UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-11569
RIO HOTEL & CASINO, INC.
(Exact name of registrant as specified in its charter)
Nevada 95-3671082
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3700 West Flamingo Road, Las Vegas, Nevada 89103
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area (702) 252-7733
code
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
TITLE OF EACH CLASS on which registered
Common Stock, $.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of class)
<PAGE>
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of voting stock held by non-
affiliates of the registrant as of February 28, 1997, based on
the closing price as reported on the New York Stock Exchange of
$15.625 per share, was approximately $246,483,359.
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of February 28, 1997.
Common Stock, $.01 par value 21,204,141
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of this Report is
incorporated by reference from the Rio Hotel & Casino, Inc. Proxy
Statement to be filed with the Commission not later than 120 days
after the end of the fiscal year covered by this Report.
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PART I
ITEM 1. BUSINESS
The Company owns and operates an all-suite hotel-casino, the
Rio Suite Hotel & Casino in Las Vegas, Nevada. Situated on an
elevated site adjacent to the Flamingo Road 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
Las Vegas Strip and a fun and comfortable environment in which to
enjoy gaming, dining and entertainment.
The Rio is decorated throughout in a fun-filled Carnivale
theme. At March 1, 1997, 1,998 of the Rio's suites were
available to hotel guests, including 1,551 suites contained
in three connected 21-story hotel towers and 447 (which
became available on December 31, 1996) of the 1,031 new suites
contained in the new Phase V 41-story curved tower. On
February 7, 1997, the Rio celebrated the grand opening of the
public areas of its Phase V Expansion project, the Masquerade
Village, and now features a 116,000 square foot casino;
13 restaurants and bars; a 595-seat entertainment complex; a
32,000 square foot retail area; a 108,000 square foot outdoor
entertainment area featuring a landscaped sand beach and three
swimming pools; and parking for approximately 3,600 cars. With
the opening of the Masquerade Village on February 7, 1997, the
Rio offers approximately 2,500 slot machines, 109 table games, a
poker room, keno and a race and sports book.
The Rio has substantially completed the $200 million Phase V
Expansion, exclusive of construction period interest and pre-
opening expenses, centered around the Masquerade Village. The
Masquerade Village contains approximately 120,000 square feet of
public space with a Carnivale and Mardi Gras themed casino
expansion, featuring MASQUERADE SHOW IN THE SKY, an interactive
$25 million indoor attraction, a variety of new restaurants and
fine specialty retail shops. The Phase V Expansion adds a curved
41-story hotel tower containing 1,031 suites, 447 of which were
open at March 1, 1997. The balance of the suites and a new
restaurant on the top two floors overlooking the Las Vegas Strip
are scheduled to be open by the end of the second quarter of
1997.
In addition to the Phase V Expansion, the Company has
assembled 38 acres immediately adjacent to the Rio. This brings
the total acreage at the Rio to 83 acres. The Company may
develop the additional acreage at some time in the future.
On March 4, 1997, the Company entered into a letter
agreement to acquire a 60% interest in the Seven Hills Golf
Course in Henderson, Nevada, a suburb of Las Vegas. The Company
is scheduled to close the acquisition, subject to certain
contingencies, in April 1997. The course, located in the
master-planned community of Seven Hills, is in the final stages
of completion and is expected to open during the late Summer of
1997 followed by the opening of a clubhouse in Fall 1997. The
Company intends to use the course to provide a golf school and
golf vacation packages to its guests, in addition to providing
play on the course to both its local and tourist customers.
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.
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MASQUERADE VILLAGE
On February 7, 1997, the Company opened its Masquerade
Village, consisting of five new restaurants and additional
retail, gaming and entertainment space. A sixth restaurant, the
Voodoo Cafe to be located at the top of the new 41-story tower
overlooking the Las Vegas Strip, is scheduled to open during the
second quarter of 1997. Inspired by European architecture,
Masquerade Village blends celebrations of Carnivale in Rio de
Janeiro and Venice, and Mardi Gras in New Orleans, into a unique
entertainment experience.
The Masquerade Village includes fine specialty retail shops
and restaurants, and a wine cellar and tasting room. Retail
stores include a NICOLE MILLER boutique, GUESS? FOOTWEAR, SPEEDO
AUTHENTIC FITNESS, WATCH ZONE by Sunshade Optique, ALEGRE, and
REEL OUTFITTERS. New restaurants include Mama Marie's Cucina,
Mask, Napa Restaurant and The Wine Cellar Tasting Room, Bamboleo,
Village Seafood Buffet and, by the end of the second quarter of
1997, the Voodoo Cafe. The Masquerade Village features a fully
interactive $25 million indoor attraction, MASQUERADE SHOW IN
THE SKY. The MASQUERADE SHOW IN THE SKY consists of three
complete parades, each with its own themed music, costumes
and live performers. The show features five floats in each
of the three parades, suspended on a 950-foot track located
over the casino floor. A cast of 36 specialty dancers, musicians,
aerialists and costume stilt walkers will perform in 17
performing areas.
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 Carnivale and Mardi Gras 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 and restaurants provide an
attractive alternative to conventional Las Vegas properties for
visitors who desire to avoid the crowds and congestion of the Las
Vegas Strip. The Interstate 15 and Flamingo Road location also
permits the Rio to attract 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. 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 Carnivale theme incorporates bright colors,
creative interior
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designs, festive employee costumes and other exotic touches to
contribute to its tropical ambiance. The Masquerade Village
expands on the Carnivale theme to blend Carnivale and Mardi
Gras entertainment experiences through architecture, retail
and restaurant areas, and the MASQUERADE SHOW IN THE SKY.
The Rio's message of a fun-filled, colorful atmosphere is
constantly emphasized. The Rio has developed the Rio Rita(TM)
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 Carnival Dice(TM), Rio
Rita's(TM) Lotto Bucks, Carnival Days(TM), Conga Mania(TM) and
Brazilia Days(TM). The Company advertises extensively in the
Las Vegas area print, television and radio media, and
periodically in Southern California, Phoenix and other regional
markets. In anticipation of the opening of the Phase V
Expansion, the Company established a national advertising program
to increase its visitor volume.
The success of the Company's business strategy is evidenced
by the large number of awards the Rio has received. In March
1996, the Rio won recognition through 11 "Best of Las Vegas"
awards in an annual readers' survey published by Nevada's largest
daily newspaper. These distinctions included: "Best Buffet,"
"Best Seafood Restaurant," "Best Coffee Shop," "Best Breakfast
Special," "Best Place to Dance (Club Rio)," "Best Locals Hotel,"
"Most Efficient Service," "Best Bartenders," "Best Cocktail
Waitresses," "Best Employee Uniforms" and "Best Outdoor Sign."
In addition, the Rio received recognition in the 1995-1996 ZAGAT
U.S. HOTELS, RESORTS & SPAS SURVEY for "Best Overall," "Best
Rooms," "Best Dining" and "Best Service" in Las Vegas. In
addition, the Rio was selected by the American Academy of
Hospitality Sciences to be the first and only recipient of the
Five Star Diamond Award for 1997 in Las Vegas. The Academy has
bestowed fewer than 100 hotels and resorts internationally with
this award. Since these awards, however, are based upon
subjective criteria, undue significance should not be attributed
to them. Management believes that these awards exemplify the
Company's reputation for quality and value.
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 among 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. During 1996, the Carnival World Buffet served
an average of approximately 6,600 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 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 Company offers VIP
services, casino hosts and a segmented
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gaming area to certain special casino customers. 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 Las Vegas
Strip) and the "New Four Corners" (Tropicana Avenue and the Las
Vegas Strip) areas of the Las Vegas Strip.
THE RIO
Since 1992, the Company has consistently expanded the Rio
under its master plan. Upon completion of the Phase V Expansion,
the Rio will have 2,582 suites, approximately 2,500 slot machines
and 109 table games.
<TABLE>
<CAPTION>
TOTALS AFTER
COMPLETION AS OF AND FOR THE
OF PHASE V YEAR ENDED DECEMBER 31,
EXPANSION<F1> 1996 1995
<S> <C> <C> <C>
Average daily suite rate - $76.93 $72.18
Average daily hotel occupancy - 94.5% 94.5%
Hotel suites<F2> 2,582 1,998 1,551
Casino square footage 116,000 89,000 89,000
Slot machines<F3> 2,500 1,884 2,098
Table games<F3> 109 79 73
Restaurant seats 4,152 2,540 2,540
<FN>
<F1> The Phase V Expansion will be completed in the second quarter
of 1997. Due to the lack of a sufficient historical period
for measurement purposes, meaningful figures cannot be provided
concerning average daily hotel occupancy and average daily
suite rate.
<F2> 447 suites in the new 41-story tower opened on December 31,
1996.
<F3> Average number available during the period.
</FN>
</TABLE>
<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR
ENDED DECEMBER 31,
1994 1993 1992
<S> <C> <C> <C>
Average daily suite rate $63.80 $62.60 $64.09
Average daily hotel occupancy 95.9% 96.8% 96.5%
Hotel suites<F2> 861 861 424
Casino square footage 89,000 79,000 54,000
Slot machines<F3> 2,200 1,950 1,450
Table games<F3> 53 44 31
Restaurant seats 2,440 1,843 1,209
<FN>
<F1> The Phase V Expansion will be completed in the second quarter
of 1997. Due to the lack of a sufficient historical period
for measurement purposes, meaningful figures cannot be provided
concerning average daily hotel occupancy and average daily
suite rate.
<F2> 447 suites in the new 41-story tower opened on December 31,
1996.
<F3> Average number available during the period.
</FN>
</TABLE>
GAMING. With the opening of the Masquerade Village on
February 7, 1997, the Rio offered 116,000 square feet of casino
space containing approximately 2,500 slot machines; 109 table
games, including "21," craps, roulette, pai gow poker, Caribbean
stud poker, baccarat and mini-baccarat; other casino games such
as keno and poker; and a race and sports book which is presently
being upgraded.
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 Rio Rita's(TM) Royals,
Rio Rita's(TM) Bonus Poker, Sneaky Queens(TM) and Mambo
Bucks.(TM) Management devotes substantial time and attention to
the type, location and player activity of all gaming devices.
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 three connected 21-story hotel towers
contain a total of 1,551 suites, comprised of 1,504 standard Rio
suites, 16 "super" suites, 18 "cariocas" suites, six two-story
penthouse suites, and seven executive suites that combine a
conference room and an adjoining suite. The new Phase V 41-story
hotel tower, when completed during the second quarter of 1997,
will contain a total of 1,031 suites,
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<PAGE>
comprised of 949 standard suites, 78 executive suites, three
"hospitality" suites ranging in size from 1,612 to 2,418 square
feet, and one "Presidential" suite consisting of 2,989 square
feet. At March 1, 1997, 447 of the 1,031 suites were open and
the balance will be opened through the end of the second quarter
of 1997. 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
94.5% for both 1995 and 1996.
The standard Rio suite measures approximately 600 square
feet, compared to approximately 400 square feet for the typical
Las Vegas hotel room. The Carnivale 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,
with the opening of five new restaurants and bars on February 7,
1997, the Rio now offers 13 bars and 13 restaurants located in
the Rio's main floor area, and a bar and restaurant will be
located at the top of the new 41-story tower overlooking the Las
Vegas Strip which are expected to open during the second quarter
of 1997. During 1996, before the addition of the five
restaurants contained in the Phase V Expansion project, the Rio
served an average of approximately 12,000 meals per day,
including banquets and room service. The following table sets
forth, for each restaurant, the type of service provided and the
current seating capacity:
<TABLE>
<CAPTION>
NUMBER OF
TYPE SEATS
<S> <C> <C>
All American Bar & Steaks, ribs, chicken and 202
Grille seafood
Antonio's Italian fine-dining 100
Beach Cafe 24-hour full menu coffee shop
featuring American and Chinese
cuisine 318
Buzios Seafood and oyster bar 160
Carnival World Buffet with live action
Buffet cooking featuring Brazilian,
Chinese, Italian, Mexican,
Japanese, Western BBQ and
traditional buffet 1,040
Toscano's Deli & Deli items, pizza and pasta,
Market ice cream and gelato, and a
large selection of bakery
products 104
Copacabana Showroom Entertainment showroom and
Club Rio nightclub 595
Fiore Rotisserie & Fine-dining featuring
Grille rotisserie-grilled seafood,
beef and poultry 186
Mama Marie's Cucina Family style casual Italian
dining 150
Mask Far Eastern restaurant 175
Napa Restaurant and Fine-dining featuring French
The Wine Cellar country cuisine and daily wine
Tasting Room tastings 174
Bamboleo Latin restaurant featuring
foods from south of the border 250
Village Seafood Fresh seafood buffet 332
Buffet
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Voodoo Cafe<F1> New Orleans flavored
restaurant featuring Creole
and Cajun cuisine 366<F2>
Total 4,152
<FN>
<F1> Scheduled to open during the second quarter of 1997.
<F2> Includes the Voodoo Cafe Patio featuring outdoor seating
for 48.
</FN>
</TABLE>
ENTERTAINMENT AND OTHER ATTRACTIONS. The Masquerade
Village, which opened on February 7, 1997, features MASQUERADE
SHOW IN THE SKY, an interactive entertainment experience
consisting of three complete parades, each with its own themed
music, costumes and live performances. The show, designed to
emulate celebrations of Carnivale in Rio de Janeiro and Venice,
and Mardi Gras in New Orleans, consists of five floats in each of
the three parades suspended along a 950-foot track above the
casino floor, and a cast of 36 specialty dancers, musicians,
aerialists and costumed stilt-walkers. The Masquerade Village
also contains fine specialty retail stores in a 32,000 square
foot retail area.
The Rio's Copacabana Showroom is a unique, circular 595-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 is utilized as an entertainment showroom and a late-
night dance club, Club Rio. 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 spa, 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
108,000 square feet and includes a landscaped sand beach, an 11-
foot waterfall, three swimming pools, a multi-level spa, and two
terrace bars 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 an 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 15 additional acres in
1989 and 1991 and has purchased or has acquired an option to
purchase an additional 38 acres as of December 31, 1996.
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.
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<TABLE>
<CAPTION>
START
DATE OPENING
<S> <C> <C>
Initial Construction 12/88 1/90
Casino (10,000 sq. ft.)/Buffet 7/92 12/92
Expansion
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
Phase IV Expansion
141-Suite Addition 4/95 12/95
Buzios Expansion 4/95 12/95
Meeting Rooms Expansion 4/95 11/95
Health Club and Salon 4/95 12/95
Phase V Expansion
1,031-Suite Tower 9/95 6/97<F1>
Casino Space (27,000 sq. ft.) 9/95 2/97
Masquerade Village 9/95 2/97
Spa and Salon Expansion 9/95 2/97
Four-Story Parking Garage 9/95 7/96
Expanded Pool Area 9/95 2/97
<FN>
<F1> Approximately 447 of the 1,031 new suites were opened as of
March 1, 1997 with the balance to open through the second quarter
of 1997.
</FN>
</TABLE>
As of December 31, 1996, the Company has invested in excess
of $505 million in the development, expansion and renovation of
the Rio. Moreover, as of December 31, 1996, the Company expects
it will incur expenses of approximately $27.6 million to complete
the Phase V Expansion.
ADDITIONAL GAMING OPPORTUNITIES. The Company has acquired
approximately 31 acres of land adjacent to the Rio site and
placed another seven acres under purchase option. This
additional acreage brings the total Rio site to approximately 83
acres. The additional acreage is being held for future
development. The Company may pursue additional opportunities
that management believes to be in the best interests of the
Company.
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GOLF COURSE. The Company has entered into a letter
agreement to acquire a 60% interest in a golf course to be
located in the master planned community of Seven Hills in
Henderson, Nevada. Management intends to use the course to
provide a golf school and golf vacation packages to the Company's
guests, in addition to offering play to both local and tourist
customers.
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 Strip and in downtown Las Vegas.
Such competition includes a number of 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.
As of December 31, 1996, there were approximately 40 major gaming
properties located on or near the Las Vegas Strip, 14 located in
the downtown area, 4 located on the Boulder Strip and 11
located in other areas in or near Las Vegas. According to the Las
Vegas Convention and Visitors Authority, the Las Vegas hotel-
motel room inventory was 101,106 as of January 3, 1997 and both
construction of new properties and expansion of existing hotel-
casinos is expected to increase inventory to approximately
122,000 rooms by 1998. In the past year three large-scale hotel-
casinos have opened on or near the Las Vegas Strip. Eight new
hotel-casinos and two hotel-casino expansions are under
construction or have been announced, which will add approximately
19,000 rooms to the Las Vegas area over approximately the next
two years. Five of the new hotel-casinos are major resorts with
a theme and an attraction which are expected to draw significant
numbers of visitors. 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 Mesquite, 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, many states have recently
legalized, and additional other states are currently considering
legalizing, casino gaming in specific geographic areas within
those states. The Company believes that the growth in the
legalization of gaming is fueled by a 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 Carnivale 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.
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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, the "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) providing 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 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.
11
<PAGE>
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 such holder's
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
12
<PAGE>
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
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 25, 1996, 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
such person 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
13
<PAGE>
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 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 December 31, 1996, the Company employed approximately
3,400 employees. None of the Company's employees is covered by
collective bargaining agreements. The Company believes that its
relationship with its employees is good.
ITEM 2. PROPERTIES
The Company owns approximately 76 acres, consisting of the
45-acre site in Las Vegas on which the Rio is located and 31
acres of land adjacent to the current Rio site. The Company has
purchase options on an additional seven acres adjacent to the Rio
site. With the exception of approximately 18 of the recently
acquired acres, all of the Company's acreage is subject to a deed
of trust securing the Rio Bank Loan (as defined below), of which
$153 million was outstanding at December 31, 1996. The Company
also owns approximately 64 acres on the Boulder Highway southeast
of Las Vegas (the "Old Vegas Site"). The Old Vegas Site is being
held for sale.
14
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
On April 26, 1994 and May 10, 1994, complaints
("Complaints") in purported class action lawsuits (WILLIAM POULOS
V. CAESARS WORLD, INC. ET AL., Case No. 94-478-Civ-Orl-22 and
WILLIAM H. AHERN V. CAESARS WORLD, INC. ET AL., Case No.
94-532-Civ-Orl-22, respectively) were filed in the United States
District Court, Middle District of Florida, 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. The Complaints allege 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 seek damages in excess of $1
billion without any substantiation of that amount. The Company
filed motions to dismiss the Complaints. The Nevada District
Court dismissed the Complaints, granting leave to plaintiffs to
refile, and denying as moot all other pending motions, including
those of the Company. The plaintiffs filed an amended complaint
on or about May 31, 1996. The Company renewed its motions to
dismiss based on abstraction and related doctrines, and joined in
the motions to dismiss filed by other defendants, which were
based on defects in the pleadings. The Nevada District Court
consolidated the actions (and one other in which the Company is
not a named defendant), ordered plaintiffs to file a consolidated
amended complaint on or before February 14, 1997, and ordered all
defense motions, including those of the Company, withdrawn
without prejudice. The parties have established a steering
committee to address motion practice, scheduling and discovery
matters. Management believes that the substantive allegations in
the Complaint are without merit and that the consolidated amended
complaint will be subject to the same defects addressed in
earlier motions, and intends vigorously to defend the
allegations. The Complaints were consolidated and transferred to
the United States District Court for the District of Nevada.
Management believes that the Complaints are without merit and
intends vigorously to defend the allegations.
On September 26, 1995, a complaint in a purported class
action lawsuit (LARRY SCHRIER V. CAESARS WORLD, INC. ET AL., Case
No. 95-923-LDG (RJJ)) was filed in the United States District
Court for the District of Nevada, Southern District against four
manufacturers, three distributors and 38 casino operators,
including the Company, that manufacture, distribute or offer for
play video poker and electronic slot machines. The plaintiff
allegedly intends to seek class certification of the interests he
claims to represent. The complaint alleges 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. The complaint alleges
violations of 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 complaint is similar to the Complaints. The
Company filed a motion to dismiss the complaint. The plaintiff's
attempts to consolidate this action with the Complaints were not
successful. The court entered an order granting the motions to
dismiss based upon defects in the pleadings, and denying as moot
all other pending motions, including those of the Company. The
court granted the plaintiff until September 30, 1996 within which
to file an amended complaint that complies with the applicable
pleading requirements. The plaintiff filed an amended complaint
on or about September 30, 1996. The Company renewed its motion
to dismiss based upon abstention and related doctrines, and based
upon defects in the pleadings. Management believes that the
complaint is without merit and intends vigorously to defend the
allegations.
On May 5, 1995, a purported class action lawsuit (HYLAND, ET
AL. V. GRIFFIN INVESTIGATIONS, ET AL., Case No. 95-CV-2236 (JEI))
was filed 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
15
<PAGE>
defendant in the action. 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 based on alleged 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. The Company has
made a motion to dismiss the complaint. The court has not yet
ruled on the motion. Management believes that the complaint is
without merit and the Company intends vigorously to defend the
allegations.
On March 27, 1996, a complaint in a purported class action
lawsuit (TOM PAYNE, ET AL. V. AZTAR CORPORATION, ET AL., Case No.
698592) was filed in the Superior Court of California, County of
San Diego, against numerous gaming entities, including the
Company. The complaint, almost identical in nature to the other
class action suits filed against the gaming industry, alleges
that the defendants have engaged in a course of conduct intended
to induce persons to play gaming devices 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. The
Company joined in an attempt to remove the case to federal court
which was not successful. The Company filed a motion to dismiss
the complaint for lack of personal jurisdiction. The motion is
pending. Management believes that the complaint is without merit
and the Company intends vigorously to defend the allegations.
On December 27, 1996, a purported stockholder derivative
action (PARK EAST, INC. V. ANTHONY A. MARNELL II, ET AL., Case
No. CV-596-01196-HDM (RLH)) was filed in the United States
District Court for the District of Nevada, against the Company as
a nominal defendant, five of the Company's directors, Marnell
Corrao and Marnell Chartered. The complaint alleges that
pursuant to construction contracts and architectural contracts
with Marnell Corrao and Marnell Chartered, respectively, the
Company paid unfair amounts in exchange for the services
provided. The complaint alleges breach of fiduciary duty by each
of the director defendants and seeks rescission of the contracts,
damages to compensate the Company to the extent that contract
amounts are unfair to the Company, and injunctive relief
prohibiting the Company from entering into similar contracts with
Mr. Marnell or entities which he controls. A motion to dismiss
the complaint was filed on January 27, 1997. The court has not
yet ruled on this motion.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
16
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
(a) Price Range of Common Stock
The Company's common stock, $.01 par value ("Common Stock"),
began trading on the New York Stock Exchange (the "NYSE") under
the symbol "RHC" on January 11, 1996. Prior to this date, the
Company's Common Stock was traded on the Nasdaq National Market
under the symbol "RIOH." The following table sets forth the high
and low closing sale prices of the Company's Common Stock, as
reported by the NYSE and the Nasdaq National Market, during the
periods indicated.
<TABLE>
<CAPTION>
HIGH LOW
<S> <C> <C>
1995
First Quarter $ 14 $ 11 1/4
Second Quarter 16 5/8 13 1/4
Third Quarter 14 3/4 12 1/2
Fourth Quarter 13 5/8 11 5/8
1996
First Quarter $ 15 1/4 $ 11 5/8
Second Quarter 18 3/4 15
Third Quarter 17 5/8 13 3/8
Fourth Quarter 14 13 7/8
</TABLE>
The last reported sale price of the Common Stock on the NYSE
on February 28, 1997 was $15.625 per share. There were
approximately 1,465 holders of record of the Company's Common
Stock as of February 28, 1997.
(b) Dividend Policy
The Company has never declared or paid cash dividends on its
Common Stock. The Company presently intends to retain earnings to
finance the operation and expansion of its business and does not
anticipate declaring cash dividends in the foreseeable future.
Under the terms of the covenants in the Rio Bank Loan (as defined
below) the Company's wholly owned subsidiary, Rio Properties,
Inc. ("Rio Properties") may pay dividends to the Company
only if such funds are used for certain specific purposes. Under
the terms of the Indentures (as defined below), governing the
10 5/8 % Notes (as defined below) and the 9 1/2% Notes (as
defined below), the payout of dividends and other distributions
is subject to specified restrictions.
17
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Revenues $ 219,581,492 $ 192,958,169 $ 146,424,090
Income before Minority Interest in
Earnings, Extraordinary Items and
Cummulative Effect of Accounting
Change $ 19,366,377 $ 18,745,479 $ 15,966,409
Minority Interest in Earnings $ - $ - $ -
Extraordinary Items $ - $ - $ -
Cumulative Effect of Accounting Change $ - $ - $ -
Net Income $ 19,366,377 $ 18,745,479 $ 15,966,409
Primary Earnings Per Common Share:
Income before Extraordinary Items
and Cummulative Effect of Accounting
Change $ 0.90 $ 0.87 $ 0.74
Extraordinary Items $ - $ - $ -
Cumulative Effect of Accounting Change $ - $ - $ -
Net Income $ 0.90 $ 0.87 $ 0.74
Total Assets $ 494,549,586 $ 308,791,594 $ 301,165,272
Long-Term Debt, net of current maturities $ 253,949,283 $ 110,176,765 $ 110,146,869
Total Stockholders' Equity $ 181,875,230 $ 162,887,900 $ 147,839,167
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA (Continued)
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Revenues $ 110,053,332 $ 82,633,154
Income before Minority Interest in
Earnings, Extraordinary Items and
Cummulative Effect of Accounting
Change $ 11,679,991 $ 5,756,628
Minority Interest in Earnings $ - $ (242,240)
Extraordinary Items $ (253,711) $ 793,511
Cumulative Effect of Accounting Change $ (776,888) $ -
Net Income $ 10,649,392 $ 6,307,899
Primary Earnings Per Common Share:
Income before Extraordinary Items
and Cummulative Effect of Accounting
Change $ 0.60 $ 0.37
Extraordinary Items $ (0.01) $ 0.05
Cumulative Effect of Accounting Change $ (0.04) $ -
Net Income $ 0.55 $ 0.42
Total Assets $ 218,050,376 $ 149,518,427
Long-Term Debt, net of current maturities $ 56,875,753 $ 50,906,000
Total Stockholders' Equity $ 129,838,481 $ 86,872,151
</TABLE>
18
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
STATEMENT ON FORWARD-LOOKING INFORMATION
Certain information included herein contains statements that
may be considered forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934, such as statements relating
to plans for future expansion, capital spending and financing
sources. Such forward-looking information involves important
risks and uncertainties that could significantly affect
anticipated results in the future and, accordingly, such results
may differ from those expressed in any forward-looking statements
made herein. These risks and uncertainties include, but are not
limited to, those relating to construction activities, dependence
on existing management, gaming regulations (including actions
affecting licensing), leverage and debt service (including
sensitivity to fluctuations in interest rates), domestic or
global economic conditions and changes in federal or state tax
laws or the administration of such laws.
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.
The Company's sole business is the operation of the Rio,
which opened in January 1990. In 1995 and 1996, as part of the
Company's three-phased expansion and development plan, the
Company entered into agreements for the purchase of approximately
22 acres and 16 acres, respectively, adjacent to the Rio which
may be developed into a future hotel/casino project. In
addition, the Company owns approximately 64 acres southeast of
Las Vegas that is zoned for hotel/casino development. At the
present time, management is contemplating the possibility of
selling the 64 acre parcel.
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<PAGE>
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996 AND 1995
Net revenues for the Company increased to $219.6 million in
1996 from $193.0 million in 1995, an increase of $26.6 million or
14%. Casino revenues increased $6.9 million, or 7.0%, to
$112.4 million in 1996 from $105.5 million in the prior year. An
increase in table game revenues of $6.4 million, or 17.7%, to
$42.5 million in the current year from $36.1 million in 1995 was
the primary component of the increase. Slot machine revenues
were $64.2 million in 1996, an increase of $1.2 million, or 1.9%,
from 1995 revenues of $63.0 million. Race and sports book
revenues were $0.2 million and $0.3 million lower, respectively,
in 1996 than in 1995, primarily due to a lower hold percentage in
the sports book and a decrease in total wagers in the race book
which was negatively impacted by a pricing dispute concerning the
live televising of races from California race tracks. Management
believes that the increase in table game revenues was
attributable to an increase in the number of available and
occupied rooms and an average of 14 more table games being
available in 1996 compared to 1995. In 1996, management believes
that slot machine revenues were negatively impacted by a 12.5%
decrease in the average number of slot machines available when
compared to 1995 as a result of temporary space limitations due
to the Phase V Expansion and casino remodeling projects.
Room revenues increased by $7.5 million, or 22.2%, to $41.3
million in 1996 from $33.8 million in 1995, primarily due to 365,
184 and 141 new hotel suites being placed into service in
February 1995, March 1995 and December 1995, respectively. Hotel
occupancy percentage was 94.5% in both years, with 567,332
available room nights in 1996 compared to 494,105 available room
nights in the prior year. The average room rate increased to
$76.93 in 1996 from $72.18 in 1995.
Food and beverage revenues increased to $70.8 million in
1996 from $60.0 million in 1995, an increase of $10.8 million or
18.0%. Higher average food checks and increased beverage sales
contributed to this increase.
Other revenues increased by $3.0 million, or 24.1%, to $15.4
million in 1996 compared to $12.4 million in 1995. Increased
telephone revenues from the additional hotel suites, as well as
increased merchandise sales, salon revenues and admissions to
entertainment activities, were the primary reasons for the
increase in other revenues.
Operating profit as a percentage of net revenue was 17.3%
and 19.5% in 1996 and 1995, respectively. Casino operating
profit was 49.5% in 1996 compared to 54.5% in 1995. Management
believes that the decline in the casino operating margin was due
to (i) the change in the ratio between table game revenues, which
traditionally have a lower operating margin, and slot machine
revenues and (ii) the incurrence of pre-opening marketing and
personnel costs associated with the September 1996 opening of the
Rio's new Shutters gaming area and the Masquerade Village that
opened on February 7, 1997. Food and beverage operating profit
was 22.4% and 19.6% for the years ended December 31, 1996 and
1995, respectively. Management believes that this improvement
was the result of effective cost controls, a higher average food
check, and the increase in the ratio of beverage sales to food
sales when comparing the two years. Hotel operating profit was
68.2% in 1996 and 69.2% in 1995. Other operating expenses were
48.8% and 53.7% of other departmental revenues for the years
ended December 31, 1996 and 1995, respectively, primarily due to
increases in telephone and admissions revenues which do not
require significant incremental expense. Selling, general and
administrative expenses were 14.4% of net revenues in both years.
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<PAGE>
Promotional allowances, which represent the retail value of
rooms, food, beverage and other products and services provided to
customers without charge, were $20.4 million in 1996 and $18.8
million in 1995. The estimated cost of providing such
promotional allowances was $11.4 million and $11.1 million in
1996 and 1995, respectively.
Depreciation and amortization increased $3.4 million, or
23.8%, to $17.6 million in 1996 compared to $14.2 million in
1995. This increase is attributable to (i) new suites being
placed into service during the period from February 1995 through
December 1995, and (ii) expanded public and back-of-the-house
areas being placed into service during 1995 and 1996. This
includes approximately $7.3 million in construction projects
placed into service in 1996 which are associated with the Phase V
Expansion project.
Interest expense increased $0.1 million in 1996 to $8.2
million from $8.1 million in 1995. Interest expense in 1996 was
reduced by $8.7 million due to the capitalization of interest on
amounts expended on the Phase V Expansion project. The $200.0
million Phase V Expansion includes approximately 1,000 new hotel
suites, 477 of which opened in late December 1996, and
approximately 120,000 of additional casino space, restaurants,
retail, and interactive entertainment space, which opened on
February 7, 1997. The remainder of the new hotel suites and the
Voodoo Lounge and Restaurant on the 41st floor of the new tower
are scheduled to open prior to the end of the second quarter of
1997.
Net income was $19.4 million or $0.90 per share (fully
diluted) compared to $0.87 per share (fully diluted) in 1995. As
a percentage of pre-tax income, federal income taxes decreased
from 36.4% in 1995 to 35.0% in 1996, primarily due to a change in
accounting for employee meals which were provided at no cost to
employees Prior to the change in accounting for these meals,
with this change having been adopted by a majority of Nevada's
hotel/casinos, the Internal Revenue Service has alleged that such
meals are subject to the 50.0% meals and entertainment
disallowance.
YEARS ENDED DECEMBER 31, 1995 AND 1994
Operating profit for the Company increased to $37.1 million
for 1995 from $25.8 million for 1994, an increase of $11.3
million or 44%. Management believes that the improvement in
operating results was due to the additional 365 new hotel suites
placed into service in February 1995, the additional 184 new
hotel suites placed into service in March 1995, the additional
141 new hotel suites placed into service in December 1995, an
average monthly increase from 1994 levels of approximately 174
slot machines and 19 table games, additional restaurant capacity
and improved operating efficiencies in the hotel department.
Net revenues for the Company increased to $192.5 million for
1995 from $146.3 for 1994, an increase of $46.2 million or 32%.
Casino revenues increased to $105.5 million for 1995 from $87.2
million for 1994, an increase of $18.3 million or 21%. The
increase in casino revenues was due primarily to an increase in
slot machine revenues of $8.5 million or 16% to $63.0 million for
1995 from $54.5 million for 1994 and an increase in table games
revenues of $10.3 million or 40% to $36.1 million for 1995 from
$25.8 million for 1994, resulting from the additional slot
machines and table games discussed above, as well as an increase
in the per unit win of both slots and table games.
Room revenues increased by $14.5 million or 76% to $33.8
million for 1995 from $19.3 million for 1994. The increase in
room revenue resulted primarily from the addition of 365 new
hotel suites placed into service in February 1995, 184 new hotel
suites placed into service in March 1995, and 141 new hotel
suites placed into service in December 1995. The additional 690
suites placed into service in 1995 increased the Rio's total to
1,551 suites compared to 861 suites for 1994. Demand for the
Rio's suites remained high during 1995 with a 94% average daily
occupancy compared to a 96% average daily
21
<PAGE>
occupancy during 1994. The average number of suites available
during 1995 was 1,354 compared to 861 during 1994. The average
daily room rate during 1995 was $72.18 compared to $63.80 during
1994.
Food and beverage revenues increased to $60.0 million for
1995 from $47.6 million for 1994, an increase of $12.4 million or
26%. 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 1995 were $12.0 million, which included
entertainment admission revenues of $4.1 million, retail sales of
$4.1 million and miscellaneous other operating revenues,
primarily telephone revenues, of $3.8 million. This represented
an increase in other revenues of $4.9 million, or 68%, compared
to the $7.1 million in other revenues generated during 1994. The
increase in other revenues resulted primarily from increased
entertainment admission revenues, retail sales and telephone
revenues resulting from increased business levels.
The Company's operating margins were relatively consistent
during 1995 compared to 1994. Operating profit as a percentage
of net revenues was 19% during 1995 compared to 18% during 1994.
Casino operating profit was relatively constant at 55% during
1995 compared to 56% during 1994. Food and beverage operating
profit remained relatively constant at 20% during 1995 compared
to 19% during 1994. Hotel operating profit increased to 69%
during 1995 compared to 66% during 1994 due to efficiencies
resulting from increased customer volume, effective cost controls
and a higher average room rate during 1995 compared to 1994.
Selling, general and administrative expenses were 14% of net
revenues in both 1995 and 1994.
During 1995, promotional allowances were $18.8 million, or
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 $11.1 million. This compares to 1994 when
promotional allowances were $14.9 million, or 9% of gross
revenues, and the estimated cost of providing such promotional
allowances was $9.1 million.
Depreciation and amortization increased by $3.3 million or
31% to $14.2 million for 1995 compared to $10.9 million for 1994.
This increase is attributable to depreciation expense from
various completed expansion projects such as the Company's
Eastside Expansion and the Phase III Expansion.
Other expenses of the Company increased primarily because of
higher interest expense. Borrowing levels increased in 1995
compared to 1994 due to funding costs of the various expansion
projects. Also, in July 1995, in anticipation of the funding
requirements for the Phase V Expansion, the Company issued
$100 million in 105/8 % Senior Subordinated Notes (the "105/8 %
Notes"). (See "Item 7. Liquidity and Capital Resources"). The
fixed coupon rate of 105/8 % was higher than the floating rate
that the Company was paying under the Rio Bank Loan.
Consequently, the issuance of these notes resulted in an increase
in interest expense. Interest expense for 1995 was reduced by
$949,423 because of interest capitalized on amounts expended on
the Phase III Expansion, the Phase IV Expansion and the Phase V
Expansion. Interest expense for 1994 was reduced by $619,887
because of interest capitalized on amounts expended on the
Eastside Expansion and the Phase III Expansion. Other income for
1994 was a one-time gain of $1.1 million related to the resale of
two real estate parcels 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
22
<PAGE>
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. Another one-time gain of $173,500
related to the sale of a second piece of real property 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.
Net income for 1995 increased 17% to $18.7 million or $0.87
per share (fully diluted) from $16.0 million or $0.74 per share
(fully diluted) for 1994 as a result of the factors discussed
above.
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 action 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.
LIQUIDITY AND CAPITAL RESOURCES
During the year ended December 31, 1996, cash provided by
operating activities was $31.9 million. Investing activities
used $183.1 million, including $13.5 million for the purchase of
land adjacent to the Rio, $151.5 million for the Phase V
Expansion, $2.6 million in connection with the Phase III
Expansion, $2.4 million in connection with the Phase IV Expansion
and $7.9 million in furniture, equipment and improvement
purchases. The cash expenditures on the Phase V Expansion
included $6.6 million in capitalized interest, which will be
capitalized and depreciated along with the construction costs.
On February 4, 1997, the Company entered into an agreement
with Salomon Brothers Inc and BancAmerica Securities, Inc. (the
"Initial Purchasers") for the sale of $125.0 million in principal
amount of the Company's 9 1/2% Senior Subordinated Notes Due 2007
(the "9 1/2% Notes"). The 9 1/2% Notes were purchased by the
Initial Purchasers for resale to qualified institutional
investors. Pursuant to a registration agreement between the
Company and the Initial Purchasers, the Company has registered
on Form S-4 under the Securities Act of 1933 $125.0 million
principal amount of 9 1/2% Senior Subordinated Notes Due 2007
(the "New 9 1/2% Notes") which will be exchanged for the 9 1/2%
Notes.
The net proceeds of the offering, approximately $121.5
million after deducting discounts and offering costs, were
applied to the Company's $200.0 million revolving line of credit
(the "Rio Bank Loan") with Bank of America National Trust &
Savings Association and a syndicate of participating banks. The
revolving credit feature of the Rio Bank Loan allows for the
Company to pay down and reborrow principal under the Rio Bank
Loan as the Company deems appropriate. On February 11, 1997,
prior to the application of the $121.5 million received from the
sale of the 9 1/2% Notes, the Company had an outstanding balance
of $180.0 million under the Rio Bank Loan. After application of
the $121.5 million payment on February 11, 1997, the Company had
$141.5 million available under the Rio Bank Loan.
23
<PAGE>
In late 1994, the Company's Board of Directors authorized
the Company to make discretionary repurchases of up to 2 million
shares of its Common Stock ("Common Stock") from time to time in
the open market or otherwise. In 1996, the Company repurchased
144,500 shares of Common Stock at an average cost of $15.37 per
share.
In March 1997, the Company entered into a letter agreement
to acquire a 60% interest in a golf course to be located in
Henderson, Nevada, at a purchase price of $9 million. The
Company is currently reviewing various financing alternatives
for this acquisition.
As of December 31, 1996, the Company's capital commitments
include $7.3 million under commitments for the balance of the
purchase price and/or option price of certain of the land parcels
adjacent to the Rio for which the entire purchase price has not
been funded. In addition, as of December 31, 1996, the Company
estimates that it will incur approximately $27.6 million to
complete the Phase V Expansion, excluding capitalized interest
and pre-opening costs. 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 V Expansion,
real estate purchase commitments and operations.
24
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
First Second Third
(In thousands except per share data) Quarter Quarter Quarter
1996 <F1>
<S> <C> <C> <C>
Revenues $ 55,089 $ 54,772 $ 53,226
Operating profit 11,402 10,926 8,321
Net income 5,326 5,475 4,266
Net income per common share <F2> $ 0.25 $ 0.25 $ 0.20
1995 <F1>
Revenues $ 43,885 $ 48,004 $ 49,961
Operating profit 8,444 9,398 10,379
Net income 4,512 4,914 4,884
Net income per common share <F2> $ 0.21 $ 0.23 $ 0.23
________________________
<FN>
<F1> There were no dividends paid in 1996 or 1995.
<F2> Net income per share calculations for each quarter are based on the weighted average
number of common stock and common stock equivalents outstanding during the respective
quarters. Accordingly, the sum of the quarters does not equal the full year income
per share for 1995.
</FN>
</TABLE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED) (Continued)
Fourth
(In thousands except per share data) Quarter Total
1996 <F1>
<S> <C> <C>
Revenues $ 56,494 $ 219,581
Operating profit 7,345 37,994
Net income 4,299 19,366
Net income per common share <F2> $ 0.20 $ 0.90
1995 <F1>
Revenues $ 51,108 $ 192,958
Operating profit 9,337 37,558
Net income 4,435 18,745
Net income per common share <F2> $ 0.21 $ 0.87
________________________
<FN>
<F1> There were no dividends paid in 1996 or 1995.
<F2> Net income per share calculations for each quarter are based on the weighted average
number of common stock and common stock equivalents outstanding during the respective
quarters. Accordingly, the sum of the quarters does not equal the full year income
per share for 1995.
</FN>
</TABLE>
25
<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, 1996 and 1995 and the related
consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended
December 31, 1996. These financial statements and the schedules
referred to below are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
financial statements and schedules 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,
1996 and 1995, and the results of their operations and their cash
flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion
on the basic financial statements taken as a whole. The
financial statement schedules listed in Item 14 are the
responsibility of the Company's management and are presented for
purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial
statements. These schedules have been subjected to the auditing
procedures applied in the audits of the basic financial
statements and, in our opinion, fairly state in all material
respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
February 7, 1997
26
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
1996 1995
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 10,623,094 $ 19,992,695
Accounts receivable, net 8,690,105 4,313,442
Federal income taxes receivable 1,147,106 190,914
Inventories 3,871,345 1,794,850
Prepaid expenses and other current assets 5,534,895 4,638,090
Total current assets 29,866,545 30,929,991
Property and equipment:
Land and improvements 51,311,851 37,509,960
Building and improvements 196,918,053 192,818,896
Equipment, furniture and improvements 72,052,458 68,500,267
Less: accumulated depreciation (60,501,211) (46,707,850)
259,781,151 252,121,273
Construction in progress 190,210,277 17,173,483
Net property and equipment 449,991,428 269,294,756
Other assets, net 14,691,613 8,566,847
$ 494,549,586 $ 308,791,594
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 352,239 $ 25,252
Accounts payable 5,854,830 4,562,132
Accrued expenses 11,967,407 9,136,226
Accounts payable - related party 19,604,470 6,641,506
Accrued interest 7,072,067 4,726,915
Total current liabilities 44,851,013 25,092,031
Non-current liabilities:
Long-term debt, less current maturities 253,949,283 110,176,765
Deferred income taxes 13,874,060 10,634,898
Total non-current liabilities 267,823,343 120,811,663
Total liabilities 312,674,356 145,903,694
Stockholders' equity:
Common stock, $0.01 par value;
100,000,000 shares authorized;
21,170,441 and 21,139,146 shares
issued and outstanding 211,705 211,392
Additional paid-in capital 113,140,798 113,520,158
Retained earnings 68,522,727 49,156,350
Total stockholders' equity 181,875,230 162,887,900
$ 494,549,586 $ 308,791,594
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Year Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Revenues:
Casino $ 112,458,824 $ 105,546,531 $ 87,164,738
Room 41,346,275 33,826,095 19,261,477
Food and beverage 70,789,839 60,009,994 47,648,778
Other 15,369,085 12,386,275 7,235,891
Less casino promotional allowances (20,382,531) (18,810,726) (14,886,794)
219,581,492 192,958,169 146,424,090
Expenses:
Casino 56,825,539 48,071,953 38,696,281
Room 13,134,549 10,413,883 6,631,787
Food and beverage 54,899,850 48,257,881 38,795,127
Other 7,496,518 6,646,950 4,959,250
Selling, general and administrative 31,610,710 27,777,901 20,550,142
Depreciation and amortization 17,620,555 14,231,307 10,863,844
181,587,721 155,399,875 120,496,431
Operating profit 37,993,771 37,558,294 25,927,659
Other income (expense):
Interest expense (8,215,285) (8,105,680) (1,923,237)
Other income - - 1,140,010
(8,215,285) (8,105,680) (783,227)
Income before income tax provision 29,778,486 29,452,614 25,144,432
Income tax provision (10,412,109) (10,707,135) (9,178,023)
Net income $ 19,366,377 $ 18,745,479 $ 15,966,409
Earnings per common share:
Primary:
Net income $ 0.90 $ 0.87 $ 0.74
Weighted average number of common
shares outstanding 21,528,006 21,591,325 21,720,121
Fully diluted:
Net income $ 0.90 $ 0.87 $ 0.74
Weighted average number of common
shares outstanding 21,533,857 21,592,769 21,720,381
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock
Number
Of Shares Amount
<S> <C> <C>
Balance, December 31, 1993 21,147,796 $ 211,478
Tax benefit of stock options exercised
Exercise of stock options 223,550 2,236
Net income for the year
Compensation expense for stock options
granted in 1993
Balance, December 31, 1994 21,371,346 213,714
Tax benefit of stock options exercised
Exercise of stock options 198,300 1,983
Repurchase of common stock (430,500) (4,305)
Common stock offering costs
Net income for the year
Compensation expense for stock options
granted in 1993
Balance, December 31, 1995 21,139,146 211,392
Tax benefit of stock options exercised
Exercise of stock options 175,795 1,758
Repurchase of common stock (144,500) (1,445)
Net income for the year
Compensation expense for stock options
granted in 1993
Balance, December 31, 1996 21,170,441 $ 211,705
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Continued)
Additional Total
Paid-In Retained Stockholders'
Capital Earnings Equity
<S> <C> <C> <C>
Balance, December 31, 1993 $ 115,182,541 $ 14,444,462 $ 129,838,481
Tax benefit of stock options exercised 886,132 886,132
Exercise of stock options 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 117,214,582 30,410,871 147,839,167
Tax benefit of stock options exercised 632,601 632,601
Exercise of stock options 965,467 967,450
Repurchase of common stock (5,381,920) (5,386,225)
Common stock offering costs 1,801 1,801
Net income for the year 18,745,479 18,745,479
Compensation expense for stock options
granted in 1993 87,627 87,627
Balance, December 31, 1995 113,520,158 49,156,350 162,887,900
Tax benefit of stock options exercised 570,283 570,283
Exercise of stock options 1,161,152 1,162,910
Repurchase of common stock (2,219,155) (2,220,600)
Net income for the year 19,366,377 19,366,377
Compensation expense for stock options
granted in 1993 108,360 108,360
Balance, December 31, 1996 $ 113,140,798 $ 68,522,727 $ 181,875,230
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Year Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 19,366,377 $ 18,745,479 $ 15,966,409
Adjustments to reconcile net income to net
cash provided by operating activities:
Compensation expense recognized from
stock option grant 108,360 87,627 141,975
Depreciation and amortization 17,620,555 14,231,307 10,863,844
Provision for uncollectible accounts 292,138 1,002,463 512,999
Deferred income taxes 2,198,017 3,122,621 1,693,101
(Increase) decrease in assets:
Accounts receivable (4,668,801) (2,026,109) (790,677)
Inventories (2,076,495) (416,252) (510,231)
Prepaid expenses and other current assets (1,106,609) 659,627 (827,476)
Phase V pre-opening costs (5,152,980) - -
Other, net (1,158,860) (843,335) (2,881,750)
Increase (decrease) in liabilities:
Accounts payable 1,292,699 2,136,487 (522,443)
Accrued federal income tax - - 546,142
Accrued expenses 2,831,182 1,305,520 1,306,086
Accrued interest 2,345,152 4,375,051 297,896
Net cash provided by operating activities 31,890,735 42,380,486 25,795,875
Cash flows from investing activities:
Purchase of land and improvements (13,522,603) (12,781,239) -
Purchase of equipment, furniture and
improvements (169,539,111) (63,326,652) (66,053,542)
Net cash used in investing activities (183,061,714) (76,107,891) (66,053,542)
Cash flows from financing activities:
Proceeds from borrowings 143,000,000 10,000,000 60,014,175
Net proceeds from issuance of senior
subordinated notes - 96,750,244 -
Net proceeds from common stock issuance 1,162,910 969,251 1,022,700
Costs paid in connection with prior common stock
offering and stock exchange rights - - (119,529)
Payments on notes and loans payable (140,932) (125,039,428) (18,358)
Repurchase of common stock (2,220,600) (5,386,225) -
Net cash provided by (used in) financing activities 141,801,378 (22,706,158) 60,898,988
Net increase (decrease) in cash and cash equivalents (9,369,601) (56,433,563) 20,641,321
Cash and cash equivalents, beginning of year 19,992,695 76,426,258 55,784,937
Cash and cash equivalents, end of year $ 10,623,094 $ 19,992,695 $ 76,426,258
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
30
<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., a Nevada corporation, and its
wholly owned subsidiaries, each of which is a Nevada
corporation, 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.);
Rio Leasing, Inc. and Rio Properties' wholly owned
subsidiaries, Cinderlane, Inc. and HLG, Inc.
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.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results
could differ from these estimates.
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 during the
years ended December 31, 1996, 1995, and 1994 was $8.7
million, $0.9 million and $0.6 million, respectively.
CASH AND CASH EQUIVALENTS
The Company classifies as cash equivalents all highly liquid
debt instruments with a maturity of three months or less
when purchased. Cash equivalents are carried at cost which
approximates fair value.
PROPERTY AND EQUIPMENT
Land and improvements, building and improvements, and
equipment, furniture and improvements are stated at cost.
Approximately $23.8 million has been invested in land and
improvements immediately adjacent to the Rio which may be
developed at some time in the future.
31
<PAGE>
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.
PREOPENING COSTS
Preopening costs consist principally of direct incremental
personnel costs and other associated expenses. These costs
are capitalized prior to the opening of the specific project
and are charged to expense at the commencement of the
operations. At December 31, 1996, preopening costs included
in noncurrent assets on the consolidated balance sheet were
$5.2 million.
IMPAIRMENT
Management reviews existing information and analyses of the
Company and its operations as well as indicators 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 operating results,
trends 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 asset
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 operations in
the amount of the impairment. Impairment is measured as any
deficiency between estimated discounted future cash flows
generated by the fixed assets and 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>
For the Year Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Room $1,808,138 $1,940,936 $1,273,154
Food and beverage 9,429,800 9,020,152 7,823,819
Other operating expenses 206,163 104,921 44,888
$11,444,101 $11,066,009 $9,141,861
</TABLE>
32
<PAGE>
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 was 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, has been classified as cash flows from operating
activities on the consolidated statement of cash flows.
The premiums paid for the interest rate cap agreement 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
consolidated balance sheet. Accounts receivable under the
agreements are accrued as a reduction of interest expense.
Amounts payable under the interest rate swap agreement would
have been 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.
2. CASH AND CASH EQUIVALENTS
Cash and cash equivalents at December 31, 1996 and 1995
include approximately $3 million and $10 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>
For the Year Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Cash payments made for interest (net of
amounts capitalized) $4,773,537 $3,904,540 $1,919,556
Cash payments made for income taxes $8,600,000 $7,100,000 $6,240,000
Non-cash financing and investing activities:
Purchase of property and equipment
financed through payables $19,604,470 $6,556,126 $10,026,210
Purchase of property and equipment
through assumption of long-term debt $140,435 $62,042 $ - - -
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
For the Year Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Tax benefit arising from exercise of
stock options under the Company's
Non-Statutory Stock Option Plan $570,283 $632,601 $886,132
</TABLE>
4. ACCOUNTS RECEIVABLE
Components of accounts receivable are as follows:
<TABLE>
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
Casino $6,318,124 $3,267,244
Hotel 3,244,388 1,757,640
Other 244,423 113,250
9,806,935 5,138,134
Less allowance for doubtful accounts (1,116,830) (824,692)
$8,690,105 $4,313,442
</TABLE>
5. ACCRUED EXPENSES
Components of accrued expenses are as follows:
<TABLE>
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
Accrued salaries, wages and
related benefits $5,615,310 $4,065,736
Progressive slot machines and
other gaming accruals 2,862,652 2,532,964
Accrued gaming taxes 1,646,333 1,714,232
Other accrued liabilities 1,843,112 823,294
$11,967,407 $9,136,226
</TABLE>
6. LONG-TERM DEBT (SEE NOTE 11: SUBSEQUENT EVENT)
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
Rio Bank Loan, originally a
$65 million revolving credit
facility, which was amended to
be a $200 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 Rio
Properties' real property,
equipment and improvements. $153,000,000 $ 10,000,000
10 5/8% Senior Subordinated
Notes, interest only payable
semi-annually; principal due
July 15, 2005. 100,000,000 100,000,000
Other 1,301,522 202,017
254,301,522 110,202,017
Less current maturities (352,239) (25,252)
$253,949,283 $110,176,765
</TABLE>
The prime interest rate quoted by the Company's primary
lenders at December 31, 1996 and 1995 was 8.25% and 8.50%,
respectively.
34
<PAGE>
At December 31, 1996, the three month Eurodollar Rate was
5.5625%. The margin on the Company's Eurodollar Rate
borrowings at December 31, 1996 was 2.50%.
The Rio Bank Loan was originally entered into on July 15,
1993 in the amount of $65 million with a syndicate of banks
led by Bank of America National Trust Savings and
Association ("Bank of America NT&SA"). As a result of
certain amendments, the Rio Bank Loan was increased in
varied increments to $200 million in June 1996. As amended,
the Rio Bank Loan is a secured reducing revolving credit
facility to be used (a) to refinance the pre-amendment Rio
Bank Loan, (b) to finance the Phase V Expansion, (c) to
finance the acquisition of land adjacent to the Rio for up
to $35 million, and (d) for general corporate purposes.
The Rio Bank Loan matures on June 30, 2001 and bears
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 the "Funded Debt to EBITDA
Ratio" (as defined) of Rio Properties. The "LIBOR Spread"
is the amount in excess of the applicable LIBOR rate which
is the London Interbank Offer Rate established in the London
interbank market. 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
NT&SA or 0.50% per annum above the latest Federal Funds
rate. The Rio Bank Loan also provides for an unused
facility fee ranging from 31.25 basis points to 50.0 basis
points depending upon the same Funded Debt to EBITDA ratio
schedule utilized for the interest rate. (A basis point is
one one-hundredth 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, a $7.5 million reduction at the end of
each quarter during 1998, a $10.0 million reduction at the
end of each quarter during 1999, a $12.5 million reduction
at the end of each quarter during 2000, and a $35 million
reduction at March 31, 2001 and maturity at June 30, 2001.
The Rio Bank Loan includes certain covenants that, among
other things, restrict the Company's ability to pay
dividends and make certain other restricted payments; incur
additional indebtedness; grant liens, other than permitted
liens; and sell material assets. The Rio Bank Loan also
requires the Company to maintain certain financial ratios,
including interest coverage and leverage ratios, and not to
exceed certain fixed ratios of Senior Indebtedness to
earnings before interest expense, income taxes, depreciation
and amortization and extraordinary items. The Rio Bank Loan
further limits capital expenditures without consent of the
lender.
The 10 5/8% Senior Subordinated Notes (the "10 5/8% Notes")
are unconditionally guaranteed on a senior subordinated
basis by Rio Properties. The 10 5/8% Notes are subordinated
in right of payment to all existing and future Senior
Indebtedness (as defined in the indenture, the "Indenture")
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 10 5/8% 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. Upon a change in control of the Company (as
defined in the Indenture), each holder of 10 5/8% Notes will
have the right to require the Company to repurchase all or
part of such holder's 10 5/8% 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
Indenture contains certain covenants that, among other
things, limit the ability of the Company and its Restricted
Subsidiaries (as defined in the Indenture) to incur
additional indebtedness, pay dividends or make other
distributions, make investments, repurchase subordinated
obligations or capital stock, create
35
<PAGE>
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.
To reduce the risks from interest rate fluctuations, the
Company 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 its expiration on 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
provided for quarterly payments to the Company in the event
that three-month LIBOR exceeded 7% on any quarterly reset
date. The Company is exposed to credit risks in the event
of non-performance by the counterparty. At December 31,
1996, the potential maximum credit risk amounted to
$199,000, which is the carrying value of the unamortized
premium. However, the Company does not anticipate non-
performance by the counterparty. The counterparty under
these agreements is Bank of America NT&SA, the lead bank in
the syndicate participating in the Rio Bank Loan.
Management believes that the financial resources of Bank of
America NT&SA and its competitive position within the
national banking industry significantly reduce the chances
of non-performance under the interest rate cap agreement.
At December 31, 1996 the interest rate cap agreement had a
negligible fair market value. The estimated fair market
value of the Company's 10 5/8% Notes at December 31, 1996
was approximately $106 million, versus its book value of
$100 million. The estimated fair market value is based on
the quoted market price on that date.
As a result of entering into interest rate swap agreements
and cap agreements, the Company has recognized interest
expense of $208,859, $18,638, and $83,833 for the years
ended December 31, 1996, 1995 and 1994, respectively. The
impact of these hedging activities on the Company's weighted
average borrowing rate was an increase of approximately
0.22%, 0.03% and 0.26% for the years ended December 31,
1996, 1995 and 1994, respectively.
For the years ended December 31, 1996, 1995 and 1994, there
were no deferred gains or losses relating to terminated
interest rate swap and interest rate cap agreements.
The revolving credit feature of the Rio Bank Loan allows the
Company to pay down and reborrow principal under the
revolving credit facility as the Company deems appropriate.
The Company borrowed $10 million on December 29, 1995 and
repaid $9 million on January 2, 1996 under the terms of the
Rio Bank Loan. The Company had $47 million and $165 million
available under the Rio Bank Loan at December 31, 1996 and
1995, respectively.
As of December 31, 1996, annual maturities of notes and
loans payable are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
<S> <C>
December 31, 1997 $ 352,239
December 31, 1998 371,331
December 31, 1999 43,264,413
December 31, 2000 50,046,144
December 31, 2001 60,047,317
Thereafter 100,220,078
$254,301,522
</TABLE>
36
<PAGE>
The following assets collateralize bank loans payable:
<TABLE>
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
Building and improvements $196,918,053 $192,818,896
Equipment, furniture and
improvements 72,052,458 68,500,267
Land and improvements 35,345,485 33,676,354
Construction in progress 190,210,277 17,173,483
$494,526,273 $312,169,000
</TABLE>
7. INCOME TAXES
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
For the Year Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Current $8,214,092 $7,681,015 $6,643,993
Deferred 2,198,017 3,026,120 2,534,030
$10,412,109 $10,707,135 $9,178,023
</TABLE>
The following schedule reconciles the Company's effective
tax rate to the statutory rate:
<TABLE>
<CAPTION>
For the Year Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Statutory rate 35.0% 35.0% 35.0%
Depreciation on premium allocated
in subsidiary partnership exchange 0.2% 0.4% 0.5%
Disallowance for tax purposes of
certain meals, travel and
entertainment expenses 0.2% 1.5% 1.2%
Other (0.4)% (0.5)% (0.2)%
Effective rate 35.0% 36.4% 36.5%
</TABLE>
During 1994, the Company utilized all remaining alternative
minimum tax credit carryforwards.
The Company's deferred tax assets (liabilities) at December
31, 1996 consisted of the following:
<TABLE>
<CAPTION>
Current Non-Current
<S> <C> <C>
Depreciation and amortization $ --- $(11,539,037)
Deferred employee benefits 581,000 ---
Bad debt expense 390,890 ---
Preopening costs - Phase V
Expansion --- (1,275,043)
Other deferred tax items, net 728,019 (1,059,980)
$1,699,909 $(13,874,060)
</TABLE>
The Company's deferred tax assets (liabilities) at
December 31, 1995 consisted of the following:
<TABLE>
<CAPTION>
Current Non-Current
<S> <C> <C>
Depreciation and amortization $ --- $(11,399,852)
Deferred employee benefits 370,122 ---
Bad debt expense 288,642 ---
Other deferred tax assets, net --- 764,954
$658,764 $(10,634,898)
</TABLE>
37
<PAGE>
The current portion of the Company's net deferred tax assets
is included on the consolidated balance sheets 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.
8. COMMITMENTS AND CONTINGENCIES
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 $376,736, $278,835,
and $215,039 have been authorized and charged to income for
the years ended December 31, 1996, 1995, and 1994,
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 1996, the Company issued 175,795 shares of Common
Stock at exercise prices ranging from $3.00 per share to
$15.63 per share pursuant to stock options previously
granted under the Company's Non-Statutory Stock Option Plan
("NSOP").
During 1996, the Company repurchased 144,500 shares of
Common Stock from time to time in the open market at a total
cost of $2.2 million. The repurchased shares of Common
Stock were retired.
During 1995, the Company issued 198,300 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.
During 1995, the Company repurchased 430,500 shares of
Common Stock from time to time in the open market at a total
cost of $5.4 million. The repurchased 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.
STOCK OPTIONS
The Company has various stock option plans under which
options may be granted to officers, outside directors,
employees, agents or independent contractors of the Company.
The options granted typically vest ratably over 5 years,
with an expiration 10 years from date of issuance.
38
<PAGE>
<TABLE>
<CAPTION>
For the Year Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Options outstanding, beginning of year 1,853,850 1,999,050 1,957,800
Granted 828,000 294,000 337,500
Exercised (175,795) (198,300) (223,550)
Forfeited (116,500) (240,900) (72,700)
Options outstanding, end of year 2,389,555 1,853,850 1,999,050
Options available for grant at end of year 1,484,300 259,400 212,500
Options exercisable at end of year 996,755 894,717 586,050
Average exercise price of options
exercised during the year $ 6.62 $ 5.21 $ 4.57
Average exercise price of options
outstanding at end of year $13.59 $10.63 $ 7.04
Average exercise price of options
granted during the year $15.43 $13.01 $12.56
Average exercise price of options
forfeited during the year $14.04 $12.43 $12.33
</TABLE>
The Company has granted 2,879,500 options at exercise prices
ranging from $3.00 to $15.625 per share to key officers and
employees under the Company's NSOP. As of December 31,
1996, 870,045 options had been exercised and 462,300 options
had been forfeited, resulting in 1,547,155 options
outstanding and 227,300 options available to be granted
under the NSOP.
Under the Directors Stock Option Plan, as amended, 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 December 31, 1996, 123,000 options had
been granted at exercise prices ranging from $3.00 per share
to $16.625 per share, 30,000 options had been exercised and
22,000 options had been forfeited, resulting in 71,000
options outstanding and 99,000 options available to be
granted.
Under the 1995 Long-Term Incentive Plan, options to purchase
up to 2,000,000 shares of the Company's common stock may be
granted to executive officers, key employees, and outside
consultants of the Company. The options exercise price is
equal to the last reported sale price of the common stock on
the date of the grant. As of December 31, 1996, 850,000
options had been granted at exercise prices ranging from
$15.50 to $16.75 per share. A total of 8,000 options had
been forfeited, resulting in 842,000 options outstanding
and 1,158,000 options available to be granted.
The Company applies APB Opinion No. 25 and related
interpretations in accounting for the plans. Accordingly,
no compensation expense has been recognized for the stock
options. FASB Statement 123 "Accounting for Stock-Based
Compensation" ("SFAS 123") was issued by the FASB in 1995
and, if fully adopted, changes the methods for recognition
of cost on plans similar to those of the Company. Had
compensation cost for the Company's stock-based compensation
plans been determined based on the fair market value of
options on the dates of grant in 1996 and 1995 using the
Black-Scholes option-pricing model with the following
assumptions: (i) no dividends, (ii) expected volatility of
37% for both years, (iii) risk free interest rate of 6.06%
and 5.68% for 1996 and 1995, respectively, (iv) and expected
lives of four years, the effect on net income and earnings
per share would be as follows:
39
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995
<S> <C> <C>
Net income - As reported $19,366,377 $18,745,479
- Proforma $18,286,839 $18,692,445
Primary Earnings per share - As reported $0.90 $0.87
- Proforma $0.86 $0.87
Fully diluted EPS - As reported $0.90 $0.87
- Proforma $0.86 $0.87
</TABLE>
The weighted average fair market value of options granted
in 1996 and 1995 were $2.49 and $4.83, respectively.
10. RELATED PARTY TRANSACTIONS
The Company contracted with two affiliates of the Company's
largest stockholder for the design and construction of a 41-
story hotel tower containing approximately 1,000 suites (the
"Phase V Expansion") for a total of approximately $200.0
million. As of December 31, 1996, the Company had
capitalized $174.3 million in connection with these
contracts. As of December 31, 1996, $19.4 million is
included in current liabilities on the Company's consolidated
balance sheet in connection with these construction and
design contracts.
The Company contracted with two affiliates of the Company's
largest stockholder for the design and construction of three
previous expansion projects, the 437 new suite Eastside
Expansion for a total of $57.6 million, the 549 new suite
Phase III Expansion for a total of $64.2 million, and the
141 new suite Phase IV Expansion for a total of $18.8
million. Each of these expansions included the addition of
new public and back-of-the-house areas and improvements.
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.
An affiliate of the Company's largest stockholder provided
real estate brokerage services to the Company in connection
with the purchase of the 31 acres adjacent to the Rio and
the acquisition of the options to purchase an additional
seven acres. Fees paid in connection with these property
acquisitions, including reimbursement of expenses, were
$999,910 and $878,428 for the years ended December 31, 1996
and 1995, respectively. Nominal amounts were paid by the
Company to the affiliate for similar purposes during 1994.
Expense reimbursements were generally reimbursed at the
affiliate's cost, and real estate brokerage commissions are
believed to be on terms at least as favorable as would have
been obtained from non-affiliated parties.
Two director/officers of the Company are associated with
affiliated entities as noted above which render various
architectural and construction services for the Company.
The Company paid these entities, in the aggregate,
approximately $147.9 million, $51.0 million, and $50.4
million during the years ended December 31, 1996, 1995, and
1994, respectively, for their services.
40
<PAGE>
Entities in which a director of the Company is the principal
stockholder and the executive officer received commissions
from the Company totaling approximately $122,000, $159,000
and $125,000 for the years ended December 31, 1996, 1995,
and 1994, respectively, arising out of the acquisition
of various insurance coverages 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. SUBSEQUENT EVENT
On February 4, 1997, the Company entered into an agreement
with Salomon Brothers Inc and BancAmerica Securities, Inc.
(the "Initial Purchasers") for the sale by the Company of
$125 million in principal amount of the Company's 9 1/2%
Senior Subordinated Notes Due 2007 (the "9 1/2% Notes").
The 9 1/2% Notes were purchased by the Initial Purchasers
for resale to qualified institutional investors. The net
proceeds from the sale of the 9 1/2% Notes (approximately
$121.5 million after the deduction of a 2.75% discount to
the Initial Purchasers and offering expenses of
approximately $0.1 million), were used to reduce amounts
outstanding under the Rio Bank Loan, thereby increasing the
amount available under the Rio Bank Loan by the same amount.
Pursuant to a registration agreement between the Company and
the Initial Purchasers, the Company will register on Form
S-4 under the Securities Act of 1933 $125 million principal
amount of 9 1/2% Senior Subordinated Notes Due 2007 (the
"New Notes") which will be exchanged for the 9 1/2% Notes
(the 9 1/2% Notes and the New Notes are collectively
referred to as the "Subordinated Notes").
The Subordinated Notes were issued under an indenture (the
"New Indenture") dated February 11, 1997 among the Company,
Rio Properties and IBJ Schroder Bank & Trust Company, as
trustee. The following summary of certain provisions of the
New Indenture does not purport to be complete and is subject
to the provisions of the New Indenture and the Subordinated
Notes. Capitalized terms not otherwise defined have the
same meanings assigned to them in the New Indenture.
The Subordinated Notes mature on April 15, 2007. Interest
payment dates under the Subordinated Notes are April 15 and
October 15, commencing April 15, 1997. Together with the
10 5/8% Notes, the Subordinated Notes are unconditionally
guaranteed (the "Rio Guarantee") on a senior subordinated
basis by Rio Properties. The Subordinated Notes are
subordinated in right of payment to all existing and future
Senior Indebtedness (as defined in the New Indenture) 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 (as defined in the
New Indenture) of Rio Properties and is structurally
subordinated to all existing and future indebtedness and
other liabilities (including trade payables) of Rio
Properties' subsidiaries.
The Subordinated Notes may be redeemed at the option of the
Company, in whole or in part, at any time on or after April
15, 2002, at the redemption prices set forth in the New
Indenture, plus accrued and unpaid interest, if any, through
the redemption date. The Subordinated Notes will be
redeemed from any holder or beneficial owner of the
Subordinated 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
New Indenture), each holder of Subordinated Notes will have
the right to require the Company to repurchase all or part
of such holder's Subordinated Notes at a price equal to 101%
of the aggregate principal amount thereof, plus accrued
41
<PAGE>
and unpaid interest, if any, to the date of repurchase.
The Company's obligation to repurchase the Subordinated
Notes is guaranteed on a senior subordinated basis by Rio
Properties. The New Indenture contains certain covenants
that, among other things, limit the ability of the Company
and its Restricted Subsidiaries (as defined in the New
Indenture) 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.
12. DEBT GUARANTEE
Summarized financial information is provided below for Rio
Properties, the Company's principal wholly-owned operating
subsidiary, as sole guarantor to the Company's $100.0
million 10 5/8% Senior Subordinated Notes Due 2005 and the
$125.0 million 9 1/2% Senior Subordinated Notes due 2007
which are pari passu under the guarantee (see Footnote
11 - Subsequent Event). The two Subordinated Note issues
are fully and unconditionally guaranteed by Rio Properties
and are subordinated to all existing and future indebtedness
and other liabilities (including trade payables) of the
Company's subsidiaries.
Summarized financial statements of Rio Properties have not
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 Company's operations or assets other than its
investment in its subsidiaries are inconsequential. The
difference in net equity between the Company and Rio
Properties 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>
As of and for the Year Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Current assets $30,139,122 $29,995,415 $85,120,465
Non-current assets 448,469,956 262,320,009 199,788,372
Current liabilities 56,301,870 33,216,257 44,662,313
Non-current liabilities 253,949,282 110,176,765 110,146,869
Revenues 219,577,608 192,537,954 146,299,304
Operating profit 37,959,885 37,138,205 25,726,349
Income before income taxes 29,744,600 29,451,596 23,925,361
Net Income 19,327,165 18,733,318 15,174,014
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
42
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
This information is incorporated by reference from the
Company's Proxy Statement to be filed with the Commission in
connection with the Company's annual meeting of stockholders on
May 22, 1997.
ITEM 11. EXECUTIVE COMPENSATION
This information is incorporated by reference from the
Company's Proxy Statement to be filed with the Commission in
connection with the Company's annual meeting of stockholders on
May 22, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
This information is incorporated by reference from the
Company's Proxy Statement to be filed with the Commission in
connection with the Company's annual meeting of stockholders on
May 22, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information is incorporated by reference from the
Company's Proxy Statement to be filed with the Commission in
connection with the Company's annual meeting of stockholders on
May 22, 1997.
43
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) 1. FINANCIAL STATEMENTS
Included in Part II of this report:
Consolidated Balance Sheets at December 31,
1996 and December 31, 1995.
Consolidated Statements of Income for the
Years Ended December 31, 1996, 1995 and 1994.
Consolidated Statements of Stockholders'
Equity for the Years Ended December 31,
1996, 1995 and 1994.
Consolidated Statements of Cash Flows for
the Years Ended December 31, 1996, 1995 and
1994.
Notes to Consolidated Financial Statements
2. FINANCIAL STATEMENT SCHEDULES
Included in Part IV of this report:
Schedule III - Condensed Financial
Information of Registrant
Schedule VIII - Valuation and Qualifying
Accounts
Other schedules are omitted because of the
absence of conditions under which they are
required or because the required information
is given in the financial statements or notes
thereto.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K have been filed by the Company
during the quarter ended December 31, 1996.
44
<PAGE>
ITEM 14. EXHIBITS
NUMBER EXHIBIT DESCRIPTION
3.01 Amended and Restated Articles of Incorporation of Rio
Hotel & Casino, Inc. filed July 19, 1994, are
incorporated herein by reference from the Company's (SEC
File No. 0-13760) Report on Form 10-Q for the Quarter
Ended June 30, 1994, Part II, Item 6(a), Exhibit 4.01.
3.02 Amended and Restated Bylaws of Rio Hotel & Casino, Inc.,
certified March 20, 1997.
4.01 Specimen common stock certificate for the common stock of
Rio Hotel & Casino, Inc. is incorporated herein by
reference from the Company's (SEC File No. 333-869)
Registration Statement on Form S-3 filed on February 12,
1996, Part II, Item 15, Exhibit 4.03.
4.02 Agreement and Plan of Exchange by and between Rio Hotel &
Casino, Inc., a Nevada corporation, and Rio Properties,
Inc., a Nevada corporation, dated August 14, 1992, is
incorporated herein by reference from the Company's (SEC
File No. 33-51092) Registration Statement on Form S-3
filed on August 24, 1992, Part II, Item 16, Exhibit 2.01.
4.03 Form of Subscription and Exchange Agreement between Rio
Properties, Inc., MarCor Resorts, Inc., and subscriber is
incorporated herein by reference from the Company's (SEC
File No. 33-51092) Registration Statement on Form S-3
filed on August 24, 1992, Part II, Item 16, Exhibit 2.02.
4.04 Rio Hotel & Casino, Inc. Non-Statutory Stock Option Plan,
as amended September 5, 1991, as amended February 28,
1992 (to reflect change in Company name) and as amended
June 22, 1993, is incorporated herein by reference from
the Company's (SEC File No. 33-38752) Registration
Statement on Form S-8 filed on October 5, 1993, Part II,
Item 8, Exhibit 4.04.
4.05 Rio Hotel & Casino, Inc. Directors' Stock Option Plan As
Amended February 28, 1992 (to reflect change in Company
name only) is incorporated herein by reference from the
Company's (SEC File No. 2-88147) Report on Form 10-K for
the Year Ended December 31, 1991, Part IV, Item 14(c),
Exhibit 4.07.
4.06 Rio Suite Hotel & Casino Employee Retirement Savings Plan
Trust Agreement dated February 11, 1991; First Amendment
to the Rio Suite Hotel & Casino Employee Retirement
Savings Plan dated March 20, 1992, effective April 1,
1992; Second Amendment to the Rio Suite Hotel & Casino
Employee Retirement Savings Plan dated March 20, 1992,
effective April 1, 1992; Third Amendment to the Rio Suite
Hotel & Casino Employee Retirement Savings Plan dated
December 14, 1992, effective August 15, 1992, and Rio
Suite Hotel & Casino Employee Retirement Savings Plan,
Participant Loan Program dated March 19, 1992 are
incorporated herein by reference from the Company's (SEC
File No. 33-56860) Registration Statement on Form S-8
filed January 8, 1993, Part II, Item 8, Exhibit 4.11; Rio
Suite Hotel & Casino Employment Retirement Savings Plan
dated February 21, 1991 is incorporated herein by
reference from the Company's (SEC File No. 33-56860)
Registration Statement on Form S-8 filed February 3,
1993, Part II, Item 8, Exhibit 4.11; Fourth Amendment to
the Rio Suite Hotel & Casino Employee Retirement Savings
Plan dated April 30, 1993, effective July 1, 1993; Fifth
Amendment to the Rio Suite Hotel & Casino Employee
Retirement Savings Plan dated August 17, 1993, effective
July 1, 1993; Sixth Amendment to the Rio Suite Hotel
& Casino Employee Retirement Savings Plan dated
45
<PAGE>
October 27, 1993, effective October 25, 1993; Seventh
Amendment to the Rio Suite Hotel & Casino Employee
Retirement Savings Plan Trust Agreement dated and
effective December 16, 1993; and Eighth Amendment to the
Rio Suite Hotel & Casino Employee Retirement Savings Plan
dated May 3, 1994, effective May 1, 1994 are incorporated
herein by reference from the Company's (SEC File No.
0-13760) Report on Form 10-Q for the Quarter Ended June
30, 1994, Part II, Item 6(a), Exhibit 4.03; Ninth
Amendment to the Rio Suite Hotel & Casino Employee
Retirement Savings Plan dated August 26, 1994, effective
August 25, 1994; Tenth Amendment to the Rio Suite Hotel
& Casino Employee Retirement Savings Plan dated and
effective January 1, 1995; and Eleventh Amendment to
the Rio Suite Hotel & Casino Employee Retirement
Savings Plan dated and effective January 12, 1995 are
incorporated herein by reference from the Company's
(SEC File No. 0-13760) Report on Form 10-K for the Year
Ended December 31, 1994, Part IV, Item 14(c), Exhibit
4.08.
4.07 Rio Hotel & Casino, Inc. 1995 Long-Term Incentive Plan,
as amended March 20, 1997.
4.08 Credit Agreement among Bank of America National Trust and
Savings Association, as agent for itself and other
financial institutions, as Lenders, and Rio Properties,
Inc., as Borrower, dated July 15, 1993; Line A Note
executed by Rio Properties, Inc., as Borrower, in favor
of Bank of America National Trust and Savings
Association, in the amount of $9,692,307.70 dated July
15, 1993; Line A Note executed by Rio Properties, Inc.,
as Borrower, in favor of Bank of America Nevada, in the
amount of $3,230,769.23, dated July 15, 1993; Line A Note
executed by Rio Properties, Inc., as Borrower, in favor
of Societe Generale, in the amount of $6,461,538.46,
dated July 15, 1993; Line A Note executed by Rio
Properties, Inc., as Borrower, in favor of NBD Bank,
N.A., in the amount of $6,461,538.46, dated July 15,
1993; Line A Note executed by Rio Properties, Inc., as
Borrower, in favor of First Security Bank of Idaho, N.A.,
in the amount of $6,461,538.46, dated July 15, 1993; Line
A Note executed by Rio Properties, Inc., as Borrower, in
favor of First Interstate Bank of Nevada, N.A., in the
amount of $6,461,538.46, dated July 15, 1993; Line A Note
executed by Rio Properties, Inc., as Borrower, in favor
of U.S. Bank of Nevada, in the amount of $3,230,769.23,
dated July 15, 1993; Line B Note executed by Rio
Properties, Inc., as Borrower, in favor of Bank of
America National Trust and Savings Association, in the
amount of $5,307,692.30 dated July 15, 1993; Line B Note
executed by Rio Properties, Inc., as Borrower, in favor
of Bank of America Nevada, in the amount of
$1,769,230.77, dated July 15, 1993; Line B Note executed
by Rio Properties, Inc., as Borrower, in favor of First
Interstate Bank of Nevada, N.A., in the amount of
$3,538,461.54, dated July 15, 1993; Line B Note executed
by Rio Properties, Inc., as Borrower, in favor of First
Security Bank of Idaho, N.A., in the amount of
$3,538,461.54, dated July 15, 1993; Line B Note executed
by Rio Properties, Inc., as Borrower, in favor of NBD
Bank, N.A., in the amount of $3,538,461.54, dated July
15, 1993; Line B Note executed by Rio Properties, Inc.,
as Borrower, in favor of Societe Generale, in the amount
of $3,538,461.54, dated July 15, 1993; Line B Note
executed by Rio Properties, Inc., as Borrower, in favor
of U.S. Bank of Nevada, in the amount of $1,769,230.77,
dated July 15, 1993; Revolving Note executed by Rio
Properties, Inc., as Borrower, in favor of Bank of
America National Trust and Savings Association, in the
amount of $15,000,000, dated July 15, 1993; Revolving
Note executed by Rio Properties, Inc., as Borrower, in
favor of Bank of America Nevada, in the amount of
$5,000,000, dated July 15, 1993; Revolving Note
executed by Rio Properties, Inc., as Borrower, in favor
of First Interstate Bank of Nevada, N.A., in the amount
of $10,000,000, dated July 15, 1993; Revolving Note
executed by Rio Properties, Inc., as Borrower, in favor
of First Interstate Bank of Idaho, N.A., in the amount of
$10,000,000, dated July 15, 1993; Revolving Note executed
46
<PAGE>
by Rio Properties, Inc., as Borrower, in favor of NBD
Bank, N.A., in the amount of $10,000,000, dated July 15,
1993; Revolving Note executed by Rio Properties, Inc., as
Borrower, in favor of Societe Generale, in the amount of
$10,000,000, dated July 15, 1993; Revolving Note executed
by Rio Properties, Inc., as Borrower, in favor of U.S.
Bank of Nevada, in the amount of $5,000,000, dated July
15, 1993; Security Agreement executed by Rio Properties,
Inc., as Debtor, in favor of Bank of America National
Trust and Savings Association, as agent for itself and
other financial institutions, as Secured Party, dated
July 15, 1993; Construction Deed of Trust With Assignment
of Rents and Fixture Filing among Rio Properties, Inc.,
as Trustor, Equitable Deed Company, as Trustee, and Bank
of America National Trust and Savings Association, as
agent for itself and the other financial institutions, as
Beneficiary, dated July 15, 1993; Unsecured Indemnity
Agreement executed by Rio Properties, Inc., as
Indemnitor, in favor of Bank of America National Trust
and Savings Association, as agent for itself and other
financial institutions, dated July 15, 1993; Guaranty
executed by Rio Hotel & Casino, Inc., as Guarantor, in
favor of Bank of America National Trust and Savings
Association, as agent for itself and other financial
institutions, as Guaranteed Parties, dated July 15, 1993;
and, Parent Guarantor Security Agreement by Rio Hotel &
Casino, Inc., as Debtor, in favor of Bank of America
National Trust and Savings Association, as agent for
itself and other financial institutions, as Secured
Party, dated July 15, 1993 are incorporated by reference
from the Company's (SEC File No. 2-88147) Report on Form
8-K dated July 15, 1993, Item 7(c), Exhibit 28.01; First
Amendment to Credit Agreement dated as of October 25,
1993 and Second Amendment and Waiver to Credit Agreement
dated as of November 8, 1993 among Rio Properties, Inc.,
Bank of America National Trust and Savings Association,
Bank of America Nevada, First Interstate Bank of Nevada,
First Security Bank of Idaho, N.A., NBD Bank, N.A.,
Societe Generale, and U.S. Bank of Nevada are
incorporated by reference from the Company's (SEC File
No. 0-13760) Report on Form 10-K for the Year Ended
December 31, 1993, Part IV, Item 14(c), Exhibit 4.09;
Third Amendment to Credit Agreement dated as of April 15,
1994 among Rio Properties, Inc., Bank of America National
Trust and Savings Association, as Agent and as a Bank,
Bank of America, Nevada, First Interstate Bank of Nevada,
First Security Bank of Idaho, N.A, NBD Bank, N.A.,
Societe Generale, and U.S. Bank of Nevada; Memorandum of
Amendments to Credit Agreement and Amendment to
Construction Deed of Trust with Assignment of Rents and
Fixture Filing dated as of May 9, 1994 by Rio Properties,
Inc. and Bank of America National Trust and Savings
Association are incorporated herein by reference from the
Company's (SEC File No. 0-13760) Report on Form 10-Q for
the Quarter Ended June 30, 1994, Part II, Item 6(a),
Exhibit No. 4.02; and Fourth Amendment to Credit
Agreement among Rio Properties, Inc., as Borrower, and
Bank of America National Trust and Savings Association,
First Interstate Bank of Nevada, First Security Bank of
Idaho, N.A., NBD Bank, N.A., Societe Generale, Bank of
America, Nevada, U.S. Bank of Nevada, Bank of Scotland
and Midlantic Bank, N.A., as Lenders; and Second
Memorandum of Amendment to Credit Agreement and Amendment
to Construction Deed of Trust with Assignment of Rents
and Fixture Filing between Borrower and Bank of America
National Trust and Savings Association, as agent for
Lenders, dated December 16, 1994 are incorporated herein
by reference from the Company's (SEC File No. 0-13760)
Report on Form 8-K dated December 16, 1994, Item 7(c),
Exhibit 10.01; Fifth Amendment to Credit Agreement dated
as of March 20, 1995, among Rio Properties, Inc., Bank of
America National Trust and Savings Association, as Agent
and as a Bank, First Interstate Bank of Nevada, First
Security Bank of Idaho, N.A., NBD Bank, N.A., Societe
Generale, Bank of America Nevada, U.S. Bank of Nevada,
Bank of Scotland and Midlantic Bank, N.A., as Banks, is
incorporated herein by reference from the Company's (SEC
File No. 0-13760) Report on Form 10-K for the Year Ended
December 31, 1994, Part IV, Item 14(c), Exhibit 10.09;
Sixth Amendment to
47
<PAGE>
Credit Agreement dated as of July 31, 1995 among Rio
Properties, Inc., Bank of America National Trust and
Savings Association, as Agent and as a Bank, and First
Interstate Bank of Nevada, First Security Bank of Idaho,
N.A., NBD Bank, N.A., Societe Generale, Bank of America
Nevada, U.S. Bank of Nevada, Bank of Scotland, Midlantic
Bank, N.A., and Bank of Hawaii, as Banks is incorporated
herein by reference from the Company's (SEC File No.
0-13760) Report on Form 8-K dated September 15, 1995,
Item 7(c), Exhibit 4.01; Seventh Amendment to Credit
Agreement dated as of January 17, 1996 among Rio
Properties, Inc., Bank of America National Trust and
Savings Association, as Agent and as a Bank, and First
Interstate Bank of Nevada, First Security Bank of Idaho,
N.A., Societe Generale, Bank of America Nevada, U.S. Bank
of Nevada, Bank of Scotland, Midlantic Bank, N.A.,
and Bank of Hawaii, as Banks is incorporated herein by
reference from the Company's (SEC File No. 1-11569)
Report on Form 10-K for the Year Ended December 31, 1995,
Part IV, Item 14(c), Exhibit 4.08; Eighth Amendment to
Credit Agreement dated as of June 17, 1996 among Rio
Properties, Inc. and Bank of America National Trust and
Savings Association, as Agent, and Wells Fargo Bank
National Association, First Security Bank of Idaho,
N.A., NBD Bank, Societe Generale, Bank of America
Nevada, U.S. Bank of Nevada, Bank of Scotland,
Midlantic Bank, N.A., and Bank of Hawaii, as Banks,
is incorporated herein by reference from the Company's
(SEC File No. 1-11569) Report on Form 10-Q for the
Quarter Ended June 30, 1996, Item 6(a), Exhibit 10.01;
Ninth Amendment to Credit Agreement dated as of
January 13, 1997 among Rio Properties, Inc. and Rio
Leasing, Inc., and Bank of America National Trust &
Savings Association, as Agent and a Bank, and Wells
Fargo Bank National Association, First Security Bank
of Utah, N.A., NBD Bank, Societe Generale, U.S. Bank
of Nevada, Bank of Scotland, PNC Bank, National
Association, successor by merger to Midlantic Bank,
N.A. and Bank of Hawaii, as Banks; and Tenth
Amendment to Credit Agreement dated as of February
3, 1997 among Rio Properties, Inc. and Rio Leasing,
Inc., and Bank of America National Trust and Savings
Association, as Agent and a Bank, and Wells Fargo
Bank National Association, First Security Bank, N.A.,
NBD Bank, Societe Generale, U.S. Bank of Nevada,
Bank of Scotland, PNC Bank, National Association,
successor by merger to Midlantic Bank, N.A., and
Bank of Hawaii, as Banks.
4.09 Indenture dated as of July 21, 1995, among Rio Hotel &
Casino, Inc., Rio Properties, Inc. and IBJ Schroder Bank
& Trust Company for the Company's 10 5/8% Senior
Subordinated Notes Due 2005 is incorporated herein by
reference from the Company's (SEC File No. 0-13760)
Report on Form 8-K dated July 18, 1995, Item 7(c),
Exhibit 4.3.
4.10 Indenture dated as of February 11, 1997, among Rio Hotel
& Casino, Inc., Rio Properties, Inc. and IBJ Schroder
Bank & Trust Company for the Company's 9 1/2% Senior
Subordinated Notes Due 2007 is incorporated herein by
reference from the Company's (SEC File No. 0-13760)
Report on Form 8-K dated February 4, 1997, Item 7(c),
Exhibit 4.3.
4.11 Registration Agreement dated July 18, 1995 by Rio Hotel &
Casino, Inc. and accepted July 18, 1995 by Salomon
Brothers Inc and Montgomery Securities is incorporated
herein by reference from the Company's (SEC File No. 0-
13760) Report on Form 8-K dated July 18, 1995, Item 7(c),
Exhibit 4.2.
4.12 Registration Agreement dated February 4, 1997 by Rio
Hotel & Casino, Inc., Rio Properties, Inc. and accepted
February 4, 1997 by Salomon Brothers Inc and BancAmerica
Securities, Inc. is incorporated herein by reference from
the Company's (SEC File No. 0-13760) Report on Form 8-K
dated February 4, 1997, Item 7(c), Exhibit 4.2.
48
<PAGE>
4.13 Form of Letter of Transmittal to IBJ Schroder Bank &
Trust Company as Exchange Agent for exchange of 10 5/8%
Senior Subordinated Notes Due 2005 is incorporated herein
by reference from the Company's (SEC File No. 33-62163)
Registration Statement on Form S-4 filed August 28, 1995,
Part II, Item 21(a), Exhibit 4.14.
10.01 Agreement by and among MarCor Resorts Inc., Marnell
Corrao, Inc., Marnell Corrao Associates, Inc., MarCor
Partnership, The Anthony A. Marnell II Revocable Living
Trust dated June 16, 1982, Anthony A. Marnell II, Sandra
J. Marnell, Barrett Family Revocable Living Trust dated
December 18, 1981, James A. Barrett, Jr. and Maureen M.
Barrett dated February 22, 1989, is incorporated herein
by reference from the Company's (SEC File No. 0-13760)
Annual Report on Form 10-K for the Year Ended December
31, 1994, Part IV, Item 14(c), Exhibit 10.01; First
Amendment to Agreement dated October 25, 1993 by and
among Rio Hotel & Casino, Inc., and
Marnell Corrao, Inc., Marnell Corrao Associates, Inc.,
MarCor Partnership, Anthony A. Marnell II, Barrett Family
Revocable Living Trust dated December 18, 1981, James A.
Barrett, Jr. and Maureen M. Barrett incorporated herein
by reference from the Company's (SEC File No. 0-13760)
Report on Form 10-K for the Year Ended December 31, 1993,
Part IV, Item 14(c), Exhibit 10.01.
10.02 Interest Rate Swap Agreement dated as of July 28, 1993
between Rio Properties, Inc. and Bank of America National
Trust and Savings Association is incorporated herein by
reference from the Company's (SEC File No. 0-13760)
Report on Form 10-K for the Year Ended December 31, 1993,
Part IV, Item 14(c), Exhibit 10.11.
10.03 Architectural Agreement entered into as of February 25,
1994 between Rio Hotel & Casino, Inc., as Owner, and
Anthony A. Marnell II, Chartered, as Architect, is
incorporated herein by reference from the Company's (SEC
File No. 0-13760), Report on Form 10-K for the Year Ended
December 31, 1993, Part IV, Item 14(c), Exhibit 10.12.
10.04 Building Contract entered into as of February 25, 1994
between Marnell Corrao Associates, Inc., as General
Contractor, and Rio Properties, Inc., as Owner, is
incorporated herein by reference from the Company's (SEC
File No. 0-13760) Report on Form 10-K for the Year Ended
December 31, 1993, Part IV, Item 14(c), Exhibit 10.13.
10.05 Architectural Agreement entered into as of February 9,
1995 between Rio Hotel & Casino, Inc., as Owner, and
Anthony A. Marnell, Chartered, as Architect, is
incorporated herein by reference from the Company's (SEC
File No. 0-13760) Annual Report on Form 10-K for the Year
Ended December 31, 1994, Part IV, Item 14(c), Exhibit
10.08.
10.06 Building Contract entered into as of February 27, 1995
between Marnell Corrao Associates, Inc., as General
Contractor, and Rio Properties, Inc., as Owner, is
incorporated herein by reference from the Company's (SEC
File No. 0-13760) Annual Report on Form 10-K for the Year
Ended December 31, 1994, Part IV, Item 14(c), Exhibit
10.09.
10.07 Real Estate Purchase and Sale Agreement entered into as
of January 25, 1995 between Focus 2000, Inc., as Seller,
and Rio Properties, Inc., as Buyer, is incorporated
herein by reference from the Company's (SEC File No. 0-
13760) Annual Report on Form 10-K for the Year Ended
December 31, 1994, Part IV, Item 14(c), Exhibit 10.10.
49
<PAGE>
10.08 Exchange Agreement entered into as of January 6, 1995
between Allied Building Materials, Cinderlane, Inc., and
Rio Hotel & Casino, Inc. is incorporated herein by
reference from the Company's (SEC File No. 0-13760)
Annual Report on Form 10-K for the Year Ended December
31, 1994, Part IV, Item 14(c), Exhibit 10.11.
10.09 Letter Agreement regarding Rate Cap Transaction dated
August 11, 1994 between Bank of America National Trust
and Savings Association and Rio Properties, Inc. is
incorporated herein by reference from the Company's (SEC
File No. 0-13760) Annual Report on Form 10-K for the Year
Ended December 31, 1994, Part IV, Item 14(c), Exhibit
10.12.
10.10 Architectural Agreement entered into as of July 27, 1995
between Rio Hotel & Casino, Inc., as Owner, and Anthony
A. Marnell II, Chtd., as Architect, is incorporated
herein by reference from the Company's (SEC File No. 333
-869) Registration Statement on Form S-3, filed on
February 12, 1996, Part II, Item 16, Exhibit 10.10.
10.11 Building Contract entered into as of August 14, 1995 by
and between Marnell Corrao Associates, Inc., as General
Contractor, and Rio Properties, Inc., as Owner, is
incorporated herein by reference from the Company's (SEC
File No. 333-869) Registration Statement on Form S-3,
filed on February 12, 1996, Part II, Item 16, Exhibit
10.11.
10.12 Employment Agreement dated as of November 25, 1996
between Rio Hotel & Casino, Inc. and David P. Hanlon;
Employment Agreement dated as of March 7, 1997 between
Rio Hotel & Casino, Inc. and Ronald J. Radcliff;
Employment Agreement dated as of March 7, 1997 between
Rio Hotel & Casino, Inc. and I. Scott Bogatz.
21.01 List of the Company's subsidiaries is incorporated herein
by reference from the Company's (SEC File No. 333-23895)
Registration Statement on Form S-4, filed on March 24,
1997, Part II, Item 21(a), Exhibit 21.01.
23.01 Consent of Arthur Andersen LLP.
27.01 Financial Data Schedule.
50
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
December 31,
1996 1995
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 469,063 $ 85,885
Accounts receivable - 537
Accounts receivable from affiliates - -
Total current assets 469,063 86,422
Other assets:
Investments in subsidiaries 192,031,880 172,308,025
Other, net 3,140,906 2,570,623
195,172,786 174,878,648
$195,641,849 $174,965,070
LIABILITIES AND STOCKHOLDERS' EQUITY
Non-current liabilities due to subsidiaries $ 13,766,619 $ 12,077,170
Stockholders' equity
Common Stock, $0.01 par value;
100,000,000 shares authorized;
21,139,146 (1995) and 21,371,346 (1994)
shares issued and outstanding 211,705 211,392
Additional paid-in capital 113,140,798 113,520,158
Retained earnings 68,522,727 49,156,350
Total stockholders' equity 181,875,230 162,887,900
$195,641,849 $174,965,070
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
51
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
RIO HOTEL & CASINO, INC.
STATEMENT OF INCOME
For the Year Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Revenues
Interest Income $ 3,884 $ 1,144 $ 2,537
Other revenues - - 966,510
Subsidiary earnings 19,612,493 18,994,335 15,267,612
19,616,377 18,995,479 16,236,659
Costs and Expenses:
General and administrative 250,000 250,000 270,250
250,000 250,000 270,250
Net income $19,366,377 $18,745,479 $15,966,409
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
RIO HOTEL & CASINO, INC.
STATEMENT OF CASH FLOW
For the Year Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 18,745,479 $ 15,966,409 $ 10,649,392
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Earnings from subsidiary investments (18,994,335) (15,267,612) (10,592,688)
(Increase) decrease in assets:
Receivables 350 64,113 (79,821)
Prepaid expenses and other current assets - - 13,811
Due from (to) subsidiaries 4,715,730 (1,820,498) (1,077,493)
Other, net - - 3,719
Decrease in liabilities:
Accounts payable-trade - (25,000) (164,770)
Net cash provided by (used in) operating
activities 4,467,224 (1,082,588) (1,247,850)
Cash flows from investing activities:
Investments in subisidiaries - (14,390) (30,730,375)
Net cash used in investing activities - (14,390) (30,730,375)
Cash flows from financing activities:
Net proceeds from common stock issuance 969,251 1,022,700 32,506,200
Common stock offerings cost - (119,529) (456,821)
Repurchase of common stock (5,386,225) - -
Net cash used in (provided by) financing
activities (4,416,974) 903,171 32,049,379
Net increase (decrease) in cash and
cash equivalents 50,250 (193,807) 71,154
Cash and cash equivalents, beginning of period 35,635 229,442 158,288
Cash and cash equivalents, end of period $ 85,885 $ 35,635 $ 229,442
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
53
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
RIO HOTEL & CASINO, INC.
STATEMENT OF CASH FLOW
For the Year Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 19,366,377 $ 18,745,479 $ 15,966,409
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Earnings from subsidiary investments (19,612,493) (18,994,335) (15,267,612)
(Increase) decrease in assets:
Receivables 537 350 64,113
Prepaid expenses and other current assets - - -
Due from (to) subsidiaries 1,686,447 4,715,730 (1,820,498)
Other, net - - -
Decrease in liabilities:
Accounts payable-trade - - (25,000)
Net cash provided by (used in) operating
activities 1,440,868 4,467,224 (1,082,588)
Cash flows from investing activities:
Investments in subisidiaries - - (14,390)
Net cash used in investing activities - - (14,390)
Cash flows from financing activities:
Net proceeds from common stock issuance 1,162,910 969,251 1,022,700
Common stock offerings cost - - (119,529)
Repurchase of common stock (2,220,600) (5,386,225) -
Net cash used in (provided by) financing activities (1,057,690) (4,416,974) 903,171
Net increase (decrease) in cash and
cash equivalents 383,178 50,250 (193,807)
Cash and cash equivalents, beginning of period 85,885 35,635 229,442
Cash and cash equivalents, end of period $ 469,063 $ 85,885 $ 35,635
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
For the Three Years Ended December 31, 1996
<S> <C>
Balance, December 31, 1993 $ 379,363
Additions charged to income 512,999
Accounts written off, less recoveries (413,227)
Balance, December 31, 1994 479,135
Additions charged to income 1,002,463
Accounts written off, less recoveries (656,906)
Balance, December 31, 1995 824,692
Additions charged to income 1,070,813
Accounts written off, less recoveries (778,675)
Balance, December 31, 1996 $ 1,116,830
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
55
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
RIO HOTEL & CASINO, INC.
March 15, 1996 By: /s/ Ronald J. Radcliffe
Ronald J. Radcliffe,
Vice President, Treasurer
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Anthony A. Marnell II Chairman of the Board of Directors and Chief March 15, 1997
Anthony A. Marnell II Executive Officer (Principal Executive
Officer)
/s/ James A. Barrett, Jr. President and Director March 15, 1997
James A. Barrett, Jr.
/s/ David P. Hanlon Executive Vice President, Chief Operating March 15, 1997
David P. Hanlon Officer and Director
/s/ Ronald J. Radcliffe Vice President, Treasurer and Chief March 15, 1997
Ronald J. Radcliffe Financial Officer (Principal Financial
and Accounting Officer)
/s/ John A. Stuart Director March 15, 1997
John A. Stuart
/s/ Thomas Y. Hartley Director March 15, 1997
Thomas Y. Hartley
/s/ Peter M. Thomas Director March 15, 1997
Peter M. Thomas
</TABLE>
56
<PAGE>
EXHIBIT INDEX
NUMBER EXHIBIT DESCRIPTION PAGE
3.01 Amended and Restated Articles of Incorporation of Rio
Hotel & Casino, Inc. filed July 19, 1994, are
incorporated herein by reference from the Company's (SEC
File No. 0-13760) Report on Form 10-Q for the Quarter
Ended June 30, 1994, Part II, Item 6(a), Exhibit 4.01.
3.02 Amended and Restated Bylaws of Rio Hotel & Casino, Inc., 63
certified March 20, 1997.
4.01 Specimen common stock certificate for the common stock of
Rio Hotel & Casino, Inc. is incorporated herein by
reference from the Company's (SEC File No. 333-869)
Registration Statement on Form S-3 filed on February 12,
1996, Part II, Item 15, Exhibit 4.03.
4.02 Agreement and Plan of Exchange by and between Rio Hotel &
Casino, Inc., a Nevada corporation, and Rio Properties,
Inc., a Nevada corporation, dated August 14, 1992, is
incorporated herein by reference from the Company's (SEC
File No. 33-51092) Registration Statement on Form S-3
filed on August 24, 1992, Part II, Item 16, Exhibit 2.01.
4.03 Form of Subscription and Exchange Agreement between Rio
Properties, Inc., MarCor Resorts, Inc., and subscriber is
incorporated herein by reference from the Company's (SEC
File No. 33-51092) Registration Statement on Form S-3
filed on August 24, 1992, Part II, Item 16, Exhibit 2.02.
4.04 Rio Hotel & Casino, Inc. Non-Statutory Stock Option Plan,
as amended September 5, 1991, as amended February 28,
1992 (to reflect change in Company name) and as amended
June 22, 1993, is incorporated herein by reference from
the Company's (SEC File No. 33-38752) Registration
Statement on Form S-8 filed on October 5, 1993, Part II,
Item 8, Exhibit 4.04.
4.05 Rio Hotel & Casino, Inc. Directors' Stock Option Plan As
Amended February 28, 1992 (to reflect change in Company
name only) is incorporated herein by reference from the
Company's (SEC File No. 2-88147) Report on Form 10-K for
the Year Ended December 31, 1991, Part IV, Item 14(c),
Exhibit 4.07.
4.06 Rio Suite Hotel & Casino Employee Retirement Savings Plan
Trust Agreement dated February 11, 1991; First Amendment
to the Rio Suite Hotel & Casino Employee Retirement
Savings Plan dated March 20, 1992, effective April 1,
1992; Second Amendment to the Rio Suite Hotel & Casino
Employee Retirement Savings Plan dated March 20, 1992,
effective April 1, 1992; Third Amendment to the Rio Suite
Hotel & Casino Employee Retirement Savings Plan dated
December 14, 1992, effective August 15, 1992, and Rio
Suite Hotel & Casino Employee Retirement Savings Plan,
Participant Loan Program dated March 19, 1992 are
incorporated herein by reference from the Company's (SEC
File No. 33-56860) Registration Statement on Form S-8
filed January 8, 1993, Part II, Item 8, Exhibit 4.11; Rio
Suite Hotel & Casino Employment Retirement Savings Plan
dated February 21, 1991 is incorporated herein by
reference from the Company's (SEC File No. 33-56860)
Registration Statement on Form S-8 filed February 3,
1993, Part II, Item 8, Exhibit 4.11; Fourth Amendment to
the Rio Suite Hotel & Casino Employee Retirement Savings
Plan dated April 30, 1993, effective July 1, 1993; Fifth
Amendment to the Rio
57
<PAGE>
Suite Hotel & Casino Employee Retirement Savings
Plan dated August 17, 1993, effective July 1, 1993; Sixth
Amendment to the Rio Suite Hotel & Casino Employee
Retirement Savings Plan dated October 27, 1993, effective
October 25, 1993; Seventh Amendment to the Rio Suite
Hotel & Casino Employee Retirement Savings Plan
Trust Agreement dated and effective December
16, 1993; and Eighth Amendment to the Rio Suite Hotel
& Casino Employee Retirement Savings Plan dated May 3,
1994, effective May 1, 1994 are incorporated herein by
reference from the Company's (SEC File No. 0-13760) Report
on Form 10-Q for the Quarter Ended June 30, 1994, Part II,
Item 6(a), Exhibit 4.03; Ninth Amendment to the Rio Suite
Hotel & Casino Employee Retirement Savings Plan dated
August 26, 1994, effective August 25, 1994; Tenth
Amendment to the Rio Suite Hotel & Casino Employee
Retirement Savings Plan dated and effective January 1,
1995; and Eleventh Amendment to the Rio Suite Hotel
& Casino Employee Retirement Savings Plan dated and
effective January 12, 1995 are incorporated herein by
reference from the Company's (SEC File No. 0-13760)
Report on Form 10-K for the Year Ended December 31,
1994, Part IV, Item 14(c), Exhibit 4.08.
4.07 Rio Hotel & Casino, Inc. 1995 Long-Term Incentive Plan, 79
as amended March 20, 1997.
4.08 Credit Agreement among Bank of America National Trust and 89
Savings Association, as agent for itself and other
financial institutions, as Lenders, and Rio Properties,
Inc., as Borrower, dated July 15, 1993; Line A Note
executed by Rio Properties, Inc., as Borrower, in favor
of Bank of America National Trust and Savings
Association, in the amount of $9,692,307.70 dated July
15, 1993; Line A Note executed by Rio Properties, Inc.,
as Borrower, in favor of Bank of America Nevada, in the
amount of $3,230,769.23, dated July 15, 1993; Line A Note
executed by Rio Properties, Inc., as Borrower, in favor
of Societe Generale, in the amount of $6,461,538.46,
dated July 15, 1993; Line A Note executed by Rio
Properties, Inc., as Borrower, in favor of NBD Bank,
N.A., in the amount of $6,461,538.46, dated July 15,
1993; Line A Note executed by Rio Properties, Inc., as
Borrower, in favor of First Security Bank of Idaho, N.A.,
in the amount of $6,461,538.46, dated July 15, 1993; Line
A Note executed by Rio Properties, Inc., as Borrower, in
favor of First Interstate Bank of Nevada, N.A., in the
amount of $6,461,538.46, dated July 15, 1993; Line A Note
executed by Rio Properties, Inc., as Borrower, in favor
of U.S. Bank of Nevada, in the amount of $3,230,769.23,
dated July 15, 1993; Line B Note executed by Rio
Properties, Inc., as Borrower, in favor of Bank of
America National Trust and Savings Association, in the
amount of $5,307,692.30 dated July 15, 1993; Line B Note
executed by Rio Properties, Inc., as Borrower, in favor
of Bank of America Nevada, in the amount of
$1,769,230.77, dated July 15, 1993; Line B Note executed
by Rio Properties, Inc., as Borrower, in favor of First
Interstate Bank of Nevada, N.A., in the amount of
$3,538,461.54, dated July 15, 1993; Line B Note executed
by Rio Properties, Inc., as Borrower, in favor of First
Security Bank of Idaho, N.A., in the amount of
$3,538,461.54, dated July 15, 1993; Line B Note executed
by Rio Properties, Inc., as Borrower, in favor of NBD
Bank, N.A., in the amount of $3,538,461.54, dated July
15, 1993; Line B Note executed by Rio Properties, Inc.,
as Borrower, in favor of Societe Generale, in the amount
of $3,538,461.54, dated July 15, 1993; Line B Note
executed by Rio Properties, Inc., as Borrower, in favor
of U.S. Bank of Nevada, in the amount of $1,769,230.77,
dated July 15, 1993; Revolving Note executed by Rio
Properties, Inc., as Borrower, in favor of Bank of
America National Trust and Savings Association, in the
amount of $15,000,000, dated July 15, 1993; Revolving
Note executed by Rio Properties, Inc., as Borrower, in
favor of Bank of America Nevada, in the amount
of $5,000,000, dated July 15, 1993; Revolving Note
executed by Rio Properties, Inc., as Borrower, in favor
of First Interstate Bank of Nevada, N.A., in the amount
58
<PAGE>
of $10,000,000, dated July 15, 1993; Revolving Note
executed by Rio Properties, Inc., as Borrower, in favor
of First Interstate Bank of Idaho, N.A., in the amount of
$10,000,000, dated July 15, 1993; Revolving Note executed
by Rio Properties, Inc., as Borrower, in favor of NBD
Bank, N.A., in the amount of $10,000,000, dated July 15,
1993; Revolving Note executed by Rio Properties, Inc., as
Borrower, in favor of Societe Generale, in the amount of
$10,000,000, dated July 15, 1993; Revolving Note executed
by Rio Properties, Inc., as Borrower, in favor of U.S.
Bank of Nevada, in the amount of $5,000,000, dated July
15, 1993; Security Agreement executed by Rio Properties,
Inc., as Debtor, in favor of Bank of America National
Trust and Savings Association, as agent for itself and
other financial institutions, as Secured Party, dated
July 15, 1993; Construction Deed of Trust With Assignment
of Rents and Fixture Filing among Rio Properties, Inc.,
as Trustor, Equitable Deed Company, as Trustee, and Bank
of America National Trust and Savings Association, as
agent for itself and the other financial institutions, as
Beneficiary, dated July 15, 1993; Unsecured Indemnity
Agreement executed by Rio Properties, Inc., as
Indemnitor, in favor of Bank of America National Trust
and Savings Association, as agent for itself and other
financial institutions, dated July 15, 1993; Guaranty
executed by Rio Hotel & Casino, Inc., as Guarantor, in
favor of Bank of America National Trust and Savings
Association, as agent for itself and other financial
institutions, as Guaranteed Parties, dated July 15, 1993;
and, Parent Guarantor Security Agreement by Rio Hotel &
Casino, Inc., as Debtor, in favor of Bank of America
National Trust and Savings Association, as agent for
itself and other financial institutions, as Secured
Party, dated July 15, 1993 are incorporated by reference
from the Company's (SEC File No. 2-88147) Report on Form
8-K dated July 15, 1993, Item 7(c), Exhibit 28.01; First
Amendment to Credit Agreement dated as of October 25,
1993 and Second Amendment and Waiver to Credit Agreement
dated as of November 8, 1993 among Rio Properties, Inc.,
Bank of America National Trust and Savings Association,
Bank of America Nevada, First Interstate Bank of Nevada,
First Security Bank of Idaho, N.A., NBD Bank, N.A.,
Societe Generale, and U.S. Bank of Nevada are
incorporated by reference from the Company's (SEC File
No. 0-13760) Report on Form 10-K for the Year Ended
December 31, 1993, Part IV, Item 14(c), Exhibit 4.09;
Third Amendment to Credit Agreement dated as of April 15,
1994 among Rio Properties, Inc., Bank of America National
Trust and Savings Association, as Agent and as a Bank,
Bank of America, Nevada, First Interstate Bank of Nevada,
First Security Bank of Idaho, N.A, NBD Bank, N.A.,
Societe Generale, and U.S. Bank of Nevada; Memorandum of
Amendments to Credit Agreement and Amendment to
Construction Deed of Trust with Assignment of Rents and
Fixture Filing dated as of May 9, 1994 by Rio Properties,
Inc. and Bank of America National Trust and Savings
Association are incorporated herein by reference from the
Company's (SEC File No. 0-13760) Report on Form 10-Q for
the Quarter Ended June 30, 1994, Part II, Item 6(a),
Exhibit No. 4.02; and Fourth Amendment to Credit
Agreement among Rio Properties, Inc., as Borrower, and
Bank of America National Trust and Savings Association,
First Interstate Bank of Nevada, First Security Bank of
Idaho, N.A., NBD Bank, N.A., Societe Generale, Bank of
America, Nevada, U.S. Bank of Nevada, Bank of Scotland
and Midlantic Bank, N.A., as Lenders; and Second
Memorandum of Amendment to Credit Agreement and Amendment
to Construction Deed of Trust with Assignment of Rents
and Fixture Filing between Borrower and Bank of America
National Trust and Savings Association, as agent for
Lenders, dated December 16, 1994 are incorporated herein
by reference from the Company's (SEC File No. 0-13760)
Report on Form 8-K dated December 16, 1994, Item 7(c),
Exhibit 10.01; Fifth Amendment to Credit Agreement dated
as of March 20, 1995, among Rio Properties, Inc.,
Bank of America National Trust and Savings
Association, as Agent and as a Bank, First Interstate
Bank of Nevada, First Security Bank of Idaho, N.A., NBD
Bank, N.A., Societe Generale, Bank of America
59
<PAGE>
Nevada, U.S. Bank of Nevada, Bank of Scotland and
Midlantic Bank, N.A., as Banks, is incorporated herein
by reference from the Company's (SEC File No. 0-13760)
Report on Form 10-K for the Year Ended December 31,
1994, Part IV, Item 14(c), Exhibit 10.09; Sixth
Amendment to Credit Agreement dated as of July 31,
1995 among Rio Properties, Inc., Bank of America National
Trust and Savings Association, as Agent and as a
Bank, and First Interstate Bank of Nevada, First
Security Bank of Idaho, N.A., NBD Bank,
N.A., Societe Generale, Bank of America Nevada, U.S.
Bank of Nevada, Bank of Scotland, Midlantic Bank, N.A.,
and Bank of Hawaii, as Banks is incorporated herein by
reference from the Company's (SEC File No. 0-13760)
Report on Form 8-K dated September 15, 1995, Item 7(c),
Exhibit 4.01; Seventh Amendment to Credit Agreement
dated as of January 17, 1996 among Rio Properties, Inc.,
Bank of America National Trust and Savings Association,
as Agent and as a Bank, and First Interstate Bank of
Nevada, First Security Bank of Idaho, N.A., Societe
Generale, Bank of America Nevada, U.S. Bank of Nevada,
Bank of Scotland, Midlantic Bank, N.A., and Bank
of Hawaii, as Banks is incorporated herein by
reference from the Company's (SEC File No. 1-11569)
Report on Form 10-K for the Year Ended December 31,
1995. Part IV, Item 14(c), Exhibit 4.08; Eighth
Amendment to Credit Agreement dated as of June 17,
1996 among Rio Properties, Inc. and Bank of America
National Trust and Savings Association, as Agent and
Wells Fargo Bank National Association, First
Security Bank of Idaho, N.A., NBD Bank, Societe
Generale, Bank of America Nevada, U.S. Bank of
Nevada, Bank of Scotland, Midlantic Bank, N.A., and
Bank of Hawaii, as Banks, is incorporated herein by
reference from the Company's (SEC File No. 1-11569)
Report on Form 10-Q for the Quarter Ended June 30,
1996, Item 6(a), Exhibit 10.01; Ninth Amendment to
Credit Agreement dated as of January 13, 1997 among
Rio Properties, Inc. and Rio Leasing, Inc., and Bank
of America National Trust & Savings Association, as
Agent and a Bank, and Wells Fargo Bank National
Association, First Security Bank of Utah, N.A., NBD
Bank, Societe Generale, U.S. Bank of Nevada, Bank of
Scotland, PNC Bank, National Association, successor
by merger to Midlantic Bank, N.A. and Bank of
Hawaii, as Banks; and Tenth Amendment to Credit
Agreement dated as of February 3, 1997 among Rio
Properties, Inc. and Rio Leasing, Inc., and Bank of
America National Trust and Savings Association, as
Agent and a Bank, and Wells Fargo Bank National
Association, First Security Bank, N.A., NBD Bank,
Societe Generale, U.S. Bank of Nevada, Bank of
Scotland, PNC Bank, National Association, successor
by merger to Midlantic Bank, N.A., and Bank of
Hawaii, as Banks.
4.09 Indenture dated as of July 21, 1995, among Rio Hotel &
Casino, Inc., Rio Properties, Inc. and IBJ Schroder Bank
& Trust Company for the Company's 10 5/8% Senior
Subordinated Notes Due 2005 is incorporated herein by
reference from the Company's (SEC File No. 0-13760)
Report on Form 8-K dated July 18, 1995, Item 7(c),
Exhibit 4.3.
4.10 Indenture dated as of February 11, 1997, among Rio Hotel
& Casino, Inc., Rio Properties, Inc. and IBJ Schroder
Bank & Trust Company for the Company's 9 1/2% Senior
Subordinated Notes Due 2007 is incorporated herein by
reference from the Company's (SEC File No. 0-13760)
Report on Form 8-K dated February 4, 1997, Item 7(c),
Exhibit 4.3.
4.11 Registration Agreement dated July 18, 1995 by Rio Hotel &
Casino, Inc. and accepted July 18, 1995 by Salomon
Brothers Inc and Montgomery Securities is incorporated
herein by reference from the Company's (SEC File No. 0-
13760) Report on Form 8-K dated July 18, 1995, Item 7(c),
Exhibit 4.2.
60
<PAGE>
4.12 Registration Agreement dated February 4, 1997 by Rio
Hotel & Casino, Inc., Rio Properties, Inc. and accepted
February 4, 1997 by Salomon Brothers Inc and BancAmerica
Securities, Inc. is incorporated herein by reference from
the Company's (SEC File No. 0-13760) Report on Form 8-K
dated February 4, 1997, Item 7(c), Exhibit 4.2.
4.13 Form of Letter of Transmittal to IBJ Schroder Bank &
Trust Company as Exchange Agent for exchange of 10 5/8%
Senior Subordinated Notes Due 2005 is incorporated herein
by reference from the Company's (SEC File No. 33-62163)
Registration Statement on Form S-4 filed August 28, 1995,
Part II, Item 21(a), Exhibit 4.14.
10.01 Agreement by and among MarCor Resorts Inc., Marnell
Corrao, Inc., Marnell Corrao Associates, Inc., MarCor
Partnership, The Anthony A. Marnell II Revocable Living
Trust dated June 16, 1982, Anthony A. Marnell II, Sandra
J. Marnell, Barrett Family Revocable Living Trust dated
December 18, 1981, James A. Barrett, Jr. and Maureen M.
Barrett dated February 22, 1989, is incorporated herein
by reference from the Company's (SEC File No. 0-13760)
Annual Report on Form 10-K for the Year Ended December
31, 1994, Part IV, Item 14(c), Exhibit 10.01; First
Amendment to Agreement dated October 25, 1993 by and
among Rio Hotel & Casino, Inc., and Marnell Corrao, Inc.,
Marnell Corrao Associates, Inc., MarCor Partnership,
Anthony A. Marnell II, Barrett Family Revocable Living
Trust dated December 18, 1981, James A. Barrett, Jr. and
Maureen M. Barrett incorporated herein by reference from
the Company's (SEC File No. 0-13760) Report on Form 10-K
for the Year Ended December 31, 1993, Part IV, Item 14(c),
Exhibit 10.01.
10.02 Interest Rate Swap Agreement dated as of July 28, 1993
between Rio Properties, Inc. and Bank of America National
Trust and Savings Association is incorporated herein by
reference from the Company's (SEC File No. 0-13760)
Report on Form 10-K for the Year Ended December 31, 1993,
Part IV, Item 14(c), Exhibit 10.11.
10.03 Architectural Agreement entered into as of February 25,
1994 between Rio Hotel & Casino, Inc., as Owner, and
Anthony A. Marnell II, Chartered, as Architect, is
incorporated herein by reference from the Company's (SEC
File No. 0-13760), Report on Form 10-K for the Year Ended
December 31, 1993, Part IV, Item 14(c), Exhibit 10.12.
10.04 Building Contract entered into as of February 25, 1994
between Marnell Corrao Associates, Inc., as General
Contractor, and Rio Properties, Inc., as Owner, is
incorporated herein by reference from the Company's (SEC
File No. 0-13760) Report on Form 10-K for the Year Ended
December 31, 1993, Part IV, Item 14(c), Exhibit 10.13.
10.05 Architectural Agreement entered into as of February 9,
1995 between Rio Hotel & Casino, Inc., as Owner, and
Anthony A. Marnell, Chartered, as Architect, is
incorporated herein by reference from the Company's (SEC
File No. 0-13760) Annual Report on Form 10-K for the Year
Ended December 31, 1994, Part IV, Item 14(c), Exhibit
10.08.
10.06 Building Contract entered into as of February 27, 1995
between Marnell Corrao Associates, Inc., as General
Contractor, and Rio Properties, Inc., as Owner, is
incorporated herein by reference from the Company's (SEC
File No. 0-13760) Annual Report on Form 10-K for the Year
Ended December 31, 1994, Part IV, Item 14(c), Exhibit
10.09.
61
<PAGE>
10.07 Real Estate Purchase and Sale Agreement entered into as
of January 25, 1995 between Focus 2000, Inc., as Seller,
and Rio Properties, Inc., as Buyer, is incorporated
herein by reference from the Company's (SEC File No. 0-
13760) Annual Report on Form 10-K for the Year Ended
December 31, 1994, Part IV, Item 14(c), Exhibit 10.10.
10.08 Exchange Agreement entered into as of January 6, 1995
between Allied Building Materials, Cinderlane, Inc., and
Rio Hotel & Casino, Inc. is incorporated herein by
reference from the Company's (SEC File No. 0-13760)
Annual Report on Form 10-K for the Year Ended December
31, 1994, Part IV, Item 14(c), Exhibit 10.11.
10.09 Letter Agreement regarding Rate Cap Transaction dated
August 11, 1994 between Bank of America National Trust
and Savings Association and Rio Properties, Inc. is
incorporated herein by reference from the Company's (SEC
File No. 0-13760) Annual Report on Form 10-K for the Year
Ended December 31, 1994, Part IV, Item 14(c), Exhibit
10.12.
10.10 Architectural Agreement entered into as of July 27, 1995
between Rio Hotel & Casino, Inc., as Owner, and Anthony
A. Marnell II, Chtd., as Architect, is incorporated
herein by reference from the Company's (SEC File No.
333-869) Registration Statement on Form S-3, filed on
February 12, 1996, Part II, Item 16, Exhibit 10.10.
10.11 Building Contract entered into as of August 14, 1995 by
and between Marnell Corrao Associates, Inc., as General
Contractor, and Rio Properties, Inc., as Owner, is
incorporated herein by reference from the Company's (SEC
File No. 333-869) Registration Statement on Form S-3,
filed on February 12, 1996, Part II, Item 16, Exhibit
10.11.
10.12 Employment Agreement dated as of November 25, 1996 117
between Rio Hotel & Casino, Inc. and David P. Hanlon;
Employment Agreement dated as of March 7, 1997 between
Rio Hotel & Casino, Inc. and Ronald J. Radcliff;
Employment Agreement dated as of March 7, 1997 between
Rio Hotel & Casino, Inc. and I. Scott Bogatz.
21.01 List of the Company's subsidiaries is incorporated herein
by reference from the Company's (SEC File No. 333-23895)
Registration Statement on Form S-4, filed on March 24,
1997, Part I, Item 21(a), Exhibit 21.01.
23.01 Consent of Arthur Andersen LLP. 177
27.01 Financial Data Schedule. 179
62
<PAGE>
EXHIBIT 3.02
63
<PAGE>
AMENDED AND RESTATED BYLAWS
OF
RIO HOTEL & CASINO, INC.
A NEVADA CORPORATION
(AMENDED AS OF MARCH 20, 1997)
ARTICLE I
OFFICES
Section 1. The principal office of this corporation
shall be in the County of Clark, State of Nevada.
Section 2. The corporation may also have offices at such
other places both within and without the State of Nevada as the
Board of Directors may from time to time determine or the
business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All annual meetings of the stockholders shall
be held at the principal office of the corporation or at such
other place within or without the State of Nevada as the
directors shall determine. Special meetings of the stockholders
may be held at such time and place within or without the State of
Nevada as shall be stated in the notice of the meeting, or in a
duly executed waiver of notice thereof.
Section 2. Annual meetings of the stockholders shall be
held each year on a date and at a time designated by the Board of
Directors. The date so designated shall be within five months
after the end of the fiscal year of the corporation and within
fifteen months after the last annual meeting, at which the
stockholders shall elect by vote a Board of Directors and
transact such other business as may properly be brought before
the meeting.
Section 3. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by statute or by
the Articles of Incorporation may be called by the President or
the Secretary by resolution of the Board of Directors or at the
request in writing of one or more stockholders owning shares in
the aggregate entitled to cast not less than 50% of the votes at
the meeting. Such request shall state the purpose of the
proposed meeting and shall be personally delivered or sent by
registered mail or by telegraph or other facsimile transmission
to the Chairman of the Board, the President, Vice-President or
the Secretary of the Corporation. The officer receiving the
request shall cause notice to be promptly given to the
stockholders entitled to vote, in accordance with the provisions
of Section 4 of this Article II. If notice is not
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given within 60 days of the request, the person or persons
requesting the meeting may, subject to any applicable federal or
state law including but not limited to federal securities laws,
give the notice. Nothing contained in this paragraph of this
Section 3 shall be construed as limiting, fixing or affecting the
time when a meeting of stockholders called by action of the Board
of Directors may be held.
Section 4. Notices of meetings shall be in writing and
signed by the President or a Vice-President or the Secretary or
an Assistant Secretary or by such other person or persons as the
directors shall designate. Such notice shall state the purpose
or purposes for which the meeting is called and the time and the
place, which may be within or without this State, where it is to
be held. A copy of such notice shall be either delivered
personally to or shall be mailed, postage prepaid, to each
stockholder of record entitled to vote at such meeting not less
than ten nor more than sixty days before such meeting. If
mailed, it shall be directed to a stockholder at his address as
it appears upon the records of the corporation and upon such
mailing of any such notice, the service thereof shall be complete
and the time of the notice shall begin to run from the date upon
which such notice is deposited in the mail for transmission to
such stockholder. Personal delivery of any such notice to any
officer of a corporation or association, or to any member of a
partnership shall constitute delivery of such notice to such
corporation, association or partnership. In the event of the
transfer of stock after delivery of such notice of and prior to
the holding of the meeting it shall not be necessary to deliver
or mail notice of the meeting to the transferee.
Section 5. The notice of any meeting at which directors
are to be elected shall include the name of any nominee or
nominees whom, at the time of the notice, management intends to
present for election.
Section 6. An affidavit of the mailing or other means of
giving any notice of any stockholders' meeting may be executed by
the Secretary, Assistant Secretary, or any Transfer Agent of the
Corporation giving the notice, and shall be filed and maintained
in the minute book of the Corporation.
Section 7. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the
notice.
Section 8. The holders of a majority of the stock issued
and outstanding and entitled to vote thereat, present in person
or represented by proxy, shall constitute a quorum at all
meetings of the stockholders for the transaction of business
except as otherwise provided by statute or by the Articles of
Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a
quorum shall be present or represented and in the absence of such
a quorum, no other business may be transacted.
Section 9. When any meeting of stockholders, either
annual or special, is adjourned to another time or place, notice
may not be given of the adjourned meeting if the time and place
are announced at a meeting at which the adjournment is taken,
unless a new record date for the adjourned meeting is fixed, or
unless the adjournment is for more than 45 days from the date set
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for the original meeting, in which case the Board of Directors
shall set a new record date. Notice of any such adjourned
meeting, if required, shall be given to each stockholder of
record entitled to vote at the adjourned meeting in accordance
with the provisions of Section 4 of this Article II. At any
adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been
transacted at the meeting as originally notified.
Section 10. When a quorum is present or represented at
any meeting, the vote of the holders of a majority of the stock
having voting power present in person or represented by proxy
shall be sufficient to elect directors or to decide any question
brought before such meeting, unless the question is one upon
which by express provision of the statutes or of the Articles of
Incorporation, a different vote is required in which case such
express provision shall govern and control the decision of such
question.
Section 11. Each stockholder of record of the corporation
shall be entitled at each meeting of stockholders to one vote for
each share of stock standing in his name on the books of the
corporation. Upon the demand of any stockholder, the vote for
directors and the vote upon any question before the meeting shall
be by ballot.
Section 12. At any meeting of the stockholders any
stockholder may be represented and vote by a proxy or proxies
appointed by an instrument in writing. In the event that any
such instrument in writing shall designate two or more persons to
act as proxies, a majority of such persons present at the
meeting, or, if only one shall be present, then that one shall
have and may exercise all of the powers conferred by such written
instrument upon all of the persons so designated unless the
instrument shall otherwise provide. No proxy or power of
attorney to vote shall be used to vote at a meeting of the
stockholders unless it shall have been filed with the secretary
of the meeting when required by the inspectors of election. All
questions regarding the qualification of voters, the validity of
proxies and the acceptance or rejection of votes shall be decided
by three inspectors of election who shall be appointed by the
Board of Directors, or if not so appointed, then by the presiding
officer of the meeting.
The inspectors of election shall:
(a) Determine the number of shares outstanding and the
voting power of each, the shares represented at the meeting,
the existence of a quorum, and the authenticity, validity,
and effect of proxies;
(b) Receive votes, ballots, or consents;
(c) Hear and determine all challenges and questions in
any way arising in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the poles shall close;
(f) Determine the results; and
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(g) Do any other acts that may be proper to conduct
the election or vote with fairness to all stockholders.
Section 13. Any action which may be taken by the vote of
the stockholders at a meeting may be taken without a meeting if
authorized by the written consent of stockholders holding at
least a majority of the voting power, unless the provisions of
the statutes or of the Articles of Incorporation require a
greater proportion of voting power to authorize such action in
which case such greater proportion of written consents shall be
required.
Section 14. The transactions of any meeting of
stockholders, either annual or special, however called and
noticed, and wherever held, shall be as valid as though had at a
meeting duly held after regular call and notice, if a quorum be
present either in person or by proxy, and if, either before or
after the meeting, each person entitled to vote, who was not
present in person or by proxy, signs a written waiver of notice
or a consent to a holding of the meeting, or an approval of the
minutes. The waiver of notice of consent need not specify either
the business to be transacted or the purpose of any annual or
special meeting of stockholders. All such waivers, consents, or
approvals shall be filed with the corporate records or made a
part of the minutes of the meeting. Attendance by a person at a
meeting shall also constitute a waiver of notice of that meeting,
except when the person objects, at the beginning of the meeting,
to the transaction of any business because the meeting is not
lawfully called or convened, and except that attendance at a
meeting is not a waiver of any right to object to the
consideration of matters required by law to be included in the
notice of the meeting, but not so included, if that objection is
expressly made at the meeting.
ARTICLE III
DIRECTORS
Section 1. The business of the corporation shall be
managed by its Board of Directors which may exercise all such
powers of the corporation and do all such lawful acts and things
as are not by statute or by the Articles of Incorporation or by
these Bylaws directed or required to be exercised or done by the
stockholders.
Section 2. The number of directors which shall
constitute the whole board shall be six (6). The number of
directors may from time to time be increased or decreased by
action of the Board of Directors to not less than one (1) nor
more than ten (10). Directors need not be stockholders.
Section 3. The corporation shall have two (2) categories
of Directors entitled "A" and "B." Each category of Directors
shall include a minimum of one-third (1/3) of the entire Board of
Directors. The term of each Director in category A shall expire
in the even numbered year following election and the term of each
Director in Category B shall expire in the odd numbered year
following election. Upon a Director's initial election to the
Board, the Board shall designate the category of such Director.
The expiration of the term of office of Directors in each
category shall be that set forth below.
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CATEGORY TERM EXPIRES
A 1998 and each even numbered year thereafter
B 1999 and each odd numbered year thereafter
Each category of Directors shall be elected at the
annual meeting of stockholders for the year in which the term of
each respective category expires. Except as provided in Section
4 of this Article, each Director shall serve until his successor
shall have been elected or qualified, provided that in the event
of failure to hold the annual meeting or to hold such election at
such annual meeting, the election may be held at any special
meeting of the stockholders called for that purpose.
Section 4. Vacancies in the Board of Directors including
those caused by an increase in the number of directors, may be
filled by a majority of the remaining directors, though less than
a quorum, or by a sole remaining director, and each director so
elected shall hold office until his successor is elected at an
annual or a special meeting of the stockholders. The holders of
two-thirds of the outstanding shares of stock entitled to vote
may at any time peremptorily terminate the term of office of all
or any of the directors by vote at a meeting called for such
purpose or by a written statement filed with the secretary or, in
his absence, with any other officer. Such removal shall be
effective immediately, even if successors are not elected
simultaneously and the vacancies on the Board of Directors
resulting therefrom shall be filled only by the stockholders.
A vacancy or vacancies in the Board of Directors shall
be deemed to exist in case of the death, resignation or removal
of any directors, or if the authorized number of directors be
increased, or if the Board of Directors by resolution declares
vacant the office of director who has been declared of unsound
mind by an order of the court or if the stockholders fail at any
annual or special meeting of stockholders at which any director
or directors are elected to elect the full authorized number of
directors to be voted for at that meeting.
The stockholders may elect a director or directors at
any time to fill any vacancy or vacancies not filled by the
directors. If the Board of Directors accepts the resignation of
a director tendered to take effect at a future time, the Board or
the stockholders shall have power to elect a successor to take
office when the resignation is to become effective.
No reduction of the authorized number of directors
shall have the effect of removing any director prior to the
expiration of his term of office.
ARTICLE IV
MEETINGS OF THE BOARD OF DIRECTORS
Section 1. Regular meetings of the Board of Directors
shall be held at any place within or without the State which has
been designated from time to time by resolution of the Board or
by written consent of all members of the Board. In the absence
of such designation regular meetings shall be held at the
principal office of the corporation. Special meetings of the
Board may be held
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either at a place so designated or at the principal office. Any
meeting, regular or special, may be held by conference telephone
network or similar communications method by which all persons
participating in the meeting can hear each other.
Section 2. The first meeting of each newly elected Board
of Directors shall be held at any place within or without the
State which has been designated from time to time by resolution
of the Board or by written consent of all members of the Board.
In the event such meeting is not so held, the meeting may be held
at such time and place as shall be specified in a notice given as
herein provided for special meetings of the Board of Directors.
Section 3. Regular meetings of the Board of Directors
may be held without call or notice at such time and at such place
as shall from time to time be fixed and determined by the Board
of Directors.
Section 4. Special meetings of the Board of Directors
may be called by the Chairman or the President or by any Vice-
President or by any two directors.
Written notice of the time and place of special
meetings shall be delivered personally to each director, or sent
to each director by mail or by other form of written
communication, charges prepaid, addressed to him at his address
as it is shown upon the records or is not readily ascertainable,
at the place in which the meetings of the directors are regularly
held. In case such notice is mailed or telegraphed, it shall
be deposited in the United States mail or delivered to the
telegraph company at least forty-eight (48) hours prior to the
time of the holding of the meeting. In case such notice is
delivered as above provided, it shall be so delivered at least
twenty-four (24) hours prior to the time of the holding of
the meeting. Such mailing, telegraphing or delivery as above
provided shall be due, legal and personal notice to such
director.
Section 5. Notice of the time and place of holding an
adjourned meeting need not be given to the absent directors if
the time and place be fixed at the meeting adjourned and unless
the meeting is adjourned for more than 24 hours, in which case
notice of the time and place shall be given before the time of
the adjourned meeting, in the manner specified in Section 4 of
Article IV, to the directors who were not present at the time of
the adjournment.
Section 6. The transactions of any meeting of the Board
of Directors, however called and noticed or wherever held, shall
be as valid as though had at a meeting duly held after regular
call and notice, if a quorum be present, and if, either before or
after the meeting, each of the directors not present signs a
written waiver of notice, or a consent to holding such meeting,
or an approval of the minutes thereof. All such waivers,
consents or approvals shall be filed with the corporate records
or made a part of the minutes of the meeting.
Section 7. A majority of the authorized number of
directors shall be necessary to constitute a quorum for the
transaction of business, except to adjourn as hereinafter
provided. Every act or decision done or made by a majority of
the directors present at a meeting duly held at which a quorum is
present shall be regarded as the act of the Board of Directors,
unless a greater number be required by law or by the Articles of
Incorporation. Any action of a majority, although not at a
regularly called meeting, and the record thereof, if assented to
in writing by all of the
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other members of the Board shall be as valid and effective in all
respects as if passed by the Board in regular meeting.
Section 8. A quorum of the directors may adjourn any
directors meeting to meet again at a stated day and hour;
provided, however, that in the absence of a quorum, a majority of
the directors present at any directors meeting, either regular or
special, may adjourn from time to time until the time fixed for
the next regular meeting of the Board.
ARTICLE V
COMMITTEES OF DIRECTORS
Section 1. The Board of Directors may, by resolution
adopted by a majority of the whole Board, designate one or more
committees of the Board of Directors, each committee to consist
of one or more of the directors of the corporation which, to the
extent provided in the resolution, shall have and may exercise
the power of the Board of Directors in the management of the
business and affairs of the corporation and may have power to
authorize the seal of the corporation to be affixed to all papers
which may require it. Such committee or committees shall have
such name or names as may be determined from time to time by the
Board of Directors. The members of any such committee present at
any meeting and not disqualified from voting may, whether or not
they constitute a quorum, unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any
absent or disqualified member. At meetings of such committees, a
majority of the members or alternate members shall constitute a
quorum for the transaction of business, and the act of a majority
of the members or alternate members at any meeting at which there
is a quorum shall be the act of the committee.
Section 2. The committees shall keep regular minutes of
their proceedings and report the same to the Board of Directors.
Section 3. Any action required or permitted to be taken
at any meeting of the Board of Directors or of any committee
thereof may be taken without a meeting if a written consent
thereto is signed by all members of the Board of Directors or of
such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board or committee.
Section 4. Meetings and actions of the committee shall
be governed by, and held and taken in accordance with, the
provisions of Article IV of these Bylaws, Section 1 (place of
meetings), Section 3 (regular meetings), Section 4 (special
meetings and notice), Section 7 (quorum), Section 6 (waiver of
notice), Section 8 (adjournment), Section 5 (notice of
adjournment), and Section 7 (action without a meeting), with such
changes in the context of those bylaws as are necessary to
substitute the committee and its members for the Board of
Directors and its members, except that the time of regular
meetings of committees may be determined either by resolution of
the Board of Directors or by resolution of the committee; special
meetings of committees may also be called by resolution of the
Board of Directors; and notice of special meetings of committees
shall also be given to all alternate members, who shall have the
right to attend all meetings of the committee. The Board of
Directors may adopt rules for the government of any committee not
inconsistent with the provisions of these bylaws.
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ARTICLE VI
COMPENSATION OF DIRECTORS
Section 1. The directors may be paid their expenses of
attendance at each meeting of the Board of Directors and may be
paid a fixed sum for attendance at each meeting of the Board of
Directors or a stated salary as director. No such payment shall
preclude any director from serving the corporation in any other
capacity and receiving compensation therefor. Members of special
or standing committees may be allowed like reimbursement and
compensation for attending committee meetings.
ARTICLE VII
NOTICES
Section 1. Notices to directors and stockholders shall
be in writing and delivered personally or mailed to the directors
or stockholders at their addresses appearing on the books of the
corporation. Notice by mail shall be deemed to be given at the
time when the same shall be mailed. Notice to directors may also
be given by telegram.
Section 2. Whenever all parties entitled to vote at any
meeting, whether of directors or stockholders, consent, either by
a writing on the records of the meeting or filed with the
secretary, or by presence at such meeting and oral consent
entered on the minutes, or by taking part in the deliberations at
such meeting without objection, the doings of such meeting shall
be as valid as if had at a meeting regularly called and noticed,
and at such meeting any business may be transacted which is not
excepted from the written consent or to the consideration of
which no objection for want of notice is made at the time, and if
any meeting be irregular for want of notice or of such consent,
provided a quorum was present at such meeting, the proceedings of
said meeting may be ratified and approved and rendered likewise
valid and the irregularity or defect therein waived by a writing
signed by all parties having the right to vote at such meeting;
and such consent or approval of stockholders may be by proxy or
attorney, but all such proxies and powers of attorney must be in
writing.
Section 3. Whenever any notice whatever is required to
be given under the provisions of the statutes, of the Articles of
Incorporation or of these Bylaws, a waiver thereof in writing,
signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE VIII
OFFICERS
Section 1. The officers of the corporation shall be
chosen by the Board of Directors and shall be a President, a
Secretary and a Treasurer. Any person may hold two or more
offices.
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Section 2. The Board of Directors at its first meeting
after each annual meeting of stockholders shall choose a Chairman
of the Board and a President, both of whom shall be directors,
and shall choose a Secretary and a Treasurer, none of whom need
be directors.
Section 3. The Board of Directors may appoint a Chairman
of the Board, Vice-Chairman of the Board, Vice Presidents and one
or more Assistant Secretaries and Assistant Treasurers and such
other officers and agents as it shall deem necessary who shall
hold their offices for such terms and shall exercise such powers
and perform such duties as shall be determined from time to time
by the Board of Directors.
Section 4. The salaries and compensation of all officers
of the Corporation shall be fixed by the Board of Directors.
Section 5. The officers of the Corporation shall hold
office at the pleasure of the Board of Directors. Any officer
elected or appointed by the Board of Directors may be removed at
any time by the Board of Directors. Any vacancy occurring in any
office of the Corporation by death, resignation, removal or
otherwise shall be filled by the Board of Directors. Any officer
may resign at any time by giving written notice to the
Corporation.
Section 6. The CHAIRMAN OF THE BOARD shall preside at
meetings of the stockholders and the Board of Directors, and
shall see that all orders and resolutions of the Board of
Directors are carried into effect.
Section 7. The VICE-CHAIRMAN shall, in the absence or
disability of the Chairman of the Board, perform the duties and
exercise the powers of the Chairman of the Board and shall
perform such other duties as the Board of Directors may from time
to time prescribe.
Section 8. The PRESIDENT shall be the chief executive
officer of the corporation and shall, subject to the control of
the Board of Directors, have active management of the business of
the corporation. He shall execute on behalf of the corporation
all instruments requiring such execution except to the extent the
signing and execution thereof shall be expressly designated by
the Board of Directors to some other officer or agent of the
corporation. The President may appoint such other officers as
the business of the Corporation may require, each of whom shall
hold office for such period, have such authority and perform such
duties as are provided in the bylaws or as the Board of Directors
may from time to time determine.
Section 9. The VICE-PRESIDENT(S) shall act under the
direction of the President and in the absence or disability of
the President shall perform the duties and exercise the powers of
the President. They shall perform such other duties and have
such other powers as the President or the Board of Directors may
from time to time prescribe. The Board of Directors may
designate one or more Executive Vice Presidents or may otherwise
specify the order of seniority of the Vice Presidents. The
duties and powers of the President shall descend to the Vice
Presidents in such specified order of seniority.
Section 10. The SECRETARY shall act under the direction
of the President. Subject to the direction of the President he
shall attend all meetings of the Board of Directors and all
meetings of
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the stockholders and record the proceedings. He shall perform
like duties for the standing committees when required. He shall
give, or cause to be given, notice of all meetings of the
stockholders and special meetings of the Board of Directors, and
shall perform such other duties as may be prescribed by the
President or the Board of Directors.
Section 11. The ASSISTANT SECRETARIES shall act under the
direction of the President. In order of their seniority, unless
otherwise determined by the President or the Board of Directors,
they shall, in the absence or disability of the Secretary,
perform the duties and exercise the powers of the Secretary.
They shall perform such other duties and have such other powers
as the President or the Board of directors may from time to time
prescribe.
Section 12. The TREASURER shall act under the direction
of the President. Subject to the direction of the President he
shall have custody of the corporate funds and securities and
shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall
deposit all monies and other valuable effects in the name and to
the credit of the corporation in such depositories as may be
designated by the Board of Directors. He shall disburse the
funds of the corporation as may be ordered by the President or
the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of
Directors, at its regular meetings, or when the Board of
Directors so requires, an account of all his transactions as
Treasurer and of the financial condition of the corporation.
Section 13. If required by the Board of Directors, the
Treasurer shall give the corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his
office and for the restoration to the corporation, in case o his
death, resignation, retirement of removal from office, of all
books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the
corporation.
Section 14. The ASSISTANT TREASURER in the order of their
seniority, unless otherwise determined by the President or the
Board of Directors, shall, in the absence or disability of the
Treasurer, perform the duties and exercise the powers of the
Treasurer. They shall perform such other duties and have such
other powers as the President or the Board of Directors may from
time to time prescribe.
ARTICLE IX
CERTIFICATES OF STOCK
Section 1. Every stockholder shall be entitled to have a
certificate signed by the President or a Vice-President and the
Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary of the corporation, certifying the number of
shares owned by him in the corporation. If the corporation shall
be authorized to issue more than one class of stock or more than
one series of any class, the designations, preferences and
relative participating, optional or other special rights of the
various classes of stock or series thereof and the
qualifications, limitations or restrictions of such rights, shall
be set forth in full or summarized on the face or back of the
certificate which the corporation shall issue to represent such
stock.
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Section 2. If a certificate is signed (1) by a transfer
agent other than the corporation or its employees or (2) by a
registrar other than the corporation or its employees, the
signatures of the officers of the corporation may be facsimiles.
In case any officer who has signed or whose facsimile signature
has been placed upon a certificate shall cease to be such officer
before such certificate is issued, such certificate may be issued
with the same effect as though the person had not ceased to be
such officer. The seal of the corporation, or a facsimile
thereof, may, but need not be, affixed to certificates of
stock.
Section 3. The Board of Directors may direct a new
certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the corporation
alleged to have been lost or destroyed upon the making of an
affidavit of that fact by the person claiming the certificate of
stock to be lost or destroyed. When authorizing such issue of a
new certificate or certificates, the Board of Directors may, in
its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost or destroyed certificate
or certificates, or his legal representative, to advertise the
same in such manner as it shall require and/or give the
corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost or
destroyed.
Section 4. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate for shares
duly endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer, it shall be the duty of the
corporation, if it is satisfied that all provisions of the laws
and regulations applicable to the corporation regarding transfer
and ownership of shares have been complied with, to issue a new
certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
Section 5. The Board of Directors may fix in advance a
date not exceeding sixty (60) days nor less than ten (10) days
preceding the date of any meeting of stockholders, or the date
for the payment of any dividend, or the date for the allotment of
rights, or the date when any change or conversion or exchange of
capital stock shall go into effect, or a date in connection with
obtaining the consent of stockholders for any purpose, as a
record date for the determination of the stockholders entitled to
notice of and to vote at any such meeting, and any adjournment
thereof, or entitled to receive payment of any such dividend, or
to give such consent, and in such case, such stockholders, and
only such stockholders as shall be stockholders of record on the
date so fixed, shall be entitled to notice of and to vote at such
meeting, or any adjournment thereof, or to receive payment of
such dividend, or to receive such allotment of rights, or to
exercise such rights, or to give such consent, as the case may
be, notwithstanding any transfer of any stock on the books of the
corporation after any such record date fixed as aforesaid.
Section 6. The Corporation shall be entitled to
recognize the person registered on its books as the owner of
shares to be the exclusive owner for all purposes including
voting and dividends, and the Corporation shall not be bound to
recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as
otherwise provided by the laws of Nevada.
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ARTICLE X
RECORDS AND REPORTS
Section 1. The Corporation shall either maintain at its
principal office a record of its stockholders, giving the names
and addresses of all stockholders and the number and class of
shares held by each stockholder, or in lieu thereof maintain at
its principal office a statement setting out the name of the
custodian of the stock ledger.
Section 2. The accounting books and records and minutes
of proceedings of the stockholders and the Board of Directors and
any committee or committees of the Board of Directors shall be
kept at such place or places designated by the Board of
Directors. The minutes, accounting books, and the records shall
be kept either in written form or in any other form capable of
being converted into written form. Subject to NRS 78.257, as
amended, the minutes and accounting books and records shall be
open to inspection by the stockholders.
Section 3. Every director shall have the absolute right
at any reasonable time to inspect all books, records, and
documents of every kind, and the physical properties of the
Corporation and each of its subsidiary corporations. This
inspection by a director may be made in person or by an agent or
attorney, and the right of inspection includes the right to copy
and make extracts of documents.
ARTICLE XI
GENERAL PROVISIONS
Section 1. Dividends upon the capital stock of the
corporation, subject to the provisions of the Articles of
Incorporation, if any, may be declared by the Board of Directors
at any regular or special meeting, pursuant to law. Dividends
may be paid in cash, in property or in shares of the capital
stock, subject to the provisions of the Articles of
Incorporation.
Section 2. Before payment of any dividend, there may be
set aside out of any funds of the corporation available for
dividends such sum or sums as the directors from time to time, in
their absolute discretion, think proper as a reserve or reserves
to meet contingencies, or for equalizing dividends or for
repairing or maintaining any property of the corporation or for
such other purpose as the directors shall think conducive to the
interest of the corporation, and the directors may modify or
abolish any such reserve in the manner in which it was created.
Section 3. All checks or demands for money and notes of
the corporation shall be signed by such officer or officers or
such other person or persons as the Board of Directors may from
time to time designate.
Section 4. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
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Section 5. The corporation may or may not have a
corporate seal, as may from time to time be determined by
resolution of the Board of Directors. If a corporate seal is
adopted, it shall have inscribed thereon the name of the
corporation and the words "Corporate Seal" and "Nevada". The seal
may be used by causing it or a facsimile thereof to be impressed
or affixed or in any manner reproduced.
Section 6. The Chairman of the Board, the President, or
any Vice-President, or any other person authorized by resolution
of the Board of Directors or by any of the foregoing designated
officers, is authorized to vote on behalf of the Corporation any
and all shares of any other corporation or corporations, foreign
or domestic, standing in the name of the Corporation. The
authority granted to these officers to vote or represent on
behalf of the Corporation any and all shares held by the
Corporation in any other corporation or corporations may be
exercised by any of these officers in person or by any person
authorized to do so by a proxy duly executed by these officers.
Section 7. Unless the context requires otherwise, the
general provisions, rules of construction, and definitions in the
Nevada Revised Statutes shall govern the construction of these
bylaws. Without limiting the generality of these provisions, the
singular number includes the plural, the plural number includes
the singular, and the term "person" includes both the Corporation
and a natural person.
ARTICLE XII
AMENDMENTS
Section 1. The Bylaws may be amended by a majority vote
of all the stock issued and outstanding and entitled to vote at
any annual or special meeting of the stockholders, provided
notice of intention to amend shall have been contained in the
notice of the meeting.
Section 2. The Board of Directors by a majority vote of
the whole Board at any meeting may amend these Bylaws, including
Bylaws adopted by the stockholders, but the stockholders may from
time to time specify particular provisions of the Bylaws which
shall not be amended by the Board of Directors.
ARTICLE XIII
INDEMNIFICATION
Every person who was or is a party or is threatened to be a
party to or is involved in any action, suit or proceedings,
whether civil, criminal, administrative or investigative, by
reason of the fact that he or a person of whom he is the legal
representative is or was a director, officer, legal spouse
(whether such status is derived by reason of statutory law,
common law or otherwise of any applicable jurisdiction) of a
director or officer, employee, agent, or other person of this
corporation, or is or was serving at the request of this
corporation or for its benefit as a director, officer, employee
or other person of another corporation, partnership, joint
venture, trust or other
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enterprise, shall be indemnified and held harmless to the fullest
extent legally permissible under the law of the state of Nevada
as it may be amended from time to time against all expenses,
liability and loss (including attorneys' fees, judgments, fines
and amounts paid or to be paid in settlement) reasonably incurred
or suffered by him in connection therewith. The indemnification
of a legal spouse of a director or officer shall not extend to
any claim for any actual or alleged wrongful act of the spouse,
but shall apply only to actual or alleged wrongful acts of a
director or officer as provided in this Article. The expenses of
a director, officer or legal spouse of a director or officer,
incurred in defending a civil or criminal action, suit or
proceeding must be paid by this corporation as they are incurred
and in advance of the final disposition of the action, suit or
proceeding, upon receipt of an undertaking by or on behalf of the
director, officer, or legal spouse of a director or officer, to
repay the amount if it is ultimately determined by a court of
competent jurisdiction that he is not entitled to be indemnified
by this corporation. Such right of indemnification shall be a
contract right which may be enforced in any manner desired by
such person. Such right of indemnification shall not be
exclusive of any other right which such a director, officer,
legal spouse of a director or officer, agent or other person may
have or hereafter acquire and, without limiting the generality of
such statement they shall be entitled to their respective rights
of indemnification under the Articles of Incorporation, any
agreement, vote of stockholders, provision of law or otherwise,
as well as their rights under this Article.
Without limiting the application of the foregoing, the Board
of Directors may cause this corporation to purchase and maintain
insurance on behalf of any person who is or was a director,
officer, legal spouse of a director or officer, employee, agent
or other person of this corporation or is or was serving at the
request of this corporation as a director, officer, employee,
agent or other person of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted
against such person and incurred in any such capacity or arising
out of such status, whether or not this corporation would have
the power to indemnify such person.
Approved And Adopted this 20th day of March 1997.
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CERTIFICATE OF SECRETARY
I hereby certify that I am the Secretary of Rio Hotel &
Casino, Inc., and that the foregoing Bylaws, consisting of 14
pages, constitute the Code of Bylaws of Rio Hotel & Casino, Inc.
as duly adopted and amended by resolution of the Board of
Directors of the Corporation dated March 20, 1997.
In Witness Whereof, I have hereunto subscribed my name this
20th day of March 1997.
/s/ I. Scott Bogatz
I. Scott Bogatz
Secretary
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EXHIBIT 4.07
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RIO HOTEL & CASINO, INC.
1995 LONG-TERM INCENTIVE PLAN
ADOPTED BY THE BOARD OF DIRECTORS JANUARY 26, 1995
AS AMENDED BY THE BOARD OF DIRECTORS ON MARCH 20, 1997
1. PURPOSE
The 1995 Long-Term Incentive Plan (the "Plan") is intended
to promote the interests of Rio Hotel & Casino, Inc. and its
subsidiaries (collectively the "Corporation") by offering certain
executive officers, employees and outside consultants of the
Corporation who are primarily responsible for the management,
growth and success of the business of the Corporation, the
opportunity to participate in a long-term incentive plan designed
to reward them for their services and to encourage them to
continue in the employ of or to provide services to the
Corporation.
2. DEFINITIONS
For all purposes of this Plan, the following terms shall
have the following meanings:
"Common Stock" means Rio Hotel & Casino, Inc. common stock,
$.01 par value.
"ISO" means incentive stock options qualified under
Section 422 of the Internal Revenue Code of 1986, as amended.
"Non-statutory Options" means stock options not qualified
under Section 422 of the Internal Revenue Code of 1986, as
amended.
"Restricted Shares" means shares of Common Stock which have
not been registered under federal securities law.
"Rio" means Rio Hotel & Casino, Inc.
"Subsidiary" means any company of which Rio owns, directly
or indirectly, the majority of the combined voting power of all
classes of stock.
3. ADMINISTRATION
The Plan shall be administered by a Committee (the
"Committee") composed solely of not less than two "non-employee
directors," as defined by Rule 16b-3(b)(3)(i) of the Securities
Exchange Act of 1934 (the "Exchange Act"), selected by, and
serving at the pleasure of, Rio's Board of Directors ("Rio
Board").
Plan participants may each be granted options to purchase up
to a maximum of 500,000 shares in any one year. Initially, the
Corporation or Subsidiary will recommend to the Committee persons
to whom awards may be granted. The Committee then shall have the
authority, subject to the terms of the Plan, to determine, based
upon recommendations, the persons to whom awards shall be granted
("Participants") the number of shares covered by each award, the
time or times at which awards shall be granted, the timing of
when awards shall vest, and the terms and provisions of the
instruments by which awards shall be evidenced, and to interpret
<PAGE>
the Plan and make all determinations necessary or advisable for
its administration. The Committee shall notify the Rio Board of
all decisions concerning awards granted to Participants under the
Plan, the interpretation thereof, and determinations concerning
its administration.
4. ELIGIBILITY
Only persons who are employees, outside consultants,
officers or employee-directors of the Corporation shall be
granted awards. An ISO may not be issued to a person who, at the
time of grant is a non-employee of the Corporation or to a person
who owns stock of the Corporation possessing more than 10% of the
total combined voting power of all classes of stock of the
Corporation or a subsidiary.
5. STOCK SUBJECT TO THE PLAN
The stock from which awards may be granted shall be shares
of Common Stock. When Restricted Shares are vested or when
options are exercised, Rio may either issue authorized but
unissued Common Stock or Rio may transfer issued Common Stock
held in its treasury. Each of the respective boards of Rio and
Subsidiaries will fund the Plan to the extent so required to
provide Common Stock for the benefit of Participants. The total
number of shares of Common Stock which may be granted as
Restricted Shares or stock options shall not exceed, in the
aggregate, 2,000,000 shares in total. Any Restricted Shares
awarded and later forfeited are again subject to award under the
Plan. If an option expires, or is otherwise terminated prior to
its exercise, the shares of Common Stock covered by such an
option immediately prior to such expiration or other termination
shall continue to be available for grant under the Plan.
6. GRANTING OF OPTIONS
The date of grant of options to Participants under the Plan
will be the date on which the options are awarded by the
Committee. The grant of any option to any Participant shall
neither entitle nor disqualify such Participant from
participating in any subsequent grant of options.
7. TERMS AND CONDITIONS OF OPTIONS
Options shall be designated Non-statutory options or ISOs
and shall be evidenced by written instruments approved by the
Committee. Such instruments shall conform to the following terms
and conditions:
7.1 OPTION PRICE
The option price per share for an option shall be
established by the Committee, but shall be no less than the fair
market value of the Common Stock under option on the day the
option is granted, which shall be an amount equal to the last
reported sale price of the Common Stock on such date on the New
York Stock Exchange, or such other stock exchange on which the
Common Stock may be listed from time to time. The option price
shall be paid (i) in cash or (ii) in Common Stock, including
Common Stock underlying the option being exercised, having a fair
market value equal to such option price or (iii) in a combination
of cash and Common Stock, including Common Stock underlying the
option being exercised. The fair market value of Common Stock
delivered to the Corporation pursuant to the immediately
preceding sentence shall be determined on the basis of the last
reported sale price of the Common Stock on the New York Stock
Exchange on the day of exercise or, if there was no such sale
price on the day of exercise, on the day next preceding the day
of exercise on which there was such a sale.
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7.2 TERM AND EXERCISE OF OPTIONS
Unless otherwise provided in the instrument of grant
for special circumstances, no option shall be exercisable sooner
than six months and one day from the date of grant.
Except in special circumstances, each option shall
expire on the tenth anniversary of the date of its grant and
shall be exercisable according to a vesting schedule to be
determined by the Committee. However the Committee may include
in any option instrument, initially or by amendment at any time,
a provision making any installment or installments exercisable at
such earlier date, if the Committee deems such provision to be in
the interests of the Corporation or necessary to realize the
reasonable expectation of the optionee.
After becoming exercisable, each installment shall
remain exercisable until expiration or termination of the option.
After becoming exercisable an option may be exercised by the
optionee from time to time, in whole or part, up to the total
number of shares with respect to which it is then exercisable.
The Committee may provide that payment of the option exercise
price may be made following delivery of the certificate for the
exercised shares.
Upon the exercise of a stock option, the purchase price
will be payable in full in cash or Common Stock, or a combination
thereof, as provided in Paragraph 7.1. Any shares of Common
Stock so assigned and delivered to Rio or the Subsidiary, as
applicable, in payment or partial payment of the purchase price
will be valued at Fair Market Value on the exercise date. Upon
the exercise of an option, Rio or a Subsidiary, as applicable,
shall withhold from the shares of Common Stock to be issued to
the Participant the number of shares necessary to satisfy Rio's
or the Subsidiary's, as applicable, obligation to withhold
federal taxes, such determination to be based on the shares' Fair
Market Value on the date of exercise.
7.3 TERMINATION OF EMPLOYMENT OR ASSOCIATION
Subject to Section 7.7, if an optionee ceases to be
employed or associated with the Corporation, other than by reason
of death, retirement as determined under any of the Corporation's
pension plans, if any, or retirement after attaining the age of
seventy-two (72) years, all options granted to such optionee and
exercisable on the date of termination of employment or
association shall expire on the earlier of (i) the tenth
anniversary after the date of grant or (ii) three months after
the day such optionee's employment or association with the
Corporation ends.
Subject to Section 7.7, if an optionee retires either
pursuant to any of the Corporation's pension plans, if any, or
after attaining the age of seventy-two (72) years, all options
granted to such optionee, and exercisable on the date of such
optionee's retirement shall expire on the earlier of (i) the
tenth anniversary after the date of grant or (ii) three years
after the date of optionee's retirement from the Corporation.
Any installment not exercisable on the date of such
termination or retirement shall expire and be thenceforth
unexercisable. Whether authorized leave of absence or absence in
military or governmental service may constitute employment for
the purposes of the Plan shall be conclusively determined by the
Committee.
7.3(1) FORFEITURE
Subsequent to February 1, 1996, all stock option grants
issued pursuant to the Plan shall be subject to the following
forfeiture provisions:
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(a) Unless otherwise provided for in the instrument of
grant, a Participant who resigns his or her position with the
Corporation without the written consent of the Rio Board, and
accepts employment, consulting, or other compensation for
services from a Competitor Company, as defined below, within six
(6) months after his or her last day of employment or association
with the Corporation shall:
1. forfeit all vested and unexercised options in
such Participant's account; and
2. reimburse the Corporation for all Profits, as
defined below, earned pursuant to any exercise of
options within six (6) months prior to or six (6)
months subsequent to the date of giving notice of such
Participant's resignation; provided however that all
options must be exercised within ninety (90) days of
the date of such Participant's termination, as provided
in Section 7.3. Further, such reimbursement payable
because of this provision shall be received by the
Corporation from such Participant within ninety (90)
days after the effective date of such Participant's
resignation.
(b) "Competitor Company" shall be defined as any
gaming or hotel company, or any affiliate thereof, located within
fifty (50) miles of any location in which the Corporation
conducts business as of the effective date of such Participant's
resignation.
(c) "Profits" shall be defined as the differential
between the exercise price and the last reported sale price on
the day of exercise, multiplied by the number of option shares
exercised.
(d) This Section 7.3(1) shall not apply to any
Participant who resigns:
1. subsequent to the Corporation entering into a
contractual commitment for a Change of Control of the
Corporation (as defined in Section 10), but prior to an
actual Change of Control; or
2. within one year following a Change of
Control.
7.4 EXERCISE UPON DEATH OF OPTIONEE
If an optionee dies, the option may be exercised, to
the extent of the number of shares that the optionee could have
exercised on the date of such death, by the optionee's estate,
personal representative or beneficiary who acquires the option by
will or by the laws of descent and distribution. Such exercise
may be made at any time prior to the earlier of (i) the tenth
anniversary after the date of grant or (ii) three years after the
date of such optionee's death. On the earlier of such dates, the
option shall terminate.
7.5 ASSIGNABILITY
(a) A stock option shall not be assigned, alienated,
pledged, attached, sold, transferred or encumbered by a
Participant other than by will or by the laws of descent and
distribution, or in the case of a Non-statutory Option,
(1) by transfer without consideration by a
Participant, subject to such rules as the Committee may adopt to
preserve the purposes of the Plan (including limiting such
transfers to transfers by Participants who are directors or
executive officers of the Corporation), to
(A) a member of his or her Immediate Family (as
defined),
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(B) a trust solely for the benefit of the
Participant and his or her Immediate Family, or
(C) a partnership, limited liability company or
corporation whose only partners, members or shareholders are the
Participant and/or his or her Immediate Family Members.
(each transferee described in (1) is hereafter referred to
as a "Permitted Transferee"), provided that the Committee is
notified in advance in writing of the terms and conditions of any
proposed transfer intended to be described in (1) and it
determines that the proposed transfer complies with the
requirements of the Plan and the applicable option agreement.
Any purported assignment, alienation, pledge, attachment, sale,
transfer or encumbrance that does not qualify under (1) shall be
void and unenforceable against the Company. For purposes of the
Plan, "Immediate Family" means, with respect to a particular
Participant, the Participant's spouse, children or grandchildren
(including adopted and step children and grandchildren).
(b) The terms of the stock option shall apply to the
beneficiaries, executors and administrators of the Participant
and of the Permitted Transferees of the Participant (including
the beneficiaries, executors and administrators of the Permitted
Transferees), except that Permitted Transfers shall not transfer
any stock option other than by will or by the laws of descent and
distribution.
(c) A stock option shall be exercised only by the
Participant (or his or her attorney in fact or guardian)
(including, in the case of a transferred option, by a Permitted
Transferee), or, in the case of the Participant's death, by the
Participant's executor or administrator (including, in the case
of a transferred option, by the executor or administrator of the
Permitted Transferee), and no shares of Common Stock shall be
issued by the Company unless the exercise of a stock option is
accompanied by sufficient payment, as determined by the Company,
to meet its withholding tax obligations on such exercise or by
other arrangements satisfactory to the Committee to provide for
such payment.
7.6 LIMITATION ON INCENTIVE STOCK OPTIONS
During a calendar year, the aggregate fair market value
of the option stock (determined at the time of the ISO grant) for
which ISOs are exercisable by a person for the first time under
the Plan, cannot exceed $100,000.
7.7 EXPIRATION OF OPTIONS
Notwithstanding the provisions of Sections 7.3 and 7.4
above, the Committee may, within its discretion, designate an
expiration date for options granted hereunder which is later than
the expiration dates contained in Sections 7.3 and 7.4.
8. RESTRICTED SHARE AWARDS
8.1 GRANT OF RESTRICTED SHARE AWARDS
The Committee will determine for each Participant the
time or times when Restricted Shares shall be awarded and the
number of shares of Common Stock to be covered by each Restricted
Share award.
8.2 RESTRICTIONS
Shares of Common Stock issued to a Participant as a
Restricted Share award will be subject to the following
restrictions ("Share Restrictions"):
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(a) Except as set forth in Paragraphs 8.4 and 8.5,
upon the termination of employment or association of a
Participant with the Corporation, all of the Participant's
Restricted Shares which are subject to Share Restrictions will be
forfeited and returned to Rio or, in the event such Restricted
Shares were provided to the Participant from shares of Common
Stock purchased by the Subsidiary, then the Restricted Shares
will be returned to the Subsidiary. In either case, all rights
of the Participant to such Restricted Shares will terminate
without any payment of consideration by Rio or the Subsidiary
with which the Participant is employed or associated, unless the
Participant maintains his or her employment or association
(including consulting arrangements) with Rio or a Subsidiary for
a period of time determined by the Committee.
(b) During the longer of the restriction period
("Restriction Period") relating to a Restricted Share award or a
period of six months and one day from the date of the award, none
of the Restricted Shares subject to such award may be sold,
assigned, bequeathed, transferred, pledged, hypothecated or
otherwise disposed of in any way by the Participant.
(c) The Committee may require the Participant to enter
into an escrow agreement providing that the certificates
representing Restricted Shares sold or granted pursuant to the
Plan will remain in the physical custody of Rio or the employing
Subsidiary or an escrow holder during the Restriction Period.
(d) Each certificate representing a Restricted Share
sold or granted pursuant to the Plan will bear a legend making
appropriate reference to the restrictions imposed on the
Restricted Share.
(e) The Committee may impose other restrictions on any
Restricted Shares sold pursuant to the Plan as it may deem
advisable, including without limitation, restrictions under the
Securities Act of 1933, as amended, under the requirements of any
stock exchange upon which such share or shares of the same class
are then listed and under any state securities laws or other
securities laws applicable to such shares.
8.3 RIGHTS AS A STOCKHOLDER
Except as set forth in Paragraph 8.2(b), the recipient
of a Restricted Share award will have all of the rights of a
stockholder of Rio with respect to the Restricted Shares,
including the right to vote the Restricted Shares and to receive
all dividends or other distributions made with respect to the
Restricted Shares.
8.4 LAPSE OF RESTRICTIONS AT TERMINATION OF EMPLOYMENT
In the event of the termination of employment, or
association of a Participant during the Restriction Period by
reason of death, total and permanent disability, retirement as
determined under any of the Corporation's pension plans, if any,
or discharge from employment other than a discharge for cause,
the Committee may, at its discretion, remove Share Restrictions
on Restricted Shares subject to a Restricted Share award.
Restricted Shares to which the Share Restrictions have
not so lapsed will be forfeited and returned to the Corporation
as provided in Paragraph 8.2(a).
8.5 LAPSE OF RESTRICTIONS AT DISCRETION OF THE
COMMITTEE
The Committee may shorten the Restriction Period or
remove any or all Share Restrictions if, in the exercise of its
absolute discretion, it determines that such action is in the
best interests of the Corporation and equitable to the
Participant.
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8.6 LISTING AND REGISTRATION OF SHARES
The Corporation may, in its reasonable discretion,
postpone the issuance and/or delivery of Restricted Shares until
completion of stock exchange listing, or registration, or other
qualification of such Restricted Shares under any law, rule or
regulation.
8.7 DESIGNATION OF BENEFICIARY
A Participant may, with the consent of the Committee,
designate a person or persons to receive, in the event of death,
any Restricted Shares to which such Participant would then be
entitled. Such designation will be made upon forms supplied by
and delivered to the Committee and may be revoked in writing by
the Participant. If a Participant fails effectively to designate
a beneficiary, then such Participant's estate will be deemed to
be the beneficiary.
8.8 WITHHOLDING OF TAXES FOR RESTRICTED SHARES
When the Participant, as holder of the Restricted
Shares, recognizes income, either on the Date of Grant or the
date the restrictions lapse, Rio or a Subsidiary, as applicable,
shall withhold from the shares of Common Stock, the number of
shares necessary to satisfy Rio's or the Subsidiary's, as
applicable, obligation to withhold federal taxes, such
determination to be based on the shares' Fair Market Value as of
the date income is recognized.
9. CAPITAL ADJUSTMENTS
The number and price of Common Stock covered by each award
of options and/or Restricted Shares and the total number of
shares that may be granted or sold under the Plan shall be
proportionally adjusted to reflect, subject to any required
action by stockholders, any stock dividend or split,
recapitalization, merger, consolidation, spin-off,
reorganization, combination or exchange of shares or other
similar corporate change.
10. CHANGE OF CONTROL
Notwithstanding the provisions of Section 7, in the event of
a change of control, all share restrictions on all Restricted
Shares will lapse and vesting on all unexercised stock options
will accelerate to the change of control date. For purposes of
this plan, a "Change of Control" of Rio shall be deemed to have
occurred at such time as (a) any "person" (as that term is used
in Section 13(d) and 14(d) of the Exchange Act), other than
Anthony A. Marnell II, James A. Barrett, or their affiliates, or
an employee benefit plan of the Corporation becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of Rio representing
25.0% or more of the combined voting power of Rio's outstanding
securities ordinarily having the right to vote at the election of
directors; or (b) individuals who constitute the Board of
Directors of Rio on the date hereof (the "Incumbent Board") cease
for any reason to constitute at least a majority thereof; or (c)
the approval by Rio's stockholders of the merger or consolidation
of Rio with any other corporation or business organization, the
sale of all or substantially all the assets of Rio, or the
liquidation or dissolution of Rio; or (d) a proxy statement is
distributed soliciting proxies from the stockholders of Rio
seeking stockholder approval of a plan of reorganization, merger
or consolidation of Rio with one or more corporations as a result
of which the outstanding shares of Rio's securities are actually
exchanged for or converted into cash or property or securities
not issued by Rio; or (e) at least a majority of the Incumbent
Board who are in office immediately prior to any action proposed
to be taken by Rio determine that such proposed action, if taken,
would constitute a change of control of Rio and such action is
taken.
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11. APPROVALS
The issuance of shares pursuant to this Plan is expressly
conditioned upon obtaining all necessary approvals from all
regulatory agencies from which approval is required, including
gaming regulatory agencies, and upon obtaining stockholder
ratification of the Plan.
12. EFFECTIVE DATE OF PLAN
The effective date of the Plan is January 26, 1995.
13. TERM AND AMENDMENT OF PLAN
This Plan shall expire on January 30, 2005 (except to
options and Restricted Shares outstanding on that date). Rio's
Board may terminate or amend the Plan in any respect at any time,
except that, without the approval of the holders of a majority of
the outstanding Common Stock: the total number of shares that
may be sold, issued or transferred under the Plan may not be
increased (except by adjustment pursuant to Section 9); the
provisions of Section 4 regarding eligibility may not be
modified; the purchase price at which shares may be offered
pursuant to options may not be reduced (except by adjustment
pursuant to Section 9); and the expiration date of the Plan may
not be extended and no change may be made which would cause the
Plan not to comply with Rule 16b-3 of the Exchange Act. No
action of the Rio Board or Rio's stockholders, however, may,
without the consent of an optionee or Restricted Shares grantee,
alter or impair such Participant's rights under any option or
Restricted Shares previously granted.
14. NO RIGHT OF EMPLOYMENT
Neither the action of Rio in establishing this Plan, nor any
action taken by any Board of Rio or any Subsidiary or the
Committee, nor any provision of the Plan itself, shall be
construed to limit in any way the right of Rio to terminate a
Participant's employment or association at any time; nor shall it
be evidence of any agreement or understanding, expressed or
implied, that the Corporation will employ an employee in any
particular position nor ensure participation in any future
compensation or stock purchase program.
15. WITHHOLDING TAXES
Rio or the Subsidiary, as applicable, shall have the right
to deduct withholding taxes from any payments made pursuant to
the Plan or to make such other provisions as it deems necessary
or appropriate to satisfy its obligations to withhold federal,
state or local income or other taxes incurred by reason of
payments or the issuance of Common Stock under the Plan.
Whenever under the Plan, Common Stock is to be delivered upon
vesting of Restricted Shares or exercise of an option, the
Committee shall be entitled to require as a condition of delivery
that the Participant remit or provide for the withholding of an
amount sufficient to satisfy all federal, state and other
government withholding tax requirements related thereto.
16. PLAN NOT A TRUST
Nothing contained in the Plan and no action taken pursuant
to the Plan shall create or be construed to create a trust of any
kind, or a fiduciary relationship, between the Corporation and
any Participant, the executor, administrator or other personal
representative, or designated beneficiary of such Participant, or
any other persons. If and to the extent that any Participant or
such Participant's executor, administrator or other personal
representative, as the case may be, acquires a right to receive
any payment from the Corporation pursuant to the Plan, such right
shall be no greater than the right of an unsecured general
creditor of the Corporation.
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17. NOTICES
Each Participant shall be responsible for furnishing the
Committee with the current and proper address for the mailing of
notices and delivery of agreements, Common Stock and cash
pursuant to the Plan. Any notices required or permitted to be
given shall be deemed given if directed to the person to whom
addressed at such address and mailed by regular United States
mail, first-class and prepaid. If any item mailed to such
address is returned as undeliverable to the addressee, mailing
will be suspended until the Participant furnishes the proper
address. This provision shall not be construed as requiring the
mailing of any notice or notification if such notice is not
required under the terms of the Plan or any applicable law.
18. SEVERABILITY OF PROVISIONS
If any provision of this Plan shall be held invalid or
unenforceable, such invalidity or unenforceability shall not
affect any other provisions hereof, and this Plan shall be
construed and enforced as if such provisions had not been
included.
19. PAYMENT TO MINORS, ETC.
Any benefit payable to or for the benefit of a minor, an
incompetent person or other person incapable of receipting
therefor shall be deemed paid when paid to such person's guardian
or to the party providing or reasonably appearing to provide for
the care of such person, and such payment shall fully discharge
the Committee, the Corporation and other parties with respect
thereto.
20. HEADINGS AND CAPTIONS
The headings and captions herein are provided for reference
and convenience only, shall not be considered part of the Plan,
and shall not be employed in the construction of the Plan.
21. CONTROLLING LAW
This Plan shall be construed and enforced according to the
laws of the State of Nevada to the extent not preempted by
federal law, which shall otherwise control.
22. ENFORCEMENT OF RIGHTS
In the event the Corporation or a Participant is required to
bring any action to enforce the terms of this Plan, the
prevailing party shall be reimbursed by the non-prevailing party
for all costs and fees, including actual attorney fees, for
bringing and pursuing such action.
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EXHIBIT 4.08
89
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NINTH AMENDMENT TO
CREDIT AGREEMENT AND NOTES
THIS NINTH AMENDMENT TO THE CREDIT AGREEMENT AND NOTES
(this "Ninth Amendment") is made and dated as of January 13, 1997
among Rio Properties, Inc., a Nevada corporation (the "Company"),
Rio Leasing, Inc. ("Rio Leasing; the Company and Rio Leasing,
each a "Borrower" and collectively, the "Borrowers"), the several
financial institutions party hereto ("Banks"), and Bank of
America National Trust and Savings Association, as agent for the
Banks (the "Agent") and amends (a) the Credit Agreement dated as
of July 15, 1993 among the Company, the Banks and the Agent, as
amended by a First Amendment to Credit Agreement dated as of
October 25, 1993, a Second Amendment to Credit Agreement dated as
of November 8, 1993, a Third Amendment to Credit Agreement dated
as of April 15, 1994, a Fourth Amendment to Credit Agreement
dated as of December 16, 1994, a Fifth Amendment to Credit
Agreement dated as of March 20, 1995, a Sixth Amendment to Credit
Agreement dated as of July 31, 1995, a Seventh Amendment to
Credit Agreement dated as of January 17, 1996 and an Eighth
Amendment to Credit Agreement dated as of June 17, 1996 (as so
amended, the "Agreement"), and (b) all Notes executed and
delivered by the Company.
RECITALS
A. The Company has notified the Agent that the Parent
Guarantor desires to issue up to $125,000,000 in aggregate
principal amount of subordinated notes.
B. The Company has requested that the Agent and the
Banks permit a newly formed subsidiary of the Parent Guarantor,
Rio Leasing, Inc. to be a co-Borrower under the Agreement.
C. Pursuant to Section 7.13 of the Agreement, the
Company and its Subsidiaries are permitted to expend up to
$35,000,000 to acquire additional real property. The Company
formed a new subsidiary, Cinderlane, Inc., a Nevada corporation
("Cinderlane"), principally for the purpose of acquiring such
real property. The Company downstreamed money to Cinderlane to
acquire certain properties, and desires to downstream additional
money to Cinderlane to fund future acquisitions, all within the
$35,000,000 basket provided in Section 7.13. The property which
Cinderlane has acquired and contemplates acquiring is described
on Schedule 5.28 hereto. Among the property acquired by
Cinderlane is the Cinderlite Parcel described on Exhibit O to the
Agreement, as revised by this Ninth Amendment (the "Cinderlite
Parcel").
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D. The Company has requested a waiver under the
Agreement to ratify such prior downstreaming and an amendment to
the Agreement to permit future investments in Subsidiaries with
respect to which Sections 6.14 and 6.15 of the Agreement have
been complied with. In connection therewith, the Company is
willing to cause Cinderlane to contribute the Cinderlite Parcel
to the Company, and pledge the Cinderlite Parcel and the other
parcels described on Exhibit O (collectively, the "Transferred
Properties") to the Secured Parties.
E. The Agent and Banks are willing to agree to the
foregoing provided (i) Rio Leasing pledges substantially all of
its assets to the Banks, (ii) Cinderlane becomes a guarantor and
its stock is pledged to the Agent, (iii) the Transferred
Properties are pledged to the Secured Parties, and (iv) any other
property which Cinderlane or other Subsidiaries of the Parent
Guarantor may from time to time hereafter acquire in addition to
the property to be set forth on Schedule 5.28 hereto are pledged
to the Secured Parties.
NOW, THEREFORE, for good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the
parties hereby agree as follows:
1. TERMS. All terms used herein shall have the same
meanings as in the Agreement and the Notes unless otherwise
defined herein. All references to the Agreement and the Notes
herein shall mean the Agreement as hereby amended.
2. AMENDMENTS TO AGREEMENT. The Loan Parties, the
Banks and the Agent hereby agree that the Agreement is amended as
follows:
2.1 The first paragraph and first recital of the
Agreement are amended and restated in their entirety as follows:
"This CREDIT AGREEMENT is entered into as of July
15, 1993, among Rio Properties, Inc., a Nevada
corporation (the "COMPANY"), Rio Leasing, Inc., a
Nevada corporation ("RIO LEASING; the Company and Rio
Leasing, each a "BORROWER" and collectively, the
"BORROWERS"), the several financial institutions party
to this Agreement, and Bank of America National Trust
and Savings Association, as agent for the Banks.
"WHEREAS, the Banks have agreed to make a term
loan available to the Company and a revolving credit
facility available to the Borrowers upon the terms and
conditions set forth in this Agreement;"
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2.2 The following definitions in Section 1.01 of the
Agreement are amended by deleting "the Company" and "the
Company's" and inserting "a Borrower" and "a Borrower's",
respectively, in lieu thereof:
"Acquisition"
"Affiliate"
"Borrowing"
"Capital Lease Obligations"
"Conversion Date"
"Disposition"
"Environmental Claim"
"Gaming Laws"
"Guaranty"
"Interest Period"
"Loan"
"Loan Documents"
"Material Adverse Effect"
"Net Issuance Proceeds"
"Notice of Borrowing"
"Notice of "Conversion/Continuation"
"Pledge Agreement"
"Subsidiary Guarantor"
2.3 The following definition in Section 1.01 of the
Agreement is amended by deleting "the Company" and inserting "the
Borrowers" in lieu thereof:
"Pricing Ratio"
2.4 The following definitions in Section 1.01 of the
Agreement are amended by deleting "the Company and its
Subsidiaries" and inserting "the Borrowers and their respective
Subsidiaries" in lieu thereof:
"Interest Coverage Ratio"
"Interest Expense"
"Material Adverse Effect"
"Tangible Net Worth"
2.5 The following definitions in Section 1.01 of the
Agreement are amended by deleting "the Company or its
Subsidiaries", "the Company or a Subsidiary", "the Company or any
Subsidiaries", "the Company or any Subsidiary of the Company",
"the Company and/or its Subsidiaries", "the Company and its
respective Subsidiaries" and "the Company or any of its
Subsidiaries" and inserting "any Borrower or any of its
Subsidiaries" in lieu thereof:
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"Acquisition"
"Collateral"
"Collateral Documents"
"Completion Guaranty"
"Disposition"
"Funded Debt"
"Guaranty Obligation"
"Joint Venture"
"License Revocation"
"Ordinary Course of Business"
"Pledge Agreement"
2.6 The definition of "Net Income" in Section 1.01 of
the Agreement is amended by deleting "the consolidated net income
of the Company and its Subsidiaries" and inserting "the combined
net income of the Borrowers and their respective Subsidiaries" in
lieu thereof.
2.7 The following definitions in Section 1.01 of the
Agreement are amended by deleting "the Company" and "the
Company's" wherever they appear and inserting "the Loan Parties"
and the "Loan Parties'", respectively, in lieu thereof:
"Obligations"
"Real Property"
2.8 The following definitions in Section 1.01 of the
Agreement are amended and restated in their entirety as follows:
"'EBITDA' means, for any period, for the Borrowers
and their respective Subsidiaries on a combined basis,
determined in accordance with GAAP, the sum of (a) the
net income (or net loss) PLUS (b) all amounts treated
as expenses for depreciation and interest and the
amortization of intangibles of any kind to the extent
included in the determination of such net income (or
loss), PLUS (c) all accrued taxes on or measured by
income to the extent included in the determination of
such net income (or loss), adjusted by adding thereto
any Pre-Opening Expenses attributable to any New
Venture; PROVIDED, HOWEVER, that net income (or loss)
shall be computed for these purposes without giving
effect to extraordinary losses or extraordinary gains."
"'FUNDED DEBT', means as of any date of
determination, without duplication, the sum of (a) all
principal Indebtedness of the Borrowers and their
respective Subsidiaries on a combined basis for
borrowed money (including debt securities issued by any
borrower or any of its Subsidiaries) on that date, PLUS
(b) the aggregate amount of all monetary
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obligations of the Borrowers and their respective
Subsidiaries on a combined basis in respect of Capital
Leases on that date, PLUS (c) the aggregate undrawn
face amount of all letters of credit (other than
letters of credit supporting workers compensation
obligations and permitted pursuant to Section 7.08(d))
for which any Borrower or any of its Subsidiaries is
the account party but which have not been drawn as of
the date of determination, PLUS the aggregate amounts
on which a drawing has been received or paid by an
issuing bank under any such letter of credit which
drawing or payment has not been reimbursed to the
issuing bank by any Borrower or any of its Subsidiaries
as of the date of determination, all as determined in
accordance with GAAP."
"'PARENT SENIOR SUBORDINATED NOTES' means (a) the
10-5/8% Senior Subordinated Notes Due 2005 issued by
the Parent Guarantor, and (b) additional senior
subordinated notes issued from time to time by the
Parent Guarantor in an aggregate principal amount not
exceeding $125,000,000, which notes shall not require
any principal payments prior to seven years after the
date of their issuance and shall have subordination and
other terms (other than pricing) substantially the same
as the Senior Subordinated Notes referred to in clause
(a) hereof."
2.9 The definition of "Security Agreement" in Section
1.01 of the Agreement is amended by inserting the following at
the end thereof: "and shall include any Security Agreement
executed and delivered by any Borrower."
2.10 The following new definitions are inserted in
proper alphabetical order in Section 1.01 of the Agreement as
follows:
"'BORROWER' means the Company or Rio Leasing
(collectively, the 'Borrowers')."
"'CINDERLANE' means Cinderlane, Inc, a Nevada
corporation."
"'LOAN PARTIES' means the Parent Guarantor, each
Borrower, Cinderlane and any other Affiliate or
Subsidiary of any of the foregoing executing and
delivering any Loan Document from time to time
(individually, a 'Loan Party')."
"'NEW VENTURE' means Phase 5 Expansion, any other
casino, hotel, casino/hotel, resort, casino/resort,
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riverboat casino, dockside casino, golf course,
entertainment center or similar facility (or any site
or proposed site for any of the foregoing), including
any substantial additions to any of the foregoing,
directly or indirectly owned or to be owned by the
Parent Guarantor or any of its Subsidiaries."
"'PRE-OPENING EXPENSES' means, with respect to any
fiscal period, the amount of expenses (other than
Interest Expense) classified as "pre-opening expenses"
on the applicable financial statements of the Borrowers
and their respective Subsidiaries for such period,
prepared in accordance with GAAP."
"'RIO LEASING' means Rio Leasing, Inc., a Nevada
corporation."
"'SUBSIDIARY GUARANTY' means each Guaranty
executed and delivered by a Subsidiary of any Borrower,
as such document may from time to time be supplemented,
modified, amended, renewed, or extended (collectively
the "Subsidiary Guaranties")."
2.11 Sections 1.03(b), 2.01(c), 2.02(b), 2.03(f), 2.08
(last sentence only), 2.09, 2.11(b), 2.11(c), 2.12(a), 2.14,
2.15, 3.01, 3.03(a), 3.03(b), 3.06, 3.07, 4.02 (subsection (b)
and last paragraph), 6.11(c), 6.15 and 10.01 of the Agreement are
amended by deleting "Company" wherever it appears and inserting
"Borrowers" in lieu thereof. Where necessary for grammatical
correctness, relevant verbs are changed from the singular form to
the plural form.
2.12 A new Section 2.02(c) is inserted in the Agreement
immediately after Section 2.02(b) as follows:
"(c) The Loans made by each Bank may, in lieu of
Notes, be evidenced by one or more accounts or records
maintained by such Bank in the ordinary course of
business. The accounts or records maintained by each
Bank shall be conclusive absent manifest error of the
amount of the Loans made by the Banks to the Borrowers,
and the interest and payments thereon; PROVIDED,
HOWEVER, that the failure of a Bank to make, or an
error in making, a notation with respect to any Loan
shall not limit or otherwise affect the obligations of
the Borrowers hereunder to such Bank."
2.13 Section 2.03(a) of the Agreement is amended by
deleting "the Company's" and inserting "a Borrower's" in lieu
thereof.
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2.14 Sections 2.03(b), 2.04(a), 2.04(d), 2.04(e), 2.05,
2.06 and 2.07(b) of the Agreement are amended by deleting "the
Company" wherever it appears and inserting "a Borrower" in lieu
thereof.
2.15 Sections 2.03(e), 2.04(b) and 2.13(a), the proviso
to Section 2.04(a) and Section 3.02(b), of the Agreement are
amended by deleting "the Company" wherever it appears and
inserting "the relevant Borrower" in lieu thereof.
2.16 The definition of "Revolving Note" in Section 1.01
of the Agreement and Sections 2.04(c), 2.12(c), 3.02(c) and 3.04
of the Agreement are amended by (a) deleting "the Company"
wherever it first appears therein and inserting "a Borrower" (or
"Each Borrower" in the case of Section 3.04) in lieu thereof and
(b) deleting "the Company" where it appears thereafter and
inserting "such Borrower" in lieu thereof.
2.17 Section 3.05 of the Agreement is amended by (a)
deleting "the Company" where it first appears in such section and
insert "the relevant Borrower" in lieu thereof and (b) deleting
"the Company" where it appears thereafter in such sections and
inserting "such Borrower" in lieu thereof.
2.18 The introductory sentence to Article V of the
Agreement is amended and restated in its entirety as follows:
"The Borrowers jointly and severally represent and
warrant to the Agent and each Bank that:"
2.19 Sections 5.01, 5.02, 5.04, 5.09, 5.10, 5.12(a) and
(b), 5.13, 5.16, 5.21, 5.24, 6.04, 6.05, 6.07, 6.08, 6.09, 6.10,
6.12, 6.22, 6.25, 6.27 (except subhead), and 6.31 are amended by
(a) deleting "Company" wherever it appears and inserting "each
Loan Party" in lieu thereof. Where necessary for grammatical
correctness, relevant verbs are changed from the singular form to
the plural form.
2.20 Section 5.03, 5.505, 5.06, 5.07, 5.08,, 5.12(c)
and (d), 5.14, 5.15, 5.17, 5.18, 5.22, 5.25, 5.26, 5.27, 6.06,
6.23, 6.24 6.26, 6.28, 7.01 through 7.24 (except Sections 7.14
and 7.15), inclusive, and Article IX of the Agreement are amended
by (a) deleting "Company" wherever it appears and inserting "Loan
Parties" in lieu thereof and (b) deleting "its Subsidiaries"
wherever it appears and inserting "their respective Subsidiaries"
in lieu thereof. Where necessary for grammatical correctness,
relevant verbs are changed from the singular form to the plural
form.
2.21 Section 5.19 of the Agreement is amended and
restated in its entirety as follows:
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"5.19 SUBSIDIARIES. Neither the Parent
Guarantor nor any Borrower has any Subsidiaries other
than those specifically disclosed in part (a) of
SCHEDULE 5.19 hereto and neither the Parent Guarantor
nor any Borrower has any equity investments in any
other corporation or entity other than those
specifically disclosed in part (b) of SCHEDULE 5.19 in
each case as such Schedule is updated from time to time
(which updates shall be deemed to update any previous
Schedule from the date received by the Agent without
further action by any party hereto)."
2.22 A new Section 5.28 is inserted in the Agreement
immediately following Section 5.27 as follows:
"5.28 ASSETS OF CINDERLANE. As of the date of
the Ninth Amendment to this Agreement, Cinderlane
neither owns nor has contracts to purchase, options to
purchase or intentions to purchase any substantial real
or personal property other than the real property
described on SCHEDULE 5.28 hereto."
2.23 The introductory sentences to Articles VI and VII
of the Agreement are amended by deleting "Company covenants and
agrees" and "Company hereby covenants and agrees" and inserting
"borrowers hereby jointly and severally covenant and agree" in
lieu thereof.
2.24 Sections 6.01(b) of the Agreement is amended by
deleting "the Company and the Subsidiaries" and inserting "the
Borrowers and their respective Subsidiaries" in lieu thereof.
2.25 Section 6.01(c) of the Agreement is amended and
restated in their entirety as follows:
"(c) As soon as available, but not later than 30
days after the end of each calendar month of each year,
a copy of the unaudited combined balance sheet of the
Borrowers and their respective Subsidiaries as of the
end of such month and the related combined statement of
income and for the period commencing on the first day
and ending on the last day of such month, and for the
year to date and, in each case showing comparisons with
the prior year and certified by an appropriate
Responsible Officer as being complete and correct and
fairly presenting, in accordance with GAAP, the
financial position and the results of operations of the
Borrowers and their respective Subsidiaries; and"
2.26 Sections 6.02(b) and 10.02(c) of the Agreement are
amended by deleting "Company" wherever it appears and inserting
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"Loan Parties" in lieu thereof. Where necessary for grammatical
correctness, relevant verbs are changed from the singular form to
the plural form.
2.27 Section 6.02(e) of the Agreement is amended by
deleting "Company or any Subsidiary" and inserting "any Borrower
or any of its Subsidiaries" in lieu thereof.
2.28 Section 5.10 (last sentence) and Section 6.03 of
the Agreement (except the lead in sentence) is amended (a) by
deleting "the Company or any of its Subsidiaries" and "the
Company or any Subsidiary" wherever it appears and inserting "the
Loan Parties or any of their respective Subsidiaries" in lieu
thereof and (b) by deleting "the Company" wherever it appears and
inserting "any Loan Party" in lieu thereof.
2.29 Sections 6.14 and 6.15 of the Agreement are
amended and restated in their entirety as follows:
"6.14 NEW SUBSIDIARIES. The Borrowers shall cause
any Person that on or after the Closing Date becomes a
Subsidiary of any Borrower to execute and deliver to
the Agent a Guaranty and Collateral Documents in form
and substance satisfactory to the Agent pledging
substantially all the assets and all real and personal
property of such Subsidiary, and the relevant Borrower
shall pledge, or shall cause the pledging of, all
capital stock of such Subsidiary; PROVIDED, HOWEVER,
that Cinderlane shall not be required to pledge any of
the properties listed on SCHEDULE 5.28.
"In connection with any new Subsidiary, the Borrowers
shall deliver a certificate signed by a Responsible
Officer certifying that Section 5.13 is true and
correct after giving effect to such new Subsidiary, and
shall cause such Subsidiary to also deliver documents
of the type referred to in Sections 4.01 (d) and (e)
and to otherwise comply with Sections 4.01 (h) - (k)
and 6.31 with respect thereto.
"6.15 ADDITIONAL COLLATERAL. The Company shall
execute and deliver to the Agent Mortgages as
appropriate containing restrictions and granting Liens
in a manner similar to the Deed of Trust and in any
event reasonably acceptable to the Majority Banks, with
respect to each fee, fixture and leasehold interest in
real property acquired by any Borrower or any of their
respective Subsidiaries, except as provided in the
proviso to Section 6.14."
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2.30 Sections 6.31 and 6.32(c) of the Agreement are
amended by (a) deleting "Company" wherever it appears and
inserting "Loan Parties" in lieu thereof, (b) deleting "its
Subsidiaries" wherever it appears and inserting "their respective
Subsidiaries" in lieu thereof and (c) deleting "the Company's"
and inserting "the Agent's" in lieu thereof. Where necessary for
grammatical correctness, relevant verbs are changed from the
singular form to the plural form.
2.31 Section 7.02 of the Agreement is amended by
deleting "or" at the end of subsection (a), deleting the period
at the end of subsection (b) and inserting "; and" in lieu
thereof, and inserting a new subsection (c) as follows:
"(c) transfers of assets by any Subsidiary or any
Borrower to any Borrower, or transfers of assets by any
Subsidiary or any Borrower to any Subsidiaries with
respect to which Sections 6.14 and 6.15 have been
complied with."
2.32 Section 7.04 of the Agreement is amended by
deleting "or" at the end of subsection (a), deleting the period
at the end of subsection (b) and inserting "; and" in lieu
thereof, and inserting a new subsection (c) as follows:
"(c) Investments in Borrowers and Subsidiaries
with respect to which Sections 6.14 and 6.14 have been
complied with."
2.33 Section 7.05 of the Agreement is amended by
deleting "and" at the end of subsection (f), deleting the period
at the end of subsection (g) and inserting "; and" in lieu
thereof, and inserting a new subsection (h) as follows:
"(h) Indebtedness not exceeding $125,000,000 in
aggregate principal amount not requiring any principal
payments prior to seven years after the date of its
issuance and having subordination and other terms
substantially the same as the Parent Guarantor's
outstanding 10-5/8% Senior Subordinated Notes Due
2005."
2.34 Section 7.08(e) of the Agreement is amended by
deleting "$100,000,000" and inserting "$225,000,000" in lieu
thereof.
2.35 Sections 7.13 and 7.15, and the first paragraphs
of subsections 8.01(x), (y) and (z) of the Agreement are amended
by deleting "the Company" and inserting "the Borrowers" in lieu
thereof and deleting "and its consolidated Subsidiaries" and
inserting "and their combined Subsidiaries" in lieu thereof.
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2.36 Subsections 8.01(a) through (v), inclusive, of the
Agreement are amended by (a) deleting "The Company" and "the
Company" wherever it appears and inserting "Any Loan Party" and
"any Loan Party," respectively, in lieu thereof.
2.37 Article IX and Section 10.01 of the Agreement is
amended by deleting "the Company's" and "the Company" and
inserting "a Loan Party's" and "a Loan Party," respectively, in
lieu thereof.
2.38 Section 10(a) of the Agreement is amended by
inserting the following at the end thereof:
"Any notice given to any Loan Party shall be deemed to
have been given to all Loan Parties."
2.39 Section 10.04 of the Agreement is amended by
deleting "Company" and inserting "Borrowers jointly and
severally" in lieu thereof.
2.40 Sections 10.05(a) and 10.05(b)(i) of the Agreement
are amended by deleting the first references to "Company" in each
section and inserting "Borrowers jointly and severally" in lieu
thereof.
2.41 Sections 3.01, 6.01(a), 10.05(b)(i) of the
Agreement is further amended by deleting "the Company's" and
inserting "the Borrowers'" in lieu thereof.
2.42 Section 10.02(a) of the Agreement is amended by
deleting "Company" and inserting "any Borrower" in lieu thereof.
2.43 Section 10.08(3) of the Agreement is amended by
deleting "Company's" and inserting "Borrower's" in lieu thereof.
2.44 A new Section 10.20 is inserted immediately
following Section 10.19 of the Agreement as follows:
"10.20 GUARANTOR AND SURETYSHIP PROVISIONS.
"(a) Each Borrower shall be jointly and
severally liable for the repayment of all Loans.
"(b) CONDITIONS TO EXERCISE OF RIGHTS.
Each Borrower hereby waives any right it may now or
hereafter have to require the Agent or the Banks, as a
condition to the exercise of any remedy or other right
against such Borrower hereunder or under any other
document executed by such Borrower in connection with
any Obligation, (i) to proceed against any Borrower or
other Person, or against any other collateral assigned
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to the Agent by such Borrower or any other Person, (ii)
to pursue any other right or remedy in the Agent or any
Banks's power, (iii) to give notice of the time, place
or terms of any public or private sale of real or
personal property collateral assigned to the Agent by
any Borrower or other Person (other than such
Borrower), or otherwise to comply with the Nevada
enactment of the Uniform Commercial Code (as modified
or recodified from time to time) with respect to any
such personal property collateral, or (iv) to make or
give (except as otherwise expressly provided in the
Loan Documents) any presentment, demand, protest,
notice of dishonor, notice of protest or other demand
or notice of any kind in connection with any
Obligation.
"(c) DEFENSES. Each Borrower hereby
waives any defense it may now or hereafter have that
relates to: (i) any disability or other defense of any
Borrower or other Person; (ii) the cessation, from any
cause other than full performance, of the obligations
of any Borrower or other Person; (iii) the application
of the proceeds of any Obligation, by any Borrower or
other Person, for purposes other than the purposes
represented to such Borrower by any Borrower or
otherwise intended or understood by such Borrower; (iv)
any act or omission by the Agent or the Banks which
directly or indirectly results in or contributes to
the release of any Borrower or other Person or any
collateral for any Obligations; (v) the
unenforceability or invalidity of any collateral
assignment or guaranty with respect to any Obligation,
or the lack of perfection or continuing perfection or
lack of priority of any lien which secures any
Obligation; (vi) any failure of the Agent or the Banks
to marshal assets in favor of such Borrower or any
other Person; (vii) any modification of any Obligation,
including any renewal, extension, acceleration or
increase in interest rate; (viii) any election of
remedies by the Agent or the Banks that impairs any
subrogation or other right of any Borrower to proceed
against any other Borrower or other Person, including
any loss of rights resulting from anti-deficiency laws
relating to nonjudicial foreclosures of real property
or other laws limiting, qualifying or discharging
obligations or remedies; (ix) any law which provides
that the obligation of a surety or guarantor must
neither be larger in amount nor in other respects more
burdensome than that of the principal or which reduces
a surety's or guarantor's obligation in proportion to
the principal obligation; (x) any failure of the Agent
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or the Banks to file or enforce a claim in any
bankruptcy or other proceeding with respect to any
Person; (xi) the election by the Agent or the Banks, in
any bankruptcy proceeding of any Person, of the
application or non-application of Section 1111(b)(2) of
the United States Bankruptcy Code; (xii) any extension
of credit or the grant of any lien under Section 364 of
the United States Bankruptcy Code; (xiii) any use of
cash collateral under Section 363 of the United States
Bankruptcy Code; or (xiv) any agreement or stipulation
with respect to the provision of adequate protection in
any bankruptcy proceeding of any Person.
"(d) SUBROGATION. Each Borrower hereby
waives (i) any right of subrogation which such Borrower
may now or hereafter have against any other Borrower
that relates to any Obligation, (ii) any right to
enforce any remedy such Borrower may now or hereafter
have against any other Borrower that relates to any
Obligation (including without limitation any right of
reimbursement, indemnity or contribution), and (iii)
any right to participate in any collateral now or
hereafter assigned to the Agent or the Banks with
respect to any Obligation (and each Borrower further
agrees that, if and to the extent that any waiver set
forth in this section is ever held to be unenforceable,
all such rights of subrogation, enforcement and
participation shall be junior and subordinate to the
right of the Agent or the Banks to obtain payment and
performance of the Obligations and to all rights of the
Agent or the Banks in and to any property which now or
hereafter serves as collateral security for any
Obligation).
"(e) BORROWER INFORMATION. Each Borrower
warrants and agrees: (i) that such Borrower has not
relied, and will not rely, on any representations or
warranties by the Agent or the Banks to such Borrower
with respect to the creditworthiness of any Borrower or
the prospects of payment of any Obligation from sources
other than the Collateral; (ii) that such Borrower has
established and/or will establish adequate means of
obtaining from each Borrower on a continuing basis
financial and other information pertaining to the
business operations, if any, and financial condition of
such Borrower; (iii) that such Borrower assumes full
responsibility for keeping informed with respect to any
Borrower's business operation, if any, and financial
condition; and (iv) that the Agent or the Banks shall
have no duty to disclose or report to such Borrower any
information now or hereafter known to the Agent or the
13
<PAGE>
Banks with respect to any information now or hereafter
known to the Agent or the Banks with respect to any
Borrower, including without limitation information
relating to any Borrower's business operation or
financial condition.
"(f) OTHER RIGHTS OF SURETIES. Each
Borrower hereby waives all other rights it may now or
hereafter have, whether or not similar to any of the
foregoing, by reason of laws of the State of Nevada
pertaining to sureties or guarantors.
"(g) SUBORDINATION. Until all of the
Obligations have been fully paid and performed, (i)
each Borrower hereby agrees that all existing an future
indebtedness and other obligations of such Borrower to
any other Borrower (collectively, the "Subordinated
Debt") shall be and are hereby subordinated to all
Obligations which constitute obligations of the
applicable Borrower, and the payment thereof is hereby
deferred in right of payment to the prior payment and
performance of all such Obligations; (ii) such Borrower
shall not collect or receive any cash or non-cash
payments on any Subordinated Debt or transfer all or
any portion of the Subordinated Debt; and (iii) in the
event that, notwithstanding the foregoing, any payment
by, or distribution of assets of, any Borrower with
respect to any Subordinated Debt is received by such
Borrower such payment or distribution shall be held in
trust and immediately paid over to the Agent or the
Banks, is hereby assigned to the Agent or the Banks as
security for the Obligations, and shall be held by the
Agent or the Banks in an interest bearing account until
all Obligations have been fully paid and preformed.
"(h) LAWFULNESS AND REASONABLENESS. Each
Borrower warrants that all of the waivers in this
Agreement are made with full knowledge of their
significance, and of the fact that events giving rise
to any defense or other benefit waived by such Borrower
may destroy or impair right which such Borrower would
otherwise have against the Agent or the Banks, any
Borrower and other Persons, or against collateral.
Each Borrower agrees that all such waivers are
reasonable under the circumstances and further agrees
that, if any such waiver is determined (by a court of
competent jurisdiction) to be contrary to any law or
public policy, such waiver shall be effective to the
fullest extent permitted by law."
14
<PAGE>
2.45 Exhibit O to the Agreement is amended by adding
the information set forth on Exhibit O hereto.
2.46 Schedule 5.19 to the Agreement is amended and
restated in its entirety in the form of Schedule 5.19 hereto.
2.47 A new Schedule 5.28 is added to the Agreement in
the form of Schedule 5.28 hereto.
3. AMENDMENTS TO COMPANY NOTES. The Loan Parties,
the Banks and the Agent hereby agree that all Notes executed and
delivered by the Company are amended by deleting "among the
Company," in the second paragraph of each Note and inserting
"among the Borrowers," in lieu thereof.
4. REPRESENTATIONS AND WARRANTIES. The Borrowers
jointly and severally represent and warrant to the Banks and
Agent:
4.1 AUTHORITY. Each Loan Party has all necessary
power and has taken all corporate action necessary to make this
Ninth Amendment, the Agreement, and all other agreements and
instruments to which it is party executed in connection herewith
and therewith, the valid and enforceable obligations they purport
to be.
4.2 NO LEGAL OBSTACLE TO NINTH AMENDMENT. Neither the
execution of this Ninth Amendment, the making by any Borrower of
any borrowings under the Agreement, nor the performance of the
Agreement by any Loan Party has constituted or resulted in or
will constitute or result in a breach of the provisions of any
contract to which any Loan Party is a party, or the violation of
any law, judgment, decree or governmental order, rule or
regulation applicable to any Loan Party, or result in the
creation under any agreement or instrument of any security
interest, lien, charge, or encumbrance upon any of the assets of
any Loan Party, except as permitted in the Agreement. No
approval or authorization of any governmental authority is
required to permit the execution, delivery or performance by any
Loan Party of this Ninth Amendment, the Agreement, or the
transactions contemplated hereby or thereby, or the making of any
borrowing by any Borrower under the Agreement.
4.3 INCORPORATION OF CERTAIN REPRESENTATIONS. The
representations and warranties set forth in Article V of the
Agreement are true and correct in all respects on and as of the
date hereof as though made on and as of the date hereof.
4.4 DEFAULT. No Event of Default under the Agreement
has occurred and is continuing.
15
<PAGE>
5. CONDITIONS, EFFECTIVENESS. The effectiveness of
this Ninth Amendment shall be subject to the compliance by the
Loan Parties with their agreements herein contained, and to the
delivery of the following to the Agent in form and substance
satisfactory to the Agent:
5.1 CORPORATE RESOLUTIONS. A copy of a resolution or
resolutions passed by the Board of Directors of each Loan Party,
certified by the Secretary or an Assistant Secretary of each Loan
Party as being in full force and effect on the date hereof,
authorizing the amendments to the Agreement, and the Loan
Documents to which each is a party, and the execution, delivery
and performance of this Ninth Amendment and, with respect to the
other Loan Parties, all other Loan Documents to which they are a
party.
5.2 AUTHORIZED SIGNATORIES. A certificate, signed by
the Secretary or an Assistant Secretary of each Loan Party dated
the date hereof, as to the incumbency of the person or persons
authorized to execute and deliver this Ninth Amendment and any
instrument or agreement required hereunder on behalf of the Loan
Parties.
5.3 AMENDMENT TO COMPANY SECURITY AGREEMENT. The
Company shall have executed and delivered an Amendment to Company
Security Agreement substantially in the form of Exhibit 5.3(b) to
this Ninth Amendment.
5.4 FIRST AMENDMENT TO PARENT GUARANTY. The Parent
Guarantor shall have executed and delivered a First Amendment to
Parent Guaranty substantially in the form of Exhibit 5.4 to this
Ninth Amendment.
5.5 RIO LEASING NOTES AND SECURITY AGREEMENT. Rio
Leasing shall have executed and delivered:
(a) a Revolving Note in favor of each Bank in
substantially the form of Exhibit 5.5(a) to this Ninth Amendment;
and
(b) A Rio Leasing Security Agreement substantially in
the form of Exhibit 5.5(b) to this Ninth Amendment, together with
all financing statements, certificates, assurances and other
instruments as the Agent shall have requested.
5.6 CINDERLANE GUARANTY. Cinderlane shall have
executed and delivered a Guaranty substantially in the form or
Exhibit 5.6 to this Ninth Amendment.
16
<PAGE>
5.7 OFFICER'S CERTIFICATE. A certificate signed by a
Responsible Officer certifying that Section 5.13 of the Agreement
is true and correct after giving effect to this Ninth Amendment.
5.8 OTHER DOCUMENTS. The Loan Parties shall have (and
shall cause any of their respective Subsidiaries to have) done,
executed, acknowledged, delivered, recorded, re-recorded, filed,
re-filed, registered and re-registered, any and all such further
acts, deeds, conveyances, security agreements, Mortgages,
assignments, estoppel certificates, financing statements and
continuations thereof, notices of assignment, transfers,
certificates, assurances and other instruments as the Agent shall
have requested in order (i) to carry out more effectively the
purposes of this Ninth Amendment and (ii) to perfect and maintain
the validity, effectiveness and priority of any of the Collateral
Documents and the Liens intended to be created thereby.
5.9 OTHER EVIDENCE. Such other evidence with respect
to the Loan Parties or any other person as the Agent or any Bank
may reasonably request to establish the consummation of the
transactions contemplated hereby, the taking of all corporate
action in connection with this Ninth Amendment, the Agreement and
the Notes and the compliance with the conditions set forth
herein.
6. CERTAIN CONDITIONS SUBSEQUENT. The continued
effectiveness of this Ninth Amendment and the Agreement is
subject to the delivery, not later than March 31, 1997, of all of
the following to the Agent, in form and substance satisfactory to
the agent (and the failure to so deliver all of the following by
such date shall constitute an immediate Event of Default under
the Agreement):
6.1 TRANSFER OF CINDERLITE PARCEL; DEEDS OF TRUST.
Evidence that Cinderlane has contributed the Cinderlite Parcel to
the Company, and the Company has executed and delivered an
Unsecured Indemnity Agreement and the additional Deeds of Trusts
or amendments to Deeds of Trust pledging the Transferred
Properties to the Agent and the Banks.
6.2 TITLE INSURANCE. A title insurance company
acceptable to the Agent and the Banks shall have issued or
committed to issue an ALTA Lender's coverage policy of title
insurance issued in connection with the additional Deeds of Trust
or amendments to the Deeds of Trust as requested by the Agent to
reflect the Transferred Properties. In addition, one or more
other title insurance companies acceptable to the Agent and the
Banks shall have issued such reinsurance as the Agent and the
Banks may require. No title matter may be insured over by any
title company without the express written consent of the Agent.
17
<PAGE>
6.3 OTHER DOCUMENTS. The Loan Parties shall have (and
shall cause any of their respective Subsidiaries to have) done,
executed, acknowledged, delivered, recorded, re-recorded, filed,
re-filed, registered and re-registered, any and all such further
acts, deeds, conveyances, security agreements, Mortgages,
assignments, estoppel certificates, financing statements and
continuations thereof, notices of assignment, transfers,
certificates, assurances and other instruments as the Agent shall
have requested in order (i) to carry out more effectively the
purposes of this Ninth Amendment and (ii) to perfect and maintain
the validity, effectiveness and priority of any of the Collateral
Documents and the Liens intended to be created thereby.
6.4 OTHER EVIDENCE. Such other evidence with respect
to the Loan Parties or any other person as the Agent or any Bank
may reasonably request to establish the consummation of the
transactions contemplated hereby, the taking of all corporate
action in connection with this Ninth Amendment, the Agreement and
the Notes and the compliance with the conditions set forth
herein.
7. MISCELLANEOUS.
7.1 EFFECTIVENESS OF THE AGREEMENT AND NOTES. Except
as hereby expressly amended, the Agreement and the Notes shall
remain in full force and effect, and are hereby ratified and
confirmed in all respects.
7.2 WAIVERS. The Banks and the Agent waive any
Default or Event of Default arising under the Agreement by reason
of the Company making investments in Cinderlane to permit
Cinderlane to acquire the real property permitted to be acquired
as Capital Expenditures under Section 7.13 or by reason of
Cinderlane transferring any real property so acquired to the
Company. This Ninth Amendment is specific in time and in intent
and does not constitute, nor should it be construed as, a waiver
of any other right, power or privilege under the Loan Documents,
or under any agreement, contract, indenture, document or
instrument mentioned in the Loan Documents; nor does it preclude
any exercise thereof or the exercise of any other right, power or
privilege, nor shall any future waiver of any right, power,
privilege or default hereunder, or under any agreement, contract,
indenture, document or instrument mentioned in the Loan
Documents, constitute a waiver of any other default of the same
or of any other term or provision.
7.3 COUNTERPARTS. This Ninth Amendment may be
executed in any number of counterparts and all of such
counterparts taken together shall be deemed to constitute one and
the same instrument. This Ninth Amendment shall not become
effective until the Borrowers, all Banks and the Agent shall have
18
<PAGE>
signed a copy hereof, whether the same or counterparts, and the
same shall have been delivered to the Agent.
7.4 JURISDICTION. This Ninth Amendment, and any
instrument or agreement required hereunder, shall be governed by
and construed under the laws of the State of Nevada; provided
that the Agent and the Banks shall retain all rights arising
under Federal law.
7.5 RIO LEASING AS A PARTY. By signing below, Rio
Leasing agrees to become a party to the Agreement and to be bound
by the terms and conditions thereof as if an original signatory
thereto as a Borrower.
IN WITNESS WHEREOF, the parties hereto have caused this
Ninth Amendment to be duly executed and delivered as of the date
first written above.
RIO PROPERTIES, INC.
By: _________________________
Title: ______________________
RIO LEASING, INC.
By: _________________________
Title: ______________________
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as Agent and a Bank
By: _________________________
Jon Varnell
Managing Director
WELLS FARGO BANK NATIONAL
ASSOCIATION
By: _________________________
Title: ______________________
19
<PAGE>
(Signatures continue)
20
<PAGE>
FIRST SECURITY BANK OF UTAH, N.A.
By: _________________________
Title: ______________________
NBD BANK
By: _________________________
Title: ______________________
SOCIETE GENERALE
By: _________________________
Title: ______________________
U.S. BANK OF NEVADA
By: _________________________
Title: ______________________
BANK OF SCOTLAND
By: _________________________
Title: ______________________
PNC BANK, NATIONAL ASSOCIATION
SUCCESSOR BY MERGER TO MIDLANTIC
BANK, N.A.
By: _________________________
Title: ______________________
BANK OF HAWAII
By: _________________________
Title: ______________________
21
<PAGE>
TENTH AMENDMENT TO
CREDIT AGREEMENT
THIS TENTH AMENDMENT TO CREDIT AGREEMENT (this "Tenth
Amendment") is made and dated as of February 3, 1997 among Rio
Properties, Inc., a Nevada corporation (the "Company"), Rio
Leasing, Inc. ("Rio Leasing"; the Company and Rio Leasing, each a
"Borrower" and collectively, the "Borrowers"), the several
financial institutions party hereto ("Banks"), and Bank of
America National Trust and Savings Association, as agent for the
Banks (the "Agent") and amends the Credit Agreement dated as of
July 15, 1993 among the Borrowers, the Banks and the Agent, as
amended by a First Amendment to Credit Agreement dated as of
October 25, 1993, a Second Amendment to Credit Agreement dated as
of November 8, 1993, a Third Amendment to Credit Agreement dated
as of April 15, 1994, a Fourth Amendment to Credit Agreement
dated as of December 16, 1994, a Fifth Amendment to Credit
Agreement dated as of March 20, 1995, a Sixth Amendment to Credit
Agreement dated as of July 31, 1995, a Seventh Amendment to
Credit Agreement dated as of January 17, 1996, an Eighth
Amendment to Credit Agreement dated as of June 17, 1996 and a
Ninth Amendment to Credit Agreement and Notes dated as of January
13, 1997 (as so amended, the "Agreement").
RECITAL
The Borrowers have requested an amendment to the
Agreement eliminating all restrictions on dividends to the Parent
Guarantor, and the Agent and Banks are willing to agree to the
foregoing on the terms and conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the
parties hereby agree as follows:
1. TERMS. All terms used herein shall have the same
meanings as in the Agreement unless otherwise defined herein.
All references to the Agreement herein shall mean the Agreement
as hereby amended.
2. AMENDMENTS TO AGREEMENT. The Loan Parties, the
Banks and the Agent hereby agree that the Agreement is amended as
follows:
2.1 Section 7.12(c) of the Agreement is amended and
restated in its entirety as follows:
"(c) Dividends to the Parent Guarantor."
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<PAGE>
2.2 Section 8.01 of the Agreement is amended by
inserting a new Section 8.01(aa) immediately after Section
8.01(z) as follows:
"(aa) USE OF DIVIDENDS BY PARENT GUARANTOR.
Notwithstanding anything else contained in this
Agreement to the contrary, any dividends received by
the Parent Guarantor from any other Loan Party as
permitted by Section 7.12(c) shall be promptly (i) used
to make required interest payments on the Parent Senior
Subordinated Notes as and when due, (ii) contributed to
the Company, or (iii) used for operating expenses of
the Parent Guarantor in the Ordinary Court of
Business;"
2.3 Sections 10.01 and 10.06 through 10.19, inclusive,
of the Agreement are amended by deleting "Company" wherever it
appears and inserting "Borrowers" in lieu thereof. Where
necessary for grammatical correctness, relevant verbs are changed
from the singular form to the plural form.
2.4 Article IX of the Agreement is amended by deleting
"the Company," "the Company and its Subsidiaries" and "the
Company's" and inserting "the Loan Parties," "the Loan Parties
and their respective Subsidiaries" and "the Loan Parties'"
respectively, in lieu thereof.
3. REPRESENTATIONS AND WARRANTIES. The Borrowers
jointly and severally represent and warrant to the Banks and
Agent:
3.1 AUTHORITY. The Borrowers have all necessary power
and have taken all corporate action necessary to make this Tenth
Amendment, the Agreement, and all other agreements and
instruments to which they are a party executed in connection
herewith and therewith, the valid and enforceable obligations
they purport to be.
3.2 NO LEGAL OBSTACLE TO TENTH AMENDMENT. Neither the
execution of this Tenth Amendment, the making by any Borrower of
any borrowings under the Agreement, nor the performance of the
Agreement by any Borrower has constituted or resulted in or will
constitute or result in a breach of the provisions of any
contract to which any Borrower is a party, or the violation of
any law, judgment, decree or governmental order, rule or
regulation applicable to any Borrower, or result in the creation
under any agreement or instrument of any security interest, lien,
charge, or encumbrance upon any of the assets of any Borrower,
except as permitted in the Agreement. No approval or
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<PAGE>
authorization of any governmental authority is required to
permit the execution, delivery or performance by any Borrower of
this Tenth Amendment, the Agreement, or the transactions
contemplated hereby or thereby, or the making of any borrowing
by any Borrower under the Agreement.
3.3 INCORPORATION OF CERTAIN REPRESENTATIONS. The
representations and warranties set forth in Article V of the
Agreement are true and correct in all respects on and as of the
date hereof as though made on and as of the date hereof.
3.4 DEFAULT. No Event of Default under the Agreement
has occurred and is continuing.
4. MISCELLANEOUS.
4.1 EFFECTIVENESS OF THE AGREEMENT. Except as hereby
expressly amended, the Agreement remains in full force and
effect, and is hereby ratified and confirmed in all respects.
4.2 WAIVER. Any violation of the Agreement resulting
from the Company previously dividending funds to the Parent
Guarantor for its use in the Ordinary Course of Business is
hereby waived. This Tenth Amendment is specific in time and in
intent and does not constitute, nor should it be construed as, a
waiver of any other right, power or privilege under the Loan
Documents, or under any agreement, contract, indenture, document
or instrument mentioned in the Loan Documents; nor does it
preclude any exercise thereof or the exercise of any other right,
power or privilege, nor shall any future waiver of any right,
power, privilege or default hereunder, or under any agreement,
contract, indenture, document or instrument mentioned in the Loan
Documents, constitute a waiver of any other default of the same
or of any other term or provision.
4.3 COUNTERPARTS. This Tenth Amendment may be
executed in any number of counterparts and all of such
counterparts taken together shall be deemed to constitute one and
the same instrument. This Tenth Amendment shall not become
effective until the Borrowers, all Banks and the Agent shall have
signed a copy hereof, and the Parent Guarantor shall have
consented hereof, whether the same or counterparts, and the same
shall have been delivered to the Agent.
4.4 JURISDICTION. This Tenth Amendment, and any
instrument or agreement required hereunder, shall be governed by
and construed under the laws of the State of Nevada; provided
that the Agent and the Banks shall retain all rights arising
under Federal law.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Tenth Amendment to be duly executed and delivered as of the date
first written above.
RIO PROPERTIES, INC.
RIO LEASING, INC.
By:________________________________
Ronald J. Radcliffe
Chief Financial Officer
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION,
as Agent
By:_______________________________
Patrick Carroll
Vice President
BANK OF AMERICA NATIONAL TRUST AND
SAVING ASSOCIATION,
as a Bank
By:________________________________
Jon Varnell
Managing Director
WELLS FARGO BANK NATIONAL ASSOCIATION
By:________________________________
Title:_____________________________
FIRST SECURITY BANK, N.A.
By:_______________________________
Title:_____________________________
(Signatures continue)
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<PAGE>
NBD BANK
By:________________________________
Title:_____________________________
SOCIETE GENERALE
By:________________________________
Title:_____________________________
U.S. BANK OF NEVADA
By:_______________________________
Title:____________________________
BANK OF SCOTLAND
By:_______________________________
Title:____________________________
PNC BANK, NATIONAL ASSOCIATION,
SUCCESSOR BY MERGER TO MIDLANTIC
BANK, N.A.
By:_______________________________
Title:____________________________
BANK OF HAWAII
By:________________________________
Title:_____________________________
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<PAGE>
CONSENT OF PARENT GUARANTOR
AND SUBSIDIARY GUARANTOR
The undersigned Parent Guarantor, as party to the Parent
Guaranty dated July 15, 1993, and the undersigned Subsidiary
Guarantor, as party to the Subsidiary Guaranty dated January 13,
1997, hereby consent to the foregoing Tenth Amendment to Credit
Agreement dated as of February 3, 1997 and confirm that the
Parent Guaranty and Subsidiary Guaranty remain in full force and
effect after giving effect thereto and represent and warrant that
there is no defense, counterclaim or offset of any type or nature
under the Parent Guaranty or the Subsidiary Guaranty.
Dated as of February 3, 1997.
RIO HOTEL & CASINO, INC.
CINDERLANE, INC.
By:_______________________________
Ronald J. Radcliffe
Chief Financial Officer
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<PAGE>
EXHIBIT 10.12
117
<PAGE>
EMPLOYMENT AGREEMENT
Agreement, dated as of November 25, 1996, between Rio Hotel
& Casino, Inc., a Nevada corporation with its principal office
located at 3700 W. Flamingo Road, Las Vegas, Nevada 89103
(together with its successors or assigns as permitted under this
agreement, the "Company"), and David P. Hanlon, who resides at
c/o P.O. Box 70940, Reno, Nevada 89570-0940 (the "Executive").
W I T N E S S E T H:
Whereas, the Company desires to employ the Executive and
enter into an agreement embodying the terms of such employment
(the "Agreement"), and the Executive desires to enter into the
Agreement and to accept such employment, subject to the terms and
provisions of this Agreement.
Now, Therefore, in consideration of the premises and mutual
covenants contained herein and for other good and valuable
consideration, the Company and the Executive (individually a
"Party" and together the "Parties") agree as follows:
1. DEFINITIONS
(a) "BASE SALARY" shall mean the salary provided for in
Paragraph 4 below subject to such increases as may be made from
time to time.
(b) "BOARD" shall mean the Board of Directors of the
Company.
(c) "BUSINESS DAY" shall mean any day other than a weekend,
a federal or state holiday or a vacation day for the Executive.
(d) "CAUSE" shall mean:
(i) the conviction of (including any act as a result
of pleading nolo contendere) or judgment against Executive
by a civil or criminal court of competent jurisdiction of a
felony, or any other offense involving embezzlement,
misappropriation of funds, any act of moral turpitude or
dishonesty;
(ii) the indictment of Executive by a state or federal
grand jury or the filing of a criminal complaint or
information for a felony, or any other offense involving
embezzlement, misappropriation of funds, any act of moral
turpitude or dishonesty, unless such indictment or filing is
dismissed within one hundred eighty (180) days from the date
of such indictment or filing. The Board may elect to
suspend and extend the Term of Employment by such one
hundred eighty (180) day period or the number of days
actually taken by Executive to dismiss such indictment or
filing, whichever is less; provided that
<PAGE>
Executive notifies the Company in writing that Executive
intends to contest in good faith such indictment or filing
and pursues the dismissal of such indictment or filing with
reasonable diligence. During such period of suspension,
Employee may be relieved of his duties, but shall be
entitled to receive his Base Salary;
(iii) the written confession by Executive of
embezzlement, misappropriation of funds or any act of moral
turpitude or dishonesty;
(iv) the denial, revocation or suspension of a license,
qualification or certificate of suitability to Executive by
any of the Gaming Authorities;
(v) any action by Executive that results in (A) a
written communication from the Gaming Authorities to the
Company advising the Company that, or (B) administrative
action by the Gaming Authorities resulting in a
determination that: (Y) any licensing, qualification and/or
approval by the Gaming Authorities with respect to the
Company will be approved only upon terms and conditions
which are unacceptable to the Company; or (Z) the Gaming
Authorities will revoke or suspend any existing license held
by the Company or its subsidiaries;
(vi) the finding by a court of competent jurisdiction
in a criminal or civil action or by the U.S. Securities and
Exchange Commission or state blue sky agency in an
administrative proceeding that Executive has wilfully
violated any federal or state securities law;
(vii) the engagement by Executive in willful and
continued misconduct, or Executive's willful and continued
failure to substantially perform Executive's obligations as
a Director of the Company or as an employee of the Company,
if such failure or misconduct is materially damaging or
materially detrimental to the business and operations of the
Company;
(viii) the use by the Executive of alcohol or any
controlled substance to an extent that it interferes, in the
sole discretion of the Board, on a continuing and material
basis with the performance of Executive's duties under the
Agreement;
(ix) the willful, unauthorized disclosure by the
Executive of Confidential Information, as defined in
Paragraph 13, concerning the Company or any Subsidiary,
unless such disclosure was (A) believed in good faith by the
Executive to be appropriate in the course of properly
carrying out his duties under the Agreement, or (B) required
by an order of a court having jurisdiction over the subject
matter or a summons, subpoena or order in the nature thereof
of any legislative body (including any committee thereof) or
any governmental or administrative agency; or
(x) the performance of services by Executive, other
than in the course of properly carrying out his duties under
the Agreement and as otherwise provided herein, for any
other corporation or person that competes with the Company
or any Subsidiary while the Executive is employed by the
Company.
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<PAGE>
(e) "CHANGE IN CONTROL" shall mean the occurrence of any
one of the following events:
(i) any "person" (as that term is used in Section
13(d) and 14(d) of the Securities and Exchange Act of 1934
(the "Exchange Act")), other than Anthony A. Marnell II,
James A. Barrett, Jr. or their affiliates, becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of
Company representing 25.0% or more of the combined voting
power of Company's outstanding securities ordinarily having
the right to vote at the election of directors; or
(ii) individuals who constitute the Board of Directors
of Company on the date hereof (the "Incumbent Board") cease
for any reason to constitute at least a majority thereof,
provided that any person becoming a director subsequent to
the date hereof whose election was approved by at least a
majority of the directors comprising the Incumbent Board, or
whose nomination or election was approved by a majority of
the Board of Directors of Company serving under an Incumbent
Board, shall be, for purposes of this clause (ii),
considered as if he or she were a member of the Incumbent
Board; or
(iii) the merger, consolidation or sale of all or
substantially all the assets of Company occurs; or
(iv) a proxy statement is distributed soliciting
proxies from stockholders of the Company, by someone other
than the current management of Company, seeking stockholder
approval of a plan of reorganization, merger or
consolidation of Company with one or more corporations as a
result of which the outstanding shares of Company's
securities are actually exchanged for or converted into cash
or property or securities not issued by Company.
(f) "COMMON STOCK" shall mean the common stock, $.01 par
value, of the Company.
(g) "CONSOLIDATED EBITDA" shall mean the Company's
consolidated "Earnings (Losses) from Operations" plus Interest,
Taxes, Depreciation and Amortization but excluding (i) the sale
of any material asset not in the ordinary course of business, and
(ii) any charge against earnings for stock options pursuant to
Paragraph 6 below. Consolidated EBITDA shall be determined on
the accrual basis of accounting in accordance with generally
accepted accounting principles. Consolidated EBITDA for a
calendar year shall be determined by the Company's independent
accountants based on audited financial statements. Consolidated
EBITDA for a period of less than one year shall be determined by
the Company's independent accountants based on a written report
setting forth the basis of the review.
(h) "CONSTRUCTIVE TERMINATION WITHOUT CAUSE" shall mean
that,
(i) without the Executive's prior written consent, one
or more of the following events occurs:
(1) the Executive is removed from the position of
Executive Vice President and Chief Operating Officer of
the Company and/or the position of
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President and Chief Operating Officer of Rio
Properties, Inc. ("Rio Properties") for any reason
other than the termination of his employment;
(2) the Executive suffers a material diminution
in the authorities, duties or responsibilities normally
associated with the foregoing positions, or there are
assigned to him duties and responsibilities materially
inconsistent with those normally associated with such
positions;
(3) the Executive's Base Salary or annual bonus
opportunity as provided for in Paragraphs 4 and 5
below, respectively, is decreased by the affirmative
act of the Company, or his benefits under any material
employee benefit plan or program of the Company or his
incentive or equity opportunity under any material
incentive or equity program is or are reduced by the
affirmative act of the Company;
(4) the Executive's office location is relocated
outside of the Las Vegas, Nevada metropolitan area; or
(5) the Company fails to obtain a written
agreement from any successors of the Company to assume
and perform the Agreement; and
(ii) within 90 days of learning of the occurrence of
such event (but in no event later than 180 days after the
occurrence of such event), the Executive terminates his
employment with the Company.
(i) "DISABILITY" shall mean the Executive's inability, for
a period of six consecutive months, to render substantially the
services provided for in Paragraph 3(a) below by reason of mental
or physical disability, whether resulting from illness, accident
or otherwise.
(j) "GAMING AUTHORITIES" means the Nevada Gaming Control
Board ("Nevada Board"), the Nevada Gaming Commission ("Nevada
Commission"), the Clark County Liquor and Gaming Licensing Board
("Clark County Board"), and any other federal, state, local or
tribal gaming authority to which the Company is now subject, or
may be subject during the Term of Employment.
(k) "SUBSIDIARY" shall mean any corporation in which the
Company owns 50% or more of the Voting Stock or any other venture
in which it owns 50% or more of the equity.
(l) "TERM OF EMPLOYMENT" shall mean the initial five-year
period specified in Paragraph 2 below and if, but only if,
automatically renewed as provided in Paragraph 2, shall include
the period of such renewal.
(m) "TERMINATION BY THE COMPANY DUE TO FAILURE TO RECEIVE
LICENSE" shall mean a termination of the Executive's employment
by the Company following a failure of Executive to obtain a
license required by the Nevada Board, Nevada Commission or the
Clark County Board and any other federal, state, local or tribal
gaming authority to which the Company is now subject, or may be
subject during the Term of Employment.
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(n) "VOTING STOCK" shall mean capital stock of any class or
classes having general voting power under ordinary circumstances,
in the absence of contingencies, to elect the directors of a
corporation.
2. TERM OF EMPLOYMENT
(a) The Company hereby employs the Executive, and the
Executive hereby accepts employment with the Company, in the
position and with the duties and responsibilities as set forth in
Paragraph 3 below for the Term of Employment, subject to the
terms and conditions of the Agreement.
(b) The initial Term of Employment shall commence on
October 8, 1996 and shall, unless sooner terminated as provided
in Paragraph 10 hereof, terminate at 11:59 p.m. (P.D.T.) on
October 7, 2001; provided that the Term of Employment shall
automatically renew for successive one-year periods unless (i) it
has sooner terminated as provided in Paragraph 10 hereof or
(ii) either Party has notified the other in writing at least 60
days prior to the otherwise scheduled expiration of the Term of
Employment that such Term of Employment shall not so renew.
3. POSITION, DUTIES AND AUTHORITIES
(a) During the Term of Employment, the Executive shall be
employed as Executive Vice President and Chief Operating Officer
of the Company and as President and Chief Operating Officer of
the Company's wholly-owned subsidiary, Rio Properties. Subject
to supervision and in accordance with the policies and directives
established by the Board, and subordinate to and working under
the supervision of the Chief Executive Officer and President of
the Company, in the case of the Company, and the Chief Executive
Officer of Rio Properties, in the case of Rio Properties,
Executive shall be the Chief Operating Officer of the Company and
Rio Properties' day-to-day business operations, with the duties,
responsibilities and authorities customarily associated with such
positions. It is also the intention of the Parties that the
Executive shall serve as a Director of the Company and of Rio
Properties throughout the Term of Employment. The Executive
shall be entitled to no additional remuneration for serving on
the Board or as an officer or director of Rio Properties or any
other Subsidiary.
(b) Anything herein to the contrary notwithstanding,
nothing shall preclude the Executive from engaging in charitable,
community and business affairs, managing his personal investments
and serving as a member of boards of directors of industry
associations or non-profit or for profit organizations and
companies so long as such activities do not materially interfere
in the opinion and sole discretion of the Chief Executive Officer
of the Company with Executive's carrying out his duties and
responsibilities under the Agreement. Executive shall disclose
all relationships covered under this Paragraph 3(b) in the
Executive's personal history disclosure form to be submitted to
the Nevada Gaming Control Board in connection with Executive's
required licensing and such form shall, prior to filing of such
form, be submitted to the Company's Chief Executive Officer for
review. Thereafter, not less often than on January 1 of each
year, Executive shall disclose in writing to the Chief Executive
Officer of the Company any changes to the information with
respect to involvement in such entities or organizations.
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4. BASE SALARY
During the Term of Employment, the Executive shall be paid
by the Company a Base Salary payable no less frequently than in
equal semi-monthly installments at an annualized rate of
(i) $580,000 during the period October 8, 1996 through
December 31, 1996, and (ii) $800,000 thereafter. The annual Base
Salary commencing January 1, 1997 and continuing to December 31,
1997 described in Paragraph 4(ii) shall be comprised of
(a) $580,000 in salary and (b) a guaranteed annual bonus of at
least $220,000, provided that the Executive's bonus opportunity
shall not be limited to the minimum annual guarantee of $220,000
herein described. Thereafter, until the end of the Term of
Employment, the Company may pay to the Executive his annual Base
Salary described in Paragraph 4(ii) in any combination of salary
and guaranteed annual bonus which the Company deems appropriate.
The guaranteed annual bonus payable under this Paragraph 4 is not
to be offset against or reduced by any bonus payable under
Paragraph 5 hereof.
5. PERFORMANCE BONUS
The Company shall pay the Executive performance bonuses for
each year during the Term of Employment in amounts determined in
accordance with Exhibit A hereto.
6. STOCK OPTIONS
The Executive shall be eligible for participation in the
Company's 1995 Long Term Incentive Plan, as amended from time to
time.
7. EMPLOYEE BENEFIT PROGRAMS
(a) During the Term of Employment, the Executive shall be
entitled, at the Company's expense, to medical, surgical,
hospitalization, dental and visual insurance coverage (which may
include any insured program provided by the Company to its
employees) providing him with 100% of all expenses both covered
and paid for by the Company's insurance program(s) or plan(s).
(b) During the Term of Employment, the Executive shall also
be provided with long-term disability insurance which shall
provide the Executive with an annual benefit of fifty percent
(50%) of Base Salary continued until age 65 or until the
Executive dies or is no longer disabled, if sooner. To the
extent available, the Executive shall be provided an opportunity
to purchase additional long-term disability insurance, at his own
expense. To the extent possible, the amount of long-term
disability insurance described in the first two sentences of this
Paragraph 7(b) shall be provided by an individual policy that
gives the Executive the right to assume the policy in the event
of his termination of employment, provided that the amount of
such insurance to be so provided shall be offset by long-term
disability insurance coverage provided to the Executive under the
Company's employee long-term disability insurance programs
described in Paragraph 7(d) below.
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(c) During the Term of Employment, the Company shall
provide the Executive, subject to insurability as a normal risk
and at reasonable cost, with life insurance coverage in an amount
equal to no less than three times the sum of the Executive's then
current Base Salary plus performance bonus amount determined on
the basis of 100% of the target bonus for the year in question
being achieved. To the extent available, the Executive shall be
provided an opportunity to purchase additional life insurance, at
his own expense, up to two times his then current total cash
compensation as described in the preceding sentence. To the
extent possible, the amount of life insurance described in the
first two sentences of this Paragraph 7(c) shall be provided by
an individual policy that gives the Executive the right to assume
the policy in the event of his termination of employment,
provided that the amount of such insurance to be so provided
shall be offset by life insurance coverage provided to the
Executive under the Company's employee group life insurance
programs described in Paragraph 7(d) below.
(d) During the Term of Employment, the Executive shall be
entitled to participate in all employee incentive and benefit
programs of the Company now or hereafter made available to the
Company's senior executives or salaried employees generally, as
such programs may be in effect from time-to-time, including,
without limitation, pension and other retirement plans, profit-
sharing plans, group life insurance, accidental death and
dismemberment insurance, hospitalization, surgical, major medical
and dental coverage, sick leave (including salary continuation
arrangements), long-term disability, holidays and up to four
weeks annually of vacations.
(e) During the Term of Employment, the Executive shall be
entitled to four (4) weeks paid vacation per calendar year. In
lieu of utilizing such paid vacation in any calendar year, the
Executive shall have the right to either (i) receive cash in an
amount equivalent to two (2) weeks of annual Base Salary, or (ii)
defer two (2) weeks of such paid vacation to the next calendar
year. Notwithstanding the foregoing, the Executive shall be
entitled to receive no more than four (4) weeks of annual Base
Salary in lieu of paid vacation in any calendar year. Except as
expressly set forth in Paragraph 7(e)(i) and (ii) herein, all
paid vacation benefits granted hereunder attributable to any
calendar year shall terminate on December 31 of said calendar
year.
8. RELOCATION EXPENSE, BUSINESS EXPENSE REIMBURSEMENT AND
PERQUISITES
(a) The Company shall pay the costs associated with the
Executive's relocation from Reno to Las Vegas, Nevada including
(i) costs associated with packing, moving and unpacking the
Executive's household goods, and (ii) the Executive's reasonable
temporary living expenses while he looks for a home in Las Vegas.
(b) During the Term of Employment, the Executive shall be
entitled to receive reimbursement by the Company, upon submission
of adequate documentation, for all reasonable out-of-pocket
expenses incurred by him in performing services under the
Agreement. Any legal fees and expenses incurred in connection
with the preparation and negotiation of the Agreement up to a
maximum of $20,000 shall be paid by the Company.
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(c) During the Term of Employment, the Executive shall be
entitled to use of an automobile and reimbursement for all
operating expenses associated therewith, including, without
limitation, collision and liability insurance. The Executive
shall have the right to choose the automobile; provided however,
the retail value of such automobile, excluding sales taxes and
licensing fees, shall not exceed $50,000.
(d) During the Term of Employment, the Executive shall be
entitled to an individual country club membership, along with
reimbursement for all reasonable business expenses associated
therewith, at a country club in the Las Vegas, Nevada
metropolitan area.
9. DEFERRED COMPENSATION
The Executive shall be entitled to defer up to 25% of his
Base Salary and any performance or other bonus for each calendar
year pursuant to a compensation deferral program to be adopted by
the Company.
10. TERMINATION OF EMPLOYMENT
(a) Termination Due to Death or Disability. In the event
of the termination of the Executive's employment under the
Agreement due to his death or Disability, the Executive or his
legal representatives, as the case may be, shall be entitled to:
(i) (A) in the case of death, continued Base Salary at
the rate in effect at the time of his death for a period of
3 months following the month in which such termination of
employment due to death occurs, or (B) in the case of
Disability, the disability benefit available under and only
to the extent of insurance maintained as provided in
Paragraph 7(b) above;
(ii) any performance or other bonus earned for a fiscal
period already completed but not yet paid;
(iii) a pro rata performance bonus for the year in
which his employment terminates due to death or Disability
based on performance in relation to the Consolidated EBITDA
targets for the period ending with the end of the month
immediately prior to the termination of his employment;
(iv) reimbursement for expenses incurred but not yet
reimbursed by the Company;
(v) any deferred compensation pursuant to Paragraph 9,
including any interest accrued on such deferred amounts; and
(vi) any other compensation and benefits to which he or
his legal representatives may be entitled under applicable
plans, programs and agreements of the Company, including,
without limitation, life insurance as provided in
Paragraph 7(c) above.
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(b) Termination by the Company for Cause. At any time
after an event constituting Cause, the Company shall give the
Executive written notice of its intention to terminate him for
Cause, specifying in such notice the event forming the basis for
Cause. Subject only to the following sentence, termination shall
be effective immediately upon delivery of notice hereunder. If
the written notice is of an event constituting Cause under
Paragraph 1(d)(i) or 1(d)(viii), and if the event is capable of
being cured, the Executive shall have ten Business Days following
actual receipt of the notice of termination in which to cure, so
long as Executive advises the Company in writing within 48 hours
of receiving the notice of termination of Executive's intention
to attempt cure. In the event the Executive's employment is
terminated by the Company for Cause, the Executive shall be
entitled to:
(i) Base Salary at the rate in effect at the time of
his termination through the date of termination of his
employment;
(ii) any performance or other bonus earned for a fiscal
period already completed but not yet paid;
(iii) reimbursement for expenses incurred but not yet
reimbursed by the Company;
(iv) any deferred compensation, pursuant to Paragraph 9
hereof including any interest accrued on such deterred
amounts; and
(v) any other compensation and benefits to which
he may be entitled under applicable plans, programs and
agreements of the Company.
The Executive's entitlement to the foregoing shall be
without prejudice to the right of the Company for any
damages or other legal or equitable remedy to which the
Company or a Subsidiary may be entitled as a result of such
Cause; provided, however, that offset shall not be available
to the Company in any event.
(c) Termination Without Cause or Constructive Termination
Without Cause. In the event the Executive's employment is
terminated by the Company without Cause (which shall not include
a termination pursuant to Paragraph 10(a)) or in the event of a
Constructive Termination Without Cause, the Executive shall be
entitled to those items described in the subparagraphs (i)
through (v) hereof. Termination Without Cause shall be effective
immediately, unless a later date is stated, upon delivery of a
written notice of such termination from the Company to Executive.
In the event Executive elects to resign based upon a Constructive
Termination Without Cause, the Executive shall give written
notice thereof to the Company and state therein the effective
date of such resignation.
(i) continued Base Salary payments for the remainder
of Term of Employment plus 100% of such amount
(collectively, the "Base Salary Termination Payment").
Notwithstanding the actual amount of the Base Salary
Termination Payment, however, Executive shall receive no
less than $1 million and no more than $2 million. The
Executive may elect, at the Executive's option, to receive
the Base Salary Termination
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Payment either (A) over the remainder of the original Term
of Employment (as if the same had not been terminated
hereunder), or (B) in a lump-sum payment promptly following
termination of the Executive's employment;
(ii) any performance or other bonus earned for a fiscal
period already completed but not yet paid;
(iii) reimbursement for expenses incurred but not yet
reimbursed by the Company;
(iv) any deferred compensation pursuant to Paragraph 9
hereof, including any interest accrued on such deferred
amounts; and
(v) any other compensation and benefits to which he
may be entitled under applicable plans, programs and
agreements of the Company.
(d) Termination by the Company Due to Failure to Receive
License. In the event of a Termination by the Company Due to
Failure to Receive License, the Executive shall be entitled to
those items specified in subparagraphs (i) through (v) hereof.
The effective date of the Termination by the Company Due to
Failure to Receive License shall be as stated in a written notice
from the Company to Executive.
(i) Base Salary at the rate in effect at the time of
his termination through the date of termination of his
employment;
(ii) any performance or other bonus earned for a fiscal
period already completed but not yet paid;
(iii) reimbursement for expenses incurred but not yet
reimbursed by the Company;
(iv) any deferred compensation pursuant to Paragraph 9
hereof, including any interest accrued on such deferred
amounts; and
(v) any other compensation and benefits to which he
may be entitled under applicable plans, programs and
agreements of the Company.
(e) Voluntary Termination. A "Voluntary Termination" shall
mean a termination of employment by the Executive on his own
initiative other than a termination under Paragraph 10(a) or
10(c). In the event of a Voluntary Termination, the Executive
shall be entitled to:
(i) Base Salary at the rate in effect at the time of
his termination through the date of termination of this
employment;
(ii) any performance or other bonus earned for a fiscal
period already completed but not yet paid;
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(iii) reimbursement for expenses incurred but not yet
reimbursed by the Company;
(iv) any deferred compensation pursuant to Paragraph 9
hereof, including any interest accrued on such deferred
amounts; and
(v) any other compensation and benefits to which he
may be entitled under applicable plans, programs and
agreements of the Company.
A Voluntary Termination shall not, solely due to a
Voluntary Termination, be deemed a breach of this Agreement
and shall be effective upon the expiration of 60 days after
written notice delivered to the Company, unless another
period of time is agreed to in writing by the Parties.
(f) No Mitigation; No Offset. In the event of any
termination of the Executive's employment under the Agreement, he
shall be under no obligation to seek other employment, and there
shall be no offset against amounts due him under the Agreement on
account of any remuneration attributable to any subsequent
employment that he may obtain.
(g) Nature of Payments. Any amounts due the Executive
under the Agreement in the event of any termination of his
employment with the Company are in the nature of severance
payments, or liquidated damages which contemplate both direct
damages and consequential damages that he may suffer as a result
of the termination of his employment, or both, and are not in the
nature of a penalty.
11. CHANGE OF CONTROL
In the event a Change of Control occurs, the Executive shall
be entitled to:
(a) a lump-sum payment equal to the Base Salary due him for
the remainder of Term of Employment; provided, however, such
amount shall be no less than an amount equal to Base Salary
payments for a period of 12 months;
(b) a lump-sum payment equal to the Base Salary due him for
the remainder of Term of Employment in lieu of any performance or
other bonus for the fiscal period in which the Change of Control
occurs; provided, however, such amount shall be no less than an
amount equal to Base Salary payments for a period of 12 months;
(c) any performance or other bonus earned for a fiscal
period already completed but not yet paid;
(d) reimbursement for expenses incurred but not yet
reimbursed by the Company;
(e) any deferred compensation pursuant to Paragraph 9
hereof, including any interest accrued on such deferred amounts;
and
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(f) any other compensation and benefits to which he may be
entitled under applicable plans, programs and agreements of the
Company.
Nothwithstanding the foregoing, in no event shall the
aggregate amount due to the Executive pursuant to Paragraphs
11(a) and (b) above exceed $3,000,000.
12. COVENANT NOT TO COMPETE
In the event of a Voluntary Termination under
Paragraph 10(e) above or a Termination Without Cause or a
Constructive Termination Without Cause under Paragraph 10(c)
above, the Executive shall not, for the remaining Term of
Employment or 12 months, whichever is shorter, engage in
competition with the Company. For purposes of this Paragraph 12,
the Executive shall be engaging in competition with the Company
if he engages in the casino and gaming business in Clark County,
Nevada or any other location in which the Company is engaging in
the casino and gaming business at the time of the termination of
the Executive's employment, whether as an employee, Executive,
partner, principal, agent, representative, stockholder or
consultant (other than as a holder of not more than a 10% equity
interest) or in any other corporate or representative capacity,
so long as the Company is engaged in the casino and gaming
business in the location in question.
13. COVENANTS TO PROTECT CONFIDENTIAL INFORMATION
The Executive shall not, during the Term of Employment or
thereafter, without prior written consent of the Company,
divulge, publish or otherwise disclose to any other person any
Confidential Information regarding the Company or any Subsidiary
except in the course of carrying out his responsibilities on
behalf of the Company (e.g., providing information to the
Company's attorneys, accountants, bankers, etc.) or if required
to do so pursuant to the order of a court having jurisdiction
over the subject matter or a summons, subpoena or order in the
nature thereof of any legislative body (including any committee
thereof) or any governmental or administrative agency. For this
purpose, Confidential Information shall include, but not be
limited to, the Company's financial, real estate, marketing and
promotional plans and strategies, customer lists and customer
data bases. Confidential Information does not include
information that becomes available to the public other than
through a breach of the Agreement on the part of the Executive.
14. INDEMNIFICATION
(a) The Company shall indemnify the Executive to the
fullest extent permitted by Nevada law in effect as of the date
hereof against all costs, expenses, liabilities and losses
(including, without limitation, attorneys' fees, judgments,
fines, penalties, ERISA excise taxes and amounts paid in
settlement) reasonably incurred by the Executive in connection
with a Proceeding. For the purposes of this Paragraph 14, a
"Proceeding" shall mean any action, suit or proceeding by reason
of the fact that he is or was an officer, director or employee,
trustee or agent of any other entity at the request of the
Company.
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(b) The Company shall advance to the Executive all
reasonable costs and expenses incurred by him in connection with
a Proceeding within 20 days after receipt by the Company of a
written request for such advance. Such request shall include an
itemized list of the costs and expenses and an undertaking by the
Executive to repay the amount of such advance if it shall
ultimately be determined by a court of competent jurisdiction
that he is not entitled to be indemnified by the Company against
such costs and expenses.
(c) The Executive shall not be entitled to indemnification
under this Paragraph 14 unless he meets the standard of conduct
specified in the Nevada Revised Statutes. Actions that fail to
meet the aforementioned standard of conduct shall include, but
are not limited to, the failure to act in good faith, failure to
act in the best interests of the Company, breach of the duty of
loyalty, appropriation of business opportunities, violation of
the provisions of the articles of incorporation or the bylaws of
the Company, violation of state or federal securities laws and
violation of criminal law. Notwithstanding the foregoing, to the
extent permitted by law neither N.R.S. 78.751(3) nor any similar
provision shall apply to indemnification under this Paragraph 14,
so that if the Executive in fact meets the applicable standard of
conduct, he shall be entitled to such indemnification whether or
not the Company (whether by the board of directors, the
stockholders, independent legal counsel or other party)
determines that indemnification is proper because he has met such
applicable standard of conduct. Neither the failure of the
Company to have made such a determination prior to the
commencement by the Executive of any suit or arbitration
proceeding seeking indemnification, nor a determination by the
Company that he has not met such applicable standard of conduct
shall create a presumption that he has not met the applicable
standard of conduct.
(d) The Company shall not settle any Proceeding or claim in
any manner which would impose on the Executive any penalty or
limitation without his prior written consent. Neither the
Company nor the Executive will unreasonably withhold its or his
consent to any proposed settlement.
15. ASSIGNABILITY; BINDING NATURE
This Agreement shall be binding upon and inure to the
benefit of the Parties and their respective successors, heirs and
assigns. No rights or obligations of the Company under the
Agreement may be assigned or transferred by the Executive or the
Company except that (a) such rights or obligations of the Company
may be assigned or transferred pursuant to a merger or
consolidation in which the Company is not the continuing entity,
or the sale or liquidation of all or substantially all of the
assets of the Company, provided that the assignee or transferee
is the successor to all or substantially all of the assets of the
Company and such assignee or transferee assumes the liabilities,
obligations and duties of the Company, as contained in the
Agreement, either contractually or as a matter of law, and (b)
such obligations of the Company may be transferred by the
Executive by will or pursuant to the laws of descent or
distribution. The Company shall take all reasonable legal action
necessary to effect such assignment and assumption of the
Company's liabilities, obligations and duties under the Agreement
in circumstances described in clause (a) of the preceding
sentence.
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16. REPRESENTATION
The Company and the Executive respectively represent and
warrant to each other that, subject to any approval that may be
necessary from the Nevada Commission, each respectively is fully
authorized and empowered to enter into the Agreement and that its
or his entering into the Agreement and the performance of its or
his respective obligations under the Agreement will not violate
any agreement between the Company or the Executive respectively
and any other person, firm or organization or any law or
governmental regulation.
17. ENTIRE AGREEMENT
The Agreement contains the entire agreement between the
Parties concerning the subject matter hereof and supersedes all
prior agreements, understandings, discussions, negotiations and
undertakings, whether written or oral, between the Parties with
respect thereto.
18. AMENDMENT OR WAIVER
The Agreement cannot be changed, modified or amended without
the consent in writing of both the Executive and the Company. No
waiver by either Party at any time of any breach by the other
Party of any condition or provision of the Agreement shall be
deemed a waiver of a similar or dissimilar condition or provision
at the same or at any prior or subsequent time. Any waiver must
be in writing and signed by the Executive or an authorized
officer of the Company, as the case may be.
19. SEVERABILITY
In the event that any provision or portion of the agreement
shall be determined to be invalid or unenforceable for any
reason, in whole or in part, the remaining provisions of the
Agreement shall be unaffected thereby and shall remain in full
force and effect to the fullest extent permitted by law.
20. SURVIVORSHIP
The respective rights and obligations of the Parties
hereunder shall survive any termination of the Agreement to the
extent necessary to the intended preservation of such rights and
obligations.
21. GOVERNING LAW
The Agreement shall be governed by and construed and
interpreted in accordance with the laws of Nevada without
reference to principles of conflict of laws.
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22. SETTLEMENT OF DISPUTES
Any disputes regarding the interpretation of the Agreement
shall be resolved by arbitration to be held in Nevada in
accordance with the rules and procedures of the American
Arbitration Association. The prevailing party in such proceeding
shall be entitled to recover the costs of the arbitration or
litigation from the other party, including, without limitation,
attorneys' fees.
23. NOTICES
Any notice given to either party shall be in writing and,
except as provided in the third sentence of Paragraph 10(b)
above, shall be deemed to have been given when delivered
personally or sent by certified or registered mail, postage
prepaid, return receipt requested, duly addressed to the Party
concerned at the address indicated below or to such changed
address as such Party may subsequently give notice of:
If to the Company or the Board:
Rio Hotel & Casino, Inc.
3700 W. Flamingo Road
Las Vegas, Nevada 89103
Attn: Chief Executive Officer
With a copy to:
General Counsel
Rio Hotel & Casino, Inc.
3700 W. Flamingo Road
Las Vegas, Nevada 89103
If to the Executive:
David P. Hanlon
7174 Durango Street
Las Vegas, Nevada 89120
24. HEADINGS
The headings of the paragraphs contained in the Agreement
are for convenience only and shall not be deemed to control or
affect the meaning or construction of any provision of the
Agreement.
25. COUNTERPARTS
The Agreement may be executed in two or more counterparts.
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26. TAXES
Compensation payable hereunder is gross and shall be subject
to such withholding taxes and other taxes as may be required by
law.
27. ACKNOWLEDGMENT
Executive acknowledges that he has been given a reasonable
period of time to study this Agreement before signing it.
Executive certifies that he has fully read, has received an
explanation of, and completely understands the terms, nature, and
effect of this Agreement. Executive further acknowledges that he
is executing this Agreement freely, knowingly, and voluntarily
and that Executive's execution of this Agreement is not the
result of any fraud, duress, mistake, or undue influence
whatsoever. In executing this Agreement, Executive does not rely
on any inducements, promises, or representations by the Company
other than the terms and conditions of this Agreement.
In Witness Whereof, the undersigned have executed the
Agreement as of the date first written above.
RIO HOTEL & CASINO, INC.
By: /s/ James A. Barrett, Jr.
Its President
/s/ David P. Hanlon
David P. Hanlon
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<PAGE>
EXHIBIT A
TO EMPLOYMENT AGREEMENT
DETERMINATION OF PERFORMANCE BONUS AMOUNTS
Executive shall be entitled to a performance bonus pursuant
to the terms of a management incentive compensation plan to be
approved by the Company's Compensation Committee and ratified by
the Board.
A-1
<PAGE>
EXHIBIT B
TO EMPLOYMENT AGREEMENT
1995 LONG-TERM INCENTIVE PLAN ("LTIP")
STOCK OPTION GRANT
EMPLOYEE: David P. Hanlon DATE OF GRANT: October 8, 1996
GRANT NO.: OPTION EXERCISE PRICE:
TYPE OF OPTION: Non-Qualified OPTION SHARES: 500,000
Subject to the terms of the LTIP and pursuant to this stock
option grant, Rio Hotel & Casino, Inc. (the "Company") hereby
grants the option to purchase the above described number of
shares of Rio Hotel & Casino, Inc. Common Stock exercisable at
the Option Price stated above.
Options granted hereunder shall be exercisable only to the
extent of "vesting." Vesting occurs when the Employee remains
continuously employed with the Company or its subsidiaries on the
date upon which the options are scheduled to vest in order to
have any right to exercise such options and any options which are
scheduled to vest thereafter. If the Employee has failed to
remain continuously employed with the Company or its subsidiaries
on a date upon which options are scheduled to vest, the Employee
shall have no right to nor be entitled to exercise those options
or any other options which may be scheduled to vest thereafter.
The vesting schedule for stock options under this stock option
grant is a follows:
October 8, 1996 (1) - 20% of Options will vest;
October 8, 1997 (1) - 40% of Options will vest;
October 8, 1998 (1) - 60% of Options will vest;
October 8, 1998 (1) - 80% of Options will vest;
October 8, 2000 (1) - 90% of Options will vest;
October 7, 2001 (1) - 100% of Options will vest.
Notwithstanding the foregoing, the options granted hereunder
will become fully vested and become exercisable in full upon a
Change in Control as defined in the Employment Agreement between
the Company and the Executive dated as of October 8, 1996 (the
"Employment Agreement").
I. Except as may be otherwise provided in the LTIP, vested
options granted thereunder shall expire the earlier of either:
A. ten (10) years after the Date of Grant;
B-1
<PAGE>
B. three (3) years after the Employee's retirement
from the Company or any of its subsidiaries after the
Employee attains the age of 72 years;
C. three (3) years after the date of the Employee's
death;
D. three (3) months after the Employee's termination
from the Company or any of its subsidiaries (except for
Termination Without Cause or Constructive Termination
Without Cause) for reasons other than death or retirement
after attaining the age of 72 years; or
E. two (2) years after the Employee's Termination
Without Cause, Constructive Termination Without Cause or
following a Change of Control.
This grant is made pursuant to the terms and conditions of
the LTIP, a copy of which is attached hereto as Exhibit "A," and
by this reference made a part hereof and in addition is subject
to the following limitations:
I. If Employee resigns his position with the Company or
any of its subsidiaries without the written consent of the
Company, and accepts employment, consulting, or other
compensation for services, within six (6) months after Employee's
last day of employment with the Company or any of its
subsidiaries from a competitor company, Employee shall:
A. Forfeit all vested options in Employee's account
which were issued subject to this grant; and
B. Reimburse the Company for all profits earned
pursuant to any exercise of these options within six (6)
months prior to or six (6) months subsequent to the date of
giving notice of Employee's resignation.
II. A "competitor company" is defined as any gaming or
hotel company, or any affiliate thereof, located within fifty
miles of any location in which the Company conducts business.
III. "Profits" are defined as the differential between the
exercise price and the last reported sale price on the day of
exercise, multiplied by the number of shares exercised.
B-2
<PAGE>
In Witness Whereof, the undersigned executes this stock
option grant as of the first date set forth herein:
RIO HOTEL & CASINO, INC.
Long Term Incentive Plan
Committee
By:
Thomas Y. Hartley
By:
Peter M. Thomas
Accepted and agreed to as of the Date of the Grant:
Name: Social Security Number:
Residence Address:
Street Address City, State, Zip Code
B-3
<PAGE>
EMPLOYMENT AGREEMENT
Agreement, dated as of March 7, 1997, between Rio Hotel &
Casino, Inc., a Nevada corporation with its principal office
located at 3700 W. Flamingo Road, Las Vegas, Nevada 89103
(together with its successors or assigns as permitted under this
agreement, the "Company"), and Ronald J. Radcliffe (the
"Executive").
W I T N E S S E T H:
Whereas, the Company desires to employ the Executive and
enter into an agreement embodying the terms of such employment
(the "Agreement"), and the Executive desires to enter into the
Agreement and to accept such employment, subject to the terms and
provisions of this Agreement.
Now, Therefore, in consideration of the premises and mutual
covenants contained herein and for other good and valuable
consideration, the Company and the Executive (individually a
"Party" and together the "Parties") agree as follows:
1. DEFINITIONS
(a) "BASE SALARY" shall mean the salary provided for in
Paragraph 4 below subject to such increases as may be made from
time to time.
(b) "BOARD" shall mean the Board of Directors of the
Company.
(c) "BUSINESS DAY" shall mean any day other than a
weekend, a federal or state holiday or a vacation day for the
Executive.
(d) "CAUSE" shall mean:
(i) the conviction of (including any act as a
result of pleading nolo contendere) or judgment against the
Executive by a civil or criminal court of competent
jurisdiction of a felony, or any other offense involving
embezzlement, misappropriation of funds, any act of moral
turpitude or dishonesty;
(ii) the indictment of the Executive by a state or
federal grand jury or the filing of a criminal complaint or
information for a felony, or any other offense involving
embezzlement, misappropriation of funds, any act of moral
turpitude or dishonesty, unless such indictment or filing is
dismissed within one hundred eighty (180) days from the date
of such indictment or filing. The Board may elect to
suspend and extend the Term of Employment by such one
hundred eighty (180) day period or the number of days
actually taken by the Executive to dismiss such indictment
or filing, whichever is less; provided that the Executive
notifies the Company in writing that the Executive intends
to contest in
<PAGE>
good faith such indictment or filing and pursues the
dismissal of such indictment or filing with reasonable
diligence. During such period of suspension, Employee may
be relieved of his duties, but shall be entitled to receive
his Base Salary;
(iii) the written confession by t he Executive of
embezzlement, misappropriation of funds or any act of moral
turpitude or dishonesty;
(iv) the denial, revocation or suspension of a
license, qualification or certificate of suitability to the
Executive by any of the Gaming Authorities;
(v) any action by the Executive that results in (A)
a written communication from the Gaming Authorities to the
Company advising the Company that, or (B) administrative
action by the Gaming Authorities resulting in a
determination that: (Y) any licensing, qualification and/or
approval by the Gaming Authorities with respect to the
Company will be approved only upon terms and conditions
which are unacceptable to the Company; or (Z) the Gaming
Authorities will revoke or suspend any existing license held
by the Company or its subsidiaries;
(vi) the finding by a court of competent
jurisdiction in a criminal or civil action or by the U.S.
Securities and Exchange Commission or state blue sky
agency in an administrative proceeding that the Executive
has wilfully violated any federal or state securities law;
(vii) the engagement by the Executive in willful and
continued misconduct, or the Executive's willful and
continued failure to substantially perform the Executive's
obligations as a Director of the Company or as an employee
of the Company, if such failure or misconduct is materially
damaging or materially detrimental to the business and
operations of the Company;
(viii) the use by the Executive of alcohol or any
controlled substance to an extent that it interferes, in the
sole discretion of the Board, on a continuing and material
basis with the performance of the Executive's duties under
the Agreement;
(ix) the willful, unauthorized disclosure by the
Executive of Confidential Information, as defined in
Paragraph 13, concerning the Company or any Subsidiary,
unless such disclosure was (A) believed in good faith by the
Executive to be appropriate in the course of properly
carrying out his duties under the Agreement, or (B) required
by an order of a court having jurisdiction over the subject
matter or a summons, subpoena or order in the nature thereof
of any legislative body (including any committee thereof) or
any governmental or administrative agency; or
(x) the performance of services by the Executive,
other than in the course of properly carrying out his duties
under the Agreement and as otherwise provided herein, for
any other corporation or person that competes with the
Company or any Subsidiary while the Executive is employed by
the Company.
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<PAGE>
(e) "CHANGE IN CONTROL" shall mean the occurrence of any
one of the following events:
(i) any "person" (as that term is used in Section
13(d) and 14(d) of the Securities and Exchange Act of 1934
(the "Exchange Act")), other than Anthony A. Marnell II,
James A. Barrett, Jr. or their affiliates, becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the
Company representing 25.0% or more of the combined voting
power of the Company's outstanding securities ordinarily
having the right to vote at the election of directors; or
(ii) individuals who constitute the Board of
Directors of the Company on the date hereof (the "Incumbent
Board") cease for any reason to constitute at least a
majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election was
approved by at least a majority of the directors comprising
the Incumbent Board, or whose nomination or election was
approved by a majority of the Board of Directors of the
Company serving under an Incumbent Board, shall be, for
purposes of this clause (ii), considered as if he or she
were a member of the Incumbent Board; or
(iii) the merger, consolidation or sale of all or
substantially all the assets of the Company occurs; or
(iv) a proxy statement is distributed soliciting
proxies from stockholders of the the Company, by someone
other than the current management of the Company, seeking
stockholder approval of a plan of reorganization, merger or
consolidation of the Company with one or more corporations
as a result of which the outstanding shares of the Company's
securities are actually exchanged for or converted into cash
or property or securities not issued by the Company.
(f) "COMMON STOCK" shall mean the common stock, $.01 par
value, of the Company.
(g) "CONSOLIDATED EBITDA" shall mean the Company's
consolidated "Earnings (Losses) from Operations" plus Interest,
Taxes, Depreciation and Amortization but excluding (i) the sale
of any material asset not in the ordinary course of business, and
(ii) any charge against earnings for stock options pursuant to
Paragraph 6 below. Consolidated EBITDA shall be determined on
the accrual basis of accounting in accordance with generally
accepted accounting principles. Consolidated EBITDA for a
calendar year shall be determined by the Company's independent
accountants based on audited financial statements. Consolidated
EBITDA for a period of less than one year shall be determined by
the Company's independent accountants based on a written report
setting forth the basis of the review.
(h) "CONSTRUCTIVE TERMINATION WITHOUT CAUSE" shall mean
that,
(i) without the Executive's prior written consent,
one or more of the following events occurs:
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<PAGE>
(1) the Executive is removed from the position
of Vice President, Treasurer and Chief Financial
Officer of the Company and/or the position of Vice
President, Treasurer and Chief Financial Officer of
Rio Properties, Inc. ("Rio Properties") for any
reason other than the termination of his employment;
(2) the Executive suffers a material
diminution in the authorities, duties or
responsibilities normally associated with the
foregoing positions, or there are assigned to him
duties and responsibilities materially inconsistent
with those normally associated with such positions;
(3) the Executive's Base Salary or annual
bonus opportunity as provided for in Paragraphs 4 and
5 below, respectively, is decreased by the affirmative
act of the Company, or his benefits under any material
employee benefit plan or program of the Company or his
incentive or equity opportunity under any material
incentive or equity program is or are reduced by the
affirmative act of the Company;
(4) the Executive's office location is
relocated outside of the Las Vegas, Nevada
metropolitan area; or
(5) the Company fails to obtain a written
agreement from any successors of the Company to assume
and perform the Agreement; and
(ii) within 90 days of learning of the occurrence of
such event (but in no event later than 180 days after the
occurrence of such event), the Executive terminates his
employment with the Company.
(i) "DISABILITY" shall mean the Executive's inability, for
a period of six consecutive months, to render substantially the
services provided for in Paragraph 3(a) below by reason of mental
or physical disability, whether resulting from illness, accident
or otherwise.
(j) "GAMING AUTHORITIES" means the Nevada Gaming Control
Board ("Nevada Board"), the Nevada Gaming Commission ("Nevada
Commission"), the Clark County Liquor and Gaming Licensing Board
("Clark County Board"), and any other federal, state, local or
tribal gaming authority to which the Company is now subject, or
may be subject during the Term of Employment.
(k) "SUBSIDIARY" shall mean any corporation in which the
Company owns 50% or more of the Voting Stock or any other venture
in which it owns 50% or more of the equity.
(l) "TERM OF EMPLOYMENT" shall mean the initial three-year
period specified in Paragraph 2 below and if, but only if,
automatically renewed as provided in Paragraph 2, shall include
the period of such renewal.
(m) "TERMINATION BY THE COMPANY DUE TO FAILURE TO RECEIVE
LICENSE" shall mean a termination of the Executive's employment
by the Company following a failure of the Executive to obtain a
license required by the Nevada Board, Nevada Commission or the
Clark County
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<PAGE>
Board and any other federal, state, local or tribal gaming
authority to which the Company is now subject, or may be subject
during the Term of Employment.
(n) "VOTING STOCK" shall mean capital stock of any class
or classes having general voting power under ordinary
circumstances, in the absence of contingencies, to elect the
directors of a corporation.
2. TERM OF EMPLOYMENT
(a) The Company hereby employs the Executive, and the
Executive hereby accepts employment with the Company, in the
position and with the duties and responsibilities as set forth in
Paragraph 3 below for the Term of Employment, subject to the
terms and conditions of the Agreement.
(b) The initial Term of Employment shall commence on
January 1, 1997 and shall, unless sooner terminated as provided
in Paragraph 10 hereof, terminate at 11:59 p.m. (P.D.T.) on
December 31, 1999; provided that the Term of Employment shall
automatically renew for successive one-year periods unless (i) it
has sooner terminated as provided in Paragraph 10 hereof or
(ii) either Party has notified the other in writing at least 60
days prior to the otherwise scheduled expiration of the Term of
Employment that such Term of Employment shall not so renew.
3. POSITION, DUTIES AND AUTHORITIES
(a) During the Term of Employment, the Executive shall be
employed as Vice President, Treasurer and Chief Financial Officer
of the Company and as Vice President, Treasurer and Chief
Financial Officer of the Company's wholly-owned subsidiary, Rio
Properties. Subject to supervision and in accordance with the
policies and directives established by the Board, and subordinate
to and working under the supervision of the Chief Executive
Officer and President of the Company, in the case of the
Company, and the Chief Operating Officer of Rio Properties in the
case of Rio Properties, the Executive shall be the Chief
Financial Officer of the Company's and Rio Properties' day-to-
day business operations, with the duties, responsibilities and
authorities customarily associated with such positions. The
Executive shall be entitled to no additional remuneration for
serving as an officer of Rio Properties or any other Subsidiary.
(b) Anything herein to the contrary notwithstanding,
nothing shall preclude the Executive from engaging in charitable,
community and business affairs, managing his personal investments
and serving as a member of boards of directors of industry
associations or non-profit or for profit organizations and
companies so long as such activities do not materially interfere
in the opinion and sole discretion of the Chief Executive Officer
of the Company with the Executive's carrying out his duties and
responsibilities under the Agreement. The Executive shall
disclose all relationships covered under this Paragraph 3(b) in
the Executive's personal history disclosure form to be submitted
to the Nevada Gaming Control Board in connection with the
Executive's required licensing and such form shall, prior to
filing of such form, be submitted to the Company's Chief
Executive Officer for review. Thereafter, not less often than
on January 1
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<PAGE>
of each year, the Executive shall disclose in writing to the
Chief Executive Officer of the Company any changes to the
information with respect to involvement in such entities or
organizations.
4. BASE SALARY
During the Term of Employment, the Executive shall be paid
by the Company a Base Salary payable no less frequently than in
equal semi-monthly installments at an annualized rate of
$255,000; subject to increase as may be determined by the Company
within its sole discretion and as set forth below.
Notwithstanding the foregoing, the Base Salary shall be increased
each January 1 during the term hereof in an amount equal to the
percentage increase in the Consumer Price Index - All Urban Areas
("CPI") issued by the U.S. Department of Labor, Bureau of Labor
Statistics, for the preceding calendar year; provided, however,
any such increase in Base Salary shall never exceed six percent
(6%) in any one year.
5. PERFORMANCE BONUS
The Company shall pay the Executive performance bonuses for
each year during the Term of Employment in amounts determined in
accordance with Exhibit A hereto.
6. STOCK OPTIONS
The Executive shall be eligible for participation in the
Company's 1995 Long Term Incentive Plan, as amended from time to
time.
7. EMPLOYEE BENEFIT PROGRAMS
(a) During the Term of Employment, the Executive and his
dependents shall be entitled, at the Company's expense, to
medical, surgical, hospitalization, dental and visual insurance
coverage (which may include any insured program provided by the
Company to its employees) providing him with 100% of all expenses
both covered and paid for by the Company's insurance program(s)
or plan(s).
(b) During the Term of Employment, the Executive shall
also be provided with long-term disability insurance which shall
provide the Executive with an annual benefit of fifty percent
(50%) of Base Salary continued until age 65 or until the
Executive dies or is no longer disabled, if sooner. To the
extent available, the Executive shall be provided an opportunity
to purchase additional long-term disability insurance, at his own
expense. To the extent possible, the amount of long-term
disability insurance described in the first two sentences of this
Paragraph 7(b) shall be provided by an individual policy that
gives the Executive the right to assume the policy in the event
of his termination of employment, provided that the amount of
such insurance to be so provided shall be offset by long-term
disability insurance coverage provided to the Executive under the
Company's employee long-term disability insurance programs
described in Paragraph 7(d) below.
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<PAGE>
(c) During the Term of Employment, the Company shall
provide the Executive, subject to insurability as a normal risk
and at reasonable cost, with life insurance coverage in an amount
equal to $500,000. To the extent available, the Executive shall
be provided an opportunity to purchase additional life insurance,
at his own expense. To the extent possible, the amount of life
insurance described in the first two sentences of this Paragraph
7(c) shall be provided by an individual policy that gives the
Executive the right to assume the policy in the event of his
termination of employment, provided that the amount of such
insurance to be so provided shall be offset by life insurance
coverage provided to the Executive under the Company's employee
group life insurance programs described in Paragraph 7(d) below.
(d) During the Term of Employment, the Executive shall be
entitled to participate in all employee incentive and benefit
programs of the Company now or hereafter made available to the
Company's senior executives or salaried employees generally, as
such programs may be in effect from time-to-time, including,
without limitation, pension and other retirement plans, profit-
sharing plans, group life insurance, accidental death and
dismemberment insurance, hospitalization, surgical, major medical
and dental coverage, sick leave (including salary continuation
arrangements), long-term disability, holidays and up to three
weeks annually of vacations.
(e) During the Term of Employment, the Executive shall be
entitled to three weeks paid vacation per calendar year. In
lieu of utilizing such paid vacation in any calendar year, the
Executive shall have the right to either (i) receive cash in an
amount equivalent to one week of annual Base Salary, or (ii)
defer one week of such paid vacation to the next calendar year.
Notwithstanding the foregoing, the Executive shall be entitled
to receive no more than three weeks of annual Base Salary in lieu
of paid vacation in any calendar year. Except as expressly set
forth in Paragraph 7(e)(i) and (ii) herein, all paid vacation
benefits granted hereunder attributable to any calendar year
shall terminate on December 31 of said calendar year.
(f) During the Term of Employment, the Company shall pay
all expenses incurred by the Executive in connection with
automobile insurance for two autombiles owned or leased by the
Executive in lieu of life insurance described at 7(c); not to
exceed $6,000.00.
8. BUSINESS EXPENSE REIMBURSEMENT AND PERQUISITES
During the Term of Employment, the Executive shall be
entitled to receive reimbursement by the Company, upon submission
of adequate documentation, for all reasonable out-of-pocket
expenses incurred by him in performing services under the
Agreement. Any legal fees and expenses incurred in connection
with the preparation and negotiation of the Agreement up to a
maximum of $2,000 shall be paid by the Company.
9. DEFERRED COMPENSATION
The Executive shall be entitled to defer up to 25% of his
Base Salary and any performance or other bonus for each calendar
year pursuant to a compensation deferral program to be adopted by
the Company.
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<PAGE>
10. TERMINATION OF EMPLOYMENT
(a) TERMINATION DUE TO DEATH OR DISABILITY. In the event
of the termination of the Executive's employment under the
Agreement due to his death or Disability, the Executive or his
legal representatives, as the case may be, shall be entitled to:
(i) (A) in the case of death, continued Base Salary
at the rate in effect at the time of his death for a period
of 3 months following the month in which such termination of
employment due to death occurs, or (B) in the case of
Disability, the disability benefit available under and only
to the extent of insurance maintained as provided in
Paragraph 7(b) above;
(ii) any performance or other bonus earned for a
fiscal period already completed but not yet paid;
(iii) a pro rata performance bonus for the year in
which his employment terminates due to death or Disability
based on performance in relation to the Consolidated EBITDA
targets for the period ending with the end of the month
immediately prior to the termination of his employment;
(iv) reimbursement for expenses incurred but not yet
reimbursed by the Company;
(v) any deferred compensation pursuant to Paragraph
9, including any interest accrued on such deferred amounts;
and
(vi) any other compensation and benefits to which he
or his legal representatives may be entitled under
applicable plans, programs and agreements of the Company,
including, without limitation, life insurance as provided in
Paragraph 7(c) above.
(b) TERMINATION BY THE COMPANY FOR CAUSE. At any time
after an event constituting Cause, the Company shall give the
Executive written notice of its intention to terminate him for
Cause, specifying in such notice the event forming the basis for
Cause. Subject only to the following sentence, termination shall
be effective immediately upon delivery of notice hereunder. If
the written notice is of an event constituting Cause under
Paragraph 1(d)(i) or 1(d)(viii), and if the event is capable of
being cured, the Executive shall have ten Business Days following
actual receipt of the notice of termination in which to cure, so
long as the Executive advises the Company in writing within 48
hours of receiving the notice of termination of the Executive's
intention to attempt cure. In the event the Executive's
employment is terminated by the Company for Cause, the Executive
shall be entitled to:
(i) Base Salary at the rate in effect at the time
of his termination through the date of termination of his
employment;
(ii) any performance or other bonus earned for a
fiscal period already completed but not yet paid;
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<PAGE>
(iii) reimbursement for expenses incurred but not yet
reimbursed by the Company;
(iv) any deferred compensation, pursuant to
Paragraph 9 hereof including any interest accrued on such
deterred amounts; and
(v) any other compensation and benefits to which
he may be entitled under applicable plans, programs and
agreements of the Company.
The Executive's entitlement to the foregoing shall be
without prejudice to the right of the Company for any damages or
other legal or equitable remedy to which the Company or a
Subsidiary may be entitled as a result of such Cause; provided,
however, that offset shall not be available to the Company in any
event.
(c) TERMINATION WITHOUT CAUSE OR CONSTRUCTIVE TERMINATION
WITHOUT CAUSE. In the event the Executive's employment is
terminated by the Company without Cause (which shall not include
a termination pursuant to Paragraph 10(a)) or in the event of a
Constructive Termination Without Cause, the Executive shall be
entitled to those items described in the subparagraphs (i)
through (v) hereof. Termination Without Cause shall be effective
immediately, unless a later date is stated, upon delivery of a
written notice of such termination from the Company to the
Executive. In the event the Executive elects to resign based upon
a Constructive Termination Without Cause, the Executive shall
give written notice thereof to the Company and state therein the
effective date of such resignation.
(i) an amount equal to one (1) year of Base Salary
(the "Base Salary Termination Payment"). The Executive
may elect, at the Executive's option, to receive the Base
Salary Termination Payment either (A) in equal monthly
installments over a (1) year period commencing immediately
upon Termination of the Executive's employment, or (B) in a
lump-sum payment promptly following termination of the
Executive's employment;
(ii) any performance or other bonus earned for a
fiscal period already completed but not yet paid;
(iii) reimbursement for expenses incurred but not yet
reimbursed by the Company;
(iv) any deferred compensation pursuant to Paragraph
9 hereof, including any interest accrued on such deferred
amounts; and
(v) any other compensation and benefits to which he
may be entitled under applicable plans, programs and
agreements of the Company.
(d) TERMINATION BY THE COMPANY DUE TO FAILURE TO RECEIVE
LICENSE. In the event of a Termination by the Company Due to
Failure to Receive License, the Executive shall be entitled to
those items specified in subparagraphs (i) through (v) hereof.
The effective date of the
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Termination by the Company Due to Failure to Receive License
shall be as stated in a written notice from the Company to the
Executive.
(i) Base Salary at the rate in effect at the time
of his termination through the date of termination of his
employment;
(ii) any performance or other bonus earned for a
fiscal period already completed but not yet paid;
(iii) reimbursement for expenses incurred but not yet
reimbursed by the Company;
(iv) any deferred compensation pursuant to Paragraph
9 hereof, including any interest accrued on such deferred
amounts; and
(v) any other compensation and benefits to which he
may be entitled under applicable plans, programs and
agreements of the Company.
(e) VOLUNTARY TERMINATION. A "Voluntary Termination" shall
mean a termination of employment by the Executive on his own
initiative other than a termination under Paragraph 10(a) or
10(c). In the event of a Voluntary Termination, the Executive
shall be entitled to:
(i) Base Salary at the rate in effect at the time
of his termination through the date of termination of this
employment;
(ii) any performance or other bonus earned for a
fiscal period already completed but not yet paid;
(iii) reimbursement for expenses incurred but not yet
reimbursed by the Company;
(iv) any deferred compensation pursuant to Paragraph
9 hereof, including any interest accrued on such deferred
amounts; and
(v) any other compensation and benefits to which he
may be entitled under applicable plans, programs and
agreements of the Company.
A Voluntary Termination shall not, solely due to a
Voluntary Termination, be deemed a breach of this Agreement and
shall be effective upon the expiration of 60 days after written
notice delivered to the Company, unless another period of time is
agreed to in writing by the Parties.
(f) NO MITIGATION; NO OFFSET. In the event of any
termination of the Executive's employment under the Agreement, he
shall be under no obligation to seek other employment, and there
shall be no offset against amounts due him under the Agreement on
account of any remuneration attributable to any subsequent
employment that he may obtain.
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(g) NATURE OF PAYMENTS. Any amounts due the Executive
under the Agreement in the event of any termination of his
employment with the Company are in the nature of severance
payments, or liquidated damages which contemplate both direct
damages and consequential damages that he may suffer as a result
of the termination of his employment, or both, and are not in the
nature of a penalty.
11. CHANGE OF CONTROL
In the event a Change of Control occurs, the Executive shall
be entitled to:
(a) a lump-sum payment equal to the Base Salary due him
for the remainder of Term of Employment; provided, however, such
amount shall be no less than an amount equal to $300,000;
(b) any performance or other bonus earned for a fiscal
period already completed but not yet paid;
(c) reimbursement for expenses incurred but not yet
reimbursed by the Company;
(d) any deferred compensation pursuant to Paragraph 9
hereof, including any interest accrued on such deferred amounts;
and
(e) any other compensation and benefits to which he may be
entitled under applicable plans, programs and agreements of the
Company.
12. COVENANT NOT TO COMPETE
In the event of a Voluntary Termination under
Paragraph 10(e) above or a Termination Without Cause or a
Constructive Termination Without Cause under Paragraph 10(c)
above, the Executive shall not, for the remaining Term of
Employment or 12 months, whichever is shorter, engage in
competition with the Company. For purposes of this Paragraph 12,
the Executive shall be engaging in competition with the Company
if he engages in the casino and gaming business in Clark County,
Nevada or any other location in which the Company is engaging in
the casino and gaming business at the time of the termination of
the Executive's employment, whether as an employee, the
Executive, partner, principal, agent, representative, stockholder
or consultant (other than as a holder of not more than a 10%
equity interest) or in any other corporate or representative
capacity, so long as the Company is engaged in the casino and
gaming business in the location in question.
13. COVENANTS TO PROTECT CONFIDENTIAL INFORMATION
The Executive shall not, during the Term of Employment or
thereafter, without prior written consent of the Company,
divulge, publish or otherwise disclose to any other person any
Confidential Information regarding the Company or any Subsidiary
except in the course of carrying out his responsibilities on
behalf of the Company (e.g., providing information to the
Company's attorneys, accountants, bankers, etc.) or if required
to do so pursuant to the order of a
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<PAGE>
court having jurisdiction over the subject matter or a summons,
subpoena or order in the nature thereof of any legislative body
(including any committee thereof and any litigation or dispute
resolution method against the Company related to or arising out
of this Agreement) or any governmental or administrative agency.
For this purpose, Confidential Information shall include, but
not be limited to, the Company's financial, real estate,
marketing and promotional plans and strategies, customer lists
and customer data bases. Confidential Information does not
include information that becomes available to the public other
than through a breach of the Agreement on the part of the
Executive.
14. INDEMNIFICATION
(a) The Company shall indemnify the Executive to the
fullest extent permitted by Nevada law in effect as of the date
hereof against all costs, expenses, liabilities and losses
(including, without limitation, attorneys' fees, judgments,
fines, penalties, ERISA excise taxes and amounts paid in
settlement) reasonably incurred by the Executive in connection
with a Proceeding. For the purposes of this Paragraph 14, a
"Proceeding" shall mean any action, suit or proceeding by reason
of the fact that he is or was an officer, director or employee,
trustee or agent of any other entity at the request of the
Company.
(b) The Company shall advance to the Executive all
reasonable costs and expenses incurred by him in connection with
a Proceeding within 20 days after receipt by the Company of a
written request for such advance. Such request shall include an
itemized list of the costs and expenses and an undertaking by the
Executive to repay the amount of such advance if it shall
ultimately be determined by a court of competent jurisdiction
that he is not entitled to be indemnified by the Company against
such costs and expenses.
(c) The Executive shall not be entitled to indemnification
under this Paragraph 14 unless he meets the standard of conduct
specified in the Nevada Revised Statutes. Actions that fail to
meet the aforementioned standard of conduct shall include, but
are not limited to, the failure to act in good faith, failure to
act in the best interests of the Company, breach of the duty of
loyalty, appropriation of business opportunities, violation of
the provisions of the articles of incorporation or the bylaws of
the Company, violation of state or federal securities laws and
violation of criminal law. Notwithstanding the foregoing, to the
extent permitted by law neither N.R.S. 78.751(3) nor any similar
provision shall apply to indemnification under this Paragraph 14,
so that if the Executive in fact meets the applicable standard of
conduct, he shall be entitled to such indemnification whether or
not the Company (whether by the board of directors, the
stockholders, independent legal counsel or other party)
determines that indemnification is proper because he has met such
applicable standard of conduct. Neither the failure of the
Company to have made such a determination prior to the
commencement by the Executive of any suit or arbitration
proceeding seeking indemnification, nor a determination by the
Company that he has not met such applicable standard of conduct
shall create a presumption that he has not met the applicable
standard of conduct.
(d) The Company shall not settle any Proceeding or claim
in any manner which would impose on the Executive any penalty or
limitation without his prior written consent. Neither the
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<PAGE>
Company nor the Executive will unreasonably withhold its or his
consent to any proposed settlement.
15. ASSIGNABILITY; BINDING NATURE
This Agreement shall be binding upon and inure to the
benefit of the Parties and their respective successors, heirs and
assigns. No rights or obligations of the Company under the
Agreement may be assigned or transferred by the Executive or the
Company except that (a) such rights or obligations of the Company
may be assigned or transferred pursuant to a merger or
consolidation in which the Company is not the continuing entity,
or the sale or liquidation of all or substantially all of the
assets of the Company, provided that the assignee or transferee
is the successor to all or substantially all of the assets of the
Company and such assignee or transferee assumes the liabilities,
obligations and duties of the Company, as contained in the
Agreement, either contractually or as a matter of law, and (b)
such obligations of the Company may be transferred by the
Executive by will or pursuant to the laws of descent or
distribution. The Company shall take all reasonable legal action
necessary to effect such assignment and assumption of the
Company's liabilities, obligations and duties under the Agreement
in circumstances described in clause (a) of the preceding
sentence.
16. REPRESENTATION
The Company and the Executive respectively represent and
warrant to each other that, subject to any approval that may be
necessary from the Nevada Commission, each respectively is fully
authorized and empowered to enter into the Agreement and that its
or his entering into the Agreement and the performance of its or
his respective obligations under the Agreement will not violate
any agreement between the Company or the Executive respectively
and any other person, firm or organization or any law or
governmental regulation.
17. ENTIRE AGREEMENT
The Agreement contains the entire agreement between the
Parties concerning the subject matter hereof and supersedes all
prior agreements, understandings, discussions, negotiations and
undertakings, whether written or oral, between the Parties with
respect thereto.
18. AMENDMENT OR WAIVER
The Agreement cannot be changed, modified or amended without
the consent in writing of both the Executive and the Company. No
waiver by either Party at any time of any breach by the other
Party of any condition or provision of the Agreement shall be
deemed a waiver of a similar or dissimilar condition or provision
at the same or at any prior or subsequent time. Any waiver must
be in writing and signed by the Executive or an authorized
officer of the Company, as the case may be.
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<PAGE>
19. SEVERABILITY
In the event that any provision or portion of this Agreement
shall be determined to be invalid or unenforceable for any
reason, in whole or in part, the remaining provisions of this
Agreement shall be unaffected thereby and shall remain in full
force and effect to the fullest extent permitted by law.
20. SURVIVORSHIP
The respective rights and obligations of the Parties
hereunder shall survive any termination of this Agreement to the
extent necessary to the intended preservation of such rights and
obligations.
21. GOVERNING LAW
This Agreement shall be governed by and construed and
interpreted in accordance with the laws of Nevada without
reference to principles of conflict of laws.
22. SETTLEMENT OF DISPUTES
Any disputes regarding the interpretation of, arising out
of, or related to this Agreement shall be resolved by arbitration
to be held in Nevada in accordance with the rules and procedures
of the American Arbitration Association. The prevailing party
in such proceeding shall be entitled to recover the costs of the
arbitration or litigation from the other party, including,
without limitation, attorneys' fees.
23. NOTICES
Any notice given to either party shall be in writing and,
except as provided in the third sentence of Paragraph 10(b)
above, shall be deemed to have been given when delivered
personally or sent by certified or registered mail, postage
prepaid, return receipt requested, duly addressed to the Party
concerned at the address indicated below or to such changed
address as such Party may subsequently give notice of:
If to the Company or the Board:
Rio Hotel & Casino, Inc.
3700 W. Flamingo Road
Las Vegas, Nevada 89103
Attn: Chief Executive Officer
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<PAGE>
With a copy to:
General Counsel
Rio Hotel & Casino, Inc.
3700 W. Flamingo Road
Las Vegas, Nevada 89103
If to the Executive:
Ronald J. Radcliffe
2222 Summerwind Circle
Henderson, Nev. 89012
24. HEADINGS
The headings of the paragraphs contained in this Agreement
are for convenience only and shall not be deemed to control or
affect the meaning or construction of any provision of this
Agreement.
25. COUNTERPARTS
This Agreement may be executed in two or more counterparts.
26. TAXES
Compensation payable hereunder is gross and shall be subject
to such withholding taxes and other taxes as may be required by
law.
27. ACKNOWLEDGMENT
The Executive acknowledges that he has been given a
reasonable period of time to study this Agreement before signing
it. The Executive certifies that he has fully read, has received
an explanation of, and completely understands the terms, nature,
and effect of this Agreement. The Executive further acknowledges
that he is executing this Agreement freely, knowingly, and
voluntarily and that the Executive's execution of this Agreement
is not the result of any fraud, duress, mistake, or undue
influence whatsoever. In executing this Agreement, the Executive
does not rely on any inducements, promises, or representations by
the Company other than the terms and conditions of this
Agreement.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed the
Agreement as of the date first written above.
RIO HOTEL & CASINO, INC.
By: /s/James A. Barrett, Jr.
Its: President
/s/Ronald J. Radcliffe
Ronald J. Radcliffe
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<PAGE>
EXHIBIT A
TO EMPLOYMENT AGREEMENT
DETERMINATION OF PERFORMANCE BONUS AMOUNTS
The Executive shall be entitled to a performance bonus
pursuant to the terms of a management incentive compensation plan
to be approved by the Company's Compensation Committee and
ratified by the Board.
A-1
<PAGE>
EXHIBIT B
TO EMPLOYMENT AGREEMENT
1995 LONG-TERM INCENTIVE PLAN ("LTIP")
STOCK OPTION GRANT
EMPLOYEE: _______________ DATE OF GRANT: _________, 1996
GRANT NO.: _______________ OPTION EXERCISE PRICE: _______
TYPE OF OPTION: Non-Qualified OPTION SHARES: _______________
Subject to the terms of the LTIP and pursuant to this
stock option grant, Rio Hotel & Casino, Inc. (the "Company")
hereby grants the option to purchase the above described number
of shares of Rio Hotel & Casino, Inc. Common Stock exercisable
at the Option Price stated above.
Options granted hereunder shall be exercisable only to the
extent of "vesting." Vesting occurs when the Employee remains
continuously employed with the Company or its subsidiaries on the
date upon which the options are scheduled to vest in order to
have any right to exercise such options and any options which are
scheduled to vest thereafter. If the Employee has failed to
remain continuously employed with the Company or its subsidiaries
on a date upon which options are scheduled to vest, the Employee
shall have no right to nor be entitled to exercise those options
or any other options which may be scheduled to vest thereafter.
The vesting schedule for stock options under this stock option
grant is a follows:
_________, 1997 (1) - 20% of Options will vest;
_________, 1998 (1) - 40% of Options will vest;
_________, 1999 (1) - 60% of Options will vest;
_________, 2000 (1) - 80% of Options will vest;
_________, 2001 (1) - 90% of Options will vest;
_________, 2002 (1) - 100% of Options will vest.
Notwithstanding the foregoing, the options granted hereunder
will become fully vested and become exercisable in full upon a
Change in Control as defined in the Employment Agreement between
the Company and the Executive dated as of __________, 1997 (the
"Employment Agreement").
I. Except as may be otherwise provided in the LTIP, vested
options granted thereunder shall expire the earlier of either:
A. ten (10) years after the Date of Grant;
B-1
<PAGE>
B. three (3) years after the Employee's retirement
from the Company or any of its subsidiaries after the
Employee attains the age of 72 years;
C. three (3) years after the date of the Employee's
death;
D. three (3) months after the Employee's termination
from the Company or any of its subsidiaries (except for
Termination Without Cause or Constructive Termination
Without Cause) for reasons other than death or retirement
after attaining the age of 72 years; or
E. two (2) years after the Employee's Termination
Without Cause, Constructive Termination Without Cause or
following a Change of Control.
This grant is made pursuant to the terms and conditions of
the LTIP, a copy of which is attached hereto as Exhibit "A," and
by this reference made a part hereof and in addition is subject
to the following limitations:
I. If the Employee resigns his position with the Company
or any of its subsidiaries without the written consent of the
Company, and accepts employment, consulting, or other
compensation for services, within six (6) months after the
Employee's last day of employment with the Company or any of its
subsidiaries from a competitor company, the Employee shall:
A. Forfeit all vested options in the Employee's
account which were issued subject to this grant; and
B. Reimburse the Company for all profits earned
pursuant to any exercise of these options within six (6)
months prior to or six (6) months subsequent to the date of
giving notice of Employee's resignation.
II. A "competitor company" is defined as any gaming or
hotel company, or any affiliate thereof, located within fifty
miles of any location in which the Company conducts business.
III. "Profits" are defined as the differential between the
exercise price and the last reported sale price on the day of
exercise, multiplied by the number of shares exercised.
B-2
<PAGE>
IN WITNESS WHEREOF, the undersigned executes this stock
option grant as of the first date set forth herein:
RIO HOTEL & CASINO, INC.
Long Term Incentive Plan Committee
By: ________________________
Thomas Y. Hartley
By: ________________________
Peter M. Thomas
Accepted and agreed to as of the Date of the Grant:
Name: __________________ Social Security Number: _____________
Residence Address: ______________________________________________
Street Address City, State, Zip Code
B-3
<PAGE>
EMPLOYMENT AGREEMENT
Agreement, dated as of March 7, 1997, between Rio Hotel &
Casino, Inc., a Nevada corporation with its principal office
located at 3700 W. Flamingo Road, Las Vegas, Nevada 89103
(together with its successors or assigns as permitted under this
agreement, the "Company"), and I. Scott Bogatz (the "Executive").
W I T N E S S E T H:
Whereas, the Company desires to employ the Executive and
enter into an agreement embodying the terms of such employment
(the "Agreement"), and the Executive desires to enter into the
Agreement and to accept such employment, subject to the terms and
provisions of this Agreement.
Now, Therefore, in consideration of the premises and mutual
covenants contained herein and for other good and valuable
consideration, the Company and the Executive (individually a
"Party" and together the "Parties") agree as follows:
1. DEFINITIONS
(a) "BASE SALARY" shall mean the salary provided for in
Paragraph 4 below subject to such increases as may be made from
time to time.
(b) "BOARD" shall mean the Board of Directors of the
Company.
(c) "BUSINESS DAY" shall mean any day other than a weekend,
a federal or state holiday or a vacation day for the Executive.
(d) "CAUSE" shall mean:
(i) the conviction of (including any act as a
result of pleading nolo contendere) or judgment against the
Executive by a civil or criminal court of competent
jurisdiction of a felony, or any other offense involving
embezzlement, misappropriation of funds, any act of moral
turpitude or dishonesty;
(ii) the indictment of the Executive by a state or
federal grand jury or the filing of a criminal complaint or
information for a felony, or any other offense involving
embezzlement, misappropriation of funds, any act of moral
turpitude or dishonesty, unless such indictment or filing is
dismissed within one hundred eighty (180) days from the date
of such indictment or filing. The Board may elect to
suspend and extend the Term of Employment by such one
hundred eighty (180) day period or the number of days
actually taken by the Executive to dismiss such indictment
or filing, whichever is less; provided that the Executive
notifies the Company in writing that the Executive intends
to contest in
<PAGE>
good faith such indictment or filing and pursues the
dismissal of such indictment or filing with reasonable
diligence. During such period of suspension, Employee may
be relieved of his duties, but shall be entitled to receive
his Base Salary;
(iii) the written confession by the Executive of
embezzlement, misappropriation of funds or any act of moral
turpitude or dishonesty;
(iv) the denial, revocation or suspension of a
license, qualification or certificate of suitability to the
Executive by any of the Gaming Authorities;
(v) any action by the Executive that results in (A)
a written communication from the Gaming Authorities to the
Company advising the Company that, or (B) administrative
action by the Gaming Authorities resulting in a
determination that: (Y) any licensing, qualification and/or
approval by the Gaming Authorities with respect to the
Company will be approved only upon terms and conditions
which are unacceptable to the Company; or (Z) the Gaming
Authorities will revoke or suspend any existing license held
by the Company or its subsidiaries;
(vi) the finding by a court of competent
jurisdiction in a criminal or civil action or by the U.S.
Securities and Exchange Commission or state blue sky agency
in an administrative proceeding that the Executive has
willfully violated any federal or state securities law;
(vii) the engagement by the Executive in willful and
continued misconduct, or the Executive's willful and
continued failure to substantially perform the Executive's
obligations as a Director of the Company or as an employee
of the Company, if such failure or misconduct is materially
damaging or materially detrimental to the business and
operations of the Company;
(viii) the use by the Executive of alcohol or any
controlled substance to an extent that it interferes, in the
sole discretion of the Board, on a continuing and material
basis with the performance of the Executive's duties under
the Agreement;
(ix) the willful, unauthorized disclosure by the
Executive of Confidential Information, as defined in
Paragraph 13, concerning the Company or any Subsidiary,
unless such disclosure was (A) believed in good faith by the
Executive to be appropriate in the course of properly
carrying out his duties under the Agreement, or (B) required
by an order of a court having jurisdiction over the subject
matter or a summons, subpoena or order in the nature thereof
of any legislative body (including any committee thereof) or
any governmental or administrative agency; or
(x) the performance of services by the Executive,
other than in the course of properly carrying out his duties
under the Agreement and as otherwise provided herein, for
any other corporation or person that competes with the
Company or any Subsidiary while the Executive is employed by
the Company, except as disclosed in that certain conflict of
interest statement from the Executive to the Company in
August 1996.
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<PAGE>
(e) "CHANGE IN CONTROL" shall mean the occurrence of any
one of the following events:
(i) any "person" (as that term is used in Section
13(d) and 14(d) of the Securities and Exchange Act of 1934
(the "Exchange Act")), other than Anthony A. Marnell II,
James A. Barrett, Jr. or their affiliates, becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the
Company representing 25.0% or more of the combined voting
power of the Company's outstanding securities ordinarily
having the right to vote at the election of directors; or
(ii) individuals who constitute the Board of
Directors of the Company on the date hereof (the "Incumbent
Board") cease for any reason to constitute at least a
majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election was
approved by at least a majority of the directors comprising
the Incumbent Board, or whose nomination or election was
approved by a majority of the Board of Directors of the
Company serving under an Incumbent Board, shall be, for
purposes of this clause (ii), considered as if he or she
were a member of the Incumbent Board; or
(iii) the merger, consolidation or sale of all or
substantially all the assets of the Company occurs; or
(iv) a proxy statement is distributed soliciting
proxies from stockholders of the the Company, by someone
other than the current management of the Company, seeking
stockholder approval of a plan of reorganization, merger or
consolidation of the Company with one or more corporations
as a result of which the outstanding shares of the Company's
securities are actually exchanged for or converted into cash
or property or securities not issued by the Company.
(f) "COMMON STOCK" shall mean the common stock, $.01 par
value, of the Company.
(g) "CONSOLIDATED EBITDA" shall mean the Company's
consolidated "Earnings (Losses) from Operations" plus Interest,
Taxes, Depreciation and Amortization but excluding (i) the sale
of any material asset not in the ordinary course of business, and
(ii) any charge against earnings for stock options pursuant to
Paragraph 6 below. Consolidated EBITDA shall be determined on
the accrual basis of accounting in accordance with generally
accepted accounting principles. Consolidated EBITDA for a
calendar year shall be determined by the Company's independent
accountants based on audited financial statements. Consolidated
EBITDA for a period of less than one year shall be determined by
the Company's independent accountants based on a written report
setting forth the basis of the review.
(h) "CONSTRUCTIVE TERMINATION WITHOUT CAUSE" shall mean
that,
(i) without the Executive's prior written consent,
one or more of the following events occurs:
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<PAGE>
(1) the Executive is removed from the position
of Vice President, Secretary and General Counsel of the
Company and/or the position of Vice President,
Secretary and General Counsel of Rio Properties, Inc.
("Rio Properties") for any reason other than the
termination of his employment;
(2) the Executive suffers a material
diminution in the authorities, duties or
responsibilities normally associated with the foregoing
positions, or there are assigned to him duties and
responsibilities materially inconsistent with those
normally associated with such positions;
(3) the Executive's Base Salary or annual
bonus opportunity as provided for in Paragraphs 4 and 5
below, respectively, is decreased by the affirmative
act of the Company, or his benefits under any material
employee benefit plan or program of the Company or his
incentive or equity opportunity under any material
incentive or equity program is or are reduced by the
affirmative act of the Company;
(4) the Executive's office location is
relocated outside of the Las Vegas, Nevada
metropolitan area; or
(5) the Company fails to obtain a written
agreement from any successors of the Company to assume
and perform the Agreement; and
(ii) within 90 days of learning of the occurrence of
such event (but in no event later than 180 days after the
occurrence of such event), the Executive terminates his
employment with the Company.
(i) "DISABILITY" shall mean the Executive's inability, for
a period of six consecutive months, to render substantially the
services provided for in Paragraph 3(a) below by reason of mental
or physical disability, whether resulting from illness, accident
or otherwise.
(j) "GAMING AUTHORITIES" means the Nevada Gaming Control
Board ("Nevada Board"), the Nevada Gaming Commission ("Nevada
Commission"), the Clark County Liquor and Gaming Licensing Board
("Clark County Board"), and any other federal, state, local or
tribal gaming authority to which the Company is now subject, or
may be subject during the Term of Employment.
(k) "SUBSIDIARY" shall mean any corporation in which the
Company owns 50% or more of the Voting Stock or any other venture
in which it owns 50% or more of the equity.
(l) "TERM OF EMPLOYMENT" shall mean the initial three-year
period specified in Paragraph 2 below and if, but only if,
automatically renewed as provided in Paragraph 2, shall include
the period of such renewal.
(m) "TERMINATION BY THE COMPANY DUE TO FAILURE TO RECEIVE
LICENSE" shall mean a termination of the Executive's employment
by the Company following a failure of the Executive to obtain a
license required by the Nevada Board, Nevada Commission or the
Clark County
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<PAGE>
Board and any other federal, state, local or tribal gaming
authority to which the Company is now subject, or may be subject
during the Term of Employment.
(n) "VOTING STOCK" shall mean capital stock of any class or
classes having general voting power under ordinary circumstances,
in the absence of contingencies, to elect the directors of a
corporation.
2. TERM OF EMPLOYMENT
(a) The Company hereby employs the Executive, and the
Executive hereby accepts employment with the Company, in the
position and with the duties and responsibilities as set forth in
Paragraph 3 below for the Term of Employment, subject to the
terms and conditions of the Agreement.
(b) The initial Term of Employment shall commence on
January 1, 1997 and shall, unless sooner terminated as provided
in Paragraph 10 hereof, terminate at 11:59 p.m. (P.D.T.) on
December 31, 1999; provided that the Term of Employment shall
automatically renew for successive one-year periods unless (i) it
has sooner terminated as provided in Paragraph 10 hereof or
(ii) either Party has notified the other in writing at least 60
days prior to the otherwise scheduled expiration of the Term of
Employment that such Term of Employment shall not so renew.
3. POSITION, DUTIES AND AUTHORITIES
(a) During the Term of Employment, the Executive shall be
employed as Vice President, Secretary and General Counsel of the
Company and as Vice President, Secretary and General Counsel of
the Company's wholly-owned subsidiary, Rio Properties. Subject
to supervision and in accordance with the policies and directives
established by the Board, and subordinate to and working under
the supervision of the Chief Executive Officer and President of
the Company, in the case of the Company, and the Chief Operating
Officer of Rio Properties in the case of Rio Properties, the
Executive shall be the General Counsel of the Company's and Rio
Properties' day-to-day business operations, with the duties,
responsibilities and authorities customarily associated with such
positions. The Executive shall be entitled to no additional
remuneration for serving as an officer of Rio Properties or any
other Subsidiary.
(b) Anything herein to the contrary notwithstanding,
nothing shall preclude the Executive from engaging in charitable,
community and business affairs, managing his personal investments
and serving as a member of boards of directors of industry
associations or non-profit or for profit organizations and
companies so long as such activities do not materially interfere
in the opinion and sole discretion of the Chief Executive Officer
of the Company with the Executive's carrying out his duties and
responsibilities under the Agreement. The Executive shall
disclose all relationships covered under this Paragraph 3(b) in
the Executive's personal history disclosure form to be submitted
to the Nevada Gaming Control Board in connection with the
Executive's required licensing and such form shall, prior to
filing of such form, be submitted to the Company's Chief
Executive Officer for review. Thereafter, not less often than
on January 1
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of each year, the Executive shall disclose in writing to the
Chief Executive Officer of the Company any changes to the
information with respect to involvement in such entities or
organizations.
4. BASE SALARY
During the Term of Employment, the Executive shall be paid
by the Company a Base Salary payable no less frequently than in
equal semi-monthly installments at an annualized rate of
$155,000; subject to increase as may be determined by the Company
within its sole discretion and as set forth below.
Notwithstanding the foregoing, the Base Salary shall be increased
each January 1 during the term hereof in an amount equal to the
percentage increase in the Consumer Price Index - All Urban Areas
("CPI") issued by the U.S. Department of Labor, Bureau of Labor
Statistics, for the preceding calendar year; provided, however,
any such increase in Base Salary shall never exceed six percent
(6%) in any one year.
5. PERFORMANCE BONUS
The Company shall pay the Executive performance bonuses for
each year during the Term of Employment in amounts determined in
accordance with Exhibit A hereto.
6. STOCK OPTIONS
The Executive shall be eligible for participation in the
Company's 1995 Long Term Incentive Plan, as amended from time to
time.
7. EMPLOYEE BENEFIT PROGRAMS
(a) During the Term of Employment, the Executive and his
dependents shall be entitled, at the Company's expense, to
medical, surgical, hospitalization, dental and visual insurance
coverage (which may include any insured program provided by the
Company to its employees) providing him with 100% of all expenses
both covered and paid for by the Company's insurance program(s)
or plan(s).
(b) During the Term of Employment, the Executive shall also
be provided with long-term disability insurance which shall
provide the Executive with an annual benefit of fifty percent
(50%) of Base Salary continued until age 65 or until the
Executive dies or is no longer disabled, if sooner. To the
extent available, the Executive shall be provided an opportunity
to purchase additional long-term disability insurance, at his own
expense. To the extent possible, the amount of long-term
disability insurance described in the first two sentences of this
Paragraph 7(b) shall be provided by an individual policy that
gives the Executive the right to assume the policy in the event
of his termination of employment, provided that the amount of
such insurance to be so provided shall be offset by long-term
disability insurance coverage provided to the Executive under the
Company's employee long-term disability insurance programs
described in Paragraph 7(d) below.
-6-
<PAGE>
(c) During the Term of Employment, the Company shall
provide the Executive, subject to insurability as a normal risk
and at reasonable cost, with life insurance coverage in an amount
equal to $500,000.00. To the extent available, the Executive
shall be provided an opportunity to purchase additional life
insurance, at his own expense. To the extent possible, the
amount of life insurance described in the first two sentences of
this Paragraph 7(c) shall be provided by an individual policy
that gives the Executive the right to assume the policy in the
event of his termination of employment, provided that the amount
of such insurance to be so provided shall be offset by life
insurance coverage provided to the Executive under the Company's
employee group life insurance programs described in Paragraph
7(d) below.
(d) During the Term of Employment, the Executive shall be
entitled to participate in all employee incentive and benefit
programs of the Company now or hereafter made available to the
Company's senior executives or salaried employees generally, as
such programs may be in effect from time-to-time, including,
without limitation, pension and other retirement plans, profit-
sharing plans, group life insurance, accidental death and
dismemberment insurance, hospitalization, surgical, major medical
and dental coverage, sick leave (including salary continuation
arrangements), long-term disability, holidays and up to three
weeks annually of vacations.
(e) During the Term of Employment, the Executive shall be
entitled to three weeks paid vacation per calendar year. In
lieu of utilizing such paid vacation in any calendar year, the
Executive shall have the right to either (i) receive cash in an
amount equivalent to one week of annual Base Salary, or (ii)
defer one week of such paid vacation to the next calendar year.
Notwithstanding the foregoing, the Executive shall be entitled
to receive no more than three weeks of annual Base Salary in lieu
of paid vacation in any calendar year. Except as expressly set
forth in Paragraph 7(e)(i) and (ii) herein, all paid vacation
benefits granted hereunder attributable to any calendar year
shall terminate on December 31 of said calendar year.
(f) During the Term of Employment, the Company shall pay
the Executive's Nevada State Bar membership dues and all fees and
expenses to be incurred in connection with the Executive's
satisfaction of any Nevada State Bar continuing legal education
requirements, including reimbursement for reasonable travel
expenses to programs outside the Las Vegas Metropolitan area.
8. BUSINESS EXPENSE REIMBURSEMENT AND PERQUISITES
During the Term of Employment, the Executive shall be
entitled to receive reimbursement by the Company, upon submission
of adequate documentation, for all reasonable out-of-pocket
expenses incurred by him in performing services under the
Agreement. Any legal fees and expenses incurred in connection
with the preparation and negotiation of the Agreement up to a
maximum of $2,000 shall be paid by the Company.
-7-
<PAGE>
9. DEFERRED COMPENSATION
The Executive shall be entitled to defer up to 25% of his
Base Salary and any performance or other bonus for each calendar
year pursuant to a compensation deferral program to be adopted by
the Company.
10. TERMINATION OF EMPLOYMENT
(a) TERMINATION DUE TO DEATH OR DISABILITY. In the event
of the termination of the Executive's employment under the
Agreement due to his death or Disability, the Executive or his
legal representatives, as the case may be, shall be entitled to:
(i) (A) in the case of death, continued Base Salary
at the rate in effect at the time of his death for a period
of 3 months following the month in which such termination
of employment due to death occurs, or (B) in the case of
Disability, the disability benefit available under and only
to the extent of insurance maintained as provided in
Paragraph 7(b) above;
(ii) any performance or other bonus earned for a
fiscal period already completed but not yet paid;
(iii) a pro rata performance bonus for the year in
which his employment terminates due to death or Disability
based on performance in relation to the Consolidated EBITDA
targets for the period ending with the end of the month
immediately prior to the termination of his employment;
(iv) reimbursement for expenses incurred but not yet
reimbursed by the Company;
(v) any deferred compensation pursuant to Paragraph
9, including any interest accrued on such deferred amounts;
and
(vi) any other compensation and benefits to which he
or his legal representatives may be entitled under
applicable plans, programs and agreements of the Company,
including, without limitation, life insurance as provided in
Paragraph 7(c) above.
(b) TERMINATION BY THE COMPANY FOR CAUSE. At any time
after an event constituting Cause, the Company shall give the
Executive written notice of its intention to terminate him for
Cause, specifying in such notice the event forming the basis for
Cause. Subject only to the following sentence, termination shall
be effective immediately upon delivery of notice hereunder. If
the written notice is of an event constituting Cause under
Paragraph 1(d)(i) or 1(d)(viii), and if the event is capable of
being cured, the Executive shall have ten Business Days following
actual receipt of the notice of termination in which to cure, so
long as the Executive advises the Company in writing within 48
hours of receiving the notice of termination of the Executive's
-8-
<PAGE>
intention to attempt cure. In the event the Executive's
employment is terminated by the Company for Cause, the Executive
shall be entitled to:
(i) Base Salary at the rate in effect at the time
of his termination through the date of termination of his
employment;
(ii) any performance or other bonus earned for a
fiscal period already completed but not yet paid;
(iii) reimbursement for expenses incurred but not yet
reimbursed by the Company;
(iv) any deferred compensation, pursuant to
Paragraph 9 hereof including any interest accrued on such
deterred amounts; and
(v) any other compensation and benefits to which
he may be entitled under applicable plans, programs and
agreements of the Company.
The Executive's entitlement to the foregoing shall be
without prejudice to the right of the Company for any damages or
other legal or equitable remedy to which the Company or a
Subsidiary may be entitled as a result of such Cause; provided,
however, that offset shall not be available to the Company in any
event.
(c) TERMINATION WITHOUT CAUSE OR CONSTRUCTIVE TERMINATION
WITHOUT CAUSE. In the event the Executive's employment is
terminated by the Company without Cause (which shall not include
a termination pursuant to Paragraph 10(a)) or in the event of a
Constructive Termination Without Cause, the Executive shall be
entitled to those items described in the subparagraphs (i)
through (v) hereof. Termination Without Cause shall be effective
immediately, unless a later date is stated, upon delivery of a
written notice of such termination from the Company to the
Executive. In the event the Executive elects to resign based upon
a Constructive Termination Without Cause, the Executive shall
give written notice thereof to the Company and state therein the
effective date of such resignation.
(i) an amount equal to one (1) year of Base Salary
(the "Base Salary Termination Payment"). The Executive
may elect, at the Executive's option, to receive the Base
Salary Termination Payment either (A) in equal monthly
installments over a (1) year period commencing immediately
upon termination of the Executive's employment, or (B) in a
lump-sum payment promptly following termination of the
Executive's employment;
(ii) any performance or other bonus earned for a
fiscal period already completed but not yet paid;
(iii) reimbursement for expenses incurred but not yet
reimbursed by the Company;
-9-
<PAGE>
(iv) any deferred compensation pursuant to Paragraph
9 hereof, including any interest accrued on such deferred
amounts; and
(v) any other compensation and benefits to which he
may be entitled under applicable plans, programs and
agreements of the Company.
(d) TERMINATION BY THE COMPANY DUE TO FAILURE TO RECEIVE
LICENSE. In the event of a Termination by the Company Due to
Failure to Receive License, the Executive shall be entitled to
those items specified in subparagraphs (i) through (v) hereof.
The effective date of the Termination by the Company Due to
Failure to Receive License shall be as stated in a written notice
from the Company to the Executive.
(i) Base Salary at the rate in effect at the time
of his termination through the date of termination of his
employment;
(ii) any performance or other bonus earned for a
fiscal period already completed but not yet paid;
(iii) reimbursement for expenses incurred but not yet
reimbursed by the Company;
(iv) any deferred compensation pursuant to Paragraph
9 hereof, including any interest accrued on such deferred
amounts; and
(v) any other compensation and benefits to which he
may be entitled under applicable plans, programs and
agreements of the Company.
(e) VOLUNTARY TERMINATION. A "Voluntary Termination" shall
mean a termination of employment by the Executive on his own
initiative other than a termination under Paragraph 10(a) or
10(c). In the event of a Voluntary Termination, the Executive
shall be entitled to:
(i) Base Salary at the rate in effect at the time
of his termination through the date of termination of this
employment;
(ii) any performance or other bonus earned for a
fiscal period already completed but not yet paid;
(iii) reimbursement for expenses incurred but not yet
reimbursed by the Company;
(iv) any deferred compensation pursuant to Paragraph
9 hereof, including any interest accrued on such deferred
amounts; and
(v) any other compensation and benefits to which he
may be entitled under applicable plans, programs and
agreements of the Company.
-10-
<PAGE>
A Voluntary Termination shall not, solely due to a
Voluntary Termination, be deemed a breach of this Agreement and
shall be effective upon the expiration of 60 days after written
notice delivered to the Company, unless another period of time is
agreed to in writing by the Parties.
(f) NO MITIGATION; NO OFFSET. In the event of any
termination of the Executive's employment under the Agreement, he
shall be under no obligation to seek other employment, and there
shall be no offset against amounts due him under the Agreement on
account of any remuneration attributable to any subsequent
employment that he may obtain.
(g) NATURE OF PAYMENTS. Any amounts due the Executive
under the Agreement in the event of any termination of his
employment with the Company are in the nature of severance
payments, or liquidated damages which contemplate both direct
damages and consequential damages that he may suffer as a result
of the termination of his employment, or both, and are not in the
nature of a penalty.
11. CHANGE OF CONTROL
In the event a Change of Control occurs, the Executive shall
be entitled to:
(a) a lump-sum payment equal to the Base Salary due him for
the remainder of Term of Employment; provided, however, such
amount shall be no less than an amount equal to $200,000;
(b) any performance or other bonus earned for a fiscal
period already completed but not yet paid;
(b) reimbursement for expenses incurred but not yet
reimbursed by the Company;
(d) any deferred compensation pursuant to Paragraph 9
hereof, including any interest accrued on such deferred amounts;
and
(e) any other compensation and benefits to which he may be
entitled under applicable plans, programs and agreements of the
Company.
12. COVENANT NOT TO COMPETE
In the event of a Voluntary Termination under
Paragraph 10(e) above or a Termination Without Cause or a
Constructive Termination Without Cause under Paragraph 10(c)
above, the Executive shall not, for the remaining Term of
Employment or 12 months, whichever is shorter, engage in
competition with the Company. For purposes of this Paragraph 12,
the Executive shall be engaging in competition with the Company
if he engages in the casino and gaming business in Clark County,
Nevada or any other location in which the Company is engaging in
the casino and gaming business at the time of the termination of
the Executive's employment, whether as an employee, the
Executive, partner, principal, agent, representative, stockholder
or consultant (other than as a holder of not more than a 10%
equity interest) or in any other corporate or
-11-
<PAGE>
representative capacity, so long as the Company is engaged in the
casino and gaming business in the location in question.
13. COVENANTS TO PROTECT CONFIDENTIAL INFORMATION
The Executive shall not, during the Term of Employment or
thereafter, without prior written consent of the Company,
divulge, publish or otherwise disclose to any other person any
Confidential Information regarding the Company or any Subsidiary
except in the course of carrying out his responsibilities on
behalf of the Company (e.g., providing information to the
Company's attorneys, accountants, bankers, etc.) or if required
to do so pursuant to the order of a court having jurisdiction
over the subject matter or a summons, subpoena or order in the
nature thereof of any legislative body (including any committee
thereof and any litigation or dispute resolution method against
the Company related to or arising out of this Agreement) or any
governmental or administrative agency. For this purpose,
Confidential Information shall include, but not be limited to,
the Company's financial, real estate, marketing and promotional
plans and strategies, customer lists and customer data bases.
Confidential Information does not include information that
becomes available to the public other than through a breach of
the Agreement on the part of the Executive.
14. INDEMNIFICATION
(a) The Company shall indemnify the Executive to the
fullest extent permitted by Nevada law in effect as of the date
hereof against all costs, expenses, liabilities and losses
(including, without limitation, attorneys' fees, judgments,
fines, penalties, ERISA excise taxes and amounts paid in
settlement) reasonably incurred by the Executive in connection
with a Proceeding. For the purposes of this Paragraph 14, a
"Proceeding" shall mean any action, suit or proceeding by reason
of the fact that he is or was an officer, director or employee,
trustee or agent of any other entity at the request of the
Company.
(b) The Company shall advance to the Executive all
reasonable costs and expenses incurred by him in connection with
a Proceeding within 20 days after receipt by the Company of a
written request for such advance. Such request shall include an
itemized list of the costs and expenses and an undertaking by the
Executive to repay the amount of such advance if it shall
ultimately be determined by a court of competent jurisdiction
that he is not entitled to be indemnified by the Company against
such costs and expenses.
(c) The Executive shall not be entitled to indemnification
under this Paragraph 14 unless he meets the standard of conduct
specified in the Nevada Revised Statutes. Actions that fail to
meet the aforementioned standard of conduct shall include, but
are not limited to, the failure to act in good faith, failure to
act in the best interests of the Company, breach of the duty of
loyalty, appropriation of business opportunities, violation of
the provisions of the articles of incorporation or the bylaws of
the Company, violation of state or federal securities laws and
violation of criminal law. Notwithstanding the foregoing, to the
extent permitted by law neither N.R.S. 78.751(3) nor any similar
provision shall apply to indemnification under this Paragraph 14,
so that if the Executive in fact meets the applicable standard of
conduct, he shall be entitled to
-12-
<PAGE>
such indemnification whether or not the Company (whether by the
board of directors, the stockholders, independent legal counsel
or other party) determines that indemnification is proper because
he has met such applicable standard of conduct. Neither the
failure of the Company to have made such a determination prior to
the commencement by the Executive of any suit or arbitration
proceeding seeking indemnification, nor a determination by the
Company that he has not met such applicable standard of conduct
shall create a presumption that he has not met the applicable
standard of conduct.
(d) The Company shall not settle any Proceeding or claim in
any manner which would impose on the Executive any penalty or
limitation without his prior written consent. Neither the
Company nor the Executive will unreasonably withhold its or his
consent to any proposed settlement.
15. ASSIGNABILITY; BINDING NATURE
This Agreement shall be binding upon and inure to the
benefit of the Parties and their respective successors, heirs and
assigns. No rights or obligations of the Company under the
Agreement may be assigned or transferred by the Executive or the
Company except that (a) such rights or obligations of the Company
may be assigned or transferred pursuant to a merger or
consolidation in which the Company is not the continuing entity,
or the sale or liquidation of all or substantially all of the
assets of the Company, provided that the assignee or transferee
is the successor to all or substantially all of the assets of the
Company and such assignee or transferee assumes the liabilities,
obligations and duties of the Company, as contained in the
Agreement, either contractually or as a matter of law, and (b)
such obligations of the Company may be transferred by the
Executive by will or pursuant to the laws of descent or
distribution. The Company shall take all reasonable legal action
necessary to effect such assignment and assumption of the
Company's liabilities, obligations and duties under the Agreement
in circumstances described in clause (a) of the preceding
sentence.
16. REPRESENTATION
The Company and the Executive respectively represent and
warrant to each other that, subject to any approval that may be
necessary from the Nevada Commission, each respectively is fully
authorized and empowered to enter into the Agreement and that its
or his entering into the Agreement and the performance of its or
his respective obligations under the Agreement will not violate
any agreement between the Company or the Executive respectively
and any other person, firm or organization or any law or
governmental regulation.
17. ENTIRE AGREEMENT
The Agreement contains the entire agreement between the
Parties concerning the subject matter hereof and supersedes all
prior agreements, understandings, discussions, negotiations and
undertakings, whether written or oral, between the Parties with
respect thereto.
-13-
<PAGE>
18. AMENDMENT OR WAIVER
The Agreement cannot be changed, modified or amended without
the consent in writing of both the Executive and the Company. No
waiver by either Party at any time of any breach by the other
Party of any condition or provision of the Agreement shall be
deemed a waiver of a similar or dissimilar condition or provision
at the same or at any prior or subsequent time. Any waiver must
be in writing and signed by the Executive or an authorized
officer of the Company, as the case may be.
19. SEVERABILITY
In the event that any provision or portion of this Agreement
shall be determined to be invalid or unenforceable for any
reason, in whole or in part, the remaining provisions of this
Agreement shall be unaffected thereby and shall remain in full
force and effect to the fullest extent permitted by law.
20. SURVIVORSHIP
The respective rights and obligations of the Parties
hereunder shall survive any termination of this Agreement to the
extent necessary to the intended preservation of such rights and
obligations.
21. GOVERNING LAW
This Agreement shall be governed by and construed and
interpreted in accordance with the laws of Nevada without
reference to principles of conflict of laws.
22. SETTLEMENT OF DISPUTES
Any disputes regarding the interpretation of, arising out
of, or related to this Agreement shall be resolved by arbitration
to be held in Nevada in accordance with the rules and procedures
of the American Arbitration Association. The prevailing party
in such proceeding shall be entitled to recover the costs of the
arbitration or litigation from the other party, including,
without limitation, attorneys' fees.
23. NOTICES
Any notice given to either party shall be in writing and,
except as provided in the third sentence of Paragraph 10(b)
above, shall be deemed to have been given when delivered
personally or sent by certified or registered mail, postage
prepaid, return receipt requested, duly addressed to the Party
concerned at the address indicated below or to such changed
address as such Party may subsequently give notice of:
-14-
<PAGE>
If to the Company or the Board:
Rio Hotel & Casino, Inc.
3700 W. Flamingo Road
Las Vegas, Nevada 89103
Attn: Chief Executive Officer
With a copy to:
President
Rio Hotel & Casino, Inc.
3700 W. Flamingo Road
Las Vegas, Nevada 89103
If to the Executive:
I. Scott Bogatz
1907 Noritake Court
Henderson, Nevada 89014
24. HEADINGS
The headings of the paragraphs contained in this Agreement
are for convenience only and shall not be deemed to control or
affect the meaning or construction of any provision of this
Agreement.
25. COUNTERPARTS
This Agreement may be executed in two or more counterparts.
26. TAXES
Compensation payable hereunder is gross and shall be subject
to such withholding taxes and other taxes as may be required by
law.
27. ACKNOWLEDGMENT
The Executive acknowledges that he has been given a
reasonable period of time to study this Agreement before signing
it. The Executive certifies that he has fully read, has received
an explanation of, and completely understands the terms, nature,
and effect of this Agreement. The Executive further acknowledges
that he is executing this Agreement freely, knowingly, and
voluntarily and that the Executive's execution of this Agreement
is not the result of any fraud,
-15-
<PAGE>
duress, mistake, or undue influence whatsoever. In executing this
Agreement, the Executive does not rely on any inducements,
promises, or representations by the Company other than the terms
and conditions of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed the
Agreement as of the date first written above.
RIO HOTEL & CASINO, INC.
By: /s/ James A. Barrett, Jr.
Its: President
/s/ I. Scott Bogatz
I. Scott Bogatz
-16-
<PAGE>
EXHIBIT A
TO EMPLOYMENT AGREEMENT
DETERMINATION OF PERFORMANCE BONUS AMOUNTS
The Executive shall be entitled to a performance bonus
pursuant to the terms of a management incentive compensation plan
to be approved by the Company's Compensation Committee and
ratified by the Board.
A-1
<PAGE>
[RIO LETTERHEAD]
1995 LONG-TERM INCENTIVE PLAN ("LTIP")
STOCK OPTION GRANT
Employee: Scott Bogatz Date of Grant: October 8, 1996
Grant No.: 1996 Option Exercise Price: $15.50
Type of Option: Non-Statutory Option Shares: 15,000
Stock Options
Subject to the terms of the LTIP and pursuant to this stock
option grant, Rio Hotel & Casino, Inc. (the "Company") hereby
grants the option to purchase the above described number of
shares of Rio Hotel & Casino, Inc. Common Stock exercisable at
the option price stated above.
Options granted thereunder shall be exercisable only to the
extent they have vested. Options vest when the Employee remains
continuously employed with the Company or its subsidiaries until
the scheduled vesting dates below. Employees will only have the
right to exercise vested options. If the employee has failed to
remain continuously employed with the Company or its subsidiaries
until the date upon which options vest, the Employee shall have
no right, nor be entitled, to exercise those options. The vesting
schedule for stock options under this stock option grant is as
follows:
August 26, 1997 - 20% of Options will vest;
August 26, 1998 - 40% of Options will vest;
August 26, 1999 - 60% of Options will vest;
August 26, 2000 - 80% of Options will vest;
August 26, 2001 - 100% of Options will vest.
The attached LTIP details the conditions and restrictions
of the options and should be carefully read in its entirety. The
following is merely a summary of the conditions and restrictions
and is provided for your convenience. If there is any question,
ambiguity or contradiction in this letter, the language of the
attached LTIP shall govern:
ADMINISTRATION
The LTIP is administed by the LTIP Committee, which is
comprised of at least two independent members of the Board of
Directors who are not employees of the Company.
TERMINATION OF EMPLOYMENT OR ASSOCIATION
If you cease to be employed or associated with the Company,
other than by reason of death, retirement as determined under any
of the Company's pension plans, if any, or retirement after
attaining the age of seventy-two (72) years, all options which
have vested as of the date of termination shall expire on the
earlier of (i) the tenth anniversary after the date this letter
is executed or (ii) three months after the day your employment is
terminated.
<PAGE>
If you retire pursuant to any of the Company's pension
plans, if any, or after attaining the age of seventy-two (72)
years, or if you die while in the employ of the Company, all
options which have vested as of the date of your retirement or
death shall expire on the earlier of (i) the tenth anniversary
after the date this letter is executed or (ii) three years after
the date of your retirement or death.
FORFEITURE AND REIMBURSEMENT OF PROFIT
If you resign your position without the written consent of
the Board of Directors and accept an employment, consulting, or
other compensation for services from a Competitor Company (as
defined in the LTIP) within six (6) months after you leave the
Company, you (i) forfeit all options, vested or otherwise, and
(ii) must reimburse the Company, under certain conditions and
definitions set forth in the LTIP, for profits derived from the
execise of any options within six (6) months before or after your
notice of resignation. This section does not apply once the
Company has entered into a contractual agreement for "Change of
Control" or within one (1) year after the "Change of Control" of
the Company as defined in the LTIP and summarized below.
CHANGE OF CONTROL
In the event of a Change of Control, all options
automatically vest and any share restrictions will lapse. The
definition of "Change of Control" is fully detailed in the LTIP.
Generally, the events that constitute a Change of Control include
(a) any person or corporation (other than Anthony A. Marnell II,
James A. Barrett, Jr., or their affiliates) acquiring 25.0% or
more of the Company, (b) individuals who currently constitute the
Board of Directors cease for any reason to constitute at least a
majority of the Board, (c) a merger or consolidation of the
Company with any other corporation or business organization or
the sale of all or substantially all the Company's assets
pursuant to approval of the Company's stockholders, (d)
outstanding shares of the Company's securities are exchanged for
or converted into cash or securities not issued by the Company
pursuant to a proxy solicitation, or (e) any event which a
majority of the Board of Directors declares to be a change of
control.
IN WITNESS WHEREOF, the undersigned executes this stock
option grant as of the first date set forth herein:
RIO HOTEL & CASINO, INC. RIO HOTEL & CASINO, INC.
/s/ Thomas Y. Hartley /s/ Peter M. Thomas
Thomas Y. Hartley, LTIP Peter M. Thomas, LTIP
Committee Committee
Accepted and agreed to as of the Date of Grant:
Name: /s/ I. Scott Bogatz Social Security Number: ________
Residence Address: 1907 Noritake Ct. Henderson NV 89014
(street address) (city, state, zip code)
<PAGE>
EXHIBIT 23.01
177
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports dated February 7, 1997 (1996 Annual
Report on Form 10-K and Supplemental Schedules), included in this
Form 10-K, into Rio Hotel & Casino, Inc.'s previously filed
registration statements on Form S-8 (File No. 33-38752), Form S-8
(File No. 33-68130), Form S-8 (File No. 33-56860), Form S-3 (File
No. 33-70192), Form S-3 (File No. 33-51092), Form S-3 (File No.
33-36598) and Form S-3 (File No. 333-869).
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
March 28, 1997
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 10,623
<SECURITIES> 0
<RECEIVABLES> 9,807
<ALLOWANCES> 1,117
<INVENTORY> 3,871
<CURRENT-ASSETS> 29,867
<PP&E> 510,493
<DEPRECIATION> 60,501
<TOTAL-ASSETS> 494,550
<CURRENT-LIABILITIES> 44,851
<BONDS> 253,949
0
0
<COMMON> 212
<OTHER-SE> 181,664
<TOTAL-LIABILITY-AND-EQUITY> 494,550
<SALES> 219,581
<TOTAL-REVENUES> 219,581
<CGS> 0
<TOTAL-COSTS> 181,588
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,215
<INCOME-PRETAX> 29,778
<INCOME-TAX> 10,412
<INCOME-CONTINUING> 19,366
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,366
<EPS-PRIMARY> .90
<EPS-DILUTED> .90
</TABLE>
