consolidated
long-term indebtedness was $275 million. See "Capitalization."
The Company will be entirely dependent upon distributions from
Rio Properties to meet its interest expense and principal
repayment obligations under the Notes. The Rio Bank Loan includes
covenants significantly restricting the amount of funds which may
be advanced by Rio Properties to the Company and the amount of
principal or interest that may be repaid on any intercompany
loans, and includes a covenant requiring the Company to maintain
a certain consolidated tangible net worth which effectively
limits the amount of funds which may be distributed by Rio
Properties to the Company in the form of dividends. The Rio Bank
Loan also contains numerous financial and operating covenants,
including requirements that Rio Properties and the Company, on a
consolidated basis, satisfy certain financial ratios and maintain
certain specified levels of net worth, as well as limitations on
the incurrence of additional indebtedness. The Indenture also
contains certain covenants, including a limitation on the
incurrence of additional Indebtedness; however, the Indenture
permits the Company to incur certain financing indebtedness, up
to $175 million under the Rio Bank Loan and certain other
indebtedness without satisfying the coverage ratio contained in
such covenants. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and
Capital Resources," "Description of Notes - Certain Covenants"
and "Notes to Consolidated Financial Statements - 6. Long-Term
Debt."
The ability of the Company to meet its debt service
requirements and the ability of Rio Properties and the Company to
comply with such covenants will be dependent upon future
performance, which is subject to financial, economic,
competitive, regulatory and other factors of which the Company is
currently unaware affecting the Company and its subsidiaries,
many of which are beyond their control. There can be no assurance
that the proposed Phase V Expansion will be completed or commence
operations at all. While the Company expects that its operating
cash flow will be sufficient to cover its expenses, including
interest costs, there can be no assurance with respect thereto.
If the Company is unable to generate sufficient cash flow, it
could be required to adopt one or more alternatives, such as
reducing or delaying planned expansions or capital expenditures,
selling or leasing assets, restructuring debt or obtaining
additional equity capital. There can be no assurance that any of
these alternatives could be effected on satisfactory terms, and
dependence on alternative sources of funds could impair the
Company's competitive position and reduce its future cash flow.
See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
SUBORDINATION
The operations of the Company are conducted through Rio
Properties, and, therefore, the Company is dependent on the
earnings and cash flow of Rio Properties and its subsidiaries to
meet its debt obligations, including its obligations with respect
to the Notes. The assets of Rio Properties constitute all the
operating assets of the Company. The Rio Guarantee is
subordinated to all existing and future Senior Indebtedness of
Guarantor (as defined on page 73) and is structurally
subordinated to all existing and future indebtedness and other
liabilities (including trade payables, if any) of subsidiaries of
Rio Properties. As of July 31, 1995, there was outstanding no
Senior Indebtedness of Guarantor to which the Rio Guarantee would
be subordinated. Assuming the subsequent incurrence by the
Guarantor of the full $175 million
14
<PAGE>
of its available bank borrowings under the Rio Bank Loan, the
Rio Guarantee would be subordinated to that amount of Senior
Indebtedness of Guarantor. There are no significant
outstanding liabilities of subsidiaries of the Guarantor.
The New Notes will be subordinated to all existing and
future Senior Indebtedness of the Company, including the
Company's guarantee of the Rio Bank Loan. Except for a limitation
on the aggregate amount of consolidated indebtedness that the
Company and its Restricted Subsidiaries may incur, the Indenture
does not limit the ability of the Company to incur additional
Senior Indebtedness, transfer assets to and among its
subsidiaries or incur or permit its subsidiaries to incur secured
indebtedness. In the event of bankruptcy, liquidation or
reorganization of the Company, the assets of the Company will be
available to make payments on the New Notes only after all Senior
Indebtedness of the Company has been paid in full, and there may
not be sufficient assets remaining to pay amounts due on the New
Notes. The Company's guarantee of the Rio Bank Loan provides that
the Company waives all right to subrogation and reimbursement
from Rio Properties. The Rio Bank Loan is secured by
substantially all of the assets of Rio Properties, the subsidiary
through which the Company owns and operates the Rio. Under
certain circumstances, holders of Senior Indebtedness of the
Company may prohibit payments on the New Notes. In addition, in
the event of any distribution or payment of assets of the Company
in any foreclosure, dissolution, winding up, liquidation or
reorganization, holders of secured indebtedness will have a
secured prior claim to the assets of the Company which
constitutes their collateral. See "Description of New Notes -
Subordination of Notes."
The Rio Guarantee of the New Notes will be subordinated to
all existing and future Senior Indebtedness of Guarantor,
including the Rio Bank Loan. Except for a limitation on the
aggregate amount of consolidated indebtedness that the Company
and its Restricted Subsidiaries (including Rio Properties) may
incur, the Indenture does not limit the ability of the Guarantor
to incur additional Senior Indebtedness of Guarantor, transfer
assets to and among its subsidiaries or incur or permit its
subsidiaries to incur secured indebtedness. In the event of
bankruptcy, liquidation or reorganization of the Guarantor, the
assets of the Guarantor will be available to make payments under
the Rio Guarantee only after all Senior Indebtedness of Guarantor
has been paid in full, and there may not be sufficient assets
remaining to pay amounts due under the Rio Guarantee. The Rio
Bank Loan is secured by substantially all of the assets of Rio
Properties. Under certain circumstances, holders of Senior
Indebtedness of Guarantor may prohibit payments under the Rio
Guarantee. In addition, in the event of any distribution or
payment of assets of the Guarantor in any foreclosure,
dissolution, winding up, liquidation or reorganization, holders
of secured indebtedness will have a secured prior claim to the
assets of the Guarantor which constitute their collateral. See
"Description of New Notes -Subordination of Rio Guarantee."
In the event of a Change of Control, each holder of the New
Notes will have the right to require the Company to repurchase
such New Notes at 101% of par, plus accrued and unpaid interest.
Such right is subordinated to the same extent as the New Notes,
as described above. The Company's obligation to repurchase the
New Notes upon a Change of Control is guaranteed by the Guarantor
pursuant to the Rio Guarantee. Such guarantee is subordinated to
the same extent as the Rio Guarantee generally, also as described
above. A Change of Control constitutes an Event of Default under
the Rio Bank Loan. In order for the Company to repurchase the New
Notes as a result of a Change of Control, it will be necessary
for the Company either to obtain the consent of the lenders under
the Rio Bank Loan or to repay the Rio Bank Loan in full. These
requirements and the subordination of the New Notes will limit
the ability of the Company to repurchase the New Notes. See
"Description of New Notes-Change of Control."
CONSTRUCTION AND DEVELOPMENT RISKS
Construction projects such as the Phase IV and Phase V
Expansions and any future development projects entail significant
risks, including management's ability to control and manage such
projects effectively, shortages of materials or skilled labor,
unforeseen engineering, environmental or geological problems,
work stoppages, weather interference, floods and unanticipated
cost increases. No assurance can be given that the budgeted costs
of the Company's current and future projects will not be exceeded
or that any such projects will commence operations within the
contemplated schedules, if at all. In addition, the scope of the
licenses, permits and authorizations required to construct and
open a new facility or expand an existing facility are extensive,
and the failure to obtain such licenses, permits and
authorizations could prevent or delay the completion of
construction or opening of all or part of such facilities,
affect the design of features of the project or increase
completion costs.
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Management estimates that the Phase IV Expansion and the
Phase V Expansion will cost approximately $20 million and
approximately $185 million, respectively. Construction on the
proposed Phase V Expansion began in September 1995, and the
expansion is expected to open in the spring of 1997. Although
designed to minimize business interruptions, the Phase V
Expansion will require, from time to time, portions of the casino
and parking areas to be temporarily closed and will disrupt
portions of existing hotel-casino operations to some extent. Any
significant disruption in hotel or casino operations could have a
material adverse effect on the Company's business and results of
operations. Additionally, as the Phase IV Expansion, the Phase V
Expansion and other future expansion projects are completed, the
Company will need to hire additional qualified employees. Such
additional hiring may become more challenging for the Company due
to a potential shortage of qualified employees caused by newly
opened hotel-casinos in Las Vegas and in other jurisdictions. If
existing funds are insufficient to complete construction of the
Phase V Expansion, the Company's ability to obtain sufficient
funds will depend on future operating results of the Company and
the Company's ability to obtain funds from other sources.
However, the New Notes will contain significant restrictions on
the ability of the Company to incur additional indebtedness, and
the Rio Bank Loan will contain restrictions on the ability of Rio
Properties to incur additional indebtedness.
Development of new facilities under the Company's master
plan will require the Company to make a substantial capital
investment and, depending on timing, may require additional debt
or equity financing. There can be no assurance that the cash flow
generated by the operations of the Company or any other new
venture will be sufficient to service any additional debt which
may be incurred in connection therewith. There can be no
assurance that additional financing can be obtained which is
acceptable to the Company. Further, there can be no assurance
that any expansion projects, including the Phase IV and Phase V
Expansions, will add proportionately to the Company's results of
operations. See "Management's Discussion and Analysis of
Financial Conditions and Results of Operations - Liquidity and
Capital Resources."
COMPETITION
Intense competition exists in the gaming industry, and many
of the Company's competitors have significantly greater resources
than the Company. The Rio faces competition from all other
casinos and hotels in the Las Vegas area, including competitors
located on the Las Vegas Strip, on the Boulder Highway and in
downtown Las Vegas. Such competition is primarily targeted toward
local residents and repeat visitors. The Company also faces
competition from non-hotel gaming facilities targeted toward
local residents. In recent months, several of the Company's
direct competitors have opened new hotel-casinos or have
commenced or completed major expansion projects, and other hotel-
casinos and expansions are planned. In addition, four new mega-
resorts on the Strip have been announced and are expected to be
completed within the next two years. Major expansions or
enhancements of existing properties or the construction of new
properties by competitors could have a material adverse effect on
the Company's business.
To a lesser extent, the Rio competes with hotel-casinos
located in the Laughlin and Reno-Lake Tahoe areas of Nevada and
in Atlantic City, New Jersey. The Company also competes with
state-sponsored lotteries, on- and off-track wagering, card
parlors, riverboat and Native American gaming ventures and other
forms of legalized gaming in the United States, as well as with
gaming on cruise ships and international gaming operations. In
addition, certain states have recently legalized, and several
other states are currently considering legalizing, casino gaming
in specific geographical areas within those states. The
development of casinos, lotteries and other forms of gaming in
other states, particularly areas close to Nevada, such as
California, could adversely affect the Company's operations.
For a more comprehensive discussion of competitive factors
affecting the Company's operations, see "Business - Competition."
RELIANCE ON CERTAIN MARKETS
The Rio draws a substantial number of customers from
throughout the United States, particularly California. Adverse
economic conditions could have a material adverse effect on the
Company's operating results. In addition, an increase in fuel
costs or transportation prices, a decrease in airplane seat
availability or a deterioration of relations with
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tour and travel agents, as they affect travel to Las Vegas and
the Company's facilities, could materially adversely affect
the Company's results.
In addition, a significant component of the Rio's customers
are Las Vegas residents. Although management believes that the
population and economic strength of Las Vegas will continue to
grow, there can be no assurance with respect thereto. See
"Business."
CONTROL BY EXISTING STOCKHOLDERS, CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
Officers and directors of the Company beneficially own or
control approximately 24.9% of the outstanding Common Stock,
including 23.7% owned by Anthony A. Marnell II, Chairman of the
Board of Directors. Two other stockholders and former members of
the Board of Directors control approximately 11.2% in the
aggregate of such Common Stock. Such individuals, if acting
together, would be able to effectively elect the entire Board of
Directors as well as approve most matters submitted to the
stockholders for approval. See "Principal Stockholders."
Anthony A. Marnell II, Chtd. ("Marnell Chartered"), an
architectural firm, and Marnell Corrao Associates, Inc. ("Marnell
Corrao Associates"), a construction company, each of which is
controlled by Mr. Marnell, have provided and continue to provide
all project design and construction services for the Company.
Potential conflicts of interest between the Company and Marnell
Chartered or Marnell Corrao Associates could arise (for example,
if a request for a change order is presented affecting a
construction contract price). To address such issues, the
Company's Board of Directors utilizes an Audit Committee,
consisting of three non-employee directors that, among other
things, reviews and reports to the full Board of Directors on
certain issues that involve potential conflicts of interest.
Pursuant to the Indenture, any such proposed transaction of $1
million or more must be approved by the Independent Directors, as
defined in the Indenture. See "Certain Transactions" and
"Description of New Notes - Certain Covenants - Limitations on
Transactions with Affiliates."
Mr. Marnell and James A. Barrett, Jr., President of the
Company, are each officers of Marnell Corrao Associates.
Mr. Marnell is an officer of Marnell Chartered. In these
capacities, Messrs. Marnell and Barrett each devote substantial
time and attention to the affairs of these enterprises. Messrs.
Marnell and Barrett are also involved in other businesses and
investments.
DEPENDENCE ON KEY PERSONNEL
The loss of the services of certain key individuals,
including Messrs. Marnell and Barrett, could have a material
adverse effect on the Company. The Company does not presently
have employment or non-competition agreements with such
individuals, nor does the Company presently maintain key person
life insurance coverage for such persons. All employees of the
Company, however, are subject to confidentiality and non-
disclosure agreements. An event of default will exist under the
Rio Bank Loan if either Mr. Marnell or Mr. Barrett cease to
perform their functions as Chief Executive Officer and President,
respectively, for a period of thirty consecutive days. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations --- Liquidity and Capital Resources,"
"Management --- Directors and Executive Officers" and "Notes to
Consolidated Financial Statements --- 8. Commitments and
Contingencies."
HEDGING TRANSACTIONS
To reduce the risks from interest rate fluctuations under
the Rio Bank Loan, the Company has entered into an interest rate
swap agreement in the amount of $20 million, and an interest rate
cap agreement in the amount of $40 million. In the event the
counterparty does not perform under those agreements, the
Company would be subject to higher interest expense under the
Rio Bank Loan. Although the Company does not anticipate non-
performance by the counterparty, there can be no assurance of
such performance. See "Management's Discussion and Analysis of
Financial Condition --- Liquidity and Capital Resources" and
"Notes to Consolidated Financial Statements --- 6. Long-Term Debt."
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NEVADA GAMING REGULATIONS
The Nevada State Gaming Control Board and the Nevada
Commission and other local, county and state regulatory agencies
may, in compliance with certain statutory and regulatory
procedures, limit, condition, suspend or revoke a license or
approval to own the stock of the Company for any cause deemed
reasonable by such licensing agency. Substantial fines for
violations of gaming laws or regulations may be levied against
the Company and persons involved. In addition, the Company could
be subject to fines for each violation of the gaming laws.
Furthermore, a supervisor could be appointed by a state court at
the request of the Nevada Commission to operate any nonrestricted
gaming establishment operated by the Company if the licenses held
by the Company are revoked, suspended or otherwise lapse. In such
extraordinary circumstances, earnings generated by gaming
operations during a supervisor's appointment (except for
reasonable rental value) could be forfeited to the State of
Nevada. Suspension or revocation of any of the licenses or the
appointment of a supervisor by the Nevada Commission would have a
material adverse effect on the business of the Company. See
"Business --- Regulation and Licensing."
REGULATORY REDEMPTION
The Nevada Commission may, in its discretion, require the
holder of any security of a corporation registered under the
Nevada Gaming Control Act and the Rules and Regulations
promulgated thereunder (collectively the "Nevada Act"), such as
the New Notes, to file applications, be investigated and be found
suitable to own the security of a registered corporation. If a
beneficial holder of New Notes is required by the Nevada
Commission to be found suitable, the holder shall apply for a
finding of suitability within 30 days after the Nevada Commission
request. The applicant for a finding of suitability must pay all
costs of such investigation. If the Nevada Commission determines
that a person is unsuitable to own such security, then, pursuant
to the regulations of the Nevada Commission, the registered
corporation can be sanctioned, including by the loss of its
approvals, if, without the prior approval of the Nevada
Commission, it (i) pays to the unsuitable person any dividend,
interest, or any distribution whatsoever, (ii) recognizes any
voting rights by such unsuitable person in connection with such
securities, (iii) pays the unsuitable person remuneration in any
form or (iv) makes any payment to the unsuitable person
by way of principal, redemption, conversion, exchange,
liquidation or similar transaction. Further, if the holder or
beneficial owner is required to be found suitable and is not
found suitable by the Nevada Commission, (i) the holder shall,
upon request of the Company, dispose of such holder's New Notes
within 30 days or within the time prescribed by the Nevada
Commission, whichever is earlier, or (ii) the Company may, at its
option, redeem the holder's New Notes at the lesser of (x) the
principal amount thereof, (y) the Current Market Price or (z) the
price at which the New Notes were acquired by the holder,
without, in any case, accrued and unpaid interest to the date of
the finding of unsuitability by the Nevada Commission, unless
payment of such interest is permitted by the Nevada Commission.
See "Business-- Regulation and Licensing" and "Description of New
Notes-Mandatory Disposition or Redemption Pursuant to Gaming
Laws."
BANKRUPTCY AND FRAUDULENT TRANSFER CONSIDERATIONS
The Notes are subordinated in right of payment to all Senior
Indebtedness. Moreover, the Rio Guarantee is subordinated to all
Senior Indebtedness of the Guarantor. In the event of the
bankruptcy, liquidation or reorganization of the Company or the
Guarantor, the assets of the Company or the Guarantor will be
available to pay obligations on the Notes only after all Senior
Indebtedness or Senior Indebtedness of Guarantor, respectively,
has been paid in full, and there may not be sufficient assets
remaining to pay amounts due on any or all of the Notes then
outstanding. Moreover, the Notes are structurally subordinated
to all existing and future indebtedness and other liabilities
(including trade payables) of the Company's subsidiaries and the
Rio Guarantee is structurally subordinated to all existing and
future indebtedness and other liabilities (including trade
payables) of the Guarantor's subsidiaries.
In addition to risks imposed by bankruptcy law, the
obligation of the Guarantor under the Rio Guarantee may be
subject to review under state or federal fraudulent transfer
laws. Under such laws, if an unpaid creditor or representative
of creditors of the Guarantor, or a trustee in bankruptcy for the
Guarantor or the Guarantor as debtor-in-possession, were
successful in establishing that at the time such obligation was
incurred, the Guarantor, among other things, (a) did not receive
fair consideration or reasonably equivalent value therefor and
(b) either (i) was insolvent, (ii) was rendered insolvent, (iii)
was engaged in a business or transaction for which its remaining
unencumbered assets constituted
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<PAGE>
unreasonably small capital or (iv) intended to incur or
believed that it would incur debts beyond its ability to pay
such debts as they matured, a court could avoid the Guarantor's
obligation and direct the return of any payments made under the
Rio Guarantee to the Guarantor or to a fund for the benefit of
its creditors. Regardless of the factors identified in the
foregoing clauses (i) through (iv), if the creditor
representative, trustee in bankruptcy or debtor in possession
were successful in establishing that the obligation was incurred
with intent to hinder, delay or defraud the Guarantor's
creditors, a court could also avoid such obligation and direct
the return of payments. In any such event, the holders of the
Notes would be subject to prior payment of all liabilities of
the Guarantor. Neither the Company nor the Guarantor can give
any assurance that the Guarantor would have sufficient funds
after payment of such prior claims to satisfy its obligations
under the Rio Guarantee.
The measure of insolvency for purposes of the foregoing will
vary depending upon the law of the jurisdiction being applied.
Generally, however, an entity would be considered insolvent if
the sums of its debts is greater than all of its property at a
fair valuation or if the present fair saleable value of its
assets is less than the amount that will be required to pay its
probable liability on its existing debts as they become absolute
and matured.
ABSENCE OF PUBLIC TRADING MARKET
The New Notes constitute a new issue of securities, have no
established trading market and may not be widely distributed. The
Initial Purchasers have informed the Company that they currently
intend to make a market in the New Notes as permitted by
applicable laws and regulations; however, the Initial Purchasers
are not obligated to do so and either Initial Purchaser may
discontinue market making at any time without notice. The
Company does not intend to list the New Notes on any national
securities exchange or to seek the admission thereof to trading
in the Nasdaq National Market, and there can be no assurance as
to the development of any market or liquidity of any market that
may develop for the New Notes. If a market does develop, the
price of the New Notes may fluctuate and liquidity may be
limited. If a market for the New Notes does not develop,
purchasers may be unable to resell such securities for an
extended period of time, if at all.
ENVIRONMENTAL RISKS AND REGULATION
As is the case with any owner or operator of real property,
the Company is subject to a variety of federal, state and local
governmental regulations relating to the use, storage, discharge,
emission and disposal of hazardous materials. Failure to comply
with environmental laws could result in the imposition of severe
penalties or restrictions on operations by government agencies or
courts of law which could adversely affect operations. The
Company does not have environmental liability insurance to cover
such events.
The Company has in the past engaged in real estate
development projects and has owned several parcels of real
estate. While the Company is unaware of any significant
environmental hazard on properties it owns or has owned, in the
event of any discovery of such hazard, severe penalties,
including the costs of remediation, could be sought against the
Company.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT
The Old Notes were sold by the Company to the Initial
Purchasers on July 18, 1995, pursuant to the Purchase Agreement.
The Initial Purchasers subsequently resold the Old Notes in
reliance on Rule 144A under the Securities Act. The Company and
the Initial Purchasers also entered into the Registration
Agreement, pursuant to which the Company agreed, with respect to
the Old Notes and subject to the Company's determination that the
Exchange Offer is permitted under applicable law, to (i) cause to
be filed, on or prior to September 4, 1995, a registration
statement with the Commission under the Securities Act concerning
the Exchange Offer, (ii) use all reasonable efforts (a) to cause
such registration statement to be declared effective by the
Commission as soon as practicable and (b) to cause the Exchange
Offer to remain open for a period of not less than 30 days (or
longer if required by applicable law). This Exchange Offer is
intended to satisfy the Company's exchange offer obligations
under the Registration Agreement.
TERMS OF THE EXCHANGE OFFER
The Company hereby offers, upon the terms and subject to the
conditions set forth herein and in the accompanying Letter of
Transmittal, to exchange $1,000 in principal amount of the
outstanding Old Notes. The Company will accept for exchange any
and all Old Notes that are validly tendered on or prior to 5:00
p.m., New York City time. Tenders of the Old Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time.
The Exchange Offer is not conditioned upon any minimum principal
amount of Old Notes being tendered for exchange. However, the
Exchange Offer is subject to certain customary conditions which
may be waived by the Company, and to the terms and provisions of
the Registration Agreement. See "Conditions of the Exchange
Offer."
Old Notes may be tendered only in multiples of $1,000.
Subject to the foregoing, Holders may tender less than the
aggregate principal amount represented by the Old Notes held by
them, provided that they appropriately indicate this fact on the
Letter of Transmittal accompanying the tendered Old Notes (or so
indicate pursuant to the procedures for book-entry transfer).
As of the date of this Prospectus, $100 million in aggregate
principal amount of the Old Notes were outstanding, the maximum
amount authorized by the Indenture for all Notes. As of July 31,
1995, there were 37 registered holders of the Old Notes, Cede,
which held the Old Notes for its participants, and holders of 36
physical certificates. Solely for reasons of administration (and
for no other purpose), the Company has fixed the close of
business on __________, 1995, as the record date (the "Record
Date") for purposes of determining the persons to whom this
Prospectus and the Letter of Transmittal will be mailed
initially. Only a Holder of the Old Notes (or such Holder's
legal representative or attorney-in-fact) may participate in the
Exchange Offer. There will be no fixed record date for
determining Holders of the Old Notes entitled to participate in
the Exchange Offer. The Company believes that, as of the date of
this Prospectus, no such Holder, other than Marnell Corrao
Associates, is an affiliate (as defined in Rule 405 under the
Securities Act) of the Company.
The Company shall be deemed to have accepted validly
tendered Old Notes when, as and if the Company has given oral or
written notice thereof to the Exchange Agent. The Exchange Agent
will act as agent for the tendering Holders of Old Notes and for
the purposes of receiving the New Notes from the Company.
If any tendered Old Notes are not accepted for exchange
because of an invalid tender, the occurrence of certain other
events set forth herein or otherwise, certificates for any such
unaccepted Old Notes will be returned, without expense, to the
tendering Holder thereof as promptly as practicable after the
Expiration Date.
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<PAGE>
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The Expiration Date shall be _____________, 1995 at
5:00 p.m. New York City time, unless the Company, in its sole
discretion, extends the Exchange Offer, in which case the
Expiration Date shall be the latest date and time to which the
Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will
notify the Exchange Agent of any extension by oral or written
notice and will make a public announcement thereof, each prior to
10:00 a.m., New York City time, on the next business day after
the previously scheduled Expiration Date.
The Company reserves the right, in its sole discretion,
(i) to delay accepting any Old Notes, (ii) to extend the Exchange
Offer, and (iii) to amend the terms of the Exchange Offer in any
manner. If the Exchange Offer is amended in a manner determined
by the Company to constitute a material change, the Company will
promptly disclose such amendments by means of a prospectus
supplement that will be distributed to the registered Holders of
the Old Notes.
TERMINATION OF CERTAIN RIGHTS
The Registration Agreement provides for the payment of
special interest to Holders of the Old Notes upon the
nonoccurrence of certain events. If (i) a registration statement
("Exchange Offer Registration Statement") for the Exchange Offer
is not filed with the Commission on or prior to the 45th day
following the date of original issuance of the Old Notes,
(ii) the Exchange Offer Registration Statement is not declared
effective prior to the 120th day following the date of original
issuance of the Old Notes or (iii) the Exchange Offer is not
consummated or a shelf registration statement ("Shelf
Registration Statement") with respect to the Notes is not
declared effective on or prior to the 150th day following the
date of original issuance of the Old Notes, interest will accrue
(in addition to stated interest on the Old Notes) from and
including the next day following each of (a) such 45-day period
in the case of clause (i) above, (b) such 120-day period in the
case of clause (ii) above, and (c) such 150-day period in the
case of clause (iii) above. In each case such additional
interest (the "Special Interest") will be payable in cash
semiannually in arrears each January 15, and July 15, commencing
January 15, 1996, at a rate per annum equal to 0.50% of the
principal amount of the Old Notes. Upon (1) the filing of the
Exchange Offer Registration Statement after the 45-day period
described in clause (i) above, (2) the effectiveness of the
Exchange Offer Registration Statement after the 120-day period
described in clause (ii) above or (3) the consummation of the
Exchange Offer or the effectiveness of a Shelf Registration
Statement, as the case may be, after the 150-day period described
in clause (iii) above, the Special Interest payable on the Old
Notes from the date of such filing, effectiveness, or
consummation, as the case may be, will cease to accrue and all
accrued and unpaid Special Interest as of the occurrence of (1),
(2) or (3) shall be paid to the Holders of the Old Notes promptly
thereafter. Holders of New Notes, and, upon consummation of the
Exchange Offer or declaration of effectiveness of a Shelf
Registration Statement provided such Shelf Registration Statement
remains effective for the requisite period of time, Holders of
Old Notes, will not be eligible to receive Special Interest.
ACCRUED INTEREST ON THE OLD NOTES
The New Notes will bear interest at a rate equal to 10 5/8%
per annum from and including their date of issuance. Holders
whose Old Notes are accepted for exchange will have the right to
receive interest accrued thereon from the date of their original
issuance or the last Interest Payment Date, as applicable, to,
but not including, the date of issuance of the New Notes, such
interest to be payable with the first interest payment on the New
Notes. Interest on the Old Notes accepted for exchange, which
interest accrued at the rate of 10 5/8% per annum, will cease to
accrue on the day prior to the issuance of the New Notes. See
"Description of New Notes-Principal, Maturity and Interest."
PROCEDURES FOR TENDERING OLD NOTES
The tender of a Holder's Old Notes as set forth below and
the acceptance thereof by the Company will constitute a binding
agreement between the tendering Holder and the Company upon the
terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal. Except as set
forth below, a Holder who wishes to
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<PAGE>
tender Old Notes for exchange pursuant to the Exchange Offer
must transmit such Old Notes, together with a properly completed
and duly executed Letter of Transmittal, including all other
documents required by such Letter of Transmittal, to the
Exchange Agent at the address set forth on the back cover page
of this Prospectus prior to 5:00 p.m., New York City time, on the
Expiration Date. THE METHOD OF DELIVERY OF OLD NOTES, LETTERS
OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE
ELECTION AND RISK OF THE HOLDER. IF SUCH DELIVERY IS BY MAIL,
IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED, BE USED. INSTEAD OF DELIVERY BY
MAIL, IT IS RECOMMENDED THAT THE HOLDER USE AN OVERNIGHT OR
HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD
BE ALLOWED TO ASSURE TIMELY DELIVERY.
Any financial institution that is a participant in DTC's
Book-Entry Transfer Facility System may make book-entry delivery
of the Old Notes by causing DTC to transfer such Old Notes into
the Exchange Agent's account in accordance with DTC's procedures
for such transfer. In connection with a book-entry transfer, a
Letter of Transmittal need not be transmitted to the Exchange
Agent, provided that the book-entry transfer procedure must be
complied with prior to 5:00 p.m., New York City time, on the
Expiration Date.
Each signature on a Letter of Transmittal or a notice of
withdrawal, as the case may be, must be guaranteed unless the Old
Notes surrendered for exchange pursuant hereto are tendered
(i) by a registered holder of the Old Notes who has not completed
either the box entitled "Special Exchange Instructions" or the
box entitled "Special Delivery Instructions" in the Letter of
Transmittal, or (ii) by an Eligible Institution (as defined on
page 22). In the event that a signature on a Letter of
Transmittal or a notice of withdrawal, as the case may be, is
required to be guaranteed, such guarantee must be by a firm which
is a member of a registered national securities exchange or the
National Association of Securities Dealers, Inc., a commercial
bank or trust company having an office or correspondent in the
United States or otherwise be an "eligible guarantor institution"
within the meaning of Rule 17Ad-15 under the Exchange Act
(collectively, "Eligible Institutions"). If the Letter of
Transmittal is signed by a person other than the registered
Holder of the Old Notes, the Old Notes surrendered for exchange
must either (i) be endorsed by the registered Holder, with the
signature thereon guaranteed by an Eligible Institution, or
(ii) be accompanied by a bond power, in satisfactory form as
determined by the Company in its sole discretion, duly executed
by the registered holder, with the signature thereon guaranteed
by an Eligible Institution. The term "registered holder" as used
herein with respect to the Old Notes means any person in whose
name the Old Notes are registered on the books of the Registrar.
All questions as to the validity, form, eligibility
(including time of receipt), acceptance and withdrawal of the Old
Notes tendered for exchange will be determined by the Company in
its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any
and all Old Notes not properly tendered and to reject any Old
Notes the Company's acceptance of which might, in the judgment of
the Company or its counsel, be unlawful. The Company also
reserves the absolute right to waive any defects or
irregularities or conditions of the Exchange Offer as to
particular Old Notes either before or after the Expiration Date
(including the right to waive the ineligibility of any holder who
seeks to tender Old Notes in the Exchange Offer). The
interpretation of the terms and conditions of the Exchange Offer
(including the Letter of Transmittal and the instructions
thereto) by the Company shall be final and binding on all
parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes for exchange must be cured
within such period of time as the Company shall determine. The
Company will use reasonable efforts to give notification of
defects or irregularities with respect to tenders of Old Notes
for exchange but shall not incur any liability for failure to
give such notification. Tenders of the Old Notes will not be
deemed to have been made until such irregularities have been
cured or waived.
If any Letter of Transmittal, endorsement, bond power, power
of attorney or any other document required by the Letter of
Transmittal is signed by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, such
person should so indicate when signing, and, unless waived by the
Company, proper evidence satisfactory to the Company, in its sole
discretion, of such person's authority to so act must be
submitted.
Any beneficial owner of the Old Notes (a "Beneficial Owner")
whose Old Notes are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and who wishes to
tender Old Notes in the Exchange Offer should contact such
registered holder promptly and instruct such registered holder to
tender on such Beneficial
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<PAGE>
Owner's behalf. If such Beneficial Owner wishes to tender
directly, such Beneficial Owner must, prior to completing
and executing the Letter of Transmittal and tendering Old Notes,
make appropriate arrangements to register ownership of the Old
Notes in such Beneficial Owner's name. Beneficial Owners should
be aware that the transfer of registered ownership may take
considerable time.
By tendering, each registered holder will represent to the
Company that, among other things (i) the New Notes to be acquired
in connection with the Exchange Offer by the Holder and each
Beneficial Owner of the Old Notes are being acquired by the
Holder and each Beneficial Owner in the ordinary course of
business of the Holder and each Beneficial Owner, (ii) the Holder
and each Beneficial Owner are not participating, do not intend to
participate, and have no arrangement or understanding with any
person to participate, in the distribution of the New Notes,
(iii) the Holder and each Beneficial Owner acknowledge and agree
that any person participating in the Exchange Offer for the
purpose of distributing the New Notes must comply with the
registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction
of the New Notes acquired by such person and cannot rely on the
position of the staff of the Commission set forth in no-action
letters that are discussed herein under "Resales of New Notes,"
(iv) that if the Holder is a broker-dealer that acquired Old
Notes as a result of market-making or other trading activities,
it will deliver a prospectus in connection with any resale of New
Notes acquired in the Exchange Offer, (v) the Holder and each
Beneficial Owner understand that a secondary resale transaction
described in clause (iii) above should be covered by an effective
registration statement containing the selling security holder
information required by Item 507 of Regulation S-K of the
Commission, and (vi) neither the Holder nor any Beneficial Owner
is an "affiliate," as defined under Rule 405 of the Securities
Act, of the Company except as otherwise disclosed to the Company
in writing. In connection with a book-entry transfer, each
participant will confirm that it makes the representations and
warranties contained in the Letter of Transmittal.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old
Notes are not immediately available or (ii) who cannot deliver
their Old Notes or any other documents required by the Letter of
Transmittal to the Exchange Agent prior to the Expiration Date
(or complete the procedure for book-entry transfer on a timely
basis), may tender their Old Notes according to the guaranteed
delivery procedures set forth in the Letter of Transmittal.
Pursuant to such procedures: (i) such tender must be made by or
through an Eligible Institution and a Notice of Guaranteed
Delivery (as defined in the Letter of Transmittal) must be signed
by such Holder, (ii) on or prior to the Expiration Date, the
Exchange Agent must have received from the Holder and the
Eligible Institution a properly completed and duly executed
Notice of Guaranteed Delivery (by facsimile transmission, mail or
hand delivery) setting forth the name and address of the Holder,
the certificate number or numbers of the tendered Old Notes, and
the principal amount of tendered Old Notes, stating that the
tender is being made thereby and guaranteeing that, within five
business days after the date of delivery of the Notice of
Guaranteed Delivery, the tendered Old Notes, a duly executed
Letter of Transmittal and any other required documents will be
deposited by the Eligible Institution with the Exchange Agent,
and (iii) such properly completed and executed documents required
by the Letter of Transmittal and the tendered Old Notes in proper
form for transfer (or confirmation of a book-entry transfer of
such Old Notes into the Exchange Agent's account at DTC) must be
received by the Exchange Agent within five business days after
the Expiration Date. Any Holder who wishes to tender Old Notes
pursuant to the guaranteed delivery procedures described above
must ensure that the Exchange Agent receives the Notice of
Guaranteed Delivery and Letter of Transmittal relating to such
Old Notes prior to 5:00 p.m., New York City time, on the
Expiration Date.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all the conditions to the
Exchange Offer, the Company will accept any and all Old Notes
that are properly tendered in the Exchange Offer prior to 5:00
p.m. New York City time, on the Expiration Date. The New Notes
issued pursuant to the Exchange Offer will be delivered promptly
after acceptance of the Old Notes. For purposes of the Exchange
Offer, the Company shall be deemed to have accepted validly
tendered Old Notes, when, as, and if the Company has given oral
or written notice thereof to the Exchange Agent.
23
<PAGE>
In all cases, issuances of New Notes for Old Notes that are
accepted for exchange pursuant to the Exchange Offer will be made
only after timely receipt by the Exchange Agent of such Old
Notes, a properly completed and duly executed Letter of
Transmittal and all other required documents (or of confirmation
of a book-entry transfer of such Old Notes into the Exchange
Agent's account at DTC); provided, however, that the Company
reserves the absolute right to waive any defects or
irregularities in the tender or conditions of the Exchange Offer.
If any tendered Old Notes are not accepted for any reason, such
unaccepted Old Notes will be returned without expense to the
tendering Holder thereof as promptly as practicable after the
expiration or termination of the Exchange Offer.
WITHDRAWAL RIGHTS
Tenders of the Old Notes may be withdrawn by delivery of a
written notice to the Exchange Agent, at its address set forth on
the back cover page of this Prospectus, at any time prior to
5:00 p.m., New York City time, on the Expiration Date. Any such
notice of withdrawal must (i) specify the name of the person
having deposited the Old Notes to be withdrawn (the "Depositor"),
(ii) identify the Old Notes to be withdrawn (including the
certificate number or numbers and principal amount of such Old
Notes, as applicable), (iii) be signed by the Holder in the same
manner as the original signature on the Letter of Transmittal by
which such Old Notes were tendered (including any required
signature guarantees) or be accompanied by a bond power in the
name of the person withdrawing the tender, in satisfactory form
as determined by the Company in its sole discretion, duly
executed by the registered Holder, with the signature thereon
guaranteed by an Eligible Institution together with the other
documents required upon transfer by the Indenture, and
(iv) specify the name in which such Old Notes are to be re-
registered, if different from the Depositor, pursuant to such
documents of transfer. All questions as to the validity, form
and eligibility (including time of receipt) of such notices will
be determined by the Company, in its sole discretion. The Old
Notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the Exchange Offer. Any
Old Notes which have been tendered for exchange but which are
withdrawn will be returned to the Holder thereof without cost to
such Holder as soon as practicable after withdrawal. Properly
withdrawn Old Notes may be retendered by following one of the
procedures described under "The Exchange Offer - Procedures for
Tendering Old Notes" at any time on or prior to the Expiration
Date.
CONSEQUENCES OF FAILURE TO TENDER OLD NOTES
Holders who do not tender their Old Notes by the Expiration
Date will be unable to exchange Old Notes for New Notes pursuant
to the Exchange Offer. Holders who acquired Old Notes pursuant
to the Offering and who do not participate in the Exchange Offer
can require the Company to file as promptly as practicable after
so requested a shelf registration statement relating to the Old
Notes and cause such shelf registration statement to be declared
effective by the 150th day following original issuance of the Old
Notes. Old Notes held by Holders who do not tender their Old
Notes pursuant to the Exchange Offer or who do not request that a
shelf registration statement be filed with respect to such Old
Notes may not be offered or sold in the United States or to, or
for the account or benefit of, U.S. persons except in accordance
with an applicable exemption from the registration requirements
thereof.
THE EXCHANGE AGENT; ASSISTANCE
IBJ Schroder Bank & Trust Company is the Exchange Agent.
All tendered Old Notes, executed Letters of Transmittal and other
related documents should be directed to the Exchange Agent.
Questions and requests for assistance and requests for additional
copies of the Prospectus, the Letter of Transmittal and other
related documents should be addressed to the Exchange Agent as
follows:
By Hand or Overnight Courier:
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Attention: Securities Processing Window, SC1
24
<PAGE>
By Registered or Certified Mail:
IBJ Schroder Bank & Trust Company
Post Office Box 84
Bowling Green Station
New York, NY 10274-0084
Attention: Reorganization Operations Department
By Facsimile: (212) 858-2611 Raymond Liszewski
Confirm by Telephone: (212) 858-2103
FEES AND EXPENSES
All expenses incident to the Company's consummation of the
Exchange Offer and compliance with the Registration Agreement
will be borne by the Company, including without limitation: (i)
all registration and filing fees and expenses (including filings
made with the National Association of Securities Dealers, Inc.,
(including, if applicable, the fees and expenses of any
"qualified independent underwriter" and its counsel, as may be
required by the rules and regulations of the National Association
of Securities Dealers, Inc.)), (ii) all fees and expenses of
compliance with federal securities or state, or other
jurisdictions, securities laws, (iii) all expenses of printing
(including printing certificates for the New Notes and
prospectuses), messenger and delivery services and telephone,
(iv) all fees and disbursements of counsel for the Company and
the fees of counsel for the Initial Purchasers with respect to
the registration statement and any shelf registration statement,
(v) all application and filing fees in the event the New Notes
are listed on a national securities exchange or automated
quotation system, and (vi) all fees and disbursements of
independent certified public accountants of the Company
(including the expenses of any special audit and comfort letters
required by or incident to such performance).
The Company will, in any event, bear its internal expenses
(including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties),
the expense of any annual audit, and the fees and expenses of any
person, including special experts, retained by the Company.
The Company has not retained any dealer-manager in
connection with the Exchange Offer and will not make any payments
to brokers, dealers or others soliciting acceptance of the
Exchange Offer. The Company, however, will pay the Exchange
Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in
connection therewith.
The Company will pay all transfer taxes, if any, applicable
to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, a transfer tax is imposed for any reason other than the
exchange of Old Notes pursuant to the Exchange Offer, then the
amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the
tendering holder. If satisfactory evidence of payment of such
taxes or exemption is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed
directly to such tendering holder.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as
the Old Notes, as reflected in the Company's accounting records
on the date of the exchange. Accordingly, no gain or loss will
be recognized by the Company for accounting purposes. The
expenses of the Exchange Offer will be amortized over the term of
the New Notes.
RESALES OF THE NEW NOTES
Based on an interpretation by the staff of the Commission
set forth in no-action letters issued to third parties, the
Company believes that the New Notes issued pursuant to the
Exchange Offer to a Holder in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by such
Holder (other than (i) a broker-dealer who purchased Old
25
<PAGE>
Notes directly from the Company for resale pursuant to Rule 144A
under the Securities Act or any other available exemption under
the Securities Act, or (ii) a person that is an affiliate of the
Company within the meaning of Rule 405 under the Securities Act)
without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that the Holder is
acquiring the New Notes in the ordinary course of business and is
not participating, and has no arrangement or understanding with
any person to participate, in the distribution of the New Notes.
However, if any Holder acquires New Notes in the Exchange Offer
for the purpose of distributing or participating in a
distribution of the New Notes, such Holder cannot rely on the
position of the staff of the Commission enunciated in Morgan
Stanley & Co., Incorporated (available June 5, 1991) and Exxon
Capital Holdings Corporation (available April 13, 1989), or
interpreted in the Commission's letter to Shearman and Sterling
(available July 2, 1993), or similar no-action or interpretive
letters and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a
secondary resale transaction, unless an exemption from
registration is otherwise available. Each broker-dealer that
receives New Notes for its own account in exchange for Old Notes,
where such Old Notes were acquired by such broker-dealer as a
result of market-making or other trading activities, must
acknowledge that it will deliver a prospectus in connection with
any resale of such New Notes. See "Plan of Distribution."
26
<PAGE>
CAPITALIZATION
The following table sets forth the cash position and
capitalization of the Company at June 30, 1995 as adjusted to
reflect the Company's issuance of the Old Notes. This table
should be read in conjunction with the more detailed information
and financial statements appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1995
ACTUAL AS ADJUSTED
(IN MILLIONS)
<S> <C> <C>
Cash and cash equivalents $20.7 $27.3
Long-term debt:
Rio Bank Loan $90.0 $ - (1)
Other long-term debt 0.2 -
Old Notes(2) - 100.0
Total long-term debt 90.2 100.0
Stockholders' equity 156.6 156.6
Total capitalization $246.8 $256.6
<FN>
(1) The Company will have $175 million of borrowing
availability under the Rio Bank Loan.
(2) Reflects the effects of the receipt of the proceeds from
the issuance of Old Notes on July 21, 1995.
</FN>
</TABLE>
27
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table summarizes certain selected consolidated
financial data, which should be read in connection with the
Company's Consolidated Financial Statements and the Notes thereto
included elsewhere herein and with "Management's Discussion and
Analysis of Financial Condition and Results of Operations." The
selected consolidated financial data as of and for the years
ended December 31, 1990 and 1991 and as of December 31, 1992 have
been derived from the Company's audited financial statements. The
selected consolidated financial data as of and for the years
ended December 31, 1993 and 1994 and for the year ended
December 31, 1992 have been derived from the Company's audited
financial statements included elsewhere herein. The selected
consolidated financial data presented below as of and for the
months ended June 30, 1994 and 1995 are derived from unaudited
consolidated financial statements. The unaudited financial
statements include all adjustments (consisting of only normal
recurring adjustments) which the Company considers necessary for
a fair presentation of the Company's financial position and
results of operations for these periods. Operating results for
the six months ended June 30, 1995 are not necessarily indicative
of the results that may be expected for future periods, including
for the entire year ending December 31, 1995.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
1995 1994 1994 1993 1992 1991 1990
(UNAUDITED) (DOLLARS IN THOUSANDS)
STATEMENTS OF INCOME DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues:
Casino $49,968 $42,188 $87,165 $71,296 $56,524 $43,710 $38,246
Non-casino 41,816 28,029 59,134 38,686 25,951 22,074 17,638
91,784 70,217 146,299 109,982 82,475 65,784 55,884
Operating expenses:
Casino 21,934 18,263 38,696 31,178 27,145 24,421 24,168
Non-casino 31,811 23,499 50,386 35,027 23,669 19,237 15,817
Selling, general and
administrative 13,194 9,666 20,550 16,001 13,551 12,356 13,370
Depreciation and
amortization 7,107 5,244 10,864 7,544 5,814 4,886 4,450
Operating profit (loss) 17,738 13,545 25,802 20,232 12,296 4,884 (1,921)
Interest (expense), net (2,679) (803) (1,798) (1,767) (3,643) (5,295) (4,834)
Other income, net - 967 1,140 - 100 1,200 1,466
Income tax (provision)
benefit (5,633) (4,950) (9,178) (6,785) (2,996) (408) 452
Income (loss) from
continuing operations 9,426 8,759 15,966 11,680 5,757 381 (4,837)
Minority interest in
consolidated partnership
(income) loss - - - - (242) (33) 2,763
Nonrecurring items (1) - - - (1,031) 793 (229) (1,773)
Net income (loss) $9,426 $8,759 $15,966 $10,649 $6,308 $119 $(3,847)
Ratio of earnings to
fixed charges (2) 5.68x 15.34x 10.64x 8.80x 3.19x 1.13x 0.48x
OTHER DATA (3):
Average daily room rate $73.00 $62.20 $63.80 $62.60 $64.09 $67.22 $73.40
(4)
Average daily hotel
occupancy 95.7% 96.3% 95.9% 96.8% 96.5% 93.5% 78.3%
Hotel rooms 1,410 861 861 861 424 424 424
Casino square footage 89,000 79,000 89,000 79,000 54,000 44,000 44,000
Slot machines 2,163 1,945 2,200 1,950 1,450 1,043 850
Table games 65 44 53 44 31 31 42
Restaurant seats 2,440 2,254 2,440 1,843 1,209 955 937
28
<PAGE>
<CAPTION>
JUNE 30, DECEMBER 31,
1995 1994 1994 1993 1992 1991 1990
(UNAUDITED) (DOLLARS IN THOUSANDS)
BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents $20,669 $63,938 $76,426 $55,785 $42,623 $11,388 $6,802
Total assets 273,690 245,083 301,165 218,050 149,518 112,267 135,644
Long-term debt, including current
maturities 90,215 85,174 125,179 65,184 53,212 57,019 84,165
Minority interest - - - - - 1,635 2,649
Stockholders' equity 156,631 140,317 147,839 129,838 86,872 47,731 42,849
<FN>
(1) Nonrecurring items include: income (loss) from operations
of discontinued real estate and development segment, net of
income taxes; extraordinary items; loss from early
extinguishment of debt; and cumulative effects of accounting
changes. See Consolidated Financial Statements and the Notes
thereto.
(2) The ratio of earnings to fixed charges is determined by
dividing (i) earnings before income taxes and fixed charges by
(ii) fixed charges. Fixed charges consist of total interest
expense.
(3) Other data relating to hotel rooms, casino square
footage, slot machines, table games and restaurant seats
represent amounts as of the end of the period.
(4) Average daily room rate figures are actual rates
expressed in dollars.
</FN>
</TABLE>
29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Rio's revenues and profits are derived largely from its
gaming activities, although the Company also seeks to maximize
revenues from food and beverage, lodging, entertainment and
retail sales. The Rio generally views its non-casino related
operations as complementary to its core casino operations. The
Rio utilizes entertainment primarily as a casino marketing tool.
The Rio expects to maintain a food and beverage pricing structure
designed to maximize casino customer foot traffic. Such a
structure tends to result in an operating loss for the food and
beverage department, although specific bars or restaurants may
report operating profits.
The Company's sole business is the operation of the Rio,
which opened in January 1990. The Rio was originally owned and
operated by a limited partnership (the "Rio Partnership") formed
by the Company in 1988. Through a series of transactions
involving an exchange of preferred stock for partnership
interests and later a merger of the Rio Partnership into Rio
Properties, the Company increased its ownership of the Rio from
34.4% in 1988 to 100% in 1992. Prior to 1990, the Company's
operations consisted of real estate development and management.
In December 1991, the Company sold all real estate assets and
operations not used or held for the operation or expansion of the
Rio. In 1995, as part of the Company's three-phased expansion and
development plan, the Company entered into agreements for the
purchase of approximately 22 acres adjacent to the Rio and
approximately 64 acres southeast of Las Vegas, both of which may
be developed into future hotel-casino projects.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1995, the Company had working capital of $12.7
million compared with $50.2 million at December 31, 1994. Cash
and cash equivalents were $20.7 million at June 30, 1995 compared
with $76.4 million at December 31, 1994. At June 30, 1995, the
Company had $35.0 million available under its bank facility while
the bank facility was fully utilized at December 31, 1994. The
decrease in both working capital and cash is primarily due to the
use of cash and cash equivalents during the first six months of
1995 to repay principal under the bank facility and the decision
of the Company not to draw down the full amount of the available
Rio Bank Loan at the end of the quarter, as well as the use of
cash and cash equivalents to make capital expenditures for the
Company's $75 million Phase III Expansion and the $20 million
Phase IV Expansion.
During the first six months of 1995, cash provided by
operating activities was $20.1 million. Investing activities
used $39.9 million of the Company's cash during the first six
months of 1995. Approximately $23.3 million of such expenditures
were related to the Company's Phase III Expansion and
approximately $3.7 million were related to the Company's Phase IV
Expansion. During the first quarter of 1995, the Company
acquired an approximate five acre site adjacent to the Rio site,
on which a former commercial warehouse is located, at a purchase
price of $3.2 million (net of credit for profit participation
from the seller to which the Company was entitled and net of
rental proceeds during the term of the escrow). During the
second quarter of 1995, the Company acquired approximately 64
acres of land southeast of Las Vegas at a purchase price of $5.7
million (net of credit for profit participation from the seller
to which the Company was entitled). The 64-acre site and
additional land acquisitions are part of the Company's recently
announced three phase expansion and development plan discussed
below. During the first six months of 1995, the Company spent
approximately $5.2 million toward the acquisition of certain real
property adjacent to the Rio. The balance of cash used in
investing activities was expended on other capital projects.
During the fourth quarter of 1994, the Board of Directors
authorized the Company to make discretionary repurchases of up to
2 million shares of its Common Stock from time to time in the
open market or otherwise. During the first quarter of 1995, the
Company repurchased 138,500 shares of its Common Stock at a total
cost of $1.6 million. These shares of Common Stock were retired.
No open market repurchases were made during the second quarter of
1995.
30
<PAGE>
The Company is subject to annual capital expenditure limits
of $7.5 million under the Rio Bank Loan. However, the Company
received a written waiver to allow the Company to construct the
Phase III Expansion and the Phase IV Expansion. Because of the
annual restrictions on capital expenditures by the Company
contained in the Rio Bank Loan, any other significant new capital
improvements to the Rio will also require the consent of the
lenders.
As of July 1, 1995, the Company's capital commitments
include approximately $5.9 million for the remainder of the Phase
III Expansion, $16.3 million for the Phase IV Expansion, and
$15.1 million under commitments for the purchase of real estate.
Based upon cash on hand, cash available through borrowings under
the Rio Bank Loan and cash from operations, the Company believes
that it has adequate cash available to fund the remaining cost of
the Phase III Expansion, the Phase IV Expansion, and the real
estate purchase commitments.
The Rio Bank Loan was originally entered into on July 15,
1993 in the amount of $65 million with a syndicate of banks
consisting of Bank of America National Trust and Savings
Association, Bank of America Nevada, Societe Generale, NBD Bank,
N.A., First Security Bank of Idaho, N.A., First Interstate Bank
of Nevada, N.A. and U.S. Bank of Nevada. As a result of certain
amendments, in December 1994, the Rio Bank Loan was increased to
$125 million and, in August 1995, it was increased to $175
million. As amended, the Rio Bank Loan is a secured reducing
revolving credit facility to be used (a) to refinance the
existing Rio Bank Loan, (b) to finance the Phase V Expansion,
(c) to finance acquisition of land adjacent to the Rio for up to
$30 million, and (d) for general corporate purposes.
The Rio Bank Loan will mature on June 30, 2001 and will bear
interest based upon a "LIBOR Spread" of from 1% to 3%, or a "Base
Rate Spread" of from 0% to 2.0% based upon a schedule determined
with reference to Rio Properties' "Funded Debt to EBIDTA Ratio."
The "LIBOR Spread" is the amount in excess of the applicable
London interbank offer rate ("LIBOR"). The "Base Rate Spread" is
the amount in excess of the applicable base rate, which is the
rate per annum equal to the higher of the reference rate as it is
publicly announced from time to time by Bank of America in San
Francisco or 0.50% per annum above the latest Federal Funds rate.
As amended, the Rio Bank Loan will also provide for an unused
facility fee ranging from 31.25 basis to 50.0 basis points
depending upon the same Funded Debt to EBIDTA ratio schedule
utilized for the interest rate. (A basis point is one one-
hundreth of one percent.) The Rio Bank Loan requires monthly
payments of interest and will require scheduled reductions of
the maximum amount available under the Rio Bank Loan commencing
with a $10 million reduction at December 31, 1997, $30 million
reductions at December 31, 1998 and December 31, 1999, a $40
million reduction at December 31, 2000, a $32.5 million reduction
at March 31, 2001 and maturity at June 30, 2001. See "Notes
to Consolidated Financial Statements - 6. Long-Term Debt."
To reduce the risks from interest rate fluctuations, the
Company has previously entered into interest rate swap agreements
in the amount of $20 million from September 30, 1994 through
December 29, 1995 and $15 million from December 29, 1995 through
June 28, 1996. In August 1994, the Company purchased a $40
million interest rate cap, effective September 30, 1994, for a
three-year term, which provides for quarterly payments to the
Company in the event that three-month LIBOR exceeds 7% on any
quarterly reset date. The Company is exposed to credit risks in
the event of non-performance by the counterparty. However, the
Company does not anticipate non-performance by the counterparty.
The counterparty under these agreements is Bank of America
National Trust and Savings Association ("B of A"), the lead bank
in the syndicate participating in the Rio Bank Loan. Management
believes that the financial resources of B of A and its
competitive position within the national banking industry
significantly reduce the chances of non-performance under the
interest rate swap and cap agreements. See "Notes to
Consolidated Financial Statements - 6. Long-Term Debt."
The Rio Bank Loan is secured by a first deed of trust on the
Rio, a security interest in substantially all of the other real
and personal property of Rio Properties, and a guaranty by Rio
Hotel & Casino, Inc., including a pledge of the Company's stock
in Rio Properties. The Rio Bank Loan provides that Rio Hotel &
Casino, Inc. will be permitted to accumulate and hold up to $5
million in assets which are not to be pledged for the benefit of
the Rio Bank Loan lenders.
The Rio Bank Loan contains certain customary financial
covenants to which the Company is subject. Those covenants
include a requirement that Rio Properties maintain a maximum
ratio of Total Debt to EBITDA ranging from 3.0 to 1 at
December 31, 1995, increasing to 4.25 to 1 for the six month
period ending March 31, 1997 and decreasing to 3.0 to 1 at
December 31, 1997 and thereafter. Rio Properties must meet a
maximum ratio of Senior Debt to EBITDA from 1.75 to 1 through
December 31, 1995 up to 3.0 to 1 for the six months ended March
31, 1997 and reducing to 1.75
31
<PAGE>
to 1 at December 31, 1997 and thereafter. Rio Properties must
maintain a maximum Interest Coverage Ratio of 2.0 to 1 through
the fiscal quarter ending December 31, 1996, reducing to 1.5
to 1 for the fiscal quarter ending September 30, 1997,
increasing to 2.0 to 1 for the fiscal quarter ending March 31,
1998, increasing to 2.5 to 1 for the fiscal quarter ending
September 30, 1998 and increasing to 3.0 to 1 for the fiscal
quarter ending December 31, 1998 and thereafter. Minimum
Consolidated Tangible Net Worth requirements must be
maintained of $125 million, plus 75% of accumulated net
income after December 31, 1994 (not reduced by any consolidated
net losses) plus 100% of the net proceeds of any equity offering
by Rio Properties or the Company. Maximum annual capital
expenditures permitted under the Rio Bank Loan are $7.5 million
annually, plus the amount available of unused capital
expenditures from the prior fiscal year, but not to exceed $12.5
million annually in any event. Specific carve-outs of $200
million for the Phase V Expansion and $30 million for the
identified adjacent Rio land acquisitions are incorporated in the
Rio Bank Loan. The Rio Bank Loan also provides for a basket of
$5 million for the repurchase of equity shares of the Company
through open market purchases over the life of the Rio Bank Loan.
The Rio Bank Loan provides for an event of default if
Anthony A. Marnell II beneficially owns less than 10% of the
voting stock of the Company, any person holds or controls a
greater amount of the voting stock of the Company, any person
holds or controls a greater amount of voting stock than the
amount held or controlled by Anthony A. Marnell II, or if either
Anthony A. Marnell II or James A. Barrett, Jr. cease to perform
their functions as Chief Executive Officer and President,
respectively, for a period of 30 consecutive days.
On July 18, 1995, the Company entered into the Purchase
Agreement with Salomon Brothers Inc and Montgomery Securities
(the "Initial Purchasers") for the sale by the Company of $100
million in principal amount of the Old Notes. The Old Notes were
purchased by the Initial Purchasers for resale to qualified
institutional investors. The net proceeds from the sale of the
Old Notes (approximately $96.8 million after the deduction of a
2.75% discount to the Initial Purchasers and estimated offering
expenses of $450,000), borrowings under the Rio Bank Loan, cash
on hand and cash from operations will be used to finance the
Company's approximately $185 million Phase V Expansion. Pending
such use, the net proceeds were used to reduce amounts
outstanding under the Rio Bank Loan.
The Old Notes were issued and the New Notes will be issued
under the Indenture dated July 21, 1995. The following summary
of certain provisions of the Indenture does not purport to be
complete and is subject to the provisions of the Indenture and
the Notes. Capitalized terms not otherwise defined have the same
meanings assigned to them in the Indenture.
The Notes mature on July 15, 2005. Interest payment dates
under the Notes are January 15 and July 15, commencing
January 15, 1996. The Notes are fully and unconditionally
guaranteed (the "Rio Guarantee") on a senior subordinated basis
by Rio Properties, Inc. (the "Guarantor"), the Company's
principal operating subsidiary. The Notes are subordinated in
right of payment to all existing and future Senior Indebtedness
of the Company and are structurally subordinated to all existing
and future indebtedness and other liabilities (including trade
payables) of the Company's subsidiaries. The Rio Guarantee is
subordinated in right of payment to all existing and future
Senior Indebtedness of Guarantor and is structurally subordinated
to all existing and future indebtedness and other liabilities
(including trade payables) of the Guarantor's subsidiaries.
The Notes may be redeemed at the option of the Company, in
whole or in part, at any time on or after July 15, 2000, at the
redemption prices set forth in the Indenture, plus accrued and
unpaid interest, if any, through the redemption date. The Notes
will be redeemed from any Holder or beneficial owner of the Notes
which is required to be found suitable and is not found suitable
by the Nevada Gaming Commission.
Upon a Change of Control of the Company (as defined in the
Indenture), each holder of Notes will have the right to require
the Company to repurchase all or part of such holder's Notes at a
price equal to 101% of the aggregate principal amount thereof,
plus accrued and unpaid interest, if any, to the date of
repurchase. The Company's obligation to repurchase the Notes is
guaranteed on a senior subordinated basis by the Guarantor. The
Indenture contains certain covenants that, among other things,
limit the ability of the Company and its Restricted Subsidiaries
to incur additional indebtedness, pay dividends or make other
distributions, make investments, repurchase subordinated
obligations or capital stock, create certain liens (except, among
others, liens securing Senior Indebtedness), enter into
certain transactions with
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affiliates, sell assets of the Company or its subsidiaries, issue
or sell subsidiary stock, create or permit to exist restrictions
on distributions from subsidiaries, or enter into certain mergers
and consolidations.
Pursuant to the Registration Agreement, the Company will
commence an exchange offer pursuant to an effective registration
statement or cause the Notes to be registered under the
Securities Act pursuant to a resale shelf registration statement.
See "The Exchange Offer - Termination of Certain Rights" for a
description of consequences of failing to timely meet the
registration requirements for the Notes.
On May 2, 1995, the Company announced a three-phase
expansion and development plan to grow the Company over the next
several years. The plan includes the Phase V Expansion on the
existing Rio site, acquisition of approximately 22 acres of land
adjacent to the Rio site to be master-planned for another hotel-
casino property and the purchase of approximately 64 acres
southeast of Las Vegas for possible future hotel-casino
development.
The approximately $185 million Phase V Expansion is planned
to include 120,000 square feet of public space containing a
casino expansion with 600 slot machines and 27 table games, new
retail and entertainment space, and additional restaurants, as
well as an expanded pool and beach area and additional parking
facilities. The Phase V Expansion will center around a 40-story
hotel tower containing approximately 1,000 new suites located
immediately southeast of the existing towers. The public area
expansion will be based on a Brazilian Carnival Mardi Gras theme
and will include a variety of owned and leased retail and
restaurant outlets. Construction commenced in September 1995 and
opening is expected to occur in the spring of 1997. The Company
cannot accurately state the timing for funding requirements of
the $185 million Phase V costs, but management anticipates that a
small portion of such funds will be applied to the project in
1995, the bulk of the funds will be applied in 1996, and the
balance of the funds will be applied in 1997. See "Risk
Factors-Construction and Development Risks."
The $185 million Phase V Expansion will be financed with the
proceeds from the Old Notes, funds available under the Rio Bank
Loan, cash on hand and cash from operations. For the Phase V
Expansion, the Company has obtained a capital expenditure
limitation wavier under the Rio Bank Loan.
As described above, the Company has acquired approximately
five acres of land adjacent to the Rio and has entered into
agreements to acquire an additional approximately 17 acres of
land adjacent to the Rio site. The combined cost of the
approximately 22 acres is approximately $20.3 million, which the
Company will fund through cash on hand, cash available through
borrowings under the Rio Bank Loan and cash from operations. The
entire Rio site is now being master-planned for the development
of another hotel-casino, the size and timing of which has not yet
been determined.
As the third step in its expansion and development plan to
provide further growth for the Company, the Company acquired
approximately 64 acres (the "Old Vegas Site") of land southeast
of Las Vegas. The cost of the Old Vegas Site was approximately
$5.7 million (net of a credit for profit participation from the
seller to which the Company was entitled) which the Company
funded through cash on hand and cash available through borrowings
under the Rio Bank Loan. The Old Vegas Site, already zoned for a
hotel-casino, is situated where Boulder Highway enters the Las
Vegas valley from Phoenix and Laughlin along U. S. Highway 93-95.
The timing of the proposed development of the Old Vegas Site has
not yet been determined.
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
Operating profit for the Company increased to $17.7 million
in the first six months of 1995 from $13.5 million in the first
six months of 1994, an increase of $4.2 million or 31%.
Management believes that the improvement in operating results was
due to increased business levels during the first six months of
1995 as a result of having an additional 365 hotel suites placed
into service in February 1995, 184 new hotel suites placed into
service in March 1995, and the addition of over 215 slot
machines, 21 table games, and additional restaurant capacity
compared to the first six months of 1994. Management believes
that operating efficiencies also improved from the first six
months of 1994 to the first six months of 1995 in the hotel
department.
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Net revenues for the Company increased to $91.8 million in
the first six months of 1995 from $70.2 million in the first six
months of 1994, an increase of $21.6 million or 31%. Casino
revenues increased to $50.0 million in the first six months of
1995 from $42.2 million in the first six months of 1994, an
increase of $7.8 million or 18%. The increase in casino revenues
was due primarily to increases in both slot machine revenues and
table game revenues. Slot machine revenues increased $4.1
million or 15% to $30.9 million in the first six months of 1995
from $26.8 million in the first six months of 1994. The increase
in slot machine revenues resulted primarily from the addition of
over 215 slot machines in November 1994. Table game revenues
increased $3.9 million or 32% to $16.0 million in the first six
months of 1995 from $12.1 million in the first six months of
1994. The increase in table game revenues resulted primarily
from the addition of 9 table games in the second half of 1994,
the addition of 6 table games in January 1995, and the addition
of 6 tables games in April 1995.
Room revenues increased by $6.8 million or 73% to $16.2
million in the first six months of 1995 from $9.4 million in the
first six months of 1994. The increase in room revenue resulted
primarily from the addition of 365 new hotel suites placed into
service in February 1995 and 184 new hotel suites placed into
service in March 1995, as well as an increase in the average room
rate of more than $10.00 per room night during the first six
months of 1995 compared to the first six months of 1994. The
additional 549 suites placed into service in February and March
1995 increased the Rio's total to 1,410 suites compared to 861
suites for the entire first six months of 1994. Demand for the
Rio's suites remained high during the first six months of 1995
with a 96% occupancy, which was identical to the 96% occupancy
attained during the first six months of 1994. The average number
of suites available during the first six months of 1995 was 1,273
compared to 861 during the first six months of 1994. The average
daily room rate during the first six months of 1995 was $73.00
compared to $62.20 during the first six months of 1994.
Food and beverage revenues increased to $29.1 million in the
first six months of 1995 from $22.5 million in the first six
months of 1994, an increase of $6.6 million or 29%. The
successful opening in February 1994 of the Copacabana Showroom, a
430-seat video, entertainment and restaurant complex; the
successful opening in April 1994 of Fiore, a 186-seat fine dining
restaurant; the successful opening in June 1994 of Club Rio, a
late-night dance club; the successful completion in November 1994
of a 50% expansion of the Carnival World Buffet to 980 seats; and
increased beverage sales as a result of increased gaming
customers all contributed to the increase in food and beverage
revenues.
Other revenues for the six months ended June 30, 1995 were
$5.6 million, which included entertainment admission revenues of
$1.9 million, retail sales of $2.0 million and miscellaneous
other operating revenues, primarily telephone revenues, of $1.7
million. This represented an increase in other revenues of $2.6
million, or 87%, compared to the $3.0 million in other revenues
generated during the six months ended June 30, 1994. Nearly half
of the increase was attributable to increased admission revenues
in Club Rio, a late night dance club that opened in June 1994,
with the balance being primarily attributable to increased retail
sales as a result of overall increased business levels.
The Company's operating margins were relatively consistent
during the first six months of 1995 compared to the first six
months of 1994. Operating profit as a percentage of net revenues
was 19% in both the first six months of 1995 and 1994. Casino
operating profit was 56% during the first six months of 1995
compared to 57% during the first six months of 1994. Food and
beverage operating profit was 18% during the first six months of
1995 compared to 19% during the first six months of 1994. Hotel
operating profit was 70% during the first six months of 1995
compared to 64% during the first six months of 1994. Management
believes that this improvement is due to efficiencies resulting
from increased customer volume, effective cost controls and a
higher average room rate during the first six months of 1995
compared to the first six months of 1994.
During the first six months of 1995, promotional allowances
were $9.0 million or 8.9% of gross revenues, which represented
the retail value of rooms, food, beverage and other services
provided to customers without charge. The estimated cost of
providing such promotional allowances was $5.4 million. This
compares to the first six months of 1994 when promotional
allowances were $6.7 million, or 8.8% of gross revenues, and the
estimated cost of providing such promotional allowances was $4.2
million.
Depreciation and amortization increased by $1.9 million or
36% to $7.1 million in the first six months of 1995 compared to
$5.2 million in the first six months of 1994. This increase is
attributable to depreciation expense from
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various completed expansion projects such as the Company's
Eastside Expansion (as defined on page 39) and the Phase III
Expansion (as defined on page 39).
Other expenses of the Company increased primarily because of
higher interest expense from increased borrowing levels during
the period along with higher prevailing interest rates.
Borrowing levels increased due to funding costs of the Eastside
Expansion, the Phase III Expansion, and the Phase IV Expansion.
Interest expense in the first six months of 1995 was reduced by
$359,689 because of interest capitalized on amounts expended on
the Phase III Expansion project and the Phase IV Expansion
project. Interest expense in the first six months of 1994 was
reduced by $102,896 because of interest capitalized on amounts
expended on the Eastside Expansion project and the Phase III
Expansion project. Other income for the first six months of 1994
was a one-time gain of $966,510 from a profit participation
agreement on the sale by an affiliate of certain real estate
previously owned by the Company.
Net income for the first six months of 1995 was $9.4 million
or $0.44 per share (fully diluted) compared to $8.8 million or
$0.40 per share (fully diluted) for the first six months of 1994
as a result of the factors discussed above.
YEARS ENDED DECEMBER 31, 1994 AND 1993
Operating profit for the Company increased to $25.8 million
for 1994 from $20.2 million for 1993, an increase of $5.6 million
or 27.5%. Management believes that the improvement in operating
results was due to increased business levels in 1994 as a result
of having an additional 437 hotel suites for nine months of the
year, an addition of approximately 800 slot machines
(approximately 500 slot machines were added in December 1993 and
approximately 300 slot machines were added in November 1994), an
addition of approximately 13 table games and additional
restaurant capacity compared to 1993.
Net revenues for the Company increased to $146.3 million for
1994 from $110.0 million for 1993, an increase of $36.3 million
or 33.0%. Casino revenues increased to $87.2 million for 1994
from $71.3 million for 1993, an increase of $15.9 million or
22.3%. The increase in casino revenues was due primarily to an
increase in slot machine revenues of $9.3 million or 20.4% to
$54.5 million for 1994 from $45.2 million for 1993 and an
increase in table games revenues of $6.0 million or 30.1% to
$25.8 million for 1994 from $19.8 million for 1993, resulting
from the additional slot machines and table games discussed
above.
Room revenues increased to $19.3 million for 1994 from $12.3
million for 1993, an increase of $6.9 million or 56.2%. The
increase in room revenues resulted primarily from the addition of
437 suites during the fourth quarter of 1993 (375 new suites were
placed in service in September 1993 and 62 suites were placed in
service in October 1993), bringing the Company's total to 861
suites available during 1994. Demand for the Rio's suites
remained high during 1994, at 95.9% occupancy compared to 96.8%
occupancy during 1993. The average daily room rate during 1994
was $63.80 compared to $62.60 during 1993.
Food and beverage revenues increased to $47.6 million for
1994 from $32.6 million for 1993, an increase of $15.1 million or
46.3%. The increase was principally due to the successful opening
in February 1994 of a new 430-seat video, entertainment and
restaurant complex, the successful opening in April 1994 of a new
186-seat fine dining restaurant, the successful completion in
November 1994 of a 50% expansion of the Carnival World Buffet to
980 seats, an increase in the number of patrons served in other
Rio restaurants and an increase in the average food check
contributed to the increase in food and beverage revenues.
Other revenues for the year ended December 31, 1994 were
$7.1 million, which included entertainment admission revenues of
$1.9 million, retail sales of $2.6 million and miscellaneous
other operating revenues, primarily telephone revenues, of $2.6
million. This represented an increase in other revenues of $2.9
million, or 69%, compared to the $4.2 million in other revenues
generated during the twelve months ended December 31, 1993. The
increase of $2.9 million was attributable to increases of
approximately $0.9 million in each of admission revenues, retail
sales, and miscellaneous other revenues.
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Management believes that operating efficiencies in the food
and beverage departments improved during 1994 compared to 1993.
Expenses in food and beverage were 81% of food and beverage
revenues during 1994 compared to 85% during 1993. Food and
beverage expense margins improved as a result of an increase in
volume, price increases and effective cost control measures.
Casino profit margins were flat. Casino expenses were 44% of
casino revenue during both 1994 and 1993. Selling, general and
administrative expenses were 14% of net revenues during 1994, of
which $421,367 were expenses related to gaming development. This
compares favorably to 1993 when selling, general and
administrative expenses were 15% of net revenues, which did not
include any material expenditures related to gaming development.
During 1994, promotional allowances were $14.9 million, or
9.2% of gross revenues, which represented the retail value of
rooms, food, beverage and other services provided to customers
without charge. The estimated cost of providing such promotional
allowances was $9.1 million. This compares to 1993 when
promotional allowances were $10.4 million, or 8.6% of gross
revenues, and the estimated cost of providing such promotional
allowances was $6.9 million.
Depreciation and amortization increased to $10.9 million for
1994 from $7.5 million for 1993, an increase of $3.3 million or
44.0%. This increase is attributable to a full year of
depreciation on the Phase II Expansion (as defined on page 39)
which was completed in October 1993, depreciation on the Eastside
Expansion which was completed in phases by April 1994 and
depreciation on the Phase III Expansion projects completed during
1994.
Other income for 1994 was a one-time gain of $1.1 million
related to the resale of certain real estate previously owned by
the Company. A one-time gain of $966,510 related to the sale of
real estate which was sold by the Company to a related party in
December 1991. In April 1994, the real estate was resold to a non-
related party. Pursuant to the terms of the sales agreement
between the Company and the related party, the Company was
entitled to a portion of the resale proceeds, which equaled
$966,510, net of expenses. A one-time gain of $173,500 related to
the sale of real estate owned by the Company until May 1991, when
it was sold to a non-related party. Pursuant to the terms of the
sales agreement, the Company was entitled to a portion of the
resale proceeds or refinancing amount, which equaled $173,500,
net of expenses.
Income before extraordinary items and cumulative effect of a
change in accounting principle increased 36.7% to $16.0 million
or $0.74 per share (fully diluted) for 1994 from $11.7 million or
$0.60 per share (fully diluted) for 1993. The results for 1993
were impacted by the cumulative effect of a change in accounting
principle resulting from the adoption of Financial Accounting
Standards Board Statement No. 109, "Accounting for Income Taxes"
("SFAS 109"). Adoption of SFAS 109 resulted in a one-time, non-
cash charge in the amount of $776,888 or ($0.04) per share (fully
diluted). The results for 1993 were also adversely affected by
the extraordinary loss on early extinguishment of debt, net of
income tax benefit, of $253,711 or ($0.01) per share (fully
diluted).
Net income for 1994 increased 49.9% to $16.0 million or
$0.74 per share (fully diluted) from $10.6 million or $0.55 per
share (fully diluted) for 1993 as a result of the factors
discussed above.
YEARS ENDED DECEMBER 31, 1993 AND 1992
Operating profit for the Company increased to $20.2 million
for 1993 from $12.3 million for 1992, an increase of $7.9 million
or 64.5%. Management believes that the improvement in operating
results was primarily the result of an increase in casino
revenues and food and beverage revenues combined with smaller
increases in operating expenses.
Net revenues for the Company increased to $110.0 million for
1993 from $82.5 million for 1992, an increase of $27.5 million or
33.4%. Casino revenues increased to $71.3 million for 1993 from
$56.5 million for 1992, an increase of $14.8 million or 26.1%.
The increase in casino revenues was due primarily to an increase
in slot machine revenues. Slot machine revenues increased $11.1
million or 32.4% to $45.2 million for 1993 from $34.2 million for
1992. The increase in slot machine revenues resulted primarily
from the addition of approximately 385 slot machines
(approximately 85 slot machines in April 1992 and approximately
300 slot machines in December 1992) while at the same time the
daily win per slot machine slightly increased. Table game
revenues increased by $3.2 million or 19.4% to $19.8 million for
1993 from $16.6 million for 1992. The increase in table game
revenues resulted primarily from a 16.6% increase in volume to
$123.9 million for 1993 from $106.3 million for 1992. Food and
beverage revenues increased to $32.6 million for 1993
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from $21.2 million for 1992, an increase of $11.4 million or
53.9%. The successful opening in December 1992 of an expanded
buffet and an additional lounge, the successful opening in May
1993 of a new 92-seat seafood restaurant, as well as a sizable
increase in the number of patrons served, contributed to the
increase in food and beverage revenues.
Other revenues for the year ended December 31, 1993 were
$4.2 million, which included entertainment admission revenues of
$1.0 million, retail sales of $1.7 million and miscellaneous
other operating revenues, primarily telephone revenues, of $1.5
million. This represented an increase in other revenues of $1.3
million, or 45%, compared to the $2.9 million in other revenues
generated during the twelve months ended December 31, 1992. The
increase of $1.3 million was attributable to increases of $0.6
million in admission revenues, $0.3 million in retail sales, and
$0.4 million in miscellaneous other revenues.
Room revenues increased to $12.3 million for 1993 from $9.6
million in 1992, an increase of $2.7 million, or 28%. The
increase in room revenues resulted primarily from the addition of
437 suites during the fourth quarter of 1993, bringing the
Company's total to 861 suites by October 31, 1993 compared to 424
suites throughout 1992. Occupancy was 96.8% during 1993 compared
to 96.5% during 1992. The average daily room rate during 1993
was $62.60 compared to $64.09 during 1992.
Demand for the Rio's suites remained high during 1993, at
96.8% occupancy compared to 96.5% occupancy during 1992. There
were 424 suites available during 1992. In September 1993, 375 new
suites were placed into service and 62 additional suites were
placed into service in October 1993.
During 1993, promotional allowances were $10.4 million, or
8.6% of gross revenues, which represented the retail value of
rooms, food, beverage and other services provided to customers
without charge. The estimated cost of providing such promotional
allowances was $6.9 million. This compares to 1992 when
promotional allowances were $7.7 million, or 8.6% of gross
revenues, and the estimated cost of providing such promotional
allowances was $5.1 million.
The Company's expense margins improved in 1993 as compared
to 1992. Casino expenses were 44% of casino revenues during 1993
compared to 48% during 1992. Casino expense margins improved as a
result of increased casino activity, particularly in slots, which
has a lower expense margin than other casino games. Expenses in
food and beverage were 85% of food and beverage revenues during
1993 compared to 87% during 1992. Food and beverage expense
margins improved as a result of a sizable increase in the number
of patrons served and effective cost controls.
Net interest expense of the Company was reduced primarily
because of reduced average borrowing during the period. The
Company took advantage of the revolving line of credit feature of
its bank loan by applying cash on hand to reduce borrowing
amounts during most of the year. This was partially offset by a
reduction in interest income. Interest expense was also reduced
by $467,798 because of interest capitalized on amounts expended
on the Phase II Expansion and Eastside Expansion projects.
Income from continuing operations after minority interests
and tax provisions but before extraordinary items and cumulative
effect of a change in accounting principle increased 111.8% to
$11.7 million or $0.60 per share (fully diluted) for 1993 from
$5.5 million or $0.36 per share (fully diluted) for 1992. The
results for 1993 were impacted by the cumulative effect of a
change in accounting principle resulting from the adoption of
SFAS 109 which resulted in a one-time, non-cash charge in the
amount of $776,888 or ($0.04) per share (fully diluted). The
results for 1993 were also adversely affected by the
extraordinary loss on early extinguishment of debt, net of income
tax benefit, of $253,711 or ($0.01) per share (fully diluted).
The results for 1992 were affected by an extraordinary credit of
$793,511 or $0.05 per share (fully diluted), reflecting a
reduction of federal income taxes arising from the carryforward
of prior years' operating losses.
Net income for 1993 increased 68.8% to $10.6 million or
$0.55 per share (fully diluted) from $6.3 million or $0.41 per
share (fully diluted) for 1992 as a result of the factors
discussed above.
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IMPACT OF INFLATION
Absent changes in competitive and economic conditions or in
specific prices affecting the industry, the Company believes that
the hotel-casino industry may be able to maintain its real
operating profit margins in periods of general inflation by
increasing minimum wagering limits for its games and increasing
the prices of its hotel rooms, food and beverage and other items,
and by taking actions designed to increase the number of patrons.
The industry may be able to maintain growth in gaming revenues by
the tendency of customer gaming budgets to increase with
inflation. Changes in specific prices (such as fuel and
transportation prices) relative to the general rate of inflation
may have a material effect on the hotel-casino industry.
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BUSINESS
The Company owns and operates the country's only all-suite
hotel-casino, the Rio Suite Hotel & Casino in Las Vegas, Nevada.
Situated on a 45-acre elevated site adjacent to a major exit from
Interstate 15, the freeway linking Las Vegas with Southern
California, the Rio is strategically positioned to attract
travelers along Interstate 15, tourists visiting the Las Vegas
Strip and local Las Vegas residents. The Company markets to both
local residents and Las Vegas visitors. Management believes that
the Rio's unique all-suite concept, diverse high quality dining,
easy access and ample parking provide an attractive alternative
to the Strip and a fun and comfortable environment in which to
enjoy gaming, dining and entertainment.
Decorated throughout in a fun-filled Brazilian Carnival and
rain forest theme, the Rio is currently comprised of an 89,000
square foot casino, three 21-story hotel towers containing 1,410
suites, eight restaurants, seven bars, a 430-seat entertainment
complex, meeting and banquet space, a 59,000 square foot outdoor
entertainment area featuring a landscaped sand beach and two
swimming pools and parking for over 3,200 cars. The Rio's casino
offers approximately 2,200 slot machines, 65 table games, a poker
room, keno and a race and sports book.
The Rio originally opened in 1990 with 424 suites and 44,000
square feet of casino space. Within the past three years the Rio
has been expanded to its present configuration in three major
phases in accordance with its original master plan. In the fall
of 1993, the Company added a second hotel tower with 437 suites,
a new restaurant and meeting rooms through its $37 million
expansion (the "Phase II Expansion"). In April 1994, the Company
completed its $25 million expansion (the "Eastside Expansion")
which comprised a 25,000 square foot addition to the casino, a
two-story parking garage, a new restaurant and the Copacabana
showroom. In April 1995, Rio completed its $75 million expansion
(the "Phase III Expansion") which encompassed a third hotel
tower with 549 suites, 10,000 square feet of casino space, a new
three-level parking garage and a 50% expansion to its award
winning Carnival World Buffet. In April 1995, the Company
commenced construction of its Phase IV Expansion. The
approximately $20 million project will add 144 suites, add
approximately 5,400 square feet of meeting room space, double the
size of the existing Buzios seafood restaurant, add a new health
club and salon facility and include a variety of back-of-the-
house improvements. Completion of the Phase IV Expansion is
expected to occur in stages through the end of 1995 and will
bring the Rio's total number of hotel suites to 1,554.
On March 29, 1995, the Company announced that it had
retained Montgomery Securities to assist in evaluating various
strategic alternatives for the Company. In June 1995, the Company
announced that it is moving forward with its three-phased
expansion and development plan to be implemented over the next
several years. The Company elected to pursue this course of
action after giving consideration to the strategic alternatives
analysis completed by Montgomery Securities. While Montgomery
Securities will continue to serve as financial advisor to the
Company, the Company is not presently exploring other strategic
alternatives. The three-phased expansion and development plan
consists of the Phase V Expansion at the Rio, acquisition of
approximately 22 acres of land adjacent to the Rio to be master-
planned for the development of another hotel-casino and the
purchase of approximately 64 acres southeast of Las Vegas for
possible future hotel-casino development.
The Company was incorporated in California in 1981 and
reincorporated in Nevada in 1988. The Company changed its name
from MarCor Resorts, Inc. to Rio Hotel & Casino, Inc. in February
1992. Its executive offices are located at 3700 West Flamingo
Road, Las Vegas, Nevada 89103, and its telephone number is (702)
252-7733.
PHASE V EXPANSION
The Phase V Expansion will center around a 40-story curved
tower located immediately southeast of the existing towers. The
Phase V Expansion is planned to include 120,000 square feet of
public space containing a casino expansion with 600 slot machines
and 27 table games, new retail and entertainment space and
additional restaurants, including a medium priced restaurant at
the top of the tower overlooking the Strip, as well as an
expanded pool and beach area and additional parking facilities.
The new suites will be similar in size and decor to the existing
suites. In addition, the Phase V Expansion will add two new night
clubs with different themes to provide a variety of nighttime
entertainment.
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As currently contemplated, the public area expansion will be
based upon a Brazilian Carnival Mardi Gras theme. The new casino
area will provide regular entertainment, as periodically a themed
overhead entertainment attraction will provide an interactive
show with patrons. The attraction will feature performers dressed
in festive attire who will sing, dance and throw free tokens and
beads to patrons. The attraction may change to celebrate
different holidays and special events.
Management believes the Phase V Expansion will increase the
number of tour and travel customers while enhancing the amenities
available to local patrons. Given the Rio's high average
occupancies and significant room turnaways, management believes
that the additional room inventory will be successfully absorbed.
Construction commenced in September 1995. Opening of the Phase V
Expansion is expected to occur in the spring of 1997.
BUSINESS STRATEGY
The Company's business strategy focuses on attracting and
fostering repeat business from customers in the local resident
and tourist markets. To implement its business strategy, the
Company capitalizes on its unique all-suite concept, strategic
location and Brazilian Carnival theme. The Company strives to
provide a quality, affordable gaming and entertainment experience
in order to generate high customer satisfaction and loyalty. The
Rio's value-priced suites provide an attractive alternative to
conventional Las Vegas rooms for visitors who desire to avoid the
crowds and congestion of the Strip. The Interstate 15 and
Flamingo Road location is also ideal for attracting local
residents.
To encourage repeat visits, the Company attempts to ensure
that each customer has an enjoyable, high quality and high value
experience. Management believes that it must offer consistent
quality, a comfortable and fun atmosphere and, most importantly,
friendly service at affordable prices to provide a high value
experience to its customers. Accordingly, the Rio's suites offer
guests approximately 50% more space than comparably priced Las
Vegas hotel rooms. Similarly, the Company's restaurants have won
awards year after year for their quality dining. All of the Rio's
restaurants offer generous portions of high quality food at
reasonable prices which management believes is a major factor in
attracting the value-conscious local customer.
Management believes that friendly service combined with a
quality facility are integral to generating repeat business from
locals as well as tourists. As a result, management continually
seeks to instill in each employee a sense of service excellence
designed to exceed guest expectations. To motivate its employees,
management also strives to instill a sense of "Team Rio" in all
of the Company's employees by making the Rio a fun place to work.
Management strongly believes that its employees are one of the
Company's biggest assets.
The Company has created an identifiable and innovative
marketing presence and continues to build on its "signature" Rio
theme. The Rio's Brazilian Carnival and rain forest theme
incorporates bright colors, creative interior designs, festive
employee costumes and other exotic touches to contribute to its
tropical ambiance. The Rio's message of a fun-filled, colorful
atmosphere is constantly emphasized. The Rio has developed the
Rio RitaTM character as a promotional ambassador to the Rio's
hotel-casino guests and as a focal point upon which many
promotional activities have been built, such as Rio Rita'sTM
Paycheck Poker Wheel, Carnival DiceTM, the Jackpot JungleTM, Rio
Rita'sTM Lotto Bucks, Carnival DaysTM, CopacabanaTM Dinner Show,
Conga ManiaTM and Brazilia DaysTM. The Company advertises
extensively in the Las Vegas area print, television and radio
media, and periodically in Southern California, Phoenix and other
regional markets.
The success of the Company's business strategy is evidenced
by the large number of awards the Rio has received. In March
1995, the Rio won recognition through 10 "Best of Las Vegas"
awards in an annual readers' survey published by Nevada's largest
daily newspaper. Among others, these distinctions included: "Best
Buffet," "Best Italian Restaurant," "Best Coffee Shop," "Best
Steakhouse," "Friendliest Employees" and "Most Efficient
Service." In addition, the Rio received recognition in the 1995
Zagat U.S. HOTELS, RESORTS & SPAS SURVEY "Best Rooms," "Best
Dining," "Best Service" and "Best Overall" in Las Vegas. Since
these awards, however, are based upon subjective criteria,
prospective holders of the New Notes should not attribute undue
significance to these awards. Management believes that these
awards exemplify the Company's reputation for quality and value.
40
<PAGE>
MARKETING STRATEGY
The Company's marketing efforts are targeted at both the
local patron and the tourist market. To market to local patrons,
the Rio relies on its convenient location, its ample parking, its
value-priced food and its slot machine variety. Management
believes that its restaurants, in particular the Carnival World
Buffet, are one of the Rio's greatest attractions for local
patrons. The Carnival World Buffet is one of the most popular
buffets in Las Vegas due to its extensive selections, its high
quality food and the entertainment provided by the live-action
cooking stations. Since February 1995, when the Company initiated
its special buffet promotion, the Carnival World Buffet has
served an average of 8,500 people per day. In addition to its
emphasis on food and beverage, the Rio also has an aggressive
marketing program which encompasses frequent radio, television
and newspaper advertising, a variety of promotions directed at
the local customer and other programs such as check cashing
promotions.
To attract visitors and fill the Rio's hotel rooms, the
Company markets primarily to three segments of the tourist
market: independent travel, wholesale and special casino
customers. The independent travel segment consists of those
travelers not affiliated with groups who make their reservations
directly with the Rio or through independent travel agents. To
attract the independent traveler, the Rio periodically utilizes
print media, radio and direct mail to advertise in Southern
California, Phoenix and other regional travel markets. In
addition, the Company's sales force frequently attends trade
shows in order to establish relationships with and promote the
Rio to travel agents nationwide. The wholesale segment comprises
those patrons participating in travel packages offered by air
tour operators. To capture this segment of the market, the Rio
has developed specialized marketing programs for, and cultivated
relationships with, these operators. Finally, special casino
customers are those frequent gaming customers who are in regular
communication with Rio casino marketing personnel. The Rio
utilizes a variety of promotions and special events and other
amenities in marketing to this segment.
RIO LOCATION
The Rio is strategically located to take advantage of the
dynamic residential and commercial growth of the western portion
of metropolitan Las Vegas, while offering proximity and easy
access to the "Old Four Corners" (Flamingo Road and the Strip)
and the "New Four Corners" (Tropicana Avenue and the Strip) areas
of the Las Vegas Strip.
THE RIO
Since 1992, the Company has consistently expanded the Rio
under its master plan. Upon the completion of both the Phase IV
Expansion and Phase V Expansion, the Rio will have approximately
2,550 suites, 2,800 slot machines and 92 table games.
<TABLE>
<CAPTION>
APPROXIMATE
AS OF TOTALS AFTER
JUNE 30, AS OF DECEMBER 31,(1) COMPLETION OF:
1995(1) 1994 1993 1992 PHASE IV PHASE V
<S> <C> <C> <C> <C> <C> <C>
Casino square footage 89,000 89,000 79,000 54,000 89,000 120,000
Slot machines 2,163 2,200 1,950 1,450 2,200 2,800
Table games 65 53 44 31 65 92
Hotel suites 1,410 861 861 424 1,554 2,550
Average daily hotel occupancy 95.7% 95.9% 96.8% 96.5% - -
Average daily room rate $73.00 $63.80 $62.60 $64.09 - -
Restaurant seats 2,440 2,440 1,843 1,209 2,530 4,230
<FN>
(1) Figures for December 31, 1992, 1993 and 1994 are for the
year ended as of such dates, and figures for June 30, 1995 are
for the six-month period ended as of such date.
</FN>
</TABLE>
GAMING. The Rio has 89,000 square feet of casino space. The
casino currently has approximately 2,200 slot machines; 65 table
games, including "21," craps, roulette, pai gow poker, Caribbean
stud poker and mini-baccarat; other casino games such as keno and
poker; and a race and sports book.
41
<PAGE>
Gaming operations at the Rio are continually being monitored
and modified to respond to both changing market conditions and
customer demand in an effort to attract new customers while
retaining its existing customer base. New and innovative slot and
table games have been introduced based on customer feedback and
demand from both local customers and Las Vegas visitors.
Management has introduced such games as Survival DiceTM, Rio
Rita'sTM Royals, Rio Rita'sTM Bonus Poker, Sneaky QueensTM, Mambo
BucksTM and Rio Rita'sTM Paycheck Poker Wheel. Management devotes
substantial time and attention to the type, location and player
activity of all slot machines. The Company believes that to
continue to attract and retain slot customers, it must expand the
number and variety of slot machines on its casino floor,
particularly its higher denomination slot machines.
HOTEL. The Rio's 21-story hotel towers contain a total of
1,410 suites, comprised of 1,366 standard Rio suites, 14 "super"
suites, 17 "cariocas" suites, six two-story penthouse suites, and
seven executive suites that combine a conference room and an
adjoining suite. The Company has progressively added new hotel
suites since 1993 to meet its consistently strong demand. Despite
such expansion, the Rio has maintained average occupancy rates of
96.8% and 95.9% for 1993 and 1994, respectively. During 1993 and
1994, management believes that approximately two potential room
night bookings were turned away for each room night booking
accepted. The Phase IV Expansion will add an additional 144
suites with completion expected by year-end 1995, and the Phase V
Expansion will add another 1,000 suites in the spring of 1997.
The standard Rio suite measures approximately 600 square
feet, compared to approximately 400 square feet for the typical
Las Vegas hotel room. The Brazilian Carnival and rain forest
theme is carried throughout the guest suites in wall coverings,
art work and other designer accents. Suite amenities include
carved wood finishes, cut glass, polished granite surfaces,
marble tile in the bath areas, room safes and refrigerators.
RESTAURANTS. While important to attracting Las Vegas
visitor gaming customers, the high quality, value and variety of
food services are critical to consistently attracting the local
resident gaming customer to the Rio. To provide such variety,
seven bars and eight restaurants are located in the Rio's main
floor area. The Rio currently serves an average of approximately
14,000 meals per day, including banquets and room service. The
following table sets forth, for each restaurant, the type of
service provided and the seating capacity:
<TABLE>
<CAPTION>
TYPE ENTREE PRICE NUMBER OF
RANGE ($) SEATS
<S> <C> <C> <C>
All American Bar & Grille Award-winning steaks, ribs, chicken and seafood 12-37 202
Antonio's Award-winning Italian fine-dining 14-35 116
Beach Cafe 24-hour full menu coffee shop featuring American and 7-15 314
Chinese cuisine
Buzios Seafood and oyster bar 10-46 92
Carnival World Buffet Award-winning buffet with live action cooking 4-8 980
featuring Brazilian, Chinese, Italian, Mexican,
Japanese, Western BBQ and traditional buffet
Toscano's Deli & Market Deli items, pizza and pasta, ice cream and gelato, and 2-15 120
a large selection of bakery products
Copacabana Showroom Copacabana Dinner Show and Club Rio nightclub 46 430
Fiore Rotisserie & Grille Fine-dining featuring rotisserie-grilled seafood, beef 21-48 186
and poultry
Total 2,440
</TABLE>
42
<PAGE>
ENTERTAINMENT AND OTHER ATTRACTIONS. The Rio's Copacabana
Showroom is a unique, circular 430-seat video, entertainment and
restaurant complex which features two 12-foot by 90-foot video
screens, an exhibition cooking area, multiple tiers of dining
room seating and a stage. The Copacabana Showroom features the
Copacabana Dinner Show, a musical review designed around the
Rio's theme. After the dinner show the Copacabana Showroom is
converted into Club Rio, a late-night dance club. The showroom is
also used for casino-hosted events, concerts, viewing of sporting
events on the large video screens, and corporate meetings that
capitalize on the unique audio visual qualities of the room.
The Ipanema Lounge and Mambo's Lounge each offer live
entertainment in separate casino cocktail settings. The Rio also
houses a gift shop, a Rio logo shop, a hair and beauty salon, and
an exercise room, as well as approximately 13,250 square feet of
public meeting and banquet room facilities.
The Rio's pool/outdoor entertainment area is approximately
59,000 square feet and includes a landscaped sand beach, an 11-
foot waterfall, two swimming pools, a multi-level spa, and a
terrace bar and food service facility. The Company hosts beach
parties, volleyball games, outdoor concerts with name performers
and other special events, including professional sporting events.
EXPANSION STRATEGY
RIO MASTER PLAN. The Rio's conceptual master plan was
originally designed to accommodate multiple expansions without
significantly interrupting normal business operations. This
design included construction of a reinforced foundation for the
hotel tower and a elevator core to support and facilitate
additional room construction. The Company has also assembled
ample acreage to allow future expansions. Starting from its
original 30 acres, the Company acquired additional acreage in
1989 and 1991, bringing the current Rio site to 45 acres
exclusive of the additional 22 acres currently under acquisition
as described elsewhere herein.
Management believes that a high quality, well-maintained
property offering innovative entertainment is integral to success
in the highly competitive Las Vegas gaming market. This belief
has driven the Company's master plan development strategy. The
Company has added substantial new facilities at the Rio every
year since 1992.
<TABLE>
<CAPTION>
START DATE OPENING
<S> <C> <C>
Initial Construction 12/88 1/90
Casino (10,000 sq. ft.)/Buffet Expansion 7/92 12/92
Phase II Expansion
Buzios Restaurant 1/93 5/93
Meeting Rooms 1/93 8/93
437-Suite Tower 1/93 9/93
Eastside Expansion
Two-Story Parking Garage 7/93 10/93
Casino Space (25,000 sq. ft.) 7/93 12/93
Copacabana Showroom 7/93 2/94
Fiore Restaurant 7/93 4/94
Expanded Pool Area 7/93 4/94
Phase III Expansion
Three-Story Parking Garage 5/94 8/94
Casino Space (10,000 sq. ft.) 5/94 11/94
Buffet Expansion 5/94 11/94
549-Suite Tower 5/94 2/95
</TABLE>
43
<PAGE>
To date, the Company has invested a total of approximately
$245 million in the development, expansion and renovation of the
Rio. The Phase IV and Phase V Expansions will continue the Rio's
commitment to continued development and provide new, innovative
entertainment attractions.
In April 1995, the Company commenced construction of the
approximately $20 million Phase IV Expansion. The project will
add 144 suites to the existing 1,410 suites, add approximately
5,400 square feet of meeting room space, double the size of the
existing Buzios seafood restaurant to approximately 180 seats,
add a new health club and salon facility and include a variety of
back-of-the-house improvements. Completion of the Phase IV
Expansion is expected to occur in stages through the end of 1995
and will bring the Rio's total number of hotel suites to 1,554
suites.
In May 1995, the Company announced the approximately $185
million Phase V Expansion. The expansion is planned to include
120,000 square feet of public space containing a casino expansion
with 600 slot machines and 27 table games, new retail and
entertainment space and additional restaurants, as well as an
expanded pool and beach area and additional parking facilities.
The public area expansion will be based on a Brazilian Carnival
Mardi Gras theme. Construction commenced in September 1995 and
opening is expected to occur in the spring of 1997.
ADDITIONAL GAMING OPPORTUNITIES. The Company has also
entered into commitments to acquire approximately 22 acres of
land adjacent to the Rio site, bringing the total Rio acreage to
approximately 67 acres. The entire Rio site is now being master-
planned for the development of another hotel-casino, the size and
timing of which has not yet been determined.
As the third step in its strategic plan to provide further
growth for the Company, the Company purchased approximately 64
acres southeast of Las Vegas. The Old Vegas Site, already zoned
for a hotel-casino, is situated where the Boulder Highway enters
the Las Vegas valley from Phoenix and Laughlin along U.S. Highway
93-95. The timing and scale of the proposed development has not
yet been determined. Moreover, the Company may pursue additional
opportunities that management believes to be in the best
interests of the Company.
COMPETITION
The gaming industry includes land-based casinos, dockside
casinos, riverboat casinos, casinos located on Native American
land and other forms of legalized gaming. There is intense
competition among companies in the gaming industry, some of which
have significantly greater resources than the Company.
The Rio faces competition from all other casinos and hotels
in the Las Vegas area, including competitors located on the Las
Vegas Strip, on the Boulder Highway and in downtown Las Vegas.
Such competition includes several hotel/casinos targeted
primarily toward local residents, as well as numerous non-hotel
gaming facilities targeted toward local residents. In recent
months, several of the Company's direct competitors have opened
new hotel-casinos or have commenced or completed major expansion
projects, and other expansions are in progress or are planned.
Currently, there are approximately 27 major gaming properties
located on or near the Las Vegas Strip, 12 located in the
downtown area and several located in other areas of Las Vegas.
Several new properties opened during the fourth quarter of 1993,
which increased the number of hotel and motel rooms in the Las
Vegas market by approximately 11,500 rooms or 15%, to a total of
approximately 86,560 rooms. Four new major resort projects have
been announced and are expected to be completed within the next
two years, adding approximately 10,000 more rooms. Each of these
facilities has a theme and an attraction which are expected to
draw significant numbers of visitors. Any other major expansions
or enhancements of existing properties or the construction of new
properties by competitors, could have a material adverse effect
on the Company's business.
To a lesser extent, the Rio competes with hotel-casinos
located in the Laughlin and Reno-Lake Tahoe areas of Nevada and
in Atlantic City, New Jersey. The Company also competes with
state-sponsored lotteries, on- and off-track wagering, card
parlors, riverboat and Native American gaming ventures and other
forms of legalized gaming in the United States, as well as with
gaming on cruise ships and international gaming operations. In
addition, certain states have recently legalized, and several
other states are currently considering legalizing, casino gaming
in specific geographic areas within those states. The Company
believes that the recent widespread legalization of gaming is
being fueled by a
44
<PAGE>
combination of increasing popularity and acceptability of gaming
activities and the desire and need for states and local
communities to generate revenues without increasing general
taxation. The Company believes that the legalization of unlimited
land-based casino gaming in or near any major metropolitan area,
such as Chicago or Los Angeles, could have a material adverse
effect on its current hotel-casino business. The development of
casinos, lotteries and other forms of gaming in other states,
particularly in areas close to Nevada, such as California, could
adversely affect the Company's operations.
As its principal methods of competition, the Company
utilizes what management believes to be its unique all-suite
concept based upon a Brazilian Carnival and rain forest theme,
diverse high quality dining and ample parking, which management
believes provide an attractive alternative to the closest source
of the Company's competition, the Las Vegas Strip, and a fun and
comfortable environment in which to enjoy gaming, dining and
entertainment.
REGULATION AND LICENSING
The ownership and operation of casino gaming facilities in
Nevada are subject to: (i) the Nevada Gaming Control Act and the
regulations promulgated thereunder (collectively, "Nevada Act");
and (ii) various local regulations. The Company's gaming
operations are subject to the licensing and regulatory control of
the Nevada Commission, the Nevada State Gaming Control Board (the
"Nevada Board"), and the Clark County Liquor and Gaming Licensing
Board (the "Clark County Board"). The Nevada Commission, the
Nevada Board, and the Clark County Board are collectively
referred to as the "Nevada Gaming Authorities."
The laws, regulations and supervisory procedures of the
Nevada Gaming Authorities are based upon declarations of public
policy which are concerned with, among other things: (i) the
prevention of unsavory or unsuitable persons from having a direct
or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible
accounting practices and procedures; (iii) the maintenance of
effective controls over the financial practices of licensees,
including the establishment of minimum procedures for internal
fiscal affairs and the safeguarding of assets and revenues,
providing reliable record keeping and requiring the filing of
periodic reports with the Nevada Gaming Authorities; (iv) the
prevention of cheating and fraudulent practices; and (v) to
provide a source of state and local revenues through taxation and
licensing fees. Changes in such laws, regulations and procedures
could have an adverse effect on the Company's gaming operations.
The Company, which operates the casino, is required to be
licensed by the Nevada Gaming Authorities. The gaming license
requires the periodic payment of fees and taxes and is not
transferable. The Company is registered by the Nevada Commission
as a publicly traded corporation ("Registered Corporation") and
as such, it is required periodically to submit detailed financial
and operating reports to the Nevada Commission and furnish any
other information which the Nevada Commission may require. The
Company has obtained from the Nevada Gaming Authorities the
various registrations, approvals, permits and licenses required
in order to engage in gaming activities in Nevada.
The Nevada Gaming Authorities may investigate any individual
who has a material relationship to, or material involvement with,
the Company in order to determine whether such individual is
suitable or should be licensed as a business associate of a
gaming licensee. Officers, directors and certain key employees of
the Company must file applications with the Nevada Gaming
Authorities and may be required to be licensed or found suitable
by the Nevada Gaming Authorities. Officers, directors and key
employees of the Company who are actively and directly involved
in gaming activities of the Company may be required to be
licensed or found suitable by the Nevada Gaming Authorities. The
Nevada Gaming Authorities may deny an application for licensing
for any cause which they deem reasonable. A finding of
suitability is comparable to licensing, and both require
submission of detailed personal and financial information
followed by a thorough investigation. The applicant for licensing
or a finding of suitability must pay all the costs of the
investigation. Changes in licensed positions must be reported to
the Nevada Gaming Authorities and in addition to their authority
to deny an application for a finding of suitability or licensure,
the Nevada Gaming Authorities have jurisdiction to disapprove a
change in a corporate position.
If the Nevada Gaming Authorities were to find an officer,
director or key employee unsuitable for licensing or unsuitable
to continue having a relationship with the Company, the Company
would have to sever all relationships with
45
<PAGE>
such person. In addition, the Nevada Commission may require
the Company to terminate the employment of any person who
refuses to file appropriate applications. Determinations of
suitability or of questions pertaining to licensing are not
subject to judicial review in Nevada.
The Company is required to submit detailed financial and
operating reports to the Nevada Commission. Substantially all
material loans, leases, sales of securities and similar financing
transactions by the Company must be reported to, or approved by,
the Nevada Commission.
If it were determined that the Nevada Act was violated by
the Company, the gaming licenses it holds could be limited,
conditioned, suspended or revoked, subject to compliance with
certain statutory and regulatory procedures. In addition, the
Company and the persons involved could be subject to substantial
fines for each separate violation of the Nevada Act at the
discretion of the Nevada Commission. Further, a supervisor could
be appointed by the Nevada Commission to operate the Company's
gaming properties and, under certain circumstances, earnings
generated during the supervisor's appointment (except for the
reasonable rental value of the Company's gaming properties) could
be forfeited to the State of Nevada. Limitation, conditioning or
suspension of any gaming license or the appointment of a
supervisor could (and revocation of any gaming license would)
materially adversely affect the Company's gaming operations.
Any beneficial holder of the Company's voting securities,
regardless of the number of shares owned, may be required to file
an application, be investigated, and have his suitability as a
beneficial holder of the Company's voting securities determined
if the Nevada Commission has reason to believe that such
ownership would otherwise be inconsistent with the declared
policies of the State of Nevada. The applicant must pay all costs
of investigation incurred by the Nevada Gaming Authorities in
conducting any such investigation.
The Nevada Act requires any person who acquires more than 5%
of the Company's voting securities to report the acquisition to
the Nevada Commission. The Nevada Act requires that beneficial
owners of more than 10% of the Company's voting securities apply
to the Nevada Commission for a finding of suitability within 30
days after the Chairman of the Nevada Board mails the written
notice requiring such filing. Under certain circumstances, an
"institutional investor," as defined in the Nevada Act, which
acquires more than 10%, but not more than 15%, of the Company's
voting securities may apply to the Nevada Commission for a waiver
of such finding of suitability if such institutional investor
holds the voting securities for investment purposes only. An
institutional investor shall not be deemed to hold voting
securities for investment purposes unless the voting securities
were acquired and are held in the ordinary course of business as
an institutional investor and not for the purpose of causing,
directly or indirectly, the election of a majority of the members
of the board of directors of the Company, any change in the
Company's corporate charter, bylaws, management, policies or
operations of the Company, or any of its gaming affiliates, or
any other action which the Nevada Commission finds to be
inconsistent with holding the Company's voting securities for
investment purposes only. Activities which are not deemed to be
inconsistent with holding voting securities for investment
purposes only include: (i) voting on all matters voted on by
stockholders; (ii) making financial and other inquiries of
management of the type normally made by securities analysts for
informational purposes and not to cause a change in its
management, policies or operations; and (iii) such other
activities as the Nevada Commission may determine to be
consistent with such investment intent. If the beneficial holder
of voting securities who must be found suitable is a corporation,
partnership or trust, it must submit detailed business and
financial information including a list of beneficial owners. The
applicant is required to pay all costs of investigation.
Any person who fails or refuses to apply for a finding of
suitability or a license within 30 days after being ordered to do
so by the Nevada Commission or the Chairman of the Nevada Board,
may be found unsuitable. The same restrictions apply to a record
owner if the record owner, after request, fails to identify the
beneficial owner. Any stockholder found unsuitable and who holds,
directly or indirectly, any beneficial ownership of the common
stock of a Registered Corporation beyond such period of time as
may be prescribed by the Nevada Commission may be guilty of a
criminal offense. The Company is subject to disciplinary action
if, after it receives notice that a person is unsuitable to be a
stockholder or to have any other relationship with the Company,
the Company (i) pays that person any dividend or interest upon
voting securities of the Company, (ii) allows that person to
exercise, directly or indirectly, any voting right conferred
through securities held by that person, (iii) pays remuneration
in any form to that person for services rendered or
46
<PAGE>
otherwise, or (iv) fails to pursue all lawful efforts to require
such unsuitable person to relinquish his voting securities for
cash at fair market value.
The Nevada Commission may, in its discretion, require the
holder of any debt security of a Registered Corporation to file
applications, be investigated and be found suitable to own the
debt security of a Registered Corporation. If the Nevada
Commission determines that a person is unsuitable to own such
security, then pursuant to the Nevada Act, the Registered
Corporation can be sanctioned, including the loss of its
approvals, if without the prior approval of the Nevada
Commission, it: (i) pays to the unsuitable person any dividend,
interest, or any distribution whatsoever; (ii) recognizes any
voting right by such unsuitable person in connection with such
securities; (iii) pays the unsuitable person remuneration in any
form; or (iv) makes any payment to the unsuitable person by way
of principal, redemption, conversion, exchange, liquidation or
similar transaction.
The Company is required to maintain a current stock ledger
in Nevada which may be examined by the Nevada Gaming Authorities
at any time. If any securities are held in trust by an agent or
by a nominee, the record holder may be required to disclose the
identity of the beneficial owner to the Nevada Gaming
Authorities. A failure to make such disclosure may be grounds for
finding the record holder unsuitable. The Company is also
required to render maximum assistance in determining the identity
of the beneficial owner. The Nevada Commission has the power to
require the Company's stock certificates to bear a legend
indicating that the securities are subject to the Nevada Act.
The Company may not make a public offering of its securities
without the prior approval of the Nevada Commission if the
securities or proceeds therefrom are intended to be used to
construct, acquire or finance gaming facilities in Nevada, or to
retire or extend obligations incurred for such purposes. On
July 27, 1995, the Nevada Commission granted the Company prior
approval to make public offerings for a period of one year,
subject to certain conditions ("Shelf Approval"). However, the
Shelf Approval may be rescinded for good cause without prior
notice upon the issuance of an interlocutory stop order by the
Chairman of the Nevada Board. Such approval does not constitute a
finding, recommendation or approval by the Nevada Commission or
the Nevada Board as to the accuracy or adequacy of the prospectus
or the investment merits of the securities. Any representation to
the contrary is unlawful.
Changes in control of the Company through merger,
consolidation, stock or asset acquisitions, management or
consulting agreements, or any act or conduct by a person whereby
he obtains control, may not occur without the prior approval of
the Nevada Commission. Entities seeking to acquire control of a
Registered Corporation must satisfy the Nevada Board and Nevada
Commission in a variety of stringent standards prior to assuming
control of such Registered Corporation. The Nevada Commission may
also require controlling stockholders, officers, directors and
other persons having a material relationship or involvement with
the entity proposing to acquire control, to be investigated and
licensed as part of the approval process relating to the
transaction.
The Nevada legislature has declared that some corporate
acquisitions opposed by management, repurchases of voting
securities and corporate defense tactics affecting Nevada gaming
licensees, and Registered Corporations that are affiliated with
those operations, may be injurious to stable and productive
corporate gaming. The Nevada Commission has established a
regulatory scheme to ameliorate the potentially adverse effects
of these business practices upon Nevada's gaming industry and to
further Nevada's policy to: (i) assure the financial stability of
corporate gaming operators and their affiliates; (ii) preserve
the beneficial aspects of conducting business in the corporate
form; and (iii) promote a neutral environment for the orderly
governance of corporate affairs. Approvals are, in certain
circumstances, required from the Nevada Commission before the
Company can make exceptional repurchases of voting securities
above the current market price thereof and before a corporate
acquisition opposed by management can be consummated. The Nevada
Act also requires prior approval of a plan of recapitalization
proposed by the Company's Board of Directors in response to a
tender offer made directly to the Registered Corporation's
stockholders for the purposes of acquiring control of the
Registered Corporation.
Licensee fees and taxes, computed in various ways depending
on the type of gaming or activity involved, are payable to the
State of Nevada and to the counties and cities in which the
Nevada licensee's respective operations are conducted. Depending
upon the particular fee or tax involved, these fees and taxes are
payable either monthly, quarterly or annually and are based upon
either: (i) a percentage of the gross revenues received; (ii) the
number of gaming devices operated; or (iii) the number of
table games operated. A casino entertainment tax is also
paid by casino operations where
47
<PAGE>
entertainment is furnished in connection with the selling of
food or refreshments. Nevada licensees that hold a license as an
operator of a slot route, or a manufacturer's or distributor's
license, also pay certain fees and taxes to the State of Nevada.
Any person who is licensed, required to be licensed,
registered, required to be registered, or is under common control
with such persons (collectively, "Licensees"), and who proposes
to become involved in a gaming venture outside of Nevada is
required to deposit with the Nevada Board, and thereafter
maintain, a revolving fund in the amount of $10,000 to pay the
expenses of investigation of the Nevada Board of their
participation in such foreign gaming. The revolving fund is
subject to increase or decrease at the discretion of the Nevada
Commission. Thereafter, Licensees are required to comply with
certain reporting requirements imposed by the Nevada Act.
Licensees are also subject to disciplinary action by the Nevada
Commission if they knowingly violate any laws of the foreign
jurisdiction pertaining to the foreign gaming operation, fail to
conduct the foreign gaming operation in accordance with the
standards of honesty and integrity required of Nevada gaming
operations, engage in activities that are harmful to the State of
Nevada or its ability to collect gaming taxes and fees, or employ
a person in the foreign operation who has been denied a license
or finding of suitability in Nevada on the ground of personal
unsuitability.
EMPLOYEES
As of July 31, 1995, the Company employed approximately
2,900 employees. The Rio occasionally employs part-time workers.
None of the Company's employees is covered by collective
bargaining agreements. The Company believes that its relationship
with its employees is good.
PROPERTIES
The Company owns the 45-acre site in Las Vegas on which the
Rio is located. The Rio site is subject to a deed of trust
securing the Rio Bank Loan, of which $125 million and $0 were
outstanding at December 31, 1994 and July 31, 1995, respectively.
The Company is in the process of accumulating 22 acres of land
adjacent to the current Rio site. In March 1995, the Company
purchased approximately five of such acres of improved land (the
"Warehouse Site"). The Company also entered into agreements to
acquire the remaining approximately 17 additional acres of land,
bringing the total Rio acreage to approximately 67 acres. The
entire Rio site, including the Warehouse Site and the additional
property the Company is acquiring, is now being master-planned
for the development of another hotel-casino, the size and timing
of which has not yet been determined. In May 1995, the Company
purchased approximately 64 acres of the Old Vegas Site on Boulder
Highway southeast of Las Vegas. The Company is presently
considering various development options for the property.
LEGAL PROCEEDINGS
On April 26, 1994 and May 10, 1994, complaints
("Complaints") in purported class action lawsuits were filed in
the United States District Court, Middle District of Florida (the
"Florida Federal Court"), against 41 manufacturers, distributors
and casino operators of video poker and electronic slot machines,
including the Company. The Complaints allege that the defendants
have engaged in a course of conduct intended to induce persons to
play such games based on a false belief concerning how the gaming
machines operate, as well as the extent to which there is an
opportunity to win on a given play. One Complaint alleges
violations of the Racketeer Influenced and Corrupt Organizations
Act (the "RICO Act"), as well as claims of common law fraud,
unjust enrichment and negligent misrepresentation, and seeks
damages in excess of $1 billion without any substantiation of
that amount. The other Complaint alleges violations of the RICO
Act and seeks damages in excess of $1 billion without any
substantiation of that amount. The Complaints have been
consolidated and have been transferred to the United States
District Court for the District of Nevada (the "Nevada Federal
Court"). The Florida Federal Court deferred action on the
Company's motion requesting abstention and did not rule on class
certification. The Company expects those motions to be heard by
the Nevada Federal Court. On September 26, 1995, an additional
purported class action lawsuit was filed ("New Complaint") in the
Nevada Federal Court which, except for the plaintiff and facts
peculiar to the plaintiff, was substantially identical to the
Complaints. Management
48
<PAGE>
believes that the Complaints and the New Complaints are without
merit and intends to defend vigorously the allegations
contained therein.
The Company has been advised that a purported class action
lawsuit was filed under the name Hyland, ET AL. v. Griffin
Investigations, ET AL. on May 5, 1995 in the United States
District Court for the District of New Jersey (Camden Division).
The Company, together with 76 other casino operators and others,
is named as a defendant in the action. The Company has not been
served with a summons and complaint. The action, purportedly
brought on behalf of "card counters," alleges that the casino
operators exclude "card counters" from play and share information
about "card counters." The action is ostensibly based on
purported violations of federal antitrust law, the Fair Credit
Reporting Act, and various state consumer protection laws.
The amount of damages sought by the plaintiffs in the action is
unspecified. If served, the Company intends to defend the action
vigorously.
49
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors, executive officers and certain key management
personnel of the Company and Rio Properties and their ages as of
September 30, 1995 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Anthony A. Marnell II(1) 46 Chairman of the Board and Chief Executive Officer of the
Company
James A. Barrett, Jr.(1) 44 President, Chief Operating Officer and Director of the Company
John A. Stuart(2) 44 Director of the Company
Thomas Y. Hartley(2)(3)(4) 61 Director of the Company
Peter M. Thomas(2)(3)(4) 45 Director of the Company
Roger M. Szepelak 31 Treasurer and Chief Financial Officer of the Company
Susan L. Johnson 44 Secretary, Vice President and General Counsel of the Company
John M. Lipkowitz 34 Senior Vice President and General Manager of Rio Properties
Cary A. Rehm 42 Vice President of Slot Development of Rio Properties
_______________________
<FN>
(1) Member of the Directors' Plan Committee of the Board of
Directors.
(2) Member of the Audit Committee of the Board of Directors.
(3) Member of the Compensation Committee of the Board of
Directors.
(4) Member of the Incentive Plan Committee of the Board of
Directors.
</FN>
</TABLE>
ANTHONY A. MARNELL II has been Chairman of the Board of the
Company and its subsidiaries since 1986, and Chief Executive
Officer since 1990. Since 1982, he has been controlling
stockholder of Marnell Corrao and of Marnell Corrao's wholly
owned subsidiary, Marnell Corrao Associates, a leading hotel-
casino general contractor, and President and controlling
stockholder of Marnell Chartered, an architectural firm, each of
which is based in Las Vegas, Nevada. Mr. Marnell is a licensed
architect.
JAMES A. BARRETT, JR. is President and Chief Operating
Officer of the Company, President of Rio Properties, and a
director of the Company and each of its subsidiaries. Mr. Barrett
has been President and a director of the Company since July 1986
and Chief Operating Officer since October 1990. Since August
1986, Mr. Barrett has been the Treasurer, and since August 1989,
a director of Marnell Corrao. Mr. Barrett has been a certified
public accountant since 1975.
JOHN A. STUART has been a member of the Board of Directors
of the Company since 1989. Since February 1991, he has been
President of John Stuart & Company, Inc., a firm specializing in
employee benefits, consulting and insurance brokerage. Prior
thereto, he was the President of Insurance Services Corporation
of Nevada, Inc., a full service insurance brokerage firm also
located in Las Vegas.
THOMAS Y. HARTLEY has been a member of the Board of
Directors since 1990. Since April 1991, Mr. Hartley has served as
President and Chief Operating Officer of Colbert Golf Design and
Development, a Las Vegas-based golf course design and development
company. From September 1988 to April 1991, Mr. Hartley served as
President and Chief Operating Officer of Jim Colbert Golf, Inc.,
a Las Vegas-based golf course development and management company.
Prior to 1988, Mr. Hartley was area managing partner for the Las
Vegas, Phoenix, Tucson, and Reno offices of Deloitte, Haskins &
Sells, now known as Deloitte & Touche, an international certified
public accounting firm. Mr. Hartley has been a member of the
Boards of Directors of Southwest Gas Corporation and its
subsidiary Primerit Bank, both in Las Vegas, since March 1991 and
of Sierra Health Services, Inc., Las Vegas, Nevada, since June
1992.
50
<PAGE>
PETER M. THOMAS was appointed to the Board of Directors of
the Company on April 27, 1995. Mr. Thomas is Managing Director of
the Thomas and Mack Company, a family owned commercial real
estate management and development company. From March 1992 until
April 1995, Mr. Thomas was President, Chief Operating Officer and
a Director of Bank of America, Nevada. From 1982 to 1992,
Mr. Thomas was President, Chief Operating Officer and a Director
of Valley Bank of Nevada, prior to its acquisition by BankAmerica
Corporation in 1992. Mr. Thomas received his law degree in 1975
and is currently a member of the Nevada, Utah and District of
Columbia Bar Associations.
ROGER M. SZEPELAK has been Treasurer and Chief Financial
Officer of the Company since September 1995 and Director of
Finance of Rio Properties since December 1994. Mr. Szepelak
joined the Company in 1988 and has since served in a variety of
financial positions including Casino Controller and Corporate
Controller. Prior to joining the Company, Mr. Szepelak held
positions with the Ribeiro Corporation, a commercial real estate
company in Las Vegas, and Manufacturers National Bank in Detroit,
Michigan.
SUSAN L. JOHNSON has been Secretary of the Company since
December 1994, Vice President of the Company since September 1994
and General Counsel of the Company since July 1994. From 1986 to
1989 Ms. Johnson was Associate General Counsel of Harrah's Hotels
& Casinos. From 1984 to 1986 Ms. Johnson was Chief Deputy
Attorney General for the State of Nevada. From 1979 to 1984 Ms.
Johnson was a Deputy District Attorney for Clark County, Nevada.
Ms. Johnson has been a licensed attorney in Nevada since 1979 and
is currently a member of the Nevada Bar Association.
JOHN M. LIPKOWITZ has been General Manager of Rio Properties
since August 7, 1995 and Senior Vice President of Rio Properties
since July 1, 1995. He was Vice President of Strategic Marketing
of Rio Properties from December 1994 to August 1995.
Mr. Lipkowitz joined Rio Properties in 1990 and has since served
in a variety of positions including Vice President of Food and
Beverage, Director of Food and Beverage, and Executive Chef.
Mr. Lipkowitz held food management positions at Harrah's and John
Ascuaga's Nugget in Reno from 1983-1990.
CARY A. REHM has been Vice President of Slot Development for
Rio Properties since January 1995. Mr. Rehm was Vice President
of Slot Operations from October 1983 to January 1995 and Director
of Slot Operations from January 1992 to October 1993. Prior to
that, he held the position of Slot Manager from August 1989 to
January 1992. Prior to joining Rio Properties, Mr. Rehm held
positions of progressively greater responsibility in slot
management at the Castaways and Silver Slipper Casinos, including
Assistant Slot Manager and Assistant Lead Slot Technician.
The Board of Directors has four standing committees: the
Audit Committee, the Compensation Committee, the Directors' Plan
Committee and the Incentive Plan Committee, formerly known as the
NSOP Committee.
The Audit Committee's functions are: to review reports of
certified public accountants to the Company; to review Company
financial practices, internal controls and policies with officers
and key employees; to review such matters with the Company's
auditors to determine scope of compliance with any deficiencies;
to consider selection of independent public accountants; to
review related party transactions; and to make periodic reports
on such matters to the Board of Directors. The Compensation
Committee's function is to review and make recommendations to the
Board of Directors with respect to the salaries and bonuses of
the Company's executive officers. The Directors' Plan Committee
administers the Directors' Plan. The NSOP Committee was
reconstituted as the Incentive Plan Committee on January 26, 1995
in connection with the Board's adoption of the Incentive Plan.
The Incentive Plan Committee's function is to administer the
Incentive Plan and the NSOP, including determining such matters
as the persons to whom awards shall be granted, the number of
shares to be awarded, when the awards shall be granted, when the
awards shall vest, and the terms and provisions of the
instruments evidencing the awards under both plans. The Incentive
Plan Committee reports to the Company's Board of Directors
regarding all decisions concerning awards granted to Incentive
Plan participants.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
GENERAL. Anthony A. Marnell II, Chairman of the Board,
Chief Executive Officer, and largest stockholder of the Company,
is the controlling stockholder and Chief Executive Officer of
Marnell Chartered and Marnell Corrao, parent corporation of
Marnell Corrao Associates. Marnell Corrao holds a majority
ownership interest in MCLP (as
51
<PAGE>
defined on page 57), a limited partnership engaged in real
estate development, and Mr. Marnell is sole stockholder of Focus
2000, Inc. ("Focus 2000"). Mr. Barrett, President, Chief
Operating Officer, and a director of the Company, is a general
partner of MCLP and is the Secretary, Treasurer, and a director
of Marnell Corrao and its subsidiaries.
CONSULTING, CONSTRUCTION, AND ARCHITECTURAL SERVICES TO AND
BY AFFILIATES. Marnell Corrao and Marnell Chartered provided
design and construction services for various Rio expansion
projects. The Marnell Corrao construction contract for the second
Rio tower, completed in October 1993, was for an amount not to
exceed $33,327,093, the contract for the public area expansion
completed in November 1994 was for an amount not to exceed
$22,000,000, and the contract for the third Rio tower completed
in April 1995 was for an amount not to exceed $60,500,000.
Construction contracts with Marnell Corrao for Phase IV and
development work associated with the Company's acquisition of
land adjacent to the Rio Site were for amounts not to exceed
$18,117,258 and $3,923,898, respectively. In the year ended
December 31, 1994, and the six months ended June 30, 1995, the
Company paid a total of $48,499,873 and $23,801,075,
respectively, in connection with these contracts. Design
contracts with Marnell Chartered for these same projects were in
amounts not to exceed $1,350,000, $880,000, $2,469,836, $731,000
and $90,000, respectively. In the year ended December 31, 1994,
and the six months ended June 30, 1995, Marnell Chartered was
paid a total of $1,916,475 and $1,314,346, respectively, in
connection with these projects, and $0 and $212,686,
respectively, in connection with design work for an expansion
opportunity investigated by the Company.
The original 1989 Rio construction loan ("Original Loan")
required that the Company, Marnell Corrao, Marnell Corrao
Associates, MCLP's predecessor, Anthony A. Marnell II and his
personal family trust, James A. Barrett, Jr. and Maureen M.
Barrett and their family trust and Focus 2000 (collectively, the
"Loan Guarantors") enter into certain guarantees ("Guarantees")
of payment of all obligations under the Original Loan.
In February 1989, in consideration of the Guarantees, the
Company agreed to pay the Loan Guarantors (excluding Focus 2000)
$250,000 per year, commencing with the fiscal year ending
December 31, 1990 and continuing through the fiscal year ending
December 31, 1994, for each year in which the Company's share of
net earnings before taxes from the Rio equals or exceeds
$900,000.
The agreement provided for up to a two-year extension if the
Loan Guarantors did not receive the full $1,250,000 by
December 31, 1994. No amounts were paid thereunder for the years
ended December 31, 1990 and 1991, and the Loan Guarantors
received payments of $250,000 in December 1992, December 1993 and
December 1994, respectively. The agreement will be extended
through December 31, 1996. In the event there is a change in
control of the Company, or the Company sells its interest in the
Rio, the full remaining unpaid amount will be immediately due and
payable to the Loan Guarantors. In 1993, the personal guarantees
under the former bank loan were replaced with provisions that
will trigger events of default should Anthony A. Marnell II
voluntarily allow his stockholdings in the Company to fall below
10% or fall below the stockholdings of another holder, or if
Messrs. Marnell or Barrett cease for a period of 30 consecutive
days to hold their respective executive officer positions.
Therefore, the agreement with the Loan Guarantors was amended to
terminate the Loan Guarantor payments in the event that said
events of default are triggered by voluntary act of the
respective Loan Guarantors.
SERVICES PROVIDED BY RELATED PARTIES. Entities in which
John A. Stuart is a principal stockholder and executive officer
earned commissions totaling $124,912 and $65,000 for the year
ended December 31, 1994, and the six months ended June 30, 1995,
respectively, arising out of the acquisition and administration
of various insurance coverages by the Company.
The Company reimbursed Focus 2000 for certain travel and
other expenses advanced on behalf of or supplied to the Company
during the year ended December 31, 1994 and the six months ended
June 30, 1995 of approximately $142,900 and $0, respectively.
CERTAIN REAL ESTATE TRANSACTIONS WITH FOCUS 2000. On
December 30, 1991, the Company sold to Focus 2000 certain non-Rio
real estate assets. Focus 2000 granted a right of first refusal
to the Company to operate gaming on 125 acres including the Old
Vegas Site (collectively, the "125-Acre Site") which was one of
the properties sold to Focus 2000. Focus 2000 also agreed for a
period up to 120 months to return 100% of sale proceeds from any
subsequent sale of the 125-Acre Site in excess of $7,000,000,
less Focus 2000's defined holding costs. Focus 2000 agreed
(the "Focus
52
<PAGE>
Participation Agreement") for a period of up to 48 months to
return, on a declining basis, sale proceeds less defined holding
costs on certain of the other assets sold which included the
general partnership interest in MarCor Green Valley Partnership
(as defined on page 54) and the Warehouse Site. In order to
preserve the ability to develop a casino on the 125-Acre Site
without the requirement of building a hotel, as required by
certain Nevada legislation, Focus 2000 advised the Company in
June 1992 that Focus 2000 intended to proceed with development of
the 125-Acre Site. Focus 2000 requested that the Company
determine whether it would exercise its right of first refusal.
At the time, the Board of Directors determined that the Company
did not want to divert its efforts and resources away from the
Rio. Therefore, the Company assigned the right of first refusal
to Messrs. Barrett and Marnell with a reserved right to assume
the assigned interest for reimbursement of expenses incurred in
filing the gaming applications and otherwise in connection with
this project, plus interest equal to two percent above the prime
rate of First Interstate Bank of Nevada, N.A. Messrs. Barrett and
Marnell were directed to enter into an agreement with Focus 2000
and thereafter filed gaming applications with the Nevada State
Gaming Control Board and Nevada Commission. On April 1, 1994,
Focus 2000, through a limited partnership ("MarCor Green Valley
Partnership"), sold a parcel of unimproved real property ("Green
Valley Site") located in Henderson, Nevada. Pursuant to the Focus
Participation Agreement, the sale of the Green Valley Site
resulted in a $975,936 profit participation paid to the Company.
Various issues involving the events prior to and during the sale
of the Green Valley Site are the subject of a pending lawsuit
between MarCor Green Valley Partnership, Focus 2000, the Company
and the limited partners of MarCor Green Valley Limited
Partnership. A favorable outcome in that litigation may produce
additional profit participation to the Company pursuant to the
Focus Participation Agreement. Since the Company and one of its
subsidiaries, as well as Messrs. Marnell and Barrett, are named
as parties to the lawsuit, an adverse ruling could produce a
damage cost to the Company; however, the agreements under which
the Company sold the Green Valley Site to Focus 2000 contain
certain indemnities in favor of a subsidiary of the Company,
which may reduce or eliminate such potential cost.
In March 1995, the Company repurchased the Warehouse Site
from Focus 2000. The $3.2 million purchase price was based upon
an independent appraisal valuation, less credit for net rental
proceeds during the term of the escrow and profit participation
pursuant to the Focus Participation Agreement. The appraised
value of the Warehouse Site was approximately $3.7 million. The
profit participation amount that the Company received credit for
was approximately $0.4 million. The Company also received credit
for net rental proceeds during the term of the escrow of less
than $0.1 million.
In May 1995, the Company repurchased the Old Vegas Site from
Focus 2000 which had been part of the 125 Acre-Site. The $5.7
million purchase price equaled Focus 2000's costs plus defined
holding costs. The purchase price was significantly below the
independent appraisal valuation. The appraised value of the Old
Vegas Site was approximately $12.5 million.
BANKING RELATIONSHIPS. Until April 1995, Peter M. Thomas
was President, Chief Operating Officer and a Director of Bank of
America, Nevada, a subsidiary of BankAmerica Corporation. Bank of
America and Bank of America, Nevada are participant banks in the
Rio Bank Loan and Bank of America, Nevada provides regular
commercial banking services to the Company.
INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 78.751
of Chapter 78 of the Nevada Revised Statutes, Article XII of the
Company's Articles of Incorporation and Article XIII of the
Company's Bylaws contain provisions for indemnification of
officers, directors, employees and agents of the Company. The
Articles of Incorporation provision requires the Company to
indemnify such persons to the full extent permitted by Nevada
Law. Each person will be indemnified in any proceeding if he
acted in good faith and in a manner which he reasonably believed
to be in, or not opposed to, the best interest of the Company.
Indemnification would cover expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement.
The Company's Articles of Incorporation also provide that
the Company's Board of Directors may cause the Company to
purchase and maintain insurance on behalf of any present or past
director or officer insuring against any liability asserted
against such person incurred in the capacity of director or
officer or arising out of such status, whether or not the
corporation would have the power to indemnify such person. The
Company presently has directors' and officers' liability
insurance in effect.
53
<PAGE>
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers or
persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that in the opinion of
the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933
and is therefore unenforceable.
TRANSACTION REVIEW. The Company believes that the
transactions described above are on terms at least as favorable
as would have been obtainable from non-related parties. The
Company requires that the Audit Committee of the Board of
Directors review related party transactions.
54
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding
beneficial ownership of the Company's common stock ("Common
Stock") as of September 30, 1995 (i) by each person (or a group
of affiliated persons) who is known by the Company to own
beneficially more than five percent of the Company's Common
Stock, (ii) by the executive officers named in the Summary
Compensation Table contained in the Company's Proxy Statement
prepared in connection with the 1995 Annual Meeting of the
Company's stockholders and (iii) by all directors and executive
officers as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES OF COMMON STOCK PERCENT
OF BENEFICIAL OWNER BENEFICIALLY OWNED (1)(2) OF CLASS (2)
<S> <C> <C>
Anthony A. Marnell II........... 5,045,780(3) 23.7%
4495 S. Polaris Avenue
Las Vegas, Nevada 89103
James A. Barrett, Jr............ 1,966,612(4) 9.2%
4495 S. Polaris Avenue
Las Vegas, Nevada 89103
Lud J. Corrao................... 1,287,728(5) 6.0%
P.O. Box 12907
Reno, Nevada 89510
Dean P. Petersen................ 1,110,910(6) 5.2%
2900 Las Vegas Blvd. South
Las Vegas, Nevada 89109
Harlan D. Braaten(7)............ 62,050(8) *
3700 West Flamingo Road
Las Vegas, Nevada 89103
Putnam Investments, Inc......... 1,853,725(9) 8.7%
One Post Office Square
Boston, Massachusetts 02109
Gilder, Gagnon, Howe & Co....... 1,800,088(10) 8.4%
1775 Broadway
New York, New York 10019
Capital Research & Management... 1,155,200(11) 5.4%
#4 Embarcadero Center, Suite 1800
San Francisco, California 94111
All Executive Officers and
Directors as a group (7 persons) 5,307,880(12) 24.9%
_______________________
*Less than one percent.
<FN>
(1)Unless otherwise noted, the persons identified in this
table have sole voting and sole investment power with
regard to the shares beneficially owned by them.
(2)Includes shares issuable upon exercise of options which
are exercisable within 60 days of the stated date.
(3)Includes options to purchase 196,000 shares issuable to
Mr. Marnell under the Company's Non Statutory Stock
Option Plan (the "NSOP"), which are not listed below.
Mr. Marnell beneficially owns the following shares which
are held of record by the following entities:
55
<PAGE>
COMMON STOCK
A.A. Marnell II Family Revocable Living Trust (a) 68,167
Certain trusts established for the benefit of Mr. Marnell's
family (a) 900,000
Marnell Corrao, Inc. ("Marnell Corrao") 2,035,051
MarCor Limited Partnership ("MCLP") (b) 1,846,562
Total Shares 4,849,780
_____________________________
(a)Mr. Marnell holds sole voting and investment power
over the shares held by his family trusts.
(b)Mr. Marnell through his family trusts, owns
approximately 83% of MCLP, a limited partnership.
(4)Includes options to purchase 99,000 shares issuable to
Mr. Barrett under the NSOP. Of the shares currently held
by Mr. Barrett, 2,000 shares are held in his individual
retirement account; 3,000 shares are held in certain of
his spouse's accounts; 16,000 shares are held by the
Barrett Family Revocable Living Trust through a family
corporation, 50 shares are held directly by the trust;
and 1,846,562 shares are held by MCLP of which Barrett,
Inc., a family corporation controlled by Mr. Barrett and
his family trust, is the general partner. Not included
are 2,000 shares held in certain trusts for which
Mr. Barrett is sole trustee.
(5)Of the shares currently held by Mr. Corrao, 25,000 are
held directly and 1,262,728 are held through the Lud
Corrao Family Trust.
(6)Includes options to purchase 20,000 shares issuable to
Mr. Petersen under the Company's 1991 Directors' Stock
Option Plan (the "Directors' Plan"). Mr. Petersen's
shares are held of record by The Dean and Mary Petersen
Living Trust of 1975.
(7)Mr. Braaten resigned as Treasurer and Chief Financial
Officer of the Company in September 1995.
(8)Includes options to purchase 34,000 shares issuable to
Mr. Braaten under the NSOP.
(9)Putnam Investments, Inc. ("Putnam") reported on a
Schedule 13G, dated January 30, 1995, that it has shared
voting power with respect to 92,400 of such shares and
shared dispositive power with respect to all of such
shares. Putnam subsequently reported on an Amendment to
the Schedule 13G, dated June 6, 1995, that it had
increased its shared voting power with respect to
189,700 of such shares and shared dispositive power with
respect to 2,224,725 of such shares. Putnam reported
that such holdings represented 10.5% of the outstanding
Common Stock on the date of the amendment.
(10)Gilder, Gagnon, Howe & Co. reported on an Amendment
to Schedule 13G, dated February 9, 1995, that it has
shared voting and dispositive power with respect to
69,650 of such shares and sole dispositive power with
respect to 1,730,438 of such shares.
(11)Capital Research & Management reported on Form 13F
that at March 31, 1995 it shared investment discretion
with an affiliate with respect to 1,155,200 shares of
Common Stock.
(12)Includes options to purchase 344,000 shares under
the NSOP and options to purchase 46,000 shares under the
Directors' Plan.
</FN>
</TABLE>
56
<PAGE>
DESCRIPTION OF NEW NOTES
The New Notes will be issued under an indenture dated as of
July 21, 1995 (the "Indenture"), among Rio Hotel & Casino, Inc.
(the "Company"), Rio Properties, Inc. (the "Guarantor") and IBJ
Schroder Bank & Trust Company, as trustee (the "Trustee").
Except as otherwise indicated below, the following summary
applies to both the Old Notes and the New Notes. As used herein,
the term "Notes" shall mean the Old Notes and the New Notes
unless otherwise stated.
The terms of the Notes include those stated in the Indenture
and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 as in effect on the date of the Indenture
(the "Trust Indenture Act"). The Notes are subject to all such
terms, and Noteholders are referred to the Indenture and the
Trust Indenture Act for a statement of those terms.
The form and terms of the New Notes are substantially
identical to the form and terms of the Old Notes, except that (i)
the New Notes will be registered under the Securities Act of
1933, as amended, and, therefore, will not bear legends
restricting the transfer thereof, (ii) holders of the New Notes
will not be entitled to Special Interest, which terminates upon
consummation of the Exchange Offer, and (iii) holders of New
Notes will not be entitled to certain rights under the
Registration Agreement intended for the holders of unregistered
securities. The New Notes will be issued solely in exchange for
an equal principal amount of Old Notes. As of the date hereof,
$100 million aggregate principal amount of Old Notes is
outstanding. See "The Exchange Offer."
The following summary of certain provisions of the Indenture
does not purport to be complete and is subject to the provisions
of the Indenture and the Notes, including the definitions therein
of certain terms used below. The Company, however, believes the
following summarizes all material provisions of the Indenture. A
copy of the Indenture has been filed with the Commission as an
exhibit to the Company's Report on Form 8-K dated July 18, 1995.
Capitalized terms used in this section and not otherwise defined
below have the respective meanings assigned to them in the
Indenture.
GENERAL
The Notes are general unsecured obligations of the Company
and will be limited to $100 million aggregate principal amount.
The Notes will be issued in fully registered form only, without
coupons, in denominations of $1,000 and integral multiples
thereof.
The payment of principal and interest on the Notes is fully
and unconditionally guaranteed on a senior subordinated and
unsecured basis by the Guarantor (the "Rio Guarantee").
PAYMENT TERMS
The Notes will mature on July 15, 2005 and will bear
interest at a rate of 10 5/8% per annum until maturity, payable
semiannually on January 15 and July 15 of each year, commencing
January 15, 1996, to the persons who are registered Noteholders
thereof at the close of business on the January 1 or July 1
immediately preceding such interest payment date.
The Indenture provides that interest on the Notes will be
computed on the basis of a 360-day year of twelve 30-day months.
Initially, the Trustee will act as Paying Agent and Registrar.
Principal and interest will be payable initially at the offices
of the Trustee but, at the option of the Company, interest may be
paid by check mailed to the persons who are registered holders of
Notes ("Noteholders") at their registered addresses. The Notes
may be presented for registration of transfer and exchange at the
offices of the Registrar, which initially will be the offices of
the Trustee. The Company or any domestically incorporated Wholly
Owned Subsidiary may act as Paying Agent and Registrar, and the
Company may change the Paying Agent or Registrar without prior
notice to Noteholders.
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SUBORDINATION OF NOTES
The Notes are subordinated in right of payment, as set forth
in the Indenture, to the prior payment in full, in cash or cash
equivalents, of all existing and future Senior Indebtedness of
the Company. The Notes shall in all respects rank PARI PASSU with
all other Senior Subordinated Indebtedness of the Company and
only Indebtedness of the Company which is Senior Indebtedness
shall rank senior to the Notes. Except with respect to
limitations on consolidated Indebtedness that the Company may
incur, the Indenture does not limit the ability of the Company to
incur additional Senior Indebtedness or restrict the ability of
the Company to transfer assets to and among its Subsidiaries. As
described below, in the event of bankruptcy, liquidation or
reorganization of the Company, the assets of the Company will be
available to make payments on the Notes only after all Senior
Indebtedness has been paid in full, and there may not be
sufficient assets remaining to pay amounts due on the Notes.
Substantially all of the Senior Indebtedness of the Company
(currently consisting of the Company's Guarantee of the Rio Bank
Loan) is secured by substantially all the assets of the Company.
In the event of any payment or distribution of the assets of the
Company in any foreclosure, dissolution, winding up, liquidation
or reorganization, holders of the secured indebtedness will have
a secured prior claim to the assets of the Company and its
Subsidiaries. The Company has outstanding no Senior Subordinated
Indebtedness, and no Senior Indebtedness other than its Guarantee
of the Rio Bank Loan.
Under certain circumstances, as described below, holders of
Senior Indebtedness may block payments on the Notes. Any claims
by Noteholders against the assets of Subsidiaries would be
subordinate to all existing and future obligations (including
trade payables and preferred stock, if any, of such
subsidiaries). As of July 31, 1995, there were no current
liabilities of the Company's subsidiaries outstanding ranking
senior to the Notes. Assuming the subsequent incurrence by Rio
Properties of the full $175 million of its available bank
borrowings under the Rio Bank Loan, there would have been
outstanding that amount of indebtedness and other liabilities of
the Company's subsidiaries ranking senior to the Notes.
Upon any payment or distribution of the assets of the
Company to creditors upon a total or partial liquidation or a
total or partial dissolution of the Company or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property: (i) holders of Senior
Indebtedness shall be entitled to receive payment in full of the
Senior Indebtedness before Noteholders shall be entitled to
receive any payment of principal of or interest on the Notes; and
(ii) until the Senior Indebtedness is paid in full, any
distribution to which Noteholders would be entitled but for this
provision shall be made to holders of Senior Indebtedness as
their interests may appear, except that Noteholders may receive
shares of stock and any debt securities that are subordinated to
Senior Indebtedness to at least the same extent as the Notes.
The Company may not pay the principal of or interest on the
Notes or make any deposit for the purpose of the discharge of its
liabilities under the Indenture and may not repurchase, redeem or
otherwise retire any Notes (collectively, "pay the Notes") if (i)
any Senior Indebtedness is not paid when due or (ii) any other
default on Senior Indebtedness occurs and the maturity of such
Senior Indebtedness is accelerated in accordance with its terms
unless, in either case, (a) the default has been cured or
waived and any such acceleration has been rescinded or (b) such
Senior Indebtedness has been paid in full. During the continuance
of any default (other than a default described in clause (i) or
(ii) of the preceding sentence) with respect to any Senior
Indebtedness pursuant to which the maturity thereof may be
accelerated immediately without further notice (except such
notice as may be required to effect such acceleration) or the
expiration of any applicable grace periods, the Company may not
pay the Notes for a period (a "Payment Blockage Period")
commencing upon the receipt by the Company and the Trustee of
written notice of such default from the Representative of any
Designated Senior Indebtedness specifying an election to effect a
Payment Blockage Period (a "Blockage Notice") and ending 179 days
thereafter (or earlier if such Payment Blockage Period is
terminated (i) by written notice to the Trustee and the Company
from the Person or Persons who gave such Blockage Notice, (ii) by
repayment in full of such Senior Indebtedness or (iii) because
the default giving rise to such Blockage Notice is no longer
continuing). Notwithstanding the provisions described in the
immediately preceding sentence (but subject to the provisions
contained in the next preceding sentence), unless the holders of
such Senior Indebtedness or the Representative of such holders
shall have accelerated the maturity of such Senior Indebtedness,
the Company may resume payments on the Notes after such Payment
Blockage Period. Not more than one Blockage Notice may be given
in any consecutive 360-day period, irrespective of the number of
defaults with respect to Senior Indebtedness during such period.
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The provisions described in the two preceding paragraphs
shall not prevent or delay (i) the Company from redeeming any
Notes if required by any Gaming Authority as described under
"Mandatory Disposition or Redemption Pursuant to Gaming Laws" or
from otherwise purchasing any Notes pursuant to any Legal
Requirement relating to the gaming business of the Company and
its Subsidiaries or (ii) the receipt by the Noteholders of
payments of principal and interest on the Notes, as described
under "Discharge of Indenture and Defeasance", from the
application of any money or U.S. Government Obligations held in
trust by the Trustee.
In the event of the Company's insolvency, liquidation,
reorganization, dissolution or other proceedings, funds which
would otherwise be payable to Noteholders will be paid to the
holders of Senior Indebtedness to the extent necessary to pay the
Senior Indebtedness in full. Moreover, creditors of the Company
who are holders of Senior Indebtedness may recover more, ratably,
than the Noteholders, and creditors of the Company who are not
holders of Senior Indebtedness or of the Notes may recover less,
ratably, than holders of the Senior Indebtedness and may recover
more, ratably, than the Noteholders.
There is currently no Indebtedness of the Company that is
subordinated to the Notes, and the Company has no current plans
to issue any Indebtedness that would be subordinated to the
Notes.
SUBORDINATION OF RIO GUARANTEE
The Rio Guarantee is subordinated in right of payment, as
set forth in the Indenture, to the prior payment in full, in cash
or cash equivalents, of all existing and future Senior
Indebtedness of Guarantor. As of July 31, 1995, there was no
Senior Indebtedness of Guarantor outstanding to which the Rio
Guarantee would be subordinated. Assuming the subsequent
incurrence by the Guarantor of the full $175 million of its
available bank borrowings under the Rio Bank Loan, the Rio
Guarantee would be subordinated to that amount of Senior
Indebtedness of Guarantor. The Rio Guarantee shall in all
respects rank PARI PASSU with all other Senior Subordinated
Indebtedness of Guarantor and only Indebtedness of the Guarantor
which is Senior Indebtedness of Guarantor shall rank senior to
the Rio Guarantee. Except with respect to limitations on
consolidated Indebtedness that the Company and its Restricted
Subsidiaries (including the Guarantor) may incur, the Indenture
does not limit the ability of the Guarantor to incur additional
Senior Indebtedness of Guarantor or restrict the ability of the
Guarantor to transfer assets to and among its Subsidiaries. As
described below, in the event of bankruptcy, liquidation or
reorganization of the Guarantor, the assets of the Guarantor will
be available to make payments under the Rio Guarantee only after
all Senior Indebtedness of Guarantor has been paid in full, and
there may not be sufficient assets remaining to pay amounts due
on the Rio Guarantee. Substantially all of the Senior
Indebtedness of Guarantor is secured by substantially all the
assets of the Guarantor. In the event of any payment or
distribution of the assets of the Guarantor in any foreclosure,
dissolution, winding up, liquidation or reorganization, holders
of the secured indebtedness will have a secured prior claim to
the assets of the Guarantor and its Subsidiaries.
Under certain circumstances, as described below, holders of
Senior Indebtedness of Guarantor may block payments on the Rio
Guarantee. Any claims by Noteholders against the assets of
Subsidiaries of the Guarantor would be subordinate to all
existing and future obligations (including trade payables and
preferred stock, if any, of such Subsidiaries). The Subsidiaries
of the Guarantor do not have any significant liabilities
outstanding.
Upon any payment or distribution of the assets of the
Guarantor to creditors upon a total or partial liquidation or a
total or partial dissolution of the Guarantor or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding
relating to the Guarantor or its property: (i) holders of Senior
Indebtedness of Guarantor shall be entitled to receive payment in
full of the Senior Indebtedness of Guarantor before Noteholders
shall be entitled to receive any payment under the Rio Guarantee;
and (ii) until the Senior Indebtedness of Guarantor is paid in
full, any distribution to which Noteholders would be entitled but
for this provision shall be made to holders of Senior
Indebtedness of Guarantor as their interests may appear, except
that Noteholders may receive shares of stock and any debt
securities that are subordinated to Senior Indebtedness of
Guarantor to at least the same extent as the Rio Guarantee.
The Guarantor may not pay the principal of or interest on
the Notes pursuant to the Rio Guarantee or make any deposit for
the purpose of the discharge of its liabilities under the
Indenture and may not repurchase, redeem or otherwise retire any
Notes pursuant to the Rio Guarantee (collectively, "pay the
Notes") if (i) any Senior Indebtedness of Guarantor
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is not paid when due or (ii) any other default on Senior
Indebtedness of Guarantor occurs and the maturity of such Senior
Indebtedness of Guarantor is accelerated in accordance with its
terms unless, in either case, (a) the default has been cured or
waived and any such acceleration has been rescinded or (b) such
Senior Indebtedness of Guarantor has been paid in full. During
the continuance of any default (other than a default described
in clause (i) or (ii) of the preceding sentence) with respect to
any Senior Indebtedness of Guarantor pursuant to which the
maturity thereof may be accelerated immediately without
further notice (except such notice as may be required to effect
such acceleration) or the expiration of any applicable grace
periods, the Guarantor may not pay the Notes for a period (a
"Payment Blockage Period") commencing upon the receipt by the
Guarantor and the Trustee of written notice of such default from
the Representative of any Designated Senior Indebtedness of
Guarantor specifying an election to effect a Payment Blockage
Period (a "Blockage Notice") and ending 179 days thereafter (or
earlier if such Payment Blockage Period is terminated (i) by
written notice to the Trustee and the Guarantor from the Person
or Persons who gave such Blockage Notice, (ii) by repayment in
full of such Senior Indebtedness of Guarantor or (iii) because
the default giving rise to such Blockage Notice is no longer
continuing). Notwithstanding the provisions described in the
immediately preceding sentence (but subject to the provisions
contained in the next preceding sentence), unless the holders of
such Senior Indebtedness of Guarantor or the Representative of
such holders shall have accelerated the maturity of such Senior
Indebtedness of Guarantor, the Guarantor may resume payments
under the Rio Guarantee after such Payment Blockage Period. Not
more than one Blockage Notice may be given in any consecutive 360-
day period, irrespective of the number of defaults with respect
to Senior Indebtedness of Guarantor during such period.
In the event of the Guarantor's insolvency, liquidation,
reorganization, dissolution or other proceedings, funds which
would otherwise be payable to Noteholders will be paid to the
holders of Senior Indebtedness of Guarantor to the extent
necessary to pay the Senior Indebtedness of Guarantor in full.
Moreover, creditors of the Guarantor who are holders of Senior
Indebtedness of Guarantor may recover more, ratably, than the
Noteholders, and creditors of the Guarantor who are not holders
of Senior Indebtedness of Guarantor or of the Notes may recover
less, ratably, than holders of the Senior Indebtedness of
Guarantor and may recover more, ratably, than the Noteholders.
There is currently no Indebtedness of the Guarantor that is
subordinated to the Rio Guarantee, and the Guarantor has no
current plans to issue any Indebtedness that would be
subordinated to the Rio Guarantee.
OPTIONAL REDEMPTION
The Notes will not be redeemable at the option of the
Company prior to July 15, 2000. On or after that date, the Notes
will be redeemable at the option of the Company, in whole at any
time or in part from time to time, on at least 30 but not more
than 60 days' prior notice, mailed by first-class mail to the
Noteholders' registered addresses, at the redemption prices
(expressed in percentages of principal amount) specified below
plus accrued interest to the redemption date, if redeemed during
the 12-month period beginning July 15 of the years indicated
below:
YEAR PERCENTAGE
2000 103.98%
2001 102.66%
2002 101.33%
2003 and thereafter 100.00%
If fewer than all the Notes are to be redeemed, selection of
Notes for redemption will be made by the Trustee, PRO RATA or by
lot or by any other means the Trustee determines to be fair and
appropriate and which complies with applicable legal and
securities exchange requirements.
The Notes are subordinated in right of payment to all
existing and future Senior Indebtedness of the Company and are
structurally subordinated to all existing and future indebtedness
and other liabilities, including trade payables, of the Company's
subsidiaries, and the Rio Guarantee is subordinated in right of
payment to all existing and future Senior Indebtedness of the
Guarantor and is structurally subordinated to all existing and
future indebtedness and other liabilities, including trade
payables, of the Guarantor's subsidiaries. Under certain
circumstances, holders of Senior Indebtedness of
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the Company or holders of Senior Indebtedness of the Guarantor
may prohibit payments on the New Notes or under the Rio Guarantee,
respectively. See "Risk Factors - Subordination."
MANDATORY DISPOSITION OR REDEMPTION PURSUANT TO GAMING LAWS
If a Holder or beneficial owner of a Note is required to be
licensed, qualified or found suitable under applicable Gaming
Laws and is not so licensed, qualified or found suitable, the
Holder shall be obliged, at the request of the Company, to
dispose of such Holder's Notes within 30 days after receipt of
notice of failure to be found suitable or such earlier date
prescribed by any Gaming Authority (in which event the Company's
obligation to pay any interest after the receipt of such notice
shall be limited as provided in such Gaming Laws), and
thereafter, the Company shall have the right to redeem, on the
date fixed by the Company for the redemption of such Notes, such
Holder's Notes at a redemption price equal to the lower of (i)
the price at which such Holder or beneficial owner acquired the
Notes without accrued interest, if any (unless the payment of
such interest is permitted by the applicable Gaming Authority),
(ii) the Current Market Price of the Notes on such redemption
date and (iii) the principal amount of such notes without accrued
interest, if any (unless the payment of such interest is
permitted by the applicable Gaming Authority). The Company is not
required to pay or reimburse any Holder or beneficial owner of a
Note for the costs of licensure or investigation for such
licensure, qualification or finding of suitability. Any Holder or
beneficial owner of a Note required to be licensed, qualified or
found suitable under applicable Gaming Laws must pay all
investigative fees and costs of the Gaming Authorities in
connection with such qualification or application therefor.
MANDATORY SINKING FUND
There are no mandatory sinking fund payments for the Notes.
CHANGE OF CONTROL
Upon a Change of Control, each Holder shall have the right
to require that the Company repurchase such Holder's Notes at a
purchase price in cash equal to 101% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of
purchase, in accordance with the terms contemplated in the next
paragraph. In the event that at the time of such Change of
Control the terms of the Bank Indebtedness or other Senior
Indebtedness restrict or prohibit the repurchase of Notes
pursuant to this provision, then prior to the mailing of the
notice to Holders provided for in the next paragraph below but in
any event within 30 days following any Change of Control, the
Company covenants to (i) repay in full all Bank Indebtedness or
such other Senior Indebtedness or to offer to repay in full all
Bank Indebtedness or such other Senior Indebtedness and to repay
the Bank Indebtedness or such other Senior Indebtedness of each
lender who has accepted such offer or (ii) obtain the requisite
consent under the agreements governing the Bank Indebtedness or
such other Senior Indebtedness to permit the repurchase of the
Notes as provided for in the next paragraph.
The Notes are subordinated in right of payment to all
existing and future Senior Indebtedness of the Company and are
structurally subordinated to all existing and future indebtedness
and other liabilities, including trade payables, of the Company's
subsidiaries, and the Rio Guarantee is subordinated in right of
payment to all existing and future Senior Indebtedness of the
Guarantor and is structurally subordinated to all existing and
future indebtedness and other liabilities, including trade
payables, of the Guarantor's subsidiaries. In order for the
Company to repurchase the New Notes as a result of a Change of
Control, it will be necessary for the Company either to obtain
the consent of the Lenders under the Rio Bank Loan or to repay
the Rio Bank Loan in full. See "Risk Factors - Subordination."
Within 30 days following any Change of Control, the Company
shall send, by first-class mail to each Holder, a notice to each
Holder with a copy to the Trustee stating:
(1) that a Change of Control has occurred and that such Holder
has the right to require the Company to purchase such Holder's
Notes at a purchase price in cash equal to 101% of the principal
amount thereof plus accrued and unpaid interest, if any, to the
date of purchase;
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(2) the circumstances and relevant facts regarding such Change
of Control which the Company in good faith believes will enable
Holders to make an informed decision (which at a minimum will
include information with respect to PRO FORMA historical income,
cash flow and capitalization, each after giving effect to such
Change of Control, events causing such Change of Control and the
date such Change of Control is deemed to have occurred);
(3) the purchase date (which shall be no earlier than 30 days
nor later than 60 days from the date such notice is mailed); and
(4) the instructions determined by the Company, consistent with
this provision, that a Holder must follow in order to have its
Notes purchased, together with the information contained in the
next paragraph (and including any related materials).
Holders electing to have a Note purchased will be required
to surrender the Note, with an appropriate form duly completed,
to the Company at the address specified in the notice at least
five Business Days prior to the purchase date. Holders will be
entitled to withdraw their election if the Trustee or the Company
receives not later than three Business Days prior to the purchase
date, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Note
which was delivered for purchase by the Holder and a statement
that such Holder is withdrawing his election to have such Note
purchased.
On the purchase date, all Notes purchased by the Company
under this provision shall be delivered by the Trustee for
cancellation, and the Company shall pay the purchase price plus
accrued and unpaid interest, if any, to the Holders entitled
thereto.
The Company's Board of Directors does not have the ability
to waive or modify the right of holders of the Notes to require
the Company to repurchase the Notes upon a Change of Control nor
will such right have limited applicability in the event of a
leveraged buy out of the Company initiated or supported by the
Company, the Company's management, an affiliate of the Company
within the meaning of Rule 405 of the Securities Act, or an
affiliate of the Company's management.
The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other
securities laws or regulations in connection with the repurchase
of Notes pursuant to this provision. To the extent that the
provisions of any securities laws or regulations conflict with
this provision, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have
breached its obligations under this provision by virtue thereof.
The Company's obligations to repurchase the Notes upon a
Change of Control will be guaranteed on a senior subordinated
basis by the Guarantor pursuant to the Rio Guarantee. Such Rio
Guarantee will be subordinated to Senior Indebtedness of
Guarantor to the same extent described above under "Subordination
of Rio Guarantee." There can be no assurance that sufficient
funds will be available to the Company upon the occurrence of a
Change of Control to provide it with the means to repurchase the
Notes.
The phrase "all or substantially all" of the assets of the
Company as used in the definition of "Change of Control" in the
Indenture has no clearly established meaning under New York law
(which governs the Indenture), has been the subject of limited
judicial interpretation in few jurisdictions and will be
interpreted based upon the particular facts and circumstances.
As a result, there may be a degree of uncertainty in ascertaining
whether a sale or transfer of "all or substantially all" of the
assets of the Company has occurred and therefore whether a Change
of Control has occurred.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms
used in the Indenture. Reference is made to the Indenture for the
full definition of all such terms, as well as any other terms
used herein for which no definition is provided.
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"ADDITIONAL ASSETS" means (i) any property or assets (other
than Indebtedness and Capital Stock) in a Related Business; (ii)
Capital Stock of a Person that becomes a Restricted Subsidiary as
a result of the acquisition of such Capital Stock by the Company
or another Restricted Subsidiary; or (iii) Capital Stock
constituting a minority interest in any Person that at such time
is a Restricted Subsidiary; PROVIDED, HOWEVER, that, in the case
of clauses (ii) and (iii), such Restricted Subsidiary is
primarily engaged in a Related Business.
"AFFILIATE" of any specified Person means (i) any other
Person, directly or indirectly, controlling or controlled by or
under direct or indirect common control with such specified
Person or (ii) any other Person who is a director or officer (a)
of such specified Person, (b) of any subsidiary of such specified
Person or (c) of any Person described in clause (i) above. For
the purposes of this definition, "control" when used with respect
to any Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and
the terms "controlling" and "controlled" have meanings
correlative to the foregoing. For purposes of the section
"Limitation on Transactions with Affiliates" only, "Affiliate"
shall also mean any beneficial owner of shares representing 10%
or more of the total voting power of the Voting Stock (on a fully
diluted basis) of the Company or of rights or warrants to
purchase such Voting Stock (whether or not currently exercisable)
and any Person who would be an Affiliate of any such beneficial
owner pursuant to the first sentence hereof.
"ASSET DISPOSITION" means any direct or indirect sale
including a Sale/Leaseback Transaction, lease, transfer,
conveyance or other disposition (or series of related sales,
Sale/Leaseback Transactions, leases, transfers, conveyances or
dispositions) of shares of Capital Stock of a Restricted
Subsidiary (other than directors' qualifying shares), property or
other assets (each referred to for the purposes of this
definition as a "disposition") by the Company or any of its
Restricted Subsidiaries (including any disposition by means of a
merger, consolidation or similar transaction) other than (i) a
disposition by a Restricted Subsidiary to the Company or by the
Company or a Restricted Subsidiary to a Wholly Owned Subsidiary,
(ii) a disposition of property or assets at Fair Market Value in
the ordinary course of business and consistent with past
practices of the Company or any of its Restricted Subsidiaries,
as applicable, (iii) a disposition with a Fair Market Value and a
sale price of less than $10 million, and (iv) for purposes of the
provisions of "Limitation on Sales of Assets and Subsidiary
Stock" only, a disposition subject to the limitations set forth
under "Limitation on Restricted Payments".
"ATTRIBUTABLE INDEBTEDNESS" means Indebtedness deemed to be
incurred in respect of a Sale/Leaseback Transaction and shall be,
at the date of determination, the greater of (i) the fair market
value of the property subject to such Sale/Leaseback Transaction
(as determined in good faith by the Board of Directors) or (ii)
the present value (discounted at the actual rate of interest
implicit in such transaction, compounded annually) of the total
obligations of the lessee for rental payments during the
remaining term of the lease included in such Sale/Leaseback
Transaction (including any period for which such lease has been
extended).
"AVERAGE LIFE" means, as of the date of determination, with
respect to any Indebtedness or Preferred Stock, the quotient
obtained by dividing (i) the sum of the products of the numbers
of years from the date of determination to the dates of each
successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred
Stock multiplied by the amount of such payment by (ii) the sum of
all such payments.
"BANK INDEBTEDNESS" means any and all amounts payable under
or in respect of the Credit Agreement, as amended (or refinanced
or replaced) from time to time, including principal, premium (if
any), interest (including interest accruing on or after the
filing of any petition in bankruptcy or for reorganization
relating to the Company or the Guarantor whether or not a claim
for post-filing interest is allowed in such proceedings), fees,
charges, expenses, reimbursement obligations, guarantees and all
other amounts payable thereunder or in respect thereof.
"BANKS" has the meaning specified in the Credit Agreement.
"BOARD OF DIRECTORS" means the Board of Directors of the
Company or any committee thereof duly authorized to act on behalf
of such Board.
"BOARD RESOLUTION" means a duly adopted resolution of the
Board of Directors in full force and effect at the time of
determination and certified as such by the Secretary or an
Assistant Secretary of the Company.
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"CAPITALIZED LEASE OBLIGATIONS" means an obligation that is
required to be classified and accounted for as a capitalized
lease for financial reporting purposes in accordance with GAAP;
and the amount of Indebtedness represented by such obligation
shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be
the date of the last payment of rent or any other amount due
under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty.
"CAPITAL STOCK" of any Person means any and all shares,
interests, rights to purchase, warrants, options, participations
or other equivalents of or interests in (however designated)
equity of such Person, including any Preferred Stock, but
excluding any debt securities convertible or exchangeable into
such equity.
"CASINO" means any gaming establishment and other property
or assets directly ancillary thereto or used in connection
therewith, including any building, restaurant, hotel, theater,
parking facilities, retail shops, land, golf courses and other
recreation and entertainment facilities, vessel, barge, ship and
equipment.
"CHANGE OF CONTROL" means the occurrence of any of the
following events: (i) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act), other than one or
more Permitted Holders or an underwriter engaged in a firm
commitment underwriting in connection with a public offering of
the Voting Stock of the Company, is or becomes the "beneficial
owner" (as that term is used in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a person shall be deemed to have
"beneficial ownership" of all shares that any such person has the
right to acquire, whether such right is exercisable immediately
or only after the passage of time), directly or indirectly, of
more than 40% of the total voting power of the Voting Stock of
the Company; (ii) during any period of 12 consecutive months
after the date of the Indenture, individuals who at the beginning
of such period constituted the Board of Directors of the Company
(together with any new directors whose election by such Board of
Directors or whose nomination for election by the stockholders of
the Company was approved by a vote of a majority of the directors
of the Company then still in office who were either directors at
the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors then in office;
or (iii) the Company consolidates or merges with or into, or,
directly or indirectly, sells all or substantially all of its
assets to any person, other than a Wholly Owned Subsidiary or a
Permitted Holder.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONSOLIDATED COVERAGE RATIO" as of any date of
determination means the ratio of (i) the aggregate amount of
EBITDA for the period of the most recent four consecutive fiscal
quarters ending at least 45 days (or at least 30 days if the
Company's Report on Form 10-Q or 10-K for the most recent fiscal
quarter or year, as the case may be, has been filed with the SEC)
prior to the date of such determination to (ii) Consolidated
Interest Expense for such four fiscal quarters; PROVIDED,
HOWEVER, that (a) if the Company or any Restricted Subsidiary has
Incurred any Indebtedness since the beginning of such period that
remains outstanding or if the transaction giving rise to the need
to calculate the Consolidated Coverage Ratio is an Incurrence of
Indebtedness, or both, Consolidated Interest Expense for such
period shall be calculated after giving effect on a PRO FORMA
basis to such Indebtedness as if such Indebtedness had been
Incurred on the first day of such period and the discharge of any
other Indebtedness repaid, repurchased, defeased or otherwise
discharged with the proceeds of such new Indebtedness as if such
discharge had occurred on the first day of such period, (b) if
since the beginning of such period the Company or any Restricted
Subsidiary shall have made any Asset Disposition or if the
transaction giving rise to the need to calculate the Consolidated
Coverage Ratio is an Asset Disposition, or both, the EBITDA for
such period shall be reduced by an amount equal to the EBITDA (if
positive) directly attributable to the assets which are the
subject of such Asset Disposition for such period, or increased
by an amount equal to the EBITDA (if negative), directly
attributable thereto for such period as if such Asset Disposition
had occurred on the first day of such period and Consolidated
Interest Expense for such period shall be reduced by an amount
equal to the Consolidated Interest Expense directly attributable
to any Indebtedness of the Company or any Restricted Subsidiary
repaid, repurchased, defeased or otherwise discharged with
respect to the Company and its continuing Restricted Subsidiaries
in connection with such Asset Dispositions for such period as
if such Asset Disposition had occurred on the first day of such
period (or, if the Capital Stock of any Restricted Subsidiary
is sold, the Consolidated Interest Expense for such period as if
such Asset Disposition had occurred on the first day of such
period directly attributable to the Indebtedness of such
Restricted Subsidiary to the extent the Company and its
continuing Restricted Subsidiaries are no longer liable for such
Indebtedness after such sale), (c) if since the beginning of such
period the Company or any Restricted Subsidiary (by merger or
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otherwise) shall have made an Investment in any Restricted
Subsidiary (or any Person which becomes a Restricted Subsidiary)
or an acquisition of assets, including any acquisition of assets
occurring in connection with a transaction causing a calculation
to be made hereunder, which constitutes all or substantially all
of an operating unit of a business, EBITDA and Consolidated
Interest Expense for such period shall be calculated after
giving PRO FORMA effect thereto (including the Incurrence of any
Indebtedness) as if such Investment or acquisition occurred
on the first day of such period and (d) if since the beginning
of such period any Person (that subsequently became a Restricted
Subsidiary or was merged with or into the Company or any
Restricted Subsidiary since the beginning of such period) shall
have made any Asset Disposition or any Investment that would have
required an adjustment pursuant to clause (b) or (c) above if
made by the Company or a Restricted Subsidiary during such
period, EBITDA and Consolidated Interest Expense for such period
shall be calculated after giving PRO FORMA effect thereto as
if such Asset Disposition or Investment occurred on the first
day of such period. For purposes of this definition, whenever
PRO FORMA effect is to be given to an acquisition of assets,
the amount of income or earnings relating thereto and the amount
of Consolidated Interes t Expense associated with any
Indebtedness Incurred in connection therewith, the PRO FORMA
calculations shall be determined in good faith by a responsible
financial or accounting Officer of the Company and as further
contemplated by the definition of PRO FORMA. If any Indebtedness
bears a floating rate of interest and is being given PRO FORMA
effect, the interest expense on such Indebtedness shall be
calculated as if the rate in effect on the date of determination
had been the applicable rate for the entire period (taking into
account any Interest Rate Protection Agreement applicable to such
Indebtedness if such Interest Rate Protection Agreement has a
remaining term in excess of 12 months).
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the
total interest expense of the Company and its consolidated
Subsidiaries, plus, to the extent not included in such interest
expense, (i) interest expense attributable to capital leases,
(ii) amortization of debt discount and debt issuance cost, (iii)
capitalized interest, (iv) non-cash interest expense, (v) accrued
interest, (vi) commissions, discounts and other fees and charges
owed with respect to letters of credit and bankers' acceptance
financing, (vii) interest actually paid by the Company or any
such Subsidiary under any Guarantee of Indebtedness or other
obligation of any other Person, (viii) net costs associated with
Interest Rate Protection Agreements (including amortization of
fees), (ix) the interest portion of any deferred obligation, (x)
Preferred Stock dividends in respect of all Preferred Stock of
Subsidiaries and Redeemable Stock of the Company held by Persons
other than the Company or a Wholly Owned Subsidiary, (xi) fees
payable in connection with financings to the extent not included
in (ii) above, including commitment, availability and similar
fees and (xii) the cash contributions to any employee stock
ownership plan or similar trust to the extent such contributions
are used by such plan or trust to pay interest or fees to any
Person (other than the Company) in connection with Indebtedness
Incurred by such plan or trust; PROVIDED, HOWEVER, that there
shall be excluded therefrom any such interest expense of any
Unrestricted Subsidiary to the extent the related Indebtedness is
not Guaranteed or paid by the Company or any Restricted
Subsidiary.
"CONSOLIDATED NET INCOME" means, for any period, the net
income (loss) of the Company and its Subsidiaries; PROVIDED,
HOWEVER, that there shall not be included in such Consolidated
Net Income (i) any net income (loss) of any Person if such Person
is not a Restricted Subsidiary, except that (a) subject to the
limitations contained in (iv) below, the Company's equity in the
net income of any such Person for such period shall be included
in such Consolidated Net Income up to the aggregate amount of
cash actually distributed by such Person during such period to
the Company or a Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other
distribution to a Restricted Subsidiary, to the limitations
contained in clause (iii) below) and (b) the Company's equity in
a net loss of any such Person (other than an Unrestricted
Subsidiary) for such period shall be included in determining such
Consolidated Net Income, (ii) any net income (loss) of any person
acquired by the Company or a Subsidiary in a pooling of interests
transaction for any period prior to the date of such acquisition,
(iii) any net income (loss) of any Restricted Subsidiary if such
Subsidiary is subject to restrictions, directly or indirectly, on
the payment of dividends or the making of distributions by such
Restricted Subsidiary, directly or indirectly, to the Company,
except that (a) subject to the limitations contained in (iv)
below, the Company's equity in the net income of any such
Restricted Subsidiary for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash that
could have been distributed by such Restricted Subsidiary during
such period to the Company or another Restricted Subsidiary as a
dividend (subject, in the case of a dividend to another
Restricted Subsidiary, to the limitation contained in this
clause) and (b) the Company's equity in a net loss of any such
Restricted Subsidiary for such period shall be included in
determining such Consolidated Net Income, (iv) any gain (but not
loss) realized upon the sale or other disposition of any
property, plant or equipment of the Company or its consolidated
Subsidiaries (including pursuant to any Sale/Leaseback
Transaction) which is not sold or otherwise disposed of in the
ordinary course of business and any gain (but not loss)
realized upon the sale or other disposition of any
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Capital Stock of any Person, (v) any extraordinary gain or loss
and (vi) the cumulative effect of a change in accounting
principles.
"CONSOLIDATED NET WORTH" means the total of the amounts
shown on the balance sheet of the Company and its consolidated
Subsidiaries, determined on a consolidated basis in accordance
with GAAP, as of the end of the most recent fiscal quarter of the
Company ending at least 45 days (or at least 30 days if the
Company's Report on Form 10-Q or 10-K for the most recent fiscal
quarter or year, as the case may be, has been filed with the SEC)
prior to the taking of any action for the purpose of which the
determination is being made, as (i) the par or stated value of
all outstanding Capital Stock of the Company plus (ii) paid-in
capital or capital surplus relating to such Capital Stock plus
(iii) any retained earnings or earned surplus less (a) any
accumulated deficit and (b) any amounts attributable to
Disqualified Stock.
"CREDIT AGREEMENT" means the $175 million revolving credit
facility, as amended, between the Company and a syndicate of
banks, and any extensions, revisions, refinancings or
replacements thereof by a bank or a syndicate of banks.
"CURRENT MARKET PRICE" on any date means the arithmetic mean
of the Quoted Price of the Notes for 20 consecutive trading days
commencing 30 days before such date.
"DEFAULT" means any event which is, or after notice or
passage of time or both would be, an Event of Default. See
"Description of New Notes - Certain Covenants - Events of
Default."
"DESIGNATED SENIOR INDEBTEDNESS" means (i) the Company's
Guarantee of the Bank Indebtedness and (ii) any other Senior
Indebtedness which, at the date of determination, has an
aggregate principal amount outstanding of, or under which, at the
date of determination, the holders thereof, are committed to lend
up to, at least $25 million and is specifically designated by the
Company in the instrument evidencing or governing such Senior
Indebtedness as "Designated Senior Indebtedness" for purposes of
the Indenture and has been designated as "Designated Senior
Indebtedness" for purposes of the Indenture in an Officers'
Certificate received by the Trustee.
"DESIGNATED SENIOR INDEBTEDNESS OF GUARANTOR" means (i) the
Bank Indebtedness and (ii) any other Senior Indebtedness of
Guarantor which, at the date of determination, has an aggregate
principal amount outstanding of, or under which, at the date of
determination, the holders thereof are committed to lend up to,
at least $25 million and is specifically designated by the
Guarantor in the instrument evidencing or governing such Senior
Indebtedness of Guarantor as "Designated Senior Indebtedness of
Guarantor" for purposes of the Indenture and has been designated
as "Designated Senior Indebtedness of Guarantor" for purposes of
the Indenture in an Officers' Certificate received by the
Trustee.
"DISQUALIFIED STOCK" of a Person means Redeemable Stock of
such Person as to which the maturity, mandatory redemption,
conversion or exchange or redemption at the option of the holder
thereof occurs, or may occur, on or prior to the first
anniversary of the Stated Maturity of the Notes.
"EBITDA" for any period means the Consolidated Net Income
for such period, plus the following to the extent deducted in
calculating such Consolidated Net Income: (i) income tax expense,
(ii) Consolidated Interest Expense, (iii) depreciation expense
and (iv) amortization expense, in each case for such period.
"EVENT OF LOSS" means, with respect to any property or
asset, any (i) loss, destruction or damage of such property or
asset; or (ii) any condemnation, seizure or taking, by exercise
of the power of eminent domain or otherwise, of such property or
asset, or confiscation or requisition of the use of such property
or asset.
"FAIR MARKET VALUE" means, with respect to any asset or
property, the price which could be negotiated in an arms'-length
free market transaction, for cash, between a willing seller and a
willing buyer, neither of whom is under undue pressure or
compulsion to complete the transaction.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect as of the date of the
Indenture, including those set forth in the opinions and
pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as approved by a
significant segment of the accounting
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profession. All ratios and computations based on GAAP contained
in the Indenture shall be computed in conformity with GAAP
consistently applied.
"GAMING AUTHORITY" means the Nevada Gaming Commission, the
Nevada State Gaming Control Board or any agency which has, or may
at any time after the date of the Indenture have, jurisdiction
over the gaming activities of the Company or any of its
Subsidiaries or any successor to such authority.
"GAMING LAWS" means the gaming laws of a jurisdiction or
jurisdictions to which the Company or any of its Subsidiaries is,
or may at any time after the date of the Indenture be, subject.
"GAMING LICENSE" means any license, permit, franchise or
other authorization from any Governmental Authority required on
the date of the Indenture or at any time thereafter to own,
lease, operate or otherwise conduct the gaming business of the
Company and its Subsidiaries, including all licenses granted
under Gaming Laws and other Legal Requirements.
"GUARANTEE" means any obligation, contingent or otherwise,
of any Person directly or indirectly guaranteeing any
Indebtedness or other obligation of any other Person and any
obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness or other obligation of
such other Person (whether arising by virtue of partnership
arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into
for purposes of assuring in any other manner the obligee of such
Indebtedness or other obligation of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or
in part); PROVIDED, HOWEVER, that the term "Guarantee" shall not
include endorsements for collection or deposit in the ordinary
course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"GUARANTOR" means Rio Properties, Inc.
"HOLDER" or "NOTEHOLDER" means the Person in whose name a
Note is registered on the Registrar's books.
"INCUR" means issue, assume, Guarantee, incur or otherwise
become liable for; PROVIDED, HOWEVER, that any Indebtedness or
Capital Stock of a Person existing at the time such person
becomes a Subsidiary (whether by merger, consolidation,
acquisition or otherwise) shall be deemed to be incurred by such
Subsidiary at the time it becomes a Subsidiary. The terms
"Incurred", "Incurrence" and "Incurring" shall each have a
correlative meaning.
"INDEBTEDNESS" means, with respect to any Person on any date
of determination (without duplication),
(i) the principal of and premium (if any) in respect of
indebtedness of such Person for borrowed money;
(ii) the principal of and premium (if any) in respect of
obligations of such Person evidenced by bonds, debentures, notes
or other similar instruments;
(iii) all Capitalized Lease Obligations and Attributable
Indebtedness of such Person;
(iv) all obligations of such Person to pay the deferred and
unpaid purchase price of property or services (except Trade
Payables), which purchase price is due more that six months after
the date of placing such property in service or taking delivery
and title thereto or the completion of such services;
(v) all obligations of such Person in respect of letters of
credit, banker's acceptances or other similar instruments or
credit transactions (including reimbursement obligations with
respect thereto), other than obligations with respect to letters
of credit securing obligations (other than obligations described
in (i) through (iv) above) entered into in the ordinary course of
business of such Person to the extent such letters of credit are
not drawn upon or, if and to the extent drawn upon, such drawing
is reimbursed no later than the third Business Day following
receipt by such Person of a demand for reimbursement following
payment on the letter of credit;
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(vi) the amount of all obligations of such Person with
respect to the redemption, repayment or other repurchase of any
Disqualified Stock or, with respect to any Subsidiary, any
Preferred Stock (but excluding, in each case, any accrued
dividends);
(vii) all Indebtedness of other Persons secured by a Lien on
any asset of such Person, whether or not such Indebtedness is
assumed by such Person; PROVIDED, HOWEVER, that the amount of
such Indebtedness shall be the lesser of (a) the fair market
value of such asset at such date of determination and (b) the
amount of such Indebtedness of such other Persons;
(viii) all Indebtedness of other Persons to the extent
Guaranteed by such Person; and
(ix) to the extent not otherwise included in this definition,
obligations in respect of Interest Rate Protection Agreements.
The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations
as described above and the maximum liability, upon the occurrence
of the contingency giving rise to the obligation, of any
contingent obligations at such date.
"INDEPENDENT DIRECTOR" means a director of the Company other
than a director who is a party, or who is a director, officer,
employee or Affiliate (or is related by blood or marriage to any
such person) of a party, to the transaction in question, and who
is, in fact, independent in respect of such transaction.
"INTEREST RATE PROTECTION AGREEMENT" means, in respect of a
Person, any interest rate swap agreement, interest rate option
agreement, interest rate cap agreement, interest rate collar
agreement, interest rate floor agreement or other similar
agreement or arrangement.
"INVESTMENT" in any Person means any direct or indirect
advance, loan (other than advances to customers in the ordinary
course of business that are recorded as accounts receivable on
the balance sheet of such Person) or other extension of credit
(including by way of Guarantee or similar arrangement) or capital
contribution to (by means of any transfer of cash or other
property to others or any payment for property or services for
the account or use of others), or any purchase or acquisition of
Capital Stock, Indebtedness or other similar instruments issued
by such Person. For purposes of the definition of "Unrestricted
Subsidiary" and the limitations set forth in "Limitation on
Restricted Payments", (i) "Investment" shall include the portion
(proportionate to the Company's equity interest in such
Subsidiary) of the Fair Market Value of the net assets of any
Subsidiary of the Company at the time that such Subsidiary is
designated an Unrestricted Subsidiary; PROVIDED, HOWEVER, that
upon a redesignation of such Subsidiary as a Restricted
Subsidiary, the Company shall be deemed to continue to have a
permanent "Investment" in an Unrestricted Subsidiary in an amount
(if positive) equal to (x) the Company's "Investment" in such
Subsidiary at the time of such redesignation less (y) the portion
(proportionate to the Company's equity interest in such
Subsidiary) of the Fair Market Value of the net assets of such
Subsidiary at the time that such Subsidiary is so re-designated a
Restricted Subsidiary; and (ii) any property transferred to or
from an Unrestricted Subsidiary shall be valued at its fair
market value at the time of such transfer. In determining the
amount of any Investment in respect of any property or assets
other than cash, such property or asset shall be valued at its
fair market value at the time of such Investment (unless
otherwise specified in this definition), as determined in good
faith by the Board of Directors, whose determination shall be
evidenced by a Board Resolution.
"LIEN" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any
conditional sale or other title retention agreement or lease in
the nature thereof) or any Sale/Leaseback Transaction.
"NET AVAILABLE CASH" from an Asset Disposition or Event of
Loss means cash payments received (including any cash payments
received by way of deferred payment of principal pursuant to a
note or installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the
form of assumption by the acquiring person of Indebtedness or
other obligations relating to such properties or assets or
received in any other noncash form) therefrom, in each case net
of (i) all legal, title and recording tax expenses, commissions
and other fees and expenses incurred, and all Federal, state,
provincial, foreign and local taxes required to be paid or
accrued as a liability under GAAP, as a consequence of such Asset
Disposition or Event of Loss, (ii) all payments made on any
Indebtedness which is
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secured by any assets subject to such Asset Disposition, in
accordance with the terms of any Lien upon such assets, or
which must by its terms, or in order to obtain a necessary
consent to such Asset Disposition, or by applicable law be
repaid out of the proceeds from such Asset Disposition, (iii)
all distributions and other payments required to be made to
minority interest holders in Subsidiaries or joint ventures as a
result of such Asset Disposition or Event of Loss and (iv) the
deduction of appropriate amounts to be provided by the seller as
a reserve, in accordance with GAAP, against any liabilities
associated with the assets disposed of in such Asset Disposition
and retained by the Company or any Restricted Subsidiary after
such Asset Disposition.
"NET CASH PROCEEDS", with respect to any issuance or sale of
Capital Stock, means the cash proceeds of such issuance or sale
net of attorneys' fees, accountants' fees, underwriters' or
placement agents' fees, discounts or commissions and brokerage,
consultant and other fees actually incurred in connection with
such issuance or sale and net of taxes paid or payable as a
result thereof.
"NON-RECOURSE INDEBTEDNESS" means Indebtedness of a Person
to the extent that under the terms thereof or pursuant to
applicable law (i) no personal recourse shall be had against such
Person for the payment of the principal of or interest or
premium, if any, on such Indebtedness, and (ii) enforcement of
obligations on such Indebtedness is limited only to recourse
against interests in Property and assets purchased with the
proceeds of the Incurrence of such Indebtedness and as to which
neither the Company nor any of its Restricted Subsidiaries
provides any credit support or is liable.
"OFFICER" means the Chairman of the Board, the President,
the Treasurer or the Secretary of the Company.
"OFFICERS' CERTIFICATE" means a certificate signed by two
Officers at least one of whom shall be the principal executive
officer, principal accounting officer or principal financial
officer of the Company.
"OPINION OF COUNSEL" means a written opinion from legal
counsel who is acceptable to the Trustee. The counsel may be an
employee of or counsel to the Company or the Trustee.
"PARI PASSU", as applied to the ranking of any Indebtedness
of a Person in relation to other Indebtedness of such Person,
means that each such Indebtedness either (i) is not subordinate
in right of payment to any Indebtedness or (ii) is subordinate in
right of payment to the same Indebtedness as is the other, and is
so subordinate to the same extent, and is not subordinate in
right of payment to each other or to any Indebtedness as to which
the other is not so subordinate.
"PERMITTED FF&E FINANCING" means Indebtedness which is Non-
Recourse Indebtedness to the Company or any of its Restricted
Subsidiaries or any of their properties that is Incurred to
finance the acquisition or lease after the date of the Indenture
of newly acquired or leased furniture, fixtures or equipment
("FF&E") used directly in the operation of any casino hotel owned
or leased by the Company or its Restricted Subsidiaries and
secured by a Lien on such FF&E (which Lien, subject to certain
limitations, shall be the only Permitted Lien with respect to
such FF&E).
"PERMITTED HOLDERS" means Anthony A. Marnell II, James A.
Barrett, Jr., their estates, spouses, ancestors, and lineal
descendants, the legal representatives of any of the foregoing
and the trustee of any bona fide trust of which the foregoing are
the sole beneficiaries or the grantors, or any Person of which
the foregoing "beneficially owns" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act) voting securities representing at
least 66 2/3% of the total voting power of all classes of Capital
Stock of such Person (exclusive of any matters as to which class
voting rights exist).
"PERMITTED INVESTMENT" means an Investment by the Company or
any Restricted Subsidiary in (i) a Restricted Subsidiary or a
Person which will, upon the making of such Investment, become a
Restricted Subsidiary; PROVIDED, HOWEVER, that the primary
business of such Restricted Subsidiary is a Related Business;
(ii) another Person if as a result of such Investment such other
Person is merged or consolidated with or into, or transfers or
conveys all or substantially all its assets to, the Company or a
Restricted Subsidiary; PROVIDED, HOWEVER, that such Person's
primary business is a Related Business; (iii) Temporary Cash
Investments; (iv) receivables owing to the Company or any
Restricted Subsidiary, if created or acquired in the ordinary
course of business and payable or dischargeable in accordance
with customary trade terms; PROVIDED, HOWEVER, that such trade
terms may include such concessionary trade terms as the Company
or any such Restricted Subsidiary deems reasonable under the
circumstances; (v) payroll, travel and similar advances to cover
matters that are expected at the time of such advances ultimately
to be treated as expenses for accounting purposes and that are
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made in the ordinary course of business; (vi) loans or advances
to employees made in the ordinary course of business consistent
with past practices of the Company or such Restricted Subsidiary,
as the case may be; and (vii) stock, obligations or securities
received in settlement of debts created in the ordinary course of
business and owing to the Company or any Restricted Subsidiary or
in satisfaction of judgments.
"PERMITTED LIENS" means, with respect to any Person, (a)
pledges or deposits by such Person under workmen's compensation
laws, unemployment insurance laws or similar legislation, or good
faith deposits in connection with bids, tenders, contracts (other
than for the payment of Indebtedness) or leases to which such
Person is a party, or deposits to secure public or statutory
obligations of such Person or deposits of cash or United States
government bonds to secure surety or appeal bonds to which such
Person is a party, or deposits as security for contested taxes or
import duties or for the payment of rent, in each case Incurred
in the ordinary course of business; (b) Liens imposed by law,
such as carriers', warehousemen's and mechanics' Liens, in each
case for sums not yet due or being contested in good faith by
appropriate proceedings, or other Liens arising out of judgments
or awards against such Person with respect to which such Person
shall then be prosecuting an appeal or other proceedings for
review; (c) Liens for property taxes not yet due or payable or
subject to penalties for non-payment and which are being
contested in good faith by appropriate proceedings; (d) Liens in
favor of issuers of surety bonds or letters of credit issued
pursuant to the request of and for the account of such Person in
the ordinary course of its business; (e) minor survey exceptions,
minor encumbrances, easements or reservations of, or rights of
others for, licenses, rights-of-way, sewers, electric lines,
telegraph and telephone lines and other similar purposes, or
zoning or other restrictions as to the use of real property or
Liens incidental to the conduct of the business of such Person or
to the ownership of its properties which were not Incurred in
connection with Indebtedness and which do not in the aggregate
materially adversely affect the value of said properties or
materially impair their use in the operation of the business of
such Person; (f) Liens existing on the date of the Indenture; (g)
Liens on property or shares of stock of a Person at the time such
Person becomes a Subsidiary; PROVIDED, HOWEVER, that any such
Lien may not extend to any other property owned by the Company or
any Restricted Subsidiary; (h) Liens on property at the time the
Company or a Subsidiary acquired the property, including any
acquisition by means of a merger or consolidation with or into
the Company or any Restricted Subsidiary; PROVIDED, HOWEVER, that
any such Lien may not extend to any other property owned by the
Company or any Restricted Subsidiary; (i) Liens securing an
Interest Rate Protection Agreement so long as the related
Indebtedness is permitted to be incurred under the Indenture, (j)
Liens to secure any refinancing, refunding, extension, renewal or
replacement (or successive refinancings, refundings, extensions,
renewals or replacements) as a whole, or in part, of any
Indebtedness secured by any Lien referred to in the foregoing
clauses (f), (g), (h) and (k); PROVIDED, HOWEVER, that (x) such
new Lien shall be limited to all or part of the same property
that secured the original Lien (plus improvements on such
property) and (y) the Indebtedness secured by such Lien at such
time is not increased to any amount greater than the sum of (A)
the outstanding principal amount or, if greater, committed amount
of the Indebtedness described under clauses (f), (g), (h) or (k)
at the time the original Lien became a Permitted Lien under the
Indenture and (B) an amount necessary to pay any fees and
expenses, including premiums, related to such refinancing,
refunding, extension, renewal or replacement and (k) Liens
securing Permitted FF&E Financings.
"PERSON" means any individual, corporation, partnership,
joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or
political subdivision thereof or any other entity.
"PREFERRED STOCK", as applied to the Capital Stock of any
corporation, means Capital Stock of any class or classes (however
designated) which is preferred as to the payment of dividends, or
as to the distribution of assets upon any voluntary or
involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
"PRINCIPAL" of a Note means the principal of the Note plus
the premium, if any, payable on the Note which is due or overdue
or is to become due at the relevant time.
"PRO FORMA" means, with respect to any calculation made or
required to be made pursuant to the terms hereof, a calculation
in accordance with Article 11 of Regulation S-X promulgated under
the Securities Act (to the extent applicable), as interpreted in
good faith by the Board of Directors after consultation with the
independent certified public accountants of the Company, or
otherwise a calculation made in good faith by the Board of
Directors after consultation with the independent certified
public accountants of the Company, as the case may be.
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"QUOTED PRICE" means for any day the last reported sale
price regular way or, in case no such reported sale takes place
on such day, the average of the closing bid and asked prices
regular way for such day, in either case on the principal
national securities exchange on which the Notes are listed or
admitted to trading, or if the Notes are not so listed or
admitted to trading, but are traded in the over the counter
market, the closing sale price of the Notes or, in case no sale
is publicly reported, the average of the closing bid and asked
prices, as furnished by two members of the National Association
of Securities Dealers, Inc. selected from time to time by the
Company for that purpose.
"REDEEMABLE STOCK" means, with respect to any Person, any
Capital Stock which by its terms (or by the terms of any security
into which it is convertible or for which it is exchangeable) or
upon the happening of any event (i) matures or is mandatorily
redeemable pursuant to a sinking fund obligation or otherwise,
(ii) is convertible or exchangeable for Indebtedness (other than
Preferred Stock) or Disqualified Stock or (iii) is redeemable at
the option of the holder thereof, in whole or in part.
"REFINANCING INDEBTEDNESS" means Indebtedness that refunds,
refinances, replaces, renews, repays or extends (including
pursuant to any defeasance or discharge mechanism) (collectively,
"refinances," and "refinanced" shall have a correlative meaning)
any Indebtedness existing on the date of the Indenture or
Incurred in compliance with the Indenture (including Indebtedness
of the Company that refinances Indebtedness of any Restricted
Subsidiary and Indebtedness of any Restricted Subsidiary that
refinances Indebtedness of another Restricted Subsidiary)
including Indebtedness that refinances Refinancing Indebtedness;
PROVIDED, HOWEVER, that (i) the Refinancing Indebtedness has a
Stated Maturity no earlier than the Stated Maturity of the
Indebtedness being refinanced, (ii) the Refinancing Indebtedness
has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the
Indebtedness being refinanced, (iii) such Refinancing
Indebtedness is Incurred in an aggregate principal amount (or if
issued with original issue discount, an aggregate issue price)
that is equal to or less than the aggregate principal amount (or
if issued with original issue discount, the aggregate accreted
value) then outstanding of the Indebtedness being refinanced and
(iv) if the Indebtedness of the Company or a Restricted
Subsidiary being refinanced is subordinated to other Indebtedness
of the Company or a Restricted Subsidiary in any respect, such
Refinancing Indebtedness is subordinated at least to the same
extent; PROVIDED FURTHER, HOWEVER, that Refinancing Indebtedness
shall not include (a) Indebtedness of a Subsidiary that
refinances Indebtedness of the Company or (b) Indebtedness of the
Company or a Restricted Subsidiary that refinances Indebtedness
of an Unrestricted Subsidiary.
"RELATED BUSINESS" means the gaming business conducted (or
proposed to be conducted) by the Company and its Subsidiaries as
of the date of the Indenture and any and all reasonably related
businesses necessary for, in support or anticipation of and
ancillary to or in preparation for, the gaming business
including, without limitation, the development, expansion or
operation of any Casino (including any land-based, dockside,
riverboat or other type of Casino), owned, or to be owned, by the
Company or one of its Subsidiaries.
"RESTRICTED SUBSIDIARY" means (i) Rio Properties, Inc. and
(ii) any other Subsidiary of the Company that is not an
Unrestricted Subsidiary.
"REPRESENTATIVE" means the trustee, agent or representative
(if any) for an issue of Senior Indebtedness.
"SALE/LEASEBACK TRANSACTION" means an arrangement relating
to property now owned or hereafter acquired whereby the Company
or a Restricted Subsidiary transfers such property to a Person
and the Company or a Restricted Subsidiary leases it from such
Person.
"SEC" means the Securities and Exchange Commission.
"SENIOR INDEBTEDNESS" means (i) the Company's Guarantee of
the Bank Indebtedness and (ii) all other Indebtedness of the
Company including interest thereon, whether outstanding on the
date of the Indenture or thereafter issued, unless in the
instrument creating or evidencing the same or pursuant to which
the same is outstanding it is provided that such obligations are
not superior in right of payment to the Notes; PROVIDED, HOWEVER,
that Senior Indebtedness shall not include (a) any obligation of
the Company to any Subsidiary, (b) any liability for Federal,
state, local or other taxes owed or owing by the Company, (c) any
accounts payable or other liability to trade creditors arising in
the ordinary course of business (including Guarantees thereof or
instruments evidencing such liabilities), (d) any
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Indebtedness, Guarantee or obligation of the Company which is
subordinate or junior in any respect to any other Indebtedness,
Guarantee or obligation of the Company, including any Senior
Subordinated Indebtedness and any Subordinated Obligations,
(e) any obligations with respect to any Capital Stock or (f) any
Indebtedness Incurred in violation of the Indenture.
"SENIOR INDEBTEDNESS OF GUARANTOR" means (i) the Bank
Indebtedness and (ii) all other Indebtedness of the Guarantor
including interest thereon, whether outstanding on the date of
the Indenture or thereafter issued, unless in the instrument
creating or evidencing the same or pursuant to which the same is
outstanding it is provided that such Indebtedness shall not
include (a) any obligation of the Guarantor to any Subsidiary,
(b) any liability for Federal, state, local or other taxes owed
or owing by the Guarantor, (c) any accounts payable or other
liability to trade creditors arising in the ordinary course of
business (including Guarantees thereof or instruments evidencing
such liabilities), (d) any Indebtedness, Guarantee or obligation
of the Guarantor which is subordinate or junior in any respect to
any other Indebtedness, Guarantee or obligation of the Guarantor,
including Senior Subordinated Indebtedness of Guarantor and any
Subordinated Obligations, (e) any obligations with respect to any
Capital Stock or (f) any Indebtedness Incurred in violation of
the Indenture.
"SENIOR SUBORDINATED INDEBTEDNESS" means the Notes and any
other Indebtedness of the Company that specifically provides that
such Indebtedness is to rank PARI PASSU with the Notes and is not
subordinated by its terms to any Indebtedness or other obligation
of the Company which is not Senior Indebtedness.
"SENIOR SUBORDINATED INDEBTEDNESS OF GUARANTOR" means the
Rio Guarantee and any other Indebtedness of the Guarantor that
specifically provides that such Indebtedness is to rank PARI
PASSU with the Rio Guarantee and is not subordinated by its terms
to any Indebtedness or other obligation of the Guarantor which is
not Senior Indebtedness of Guarantor.
"STATED MATURITY" means, with respect to any security, the
date specified in such security as the fixed date on which the
payment of principal of such security is due and payable,
including pursuant to any mandatory redemption provision (but
excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening
of any contingency beyond the control of the issuer unless such
contingency has occurred).
"SUBORDINATED OBLIGATION" means (i) any Indebtedness of the
Company (whether outstanding on the date of the Indenture or
thereafter Incurred) which is subordinate or junior in right of
payment to the Notes or (ii) any Indebtedness of the Guarantor
(whether outstanding on the date of the Indenture or thereafter
Incurred) which is subordinate or junior in right of payment to
the Rio Guarantee.
"SUBSIDIARY" of any Person means any corporation,
association, partnership or other business entity of which more
than 50% of the total voting power of shares of Capital Stock or
other interests (including partnership interests) entitled
(without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the
time owned or controlled, directly or indirectly, by (i) such
Person, (ii) such Person and one or more Subsidiaries of such
Person or (iii) one or more Subsidiaries of such Person.
"TEMPORARY CASH INVESTMENTS" means any of the following: (i)
investments in U.S. Government Obligations maturing within 90
days of the date of acquisition thereof, (ii) investments in time
deposit accounts, certificates of deposit and money market
deposits maturing within 90 days of the date of acquisition or
any state thereof having capital, surplus and undivided profits
aggregating in excess of $500,000,000 and whose long-term debt is
rated "A-3" or "A-" or higher according to Moody's Investors
Service, Inc. or Standard and Poor's Corporation (or such similar
equivalent rating by at least one "nationally recognized
statistical rating organization" (as defined in Rule 436 under
the Securities Act)), (iii) repurchase obligations with a term of
not more than 7 days for underlying securities of the types
described in clause (i) above entered into with a bank meeting
the qualifications described in clause (ii) above, and (iv)
investments in commercial paper, maturing not more than 90 days
after the date of acquisition, issued by a corporation (other
than an Affiliate of the Company) organized and in existence
under the laws of the United States of America with a rating at
the time as of which any investment therein is made of "P-1" (or
higher) according to Moody's Investors Service, Inc. or "A-1" (or
higher) according to Standard and Poor's Corporation.
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"TRADE PAYABLES" means, with respect to any Person, any
accounts payable or any indebtedness or monetary obligation to
trade creditors created, assumed or Guaranteed by such Person
arising in the ordinary course of business of such Person in
connection with the acquisition of goods or services.
"TRUSTEE" means the party named as such in the Indenture
until a successor replaces it in accordance with the provisions
of the Indenture and, thereafter, means the successor.
"UNIFORM COMMERCIAL CODE" means the New York Uniform
Commercial Code as in effect from time to time.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary of the
Company that at the time of determination shall be designated an
Unrestricted Subsidiary by the Board of Directors in the manner
provided below and (ii) any Subsidiary of an Unrestricted
Subsidiary. The Board of Directors may designate any Subsidiary
of the Company (including any newly acquired or newly formed
Subsidiary of the Company) to be an Unrestricted Subsidiary
unless such Subsidiary owns any Capital Stock or Indebtedness of,
or owns or holds any Lien on any property of, the Company or any
other Subsidiary of the Company that is not a Subsidiary of the
Subsidiary to be so designated; PROVIDED, HOWEVER, that either
(a) the Subsidiary to be so designated has total assets of $1,000
or less or (b) if such Subsidiary has assets greater than $1,000,
then such designation would be permitted under "Limitation on
Restricted Payments" as a "Restricted Payment". The Board of
Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; PROVIDED, HOWEVER, that immediately after
giving PRO FORMA effect to such designation (1) the Company could
incur $1.00 of additional Indebtedness if it complies with the
Consolidated Coverage Ratio limitations in "Limitation on
Indebtedness" and (2) no Default shall have occurred and be
continuing. Any such designation by the Board of Directors shall
be evidenced to the Trustee by promptly filing with the Trustee a
copy of the Board Resolution giving effect to such designation
and an Officers' Certificate certifying that such designation
complies with the foregoing provisions.
"U.S. GOVERNMENT OBLIGATIONS" means direct obligations (or
certificates representing an ownership interest in such
obligations) of the United States of America (including any
agency or instrumentality thereof) for the payment of which the
full faith and credit of the United States of America is pledged
and which are not callable or redeemable at the issuer's option.
"VOTING STOCK" of a corporation means all classes of Capital
Stock of such corporation then outstanding and normally entitled
to vote in the election of directors.
"WHOLLY OWNED SUBSIDIARY" means a Restricted Subsidiary of
the Company all the Capital Stock of which (other than directors'
qualifying shares) is owned by the Company or another Wholly
Owned Subsidiary.
CERTAIN COVENANTS
The Indenture contains covenants including, among others,
the following:
LIMITATION ON INDEBTEDNESS. The Company shall not, and
shall not permit any Restricted Subsidiary to, Incur any
Indebtedness; PROVIDED, HOWEVER, that the Company or any
Restricted Subsidiary may Incur Indebtedness if on the date
thereof the Consolidated Coverage Ratio would be greater than
2.00:1.00.
Notwithstanding the foregoing limitation, the Company and
its Restricted Subsidiaries may Incur the following Indebtedness:
(i) Indebtedness under the Credit Agreement in an aggregate
amount outstanding at any time not to exceed $175 million (less
the amount of any permanent reductions in the amount of available
borrowings); (ii) Indebtedness outstanding under Permitted FF&E
Financings in an amount not to exceed 100% of the lower of cost
or fair market value of the FF&E so purchased or leased; (iii)
Indebtedness (other than Indebtedness permitted by the
immediately preceding paragraph or elsewhere in this paragraph)
in an aggregate principal amount outstanding at any time not to
exceed $40 million; (iv) Indebtedness of the Company owing to and
held by any Wholly Owned Subsidiary or Indebtedness of a
Restricted Subsidiary owing to and held by the Company or any
Wholly Owned Subsidiary; PROVIDED, HOWEVER, that any subsequent
issuance or transfer of any Capital Stock which results in any
such Wholly Owned Subsidiary ceasing to be a Wholly Owned
Subsidiary or any subsequent transfer of any such Indebtedness
(except to the Company or a Wholly
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Owned Subsidiary) shall be deemed, in each case, to
constitute the Incurrence of such Indebtedness by the issuer
thereof; (v) Indebtedness represented by the Notes and the Rio
Guarantee and any Indebtedness (other than the Indebtedness
described in clauses (i) or (iv) above) outstanding on the date
of the Indenture; (vi) Indebtedness under Interest Rate
Protection Agreements; PROVIDED, HOWEVER, such Interest Rate
Protection Agreements do not increase the Indebtedness of
the Company outstanding at any time other than as a result of
fluctuations in the exchange rates or interest rates or by reason
of customary fees, indemnities and compensation payable
thereunder; (vii) Indebtedness in connection with one or more
standby letters of credit issued in the ordinary course of
business or pursuant to self-insurance obligations; (viii)
Indebtedness Incurred solely in respect of performance bonds or
completion guarantees, to the extent that such Incurrence does
not result in the Incurrence by the Company or any Restricted
Subsidiary of any obligation for the payment of borrowed money to
others; and (ix) Refinancing Indebtedness Incurred in respect of
Indebtedness Incurred pursuant to the provisions of the
immediately preceding paragraph or clauses (ii) and (v) above.
For purposes of determining the outstanding principal amount
of any particular Indebtedness Incurred pursuant to this section
"Limitation on Indebtedness", (i) Indebtedness permitted by this
section need not be permitted solely by reference to one
provision permitting such Indebtedness but may be permitted in
part by one such provision and in part by one or more other
provisions of this provision permitting such Indebtedness and
(ii) in the event that Indebtedness or any portion thereof meets
the criteria of more than one of the types of Indebtedness
described in this section, the Company, in its sole discretion,
shall classify such Indebtedness and only be required to include
the amount of such Indebtedness in one of such clauses.
LIMITATION ON RESTRICTED PAYMENTS. The Company shall not,
and shall not permit any Restricted Subsidiary to, directly or
indirectly, (i) declare or pay any dividend or make any
distribution on or in respect of its Capital Stock (including any
payment in connection with any merger or consolidation involving
the Company) except dividends or distributions payable solely in
its Capital Stock (other than Disqualified Stock) or in options,
warrants or other rights to purchase such Capital Stock and
except dividends or distributions payable to the Company or a
Restricted Subsidiary (and, if such Restricted Subsidiary is not
wholly owned, to its other shareholders on a pro rata basis),
(ii) purchase, redeem, retire or otherwise acquire for value any
Capital Stock of the Company or any Restricted Subsidiary held by
Persons other than the Company or a Restricted Subsidiary, (iii)
purchase, repurchase, redeem, defease or otherwise acquire or
retire for value, prior to scheduled maturity, scheduled
repayment or scheduled sinking fund payment any Subordinated
Obligations (other than the purchase, repurchase or other
acquisition of Subordinated Obligations purchased in anticipation
of satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date of
acquisition) or (iv) make any Investment (other than a Permitted
Investment) in any Person (any such dividend, distribution,
purchase, redemption, repurchase, defeasance, other acquisition,
retirement or Investment being herein referred to as a
"Restricted Payment") if at the time the Company or such
Restricted Subsidiary makes such Restricted Payment: (a) a
Default shall have occurred and be continuing (or would result
therefrom); (b) the Company could not Incur at least $1.00
of additional Indebtedness under the Consolidated Coverage Ratio
limitation set forth in "Limitation on Indebtedness" above; or
(c) the aggregate amount of such Restricted Payment and all
other Restricted Payments (the amount so expended, if other
than in cash, to be determined in good faith by the Board
of Directors, whose determination shall be evidenced by a Board
Resolution) declared or made since June 30, 1995, would exceed,
without duplication, the sum of: (1) 50% of the Consolidated Net
Income accrued during the period (treated as one accounting
period) from June 30, 1995, to the end of the most recent fiscal
quarter ending at least 45 days (or at least 30 days if the
Company's Report on Form 10-Q or 10-K for the most recent fiscal
quarter or year, as the case may be, has been filed with the
SEC) prior to the date of such Restricted Payment (or, in
case such Consolidated Net Income shall be a deficit, minus
100% of such deficit) and minus 100% of the amount of any
write-downs, write-offs, other negative revaluations and
other negative extraordinary charges not otherwise reflected in
Consolidated Net Income during such period; (2) the aggregate
Net Cash Proceeds received by the Company from the issue or
sale of its Capital Stock (other than Disqualified Stock)
subsequent to June 30, 1995 (other than an issuance or sale
to a Subsidiary of the Company or an employee stock ownership
plan or other trust established by the Company or any of its
Subsidiaries); (3) the amount by which Indebtedness of the
Company or its Restricted Subsidiaries is reduced on the
Company's balance sheet upon the conversion or exchange (other
than by a Subsidiary) subsequent to June 30, 1995, of any
Indebtedness of the Company or its Restricted Subsidiaries
convertible or exchangeable for Capital Stock (other than
Disqualified Stock) of the Company (less the amount of any cash
or other property distributed by the Company or any Restricted
Subsidiary upon such conversion or exchange); (4) the amount
equal to the net reduction in Investments resulting from (A)
payments of dividends, repayments of loans or advances or other
transfers of assets to the Company or any Restricted Subsidiary
or (B)
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the redesignation of Unrestricted Subsidiaries as Restricted
Subsidiaries (valued in each case as provided in the definition
of "Investment") not to exceed the amount of Investments
previously made by the Company or any Restricted Subsidiary,
which amount was treated as a Restricted Payment, in each case to
the extent not included in Consolidated Net Income; and (5) $20
million.
The provisions of this section shall not prohibit: (i) any
purchase or redemption of Capital Stock of the Company or
Subordinated Obligations made by exchange for, or out of the
proceeds of the substantially concurrent sale of, Capital Stock
of the Company (other than Disqualified Stock and other than
Capital Stock issued or sold to a Subsidiary or an employee stock
ownership plan or other trust established by the Company or any
of its Subsidiaries); PROVIDED, HOWEVER, that (a) such purchase
or redemption shall be excluded in the calculation of the amount
of Restricted Payments and (b) the Net Cash Proceeds from such
sale shall be excluded from clause (c)(2) of the preceding
paragraph; (ii) any purchase or redemption of Subordinated
Obligations made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Refinancing Indebtedness;
PROVIDED, HOWEVER, that such purchase or redemption shall be
excluded in the calculation of the amount of Restricted Payments;
(iii) the Company or the Guarantor from redeeming or repurchasing
Capital Stock of the Company or any Subordinated Obligation in
the event that the holder of such Capital Stock or Subordinated
Obligation has failed to qualify or to be found suitable or
otherwise eligible under a Gaming Law to remain a holder of such
Capital Stock or Subordinated Obligation; PROVIDED, HOWEVER, that
the amount of such redemption or repurchase shall be included in
the calculation of the amount of Restricted Payments; (iv)
dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have
complied with the preceding paragraph; PROVIDED, HOWEVER, that at
the time of payment of such dividend, no other Default shall have
occurred and be continuing (or result therefrom); PROVIDED
FURTHER, HOWEVER, that such dividend shall be included in the
calculation of the amount of Restricted Payments or (v) the
Company from making Investments (other than Investments in the
Capital Stock of the Company) the cost to the Company of which do
not exceed $30 million in the aggregate at any one time
outstanding for all such Investments made in reliance upon this
clause (v), PROVIDED FURTHER, HOWEVER, that such Investments
shall be included in the calculation of the amount of Restricted
Payments.
LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM
SUBSIDIARIES. The Company shall not, and shall not permit any
Restricted Subsidiary to, create or otherwise cause or permit to
exist or become effective any consensual encumbrance or
restriction on the ability of any Restricted Subsidiary to (i)
pay dividends or make any other distributions on its Capital
Stock or pay any Indebtedness owed to the Company, (ii) make any
loans or advances to the Company or (iii) transfer any of its
property or assets to the Company, except: (a) any encumbrance or
restriction pursuant to an agreement in effect at or entered into
on the date of the Indenture; (b) any encumbrance or restriction
with respect to a Restricted Subsidiary pursuant to an agreement
relating to any Indebtedness Incurred by such Restricted
Subsidiary prior to the date on which such Restricted Subsidiary
was acquired by the Company (other than Indebtedness Incurred as
consideration in, or to provide all or any portion of the funds
or credit support utilized to consummate, the transaction or
series of related transactions pursuant to which such Restricted
Subsidiary became a Restricted Subsidiary or was acquired by the
Company) and outstanding on such date; (c) any encumbrance or
restriction pursuant to anagreement effecting a refinancing
of Indebtedness Incurred pursuant to an agreement referred to in
clause (a) or (b) of this provision or contained in any amendment
to an agreement referred to in clause (a) or (b) of this
provision; PROVIDED, HOWEVER, that the encumbrances and
restrictions contained in any such refinancing agreement or
amendment are no less favorable to the Noteholders than
encumbrances and restrictions contained in such agreements; (d)
in the case of clause (iii), any encumbrance or restriction (1)
that restricts in a customary manner the subletting, assignment
or transfer of any property or asset that is a lease, license,
conveyance or contract or similar property or asset, (2) arising
by virtue of any transfer of, agreement to transfer, option or
right with respect to, or Lien on, any property or assets of
the Company or any Restricted Subsidiary not otherwise prohibited
by the Indenture, or (3) arising or agreed to in the ordinary
course of business and that does not, individually or in the
aggregate, detract from the value of property or assets of the
Company or any Restricted Subsidiary in any manner material to
the Company or such Restricted Subsidiary; (e) any encumbrance
or restriction pursuant to an agreement relating to an
acquisition of property, so long as such encumbrance or
restriction relate solely to the property so acquired; (f) any
encumbrances or restrictions pursuant to the Credit Agreement and
any extensions or revisions thereof; and (g) any encumbrance or
restriction imposed by any Gaming Authority.
LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK. The
Company shall not, and shall not permit any Restricted Subsidiary
to, make any Asset Disposition unless (i) the Company or such
Restricted Subsidiary receives consideration at the time of such
Asset Disposition at least equal to the Fair Market Value, as
determined in good faith by the Board of
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Directors, the determination of which shall be evidenced by a
Board Resolution (including as to the value of all non-cash
consideration), of the shares and assets subject to such
Asset Disposition; (ii) at least 85% of the consideration thereof
received by the Company or such Restricted Subsidiary is in the
form of cash or cash equivalents; (iii) the Company delivers an
Officers' Certificate to the Trustee certifying that such Asset
Disposition complies with clauses (i) and (ii); and (iv) an
amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by the Company (or such Restricted
Subsidiary, as the case may be) (a) FIRST, to the extent the
Company elects (or is required by the terms of any Senior
Indebtedness), to prepay, repay or purchase Senior Indebtedness
or Indebtedness (other than any Preferred Stock) of a Wholly
Owned Subsidiary (in each case other than Indebtedness owed to
the Company or an Affiliate of the Company) within 270 days from
the later of the date of such Asset Disposition or the receipt
of such Net Available Cash; (b) SECOND, to the extent of the
balance of Net Available Cash after application in accordance
with clause (a), to the extent the Company or such Restricted
Subsidiary elects, to reinvest in Additional Assets (including
by means of an Investment in Additional Assets by a Restricted
Subsidiary with Net Available Cash received by the Company or
another Restricted Subsidiary) within 270 days from the later of
such Asset Disposition or the receipt of such Net Available Cash;
(c) THIRD, to the extent of the balance of such Net Available
cash after application in accordance with clauses (a) and (b),
to make an Offer to purchase Notes pursuant to and subject to
the conditions of the following paragraph; PROVIDED, HOWEVER
that in connection with any prepayment, repayment or
purchase of Indebtedness pursuant to clause (a) or (c) above,
the Company or such Restricted Subsidiary shall retire such
Indebtedness and shall cause the related loan commitment (if any)
to be permanently reduced in an amount equal to the principal
amount so prepaid, repaid or purchased. Notwithstanding the
foregoing provisions of this provision, the Company and its
Restricted Subsidiaries shall not be required to apply any Net
Available Cash in accordance with this provision except to the
extent that the aggregate Net Available Cash from all Asset
Dispositions which are not applied in accordance with this
provision exceed $15 million. Pending application of Net
Available Cash pursuant to this provision, such Net Available
Cash shall be invested in Temporary Cash Investments.
Upon an Event of Loss incurred by the Company or any of its
Restricted Subsidiaries, the Net Available Cash received from
such Event of Loss shall be applied in the same manner as
proceeds from Asset Dispositions described above and pursuant to
the procedures set forth below.
In the event of an Asset Disposition or Event of Loss that
requires the purchase of Notes pursuant to clause (iii)(c) of the
preceding paragraph, the Company will be required to purchase
Notes tendered pursuant to an offer by the Company for the Notes
(the "Offer") at a purchase price of 100% of their principal
amount plus accrued interest to the Purchase Date in accordance
with the procedures (including prorationing in the event of over
subscription) set forth in the next paragraph. If the aggregate
purchase price of Notes tendered pursuant to the Offer is less
than the Net Available Cash allotted to the purchase of the
Notes, the Company may use the remaining Net Available Cash in
its general operations. The Company shall not be required to
make an Offer for Notes pursuant to this provision if the Net
Available Cash available therefor (after application of the
proceeds as provided in clauses (a) and (b) of clause (iii)
of the preceding paragraph) are less than $15 million for any
particular Asset Disposition or Event of Loss (which lesser
amounts shall be carried forward for purposes of determining
whether an Offer is required with respect to the Net Available
Cash from any subsequent Asset Disposition or Event of Loss).
Promptly, and in any event within 10 days after the Company
becomes obligated to make an Offer, the Company shall be
obligated to deliver to the Trustee and send, by first-class mail
to each Holder, a written notice stating that the Holder may
elect to have his Notes purchased by the Company either in whole
or in part (subject to prorationing as hereinafter described in
the event the Offer is oversubscribed) in integral multiples of
$1,000 of principal amount, at the applicable purchase price. The
notice shall specify a purchase date not less than 30 days nor
more than 60 days after the date of such notice (the "Purchase
Date") and shall contain information concerning the business of
the Company which the Company in good faith believes will enable
such Holders to make an informed decision (which at a minimum
will include (i) the most recently filed Annual Report on Form 10-
K (including audited consolidated financial statements) of the
Company, the most recent subsequently filed Quarterly Report on
Form 10-Q and any Current Report on Form 8-K of the Company filed
subsequent to such Quarterly Report, other than Current Reports
describing Asset Dispositions or Events of Loss otherwise
described in the offering materials (or corresponding successor
reports) (collectively, the "Reports"), (ii) a description of
material developments in the Company's business subsequent to the
date of the latest of the Reports, and (iii) if material,
appropriate PRO FORMA financial information) and all instructions
and materials necessary to tender Notes pursuant to the Offer,
together with the information contained in the next following
paragraph.
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Not later than the date upon which written notice of an
Offer is delivered to the Trustee as provided below, the Company
shall deliver to the Trustee an Officers' Certificate as to (i)
the amount of the Offer (the "Offer Amount"), (ii) the allocation
of the Net Available Cash from the Asset Dispositions or Event of
Loss pursuant to which such Offer is being made and (iii) the
compliance of such allocation with the provisions of the next
preceding paragraph. On such date, the Company shall also
irrevocably deposit with the Trustee or with a paying agent (or,
if the Company is acting as its own paying agent, segregate and
hold in trust) in Temporary Cash Investments an amount equal to
the Offer Amount to be held for payment in accordance with the
provisions of this provision. Upon the expiration of the period
for which the Offer remains open (the "Offer Period"), the
Company shall deliver to the Trustee the Notes or portions
thereof which have been properly tendered to and are to be
accepted by the Company. The Trustee shall, on the Purchase Date,
mail or deliver payment to each tendering Holder in the amount of
the purchase price. In the event that the aggregate purchase
price of the Notes delivered by the Company to the Trustee is
less than the Offer Amount, the Trustee shall deliver the excess
to the Company immediately after the expiration of the Offer
Period.
Holders electing to have a Note purchased will be required
to surrender the Note, with an appropriate form duly completed,
to the Company at the address specified in the notice at least
five Business Days prior to the Purchase Date. Holders will be
entitled to withdraw their election if the Trustee or the Company
receives not later than three Business Days prior to the Purchase
Date, a telegram, telex, facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Note
which was delivered for purchase by the Holder and a statement
that such Holder is withdrawing his election to have such Note
purchased. If at the expiration of the Offer Period the aggregate
principal amount of Notes surrendered by Holders exceeds the
Offer Amount, the Company shall select the Notes to be purchased
on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of
$1,000, or integral multiples thereof, shall be purchased).
Holders whose Notes are purchased only in part will be issued new
Notes equal in principal amount to the unpurchased portion of the
Notes surrendered.
At the time the Company delivers Notes to the Trustee which
are to be accepted for purchase, the Company will also deliver an
Officers' Certificate stating that such Notes are to be accepted
by the Company pursuant to and in accordance with the terms of
this provision. A Note shall be deemed to have been accepted for
purchase at the time the Trustee, directly or through an agent,
mails or delivers payment therefor to the surrendering Holder.
The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other
securities laws or regulations in connection with the repurchase
of Notes pursuant to this provision. To the extent that the
provisions of any securities laws or regulations conflict with
this provision, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have
breached its obligations under this provision by virtue thereof.
LIMITATION ON TRANSACTIONS WITH AFFILIATES. (a) The
Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, conduct any business, enter into or
permit to exist any transaction (including the purchase,
conveyance, disposition, sale, lease or exchange of any property
or the rendering of any service) with any Affiliate of the
Company (an "Affiliate Transaction") unless the terms of such
Affiliate Transaction are (i) set forth in writing, (ii) in the
best interest of the Company or such Restricted Subsidiary, as
the case may be, (iii) as favorable to the Company or such
Restricted Subsidiary, as the case may be, as those that could be
obtained at the time of such transaction for a similar
transaction in arm's-length dealings with a Person who is not
such an Affiliate, and (iv) with respect to an Affiliate
Transaction involving aggregate payments or value of $1 million
or greater, the Independent Directors have determined in good
faith that the criteria set forth in clauses (ii) and (iii) are
satisfied and have approved the relevant Affiliate Transaction,
such approval to be evidenced by a Board Resolution. The
determinations pursuant to clauses (ii) and (iii) above shall not
require the Board of Directors or the Independent Directors to
obtain independent expert opinions unless, in the sole judgment
of the Board of Directors or the Independent Directors, the Board
of Directors or the Independent Directors decide to obtain such
an opinion.
(b) The provisions of the preceding paragraph shall not
prohibit (i) any Restricted Payment permitted to be paid pursuant
to "- Limitation on Restricted Payments" above, (ii) any issuance
of securities, or other payments, awards or grants in cash,
securities or otherwise pursuant to, or the funding of,
employment arrangements, stock options and stock ownership plans
approved by the Board of Directors, (iii) loans or advances to
employees in the ordinary course of business in accordance with
past practices of the Company, (iv) the payment of reasonable
fees to directors of the
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Company and its Restricted Subsidiaries who are not employees of
the Company or its Restricted Subsidiaries or (v) any transaction
between the Company and a Wholly Owned Subsidiary or between
Wholly Owned Subsidiaries.
LIMITATION ON LAYERED INDEBTEDNESS. The Company will not,
and will not permit the Guarantor to, directly or indirectly,
Incur any Indebtedness that is subordinate in right of payment to
any other Indebtedness of the Company or the Guarantor, as the
case may be, unless such Indebtedness is subordinate in right of
payment to, or ranks PARI PASSU with, the Notes in the case of
the Company or the Rio Guarantee in the case of the Guarantor.
The Guarantor will not, directly or indirectly, Guarantee
any Indebtedness of the Company that is subordinated in right of
payment to any other Indebtedness of the Company unless such
Guarantee is subordinate in right of payment to, or ranks PARI
PASSU with, the Rio Guarantee.
LIMITATION ON LIENS. The Company shall not, and shall not
permit the Guarantor to, directly or indirectly, create or permit
to exist any Lien (other than Permitted Liens and Liens securing
Senior Indebtedness or Senior Indebtedness of Guarantor,
including Attributable Indebtedness that is Senior Indebtedness
or Senior Indebtedness of Guarantor) on any of its property or
assets (including Capital Stock), whether owned on the date of
the Indenture or thereafter acquired, or any income or profits
therefrom securing any obligation unless contemporaneously
therewith effective provision is made to secure the Notes equally
and ratably with (or prior to) such obligation for so long as
such obligation is so secured.
LIMITATION ON ISSUANCE AND SALE OF CAPITAL STOCK OF
RESTRICTED SUBSIDIARIES. The Company will not permit any
Restricted Subsidiary to, directly or indirectly, issue any
Capital Stock other than to the Company or a Restricted
Subsidiary, that shall entitle the holder of such Capital Stock
to a preference in right of payment in the event of the
liquidation, dissolution or winding-up of such Restricted
Subsidiary or with respect to dividends of such Restricted
Subsidiary.
OWNERSHIP OF RIO PROPERTIES, INC. The Company will
maintain its 100% ownership of the Capital Stock of the
Guarantor.
SUCCESSOR COMPANY
Neither the Company nor the Guarantor shall consolidate with
or merge with or into, or convey, transfer or lease all or
substantially all its assets to, any Person, unless: (i) the
resulting, surviving or transferee Person (the "Successor
Company") shall be a corporation organized and existing under the
laws of the United States of America, any State thereof or the
District of Columbia and the Successor Company (if not the
Company or the Guarantor) shall expressly assume, by an indenture
supplemental hereto, executed and delivered to the Trustee, in
form satisfactory to the Trustee, all the obligations of the
Company under the Notes and the Indenture or the Guarantor under
the Rio Guarantee and the Indenture, as the case may be; (ii)
immediately after giving effect to such transaction on a PRO
FORMA basis (and treating any Indebtedness which becomes an
obligation of the Successor Company or any Restricted Subsidiary
as a result of such transaction as having been Incurred by the
Successor Company or such Restricted Subsidiary at the time of
such transaction), no Default shall have occurred and be
continuing; (iii) immediately after giving effect to such
transaction on a PRO FORMA basis (and treating any Indebtedness
which becomes an obligation of the Successor Company or any
Restricted Subsidiary as a result of such transaction as having
been Incurred by the Successor Company or such Restricted
Subsidiary at the time of such transaction), the Successor
Company would be able to incur an additional $1.00 of
Indebtedness in compliance with the Consolidated Coverage Ratio
limitations set forth in "Limitation on Indebtedness"; (iv)
immediately after giving effect to such transaction on a PRO
FORMA basis (and treating any Indebtedness which becomes an
obligation of the Successor Company or any Restricted Subsidiary
as a result of such transaction as having been Incurred by the
Successor Company or such Restricted Subsidiary at the time of
such transaction), the Successor Company shall have Consolidated
Net Worth in an amount which is not less than the Consolidated
Net Worth of the Company immediately prior to such transaction;
and (v) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger or transfer and such supplemental
indenture (if any) comply with the Indenture.
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The Successor Company shall succeed to, and be substituted
for, and may exercise every right and power of, the Company or
the Guarantor, as the case may be, under the Indenture, but the
predecessor Company in the case of a lease shall not be released
from the obligation to pay the principal of and interest on the
Notes.
Notwithstanding the foregoing clauses (ii), (iii) and (iv),
any Restricted Subsidiary may consolidate with, merge into or
transfer all or part of its properties and assets to the Company.
The phrase "all or substantially all" of the Company's
assets has no clearly established meaning under New York law
which may result in uncertainty in ascertaining whether such an
event has occurred. See "Description of New Notes-Change of
Control."
EVENTS OF DEFAULT
An "Event of Default" occurs if: (i) the Company and the
Guarantor default in any payment of interest on any Note when the
same becomes due and payable, and such default continues for a
period of 30 days; (ii) the Company and the Guarantor (a) default
in the payment of the principal of any Note when the same becomes
due and payable at its Stated Maturity, upon redemption, upon
declaration or otherwise, or (b) fail to redeem or purchase Notes
when required pursuant to the Indenture or the Notes; (iii) the
Company or the Guarantor fails to comply with the provisions of
"Successor Corporation" above; (iv) the Company or the Guarantor,
as the case may be, fails to comply with "Change of Control"
above, "Reports to Holders of Notes" below, and subsections "-
Limitation on Indebtedness," "- Limitation on Restricted
Payments," "- Limitation on Restrictions on Distributions from
Subsidiaries," "- Limitation on Sales of Assets and Subsidiary
Stock," "- Limitation on Liens," "- Limitation on Layered
Indebtedness," "- Limitation on Transactions with Affiliates",
and "Ownership of Rio Properties, Inc." in "Certain Covenants"
(other than a failure to purchase Notes when required under
"Change of Control" or "Certain Covenants - Limitation on Sale of
Assets and Subsidiary Stock") of the Indenture and such failure
continues for 30 days after the notice specified below or the
Company fails to give the notice specified below; (v) the Company
or the Guarantor fails to comply with any of its agreements in
the Notes or the Indenture (other than those referred to in (i),
(ii), (iii) or (iv) above) and such failure continues for 60 days
after the notice specified below or the Company fails to give the
notice specified below; (vi) the principal, any premium or
accrued and unpaid interest of Indebtedness of the Company or any
Restricted Subsidiary is not paid within any applicable grace
period after final maturity or is accelerated by the holders
thereof because of a default, the total amount of such
Indebtedness unpaid or accelerated exceeds $10 million at the
time and such default continues for 10 days; (vii) the Company
or any Restricted Subsidiary pursuant to or within the meaning
of any Bankruptcy Law: (a) commences a voluntary case; (b)
consents to the entry of an order for relief against it in an
involuntary case; (c) consents to the appointment of a Custodian
of it or for any substantial part of its property; or (d)
makes a general assignment for the benefit of its creditors;
or takes any comparable action under any foreign laws relating
to insolvency; (viii) a court of competent jurisdiction enters
an order or decree under any Bankruptcy Law that: (a) is for
relief against the Company or any Restricted Subsidiary in an
involuntary case; (b) appoints a Custodian of the Company or
any Restricted Subsidiary or for any substantial part of its
property; or (c) orders the winding up or liquidation of the
Company or any Restricted Subsidiary; or any similar relief is
granted under any foreign laws and the order or decree remains
unstayed and in effect for 60 days; (ix) any judgment or decree
for the payment of money in excess of $10 million at the time is
entered against the Company or any Restricted Subsidiary and is
not discharged and either (a) an enforcement proceeding has been
commenced by any creditor upon such judgment or decree or (b)
there is a period of 60 days following the entry of such
judgment or decree during which such judgment or decree is not
discharged, waived or the execution thereof stayed and, in the
case of (a) or (b), such default continues for 10 days; or (x)
any Gaming License of the Company or any of its Restricted
Subsidiaries is revoked, terminated or suspended or otherwise
ceases to be effective, resulting in the cessation or
suspension of operation for a period of more than 90 days of the
casino business of any casino hotel owned, leased or operated
directly or indirectly by the Company or any of its Restricted
Subsidiaries (other than any voluntary relinquishment of a
Gaming License if such relinquishment is, in the reasonable,
good faith judgment of the Board of Directors of the Company
evidenced by a Board Resolution, both desirable in the conduct
of the business of the Company and its Subsidiaries, taken as
a whole, and not disadvantageous in any material respect to the
Holders).
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The foregoing will constitute Events of Default whatever the
reason for any such Event of Default and whether it is voluntary
or involuntary or is effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body.
The term "Bankruptcy Law" means Title 11, UNITED STATES
CODE, or any similar Federal or state law for the relief of
debtors. The term "Custodian" means any receiver, trustee,
assignee, liquidator, custodian or similar official under any
Bankruptcy Law.
A Default under clause (iv) or (v) is not an Event of
Default until the Trustee or the Holders of at least 25% in
principal amount of the Notes notify the Company of the Default
and the Company does not cure such Default within the time
specified after receipt of such notice. Such notice must specify
the Default, demand that it be remedied and state that such
notice is a "Notice of Default".
The Company shall deliver to the Trustee, within 30 days
after the occurrence thereof, written notice in the form of an
Officers' Certificate of any event which with the giving of
notice and the lapse of time would become an Event of Default
under clause (iv), (v), (vi) or (ix), its status and what action
the Company is taking or proposes to take with respect thereto.
ACCELERATION
If an Event of Default (other than an Event of Default
specified in clauses (vii) or (viii) in "Events of Default" above
with respect to the Company) occurs and is continuing, the
Trustee by notice to the Company, or the Holders of at least 25%
in principal amount of the Notes by notice to the Company and the
Trustee, may declare the principal of and accrued interest on all
the Notes to be due and payable. Upon such a declaration, such
principal and interest shall be due and payable immediately. If
an Event of Default specified in clause (vii) or (viii) above
with respect to the Company occurs, the principal of and interest
on all the Notes shall IPSO FACTO become and be immediately due
and payable without any declaration or other act on the part of
the Trustee or any Noteholders. The Holders of a majority in
principal amount of the Notes by notice to the Trustee may
rescind an acceleration and its consequences if the rescission
would not conflict with any judgment or decree and if all
existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely
because of acceleration. No such rescission shall affect any
subsequent Default or impair any right consequent thereto.
LIMITATION ON SUITS
A Noteholder may not pursue any remedy with respect to the
Indenture or the Notes unless: (i) the Holder gives to the
Trustee written notice stating that an Event of Default is
continuing; (ii) the Holders of at least 25% in principal amount
of the Notes make a written request to the Trustee to pursue the
remedy; (iii) such Holder or Holders offer to the Trustee
reasonable security or indemnity against any loss, liability or
expense; (iv) the Trustee does not comply with the request within
60 days after receipt of the request and the offer of security or
indemnity; and (v) the Holders of a majority in principal amount
of the Notes do not give the Trustee a direction inconsistent
with the request during such 60-day period.
A Noteholder may not use the Indenture to prejudice the
rights of another Noteholder or to obtain a preference or
priority over another Noteholder.
RIGHTS OF HOLDERS TO RECEIVE PAYMENT
Notwithstanding any other provision of the Indenture, the
right of any Holder to receive payment of principal of and
interest on the Notes held by such Holder, on or after the
respective due dates expressed in the Notes, or to bring suit for
the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of
such Holder.
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DISCHARGE OF INDENTURE AND DEFEASANCE
When (i) the Company delivers to the Trustee all outstanding
Notes (other than Notes replaced because of mutilation, loss,
destruction or wrongful taking) for cancellation or (ii) all
outstanding Notes have become due and payable, whether at
maturity or as a result of the mailing of a notice of redemption
as described above and the Company irrevocably deposits with the
Trustee funds sufficient to pay at maturity or upon redemption
all outstanding Notes, including interest thereon, and if in
either case the Company pays all other sums payable hereunder by
the Company, then the Indenture shall, subject to certain
surviving provisions, cease to be of further effect. The Trustee
shall acknowledge satisfaction and discharge of the Indenture on
demand of the Company accompanied by an Officers' Certificate and
an Opinion of Counsel and at the cost and expense of the Company.
Subject to conditions to defeasance described below and the
survival of certain provisions, the Company at any time may
terminate (i) all its obligations under the Notes and the
Indenture ("legal defeasance option") or (ii) its obligations
under certain restrictive covenants and the related Events of
Default ("covenant defeasance option"). The Company may exercise
its legal defeasance option notwithstanding its prior exercise of
its covenant defeasance option.
If the Company exercises its legal defeasance option,
payment of the Notes may not be accelerated because of an Event
of Default. If the Company exercises its covenant defeasance
option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (ii) of the immediately
preceding paragraph.
The Company may exercise its legal defeasance option or its
covenant defeasance option only if:
(a) the Company irrevocably deposits in trust with the
Trustee money or U.S. Government Obligations for the payment of
principal and interest on the Notes to maturity or redemption, as
the case may be; and
(b) certain other conditions, including delivery of certain
opinions of counsel, are met.
REPORTS TO HOLDERS OF THE NOTES
The Company shall file with the Trustee and provide
Noteholders, within 15 days after it files them with the SEC,
copies of its annual report and the information, documents and
other reports which the Company is required to file with the SEC
pursuant to Section 13 or 15(d) of the Exchange Act.
Notwithstanding that the Company may not be required to remain
subject to the reporting requirements of Section 13 or 15(d) of
the Exchange Act, the Company shall continue to file with the SEC
and provide the Trustee and Noteholders with the annual reports
and the information, documents and other reports which are
specified in Sections 13 and 15(d) of the Exchange Act. The
Company also shall comply with the other provisions of TIA
SECTION 314(a).
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with
the Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer
documents, and the Company may require a Holder to pay any taxes
and fees required by law or permitted by the Indenture. The
Registrar is not required to transfer or exchange any Note
selected for redemption, or any Note for a period of 15 days
before a selection of Notes to be redeemed, or any Note for a
period of 15 days before an interest payment date.
The registered holder of a Note may be treated as the owner
of it for all purposes.
AMENDMENT AND SUPPLEMENT
Subject to certain exceptions, the Indenture, the Notes or
the Rio Guarantee may be amended or supplemented by the Company
or the Guarantor and the Trustee with the consent of the Holders
of at least a majority in principal amount of such then
outstanding Notes. Without notice to or the consent of any
Noteholder, the Company, the Guarantor and the
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Trustee may amend the Indenture or the Notes, among other
things, to cure any ambiguity, defect or inconsistency; to
provide for the assumption of the Company's or the Guarantor's
obligations to Noteholders by a Successor Corporation; to provide
for uncertificated Notes in addition to or in place of
certificated Notes; or to make any change that does not adversely
affect the rights of any Noteholder. Without the consent of each
Noteholder affected, the Company may not reduce the principal
amount of Notes the Holders of which must consent to an
amendment of the Indenture; reduce the rate or extend the time
for payment of interest on any Note; reduce the principal of or
extend the fixed maturity of any Note; reduce the premium
payable upon the redemption of any Note or change the time at
which any Note may or shall be redeemed; reduce the premium
payable upon the repurchase of any Note upon a Change of Control;
make any Note payable in money other than that stated in the
Note; make any change in the provisions concerning waiver of
Defaults or Events of Default by Holders of the Notes or rights
of Holders to receive payment of principal or interest; make any
change in the subordination provisions in the Indenture that
affects the right of any Holder; or release the Company or
the Guarantor from its obligations under the Notes or the Rio
Guarantee (except pursuant to the provisions described above in
"Limitation on Merger or Sale of Assets") or make any change in
the Notes that would adversely affect the rights of any Holder.
NO PERSONAL LIABILITY OF STOCKHOLDERS, OFFICERS, DIRECTORS
No director, officer, employee or stockholder, as such, of
the Company shall have any personal liability in respect of the
obligations of the Company under the Notes or the Indenture by
reason of his or its status as such.
THE TRUSTEE
IBJ Schroder Bank & Trust Company is the Trustee under the
Indenture.
The Indenture provides that, except during the continuance
of an Event of Default, the Trustee will perform only such duties
as are specifically set forth in the Indenture. During the
existence of an Event of Default, the Trustee will exercise such
of the rights and powers vested in it under the Indenture and
use the same degree of care and skill in its exercise as a
prudent Person would exercise under the circumstances in the
conduct of such Person's own affairs.
CERTAIN U.S. FEDERAL TAX CONSEQUENCES
BACKUP WITHHOLDING
Under federal income tax law, a holder of Notes may, under
certain circumstances, be subject to "backup withholding" unless
such holder (i) is a corporation, or is otherwise exempt and,
when required, demonstrates this fact, or (ii) provides a
taxpayer identification number, certifies as to no loss of
exemption from backup withholding and otherwise complies with
applicable requirements of the backup withholding rules. The
withholding rate is 31% of "reportable payments," which include
interest and, under certain circumstances, principal payments.
PAYMENTS TO UNITED STATES ALIENS
Under current United States federal income and estate tax
law, (i) payments of principal and interest on a Note by the
Company or any paying agent to a Noteholder that is a foreign
corporation, a nonresident alien individual, a nonresident alien
fiduciary of a foreign estate or trust, or a foreign partnership
one or more of the members of which is, for United States federal
income tax purposes, a foreign corporation, a nonresident alien
individual, or a nonresident alien fiduciary of a foreign estate
or trust (a "United States Alien") will not be subject to
withholding of United States federal income tax, provided that,
with respect to payments of interest, the Noteholder (1) does not
actually or constructively own ten percent or more of the
combined voting power of all classes of stock of the Company, (2)
is not a controlled foreign corporation related to the Company
through stock ownership and (3) provides a statement, under
penalties of perjury (such as Form W-8), to the Company that the
holder is a United States Alien and provides its name and
address; (ii) a
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Noteholder that is a United States Alien will not be subject to
United States federal income tax on gain realized on the sale,
exchange or redemption of such Note, provided that such
Noteholder (or a fiduciary, settlor or beneficiary of, or a
person holding power over, such Noteholder, if such Noteholder is
an estate or trust, or a member or shareholder of each
Noteholder, if such Noteholder is a partnership or corporation)
does not have a present or former connection with or status with
respect to the United States including, without limitation, such
Noteholder's (or such fiduciary, settlor, beneficiary, person
holding a power, member or shareholder) (1) being or having been
a citizen or resident thereof or being or having been engaged in
trade or business or present therein or having or having had a
permanent establishment therein or (2) past or present status as
a personal holding company, foreign person holding company or
private foundation or other tax-exempt organization with respect
to the United States or as a corporation that accumulates
earnings to avoid United States federal income tax; and (iii) a
Note will not be subject to United States federal estate tax as a
result of the death of a Noteholder who is not a citizen or
resident of the United States at the time of death, provided that
such Noteholder did not at the time of death actually or
constructively own ten percent or more of the combined voting
power of all classes of stock of the Company and, at the time of
such Noteholder's death, payments of interest on such New Note
would not have been effectively connected with the conduct by
such Noteholder of a trade or business in the United States.
United States information reporting requirements and backup
withholding tax will not apply to payments on a Note made outside
the United States by the Company or any paying agent (acting in
its capacity as such) to a Noteholder that is a United States
Alien provided that a statement described in (i)(3) above has
been received by the payor and the payor does not have actual
knowledge that the payee is not a United States Alien.
Information reporting requirements and backup withholding
tax will not apply to any payment of the proceeds of the sale of
a Note effected outside the United States by a foreign office of
a "broker" (as defined in applicable Treasury regulations),
provided that such broker (1) is a United States Alien, (2)
derives less than 50% of its gross income for certain periods
from the conduct of a trade or business in the United States and
(3) is not a controlled foreign corporation as to the United
States (a person described in (1), (2) and (3) being hereinafter
referred to as a "foreign controlled person"). Payment of the
proceeds of the sale of a Note effected outside the United States
by a foreign office of any broker that is not a foreign
controlled person will not be subject to backup withholding tax,
but will be subject to information reporting requirements unless
such broker has documentary evidence in its records that the
beneficial owner is a United States Alien and certain other
conditions are met, or the beneficial owner otherwise establishes
an exemption.
OTHER TAX CONSIDERATIONS
There may be other federal, state, local or foreign tax
considerations applicable to the circumstances of a particular
prospective purchaser of Notes as to which it should consult its
tax adviser. ACCORDINGLY, EACH INVESTOR SHOULD CONSULT ITS OWN
TAX ADVISER AS TO THE PARTICULAR TAX CONSEQUENCES TO IT OF
PURCHASING, HOLDING AND DISPOSING OF THE NEW NOTES.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own
account pursuant to the Exchange Offer must acknowledge that it
will deliver a prospectus in connection with any resale of such
New Notes. This Prospectus, as it may be amended or supplemented
from time to time, may be used by a broker-dealer in connection
with any resale of New Notes received in exchange for Old Notes
where such Old Notes were acquired as a result of market-making
activities or other trading activities. The Company has agreed,
starting on the Expiration Date and ending on the close of
business on the first anniversary of the Expiration Date, it will
make this Prospectus, as amended or supplemented, available to
any broker-dealer for use in connection with any such resale.
The Company will not receive any proceeds from any sale of
New Notes by broker-dealers. New Notes received by any broker-
dealer for their own account pursuant to the Exchange Offer may
be sold from time to time in one or more transactions in the over-
the-counter market, in negotiated transactions, through the
writing of options on the New Notes or a combination of such
methods of resale, at market prices prevailing at the time of
resale, at prices related to such prevailing market prices or
negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any
such broker-dealer and/or the purchasers of any such New Notes.
Any broker-dealer that resells New Notes that were received by it
for its own account pursuant to the Exchange Offer and any broker
or dealer that participates in a distribution of such New Notes
may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and
any commissions or concessions received by any such persons may
be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that by acknowledging that
it will deliver, and by delivering, a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
For a period of one year after the Expiration Date, the
Company will promptly send additional copies of this Prospectus
and any amendment or supplement to this Prospectus to any broker-
dealer that requests such documents in the Letter of Transmittal.
The Company has agreed to pay all expenses incident to the
Exchange Offer (including the expenses of counsel for the Initial
Purchasers and the Trustee) other than commissions or concessions
of any brokers or dealers and will indemnify the holders of the
Old Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company incorporates herein by reference, the following
documents filed with the Commission under the Exchange Act:
(a) The Company's Annual Report on Form 10-K for the year
ended December 31, 1994; the Company's Reports on Form
10-Q for the periods ended March 31, 1995 and June 30,
1995; and the Company's Reports on Form 8-K dated July 18,
1995 and September 15, 1995; and
(b) All documents and reports subsequently filed by the
Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the Exchange Act after the date of this Prospectus and
prior to termination of the Exchange Offer, shall be
deemed to be incorporated by reference in this Prospectus
and to be a part hereof from the date of filing of such
documents or reports.
Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded, except
as so modified or superseded, shall not be deemed to constitute a
part of this Prospectus.
The Company will provide without charge to each person to
whom a copy of this Prospectus has been delivered, on the written
or oral request of such person, a copy of any or all of the
documents incorporated herein by reference, other than exhibits
to such documents unless they are specifically incorporated by
reference into such documents. Requests for such copies should
be directed to: James A. Barrett, Jr., President and Chief
Operating Officer, Rio Hotel & Casino, Inc., 3700 West Flamingo
Road, Las Vegas, Nevada 89103, (702) 252-7733.
LEGAL MATTERS
Certain legal matters with regard to the validity of the New
Notes will be passed upon for the Company by Kummer Kaempfer
Bonner & Renshaw, Las Vegas, Nevada.
EXPERTS
The consolidated financial statements and schedule included
elsewhere in this Prospectus have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report
with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in giving said report.
85
<PAGE>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Report of Independent Public Accountants F-2
Consolidated Balance Sheets as of December 31, 1994 and 1993 and F-3
June 30, 1995 (Unaudited)
Consolidated Statements of Income for the Years Ended December 31, F-4
1994, 1993 and 1992, and for the Six Months Ended June 30,
1995 and 1994 (Unaudited)
Consolidated Statements of Cash Flows for the Years Ended December F-6
31, 1994, 1993 and 1992, and for the Six Months Ended June 30,
1995 and 1994 (Unaudited)
Consolidated Statements of Stockholders' Equity for the Years Ended F-8
December 31, 1994, 1993 and 1992 and for the Six Months Ended
June 30, 1995 (Unaudited)
Notes to Consolidated Financial Statements F-9
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Rio Hotel & Casino, Inc.:
We have audited the accompanying consolidated balance sheets
of Rio Hotel & Casino, Inc. (a Nevada corporation) and
subsidiaries as of December 31, 1994 and 1993 and the related
consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended
December 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we plan
and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Rio Hotel & Casino, Inc. and subsidiaries as of December 31,
1994 and 1993, and the results of their operations and their cash
flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted
accounting principles.
As discussed in Note 7 to the consolidated financial
statements, effective January 1, 1993, the Company changed its
method of accounting for income taxes.
Arthur Andersen LLP
Las Vegas, Nevada
January 25, 1995
F-2
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
JUNE 30, DECEMBER 31,
1995 1994 1993
(UNAUDITED)
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents $ 20,669,015 $76,426,258 $55,784,937
Accounts receivable, net 3,716,239 3,204,416 2,926,738
Federal income taxes receivable - 139,329 -
Inventories 1,519,597 1,378,598 868,367
Prepaid expenses and other assets 4,827,767 4,716,701 4,028,554
Total current assets 30,732,618 85,865,302 63,608,596
Property and Equipment:
Land and improvements 33,237,430 24,666,679 24,666,679
Building and improvements 176,165,730 137,005,432 105,058,208
Equipment, furniture and improvements 59,750,145 43,108,873 37,271,711
Less: accumulated depreciation (39,759,072) (32,826,276) (22,240,358)
229,394,233 171,954,708 144,756,240
Construction in progress 8,566,920 38,521,773 7,465,875
Net property and equipment 237,961,153 210,476,481 152,222,115
Other Assets:
Other, net 4,996,280 4,823,489 2,219,665
$273,690,051 $301,165,272 $218,050,376
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C>
Current Liabilities:
Current maturities of long-term debt $ 25,252 $15,032,534 $8,307,833
Accounts payable 3,071,515 2,425,645 2,948,088
Accrued expenses 9,434,519 7,830,706 6,524,620
Federal income taxes payable 403,327 - 339,989
Accounts payable-related party 4,578,228 10,026,210 7,342,468
Accrued interest 524,509 351,864 53,968
Total current liabilities 18,037,350 35,666,959 25,516,966
Non-Current Liabilities:
Long-term debt, less current maturities 90,189,391 110,146,869 56,875,753
Deferred income taxes 8,832,073 7,512,277 5,819,176
Total non-current liabilities 99,021,464 117,659,146 62,694,929
Total liabilities 117,058,814 153,326,105 88,211,895
Commitments and Contingencies
Stockholders' Equity:
Common Stock, $0.01 par value; 50,000,000
shares authorized (1993); 100,000,000
shares authorized (1994 and 1995); 21,147,796
(1993); 21,371,346 (1994); and 21,341,546 (1995)
shares issued and outstanding 213,416 213,714 211,478
Additional paid-in capital 116,580,953 117,214,582 115,182,541
Retained earnings 39,836,868 30,410,871 14,444,462
Total stockholders' equity 156,631,237 147,839,167 129,838,481
$273,690,051 $301,165,272 $218,050,376
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
F-3
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
SIX MONTHS ENDED JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
1995 1994 1994 1993 1992
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Casino $49,967,529 $42,188,116 $87,164,738 $71,295,870 $56,524,184
Room 16,160,634 9,349,214 19,261,477 12,334,207 9,611,985
Food and beverage 29,049,257 22,456,570 47,648,778 32,573,861 21,171,970
Other 5,590,750 2,968,737 7,111,105 4,172,272 2,913,199
Casino promotional allowances (8,983,715) (6,745,493) (14,886,794) (10,394,625) (7,746,174)
91,784,455 70,217,144 146,299,304 109,981,585 82,475,164
Expenses:
Casino 21,933,708 18,262,770 38,696,281 31,177,642 27,145,337
Room 4,816,534 3,362,746 6,631,787 4,441,851 3,424,475
Food and beverage 23,806,945 18,236,796 38,795,127 27,799,449 18,365,657
Other 3,187,635 1,899,631 4,959,250 2,784,746 1,879,232
Selling, general and administrative 13,194,268 9,666,127 20,550,142 16,001,309 13,550,940
Depreciation and amortization 7,107,416 5,243,814 10,863,844 7,544,326 5,813,762
74,046,506 56,671,884 120,496,431 89,749,323 70,179,403
Operating Profit 17,737,949 13,545,260 25,802,873 20,232,262 12,295,761
Other Income (Expense):
Interest income 103,595 43,302 124,786 71,747 157,990
Interest expense (2,782,732) (846,150) (1,923,237) (1,838,713) (3,801,495)
Other income, net - 966,510 1,140,010 - 100,000
(2,679,137) 163,662 (658,441) (1,766,966) (3,543,505)
Income before income tax provision
and minority interest 15,058,812 13,708,922 25,144,432 18,465,296 8,752,256
Income tax provision (5,632,815) (4,949,632) (9,178,023) (6,785,305) (2,995,628)
Income before minority interest 9,425,997 8,759,290 15,966,409 11,679,991 5,756,628
Minority interest in consolidated
partnership income - - - - (242,240)
Income before extraordinary items 9,425,997 8,759,280 15,966,409 11,679,991 5,514,388
Extraordinary items:
Reduction of federal income taxes
arising from carryforward of prior
years' operating loss - - - - 793,511
Loss on early extinguishment of
debt, net of income tax benefit - - _ (253,711) -
Cumulative effect of a change in
accounting principle:
Adoption of SFAS No. 109 - - - (776,888) -
Net income $9,425,997 $8,759,290 $15,966,409 $10,649,392 $6,307,899
See Accompanying Notes to Consolidated Financial Statements
F-4
<PAGE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)
SIX MONTHS ENDED JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
1995 1994 1994 1993 1992
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Earnings per Common Share:
Primary:
Income applicable to common
shares $ 0.44 $ 0.40 $ 0.74 $ 0.60 $ 0.37
Extraordinary items:
Reduction of federal income taxes
arising from carryforward of
prior years' operating loss - - - - 0.05
Loss on early extinguishment of
debt, net of income tax benefit - - - (0.01) -
Cumulative effect of a change in
accounting principle:
Adoption of SFAS No. 109 - - - (0.04) -
Net income $ 0.44 $ 0.40 $ 0.74 $ 0.55 $ 0.42
Weighted average number of
common shares outstanding 21,644,821 21,747,284 21,720,121 19,504,466 15,131,332
Fully diluted:
Income applicable to common
shares $ 0.44 $ 0.40 $ 0.74 $ 0.60 $ 0.36
Extraordinary items:
Reduction of federal income taxes
arising from carryforward of
prior year's operating loss - - - - 0.05
Loss on early extinguishment of
debt, net of income tax benefit - - - (0.01) -
Cumulative effect of a change in
accounting principle:
Adoption of SFAS No. 109 - - - (0.04) -
Net income $ 0.44 $ 0.40 $ 0.74 $ 0.55 $ 0.41
Weighted average number of
common shares outstanding 21,663,449 21,747,807 21,720,381 19,537,515 15,318,828
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
F-5
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
SIX MONTHS ENDED JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
1995 1994 1994 1993 1992
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 9,425,997 $8,759,290 $15,966,409 $10,649,392 $6,307,899
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Loss on early extinguishment of
debt, net of income tax benefit - - - 253,711 -
Compensation expense recognized
from stock option grant 59,900 73,267 141,975 54,133 -
Minority interest in net income of
consolidated partnerships - - - - 242,240
Depreciation and amortization 7,107,416 5,243,814 10,863,844 7,544,326 5,813,762
Provision for uncollectible
accounts 161,833 28,757 99,772 116,131 93,747
Net loss on sale of assets - - - 10,885 150,000
Cumulative effect of change in
accounting principle - Adoption
of SFAS No. 109 - - - 776,888 -
Deferred income taxes 1,319,796 721,308 1,693,101 2,265,571 550,373
(Increase) decrease in assets:
Accounts receivable (673,656) (369,975) (377,450) (1,484,079) (127,984)
Inventories (140,999) (169,086) (510,231) (223,051) (89,849)
Prepaid expenses and other
current assets 28,263 32,578 (827,476) (856,554) (643,369)
Other, net (347,411) (1,698,250) (2,881,750) (662,965) 57,308
Increase (decrease) in liabilities:
Accounts payable 645,870 (1,579,399) (522,443) 304,585 1,384
Accrued federal income tax
payable 761,924 570,313 546,142 91,401 1,318,058
Accrued expenses 1,603,812 (433,011) 1,306,086 1,628,387 955,194
Accrued interest 172,645 59,012 297,896 (92,009) (267,862)
Net cash provided by operating
activities 20,125,390 11,238,618 25,795,875 20,376,752 14,360,90
Cash flows from investing activities:
Proceeds from sale of equipment,
furniture and improvements - - - - 230,978
Purchase of equipment, furniture and
improvements (31,294,698) (23,857,872) (66,053,542) (49,967,458) (9,255,776)
Purchase of land and improvements (8,570,751) - - 22,499 (88,810)
Net cash (used in) investing
activities (39,865,449) (23,857,872) (66,053,542) (49,944,959) (9,113,608)
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
F-6
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW (CONTINUED)
SIX MONTHS ENDED JUNE 30, FOR THE YEAR ENDED DECEMBER 31,
1995 1994 1994 1993 1992
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from financing activities:
Proceeds from borrowings $ - $20,000,000 $60,014,175 $65,000,000 $8,000,000
Net proceeds from common stock
issuance 556,650 901,400 1,022,700 32,506,200 30,252,138
Costs paid in connection with prior
common stock offering and stock
exchange rights 1,801 (119,529) (119,529) (456,821) (457,160)
Loan acquisition costs - - - (1,107,647) -
Payments on notes and loans
payable (34,964,760) (9,179) (18,358) (53,212,000) (11,807,241)
Repurchase of common stock (1,610,875) - - - -
Net cash provided by (used in)
financing activities (36,017,184) 20,722,692 60,898,988 42,729,732 25,987,737
Net increase (decrease) in cash
and cash equivalents (55,757,243) 8,153,438 20,641,321 13,161,525 31,235,030
Cash and cash equivalents, beginning
of period 76,426,258 55,784,937 55,784,937 42,623,412 11,388,382
Cash, cash equivalents and
restricted cash, end of period $20,669,015 $63,938,375 $76,426,258 $55,784,937 $42,623,412
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
F-7
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
COMMON STOCK
STOCK NUMBER ADDITIONAL RETAINED TOTAL
EXCHANGE OF PAID-IN EARNINGS STOCKHOLDERS'
RIGHTS SHARES AMOUNT CAPITAL (DEFICIT) EQUITY
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1991 $3,773,938 13,615,696 $136,158 $46,334,180 $(2,512,829) $47,731,447
Conversion of stock exchange
rights (3,773,938) 728,461 7,285 3,766,653 - -
Issuance of common stock - 4,256,639 42,565 33,339,150 - 33,381,715
Common stock offering costs - - - (548,910) - (548,910)
Net income for the year - - - - 6,307,899 6,307,899
Balance, December 31, 1992 - 18,600,796 186,008 82,891,073 3,795,070 86,872,151
Tax benefit of stock options
exercised - - - 1,120,823 - 1,120,823
Issuance of common stock - 2,547,000 25,470 32,480,730 - 32,506,200
Common stock offering costs - - - (541,066) - (541,066)
Net income for the year - - - - 10,649,392 10,649,392
Implementation of SFAS No. 109 - - - (823,152) - (823,152)
Compensation expense for stock
options granted - - - 54,133 - 54,133
Balance, December 31, 1993 - 21,147,796 211,478 115,182,541 14,444,462 129,838,481
Tax benefit of stock options
granted - - - 886,132 - 886,132
Exercise of common stock options - 223,550 2,236 1,003,934 - 1,006,170
Net income for the year - - - - 15,966,409 15,966,409
Compensation expense for stock
options granted in 1993 - - - 141,975 - 141,975
Balance, December 31, 1994 - 21,371,346 213,714 117,214,582 30,410,871 147,839,167
Tax benefit of stock options
granted* - - - 358,597 - 358,597
Repurchase of common stock* - (138,500) (1,385) (1,609,490) - (1,610,875)
Exercise of common stock - 108,700 1,087 555,563 - 556,650
options*
Net income for the six months* - - - - 9,425,997 9,425,997
1993 Common Stock Offering costs
reimbursement* - - - 1,801 - 1,801
Compensation expense for stock
options granted in 1993* - - - 59,900 - 59,900
Balance, June 30, 1995* $ - 21,341,546 $213,416 $116,580,953 $39,836,868 $156,631,237
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
*Unaudited
F-8
<PAGE>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts
of Rio Hotel & Casino, Inc. and its wholly owned subsidiaries Rio
Properties, Inc. ("Rio Properties," which owns and operates the
Rio Suite Hotel & Casino [the "Rio"] in Las Vegas, Nevada); Rio
Development Company, Inc. (formerly MarCor Development Company,
Inc.); Rio Resort Properties, Inc. (formerly MarCor Resort
Properties, Inc.) ("MRPI"); MarCor Rio Holding Corp. ("MRHC")
(until its dissolution as of December 29, 1992), a subsidiary of
MRPI and second-tier subsidiary of the Company; Rio Properties'
wholly owned subsidiary Cinderlane, Inc.; and one limited
partnership, MarCor Resorts, L.P. V (the "Rio Partnership"),
until its merger with Rio Properties on August 15, 1992
(collectively the "Company"). The Rio Partnership is included in
the accounts of the Company as a result of the Company retaining
more than a 50% ownership interest or a "controlling" interest as
defined by Statement of Financial Accounting Standards No. 94,
"Consolidation of All Majority Owned Subsidiaries".
The Consolidated Financial Statements for the six months
ended June 30, 1995 and 1994 and related amounts in the Notes to
Consolidated Financial Statements are unaudited, but in the
opinion of management reflect all normal and recurring
adjustments necessary for fair presentation of the results of
those periods.
All significant intercompany balances and transactions have
been eliminated in consolidation.
RECLASSIFICATIONS
The financial statements for prior periods reflect certain
reclassifications, which have no effect on net income, to conform
with classifications adopted in the current year.
CAPITALIZATION OF INTEREST
The Company capitalizes interest on funds disbursed during
the active construction phases of real estate development and
other major projects. Interest capitalized for the six months
ended June 30, 1995 and 1994, and during the years ended
December 31, 1994, 1993, and 1992, was $359,689, $102,896,
$619,887, $467,798, and $59,732, respectively.
PROPERTY AND EQUIPMENT
Land and improvements, building and improvements, and
equipment, furniture and improvements are stated at cost.
Depreciation and amortization of property and equipment is
computed using the straight-line method predominantly over the
following estimated useful lives:
Building and improvements 7 to 45 years
Equipment, furniture and improvements 3 to 15 years
Costs of major improvements are capitalized, while costs of
normal repairs and maintenance are charged to expense as
incurred.
F-9
<PAGE>
IMPAIRMENT
Management reviews existing information and analyses of the
Company and its operations as well as indications of impairment
(such as dramatic changes in the manner in which an asset is used
or forecasts showing lack of long-term profitability) to
determine whether an impairment may exist. The Company considers
relevant cash flow and profitability information, including
estimated future operations results, trend and other available
information, in assessing whether the carrying value of its fixed
assets can be recovered. Upon a determination that the carrying
value of an will not be recovered from its future undiscounted
cash flows, the carrying value of that asset would be considered
impaired and will be reduced by a charge to the operations in the
amount of the impairment. Impairment is measured as any
deficiency in estimated undiscounted future cash flows of the
fixed assets to recover the carrying value related to those
assets.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost
is determined by using the first-in, first-out method.
REVENUE AND PROMOTIONAL ALLOWANCES
Casino revenues represent the net win from gaming wins and
losses. The retail value of rooms, food, beverage and other
services provided to customers without charge is included in
gross revenue and deducted as promotional allowances. The
estimated departmental costs of providing such promotional
allowances are included in casino costs and expenses as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
1995 1994 1994 1993 1992
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Room $ 875,973 $ 469,629 $1,273,154 $ 889,448 $ 752,935
Food and Beverage 4,439,931 3,701,048 7,823,819 5,969,683 4,279,365
Other operating expenses 46,902 12,144 44,888 36,940 28,202
$ 5,362,806 $ 4,182,821 $9,141,861 $6,896,071 $5,060,502
</TABLE>
EARNINGS PER SHARE
Earnings per common share are computed on the basis of the
weighted average number of common shares and common stock
equivalents outstanding during the period.
HEDGING TRANSACTION
The Company is a party to an interest rate swap agreement
and has purchased an interest rate cap (Note 6). Any net payments
made or received by the Company in connection with this interest
rate swap agreement or interest rate cap, or any other hedging
transaction that the Company may enter into, will be classified
as cash flows from operating activities.
Premiums paid for the interest rate cap agreements are
amortized to interest expense over the shorter of the original
life of the debt or the term of the cap. Unamortized premiums
are included in other assets in the statement of financial
position. Accounts receivable under the agreements are accrued
as a reduction of interest expense. Amounts receivable or payable
under the interest rate swap agreements are included in interest
expense.
INCOME TAXES
Effective January 1, 1993, the Company implemented the
provisions of SFAS 109. SFAS 109 utilizes the liability method
and deferred taxes are determined based on the estimated future
tax effects of differences between the financial statement and
tax bases of assets and liabilities given the provisions of the
enacted tax laws. Prior to the implementation of SFAS 109, the
Company accounted for income taxes using Accounting Principles
Board Opinion No. 11.
F-10
<PAGE>
2. CASH AND CASH EQUIVALENTS
Cash and cash equivalents at June 30, 1995, December 31,
1994 and 1993 include $12.1 million, $68 million and $48 million,
respectively, in overnight repurchase agreements with a bank.
These items are recorded at cost which approximates market value
and are considered cash equivalents for purposes of the
Consolidated Statements of Cash Flows.
3. CONSOLIDATED STATEMENTS OF CASH FLOWS
The following supplemental disclosures are provided as part
of the Consolidated Statements of Cash Flows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
1995 1994 1994 1993 1992
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash payments made for interest
(net of amounts capitalized) $ 2,679,190 $ 793,742 $1,919,556 $1,728,693 $3,974,045
Cash payments made for income
taxes $ 3,500,000 $ 2,800,000 $6,240,000 $4,428,335 $ 198,627
</TABLE>
Non-cash financing and investing activities:
JUNE 30, 1995
Purchase of property and equipment financed through
payables totaled $4,578,228.
Tax benefit arising from the exercise of stock options
granted under the Company's Non-Statutory Stock Option
Plan ("NSOP") totaled $358,597.
DECEMBER 31, 1994
Purchase of property and equipment financed through
payables totaled $10,026,210.
Tax benefit arising from the exercise of stock options
granted under the NSOP totaled $886,132.
JUNE 30, 1994
Purchase of property and equipment financed through
payables totaled $5,318,639.
Tax benefit arising from the exercise of stock options
granted under the NSOP totaled $761,309.
DECEMBER 31, 1993
Purchase of property and equipment financed through
payables totaled $8,442,660.
Purchase of property and equipment financed through
long-term debt totaled $183,586.
Additional costs of issuing Common Stock totaled
$12,194.
Costs of issuing Common Stock financed through payables
totaled $163,801.
Tax benefit arising from the exercise of stock options
granted under the NSOP totaled $1,120,823.
Reduction in paid-in capital as a result of the
implementation of SFAS 109 totaled $823,152. This
amount was charged directly against equity because it
reflects the tax effect of SFAS 109 as it related to
F-11
<PAGE>
the gain on sale of assets to affiliates of the
Company's largest stockholder in December 1991, which
was also recorded directly to equity.
DECEMBER 31, 1992
During 1992, the Company exchanged 728,461 stock
exchange rights for 728,461 shares of the Company's
Common Stock. The transactions resulted in the
following changes:
<TABLE>
<S> <C>
Common Stock $ 7,285
Additional paid in capital 3,766,653
Stock exchange rights (3,773,938)
$ -
</TABLE>
On August 14, 1992, the Company, through Rio
Properties, acquired an additional 3.25% of the Rio
Partnership in exchange for 354,549 shares of the
Company's Common Stock. On August 15, 1992, the Rio
Partnership was merged into Rio Properties, with an
additional 109,092 shares of Common Stock issued for
the remaining 1% interests in the Rio Partnership. The
summarized results of these transactions are as
follows: (1) Rio Properties now owns 100% of the assets
and liabilities formerly held by the Rio Partnership;
(2) the Rio Partnership, as a result of its merger with
Rio Properties, no longer exists; (3) Rio Properties is
wholly owned by the Company; (4) the Company issued
463,641 shares of Common Stock to the former minority
partners in the Rio Partnership; (5) MRPI and MRHC,
which had previously held 27.90% and 67.85% ownership
interests in the Rio Partnership, respectively, no
longer hold such interests.
The transaction resulted in the following:
<TABLE>
<S> <C>
Value of stock issued (463,641 shares @ $6.75/share) $3,129,577
Minority interests (1,877,067)
Premium paid $1,252,510
</TABLE>
This premium was allocated based on fair market values among
land, building, and equipment, furniture and improvements.
The Company reclassified $248,951 of Rio assets previously
in equipment, furniture and improvements into other assets
during the year ended December 31, 1992.
The Company reclassified $160,443 of Rio assets previously
in other assets into construction in progress during the year
ended December 31, 1992.
Construction in progress financed through payables totaled
$74,369. Additional asset purchases financed through payables
totaled $829,242. Costs of issuing Common Stock, financed
through payables, totaled $91,750.
4. ACCOUNTS RECEIVABLE
Components of receivables are as follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1995 1994 1993
(UNAUDITED)
<S> <C> <C> <C>
Casino $2,266,631 $2,082,871 $1,669,419
Hotel 2,028,466 1,534,107 1,543,646
Other 62,110 66,573 93,036
4,357,207 3,683,551 3,306,101
F-12
<PAGE>
Less allowance for doubtful accounts (640,968) (479,135) (379,363)
$3,716,239 $3,204,416 $2,926,738
</TABLE>
5. ACCRUED EXPENSES
Components of accrued expenses are as follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1995 1994 1993
(UNAUDITED)
<S> <C> <C> <C>
Accrued salaries, wages and related benefits $6,222,250 $4,004,080 $3,300,004
Progressive slot machines and other gaming
accruals 1,104,379 2,033,406 1,971,251
Accrued gaming taxes 1,340,684 1,123,036 952,775
Other accrued liabilities 767,206 670,184 300,590
$9,434,519 $7,830,706 $6,524,620
</TABLE>
6. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1995 1994 1993
(UNAUDITED)
<S> <C> <C> <C>
Rio Bank Loan, originally a $65 million revolving credit
facility, which was amended to be a $125 million
revolving credit facility with interest equal to the
Eurodollar Rate or the Base Rate, plus a margin. The
loan matures on June 30, 2001 and is collateralized by a
first deed of trust on the Rio's real property, equipment
and improvements $90,000,000 $125,000,000 $65,000,000
Special Improvement District assessment bonds, payable
over 10 years in twenty substantially equal semi-annual
installments of principal, plus 6.1% interest. 214,643 165,228 183,586
Other short-term financing of certain insurance premiums - 14,175 -
90,214,643 125,179,403 65,183,586
Less current maturities (25,252) (15,032,534) (8,307,833)
$90,189,391 $110,146,869 $56,875,753
</TABLE>
The prime interest rates quoted by the Company's primary
lenders at June 30, 1995 and December 31, 1994 were 9.00% and
8.50%, respectively.
At June 30, 1995, the six month Eurodollar Rate was 6.0625%.
The margin on the Company's Eurodollar Rate borrowings at
June 30, 1995 was 1.75%.
On July 15, 1993, Rio Properties entered into the $65
million Rio Bank Loan with a consortium of banks. The Rio Bank
Loan was increased to an $85 million loan in April 1994 and
increased to a $125 million loan in December 1994. The Rio Bank
Loan is a revolving credit facility to be used for construction
and working capital purposes.
The Rio Bank Loan matures on June 30, 2001, and bears
interest on the outstanding principal amount at a rate per annum
equal to the Eurodollar Rate or the Base Rate (as defined in the
Rio Bank Loan) at the election of Rio Properties, plus a
predetermined margin over the Eurodollar Rate or the Base Rate,
as applicable. The Eurodollar Rate means an interest rate per
annum determined pursuant to the following formula:
F-13
<PAGE>
Eurodollar Rate = LIBOR
1.00 - Eurodollar Reserve Percentage
The Base Rate means a rate per annum equal to the higher of
the reference rate as it is publicly announced from time to time
by Bank of America in San Francisco, or 0.50% per annum above the
latest Federal Funds Rate. The Rio Bank Loan requires monthly
payments of interest only and principal reductions of $15 million
on December 31, 1995, $5 million on March 31, 1996 and $5 million
every quarter thereafter until maturity. To reduce the risk from
rate fluctuations, the Company has entered into an interest rate
swap agreement in the amount of $20 million from September 30,
1994 through December 29, 1995 and $15 million from December 29,
1995 through June 28, 1996. In addition, in August 1994 the
Company purchased a $40 million interest rate cap. The cap is
effective on September 30, 1994, has a three year term, and
provides for quarterly payments to the Company in the event that
three-month LIBOR exceeds 7.00% on any quarterly reset date. The
Company is exposed to credit risk in the event of non-performance
by the counterparty. At December 31, 1994, the potential maximum
credit risk amounted to $729,667, which is the carrying value of
the unamortized premium. The Company, however, does not
anticipate non-performance by the counterparty. The Rio Bank
Loan is secured by a first priority mortgage lien on the Rio and
certain other real and personal property of Rio Properties and
the Company. The Company is a guarantor of the Rio Bank Loan.
The following table discloses (i) the aggregate amount of
interest rate swaps categorized by annual maturity and (ii) the
related weighted average interest rate paid and received assuming
current market conditions:
<TABLE>
<CAPTION>
Maturity: 1995 1996 1997 1998 1999 TOTAL
<S> <C> <C> <C> <C> <C> <C>
Company pays Fixed $5,000,000 $15,000,000 $ - $ - $ - $20,000,00
Weighted Average
Interest Rate:
Received by
Company1 5.875% 5.875%
Paid by Company 4.950% 4.950%
<FN>
(1) The Company receives 3-month LIBOR, which was reset at 5.875% for the
three-month period beginning September 29, 1995.
</FN>
</TABLE>
At December 31, 1994 the interest rate swap and interest
rate cap agreements had fair market values of $742,678 and
$1,246,441, respectively (carrying values of $0 and $729,667,
respectively). Management is of the opinion that the fair values
of all other financial instruments are not materially different
from their carrying values.
As a result of entering into interest rate swap agreements
and cap agreements, the Company has recognized interest expense
of $83,833, $187,875, and $28,622 for the years ended
December 31, 1994, 1993 and 1992, respectively. The impact of
these hedging activities on the Company's weighted average
borrowing rate was an increase of approximately 0.26%, 0.44%, and
0.07% for the years ended December 31, 1994, 1993 and 1992,
respectively.
As of the years ended December 31, 1994 and 1993, there were
no deferred gains and losses relating to terminated interest rate
swap and interest rate cap agreements.
The Rio Bank Loan contains certain customary financial
covenants to which the Company is subject. Because of annual
restrictions on capital expenditures by the Company contained in
the Rio Bank Loan, any new significant capital improvements to
the Rio will require the consent of the lenders.
The revolving credit feature of the Rio Bank Loan allows the
Company to pay down and reborrow principal under the line of
credit as the Company deems appropriate. The Company utilized
this ability by reborrowing $10 million on June 30, 1995 and
repaying $10 million on July 3, 1995. The Company also reborrowed
$69 million on December 30, 1994 and repaid $69 million on
January 3, 1995 under the terms of the Rio Bank Loan.
F-14
<PAGE>
As of December 31, 1994, annual maturities of total notes
and loans payable are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
<S> <C>
December 31, 1995 $15,032,534
December 31, 1996 20,018,359
December 31, 1997 20,018,359
December 31, 1998 20,018,359
December 31, 1999 20,018,359
Thereafter 30,073,433
$125,179,403
</TABLE>
Based upon the present operations of the Rio, internal
projections of revenues and expenses, and other anticipated cash
requirements of Rio Properties during 1995, the Company
anticipates meeting required principal and interest payments
under the Rio Bank Loan during 1995.
The carrying values of assets included in the consolidated
financial statements, which collateralize bank loans payable, are
as follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1995 1994 1993
(UNAUDITED)
<S> <C> <C> <C>
Building and improvements $176,165,730 $137,005,432 $105,058,208
Equipment, furniture and improvements 59,750,145 43,108,873 37,271,711
Land and improvements 33,237,430 24,666,679 24,666,679
Construction in progress 8,566,920 38,521,773 7,465,875
$277,720,225 $243,302,757 $174,462,473
</TABLE>
On July 18, 1995, the Company issued $100,000,000 105/8%
Senior Subordinated Notes Due 2005 (the "Subordinated Notes").
The net proceeds from the sale of the Subordinated Notes of
approximately $96.8 million were used to reduce amounts
outstanding under the Rio Bank Loan. (See Note 12). The
Subordinated Notes mature July 15, 2005. The Subordinated Notes
are unconditionally guaranteed on a senior subordinated basis by
Rio Properties, Inc. The indenture governing the Subordinated
Notes contains covenants that, among other things, limit the
ability of the Company and its Restricted Subsidiaries to incur
additional indebtedness, pay dividends or make other
distributions, make investments, repurchase subordinated
obligations or capital stock, create certain liens (except, among
others, liens securing Senior Indebtedness), enter into certain
transactions with affiliates, sell assets of the Company or its
subsidiaries, issue or sell subsidiary stock, create or permit to
exist restrictions on distributions from subsidiaries, or enter
into certain mergers and consolidations.
7. INCOME TAXES
In February 1992, the Financial Accounting Standards Board
issued SFAS 109 which supersedes previous pronouncements on
accounting for income taxes and is effective for fiscal years
commencing after December 15, 1992. The Company adopted SFAS 109
in the first quarter of 1993 by reporting the effect of SFAS 109
as a cumulative effect of a change in accounting principle and
not restating prior periods. The effect of SFAS 109 recorded in
January 1993 decreased net income as a non-cash, non-recurring
cumulative effect of a change in accounting principle by an
amount totaling $776,888. It also reduced paid-in capital by an
amount totaling $823,152. This amount was charged directly
against equity because it reflects the tax effect of SFAS 109 as
it related to the gain on sale of assets to affiliates of the
Company's largest stockholder in December 1991, which was also
recorded directly to equity.
F-15
<PAGE>
The federal income tax provisions for the years ended
December 31, 1994 and 1993 consist of the following:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Provision before tax rate change and extraordinary
items $9,178,023 $6,671,872
Additional provision due to tax rate change (see below) - 113,433
Provision before extraordinary item 9,178,023 6,785,305
Income tax benefit from extraordinary loss on early
retirement of debt - (130,700)
Total Income Tax Provision $9,178,023 $6,654,605
</TABLE>
The federal income tax provisions for the six months ended
June 30, 1995 and 1994 were $5,632,815 and $4,949,632,
respectively.
The Revenue Reconciliation Act of 1993 raised the Corporate
Income Tax Rate from 34% to 35%, retroactively to January 1,
1993. In accordance with the requirements of SFAS 109, the
deferred income tax assets and liabilities were adjusted
accordingly, resulting in a charge against income in the amount
of $113,433.
The following schedule reconciles the Company's effective
tax rate to the statutory rate for the year ended December 31:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Statutory rate 35.0% 35.0% 34.0%
Depreciation on premium allocated in Rio
Partnership exchange 0.5% 0.7% 1.2%
Disallowance for tax purposes of certain meals,
travel and entertainment expenses 1.2% 0.4% -
Other ( 0.2)% - -
Effective Rate 36.5% 36.1% 35.2%
</TABLE>
F-16
<PAGE>
For the six months ended June 30, a reconciliation between
the statutory rate and effective rate is as follows:
<TABLE>
<CAPTION>
1995 1994
(Unaudited)
<S> <C> <C>
Statutory rate 35.0% 35.0%
Depreciation on premium allocated in Rio Partnership
exchange 0.4% 0.4%
Disallowance for tax purposes of certain meals,
travel and entertainment expenses 1.7% 1.1%
Other 0.3% (0.4)%
Effective Rate 37.4% 36.1%
</TABLE>
During 1994, the Company utilized all remaining alternative
minimum tax credit carryforwards.
The Company's deferred tax assets (liabilities) at June 30,
1995 consisted of the following:
<TABLE>
<CAPTION>
CURRENT NON-CURRENT
(Unaudited)
<S> <C> <C>
Depreciation and amortization - $(8,933,156)
Deferred employee benefit $391,927 -
Bad debt expense 224,339 -
Other deferred tax assets, net 34,231 101,083
$650,497 $(8,832,073)
</TABLE>
The Company's deferred tax assets (liabilities) at
December 31, 1994 consisted of the following:
<TABLE>
<CAPTION>
CURRENT NON-CURRENT
<S> <C> <C>
Depreciation and amortization - $(7,613,359)
Deferred employee benefit $391,927 -
Bad debt expense 136,105 -
Other deferred tax assets, net 34,231
101,082
$562,263 $(7,512,277)
</TABLE>
The Company's deferred tax assets (liabilities) at
December 31, 1993 consisted of the following:
<TABLE>
<CAPTION>
CURRENT NON-CURRENT
<S> <C> <C>
Depreciation and amortization - $(6,231,735
Alternative Minimum Tax ("AMT") credit carryforwards $ 868,160 -
Partnership syndication fees - 234,779
Deferred employee benefit 373,273 -
Bad debt expense 132,777 -
Other deferred tax assets, net 28,982 177,780
$1,403,192 $(5,819,176)
</TABLE>
The current portion of the Company's net deferred tax assets
is included on the Consolidated Balance Sheet under the heading
"Prepaid Expenses and Other Current Assets."
The Company has determined that it is probable that the full
amount of the tax benefit from the deferred tax assets will be
realized and therefore, has not recorded a valuation allowance to
reduce the carrying value of the deferred tax assets.
F-17
<PAGE>
Prior to 1993, the Company accounted for income taxes in
accordance with APB 11. The provision for income taxes for the
year ended December 31, 1992 is as follows:
<TABLE>
<CAPTION>
1992
<S> <C>
Provision before extraordinary item $(2,995,628)
Extraordinary credit carryforward of prior years' loss 793,511
Net provision $(2,202,117)
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
In connection with the bank loan agreements, the Company has
entered into agreements with certain key stockholders, directors
and executive officers to facilitate borrowings by the Company.
These individuals personally guaranteed the previous bank loan
made to Rio Properties in exchange for compensation of $1,250,000
upon the satisfaction of certain terms and conditions. The first
potential payment obligation of the Company of $250,000 commenced
with the fiscal year ended December 31, 1990 and continued to
December 31, 1994, with a two-year extension provision. No
amounts were due or paid arising out of the years ended
December 31, 1990 or 1991. The Company made $250,000 payments in
each of the three years ended December 31, 1994, 1993, and 1992.
The Company has not made any payments during the six months ended
June 30, 1995 but has accrued $125,000 at June 30, 1995 and
anticipates paying the entire balance on or before December 31,
1996. Because the personal guaranties under the former bank loan
have been replaced under the Rio Bank Loan with provisions that
trigger events of default should the Company's Chief Executive
Officer voluntarily allow his stockholdings in the Company to
fall below 10% or that of another holder or if the Company's
Chief Executive Officer or Chief Operating Officer cease for a
period of 30 consecutive days to hold their respective executive
officer positions, the agreement with the guarantors has been
amended to terminate the guarantor payments in the event that
said events of default are triggered by voluntary act of the
respective guarantors.
Effective January 1, 1991, Rio Properties maintains an
employee profit sharing plan for all employees who have
accredited service. Contributions to the plan are discretionary
and cannot exceed amounts permitted under the Internal Revenue
Code. Contributions of $110,999, $101,429, $215,039, $109,701,
and $69,113 have been authorized and charged to income for the
six months ended June 30, 1995 and 1994 and for the years ended
December 31, 1994, 1993, and 1992, respectively.
In the normal course of business, the Company is involved
with various negotiations and legal matters. In addition, Rio
Properties is a potential defendant in various personal injury
allegations. Management is of the opinion that the effect of
these matters is not material to the consolidated financial
statements.
9. STOCKHOLDERS' EQUITY
COMMON STOCK
During the six months ended June 30, 1995, the Company
issued 108,700 shares of Common Stock at exercise prices ranging
from $3.00 per share to $14.25 per share pursuant to options
previously granted under the Company's NSOP (see below).
During the fourth quarter of 1994, the Board of Directors
authorized the Company to make discretionary repurchases of up to
2 million shares of its Common Stock from time to time in the
open market or otherwise. During the six months ended June 30,
1995, the Company repurchased 138,500 shares of its Common Stock
at a total cost of $1.6 million. These shares of Common Stock
were retired.
During 1994, the Company issued 223,550 shares of Common
Stock at exercise prices ranging from $3.00 per share to $15.625
per share pursuant to options previously granted under the
Company's NSOP (see below).
F-18
<PAGE>
On November 24, 1993, the Company sold in a public offering
2,300,000 shares of Common Stock at a net price per share of
$13.60. The proceeds from the sale were received in November
1993.
During 1993, the Company issued 247,000 shares of Common
Stock at exercise prices ranging from $3.00 per share to $6.00
per share pursuant to options previously granted under the
Company's NSOP (see below).
On November 24, 1992, the Company sold in a public offering
3,737,500 shares of Common Stock at a net price per share of
$7.98. The proceeds from the sale were received in December 1992.
On August 15, 1992, the Company issued 463,641 shares of
Common Stock to the partners in the Rio Partnership in exchange
for 4.25% of the Rio Partnership (Note 3).
During 1992, the Company issued 55,400 shares of Common
Stock at exercise prices ranging from $3.00 per share to $5.00
per share pursuant to options previously granted under the
Company's NSOP (see below).
STOCK OPTIONS
Key officers and employees are eligible to participate in
the Company's NSOP. As of June 30, 1995, 2,637,500 shares were
available for issuance pursuant to options granted under the NSOP
and 2,588,500 options had been granted at exercise prices ranging
from $3.00 to $15.625 per share. As of June 30, 1995, 614,650
options had been exercised and 247,300 options had been
forfeited, resulting in 1,726,550 options outstanding.
The NSOP will terminate July 8, 1997, subject to the right
of the Board of Directors to terminate the NSOP prior thereto.
On May 16, 1995, the Company's stockholders amended the 1991
Directors' Stock Option Plan under which options to purchase up
to 200,000 shares of Common Stock may be granted to non-employee
directors. The option exercise price is 100% of the fair market
value of the Common Stock on the date of grant. As of June 30,
1995, 108,000 options had been granted at exercise prices ranging
from $3.00 per share to $16.625 per share. As of June 30, 1995,
20,000 options had been exercised and 2,000 options had been
forfeited, resulting in 86,000 options outstanding.
STOCK EXCHANGE RIGHTS
On September 28, 1990, MRHC issued 6,638,214 shares of
preferred stock (the "Stock Exchange Rights") in exchange for
60.85 Rio Partnership Units. These Stock Exchange Rights
permitted the exchange for the Company Common Stock on a one-for-
one basis after March 28, 1991, and the Company could have
required exchange any time on or after December 31, 1999. In
connection with this transaction, the Company paid $13,681,286 of
costs in excess of recorded minority interests for the Rio
Partnership Units. All costs were allocated to assets based on
fair market values; however, the costs in excess of recorded
minority interests paid to related parties were not recorded. As
of December 31, 1992, all 6,638,214 Stock Exchange Rights had
been exchanged for the Company's Common Stock. The Company has
reflected the cost of the issuance of the Stock Exchange Rights
in its stockholders' equity.
10. RELATED PARTY TRANSACTIONS
The Company has contracted with two affiliates of the
Company's largest stockholder for the design and construction of
an addition of 144 suites (the "Phase IV Expansion") for a total
of $18,848,258. As of June 30, 1995, the Company had capitalized
$3,257,580 in connection with these contracts. As of June 30,
1995, $3,410,631 had been accrued in connection with these
construction and design contracts.
The Company has contracted with two affiliates of the
Company's largest stockholder for the design and construction of
a 21-story hotel tower containing 549 suites (the "Phase III
Expansion") for a total of $64,166,368. As of June 30, 1995, the
Company had capitalized $56,484,126 in connection with these
contracts. As of June 30, 1995, $642,071 had been accrued in
connection with these construction and design contracts.
F-19
<PAGE>
In 1993, the Company contracted with two affiliates of the
Company's largest stockholder for the design and construction of
a 21-story hotel tower containing 437 suites (the "Phase II
Expansion") and an expansion of the Rio's public area (the
"Eastside Expansion"). The two contracts were in amounts not to
exceed $57,557,093. Amounts capitalized in connection with these
contracts totaled $50,193,919. As of December 31, 1993,
$7,189,042 had been accrued in connection with these construction
and design contracts. As of December 31, 1994, all amounts due in
connection with these contracts had been capitalized and paid.
On July 1, 1992, the Company entered into contracts with two
affiliates of the Company's largest stockholder in an amount not
to exceed $6,107,571 for the design and construction of an
addition to the Rio's buffet restaurant, as well as expansion of
casino space and addition of a lounge. As of December 31, 1992,
$5,605,540 had been capitalized in connection with these
contracts. As of December 31, 1992, $984,195 had been accrued in
connection with these contracts. As of December 31, 1993, all
amounts due in connection with these contracts had been
capitalized and paid.
In December 1991, the Company sold non-Rio real estate to an
affiliate of the Company's largest stockholder. In April 1994,
the affiliated entity sold the real estate to a non-related
party. Pursuant to the terms of the sales agreement, the Company
was entitled to a portion of the sales proceeds which equaled
$966,510, net of expenses.
The Company entered into consulting contracts with an
affiliated entity to provide real estate, financial and
supervisory services through April 30, 1992. The contract was
terminated three months early, on January 31, 1992, by mutual
agreement of the parties. Revenues earned thereunder during the
first six months of 1995 and 1994 and the years ended
December 31, 1994, 1993, and 1992 were $0, $0, $0, $0, and
$100,000, respectively.
The Company reimbursed an affiliate of the Company's largest
stockholder for certain expenses advanced on behalf of or
supplied to the Company during the years ended December 31, 1993
and December 31, 1992 of approximately $162,425 and $121,000,
respectively. Nominal amounts were paid by the Company to the
affiliate for similar purposes during 1994 and the first six
months of 1995. Such amounts were generally billed to the Company
at the affiliate's cost.
Two director/officers of the Company are associated with
affiliated entities which render various architectural and
construction services for the Company. The Company paid these
entities, in the aggregate, approximately $25,339,356,
$17,205,720, $50,416,348, $44,567,088 and $5,669,743 during the
first six months of 1995 and 1994 and the years ended
December 31, 1994, 1993, and 1992, respectively, for their
services.
Entities in which a director of the Company is the principal
stockholder and the executive officer received commissions from
the Company totaling approximately $65,000, $60,000, $124,912,
$90,325 and $79,000 for the first six months of 1995 and 1994 and
the years ended December 31, 1994, 1993, and 1992, respectively,
arising out of the acquisition of various insurance coverage by
the Company.
The Company believes that the transactions described above
are on terms at least as favorable as would have been obtained
from non-related parties.
11. MARCOR RESORTS, L.P. V (THE RIO PARTNERSHIP)
During the year ended February 28, 1989, a limited
partnership (known as MarCor Resorts, L.P. V, a Nevada limited
partnership) was formed. Until its merger into Rio Properties on
August 15, 1992, the Rio Partnership was included in the
consolidated financial statements of the Company. The Company
obtained a 34.4% general partnership interest in the Rio
Partnership in exchange for land, cash and certain other assets
with a collective value of $13,760,000. The exchange resulted in
a deferred gain to the Company of $1,608,274. Subsequently, the
Company acquired an additional 0.5% limited partnership interest.
On September 28, 1990, MarCor Rio Holding Corp. issued
6,638,214 stock exchange rights in exchange for 60.85 Rio
Partnership Units, increasing the Company's total investment in
the Rio Partnership to 95.75%. As a result of
F-20
<PAGE>
this transaction, certain related party rules came into
effect, thereby requiring the reversal of the deferred gain of
$1,608,274 recorded upon initial capitalization of the
partnership.
On August 15, 1992, the Rio Partnership merged with Rio
Properties (Note 3), resulting in the Company owning 100% of the
net assets formerly held by the Rio Partnership. As a result of
the merger, the Rio Partnership ceased to exist.
12. DEBT GUARANTEE
Summarized financial information is provided below for Rio
Properties, Inc. (the "Guarantor"), the Company's principal
wholly-owned operating subsidiary, as sole guarantor to the
Company's $100,000,000 10 5/8% Senior Subordinated Notes Due
2005. The Senior Subordinated Notes are fully and
unconditionally guaranteed by the Guarantor and are subordinated
to all existing and future indebtedness and other liabilities
(including trade payables) of the Company's subsidiaries.
Summarized financial statements of the Guarantor have been
prepared since the assets, pre-tax income and parents' net
investment in the non-guarantor subsidiaries on an individual and
combined basis are inconsequential. In addition, the
Registrant's operations or assets other than its investment in
its subsidiaries are inconsequential. The difference in net
equity between the Company and the Guarantor is principally a
result of the Company's purchase in 1990 and 1992 of minority
interests in a subsidiary, resulting in the payment of premiums
of approximately $13.7 million and $1.3 million, respectively.
The premiums were allocated by the Company, based on fair market
values, among land, building, and equipment, furniture and
improvements.
<TABLE>
<CAPTION>
SIX MONTHS ENDED FOR THE YEAR ENDED
JUNE 30, DECEMBER 31,
1995 1994 1994 1993 1992
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current Assets $30,004,746 $72,311,313 $85,120,465 $62,303,414 $46,360,823
Non-Current Assets 227,410,835 156,687,156 199,788,372 138,644,090 87,337,089
Current Liabilities 27,462,973 20,891,194 44,662,313 29,292,301 10,660,847
Non-Current Liabilities 90,189,391 85,165,228 110,146,869 56,875,753 50,906,000
Revenues 91,784,455 70,217,144 146,299,304 109,981,585 82,475,164
Operating Profit 17,753,071 13,566,308 25,726,349 20,265,334 13,008,251
Income before income taxes 15,073,420 12,761,362 23,925,361 18,107,197 9,394,460
Net Income 9,601,860 8,085,105 15,174,014 10,745,469 8,940,543
</TABLE>
F-21
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
NUMBER EXHIBIT DESCRIPTION
<S> <C>
5.01 Opinion and Consent of Kummer Kaempfer Bonner & Renshaw as to
the legality of securities being registered.
10.13 Form of Exchange Agency Agreement between Rio Hotel &
Casino, Inc. and IBJ Schroder Bank & Trust Company.
23.01 Consent of Kummer Kaempfer Bonner & Renshaw is contained in
Exhibit 5.01.
23.02 Consent of Arthur Andersen LLP.
</TABLE>
II-1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant has duly caused this Pre-Effective Amendment No. 2
to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Las Vegas,
State of Nevada, on October 30, 1995.
RIO HOTEL & CASINO, INC.
/s/ James A. Barrett, Jr.
James A. Barrett, Jr.
President, Chief Operating Officer
and Director
Pursuant to the requirements of the Securities Act of 1933,
this Pre-Effective Amendment No. 2 to the Registration Statement
has been signed by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<C> <C> <C>
* Chairman of the Board of Directors October 30, 1995
Anthony A. Marnell II and Chief Executive Officer
(Principal Executive Officer)
/s/ James A. Barrett, Jr. President, Chief Operating Officer October 30, 1995
James A. Barrett, Jr. and Director
/s/ Roger M. Szepelak Treasurer and Chief Financial Officer October 30, 1995
Roger M. Szepelak (Principal Financial and Accounting
Officer)
/s/ John A. Stuart Director October 30, 1995
John A. Stuart
/s/ Thomas Y. Hartley Director October 30, 1995
Thomas Y. Hartley
/s/ Peter M. Thomas Director October 30, 1995
Peter M. Thomas
*By: /s/ James A. Barrett, Jr.
James A. Barrett, Jr.
Attorney in Fact
</TABLE>
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant has duly caused this Pre-Effective Amendment No. 2
to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Las Vegas,
State of Nevada, on October 30, 1995.
RIO PROPERTIES, INC.
/s/ James A. Barrett, Jr.
James A. Barrett, Jr.
President, Chief Operating Officer
and Director
Pursuant to the requirements of the Securities Act of 1933,
this Pre-Effective Amendment No. 2 to the Registration Statement
has been signed by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<C> <C> <C>
* Chairman of the Board of Directors October 30, 1995
Anthony A. Marnell II and Chief Executive Officer
(Principal Executive Officer)
/s/ James A. Barrett, Jr. President and Director October 30, 1995
James A. Barrett, Jr.
/s/ Roger M. Szepelak Treasurer and Chief Financial Officer October 30, 1995
Roger M. Szepelak (Principal Financial and Accounting
Officer)
/s/ John A. Stuart Director October 30, 1995
John A. Stuart
/s/ Thomas Y. Hartley Director October 30, 1995
Thomas Y. Hartley
/s/ Peter M. Thomas Director October 30, 1995
Peter M. Thomas
*By: /s/ James A. Barrett, Jr.
James A. Barrett, Jr.
Attorney in Fact
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER EXHIBIT DESCRIPTION PAGE
<C> <C> <C>
5.01 Opinion and Consent of Kummer Kaempfer Bonner & Renshaw as to the 111
legality of securities being registered.
10.13 Form of Exchange and Agency Agreement between Rio Hotel & Casino, 114
Inc. and IBJ Schroder Bank & Trust Company.
23.01 Consent of Kummer Kaempfer Bonner & Renshaw is contained in
Exhibit 5.01
23.02 Consent of Arthur Andersen LLP. 122
</TABLE>
<PAGE>
EXHIBIT 5.01
<PAGE>
October 27, 1995
Securities and Exchange Commission
450 Fifth Street N.W.
Washington, D.C. 20549
Re: Rio Hotel & Casino, Inc.
Registration Statement on Form S-4
Registration No. 33-62163
Ladies and Gentlemen:
As counsel to Rio Hotel & Casino, Inc., a Nevada
corporation (the "Company"), we are rendering this opinion letter
in connection with the registration by the Company of 105/8%
Senior Subordinated Notes Due 2005 in the principal aggregate
amount of $100,000,000 (the "New Notes") proposed by the Company
to be exchanged for the Company's outstanding 105/8% Senior
Subordinated Notes Due 2005. The New Notes will be unsecured
general obligations of the Company, subordinated in right of
payment to all Senior Debt as defined in the Indenture (defined
below) of the Company. The New Notes will be unconditionally
guaranteed (the "Guarantee") by Rio Properties, Inc. (the
"Guarantor").
We have examined the Indenture (the "Indenture") among
the Company, as issuer, the Guarantor and IBJ Schroder Bank &
Trust Company (the "Trustee"), and we have examined such other
papers, documents, records of the Company and the Guarantor, and
certificates of public officials as we have deemed relevant and
necessary as a basis for the opinions hereinafter set forth. In
such examinations, we have assumed the genuineness of all
signatures and the authenticity of all documents submitted to us
as originals and the conformity to originals of documents
submitted to us as conformed or photostatic copies. We have also
assumed that the Exchange Agency Agreement between the Company
and the Trustee (the "Exchange Agency Agreement") will, when
executed and delivered, be substantially in the form submitted to
us for examination. As to various questions of fact material to
such opinions, we have relied upon resolutions of the Board of
Directors of the Company and the Guarantor.
<PAGE>
On the basis of the foregoing and in reliance thereon,
we are of the opinion that when: (i) the Registration Statement
on Form S-4 covering the New Notes and the Guarantee shall have
become effective under the Securities Act of 1933, as amended
(the "Act"); (ii) the securities, Blue Sky and gaming laws of
certain states shall have been complied with; and (iii) the New
Notes shall have been authenticated and issued as provided in the
Indenture and exchanged pursuant to the Exchange Agency
Agreement, the New Notes and the Guarantee will be legally
issued, fully paid, non-assessable and binding obligations of the
Company and the Guarantor, respectively.
The obligations of the Company and the Guarantor referred to
in the preceding paragraph will be enforceable in accordance with
their respective terms, except as the same may be limited by, and
subject to (i) applicable bankruptcy, insolvency, reorganization,
moratorium and other laws now or hereafter in effect relating to
or affecting creditors' rights generally and (ii) by general
principles of equity, whether enforcement is considered in a
proceeding in equity or law, which provide, among other things,
that the remedies of specific performance and injunctive and
other forms of equitable relief are subject to equitable defenses
and to the discretion of the court before which any proceeding
therefor may be brought.
We hereby consent to the filing of this opinion letter
as an exhibit to the above-referenced registration statement
filed with the Securities and Exchange Commission under the Act
and the use of our name under the caption "Legal Matters" in the
Registration Statement and in the Prospectus contained therein.
Very truly yours,
/s/ Kummer Kaempfer Bonner & Renshaw
KUMMER KAEMPFER BONNER & RENSHAW
<PAGE>
<PAGE>
EXHIBIT 10.13
<PAGE>
EXCHANGE AGENCY AGREEMENT
This Agreement is entered into as of ____________________,
1995 between IBJ Schroder Bank & Trust Company, a banking
corporation organized under the laws of the State of New York, as
Exchange Agent (the "Agent"), and Rio Hotel & Casino, Inc., a
corporation organized under the laws of the State of Nevada (the
"Company").
The Company proposes to exchange (the "Exchange Offer")
$1,000 in principal amount of its 10 5/8% Senior Subordinated
Notes due 2005 (the "New Notes") for each $1,000 in principal
amount of its outstanding 10 5/8% Senior Subordinated Notes due
2005 (the "Old Notes") (collectively the New Notes and the Old
Notes are referred to as the "Notes") of which an aggregate
principal amount of $100,000,000 is outstanding. This Exchange
Offer and withdrawal rights will expire at 5:00 p.m., New York
City time, on ____________________, 1995.
The Exchange Offer is not conditioned upon any minimum
principal amount of the Old Notes being tendered for exchange.
However, the Exchange Offer is subject to the terms and
provisions of the Registration Agreement dated as of July 18,
1995 among the Company; Rio Properties, Inc., a subsidiary of the
Company that has agreed to guarantee the Notes; and Salomon
Brothers Inc and Montgomery Securities.
Subject to the provisions hereof, the Company hereby
appoints and the Agent hereby accepts the appointment as Agent
for the purposes of receiving, accepting for delivery and
otherwise acting upon tenders of the Old Notes (the
"Certificates") in accordance with the form of Letter of
Transmittal attached hereto (the "L/T") and with the terms and
conditions set forth herein.
The Agent has received the following documents in connection
with its appointment:
1. L/T
2. Specimen Certificates representing New Notes ("New
Certificates")
3. Letter to holders from the Company
The Agent shall obtain no later than 5:00 p.m., New York
City Time, on the effective date (as specified above), a list of
all holders of Certificates eligible to participate in the
Exchange Offer, to include the amount owned of record by each
such holder. Agent will take reasonable action to identify any
changes in the registered ownership during the Exchange Offer.
The Agent is authorized and hereby agrees to act as follows:
1. receive all tenders of Certificates made pursuant to
the L/T and stamp the L/T with the day, month and
approximate time of receipt;
2. examine each L/T and Certificate received to determine
that all requirements for a valid tender set forth in
the L/T have been met;
<PAGE>
3. take such actions necessary and appropriate to correct
any irregularity or deficiency associated with any
tender which does not meet the requirements in the L/T;
4. follow instructions of Roger M. Szepelak, or such other
person who is designated by the Company as its Chief
Financial Officer, with respect to the waiver of any
irregularities or deficiencies associated with any
tender;
5. render a written report, in the form of Exhibit A
attached hereto, on each business day during the
Exchange Offer and promptly confirm, by telephone, the
information contained therein to Roger Szepelak, or
such other person who is designated by the Company as
its Chief Financial Officer, at (702) 252-7635.
6. return to the presentors, in accordance with the
provisions of the L/T, any Certificates that were not
received in proper order and as to which the
irregularities or deficiencies were not cured or waived;
7. deliver by First Class Mail, postage prepaid, New
Certificates in the amount to which the presentors are
entitled, at the addresses specified in the L/T's;
8. determine that all endorsements, guarantees, signatures,
authorities, stock transfer taxes (if any) and such
other requirements are fulfilled in connection with any
request for issuance of New Certificates in a name other
than that of the registered owner of the Certificates;
and
9. retain, unless otherwise directed by the Company, all
certificates received under the Exchange Offer, together
with any related assignment forms and other documents.
The Agent shall:
A. have no duties or obligations other than those
specifically set forth herein;
B. not be required to refer to any documents for the
performance of its obligations hereunder other than
this Agreement, the L/T and the documents required to be
submitted with the L/T; other than such documents, the
Agent will not be responsible or liable for any
directions or information in the prospectus distributed
in connection with the Exchange Offer or any other
document unless the Agent specifically agrees thereto in
writing;
C. not be required to act on the directions of any person,
including the persons named above, unless the Company
provides a corporate resolution to the Agent or other
evidence satisfactory to the Agent of the authority of
such person;
D. not be required to and shall make no representations and
have no responsibilities as to the validity, accuracy,
value or genuineness of (i) the Exchange Offer, (ii) any
Certificates, L/T's or documents prepared by the Company
in connection with the Exchange Offer or (iii) any
signatures or endorsements, other than its own;
<PAGE>
E. not be obligated to take any legal action hereunder that
might, in its judgment, involve any expense or liability,
unless it has been furnished with reasonable indemnity by
the Company;
F. be able to rely on and shall be protected in acting on the
written or oral instructions with respect to any matter
relating to its actions as Agent specifically covered by
this Agreement, of any officer of the Company authorized
to give instructions under paragraph 4 above;
G. be able to rely on and shall be protected in acting upon
any certificate, instrument, opinion, notice, letter,
telegram or any other document or security delivered to it
and believed by it reasonably and in good faith to be
genuine and to have been signed by the proper party or
parties;
H. not be responsible for or liable in any respect on account
of the identity, authority or rights of any person
executing or delivering or purporting to execute or
deliver any document or property under this Agreement and
shall have no responsibility with respect to the use or
application of any property delivered by it pursuant to
the provisions hereof;
I. be able to consult with counsel satisfactory to it
(including counsel for the Company or staff counsel of the
Agent) and the advice or opinion of such counsel shall be
full and complete authorization and protection in respect
of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with advice or opinion of
such counsel;
J. not be called on at any time to advise, and shall not
advise, any person delivering an L/T pursuant to the
Exchange Offer as to the value of the consideration to be
received;
K. not be liable for anything which it may do or refrain from
doing in connection with this Agreement except for its own
gross negligence, willful misconduct or bad faith;
L. not be bound by any notice or demand, or any waiver or
modification of this Agreement or any of the terms hereof,
unless evidenced by a writing delivered to the Agent signed
by the proper authority or authorities and, if the Agent's
duties or rights are affected, unless the Agent shall give
its prior written consent thereto;
M. have no duty to enforce any obligation of any person to
make delivery, or to direct or cause any delivery to be
made, or to enforce any obligation of any person to perform
any other act;
N. have the right to assume, in the absence of written notice
to the contrary from the proper person or persons, that a
fact or an event by reason of which an action would or
might be taken by the Agent does not exist or has not
occurred without incurring liability for any action taken
or omitted, or any action suffered by the Agent to be taken
or omitted, in good faith or in the exercise of the Agent's
best judgment, in reliance upon such assumption; and
<PAGE>
O. have no liability whatsoever in connection with
Certificates tendered to it which may have stops placed
against them or in connection with the payment made against
stopped Certificates unless it is furnished with a stop
list from the transfer agent.
The Agent shall be entitled to compensation as set forth in
Exhibit B attached hereto.
The Company covenants and agrees to reimburse the Agent for,
indemnify it against, and hold it harmless from any and all
reasonable costs and expenses (including reasonable fees and
expenses of counsel and allocated costs of staff counsel) that
may be paid or incurred or suffered by it or to which it may
become subject without gross negligence, willful misconduct or
bad faith on its part by reason of or as a result of its
compliance with the instructions set forth herein or with any
additional or supplemental written or oral instructions delivered
to it pursuant hereto, or which may arise out of or in connection
with the administration and performance of its duties under this
Agreement.
This Agreement shall be construed and enforced in accordance
with the laws of the State of Nevada and shall inure to the
benefit of, and the obligations created hereby shall be binding
upon, the successors and assigns of the parties hereto.
Unless otherwise expressly provided herein, all notices,
requests, demands and other communications hereunder shall be in
writing, shall be delivered by hand or by First Class Mail,
postage prepaid, shall be deemed given when received and shall be
addressed to the Agent and the Company at the respective
addresses listed below or to such other addresses as they shall
designate from time to time in writing, forwarded in like manner.
The Agent:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attention: Corporate Agency Administration
Telephone: (212) 858-2103
Facsimile: (212) 858-2611
The Company:
Rio Hotel & Casino, Inc.
3700 W. Flamingo Road
Las Vegas, Nevada 89103
Attention: Chief Financial Officer
Telephone: (702) 252-7635
Facsimile: (702) 247-7957
<PAGE>
with copies to:
Michael J. Bonner
Kummer Kaempfer Bonner & Renshaw
Seventh Floor
3800 Howard Hughes Parkway
Las Vegas, Nevada 89109
Telephone: (702) 792-7000
Facsimile: (702) 796-7181
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on their behalf by their officers
thereunto duly authorized, all as of the day and year first set
forth above.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/
Name:
Title:
RIO HOTEL & CASINO, INC.
By: /s/
James A. Barrett, Jr.
President
<PAGE>
EXHIBIT A
SAMPLE REPORT LETTER
Date:
Report Number:
As of Date:
Rio Hotel & Casino, Inc.
3700 West Flamingo Road
Las Vegas, Nevada 89103
Re: Offer to Exchange 105/8% Senior Subordinated Notes
Due 2005 ("Notes") for 105/8% Senior Subordinated Notes Due 2005
Gentlemen:
As Exchange Agent for the above Offer dated ______________,
we hereby render the following report:
Principal amount of Notes previously received:
Principal amount of Notes received today:
Total principal amount of Notes received to date:
Very truly yours,
<PAGE>
EXHIBIT B
EXCHANGE AGENCY FEE SCHEDULE
For each Letter of Transmittal received with four or
less certificates $ 6.00
For each Letter of Transmittal received with four or
less certificates where multiple classes of
securities, rights or dividend reinvestment are
involved 7.50
For each certificate, in excess of four, received
with a Letter of Transmittal .50
For each defective Letter of Transmittal requiring
communication with presentor to cure deficiency,
including solicitation of a properly executed Form W-9 7.50
For each certificate requisitioned and mailed,
including transfers resulting from partial exchanges 2.50
For each check issued and mailed 1.50
For each Form 1099 or Form 1099-B issued and mailed,
including tape supplied to the IRS 1.00
For each extension of the expiration date 1,000.00
For each additional midnight expiration 1,500.00
Minimum Fee:
Through first expiration date 7,500.00
Incidental or Extraordinary Services:
Charges for services of this nature will be based on an
analysis of the work to be provided.
Out-of-Pocket Expenses:
The above fees do not include out-of-pocket expenses that
include, but are not limited to, postage, stationary, fees
and expenses of counsel, telephone, messenger, overtime,
special programming, brokerage fees, FDIC assessment, if
any, etc.
<PAGE>
<PAGE>
EXHIBIT 23.02
<PAGE>
CONSENT OF INDEPENDANT PUBLIC ACCOUNTANTS
As independant public accountants, we hearby consent to the use of
our reports and to all references to our Firm included in or made
part of this Registration Statement.
AURTHUR ANDERSON LLP
Las Vegas, Nevada
October 27, 1995
<PAGE>
