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, 1997
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- ---- SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-11569
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RIO HOTEL & CASINO, INC.
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(Exact name of registrant as specified in its charter)
Nevada 95-3671082
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3700 West Flamingo Road, Las Vegas, Nevada 89103
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (702) 252-7733
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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Common Stock, $.01 par value New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
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(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 27, 1998, based on
the closing price as reported on the New York Stock Exchange of
$28.1875 per share, was approximately $542,142,449.
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of February 27, 1998.
Common Stock, $.01 par value 24,766,141
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, through a wholly owned subsidiary, owns and
operates an all-suite hotel-casino, the Rio Suite Hotel & Casino
(the "Rio"), 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 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
and Mardi Gras theme. The Rio features over 2,500 suites,
including over 1,500 suites contained in three connected 21-story
hotel towers (the "Ipanema Towers") and over 1,000 suites in a
new 41-story curved tower (the "Masquerade Tower"). On February
7, 1997, the Rio celebrated the grand opening of the public areas
of its Phase V Expansion project, the Masquerade Village. With
the Masquerade Village and Tower, the Rio features a 116,000
square foot casino; 14 restaurants, 14 bars and two coffee bars;
a 737-seat entertainment complex; a 32,000 square foot retail
area; and a 108,000 square foot outdoor entertainment area
featuring a landscaped sand beach and three swimming pools. The
Rio offers approximately 2,300 slot machines, approximately 100
table games, including a premium gaming area, a poker room, keno
and a race and sports book.
On September 8, 1997, the Company acquired the Seven Hills
Golf Course in Henderson, Nevada, a suburb of Las Vegas, and
renamed it the Rio Secco Golf Club. The golf course, located in
the master-planned community of Seven Hills, is complete and
opened for play in October 1997. The clubhouse is under
construction and is scheduled for completion during the second
quarter of 1998. In addition to providing play on the golf
course to local and tourist customers, the Company intends to use
the Rio Secco Golf Club as part of golf packages for its guests.
The Rio Secco Golf Club will also feature a golf school operated
by Butch Harmon, the Butch Harmon School of Golf.
The Company has assembled 43 acres immediately adjacent to
the Rio (seven of which are subject to options to purchase),
bringing the total acreage at the Rio to 83 acres. In October
1997, the Company announced a new master plan (the "New Rio
Master Plan") for continued development of the existing Rio site
and the adjacent 43 acre site. The New Rio Master Plan is
expected to be implemented in phases, the first of which has
commenced and includes a state-of-the-art convention and
entertainment center adaptable to meet a variety of
entertainment, meeting, special event and convention needs; a
complex of nine ''Palazzo'' suites; a restaurant serving
authentic Chinese food; a valet parking structure; a retail
shopping area; an expanded outdoor area with an additional
swimming pool; additional exhibition space in the Masquerade
Village; an expansion of the Shutters premium gaming lounge; the
creation of a concierge suite level in the Ipanema and Masquerade
Towers; an expansion of the Rio's spa; a new road connecting the
Rio and the Las Vegas Strip through an extension of Twain Avenue
to Industrial Road; and additional customer parking.
This first phase of the New Rio Master Plan is anticipated
to be completed in stages through 1998 and early 1999 at an
estimated cost of $200 million. Subsequent phases of the New Rio
Master Plan are currently in the conceptual stage. These
conceptual phases currently include a separate hotel-casino of up
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to 3,000 rooms and two additional parking structures. The
timetable, theme and cost of the subsequent phases have not yet
been established and there can be no assurance that the balance
of New Rio Master Plan will be implemented successfully, if at
all.
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.
MASQUERADE VILLAGE
On February 7, 1997, the Company opened the Masquerade
Village, consisting of five new restaurants and additional
retail, gaming and entertainment space. A sixth restaurant, the
VooDoo Cafe & Lounge, located at the top of the new 41-story
Masquerade Tower overlooking the Las Vegas Strip, opened on May
24, 1997. Inspired by European architecture, the 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 specialty retail shops and
restaurants, and The Wine Cellar Tasting Room. New restaurants
include Mama Marie's Cucina, Mask, Napa Restaurant, Bamboleo, The
Village Seafood Buffet and the VooDoo Cafe & Lounge. The
Masquerade Village also features a fully interactive $25 million
indoor attraction, the 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 of the Masquerade Village,
and a cast of specialty dancers, musicians, aerialists and
costume stilt walkers. Rio guests can participate in the show by
traveling on a float in complete costume amid the performers.
BUSINESS STRATEGY
The Company's business strategy focuses on attracting and
fostering repeat business from customers in the middle to upper
income segments of the local resident and tourist markets. To
implement its business strategy, the Company capitalizes on its
all-suite concept, strategic location, and fun-filled 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
location at Interstate 15 and Flamingo Road helps to attract both
of its target market segments. The Rio's value-priced suites
provide an attractive alternative to conventional Las Vegas rooms
for visitors who desire to avoid the crowds and congestion of the
Las Vegas Strip. The Rio's suites offer approximately 50% more
space than other comparably priced Las Vegas hotel rooms.
Management believes that it must offer consistent quality, a
comfortable and fun atmosphere and, most importantly, friendly
service at affordable prices to provide a high value experience
to its customers. The Company's restaurants have won awards year
after year for their quality dining.
Management believes that friendly service combined with
quality facilities are integral to generating repeat business.
Management continually seeks to instill in each employee a sense
of service excellence designed to exceed guest expectations. To
motivate its employees, management strives to instill a sense of
''Team Rio'' in all of the Company's employees. Management
strongly believes that its employees are one of the Company's
biggest assets.
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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 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 RitaTM character as a promotional ambassador to the Rio's
hotel-casino guests and as a focal point for many promotional
activities.
The high quality of the Company's facilities and service is
reflected by the number of awards the Rio has received. In the
1997-1998 ZAGAT HOTEL AND RESTAURANT SURVEY, the Rio received
awards for ''Best Accommodations,'' ''Best Service,'' ''Best
Food'' and ''Best Overall Hotel'' 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 American Academy of Hospitality
Sciences has bestowed fewer than 100 hotels and resorts
internationally with this award. Furthermore, the CASINO PLAYER
1997 ''Best of Gaming'' readers' poll voted the Rio best in 12
categories, including ''Best Overall Hotel & Casino.'' Recently,
the Rio was named the "Best Value in the World" by TRAVEL &
LEISURE MAGAZINE'S Second Annual Reader's Survey of hotels and
cities around the world.
MARKETING STRATEGY
The Company's marketing efforts are targeted at both the
local market 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 primary 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 1997, the Carnival World Buffet served
an average of approximately 6,550 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, and a variety of promotions directed
at the local customer.
To attract visitors and fill the Rio's suites, 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 targeted 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 the Rio's casino marketing personnel. The Rio utilizes a
variety of promotions, including credit availability, special
events and other amenities in marketing to this segment.
THE RIO
Since 1992, the Company has consistently expanded the Rio under
its master plan. The Rio has over 2,500 suites, approximately
2,300 slot machines and approximately 100 table games.
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<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED DECEMBER 31,
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1997 1996 1995 1994 1993
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<S> <C> <C> <C> <C> <C>
Average daily suite rate $91 $77 $72 $64 $63
Average daily hotel occupancy 90% 95% 95% 96% 97%
Hotel suites<F1> 2,582 1,998 1,551 861 861
Casino square footage 116,000 89,000 89,000 89,000 79,000
Slot machines<F1> 2,431 1,884 2,142 1,968 1,474
Table games<F1> 103 79 65 46 33
Restaurant seats 3,460 2,705 2,575 2,345 1,843
<FN>
<F1> Average number available during the period.
</FN>
</TABLE>
GAMING. For the year ended December 31, 1997, the Rio
offered 116,000 square feet of casino space containing
approximately 2,300 slot machines; approximately 100 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.
Gaming operations at the Rio are continually 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 devotes substantial time and attention to the type,
location and player activity of all gaming devices. The Company
continually adds new and innovative gaming devices as they become
available. By offering a variety of slot machines, the Company
believes that it will attract and retain its slot customers.
HOTEL. With the completion of the remodeling program on the
top two floors of the Ipanema Towers in the spring of 1998,
including the conversion of some standard suites into "super"
suites, the number of suites available at the Rio will be reduced
from 2,582 to 2,542 suites. At that time, the Rio will have 124
multiple room suites and 2,418 standard suites. The standard Rio
suite is a luxury room measuring 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, tile in the bath areas, room safes and
refrigerators. The Company's use of the term ''suite'' is
currently the subject of litigation. See "Item 3. Legal
Proceedings.''
RESTAURANTS. While important to attracting Las Vegas
visitor gaming customers, the high quality, value and variety of
food services are critical to consistently attracting local
resident gaming customers to the Rio. To provide such variety, 13
bars, 13 restaurants and two coffee bars are located in the Rio's
main floor area, and a bar and restaurant are located at the top
of the new 41-story Masquerade Tower overlooking the Las Vegas
Strip. During 1997, the Rio served an average of approximately
15,000 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:
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<PAGE>
<TABLE>
<CAPTION>
NUMBER
NAME TYPE OF SEATS
---- ---- --------
<S> <C> <C>
All American Bar & Grille Steaks, ribs, chicken and 202
seafood
Antonio's Italian fine-dining 100
Bamboleo Latin restaurant featuring foods 200
from south of the border
Beach Cafe 24-hour full menu coffee shop 318
featuring American and
Chinese cuisine
Buzios Seafood and oyster bar 160
Carnival World Buffet Buffet with live action cooking 1,040
featuring Brazilian, Chinese,
Italian, Mexican, Japanese,
Western BBQ and traditional
buffet foods
Cucina Coffee Gourmet coffee and espresso bar, 18
featuring fresh pastries
Fiore Rotisserie & Grille Fine-dining featuring rotisserie- 132
grilled seafood, beef and
poultry
Mama Marie's Cucina Family style casual Italian 143
dining
Mask Restaurant featuring cuisine 175
from the Far East
Napa Restaurant Fine-dining featuring French 110
country cuisine
Rio Java Gourmet coffee and espresso bar, 16
featuring fresh breads
and pastries
Toscano's Deli & Market Deli items, pizza and pasta, ice 104
cream and gelato, and a
large selection of bakery
products
The Village Seafood Buffet Fresh seafood buffet 332
VooDoo Cafe & Lounge New Orleans flavored restaurant 366
featuring Creole and Cajun
cuisine
The Wine Cellar Tasting Room World's largest collection of 44
fine and rare wines offering a
wine tasting bar, a retail shop,
and educational wine seminars
-----
Total 3,460
=====
</TABLE>
ENTERTAINMENT AND OTHER ATTRACTIONS. The Masquerade
Village, which opened on February 7, 1997, features the
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 located above the casino floor, and a cast of specialty
dancers, musicians, aerialists and costumed stilt-walkers. Rio
guests can participate
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in the show by traveling on a float in complete costume amid the
performers. 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 737-seat
video, entertainment complex which features two 12-foot by 90-
foot video screens, multiple tiers of seating, and a stage. The
Copacabana Showroom is utilized as an entertainment showroom,
featuring nightly performances by Las Vegas' "Entertainer of the
Year" Danny Gans, 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 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.
The Company has recently opened the Rio Secco Golf Club
located in the master planned community of Seven Hills in
Henderson, Nevada. The Rio Secco Golf Club will provide a world-
class golf experience to its guests with the Butch Harmon School
of Golf and an 18-hole championship course designed by famed
course architect, Rees Jones.
EXPANSION STRATEGY
RIO MASTER PLAN. The Rio's conceptual master plan was
originally designed to accommodate multiple expansions without
significantly interrupting normal business operations. 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,
1997. As described in the New Rio Master Plan below, the Company
has commenced construction on certain portions of this acreage.
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Management believes that a high quality, well-maintained
property offering innovative entertainment is integral to success
in the highly competitive Las Vegas gaming market. This belief
has driven the Company's master plan development strategy. The
Company has added substantial new facilities at the Rio every
year since 1992.
<TABLE>
<CAPTION>
START DATE OPENING DATE
---------- ------------
<S> <C> <C>
Initial Construction 12/88 1/90
Casino (10,000 sq. ft.)/Buffet Expansion 7/92 12/92
Phase II Expansion
Buzios Restaurant 1/93 5/93
Meeting Rooms 1/93 8/93
437-Suite Tower 1/93 9/93
Eastside Expansion
Two-Story Parking Garage 7/93 10/93
Casino Space (25,000 sq. ft.) 7/93 12/93
Copacabana Showroom 7/93 2/94
Fiore Restaurant 7/93 4/94
Expanded Pool Area 7/93 4/94
Phase III Expansion
Three-Story Parking Garage 5/94 8/94
Casino Space (10,000 sq. ft.) 5/94 11/94
Buffet Expansion 5/94 11/94
549-Suite Tower 5/94 2/95
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
VooDoo Cafe and Lounge 9/95 5/97
<FN>
<F1> The new suites were opened in several phases commencing
December 31, 1996 and continuing through the second quarter
of 1997.
</FN>
</TABLE>
As of December 31, 1997, the Company has invested in excess
of $560 million in the development, expansion and renovation of
the Rio, including the acquisition of additional land.
NEW RIO MASTER PLAN. As part of the New Rio Master Plan,
the Company has assembled 43 acres immediately adjacent to the
Rio (seven of which are subject to options to purchase), bringing
the total acreage at the Rio to 83 acres. The Company expects to
implement the New Rio Master Plan in phases. The Company has
commenced the first phase which will include a state-of-the-art
convention and
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entertainment center adaptable to meet a variety of
entertainment, meeting, special event and convention needs, a
complex of nine ''Palazzo'' suites, a restaurant serving
authentic Chinese food, a valet parking structure, a retail
shopping area, an expanded outdoor entertainment area with an
additional swimming pool, additional exhibition space in the
Masquerade Village, an expansion of the Shutters premium gaming
lounge, the creation of a concierge suite level in the Ipanema
and Masquerade Towers, an expansion of the Rio's spa, a new road
connecting the Rio and the Las Vegas Strip through an extension
of Twain Avenue to Industrial Road and additional customer
parking.
The subsequent phases of the New Rio Master Plan are in the
conceptual stage, but currently include a separate hotel-casino
of up to 3,000 rooms and two additional parking structures. The
timetable, theme and cost of the subsequent phases have not yet
been established and there can be no assurance that the balance
of New Rio Master Plan will be implemented successfully, if at
all.
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 increasing competition from all other casinos
and hotels in the greater Las Vegas area, including competitors
located on the Las Vegas Strip, on the Boulder Highway, in
Henderson, 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. As of December 31, 1997, there
were approximately 44 major gaming properties located on or near
the Las Vegas Strip, 15 located in the downtown area, five
located on the Boulder Highway and 15 located in other areas in
or near Las Vegas. In recent years, 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. For example, in 1997,
New York-New York Hotel & Casino opened with 2,033 rooms,
Harrah's Las Vegas completed an expansion of 986 rooms, and
Caesars Palace completed an expansion of 1,200 rooms. According
to the Las Vegas Convention and Visitors Authority, the Las Vegas
hotel-motel room inventory was 105,304 as of December 31, 1997
and both construction of new properties and expansion of existing
hotel-casinos are expected to increase this inventory to
approximately 122,777 rooms by 1999. By the year 2000, nine new
hotel-casinos, of which four are currently under construction,
and one expansion project will have added over 19,000 rooms to
Las Vegas. Major expansions or enhancements of existing
properties or the construction of new properties by competitors
could have a material adverse effect on the Company's business.
To a lesser extent, the Rio competes with hotel-casinos
located in the Laughlin and Reno-Lake Tahoe areas of Nevada and
in Atlantic City, New Jersey. The Company also competes with
state-sponsored lotteries, on-track and off-track wagering, card
parlors, riverboats, 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 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
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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 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.
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 State Gaming Control Board (the ''Nevada Board''), the
Nevada Gaming Commission (the "Nevada Commission"), 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.
Rio Properties, Inc., a wholly owned subsidiary of the
Company ("Rio Properties"), operates the Rio and 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
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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.
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
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<PAGE>
consistent with such investment intent. If the beneficial holder
of voting securities who must be found suitable is a corporation,
partnership or trust, it must submit detailed business and
financial information including a list of beneficial owners. The
applicant is required to pay all costs of investigation.
Any person who fails or refuses to apply for a finding of
suitability or a license within 30 days after being ordered to do
so by the Nevada Commission or the Chairman of the Nevada Board,
may be found unsuitable. The same restrictions apply to a record
owner if the record owner, after request, fails to identify the
beneficial owner. Any stockholder found unsuitable and who holds,
directly or indirectly, any beneficial ownership of the common
stock of a Registered Corporation beyond such period of time as
may be prescribed by the Nevada Commission may be guilty of a
criminal offense. The Company is subject to disciplinary action
if, after it receives notice that a person is unsuitable to be a
stockholder or to have any other relationship with the Company,
the Company (i) pays that person any dividend or interest upon
voting securities of the Company, (ii) allows that person to
exercise, directly or indirectly, any voting right conferred
through securities held by that person, (iii) pays remuneration
in any form to that person for services rendered or 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
24, 1997, the Nevada Commission granted the Company prior
approval to make public offerings for a period of two years,
subject to certain conditions (the ''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
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<PAGE>
stringent standards prior to assuming control of such Registered
Corporation. The Nevada Commission may also require controlling
stockholders, officers, directors and other persons having a
material relationship or involvement with the entity proposing to
acquire control, to be investigated and licensed as part of the
approval process relating to the transaction.
The Nevada legislature has declared that some corporate
acquisitions opposed by management, repurchases of voting
securities and corporate defense tactics affecting Nevada gaming
licensees, and Registered Corporations that are affiliated with
those operations, may be injurious to stable and productive
corporate gaming. The Nevada Commission has established a
regulatory scheme to ameliorate the potentially adverse effects
of these business practices upon Nevada's gaming industry and to
further Nevada's policy to: (i) assure the financial stability of
corporate gaming operators and their affiliates; (ii) preserve
the beneficial aspects of conducting business in the corporate
form; and (iii) promote a neutral environment for the orderly
governance of corporate affairs. Approvals are, in certain
circumstances, required from the Nevada Commission before the
Company can make exceptional repurchases of voting securities
above the current market price thereof and before a corporate
acquisition opposed by management can be consummated. The Nevada
Act also requires prior approval of a plan of recapitalization
proposed by the Company's Board of Directors in response to a
tender offer made directly to the Company's stockholders for the
purposes of acquiring control of the Company.
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, 1997, the Company employed approximately
5,000 employees. None of the Company's employees are covered by
collective bargaining agreements. Certain local unions have
announced an intention to focus their organizational efforts on
existing non-union hotel-casinos such as the Rio. Recently,
these local unions have distributed literature to some of the
Rio's employees. The Company believes that its relations with its
employees are good and that it provides competitive wages and
benefits to its employees. The Company, however, cannot predict
the nature and effect of any future union activities.
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<PAGE>
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
purchased options on an additional seven acres adjacent to the
Rio site. Approximately 58 of the acres is subject to a deed of
trust securing the Company's senior secured reducing revolving
credit facility, the Amended and Restated Credit Agreement (the
"Amended Bank Loan"), of which $24 million was outstanding at
February 24, 1998. 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.
The Company owns the Rio Secco Golf Club south of Las Vegas
which is subject to a deed of trust securing a loan from ORIX USA
Corporation (the ''Orix Loan''). The maximum principal amount
that may be borrowed under the Orix Loan is $6.0 million of which
approximately $3.8 million was outstanding on December 31, 1997.
ITEM 3. LEGAL PROCEEDINGS
On April 26, 1994 and May 10, 1994, 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 for the Middle
District of Florida (the "Florida Complaints"). The Florida
Complaints were subsequently transferred to the United States
District Court for the District of Nevada, Southern Division (the
"United States District Court of Nevada"). 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 United States District Court of Nevada (along with
the Florida Complaints, the "Complaints"). The Complaints allege
that manufacturers, distributors and casino operators of video
poker and electronic slot machines, including the Company, have
engaged in a course of conduct intended to induce persons to play
such gaming machines 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 charge
defendants with violations of the Racketeer Influenced and
Corrupt Organizations 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. After the United States District Court of Nevada
dismissed the Complaints, granting leave to plaintiffs to re-
file, the plaintiffs filed an amended complaint on or about May
31, 1996. Subsequently, the United States District Court of
Nevada consolidated the actions (and one other action styled
WILLIAM POULOS V. AMERICAN FAMILY CRUISE LINE, N.V. ET AL., Case
No. CV -S-95-936-LDG (RLH), 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.
Plaintiffs filed their consolidated amended complaint on February
14, 1997. The Company renewed its motions to dismiss and joined
in motions to dismiss filed by other defendants. In late December
1997, the United States District Court of Nevada granted in part
and denied in part Defendants' Motions to Dismiss for Failure to
Plead Fraud with Particularity and for Failure to State a Claim;
granted in part and denied in part Defendants' Motion to Strike
Changes Made in Plaintiffs' Consolidated Amended Complaint;
denied Cruise Ship Defendant's Motion to Dismiss for Lack of
Subject Matter Jurisdiction; denied Defendant Princess Hotel's
Motion to Dismiss Under the Act of State Doctrine; and denied
Defendants' Motion for a Stay on Primary Jurisdiction and
Abstention Grounds. In addition, the United States District
Court of Nevada requested additional briefing from the parties
with respect to Defendants' Motion to Dismiss for Lack of
Personal Jurisdiction. Plaintiffs filed their Second
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Consolidated Amended Complaint on or about January 8, 1998. The
Answer to the Second Consolidated Amended Complaint was filed on
February 11, 1998. Management believes that the substantive
allegations in the Complaints are 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 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 a number of gaming entities in Nevada, New
Jersey and Louisiana, including the Company. In a subsequent
amendment, Rio Properties was later added as a defendant. The
complaint, which is primarily a narrower version of the other
class action suits filed against the gaming industry, alleges
that the defendants have engaged in a course of conduct intended
to induce citizens of California to play video poker based on a
false belief concerning how the gaming machines operate, as well
as to the extent to which the odds of the gaming machines are the
same as live poker. The Company and Rio Properties filed motions
to quash challenging personal jurisdiction. Thereafter, other
defendants appeared and demurred to the complaint, and plaintiffs
moved to certify the class. The motions to quash and for class
certification were continued pending the outcome of the
demurrers. On July 11, 1997, the court sustained the demurrers
without leave to amend on grounds that an action by the court
would interfere with the decisions of out-of-state regulators of
the gaming industry, thus violating the Commerce Clause of the
United States Constitution. Subsequently, the remaining
defendants, including the Company and Rio Properties, entered
into a stipulation with plaintiffs whereby plaintiffs agreed to
dismiss the remaining defendants without prejudice pending the
appeal of the court's order sustaining the demurrers and the
remaining defendants agreed to toll the applicable statute of
limitations during the pendency of the appeal. Plaintiffs have
filed a Notice of Appeal. The Company and Rio Properties have
specifically reserved their jurisdictional objections. Although
the Company and Rio Properties are still technically defendants,
management believes that the court's ruling will be applied to
all defendants and that the Company and Rio Properties will be
dismissed from the action. In addition, 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 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. On January 27, 1997,
the Company and the director defendants filed a motion to dismiss
and a joinder in the Company's motion to dismiss. On April 21,
1997, the United States District Court of Nevada entered an order
denying the motion to dismiss
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<PAGE>
the Company and the individual directors, and granting the motion
to dismiss Marnell Corrao and Marnell Chartered. The Company and
the remaining defendants have filed an answer to the complaint,
and discovery proceedings have not yet begun.
On June 10, 1997, Rio Properties filed a complaint in the
United States District Court of Nevada (RIO PROPERTIES, INC. V.
ROBERT P. BAKER, Case No. CV-S-97-00710-PMP (RLH)). The
complaint seeks a declaration from the court that the use by Rio
Properties of the term ''suite'' is not misleading under either
the federal trademark act or California's advertising code.
Subsequently, on July 16, 1997, Mr. Baker filed a related action
in California state court (ROBERT P. BAKER V. RIO PROPERTIES,
INC., ET AL., Case No. BC 173 554), which was removed to the
United States District Court for the Central District of
California (Case No. 97-6364-WDK (AIJx)). Mr. Baker alleges that
the use of the term ''all-suite'' in advertising directed into
California is misleading and violates California law on the
grounds that the Rio's rooms are not partitioned. Mr. Baker
unsuccessfully sought to have the Nevada action dismissed in
favor of the California action. The parties have now stipulated
to have the California action dismissed and proceed in United
States District Court of Nevada. Mr. Baker filed a counterclaim
in the Nevada action seeking compensatory damages under
California's advertising code for all California residents who
have stayed in any of the Rio's accommodations, injunctive relief
prohibiting use of the term ''suite'' by Rio to describe its
accommodations and other relief deemed appropriate by the court.
On February 13, 1998, Mr. Baker filed a motion to amend his
complaint to include the Company. This motion was denied on
March 6, 1998. Management believes Mr. Baker's claims are
without merit, and will vigorously pursue the declaratory relief
action and defend the counterclaim.
Two lawsuits have been filed against a number of entities,
including the Company, which have been consolidated under the
designation, "Seven Hills Golf Course Litigation," by the Clark
County, Nevada, District Court (the "Nevada District Court").
The cases are as follows: On October 15, 1997, a First Amended
Complaint in a purported class action lawsuit (MARSHALL F.
DANIEL, ET AL. V. AMERICAN NEVADA CORPORATION, ET AL., Case No.
A377489) was filed in the Nevada District Court, seeking damages,
declaratory relief and imposition of a constructive trust. On
September 18, 1997, a First Amended Complaint (THE HELMER COMPANY
OF NEVADA VS. SILVER CANYON PARTNERSHIP, ET AL., Case No. 377455)
was filed in the Nevada District Court, seeking damages for
fraud, deceit, promissory estoppel, injunctive relief, breach of
contract and declaratory relief (the "Helmer Action"). These
cases arise out of the Company's purchase of golf course property
currently known as the Rio Secco Golf Club, which the Company
purchased as an amenity for the customers of the Rio (the "Rio
Customers"). Plaintiffs allege that the Company violated the
relevant CC&R's in purchasing the golf course and is required to
open the course to non-Rio Customers. Plaintiffs are claiming
that their interests run with the land, which the Company denies.
Plaintiff in the HELMER Action filed a Motion for Preliminary
Injunction asking the Nevada District Court to require that the
Company open the golf course for play to non-Rio Customers.
Prior to the date set for the preliminary injunction hearing, the
Company issued a press release opening the golf course for play
to non-Rio Customers, which rendered the Motion for Preliminary
Injunction moot. The Company agreed to keep the course open to
non-Rio Customers pending final adjudication of the lawsuits as
to the Company. On January 6, 1998, the Nevada District Court
clarified the case management order to provide for a trial date
of September 14, 1998, at which time the issues of local, public
or private access to the golf course will be decided by the
court, along with all equitable issues in the case. Any and all
damage issues would be reserved for a later hearing. On March 9,
1998, the Nevada District Court certified a class consisting of
all present and future record owners of residential lots within
the Seven Hills Master-Planned Community with respect to the
issue of right of access. On April 3, 1998, the Nevada District
Court will hear motions for summary judgment filed by plaintiffs
in the consolidated action on the issue of access and a motion
for mandatory injunctive relief related to the issues of fees for
play. Management believes that the substantive allegations in
the complaints are without merit and that, aside from its own
legal fees and
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<PAGE>
potential exposure for the legal fees of certain plaintiffs,
there is no liability or exposure for money damages from any of
the claims for relief brought against it. Accordingly,
management intends vigorously to defend the Company against all
allegations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
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>
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
1997
First Quarter $ 17 1/4 $ 14
Second Quarter 15 5/8 13 5/8
Third Quarter 22 1/4 14 9/16
Fourth Quarter 24 1/2 19 3/4
</TABLE>
The last reported sale price of the Common Stock on the NYSE
on March 5, 1998 was $27.8125 per share. There were
approximately 1,279 holders of record of the Company's Common
Stock as of March 5, 1998.
(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 Amended Bank Loan, the
Company's wholly owned subsidiaries, Rio Properties and Rio
Leasing, Inc. ("Rio Leasing") may pay dividends to the Company
only if such funds are used for certain specific purposes. Under
the terms of the Indentures (as defined herein), governing the
105/8 % Notes (as defined herein) and the 92% Notes (as defined
herein), the payout of dividends and other distributions is
subject to specified restrictions.
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(in thousands except per share data) 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Net Revenues $ 392,148 $ 219,581 $ 192,958 $ 146,424 $ 110,053
Income before Extraordinary Items and
Cumulative Effect of Accounting Change $ 21,494 $ 19,366 $ 18,745 $ 15,966 $ 11,680
Extraordinary Items $ - $ - $ - $ - $ (254)
Cumulative Effect of Accounting Change $ - $ - $ - $ - $ (777)
Net Income $ 21,494 $ 19,366 $ 18,745 $ 15,966 $ 10,649
Earnings Per Common Share:
Basic:
Income before Extraordinary Items and $ 0.99 $ 0.91 $ 0.88 $ 0.75 $ 0.61
Cumulative Effect of Accounting Change
Extraordinary Items $ - $ - $ - $ - $ (0.01)
Cumulative Effect of Accounting Change $ - $ - $ - $ - $ (0.04)
Net Income $ 0.99 $ 0.91 $ 0.88 $ 0.75 $ 0.56
Diluted:
Income before Extraordinary Items and $ 0.98 $ 0.90 $ 0.87 $ 0.74 $ 0.60
Cumulative Effect of Accounting Change
Extraordinary Items $ - $ - $ - $ - $ (0.01)
Cumulative Effect of Accouting Change $ - $ - $ - $ - $ (0.04)
Net Income $ 0.98 $ 0.90 $ 0.87 $ 0.74 $ 0.55
Total Assets $ 588,155 $ 494,550 $ 308,792 $ 301,165 $ 218,050
Long-Term Debt, net of current maturities $ 50,523 $ 253,949 $ 110,177 $ 110,147 $ 56,876
Total Stockholders' Equity $ 270,175 $ 181,875 $ 162,888 $ 147,839 $ 129,838
Cash Dividends Declared Per Common Share $ - $ - $ - $ - $ -
</TABLE>
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), issues related to
the Year 2000, domestic or global economic conditions and changes
in federal or state tax laws or the administration of such laws.
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OVERVIEW
During the first six months of 1997, the Company introduced
the Phase V Expansion project in phases. On February 7, 1997,
the Company opened the Masquerade Village which included five new
restaurants, over twenty retail shops, approximately 30,000
square feet of gaming area, the MASQUERADE SHOW IN THE SKY, an
entertainment event featuring parade floats with live
entertainers suspended from the Masquerade Village's ceiling, and
over one-half of the approximately 1,000 new suites in the
Masquerade Tower, 447 of which had become available as of
December 31, 1996. On May 24, 1997, the Company opened the
uppermost floors of the 41-story Masquerade Tower including 31
new suites and the VooDoo Lounge and Cafe on the 40th and 41st
floors which offer panoramic views of the Las Vegas valley.
In addition, during the third quarter of 1997, the Company
consummated the purchase of the Seven Hills Golf Course located
in the master-planned community of Seven Hills, approximately 15
minutes south of the Rio. The Company renamed the facility as
the Rio Secco Golf Club and opened the golf course for play in
October 1997. The Company intends to use the Rio Secco Golf
Course to provide golf vacation packages to its guests and to
provide play on the course to local and tourist customers. The
Rio Secco Golf Club will feature a clubhouse scheduled to open in
the spring of 1998 and the Butch Harmon School of Golf.
The approach of the year 2000 has become a potential problem
for businesses utilizing computers in their operations since many
computer programs are date sensitive and will only recognize the
last two digits of the year, thereby recognizing the year 2000 as
the year 1900 or not at all (the "Year 2000 Issue"). Management
has made a comprehensive assessment of the Company's exposure to
the Year 2000 Issue and what will be required to ensure that the
Company is Year 2000 compliant. The primary computer programs
utilized in the Company's operations and financial reporting
systems have been acquired from independent software vendors.
All of these vendors have been formally contacted to determine
whether their systems are Year 2000 compliant, and, if not,
timelines have been or will be established as to when the Company
will receive the required upgrades that assure that these systems
will be Year 2000 compliant. Maintenance or modification costs
associated with the Year 2000 Issue will be expensed as incurred,
while the costs of any new software will be capitalized and
amortized over the software's useful life. The Company does not
expect to incur costs in connection with the Year 2000 Issue that
would have a material impact on operations. Although the Company
presently believes that all of its software programs will be Year
2000 compliant, there can be no assurances that the Company will
not be adversely affected by the Year 2000 Issue.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997 AND 1996
The Company's net revenues increased to $392.1 million for
the year ended December 31, 1997 from $219.6 million in the year
ended December 31, 1996, an increase of $172.5 million or 79%.
Casino revenues increased $101.6 million, or 90%, to $214.0
million in 1997, compared to $112.4 million in 1996. With the
opening of the Masquerade Village casino area on February 7,
1997, the average number of slot machines and table games
available increased from 1,884 and 79, respectively, in 1996 to
2,431 and 103, respectively, in 1997. Table game revenues were
$122.8 million for 1997, an increase of $80.5 million, or 190%,
from the $42.3 million in 1996. When comparing 1997 with 1996,
the table game hold percentages were 21% and 16%, respectively,
and table game handle increased to $573.1 million, or 114%, from
$268.4 million. Management believes that the increase in table
game handle was primarily due to the increased number of table
games available, the increased customer traffic generated through
the additional
-20-
<PAGE>
suites and expanded casino and entertainment areas associated
with the Phase V Expansion, and an increased emphasis by
management on marketing to customers with higher credit limits
and average wagers. Slot machine revenues were $84.4 million in
1997, an increase of $20.2 million, or 32%, from $64.2 million in
1996. Management believes that the increase in the average
number of slot machines available and the increase in customer
traffic generated through the additional suites and expanded
casino and entertainment areas associated with the Phase V
Expansion were the primary reasons for the increase in slot
machine revenues. Other casino revenues, consisting of the race
and sports books, keno and poker, increased 18% to $6.9 million
in 1997 from $5.8 million in the prior year.
Room revenues increased by $29.1 million, or 70%, to $70.4
million for 1997 from $41.3 million in 1996. Management believes
that the primary reasons for the increase in room revenues were
the additional availability of new suites in the new 41-story
tower and an increase in the average room rate from $77 in 1996
to $91 in 1997. The occupancy rate was 90% in 1997 compared to
95% in 1996, with 284,000 more suite nights available and 233,000
more suites being occupied in 1997 than in 1996.
Food and beverage revenues increased $44.0 million, or 62%,
to $114.8 million in 1997 compared to $70.8 million in 1996.
Management believes that the opening of the Masquerade Village,
including the initial five new restaurants and bars on February
7, 1997, the opening of the VooDoo Cafe and Lounge on May 24,
1997, increased customer traffic generated through the additional
suites and expanded casino and entertainment areas were the
primary reasons for the increase. An increase in the average
food check also contributed to the increase in food and beverage
revenues.
Other revenues increased by $10.2 million, or 66%, to $25.6
million for 1997 from $15.4 million in 1996. The primary reasons
for this increase were an increase in showroom admissions, gift
shop and other retail sales, increased telephone revenues due to
the increase in suites occupied, and shop rental received from
the retail outlets leased to third parties.
Before preopening expense, operating profit as a percentage
of net revenues was 18% in 1997 compared to 17% in 1996. The one-
time preopening expense, which consisted primarily of direct
incremental personnel costs and advertising and marketing
expenses associated with the opening of the Phase V Expansion on
February 7, 1997, totaled approximately $11.2 million. The
casino operating margin was 45% in 1997 compared to 49% in 1996.
Payroll and other volume related expenses, increased casino
marketing and promotional costs and an increase in reserves
associated with the potential uncollectibility of casino
receivables of $21.9 million in 1997 compared to $0.3 million in
1996 are considered to be the primary contributors to the
decrease in the casino operating profit margin. For the years
ended December 31, 1997 and 1996, hotel operating profits were
71% and 68%, respectively, food and beverage operating profits
were 22% in each year, and other operating department profit
margins were 41% and 51%, respectively. The decrease in the
operating profit margin for other operating departments is
primarily due to the increase in retail sales, the
correspondingly higher costs of merchandise, sales, payroll and
other expenses associated with retail sales, and expenses
incurred in the operation of the MASQUERADE SHOW IN THE SKY which
opened on February 7, 1997. Selling, general and administrative
expenses were 14% of net revenues in both years. In 1997,
selling, general and administrative expenses included
approximately $1.0 million associated with the Company=s
unsuccessful effort to obtain one of three hotel-casino licenses
in Detroit, Michigan.
Promotional allowances, which represent the retail value of
rooms, food, beverage and other services provided to customers
without charge, were 8% of total revenues in both 1997 and 1996.
-21-
<PAGE>
Depreciation and amortization increased by $7.3 million, or
41%, to $24.9 million in 1997 compared to $17.6 million in 1996.
This increase is primarily attributable to depreciation and
amortization expense associated with the opening of the Phase V
Expansion.
Interest expense increased by $18.1 million, or 220%, to
$26.3 million in 1997 from $8.2 million in 1996. Interest
expense was reduced by $4.4 million and $8.7 million in 1997 and
1996, respectively, due to interest being capitalized on the
Phase V Expansion Project in 1996 and in early 1997, and on the
development of the Rio Secco Golf Club and the New Rio Master
Plan in 1997. This increase was primarily due to interest on
financing of the Phase V Expansion.
Net income for 1997, after deducting $11.2 million ($7.1
million net after income tax) of preopening expenses associated
with the opening of the Phase V Expansion, was $21.5 million.
Adjusted on a pro forma basis for the one-time after-tax charge
of $7.1 million for preopening expense, net income for 1997 would
have been $28.6 million, compared to 1996 net income of $19.4
million.
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%, to
$112.4 million in 1996 from $105.5 million in 1995. An increase
in table game revenues of $6.4 million, or 18%, to $42.5 million
in 1996 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 2%, 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 13% 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%, 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 1996 and 1995, with
567,332 available suite nights in 1996 compared to 494,105
available suite nights in 1995. 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%. Higher average food checks and increased beverage sales
contributed to this increase.
Other revenues increased by $3.0 million, or 24%, 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% and
19% in 1996 and 1995, respectively. Casino operating profit was
49% in 1996 compared to 54% in 1995. Management believes that
the decline
-22-
<PAGE>
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 additional 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% and 20% 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% in 1996 and 69% in 1995.
Other operating expenses were 49% and 54% 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%
of net revenues in both years.
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
24%, 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 Cafe and Lounge on the 40th and 41st floors of the
Masquerade Tower opened during the first six months of 1997.
Net income was $19.4 million or $0.90 per share (diluted)
compared to $0.87 per share (diluted) in 1995.
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
On February 4, 1997, the Company issued $125.0 million in
principal amount of the Company's 9 1/2% Senior Subordinated
Notes Due 2007. Approximately $112.0 million of the net proceeds
of $121.6
-23-
<PAGE>
million were utilized to reduce the principal amount that had
been drawn under the Company's $200 million Rio Bank Loan.
During the fourth quarter of 1997, the Company issued
3,200,000 shares of its common stock for net proceeds of $65.6
million, $60.0 million of which was utilized to further reduce
the principal amount that had been drawn under the Company's
senior secured reducing revolving credit facility (the "Rio Bank
Loan").
During the year ended December 31, 1997, net cash provided
by operating activities was $48.1 million. Investing activities
used $95.9 million, including $55.4 million related to the
construction of the Phase V Expansion, $3.1 million related to
the New Rio Master Plan, $6.8 million in land acquisitions
adjacent to the Rio, and $22.0 million for the acquisition of
and improvements to the Rio Secco Golf Club. The Company
obtained an $8.0 million loan from Bank of America in May 1997 as
partial funding of its estimated $28.0 million investment,
including the assumption of $4.5 million in debt, in the Rio
Secco Golf Club, which will include a clubhouse, golf school and
other associated amenities.
The Company has commenced the first phase of the New Rio
Master Plan, which will include a new road providing access to
the Las Vegas Strip and additions and improvements to the Rio.
The improvements will include a 100,000 square foot state-of-the-
art entertainment/meeting/special event/convention center, 10,000
square feet of new retail space, nine "Palazzo" suites, an
additional swimming pool, a 650-car valet parking garage, an
authentic Chinese restaurant, 20,000 square feet of additional
exhibition space in the Masquerade Village, an expansion of the
Shutters premium gaming lounge, creation of a concierge suite
level in the Ipanema and Masquerade Towers, and an expansion of
the Rio's spa. These improvements, along with the new road, are
scheduled to open in stages throughout 1998 and early 1999. In
addition, site work has commenced for future development of the
Rio property, with the New Rio Master Plan providing for a
separate 3,000-room hotel-casino resort on a portion of the
adjacent acreage recently acquired by the Company. The
timetable, theme and cost of this separate hotel casino resort
project have not yet been established.
On February 24, 1998, the Company amended and restated the
Rio Bank Loan with the Amended Bank Loan increasing the amount
available to $275 million, providing a mechanism whereby the
Company may borrow an additional $25 million above and beyond the
$275 million limit, and extending the maturity date to December
31, 2003. At February 24, 1998, $251 million was available for
borrowing under the Amended Bank Loan. The Amended Bank Loan is
secured by a first deed of trust on substantially all of the real
property, equipment and improvements of Rio Properties, Rio
Leasing and Rio Properties' subsidiaries, and is guaranteed by
the Company.
Based upon cash on hand, cash available through borrowings,
including additional issuances of debt, and cash provided by
operations, the Company believes that it has adequate cash
available to fund real estate purchase commitments, the first
phase of the New Rio Master Plan, ongoing maintenance and
upgrades, investment commitments associated with the acquisition
of the Rio Secco Golf Club and the Company's 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 Fourth
(in thousands except for per share data) Quarter Quarter Quarter Quarter Total
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1997 <F1>
Revenues $ 69,928 $ 97,190 $ 103,575 $ 121,455 $ 392,148
Operating profit <F2> 1,106 17,634 19,306 22,060 60,106
Net income (loss) <F2> (2,417) 6,634 7,755 9,526 21,494
Net income (loss) per common share<F2><F3>:
Basic $ (0.11) $ 0.31 $ 0.36 $ 0.42 $ 0.99
Diluted $ (0.11) $ 0.31 $ 0.36 $ 0.41 $ 0.98
1996 <F1>
Revenues $ 55,089 $ 54,772 $ 53,226 $ 56,494 $ 219,581
Operating profit 11,402 10,926 8,321 7,345 37,994
Net income 5,326 5,475 4,266 4,299 19,366
Net income per common share <F3>:
Basic $ 0.25 $ 0.26 $ 0.20 $ 0.20 $ 0.91
Diluted $ 0.25 $ 0.25 $ 0.20 $ 0.20 $ 0.90
<FN>
<F1> There were no dividends paid in 1997 or 1996.
<F2> The first quarter of 1997 included $11.2 million ($7.1
million net of income taxes) of pre-opening expenses
associated with the February 7, 1997 opening of the
Masquerade Village.
<F3> Basic net income per share calculations are based on the
weighted average number of shares of common stock
outstanding during each quarter, while diluted net income
per share reflects the addition of all potentially dilutive
instruments, such as stock options, during each quarter.
Accordingly, the sum of the quarters may not equal the full
year net income per share for 1997.
</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, 1997 and 1996 and the related
consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended
December 31, 1997. 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,
1997 and 1996, and the results of their operations and their cash
flows for each of the three years in the period ended
December 31, 1997, 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 24, 1998
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<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
---------------------------------
1997 1996
-------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 22,241,976 $ 10,623,094
Accounts receivable, net 28,177,480 8,690,105
Federal income taxes receivable - 1,147,106
Inventories 7,797,343 3,871,345
Prepaid expenses and other current
assets 8,277,440 5,534,895
-------------- --------------
Total current assets 66,494,239 29,866,545
-------------- --------------
Property and equipment:
Land and improvements 85,713,088 51,311,851
Building and improvements 418,618,050 196,918,053
Equipment, furniture and improvements 82,792,652 72,052,458
Less: accumulated depreciation (82,162,055) (60,501,211)
-------------- --------------
504,961,735 259,781,151
Construction in progress 5,354,757 190,210,277
-------------- --------------
Net property and equipment 510,316,492 449,991,428
-------------- --------------
Phase V expansion pre-opening costs - 5,152,980
Other assets, net 11,344,116 9,538,633
-------------- --------------
$ 588,154,847 $ 494,549,586
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 2,434,483 $ 352,239
Accounts payable 11,440,103 5,854,830
Accrued expenses 23,554,336 11,967,407
Accounts payable - related party 2,808,488 19,604,470
Accrued interest 7,412,999 7,072,067
-------------- --------------
Total current liabilities 47,650,409 44,851,013
-------------- --------------
Non-current liabilities:
Long-term debt, less current maturities 250,522,894 253,949,283
Deferred income taxes 19,806,419 13,874,060
-------------- --------------
Total non-current liabilities 270,329,313 267,823,343
-------------- --------------
Total liabilities 317,979,722 312,674,356
-------------- --------------
Stockholders' equity:
Common stock, $0.01 par value;
100,000,000 shares authorized;
24,643,141 and 21,170,441 shares
issued and outstanding 246,432 211,705
Additional paid-in capital 179,912,196 113,140,798
Retained earnings 90,016,497 68,522,727
-------------- --------------
Total stockholders' equity 270,175,125 181,875,230
-------------- --------------
$ 588,154,847 $ 494,549,586
</TABLE> ============== ==============
See Accompanying Notes to Consolidated Financial Statements
-27-
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Year Ended December 31,
-------------------------------------------------
1997 1996 1995
-------------- -------------- -------------
<S> <C> <C> <C>
Revenues:
Casino $ 214,036,249 $ 112,458,824 $ 105,546,531
Room 70,446,812 41,346,275 33,826,095
Food and beverage 114,765,405 70,789,839 60,009,994
Other 25,590,029 15,369,085 12,386,275
Casino promotional allowances (32,690,516) (20,382,531) (18,810,726)
-------------- -------------- --------------
Net Revenues 392,147,979 219,581,492 192,958,169
-------------- -------------- --------------
Expenses:
Casino 117,648,680 56,825,539 48,071,953
Room 20,600,625 13,134,549 10,413,883
Food and beverage 88,971,034 54,899,850 48,257,881
Other 15,093,736 7,496,518 6,646,950
Selling, general and administrative 53,621,974 31,610,710 27,777,901
Depreciation and amortization 24,906,232 17,620,555 14,231,307
Preopening expense 11,200,000 - -
-------------- ------------- --------------
332,042,281 181,587,721 155,399,875
-------------- ------------- --------------
Operating profit 60,105,698 37,993,771 37,558,294
Interest expense 26,257,242 8,215,285 8,105,680
-------------- ------------- --------------
Income before income tax provision 33,848,456 29,778,486 29,452,614
Income tax provision 12,354,686 10,412,109 10,707,135
-------------- ------------- --------------
Net income $ 21,493,770 $ 19,366,377 $ 18,745,479
============== ============= ==============
Earnings per common share:
Basic:
Net income $ 0.99 $ 0.91 $ 0.88
============== ============= ==============
Weighted average number of common
shares outstanding 21,616,711 21,204,527 21,288,062
============== ============= ==============
Diluted:
Net Income $ 0.98 $ 0.90 $ 0.87
============== ============= ==============
Weighted average number of common
shares outstanding 22,031,321 21,528,006 21,591,325
============== ============= ==============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
-28-
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock
--------------------------- Additional Total
Number Paid-In Retained Stockholders'
Of Shares Amount Capital Earnings Equity
------------- ------------ -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994 21,371,346 $ 213,714 $ 117,214,582 $ 30,410,871 $ 147,839,167
Tax benefit of stock options exercised - - 632,601 - 632,601
Exercise of stock options 198,300 1,983 965,467 - 967,450
Repurchase of common stock (430,500) (4,305) (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 21,139,146 211,392 113,520,158 49,156,350 162,887,900
Tax benefit of stock options exercised - - 570,283 - 570,283
Exercise of stock options 175,795 1,758 1,161,152 - 1,162,910
Repurchase of common stock (144,500) (1,445) (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 21,170,441 211,705 113,140,798 68,522,727 181,875,230
Tax benefit of stock options exercised - - 1,066,457 - 1,066,457
Exercise of stock options 272,700 2,727 1,559,661 - 1,562,388
Issuance of common stock 3,200,000 32,000 64,030,000 - 64,062,000
Net income for the year - - - 21,493,770 21,493,770
Compensation expense for stock options
granted in 1993 - - 115,280 - 115,280
------------ ------------ -------------- -------------- --------------
Balance, December 31, 1997 24,643,141 $ 246,432 $ 179,912,196 $ 90,016,497 $ 270,175,125
============ ============ ============== ============== ==============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
-29-
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Year Ended December 31,
------------------------------------------------
1997 1996 1995
---------------- -------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 21,493,770 $ 19,366,377 $ 18,745,479
Adjustments to reconcile net income to net
cash provided by operating activities:
Compensation expense recognized from
stock option grant 115,280 108,360 87,627
Depreciation and amortization 24,906,232 17,620,555 14,231,307
Pre-opening expenses 11,200,000 - -
Provision for uncollectible accounts 22,027,920 292,138 1,002,463
Deferred income taxes 4,146,783 2,198,017 3,122,621
(Increase) decrease in assets:
Accounts receivable (41,515,295) (4,668,801) (2,026,109)
Inventories (3,925,998) (2,076,495) (416,252)
Prepaid expenses and other current assets (1,258,515) (1,106,609) 659,627
Phase V pre-opening costs (6,047,020) (5,152,980) -
Other, net (2,815,414) (1,158,860) (843,335)
Increase in liabilities:
Accounts payable 13,488,534 1,292,699 2,136,487
Accrued federal income tax 2,351,837 - -
Accrued expenses 3,545,392 2,831,182 1,305,520
Accrued interest 340,932 2,345,152 4,375,051
---------------- -------------- --------------
Net cash provided by operating activities 48,054,438 31,890,735 42,380,486
---------------- -------------- --------------
Cash flows from investing activities:
Purchase of land and improvements (5,728,690) (13,522,603) (12,781,239)
Purchase of equipment, furniture and
improvements (73,807,565) (169,539,111) (63,326,652)
Purchase of golf course (16,386,159) - -
---------------- -------------- --------------
Net cash used in investing activities (95,922,414) (183,061,714) (76,107,891)
---------------- -------------- --------------
Cash flows from financing activities:
Proceeds from borrowings 111,200,000 143,000,000 10,000,000
Net proceeds from issuance of senior
subordinated notes 121,562,500 - 96,750,244
Net proceeds from common stock issuance 65,624,388 1,162,910 969,251
Payments on notes and loans payable (238,900,030) (140,932) (125,039,428)
Repurchase of common stock - (2,220,600) (5,386,225)
---------------- -------------- --------------
Net cash provided by (used in) financing
activities 59,486,858 141,801,378 (22,706,158)
---------------- -------------- --------------
Net increase (decrease) in cash and cash
equivalents 11,618,882 (9,369,601) (56,433,563)
Cash and cash equivalents, beginning of period 10,623,094 19,992,695 76,426,258
---------------- -------------- --------------
Cash and cash equivalents, end of period $ 22,241,976 $ 10,623,094 $ 19,992,695
================ ============== ==============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
-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 (the
"Company"), and its wholly owned subsidiaries, each of which
is a Nevada corporation, Rio Properties, Inc., which owns
and operates the Rio ("Rio Properties"); Rio Development
Company, Inc., which owns and operates the Rio Secco Golf
Club in Henderson, Nevada; Rio Resort Properties, Inc.; Rio
Leasing, Inc. ("Rio Leasing"), 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, 1997, 1996, and 1995 was $4.4
million, $8.7 million and $0.9 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.
Depreciation and amortization of property and equipment is
computed using the straight-line method predominantly over
the following estimated useful lives:
-31-
<PAGE>
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 EXPENSES
Preopening expenses consist principally of direct
incremental personnel costs and other associated expenses.
These expenses have been capitalized prior to the opening of
the specific project and have been charged to expense at the
commencement of the operations. A total of $11.2 million
in preopening costs associated with the Phase V Expansion
project was expensed in the first quarter of 1997.
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.
CASINO RECEIVABLES
The Rio extends credit to certain casino customers, both
foreign and domestic, after investigation and evaluation of
the creditworthiness of the individual. The Company
maintains an allowance for doubtful accounts to reduce the
casino receivables to their estimated collectible amount.
At December 31, 1997, the allowance for doubtful accounts
was 49.5% of the casino receivables. As of December 31,
1997, management believes that there are no concentrations
of credit risk for which an allowance has not been
established and recorded. The collectibility of foreign and
domestic receivables could be affected by future economic or
other significant events in the United States or in the
countries in which such foreign customers reside.
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:
-32-
<PAGE>
<TABLE>
<CAPTION>
For the Year Ended December 31,
-----------------------------------------------
1997 1996 1995
------------ ------------ -----------
<S> <C> <C> <C>
Room $ 3,171,420 $ 1,808,138 $ 1,940,936
Food and beverage 12,812,337 9,429,800 9,020,152
Other operating expenses 844,870 206,163 104,921
------------ ------------ ------------
$ 16,828,627 $ 11,444,101 $ 11,066,009
============ ============ ============
</TABLE>
2. 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,
----------------------------------------------
1997 1996 1995
------------ ------------ -----------
<S> <C> <C> <C>
Cash payments made for interest (net of
amounts capitalized) $ 24,517,752 $ 4,773,537 $ 3,904,540
============ ============ ============
Cash payments made for income taxes $ 5,856,067 $ 8,600,000 $ 7,100,000
============ ============ ============
Non-cash financing and investing activities:
Purchase of property and equipment financed
through payables $ 2,808,488 $ 19,604,470 $ 6,556,126
============ ============ ============
Purchase of property and equipment through
assumption of long-term debt $ 4,483,448 $ 140,435 $ 62,042
============ ============ ============
Tax benefit arising from exercise of stock
options under the Company's Non-Statutory
Stock Option Plan $ 1,066,457 $ 570,283 $ 632,601
============ ============ ============
</TABLE>
3. ACCOUNTS RECEIVABLE
Components of accounts receivable are as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------------
1997 1996
-------------- -------------
<S> <C> <C>
Casino $ 46,392,622 $ 6,318,124
Hotel 4,526,201 3,244,388
Other 403,406 244,423
-------------- -------------
51,322,229 9,806,935
Less allowance for doubtful accounts (23,144,749) (1,116,830)
-------------- -------------
$ 28,177,480 $ 8,690,105
</TABLE> ============== =============
4. ACCRUED EXPENSES
Components of accrued expenses are as follows:
<TABLE>
<CAPTION>
December 31,
---------------------------------
1997 1996
------------- -------------
<S> <C> <C>
Accrued salaries, wages and related benefits $ 10,076,906 $ 5,615,310
Progressive slot machines and other gaming accruals 6,042,277 2,862,652
Accrued gaming taxes 3,395,630 1,646,333
Other accrued liabilities 4,039,523 1,843,112
------------- -------------
$ 23,554,336 $ 11,967,407
============= =============
</TABLE>
-33-
<PAGE>
5. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------------------
1997 1996
--------------- ---------------
<S> <C> <C>
Rio Bank Loan, originally a $65 million
revolving credit facility, was amended and
restated to a $275 million revolving credit
facility on February 24, 1998 with interest
equal to the Eurodollar Rate or the Base
Rate, plus a margin. The loan matures on
December 31, 2003 and is collateralized by a
first deed of trust on the real property,
equipment and improvements of Rio Leasing,
Rio Properties and Rio Properties'
subsidiaries and guaranteed by the Company. $ 18,000,000 $ 153,000,000
10 5/8% Senior Subordinated Notes, interest
only payable semi-annually; principal due
July 15, 2005. 100,000,000 100,000,000
9 1/2% Senior Subordinated Notes, interest
only payable semi-annually, net of
unamortized discount of $3,127,561;
principal due April 15, 2007 121,872,439 --
Note payable, interest payable monthly based
on the prime rate, quarterly principal
payments of $400,000 commencing May 31, 1998
with any remaining balance due May 31, 2000 8,000,000 --
Construction loan agreement, secured by a
first deed of trust on the Rio Secco Golf
Club real property, to be increased to a
maximum of $6.0 million upon completion of
the golf course clubhouse at which time it
will convert to a standing loan payable in
60 monthly installments together with
interest at the LIBOR rate plus 2.5% 3,817,961 --
Other 1,266,977 1,301,522
--------------- ---------------
252,957,377 254,301,522
Less current maturities (2,434,483) (352,239)
--------------- ---------------
$ 250,522,894 $ 253,949,283
=============== ===============
</TABLE>
On July 15, 1993, the Company originally entered into a
revolving credit facility (the "Rio Bank Loan") 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. On February 24, 1998, the Company amended and
restated the Rio Bank Loan with the Amended and restated
Credit Agreement (the "Amended Bank Loan") increasing the
funds available in the revolving credit facility to $275
million, providing a mechanism whereby the Company may
borrow an additional $25 million above and beyond the $275
million limit, and extending the maturity date to December
31, 2003. The Amended Bank Loan is a secured reducing
revolving credit facility to be used to make allowed capital
expenditures, to fund working capital needs and to pay for
general corporate purposes.
The Amended Bank Loan bears interest based upon a "LIBOR
Margin" of from 0.75% to 2.25%, or a "Base Rate Margin" of
from 0% to 1.25% based upon a schedule determined with
reference to the "Total Leverage Ratio" (as defined in the
Amended Bank Loan) of Rio Properties. The "LIBOR Margin" is
the amount in excess of the applicable LIBOR which is the
London InterBank Offer Rate established in the London
interbank market. The "Base Rate Margin" 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
-34-
<PAGE>
announced from time to time by Bank of America NT&SA or
0.50% per annum above the latest Federal Funds rate. The
Amended Bank Loan also provides for an unused facility fee
ranging from 22.5 basis points to 45.0 basis points
depending upon the same Total Leverage Ratio schedule
utilized for the interest rate. The Amended Bank Loan
requires periodic payments of interest and will require
scheduled reductions of the maximum amount available
commencing with scheduled reductions of $60 million at
December 31, 2000, 2001 and 2002 and maturity at December
31, 2003.
The reference interest rate quoted by the Company's primary
lenders at December 31, 1997 and 1996 was 8.25%. The margin
on the Company's Base Rate borrowings at December 31, 1997
was 1.75%, which was reduced to 0.50% by the Amended Bank
Loan.
At December 31, 1997, the three month Eurodollar Rate was
5.78125%. The margin on the Company's Eurodollar Rate
borrowings at December 31, 1997 was 2.75% which was
subsequently reduced to 1.5% by the Amended Bank Loan.
The Amended 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 Amended 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 (as
defined in the Amended Bank Loan) to earnings before
interest expense, income taxes, depreciation and
amortization and extraordinary items.
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. As a result of entering into the interest rate swap
agreements, the Company has recognized interest expense of
$199,000, $208,859, and $18,638 for the years ended December
31, 1997, 1996 and 1995, respectively. The impact of these
hedging activities on the Company's weighted average
borrowing rate was negligible in each of the years. There
were no deferred gains or losses related to the terminated
interest rate swap and interest rate cap agreements.
The revolving credit features of the Rio Bank Loan and the
Amended Bank Loan allow for the Company to pay down and
reborrow principal under the revolving credit facility as
the Company deems appropriate. The Company had $172
million and $47 million available under the Rio Bank Loan at
December 31, 1997 and 1996, respectively, and $251 million
available under the Amended Bank Loan at February 24, 1998.
The 10 5/8% Senior Subordinated Notes (the "10 5/8% Notes")
and the 9 1/2% Senior Subordinated Notes (the "9 1/2%
Notes") are unconditionally guaranteed on pari passu senior
subordinated basis by Rio Properties. The 10 5/8% Notes and
the 9 1/2% Notes (together, the" Notes") are pari passu in
right of payment, are subordinated in right of payment to
all existing and future Senior Indebtedness (as defined in
the indentures for the Notes, the "Indentures") 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 for the 10 5/8% Notes. The
-35-
<PAGE>
9 1/2% Notes may be redeemed at the option of the Company,
in whole or in part, at any time after April 15, 2002, at
the redemption prices set forth in the Indenture for the
9 1/2% Notes. Upon a change in control of the Company (as
defined in the Indentures), each holder of the Notes will
have the right to require the Company to repurchase all or
part of such holder's Notes at a price equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid
interest, if any, to the date of repurchase. Each Indenture
contains certain covenants that, among other things, limit
the ability of the Company and its Restricted Subsidiaries
(as defined in the Indentures) 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.
The estimated fair market value of the Company's 10 5/8%
Notes and 9 1/2% Notes at December 31, 1997 were
approximately $109.2 million and $132.5 million,
respectively, versus their book value of $100 million and
$121.9 million, respectively. The estimated fair market
values are based on the quoted market prices on that date.
As of December 31, 1997, annual maturities of notes and
loans payable are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
-----------
<S> <C>
December 31, 1998 $ 2,434,483
December 31, 1999 2,712,529
December 31, 2000 6,130,709
December 31, 2001 18,925,493
December 31, 2002 881,724
Thereafter 221,872,439
--------------
$ 252,957,377
==============
</TABLE>
The following assets collateralize the Rio Bank Loan and the
Amended Bank Loan:
<TABLE>
<CAPTION>
December 31,
---------------------------------
1997 1996
-------------- --------------
<S> <C> <C>
Building and improvements $ 414,909,591 $ 196,918,053
Equipment, furniture and improvements 81,793,094 72,052,458
Land and improvements 38,543,151 37,162,710
Construction in progress 3,894,173 182,407,337
-------------- --------------
$ 539,140,009 $ 488,540,558
============== ==============
</TABLE>
6. EARNINGS PER SHARE
The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 - "Earnings Per
Share" ("SFAS 128") which became effective for periods
ending after December 15, 1997 and replaces historically
reported earnings per share with "basic", or undiluted,
earnings per share and "diluted" earnings per share. Basic
earnings per share is computed by dividing net income by the
weighted average number of shares outstanding during the
period, while diluted earnings per share reflects the
additional dilution for all potentially dilutive securities,
such as stock options. Application of SFAS 128 for periods
ending prior to December 15, 1997 was not permitted, but its
effect has been included in notes to the Company's financial
statements filed with the Securities and Exchange
-36-
<PAGE>
Commission for all periods during 1997. The following table
reflects the Company's basic and diluted earnings per share
for the years ended December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
Weighted Average
Number of Shares Earnings
Net Income Outstanding Per Share
-------------- ---------------- ---------
<S> <C> <C> <C>
1995:
Basic $ 18,745,479 21,288,062 $0.88
Assumed conversion of stock options ============== 303,263 =====
-----------
Diluted $ 18,745,479 21,591,325 $0.87
============== =========== =====
1996:
Basic $ 19,366,377 21,204,527 $0.91
Assumed conversion of stock options ============== 323,479 =====
-----------
Diluted $ 19,366,377 21,528,006 $0.90
============== =========== =====
1997:
Basic $ 21,493,770 21,616,711 $0.99
Assumed conversion of stock options ============== 414,610 =====
-----------
Diluted $ 21,493,770 22,031,321 $0.98
============== =========== =====
</TABLE>
7. INCOME TAXES
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
For the Year Ended December 31,
-------------------------------------------------
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Current $ 7,644,417 $ 8,214,092 $ 7,681,015
Deferred 4,710,269 2,198,017 3,026,120
------------- ------------- -------------
$ 12,354,686 $ 10,412,109 $ 10,707,135
============= ============= =============
</TABLE>
The following schedule reconciles the Company's effective
tax rate to the statutory rate:
<TABLE>
<CAPTION>
For the Year Ended December 31,
---------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Statutory rate 35.0 % 35.0 % 35.0 %
Depreciation on premium allocated
in Rio Partnership exchange 0.1 % 0.2 % 0.4 %
Disallowance for tax purposes of
certain meals, travel and
entertainment expenses 0.1 % 0.2 % 1.5 %
Other 1.3 % (0.4)% (0.5)%
------ ------ ------
Effective rate 36.5 % 35.0 % 36.4 %
====== ====== ======
</TABLE>
The Company's deferred tax assets (liabilities) at December
31, 1997 consisted of the following:
<TABLE>
<CAPTION>
Current Non-Current
---------------- ----------------
<S> <C> <C>
Depreciation and amortization $ -- $ (18,710,633)
Deferred employee benefits 614,145 --
Bad debt expense 1,980,057 --
Other deferred tax items, net 1,444,844 (1,095,786)
-------------- --------------
$ 4,039,046 $ (19,806,419)
============== ==============
</TABLE>
-37-
<PAGE>
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 assets, net 728,019 (1,059,980)
------------ -------------
$ 1,699,909 $(13,874,060)
============ =============
</TABLE>
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
The Company holds options to purchase two land parcels which
total approximately seven acres adjacent to the Rio for a
combined cost of approximately $5.5 million.
In addition, the Company has entered into an agreement with
Clark County to install a road across certain of its
recently acquired properties that will provide an additional
east/west conduit for Las Vegas residents and tourists and
allow for access to the Rio from the Las Vegas Strip. Upon
completion, the Company will deed the roadway acreage to
Clark County in exchange for the vacating by Clark County
other acreage to the Company and reimbursing the Company for
a majority of the Company's construction costs.
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
$470,330, $376,736, and $278,835 have been authorized and
charged to income for the years ended December 31, 1997,
1996, and 1995, respectively.
During 1997, the Company entered into four year operating
leases for gaming equipment with an annual rent of $1.2
million.
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
On November 26, 1997 and December 24, 1997, the Company
issued 3.2 million shares of common stock at a net share
price of $20.16. The total net proceeds for the shares were
received in the fourth quarter of 1997.
-38-
<PAGE>
During 1997, the Company issued 268,300 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
(the "NSOP") and 4,400 shares of Common Stock at $15.50 per
share pursuant to stock options previously granted under the
Company's 1995 Long Term Incentive Stock Option Plan (the
"LTIP").
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 NSOP. In addition, the Company
repurchased 144,500 shares of Common Stock from time to time
in 1996 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 NSOP. In addition, the Company repurchased
430,500 shares of Common Stock from time to time in 1995 in
the open market at a total cost of $5.4 million. The
repurchased shares of Common Stock were retired.
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.
<TABLE>
<CAPTION>
For the Year Ended December 31,
--------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Options outstanding, beginning of 2,389,555 1,853,850 1,999,050
year
Granted 1,457,500 828,000 294,000
Exercised (272,700) (175,795) (198,300)
Forfeited (43,500) (116,500) (240,900)
----------- ----------- -----------
Options outstanding, end of year 3,530,855 2,389,555 1,853,850
=========== =========== ===========
Options available for grant at end
of year 133,900 1,484,300 259,400
Options exercisable at end of year 1,258,955 996,755 894,717
Average exercise price of options
exercised during the year $ 5.73 $ 6.62 $ 5.21
Average exercise price of options
outstanding at end of year $ 14.45 $ 12.40 $ 10.63
Average exercise price of options
granted during the year $ 17.01 $ 15.37 $ 13.01
Average exercise price of options
forfeited during the year $ 14.21 $ 14.04 $ 12.43
</TABLE>
The Company has granted 3,104,500 options at exercise prices
ranging from $3.00 to $15.625 per share to key officers and
employees under the NSOP. As of December 31, 1997,
1,138,345 options had been exercised and 492,200 options had
been forfeited, resulting in 1,473,955 options outstanding
and 25,200 options available to be granted under the NSOP.
Under the 1991 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, 1997, 138,000
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 86,000 options outstanding and 84,000 options
available to be granted.
-39-
<PAGE>
Under the LTIP, 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 option exercise price is equal to at least the
last reported sale price of the common stock on the date of
the grant. As of December 31, 1997, 2,007,500 options had
been granted at exercise prices ranging from $15.50 to
$21.1875, 4,400 of which had been exercised and 32,200
options had been forfeited, resulting in 1,970,900 options
outstanding and 24,700 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 1997, 1996 and 1995 using
the Black-Scholes option-pricing model with the following
assumptions: (i) no dividends, (ii) expected volatility of
32% for 1997 and 37% for 1996 and 1995, (iii) risk free
interest rates of 6.0%, 6.06% and 5.68% for 1997, 1996 and
1995, respectively, and (iv) expected lives of four years,
the effect on net income and earnings per share would be as
follows:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net income - As reported $21,493,770 $19,366,377 $18,745,479
============ ============ ============
- Proforma $19,395,182 $18,286,839 $18,692,445
============ ============ ============
Diluted EPS - As reported $0.98 $0.90 $0.87
============ ============ ============
- Proforma $0.88 $0.86 $0.87
============ ============ ============
</TABLE>
The weighted average fair market values of options granted
in 1997, 1996 and 1995 were $5.08, $2.49 and $4.83,
respectively.
10. RELATED PARTY TRANSACTIONS
With the approval of the Company's Audit Committee and Board
of Directors, the Company has contracted with two affiliates
of the Company's largest stockholder for the design and
construction of four expansion projects at the Rio,
including the 41-story Masquerade Tower with over 1,000
suites completed during the first six months of 1997, the
previously completed Phase IV Expansion of 141 suites, the
Phase III Expansion of 549 suites, and the Eastside
Expansion of 437 suites. Each of these expansions included
the addition of new public and back-of-the-house areas and
improvements. In addition, the Company retained these two
affiliates to perform various remodeling and improvements
projects at the Rio. During 1997, the Company contracted
with these affiliated entities for the completion of the Rio
Secco Golf Club facility, including the clubhouse. The
Company paid these entities, in the aggregate, approximately
$64.7 million, $147.9 million, and $51.0 million during the
years ended December 31, 1997, 1996 and 1995, respectively,
for their services. The Company has entered into agreements
with these affiliates for the expansion of the Rio pursuant
to the New Rio Master Plan for an estimated cost of
approximately $156.7 million.
An affiliate of the Company's largest stockholder rents a
building located on the Las Vegas Strip to the Company which
is utilized as a station for transporting customers by bus
to and from the Rio. In addition, this affiliate provided
real estate brokerage and administration services to the
Company in connection with the purchase of the 38 acres
adjacent to the Rio. Rent and fees paid to this affiliate,
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<PAGE>
including the reimbursement of expenses, were $0.9 million,
$1.0 million and $0.9 million for the years ended December
31, 1997, 1996 and 1995, respectively. Expense
reimbursements were 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.
In 1994, the Company entered into a five year agreement with
an entity in which a director of the Company possesses a
less than ten percent ownership interest. The Company
entered into the Agreement prior to the time this individual
joined the Company's Board of Directors. The agreement
involves the lease of land upon which the Company has
constructed two billboards. Payments made under the
agreement for the years ended December 31, 1997 and 1996
were approximately $166,000 and $160,000, respectively.
In 1996, the Company entered into a two year agreement with
entities in which a director of the Company was a principal
stockholder and executive officer. These entities earned
commissions totaling $122,000 and $159,000 for the years
ended December 31, 1996 and 1995, respectively. Although
these entities were acquired in June 1997 by a non-
affiliated third party, the resulting entities, in which the
director is now an employee, earned commissions totaling
$188,000 for the year ended December 31, 1997. These
commissions arose out of the acquisition and administration
of various insurance coverages by the Company.
In October 1997, the Company entered into a lease with an
affiliate of the Company's two largest stockholders for
certain warehouse space with such lease including an option
to purchase the warehouse. In 1997, the Company paid this
entity $57,200.
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. DEBT GUARANTEE
Summarized financial information is provided below for Rio
Properties, the Company's principal wholly-owned operating
subsidiary, as sole guarantor to the 10 5/8% Notes and the
9 1/2% Notes which are pari passu under the guarantee. 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 basis and combined basis are inconsequential,
except as described below. In addition, the Company,s
operations and 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.
-41-
<PAGE>
<TABLE>
<CAPTION>
As of and for the Year Ended December 31,
----------------------------------------------------
1997 1996 1995
------------- --------------- ----------------
<S> <C> <C> <C>
Current assets $ 60,333,843 $ 30,139,122 $ 29,995,415
Non-current assets 531,724,670 448,469,956 262,320,009
Current liabilities 61,817,819 56,301,870 33,216,257
Non-current liabilities 240,161,516 253,949,282 110,176,765
Revenues 391,678,931 219,577,608 192,537,954
Operating profit 60,421,158 37,959,885 37,138,205
Income before income taxes 34,644,211 29,744,600 29,451,596
Net Income 21,923,957 19,327,165 18,733,318
</TABLE>
One of the Company's non-guarantor subsidiaries, Rio
Development Company, Inc. ("Rio Development"), has recently
acquired assets and liabilities associated with the purchase
of the Rio Secco Golf Club. As of December 31, 1997, this
subsidiary had current assets of $340,050; non-current
assets of $31,542,602, including $5,635,073 due from the
Company; current liabilities of $100,537 and non-current
liabilities of $26,549,897, including $14,100,782 due Rio
Properties. Prior to the purchase of the golf course in
September 1997, the assets and operations of Rio Development
were inconsequential.
-42-
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
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 21, 1998.
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 21, 1998.
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 21, 1998.
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 21, 1998.
-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, 1997 and December 31, 1996.
For the Years Ended December 31, 1997,
1996 and 1995
Consolidated Statements of Income
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows.
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, 1997.
-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, is incorporated herein by
reference from the Company's (SEC File No. 001-11569)
Annual Report on Form 10-K for the Year Ended December
31, 1996, Part IV, Item 14(c), Exhibit 3.02.
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 Rio Hotel & Casino, Inc. Non-Statutory Stock Option
Plan, as amended February 25, 1998.
4.03 Rio Hotel & Casino, Inc. Directors' Stock Option Plan,
as amended February 25, 1998.
4.04 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 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; 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) Annual Report on Form 10-K for the Year Ended
December 31, 1994, Part IV, Item 14(c), Exhibit 4.08;
Twelfth Amendment to the Rio Suite Hotel & Casino
Employee Retirement Savings Plan dated and effective
December 21, 1995; and Thirteenth Amendment to the
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<PAGE>
NUMBER EXHIBIT DESCRIPTION
Rio Suite Hotel & Casino Employee Retirement Savings
Plan dated and effective March 17, 1998.
4.05 Rio Hotel & Casino, Inc. 1995 Long-Term Incentive Plan,
as amended March 20, 1997, is incorporated herein by
reference from the Company's (SEC File No. 001-11569)
Annual Report on Form 10-K for the Year Ended December
31, 1996, Item 14(c), Exhibit 4.07.
4.06 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 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;
-46-
<PAGE>
NUMBER EXHIBIT DESCRIPTION
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) Annual 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; 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) Annual 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.
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<PAGE>
NUMBER EXHIBIT DESCRIPTION
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)
Annual 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, are
incorporated herein by reference from the Company's (SEC
File No. 001-11569) Annual Report on Form 10-K for the
Year Ended December 31, 1996, Item 14(c), Exhibit 4.08;
Eleventh Amendment to Credit Agreement and Waiver dated
as of May 13, 1997 among Rio Properties, Inc., Rio
Leasing, Inc., Bank of America National Trust & Savings
Association, as Agent and as 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; and Twelfth Amendment to Credit Agreement and
Waiver dated as of May 13, 1997 among Rio Properties,
Inc., Rio Leasing, Inc., Bank of America National Trust
& Savings Association, as Agent as a Bank, and Wells
Fargo Bank National Trust & Savings 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, are incorporated
herein by reference from the Company's (SEC File No. 001-
11569) Report on Form 10-Q for the Quarter Ended March
31, 1997, Item 6(a), Exhibit 4.01; and Thirteenth
Amendment to Credit Agreement dated as of August 8, 1997
among Rio Properties, Inc. and Rio Leasing, Inc., as
Borrowers, Bank of America National Trust and Savings
Association, as Agent and as a Bank, and Wells Fargo
Bank National Association, First Security Bank, N.A.,
NBA 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, is incorporated herein by reference from the
Company's (SEC File No. 001-11569) Report on Form 10-Q
for the Quarter Ended June 30, 1997, Item 6(a), Exhibit
4.01.
4.07 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.
4.08 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
-48-
<PAGE>
NUMBER EXHIBIT DESCRIPTION
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.
4.09 Form of Letter of Transmittal to IBJ Schroder Bank &
Trust Company as Exchange Agent for exchange of 9-1/2%
Senior Subordinated Notes Due 2007 is incorporated
herein by reference from the Company's (SEC File No. 333-
23895) Registration Statement on Form S-4 filed March
24, 1997, Part II, Item 21(A), Exhibit 4.14.
4.10 Amended and Restated Credit Agreement dated as of
February 24, 1998 among Rio Properties, Inc. and Rio
Leasing, Inc. and Bank of America National Trust and
Savings Association as Agent and the other financial
institutions party hereto is incorporated herein by
reference from the Company's (SEC File No. 1-11569)
Report on Form 8-K dated February 24, 1998, Item 7(c),
Exhibit 4.1.
10.01 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) Annual Report on Form 10-K for the Year Ended
December 31, 1993, Part IV, Item 14(c), Exhibit 10.11.
10.02 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.
10.03 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.
10.04 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.
10.05 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.
10.06 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.
10.07 Architectural Agreement entered into as of July 27, 1995
by and between Anthony A. Marnell II, Chtd., as
Architect, and Rio Hotel & Casino, 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
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<PAGE>
NUMBER EXHIBIT DESCRIPTION
February 12, 1996, Part II, Item 16, Exhibit 10.10.
10.08 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.
10.09 Form of Exchange Agency Agreement between Rio Hotel &
Casino, Inc. and IBJ Schroder Bank & Trust Company is
incorporated herein by reference from the Company's (SEC
File No. 333-23895) Registration Statement on Form S-4
filed March 24, 1997, Part II, Item 21(A), Exhibit
10.12.
10.10 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. Radcliffe;
Employment Agreement dated as of March 7, 1997 between
Rio Hotel & Casino, Inc. and I. Scott Bogatz are
incorporated herein by reference from the Company's (SEC
File No. 001-11569) Annual Report on Form 10-K for the
Year Ended December 31, 1996, Part IV, Item 14(c),
Exhibit 10.12.
10.11 Purchase Agreement dated as of June 1, 1997 among Rio
Development Company, Inc. and Seven Hills Golf Limited
Partnership is incorporated herein by reference from the
Company's (SEC File No. 001-11569) Quarterly Report on
Form 10-Q for the Quarter Ended June 30, 1997, Part II,
Item 6(a), Exhibit 10.01.
10.12 Architectural Agreements entered into as of March 25,
1998 by and between Anthony A. Marnell II, Chtd., as
Architect, and Rio Hotel & Casino, Inc., as Owner.
10.13 Building Contracts entered into as of March 25, 1998 by
and between Marnell Corrao Associates, Inc., as General
Contractor, and Rio Properties, Inc., as Owner.
21.01 List of subsidiaries of Registrant.
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,
--------------------------------
1997 1996
ASSETS --------------- --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 513,528 $ 469,063
--------------- --------------
Total current assets 513,528 469,063
--------------- --------------
Other assets:
Investments in subsidiaries 277,659,111 192,031,880
Other, net 4,207,363 3,140,906
--------------- --------------
281,866,474 195,172,786
--------------- --------------
$ 282,380,002 $ 195,641,849
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Non-current liabilities due to subsidiaries $ 12,204,877 $ 13,766,619
--------------- --------------
Stockholders' equity
Common Stock, $0.01 par value;
100,000,000 shares authorized;
24,643,141 and 21,170,441
shares issued and outstanding 246,432 211,705
Additional paid-in capital 179,912,196 113,140,798
Retained earnings 90,016,497 68,522,727
--------------- --------------
Total stockholders' equity 270,175,125 181,875,230
--------------- --------------
$ 282,380,002 $ 195,641,849
=============== ==============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
-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,
----------------------------------------------
1997 1996 1995
--------------- ------------- -------------
<S> <C> <C> <C>
Revenues
Interest Income $ 21,813 $ 3,884 $ 1,144
Subsidiary earnings 21,481,957 19,612,493 18,994,335
--------------- ------------- -------------
21,503,770 19,616,377 18,995,479
--------------- ------------- -------------
Costs and Expenses:
General and administrative 10,000 250,000 250,000
--------------- ------------- -------------
Net income $ 21,493,770 $ 19,366,377 $ 18,745,479
=============== ============= =============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
-52-
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
SCHEDULE III C CONDENSED FINANCIAL INFORMATION OF REGISTRANT
RIO HOTEL & CASINO, INC.
STATEMENT OF CASH FLOW
For the Year Ended December 31,
--------------------------------------------------
1997 1996 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 21,493,770 $ 19,366,377 $ 18,745,479
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Earnings from subsidiary investments (21,481,957) (19,612,493) (18,994,335)
(Increase) decrease in assets:
Receivables - 537 350
Due from (to) subsidiaries (1,561,736) 1,686,447 4,715,730
Net cash provided by (used in) operating activities (1,549,923) 1,440,868 4,467,224
-------------- -------------- --------------
Cash flows from investing activities:
Investments in subsidiaries (64,030,000) - -
-------------- -------------- --------------
Net cash used in investing activities (64,030,000) - -
-------------- -------------- --------------
Cash flows from financing activities:
Net proceeds from common stock issuance 65,624,388 1,162,910 969,251
Repurchase of common stock - (2,220,600) (5,386,225)
-------------- -------------- --------------
Net cash used in (provided by) financing activities 65,624,388 (1,057,690) (4,416,974)
-------------- -------------- --------------
Net increase (decrease) in cash and
cash equivalents 44,465 383,178 50,250
Cash and cash equivalents, beginning of period 469,063 85,885 35,635
-------------- -------------- --------------
Cash and cash equivalents, end of period $ 513,528 $ 469,063 $ 85,885
============== ============== ==============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
-53-
<PAGE>
<TABLE>
<CAPTION>
RIO HOTEL & CASINO, INC. AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
<S> <C>
Balance, December 31, 1994 $ 479,135
Additions charged to income 1,002,463
Accounts written off, net of recoveries (656,906)
--------------
Balance, December 31, 1995 824,692
Additions charged to income 1,070,813
Accounts written off, net of recoveries (778,675)
--------------
Balance, December 31, 1996 1,116,830
Additions charged to income 25,599,841
Accounts written off, net of recoveries (3,571,922)
--------------
Balance, December 31, 1997 $ 23,144,749
==============
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
-54-
<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 30, 1998 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>
March 30, 1998
/s/ Anthony A. Marnell II Chairman of the Board of Directors and Chief
Anthony A. Marnell II Executive Officer (Principal Executive Officer)
/s/ James A. Barrett, Jr. President and Director March 30, 1998
James A. Barrett, Jr.
/s/ David P. Hanlon Executive Vice President, Chief Operating March 30, 1998
David P. Hanlon Officer and Director
/s/ Ronald J. Radcliffe Vice President, Treasurer and Chief Financial March 30, 1998
Ronald J. Radcliffe Officer (Principal Financial and Accounting Officer)
/s/ I. Scott Bogatz Vice President, Secretary and General Counsel March 30, 1998
I. Scott Bogatz
/s/ John A. Stuart Director March 30, 1998
John A. Stuart
/s/ Thomas Y. Hartley Director March 30, 1998
Thomas Y. Hartley
/s/ Peter M. Thomas Director March 30, 1998
Peter M. Thomas
</TABLE>
-55-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
NUMBER EXHIBIT DESCRIPTION PAGE
<S> <C> <C>
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, is incorporated herein
by reference from the Company's (SEC File No. 001-
11569) Annual Report on Form 10-K for the Year Ended
December 31, 1996, Part IV, Item 14(c), Exhibit 3.02.
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 Rio Hotel & Casino, Inc. Non-Statutory Stock Option 62
Plan, as amended February 25, 1998.
4.03 Rio Hotel & Casino, Inc. Directors' Stock Option Plan, 71
as amended February 25, 1998.
4.04 Rio Suite Hotel & Casino Employee Retirement Savings 78
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 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;
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) Annual Report
on Form 10-K for the Year Ended December 31, 1994, Part
IV, Item 14(c), Exhibit 4.08; Twelfth Amendment to the
Rio Suite Hotel & Casino Employee Retirement Savings
Plan dated and effective December 21, 1995; and
Thirteenth Amendment to the Rio Suite Hotel & Casino
Employee Retirement Savings Plan dated and effective
March 17, 1998.
-56-
<PAGE>
NUMBER EXHIBIT DESCRIPTION PAGE
4.05 Rio Hotel & Casino, Inc. 1995 Long-Term Incentive Plan,
as amended March 20, 1997, is incorporated herein by
reference from the Company's (SEC File No. 001-11569)
Annual Report on Form 10-K for the Year Ended December
31, 1996, Item 14(c), Exhibit 4.07.
4.06 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 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
-57-
<PAGE>
NUMBER EXHIBIT DESCRIPTION PAGE
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) Annual 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; 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) Annual 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) Annual 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
-58-
<PAGE>
NUMBER EXHIBIT DESCRIPTION PAGE
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, are incorporated herein by
reference from the Company's (SEC File No. 001-11569)
Annual Report on Form 10-K for the Year Ended December
31, 1996, Item 14(c), Exhibit 4.08; Eleventh Amendment
to Credit Agreement and Waiver dated as of May 13, 1997
among Rio Properties, Inc., Rio Leasing, Inc., Bank of
America National Trust & Savings Association, as Agent
and as 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; and Twelfth Amendment to Credit Agreement and
Waiver dated as of May 13, 1997 among Rio Properties,
Inc., Rio Leasing, Inc., Bank of America National Trust
& Savings Association, as Agent as a Bank, and Wells
Fargo Bank National Trust & Savings 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, are incorporated
herein by reference from the Company's (SEC File No.
001-11569) Report on Form 10-Q for the Quarter Ended
March 31, 1997, Item 6(a), Exhibit 4.01; and Thirteenth
Amendment to Credit Agreement dated as of August 8,
1997 among Rio Properties, Inc. and Rio Leasing, Inc.,
as Borrowers, Bank of America National Trust and
Savings Association, as Agent and as a Bank, and Wells
Fargo Bank National Association, First Security Bank,
N.A., NBA 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, is incorporated herein by
reference from the Company's (SEC File No. 001-11569)
Report on Form 10-Q for the Quarter Ended June 30,
1997, Item 6(a), Exhibit 4.01.
4.07 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.
4.08 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.
-59-
<PAGE>
NUMBER EXHIBIT DESCRIPTION PAGE
4.09 Form of Letter of Transmittal to IBJ Schroder Bank &
Trust Company as Exchange Agent for exchange of 9-1/2%
Senior Subordinated Notes Due 2007 is incorporated
herein by reference from the Company's (SEC
File No. 333-23895) Registration Statement on Form S-4
filed March 24, 1997, Part II, Item 21(A), Exhibit
4.14.
4.10 Amended and Restated Credit Agreement dated as of
February 24, 1998 among Rio Properties, Inc. and Rio
Leasing, Inc. and Bank of America National Trust and
Savings Association as Agent and the other financial
institutions party hereto is incorporated herein by
reference from the Company's (SEC File No. 1-11569)
Report on Form 8-K dated February 24, 1998, Item 7(c),
Exhibit 4.1.
10.01 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) Annual Report on Form 10-K for the Year Ended
December 31, 1993, Part IV, Item 14(c), Exhibit 10.11.
10.02 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.
10.03 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.
10.04 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.
10.05 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.
10.06 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.
10.07 Architectural Agreement entered into as of July 27,
1995 by and between Anthony A. Marnell II, Chtd., as
Architect, and Rio Hotel & Casino, 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 10.10.
10.08 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
-60-
<PAGE>
NUMBER EXHIBIT DESCRIPTION PAGE
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.
10.09 Form of Exchange Agency Agreement between Rio Hotel &
Casino, Inc. and IBJ Schroder Bank & Trust Company is
incorporated herein by reference from the Company's
(SEC File No. 333-23895) Registration Statement on Form
S-4 filed March 24, 1997, Part II, Item 21(A), Exhibit
10.12.
10.10 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. Radcliffe;
Employment Agreement dated as of March 7, 1997 between
Rio Hotel & Casino, Inc. and I. Scott Bogatz are
incorporated herein by reference from the Company's
(SEC File No. 001-11569) Annual Report on Form 10-K for
the Year Ended December 31, 1996, Part IV, Item 14(c),
Exhibit 10.12.
10.11 Purchase Agreement dated as of June 1, 1997 among Rio
Development Company, Inc. and Seven Hills Golf Limited
Partnership is incorporated herein by reference from
the Company's (SEC File No. 001-11569) Quarterly Report
on Form 10-Q for the Quarter Ended June 30, 1997, Part
II, Item 6(a), Exhibit 10.01.
10.12 Architectural Agreements entered into as of March 25, 81
1998 by and between Anthony A. Marnell II, Chtd., as
Architect, and Rio Hotel & Casino, Inc., as Owner.
10.13 Building Contracts entered into as of March 25, 1998 by 137
and between Marnell Corrao Associates, Inc., as General
Contractor, and Rio Properties, Inc., as Owner.
21.01 List of subsidiaries of Registrant. 278
23.01 Consent of Arthur Andersen LLP. 280
27.01 Financial Data Schedule. 282
-61-
<PAGE>
</TABLE>
EXHIBIT 4.02
<PAGE>
RIO HOTEL & CASINO, INC.
(FORMERLY MARCOR RESORTS, INC.)
NON-STATUTORY STOCK OPTION PLAN
AS AMENDED SEPTEMBER 5, 1991,
AS AMENDED FEBRUARY 28, 1992,
AS AMENDED JUNE 22, 1993,
AS FURTHER AMENDED FEBRUARY 25, 1998
1. PURPOSE
The purpose of the Non-Statutory Stock Option Plan (the
"NSOP") is to advance the interests of Rio Hotel & Casino, Inc.
(the "Company"), its stockholders, and its subsidiaries by
encouraging and motivating selected officers, employee-directors,
key employees, outside consultants and other persons on whose
judgment, initiative and effort the Company depends for the
successful conduct of its business, to acquire a proprietary
interest in the Company by ownership of its stock. Options
granted under the NSOP are intended to be options which do not
meet the requirements of Section 422A of the Internal Revenue
Code of 1986, as amended.
2. DEFINITIONS
Unless otherwise required by the context:
"Board" shall mean the Board of Directors of the Company.
"Committee" shall mean the Non-Statutory Stock Option Plan
Committee, which is appointed by the Bord, and which shall be
composed of no less than two members of the Board who are
disinterested persons as provided under Rule 16b-3(c)(2)(i) of
the Securities Exchange Act of 1934 ("Exchange Act").
"Company" shall mean Rio Hotel & Casino, Inc., a Nevada
corporation (formerly MarCor Resorts, Inc.), successor in
interest to MarCor Development Company, Inc., a California
corporation.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Fair Market Value" of the Stock on a given date shall mean
the last reported sale price of the Stock on such date on the
NASDAQ National Market System, or on such other stock exchange
that the stock may be listed from time to time.
"Option" shall mean a right to purchase Stock, granted
pursuant to the Plan.
"Option Price" shall mean the purchase price for Stock under
an Option, as determined in Section 6.1 below.
"Participant" shall mean an employee, outside consultant,
officer or employee-director of the Company, or an employee,
outside consultant, officer or director of any Subsidiary of the
Company, to whom an Option is granted under the Plan. See
Section 4, "Eligibility" for certain express exclusions of
persons who might otherwise fall within this definition.
"NSOP" or "Plan" shall mean this Rio Hotel & Casino, Inc.
Non-Statutory Stock Option Plan.
<PAGE>
NON-STATUTORY STOCK OPTION PLAN
PAGE 2 OF 8
"Stock" shall mean the common stock of the Company, par
value $.01.
"Subsidiary" shall mean any corporation, limited
partnership, general partnership or other entity in which the
Company owns, directly or indirectly, more than fifty percent
(50%) of the total combined voting power of all classes of
securities of such corporation, limited partnership, general
partnership or other entity.
3. ADMINISTRATION
3.1. ADOPTION
The NSOP has been approved by the Company's Board of
Directors (the "Board") and is to become effective upon such
Board's approval (the "Effective Date") subject to the subsequent
ratification of the holders of a majority of the Company's shares
of common stock constituting a quorum and present, in person or
by proxy, at the duly called and held stockholders meeting. For
all purposes herein, the Effective Date is July 9, 1987.
3.2. AMENDMENT
The NSOP and Options granted under the NSOP may be
amended, modified or terminated by the Committee, provided that:
(a) No action with respect to an outstanding option
may be taken that would adversely affect the rights of the
holder of such option without such holder's consent; and
(b) No amendment to the NSOP shall become effective
without approval by the holders of a majority of the
Company's shares of common stock constituting a quorum and
present, in person or by proxy, at an annual or special
stockholders meeting if such amendment would:
(i) increase the number of shares as to which
options may be granted under the NSOP; or
(ii) extend the term of the NSOP; or
(iii) materially increase the benefits
accruing to or modify eligibility requirements for
participants in the NSOP.
3.3. PLAN ADMINISTRATION
The Plan shall be administered by the Committee. Two
members of the Committee shall constitute a quorum for the
transaction of business. The Committee shall be responsible to
the Board for the operation of the Plan, and shall notify the
Board with respect to decisions regarding participation in the
Plan by individuals selected and with respect to the extent of
that participation. The interpretation and construction of any
provision of the Plan by the Committee shall be final, unless
otherwise determined by the Board. No member of the Board or the
Committee shall be liable for any action or determination made by
him in good faith.
4. ELIGIBILITY
The Committee may grant Options to any key management
employee, including a non-employee who is an officer or outside
consultant, or an employee-officer or employee-director of the
Company, or an employee,
<PAGE>
NON-STATUTORY STOCK OPTION PLAN
PAGE 3 OF 8
outside consultant, officer or director of a Subsidiary at any
time from time to time to new Participants. Notwithstanding the
foregoing, non-employee directors of Rio Hotel & Casino, Inc. are
not eligible to participate in the NSOP. Options granted at
different times need not contain similar provisions.
5. OPTION SHARES
5.1. NUMBER
The maximum number of shares of the Company's
authorized common stock as to which options may be granted is
2,637,500. Such shares may be treasury, or authorized, but
unissued shares of Stock of the Company.
5.2. UNEXERCISED OPTIONS
Shares subject to unexercised options which expire or
terminate will thereupon become available for the grant of
additional options.
6. OPTION TERMS
The terms of each option will be set forth in a written
stock option agreement subject to the following provisions:
6.1. PRICE
The exercise price of each option granted under the
NSOP shall be established by the Committee at the time the Option
is granted, provided, however, that the exercise price of any
option shall not be less than the lesser of:
(a) 85% of the fair market value of the underlying
Common Stock on the date the option is granted, or
(b) 85% of the fair market value of the underlying
Common Stock on the date the option is exercised.
6.2. EXERCISE
Subject to Section 8 below, each option granted under
the NSOP will be exercisable for a period of not more than ten
years from the date of grant, provided that:
(a) No option granted an executive officer or director
of the Company or owner of more than 10% of a class of the
Company's equity securities registered under Section 12 of
the Exchange Act will be exercisable until six months and
one day after the latest to occur of either the date of
option grant or the date of stockholder approval of the
Plan;
(b) No option will be exercisable more than once
during any calendar month, and the minimum number of shares
as to which any option will be exercisable will be 100
shares unless the maximum number of shares subject to
exercise is less than 100 shares, in which event the option
must be exercised as to all shares available at the date of
exercise; and
<PAGE>
NON-STATUTORY STOCK OPTION PLAN
PAGE 4 OF 8
(c) No option will be exercisable (and any attempted
exercise will be deemed null and void) if such exercise
would crate a right of recovery for "short-swing profits"
under Section 16(b) of the Exchange Act.
6.3. PAYMENT
In order to exercise any option, the Participant must
give the Company's Treasurer written notice of such exercise
accompanied by payment in full of the option price:
(a) in cash;
(b) the assignment and delivery to the Company of
shares of Stock; or
(c) a combination of (a) and (b).
Any shares of Stock so assigned and delivered to the Company
in payment or partial payment of the option price will be valued
at Fair Market Value on the exercise date.
6.4. DELIVERY OF OPTION CERTIFICATES
Upon exercise of any stock option, a certificate for
the shares purchased will be issued in the name of the
participant and the participant will be entitled to vote such
shares, to receive dividends and other distributions with respect
to such shares and to exercise all other rights of a stockholder.
6.5. ASSIGNABILITY
No option or other right under the NSOP will be
assignable or transferable by any Participant except by will or
the laws of the descent and distribution, and no option shall be
exercisable except by the Participant or the participant's legal
representative.
(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,
(i) 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
Company), to
(1) a member of his or her Immediate Family
(as defined),
(2) a trust solely for the benefit of the
Participant and his or her Immediate Family, or
(3) 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 (i) 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 (i) and
it determines that the proposed transfer complies with the
requirements of the
<PAGE>
NON-STATUTORY STOCK OPTION PLAN
PAGE 5 OF 8
Plan and the applicable option agreement. Any purported
assignment, alienation, pledge, attachment, sale, transfer
or encumbrance that does not qualify under (i) 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.
6.6. EMPLOYMENT AGREEMENT
The Board may, in its discretion, include in any Option
granted under the Plan a condition that the Participant shall
agree to remain in the employ of, and to render services to, the
Company or any of its Subsidiaries for a period of time following
the date the Option is granted. No such agreement shall impose
upon the Company or any of its Subsidiaries, however, any
obligation to employ the Participant for any period of time.
6.7. NUMBER OF SHARES
Each Option shall state the total number of shares of
Stock to which it pertains.
6.8. OPTION PERIOD AND LIMITATIONS ON EXERCISE OF
OPTIONS
The Committee may, in its discretion, provide that an
Option may not be exercised in whole or in part for any period or
periods of time specified in the Option agreement. Except as
provided in the Option agreement, an Option may be exercised in
whole or in part at any time during its term. No Option may be
exercised after the expiration of ten years from the date it is
granted. No Option may be exercised for a fractional share of
Stock.
7. TERM
The provisions of the NSOP will govern all options granted
under the NSOP but no options may be granted under the NSOP more
than 10 years after the Effective Date or the date Plan is
approved by the Company's stockholders whichever is earlier.
8. TERMINATION OF EMPLOYMENT OR SERVICE
Except as provided in Sections 9 and 10 below, if a
Participant:
(a) ceases to be employed (or is not employed) by the
Company or any of its Subsidiaries;
<PAGE>
NON-STATUTORY STOCK OPTION PLAN
PAGE 6 OF 8
(b) ceases to hold office (or does not hold office) as
an officer of the Company or any of its Subsidiaries; and
(c) ceases to serve as a director (or is not a
director) of the Company or any of its Subsidiaries; and
(d) ceases to be an outside consultant (or is not an
outside consultant) of the Company or any of its
subsidiaries, then the Participant's Options shall terminate
with rights thereto being terminated, including the right to
exercise the Options, three months after the happening of
the last event described above in 8 (a), (b), (c) or (d)
(the "Last Event"). In such event, at any time within three
months of the Last Event, the holder of an Option may
exercise his Options in the manner therein prescribed and to
the extent that he was entitled to exercise them on the date
of the Last Event, but in no event shall any option be
exercisable more than ten years from the date it was
granted. The Committee may cancel an Option during the
three month period referred to in this paragraph, if in the
Committee's sole and absolute opinion the Participant
engages in employment or activities contrary to the best
interests of the Company or any of its Subsidiaries. Any
such determination of the Committee shall be final and
conclusive, subject solely to the review of the Board.
Notwithstanding, the provisions of this Section 8, Section
6.2 above, and Sections 9 and 10 below, the Committee may,
within its discretion, designate an expiration date for
options granted hereunder which is later than the expiration
dates contained in said Sections, so long as said later
expiration date is clearly stated in the instrument of
grant.
9. RIGHTS IN EVENT OF RETIREMENT
Notwithstanding Section 8, if the Last Event described in
Section 8(a), (b), or (c) occurs after a Participant attains the
age of seventy-two (72) years, without having fully exercised his
Options, the Participant shall have the right to exercise such
Options to the extent that such Participant was entitled to
exercise the Options on the date of the Last Event, provided,
however, that in no event shall the Options be exercisable more
than ten years from the date they were granted.
10. RIGHTS IN EVENT OF DEATH
If a Participant dies without having fully exercised his
Options, the executors or administrators, or legatees or heirs,
of his estate shall have the right to exercise such Options to
the extent that such deceased Participant was entitled to
exercise the Options on the date of his death, if any; provided,
however, that in no event shall the Options be exercisable more
than ten years from the date they were granted.
11. NO OBLIGATIONS TO EXERCISE OPTION
The granting of an Option shall impose no obligation upon
the Participant to exercise such Option.
12. EFFECT OF CHANGE IN STOCK SUBJECT TO THE PLAN
The aggregate number of shares of Stock available for
Options under Plan, the shares subject to any Option, the price
per share, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Stock subsequent to
the effective date of the Plan resulting from (1) a subdivision
or consolidation of shares or any other capital adjustment,
(2) the payment of a stock dividend, or (3) other increase or
decrease in such shares effected without receipt of consideration
by the Company. If the Company shall be the surviving
corporation in any merger or consolidation, any Option shall
pertain, apply, and relate to the securities to which a
<PAGE>
NON-STATUTORY STOCK OPTION PLAN
PAGE 7 OF 8
holder of the number of shares of Stock subject to the Option
would have been entitled after the merger or consolidation. Upon
dissolution or liquidation of the Company, or upon a merger or
consolidation in which the Company is not the surviving
corporation, all Options under the Plan shall terminate;
provided, however that each Participant (and each other person
entitled under Section 9 to exercise an Option) shall have the
right, immediately prior to such dissolution or liquidation, or
such merger or consolidation, to exercise such Participant's
Options and in whole or in part, but only to the extent that such
Options are otherwise exercisable under the terms of the Plan.
13. CHANGE OF CONTROL
Notwithstanding the provisions of Section 12, in the event
of a change of control, vesting on all unexercised stock options
will accelerate to the change of control date. For purposes of
this plan, a "Change of Control" of the Company 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 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 (b) 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; or (c) the approval by the Company's
stockholders of the merger or consolidation of the Company with
any other corporation or business organization, the sale of all
or substantially all the assets of the Company, or the
liquidation or dissolution of the Company; or (d) a proxy
statement is distributed soliciting proxies from the stockholders
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; or (e) at least a majority of the Incumbent Board who
are in office immediately prior to any action proposed to be
taken by the Company determine that such proposed action, if
taken, would constitute a change of control of the Company and
such action is taken.
14. AMENDMENT AND TERMINATION
The Board, by resolution, may terminate, amend, or revise
the Plan with respect to any shares as to which Options have not
been granted. Neither the Board nor the Committee may, without
the consent of the holder of an Option, alter or impair any
Option previously granted under the Plan, except as authorized
herein. Unless sooner terminated, the Plan shall remain in
effect for a period of ten years from the date of the Effective
Date. Termination of the Plan shall not affect any Option
previously granted.
15. AGREEMENT AND REPRESENTATION OF EMPLOYEES
As a condition to the exercise of any portion of an Option,
the Company may require the person exercising such Option to
represent and warrant at the time of such exercise that any
shares of Stock acquired at exercise are being acquired only for
investment and without any present intention to sell or
distribute such shares, if in the opinion of counsel for the
Company, such a representation is required under the Securities
Act of 1933 or any other applicable law, regulation, or rule of
any governmental agency.
<PAGE>
NON-STATUTORY STOCK OPTION PLAN
PAGE 8 OF 8
16. RESERVATION OF SHARES OF STOCK
The Company, during the term of this Plan, will at all times
reserve and keep available, and will seek or obtain from any
regulatory body having jurisdiction any requisite authority
necessary to issue and to sell, the number of shares of Stock
that shall be sufficient to satisfy the requirements of this
Plan. The inability of the Company to obtain from any regulatory
body having jurisdiction the authority deemed necessary by
counsel for the Company for the lawful issuance and sale of its
Stock hereunder shall relieve the Company of any liability in
respect of the failure to issue or sell Stock as to which the
requisite authority has not been obtained.
17. EFFECTIVE DATE OF PLAN
The Plan shall be effective as provided in Section 3.1.
<PAGE>
EXHIBIT 4.03
<PAGE>
RIO HOTEL & CASINO, INC.
(FORMERLY MARCOR RESORTS, INC.)
1991 DIRECTORS' STOCK OPTION PLAN
AS AMENDED FEBRUARY 28, 1992;
AS AMENDED MARCH 28, 1995;
AS AMENDED JANUARY 25, 1996; AND
AS FURTHER AMENDED ON FEBRUARY 25, 1998
1. PURPOSE
The Rio Hotel & Casino, Inc. 1991 Directors' Stock Option
Plan (the "Plan") is intended to promote the interests of Rio
Hotel & Casino, Inc. (formerly MarCor Resorts, Inc.) (the
"Company") by encouraging members of the Board of Directors of
the Company (the "Board") who are not employed as regular
salaried officers or employees of the Company (hereinafter
referred to as "Non-Employee Directors" or "Optionees") the
opportunity to participate in a stock option plan in order to
encourage Non-Employee Directors to take a long-term view of the
affairs of the Company to attract and retain new top-notch Non-
Employee Directors; and to aid in rewarding Non-Employee
Directors for their services to the Company.
2. ADMINISTRATION
The Plan shall be administrated by a Committee (the
"Committee") of not less than two directors of the Company
selected by, and serving at the pleasure of, its Board. The
Committee shall not have any discretion to determine or vary any
matters which are fixed under the terms of the Plan including,
without limitation, which individuals shall receive option
awards, how many shares of the Company's stock shall be subject
to each such option award, what the exercise price of stock
covered by an option shall be, and what means of payment shall be
acceptable.
The Committee shall have the authority to otherwise
interpret the Plan and make all determinations necessary or
advisable for its administration.
The Committee's decisions under the Plan shall be subject to
the approval of the Board.
3. ELIGIBILITY
Only Non-Employee Directors of the Company will be eligible
to be granted awards.
4. STOCK SUBJECT TO THE PLAN
The stock from which awards may be granted shall be the
Company's, $.01 par value, common stock ("Common Stock"). When
options are exercised, the Company may either issue authorized
but unissued shares of Common Stock or transfer issued Common
Stock held in its treasury. The total number of shares of Common
Stock which may be granted as stock options shall not exceed
200,000. If an option expires, or is otherwise terminated prior
to its exercise, the Common Stock covered by such option
immediately prior to such expiration or other termination shall
continue to be available for grant under the Plan.
<PAGE>
5. GRANT AND AMOUNT OF OPTIONS
The date of the initial option grant for a Non-Employee
Director serving his or her term shall be the date upon which the
Plan is adopted by the Board for submission to the stockholders
for approval. The date of the initial grant for a Non-Employee
Director commencing his or her term shall be the date that he or
she is elected to the Board by the stockholders at any special or
annual meeting. The initial option grant shall be to purchase
20,000 shares of Common Stock (subject to adjustment pursuant to
Section 7).
All annual awards of options shall be granted on January, of
each year, with the first annual grant effective January 1, 1993.
Annual grants prior to January 1, 1996 will be to purchase 1,000
shares of Common Stock; and thereafter annual grants will be to
purchase 5,000 shares of Common Stock (subject to adjustment
pursuant to Section 7).
6. TERMS AND CONDITIONS OF OPTIONS
Options shall be designated non-qualified options or not
qualified as Incentive Stock Options under Section 422A of the
Internal Revenue Code of 1954, as amended (the "Code"), and shall
be evidenced by written instruments approved by the Committee.
Such instruments shall conform to the following terms and
conditions.
6.1. OPTION PRICE
The option price shall be 100% of the fair market value
of the Common Stock granted under the option on the date of
grant. For purposes of this section, the fair market value per
share shall be the last reported sale price of the Common Stock
on the NASDAQ National Market System, or on such other stock
exchange that the Common Stock may be listed from time-to-time,
(the "Reported Price") that day or, if no sale of Common Stock is
recorded on that day, then on the next preceding day on which
there was such a sale. The option price shall be paid (i) in
cash, (ii) in shares of the Company's Common Stock having a fair
market value equal to such option price or (iii) in a combination
of cash and Common Stock. The fair market value of shares of
Common Stock delivered to the Company pursuant to the immediately
preceding sentence shall be determined on the basis of the
Reported Price on the day of exercise or, if there was no such
sale on the day of exercise, on the day next preceding the day of
exercise on which there was such a sale.
6.2. EXERCISE AND TERM OF OPTIONS
Each option shall be exercisable in full six months and
one day following the later of either the date of grant or
stockholder approval of the Plan.
Except in special circumstances, each option shall
expire the later of the tenth anniversary of the date of its
grant or three months after the Optionee ceases to serve as a
member of the Board.
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 its equivalent in property
acceptable to the Company. In the discretion of the Committee,
the purchase price may be
<PAGE>
paid by the assignment and delivery to the Company of shares of
Common Stock or a combination of cash and such shares equal in
value to the purchase price. Any shares of Common Stock so
assigned and delivered to the Company in payment or partial
payment of the purchase price will be valued at Fair Market Value
on the exercise date. Upon the exercise of a non-qualified stock
option, the Optionee may (a) direct the Company to withhold from
the shares of Common Stock to be issued to the Optionee the
number of shares necessary to satisfy the Company's obligation to
withhold Federal taxes, such determination to be based on the
shares' Fair Market Value on the date of exercise, (b) deliver to
the Company sufficient shares of Common Stock to satisfy the
Company's withholding obligations, based on the shares' Fair
Market Value as of the date of exercise, or (c) deliver
sufficient cash to the Company to satisfy its Federal tax
withholding obligations. Optionees who elect to use the stock
withholding feature must make that election at the time and in
the manner prescribed by the Committee.
6.3. TERMINATION OF DIRECTORSHIP
If an Optionee ceases, other than by reason of death or
retirement after attaining the age of 72 years, to be elected to
serve on the Board, all options granted to such Optionee and
exercisable on the date of termination of Directorship 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 term
ends.
6.4. 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, if any, 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) the third
anniversary of such Optionee's death. On the earlier of such
dates, the option shall terminate. The Committee may approve all
cash payments to the estate of an Optionee if circumstances
warrant such a decision.
6.5. EXERCISE UPON RETIREMENT OF OPTIONEE
If an Optionee retires from the Board after attaining
the age of 72 years, the option may be exercised, to the extent
of the number of shares that the Optionee could have exercised on
the date of such retirement, if any. Such exercise may be made
at any time prior to the earlier of (i) the tenth anniversary
after the date of grant or (ii) the third anniversary of such
Optionee's retirement. On the earlier of such dates, the option
shall terminate.
6.6. ASSIGNABILITY
No option or other right under the Plan will be
assignable or transferable by any Optionee except by will or the
laws of the descent and distribution, and no option shall be
exercisable except by the Optionee or the Optionee's legal
representative.
(a) A stock option shall not be assigned, alienated,
pledged, attached, sold, transferred or encumbered by an
Optionee other than by will or by the laws of descent and
distribution, or,
(i) by transfer without consideration by an
Optionee, subject to such rules as the Committee may
adopt to preserve the purposes of the Plan (including
limiting such transfers to transfers by Optionees who
are directors or executive officers of the Company), to
<PAGE>
(1) a member of his or her Immediate Family
(as defined),
(2) a trust solely for the benefit of the
Optionee and his or her Immediate Family, or
(3) a partnership, limited liability company
or corporation whose only partners, members or
shareholders are the Optionee and/or his or her
Immediate Family Members;
(each transferee described in (I) 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 (I) 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 (I) shall be void and unenforceable against
the Company. For purposes of the Plan, "Immediate Family"
means, with respect to a particular Optionee, the Optionee'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 Optionee
(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
Optionee (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 Optionee's
death, by the Optionee'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. CAPITAL ADJUSTMENTS
The number and price of shares of Common Stock covered by
each award of options and the total number of shares that may be
granted under the Plan shall be proportionally adjusted to
reflect, as deemed equitable and appropriate by the Committee and
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.
8. CHANGE OF CONTROL
Notwithstanding the provisions of Section 7, in the event of
a change of control, all vesting on all unexercised stock options
will accelerate to the change of control date. For purposes of
the Plan, a "Change of Control" of the Company shall be deemed to
have occurred at such time as (a) any "person" (as term is used
in Section 13(d) and 14(d) of the Securities Exchange Act of 1934
("Exchange Act")) 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 (b) individuals who constitute the Board on the date hereof
(the "Incumbent Board") cease for any reason to constitute at
least a majority
<PAGE>
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 for election was approved by a majority of the
Board serving under an Incumbent Board, shall be, for purposes of
this clause (b), considered as if he or she were a member of the
Incumbent Board; or (c) a merger, consolidation or sale of all or
substantially all the assets of the Company occurs, unless such
merger or consolidation shall have been affirmatively recommended
to the Company's stockholders by a majority of the Incumbent
Board; or (d) a proxy statement is distributed soliciting proxies
from stockholders of the Company by someone other than the
current management of the Company seeking stockholder approval of
a plan or 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 unless the reorganization, merger or
consolidation shall have been affirmatively recommended to the
Company's stockholders by a majority of the Incumbent Board.
9. APPROVALS
The issuance of shares pursuant to this Plan is expressly
conditioned upon obtaining all necessary approvals from the
Nevada Gaming Commission, if any, and upon obtaining stockholder
approval of the Plan.
10. EFFECTIVE DATE OF PLAN
The effective date of the Plan is September 5, 1991. The
Plan will become effective as of that date provided that the Plan
receives the approval of the holders of a majority of the
outstanding shares of Common Stock at the Company's 1992 Annual
Meeting of Stockholders.
11. TERM: AMENDMENT OF PLAN
This Plan shall expire on September 5, 2001 (except to
options outstanding on that date). The Board may terminate the
Plan at any time. The Board may amend the Plan at any time;
provided, however, the provisions of Section 5 pertaining to the
amount of options to be granted and the timing of such option
grants and the provisions of Section 6.1 pertaining to the option
price of the Common Stock under option shall not be amended more
than once every six months other than to comport with changes in
the Code or the regulations promulgated thereunder. Further
provided, however, that without the approval of the holders of a
majority of shares of 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
7); the provisions of Section 3 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 7); 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 under the Exchange Act, as
amended from time to time. No action of the Board or
stockholders, however, may, without the consent of an Optionee,
alter or impair such Optionee's rights under any option
previously granted.
12. WITHHOLDING TAXES
The Company 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 shares of
Common Stock under the Plan. Whenever under the Plan, shares of
Common Stock are to be
<PAGE>
delivered upon exercise of an option, the Committee shall be
entitled to require as a condition of delivery that the Optionee
remit an amount sufficient to satisfy all Federal, state and
other government withholding tax requirements related thereto.
13. 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 Company and any
Optionee, the executor, administrator or other personal
representative, or designated beneficiary of such Optionee, or
any other persons. Any reserves that may be established by the
Company in connection with the Plan shall continue to be part of
the general funds of the Company and no individual or entity
other than the Company shall have any interest in such funds
until paid to an Optionee. If and to the extent that any
Optionee or such Optionee's executor, administrator or other
personal representative, as the case may be, acquires a right to
receive any payment from the Company pursuant to the Plan, such
right shall be no greater than the right of an unsecured general
creditor of the Company.
14. NOTICES
Each Optionee shall be responsible for furnishing the
Committee with the current and proper address for the mailing of
notices and delivery of agreements, shares of 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 Optionee 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.
15. SEPARABILITY 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.
16. 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 Company and other parties with respect
thereto.
17. 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.
18. 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.
<PAGE>
EXHIBIT 4.04
<PAGE>
TWELFTH AMENDMENT
TO
RIO SUITE HOTEL & CASINO EMPLOYEE RETIREMENT
SAVINGS PLAN
THE UNDERSIGNED do hereby adopt the following amendment to
the above stated Plan. These amendments have been duly
authorized by the Board of Directors.
Effective January 1, 1996, The Rio Suite Hotel & Casino
Emplouee Retirement Plan is amended as follows:
ARTICLE VII, Section 7.4(a) "Loans to Participants" is
amended as follows to add the following subsection (6):
"(6) There shall be a mandatory one-year interval
between a participant's payoff of one loan from the Plan and
application for another loan."
IN WITNESS WHEREOF, the Company has duly executed this amendment
this 21st day of December, 1995.
RIO PROPERTIES, INC. DBA
RIO SUITE HOTEL & CASINO
By: /s/ James A. Barrett, Jr.
James A. Barrett, Jr.
Trustee
By: /s/ Susan L. Johnson
Susan L. Johnson
Trustee
By: /s/ Roger M. Szepelak
Roger M. Szepelak
Trustee
<PAGE>
THIRTEENTH AMENDMENT TO THE
RIO SUITE HOTEL & CASINO
EMPLOYEE RETIREMENT SAVINGS PLAN
THE UNDERSIGNED, Secretary to the Board, does hereby
certify that the Board of Directors has adopted the following
amendments to the above stated plan. These amendments were
duly authorized by the Board of Directors by unanimous vote at
the Board of Directors' Meeting held on December 18, 1997.
Effective October 1, 1997, the Rio Suite Hotel & Casino
Employee Retirement Savings Plan is amended as follows:
ARTICLE IV CONTRIBUTION AND ALLOCATION
Section 4.4 ALLOCATION AND CONTRIBUTIONS OF EARNINGS IS
amended such that subsection (f) reads as follows:
(f) Each Participant's account shall
be maintained by purchasing the
appropriate number of shares in each of
the funds that the Participant selected
in accordance with subsection (a). The
balance in a Participant's account
shall be the market value of the shares
that are in his account.
ARTICLE VI DETERMINATION AND DISTRIBUTION OF BENEFITS
Section 6.5 DISTRIBUTION OF BENEFITS is amended such
that the third paragraph of subsection (I) reads as follows:
(i) Any residual shares in the
Participant's account shall be
converted to cash and distributed to
him.
In witness thereof, the company has duly executed this
amendment as of the date stated above.
RIO PROPERTIES, INC.
By: /s/ I. Scott Bogatz
I. SCOTT BOGATZ
TITLE: SECRETARY
DATE: March 17, 1998
<PAGE>
EXHIBIT 10.12
<PAGE>
STANDARD FORM OF AGREEMENT BETWEEN OWNER AND ARCHITECT
AIA Document B141 - Electronic Format
THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES: CONSULTATION WITH AN
ATTORNEY IS ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION.
AUTHENTICATION OF THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY
USING AIA DOCUMENT D401.
Copyright 1917, 1926, 1948, 1951, 1953, 1958, 1961, 1963, 1966, 1967, 1970,
1974, 1977, 1987 by The American Institute of Architects, 1735 New York
Avenue, N.W., Washington, D.C., 10006-5292. Reproduction of the material
herein or substantial quotation of its provisions without written
permission of the AIA violates the copyright laws of the United States and
will be subject to legal prosecution.
AGREEMENT
made as of the 25 day of March in the year of Nineteen Hundred
and Ninety-eight.
BETWEEN the Owner:
(NAME AND ADDRESS)
RIO HOTEL & CASINO, INC.
3700 West Flamingo Road
Las Vegas, Nevada 89103
and the Architect:
(NAME AND ADDRESS)
ANTHONY A. MARNELL II, CHTD.
4495 South Polaris Avenue
Las Vegas ,Nevada 89103
For the following Project:
(INCLUDE DETAILED DESCRIPTION OF PROJECT, LOCATION, ADDRESS AND SCOPE.)
RIO NORTH DEVELOPMENT
Architect's Project Numbers: AAM276-97; 277-97; 278-97 & 279-97
Rio Job Number 9999-3000
SEE ATTACHMENT - A1
The Owner and Architect agree as set forth below.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I 2.2.3. The Architect shall review with the
ARCHITECT'S RESPONSIBILITIES Owner alternative approaches to design and
construction of the Project.
1.1. ARCHITECTS' SERVICES
2.2.4. Based on the mutually agreed-upon
1.1.1. The Architect's services consist of program, schedule and construction budget
those services performed by the Architect, requirements, the Architect shall prepare, for
Architect's employees and Architect's approval by the Owner, Schematic Design
consultants as enumerated in Articles 2 and 3 Documents consisting of drawings and other
of this Agreement and any other services documents illustrating the scale and
included in Article 12. relationship of Project components.
1.2.3. The Architect's services shall be 2.2.5. The Architect shall submit to the
performed as expeditiously as is consistent Owner a preliminary estimate of Construction
with professional skill and care and the Cost based on current area, volume or other unit
orderly progress of the Work. Upon request of costs.
the Owner, the Architect shall submit for the
Owner's approval a schedule for the performance 2.3 DESIGN DEVELOPMENT PHASE
of the Architect's services which may be
adjusted as the Project proceeds, and shall 2.3.1. Based on the approved Schematic Design
include allowances for periods of time required Documents and any adjustments authorized by the
for the Owner's review and for approval of Owner in the program, schedule or construction
submissions by authorities having jurisdiction budget, the Architect shall prepare, for
over the Project. Time limits established by approval by the Owner, Design Development
this schedule approved by the Owner shall not, Documents consisting of drawings and other
except for reasonable cause, be exceeded by the documents to fix and describe the size and
Architect or Owner. character of the Project as to architectural,
structural, mechanical and electrical systems,
1.1.3. The services covered by this materials and such other elements as may be
Agreement are subject to the time limitations appropriate.
contained in Subparagraph 11.5.1.
2.3.2. The Architect shall advise the Owner
ARTICLE 2 of any adjustments to the preliminary estimate
SCOPE OF ARCHITECT'S BASIC SERVICES of Construction Cost.
2.1 DEFINITION 2.4 CONSTRUCTION DOCUMENTS PHASE
2.1.1. The Architect's Basic Services 2.4.1. Based on the approved Design
consist of those described in Paragraphs 2.2 Development Documents and any further
through 2.6 and any other services identified adjustments in the scope or quality of the
in Article 12 as part of Basic Services, and Project or in the construction budget authorized
include normal structural, mechanical and by the Owner, the Architect shall prepare, for
electrical engineering services. approval by the Owner, Construction Documents
consisting of Drawings and Specifications
2.2 SCHEMATIC DESIGN PHASE setting forth in detail the requirements for the
construction of the Project.
2.2.1. The Architect shall review the
program furnished by the Owner to ascertain the 2.4.2. The Architect shall assist the Owner,
requirements of the Project and shall arrive at only if requested by the Owner, in the
a mutual understanding of such requirements preparation of the necessary bidding
with the Owner. information, bidding forms, the Conditions of
the Contact, and the form of Agreement between
2.2.2. The architect shall provide a the Owner and Contractor.
preliminary evaluation of the Owner's program,
schedule and construction budget requirements, 2.4.3. The Architect shall advise the Owner
each in terms of the other, subject to the of any adjustments to previous preliminary
limitations set forth in Subparagraph 5.2.1. estimates of Construction
Page #2
<PAGE>
Cost indicated by changes in requirements or and to determine in general if the Work is being
general market conditions. performed in a manner indicating that the Work
when completed will be in accordance with the
2.4.4 The Architect shall assist the Owner Contract Documents. However, the Architect
in connection with the Owner's responsibility shall not be required to make exhaustive or
for filing documents required for the approval continuous on-site inspections to check the
of governmental authorities having jurisdiction quality or quantity of the Work. On the basis
over the Project. of on-site observations as an architect, the
Architect shall keep the Owner informed of the
2.5 BIDDING OR NEGOTIATION PHASE progress and quality of the Work, and shall
endeavor to guard the Owner against defects and
2.5.1. The Architect, following the Owner's deficiencies in the Work. (More extensive site
approval of the Construction Documents and of representation may be agreed to as an Additional
the latest preliminary estimate of Construction Service, as described in Paragraph 3.2.)
Cost, shall assist the Owner and negotiated
Contractor, only if requested by Owner in 2.6.6. The Architect shall not have control
obtaining bids or negotiated proposals and over or charge of and shall not be responsible
assist in awarding and preparing contracts for for construction means, methods, techniques,
construction. sequences or procedures, or for safety
precautions and programs in connection with the
2.6 CONSTRUCTION PHASE-ADMINISTRATION OF THE Work, since these are solely the Contractor's
CONSTRUCTION CONTRACT responsibility under the Contract for
Construction. The Architect shall not be
2.6.1 The Architect's responsibility to responsible for the Contractor's schedules or
provide Basic Services for the Construction failure to carry out the Work in accordance with
Phase under this Agreement commences with the the Contract Documents. The Architect shall not
award of the Contract for Construction and have control over or charge of acts or omissions
terminates at the earlier of the issuance to of the Contractor, Subcontractors, or their
the Owner of the final Certificate for Payment agents or employees, or of any other persons
by the Contractor or 60 days after the date of performing portions of the Work.
Substantial Completion of the Work, unless
extended under the terms of Subparagraph 2.6.7. The Architect shall at all times have
10.3.3. access to the Work wherever it is in preparation
or progress.
2.6.2. The Architect shall provide
administration of the Contract for Construction 2.6.8. Except as may otherwise be provided in
as set forth below unless otherwise provided in the Contract Documents or when direct
this Agreement. communications have been specially authorized,
the Owner and Contractor shall communicate
2.6.3. Duties, responsibilities and through the Architect. Communications by and
limitations of authority of the Architect shall with the Architect's consultants shall be
not be restricted, modified or extended without through the Architect.
written agreement of the Owner and Architect
with consent of the Contractor, which consent 2.6.9. Based on the Architect's observations
shall not be unreasonably withheld. and evaluations of the Contractor's Applications
for Payment, the Architect shall review and
2.6.4. The Architect shall be a certify the amounts due the Contractor., only if
representative of and shall advise and consult requested by the Owner.
with the Owner (1) during construction until
final payment to the Contractor is due, and (2) 2.6.10. [Intentionally omitted]
as an Additional Service at the Owner's
direction from time to time during the
correction period described in the Contract for
Construction. The Architect shall have
authority to act on behalf of the Owner only to
the extent provided in this Agreement unless
otherwise modified by written instrument.
2.6.5 The Architect shall visit the site at
intervals appropriate to the stage of
construction or as otherwise agreed by the
Owner and Architect in writing to become
generally familiar with the progress and
quality of the Work completed
Page #3
<PAGE>
2.6.11. The Architect shall have authority to When professional certification of performance
reject Work which does not conform to the characteristics of materials, systems or
Contract Documents. Whenever the Architect equipment is required by the Contract Documents,
considers it necessary or advisable for the Architect shall be entitled to rely upon
implementation of the intent of the Contract such certification to establish that the
Documents, the Architect will have authority to materials, systems or equipment will meet the
require additional inspection or testing of the performance criteria required by the Contract
Work in accordance with the provisions of the Documents.
Contract Documents, whether or not such Work is
fabricated, installed or completed. However, 2.6.13. The Architect may authorize minor
neither this authority of the Architect nor a changes in the Work not involving an adjustment
decision made in good faith either to exercise in the Contract Sum or an extension of the
or not to exercise such authority shall give Contract Time which are not inconsistent with
rise to a duty or responsibility of the the intent of the Contract Documents.
Architect to the Contractor, Subcontractors,
material and equipment suppliers, their agents 2.6.14. The Architect shall forward to the
or employees or other persons performing Owner for the Owner's review and records, any
portions of the Work. other written warranties and related documents
required by the Contract Documents and not
2.6.12. The Architect shall review and received, assembled and issued directly to the
approve or take other appropriate action upon Owner by the Contractor.
Contractor's submittals such as Shop Drawings,
Product Data and Samples, but only for the 2.6.15. The Architect shall interpret and
limited purpose of checking for conformance decide matters concerning performance of the
with information given and the design concept Owner and Contractor under the requirements of
expressed in the Contract Documents. The the Contract Documents on written request of
Architect's action shall be taken with such either the Owner or Contractor. The Architect's
reasonable promptness as to cause no delay in response to such requests shall be made with
the Work or in the construction of the Owner or reasonable promptness and within any time limits
of separate contractors, while allowing agreed upon.
sufficient time in the Architect's professional
judgment to permit adequate review. Review of 2.6.16. Interpretations and decisions of the
such submittals is not conducted for the Architect shall be consistent with the intent of
purpose of determining the accuracy and and reasonably inferable from the Contract
completeness of other details such as Documents and shall be in writing or in the form
dimensions and quantities or for substantiating of drawings. When making such interpretations
instructions for installation or performance of and initial decisions, the Architect shall
equipment or systems designed by the Contractor endeavor to secure faithful performance by both
to the extent required by the Contract Owner and Contractor, shall not show partiality
Documents. The Architect's review shall not to either, and shall not be liable for results
constitute approval of safety precautions or, of interpretations or decisions so rendered in
unless otherwise specifically stated by the good faith.
Architect, of construction means, methods,
techniques, sequences or procedures. The 2.6.17. The Architect's decisions on matters
architect's approval of a specific item shall relating to aesthetic effect shall be final if
not indicate approval of an assembly of which consistent with the intent expressed in the
item is a component. Contract Documents.
2.6.18. The Architect shall render written
decisions within a reasonable time on all
claims, disputes or other matters in question
between the Owner and Contractor relating to the
execution or progress of the Work as provided in
the Contract Documents.
Page #4
<PAGE>
2.6.19 The Architect's decisions on claims, Agreement.
disputes or other matters, including those in
question between the Owner and Contractor, 3.3 CONTINGENT ADDITIONAL SERVICES
except for those relating to aesthetic effect
as provided in Subparagraph 2.6.17, shall be 3.3.1. Making revisions in Drawings,
subject to arbitration as provided in this Specifications or other documents when such
Agreement and in the Contract Documents. revisions are:
.1 inconsistent with approvals or
ARTICLE 3 instructions previously given by the Owner,
ADDITIONAL SERVICES including revisions made necessary by
adjustments in the Owner's program or
GENERAL Project budget;
3.1.1. The service described in this Article .2 required by the enactment or revision
3 are not included in Basic Services unless so of codes, laws or regulations subsequent to
identified in Article 12, and they shall be the preparation of such documents; or
paid for by the Owner as provided in this
Agreement, in addition to the compensation for .3 due to changes required as a result of
Basic Services. The services described under the Owner's failure to render decisions in
Paragraphs 3.2 and 3.4 shall only be provided a timely manner.
if authorized or confirmed in writing by the
Owner. If services described under Contingent 3.3.2. Providing services required because of
Additional Services in Paragraph 3.3 are significant changes in the Project including,
required due to circumstances beyond the but not limited to, size, quality, complexity,
Architect's control, the Architect shall notify the Owner's schedule, or the method of bidding
the Owner prior to commencing such services. or negotiating and contracting for construction,
If the Owner deems that such services described except for services required under Subparagraph
under Paragraph 3.3 are not required, the Owner 5.2.5.
shall give prompt written notice to the
Architect. If the Owner indicates in writing 3.3.3. Preparing Drawings, Specifications and
that all or part of such Contingent Additional other documentation and supporting data,
Services are not required, the Architect shall evaluating Contractor's proposals, and providing
have no obligation to provide those services. other services in connection with Change Orders
and Construction Change Directives
3.2 PROJECT REPRESENTATION BEYOND BASIC
SERVICES 3.3.4. Providing services in connection with
evaluating substitutions proposed by the
Contractor and making subsequent revisions to
3.2.1. If more extensive representation at Drawings, Specifications and other documentation
the site than is described in Subparagraph resulting within.
2.6.5 is required by the Owner, the Architect
shall provide one or more Project 3.3.5. Providing consultation concerning
Representatives to assist in carrying out such replacement of Work damaged by fire or other
additional on-site responsibilities. cause during construction, and furnishing
services required in connection with the
3.2.2. Project representatives shall be replacement of such Work.
selected, employed and directed by the
Architect, and the Architect shall be 3.3.6. Providing services made necessary by
compensated therefor as agreed by the Owner and the default of the Contractor, by major defects
Architect. or deficiencies in the Work of the Contractor,
or by failure of performance of either the Owner
3.2.3. Through the observations by such or Contractor under the Contract for
Project Representatives, the Architect shall Construction.
endeavor to provide further protection for the
Owner against defects and deficiencies in the 3.3.7 [Intentionally omitted.]
Work, but furnishing of such project
representation shall not modify the rights, 3.3.8. Providing services in connection with
responsibilities or obligations of the a public hearing, arbitration proceeding or
Architect as described elsewhere in this legal proceeding except where the Architect is
party thereto.
Page #5
<PAGE>
3.3.9. Preparing documents for alternate, 3.4.14. Providing services for planning tenant
separate or sequential bids or providing or rental spaces.
services in connection with bidding,
negotiation or construction prior to the 3.4.15. Making investigations, inventories of
completion of the Construction Documents Phase. materials or equipment, or valuations and
detailed appraisals of existing facilities.
3.4 OPTIONAL ADDITIONAL SERVICES
3.4.16. Preparing a set of reproducible record
3.4.1. Providing analyses of the Owner's drawings showing significant changes in the Work
needs and programming the requirements of the made during construction based on marked-up
Project. prints, drawings and other data furnished by the
Contractor to the Architect.
3.4.2. Providing financial feasibility or
other special studies. 3.4.17. Providing assistance in the
utilization of equipment or systems such as
3.4.3. Providing planning surveys, site testing, adjusting and balancing, preparation of
evaluations or comparative studies of operation and maintenance manuals, training
prospective sites. personnel for operation and maintenance, and
consultation during operation.
3.4.4. Providing special surveys,
environmental studies and submissions required 3.4.18. Providing services after issuance to
for approvals of governmental authorities or the Owner of the final Certificate for Payment
others having jurisdiction over the Project BY THE CONTRACTOR, or in the absence of a final
beyond that normally required to gain public Certificate for Payment, more than 60 days after
hearing before the Clark County Planning the date of Substantial Completion of the Work.
Commission and Clark County Commissioners with
regard to Architectural Review, Variance, etc. 3.4.19. Providing services of consultants for
if required. other than architectural, structural, mechanical
and electrical engineering portions of the
3.4.5. Providing services relative to future Project provided as a part of Basic Services.
facilities, systems and equipment.
3.4.20. Providing any other services not
3.3.6. Providing services to investigate otherwise included in this Agreement or not
existing conditions or facilities or to make customarily furnished in accordance with
measured drawings thereof generally accepted architectural practice.
3.4.7. Providing services to verify the
accuracy of drawings or other information ARTICLE 4
furnished by the Owner. OWNER'S RESPONSIBILITIES
3.4.8. Providing coordination of 4.1. The Owner shall provide full information
construction performed by separate contractors regarding requirements for the Project,
or by the Owner's own forces and coordination including a program which shall set forth the
of services required in connection with Owner's objectives, schedule, constraints and
construction performed and equipment supplied criteria, including space requirements and
by the Owner. relationships, flexibility, expandability,
special equipment, systems and site
3.4.9. Providing services in connection with requirements.
the work of a construction manager or separate
consultants retained by the Owner. 4.2. The Owner shall establish and update an
overall budget for the Project, including the
3.4.10. Providing detailed estimates of Construction Cost, the Owner's other costs and
Construction Cost. reasonable contingencies related to all of these
costs.
3.4.11. Providing detailed quantity surveys
or inventories of material, equipment and 4.3. If requested by the Architect, the Owner
labor. shall furnish evidence that financial
arrangements have been made
3.4.12. Providing analyses of owning and
operating costs.
3.4.13. [Intentionally omitted.]
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to fulfill the Owner's obligations under this 4.9 The services, information, surveys and
Agreement. reports required by Paragraphs 4.5 through 4.8
shall be furnished at the Owner's expense, and
4.4. The Owner shall designate a representative the Architect shall be entitled to rely upon the
authorized to act on the Owner's behalf with accuracy and completeness thereof.
respect to the Project. The Owner or such
authorized representative shall render 4.19 Prompt written notice shall be given by the
decisions in a timely manner pertaining to Owner to the Architect if the Owner becomes
documents submitted by the Architect in order aware of any fault or defect in the Project or
to avoid unreasonable delay in the orderly and nonconformance with the Contract Documents.
sequential progress of the Architect's
services. Refer to Article 12; paragraph 12.2. 4.11 The proposed language of certificates or
certifications requested of the Architect or
4.5. The Owner shall furnish surveys describing Architect's consultants shall be submitted to
physical characteristics, legal limitations and the Architect for review and approval at least
utility locations for the site of the Project, 14 days prior to execution. The Owner shall not
and a written legal description of the site. request certifications that would require
The surveys and legal information shall knowledge or services beyond the scope of this
include, as applicable, grades and lines of Agreement.
streets, alleys, pavements and adjoining
property and structures; adjacent drainage; ARTICLE 5
rights-of-way, restrictions, easements, CONSTRUCTION COST
encroachments, zoning, deed restrictions,
boundaries and contours of the site; locations, 5.1 DEFINITION
dimensions, and necessary data pertaining to
existing buildings, other improvements and 5.1.1 The Construction Cost shall be the
trees; and information concerning available total cost or estimated cost to the Owner of all
utility services and lines, both public and elements of the Project designed or specified by
private, above and below grade, including the Architect.
inverts and depths. All information on the
survey shall be referenced to a project 5.1.2 The Construction Cost shall include
benchmark. the cost at current market rates of labor and
materials furnished by the Owner and equipment
4.6 [Intentionally omitted] REFER TO ARTICLE designed, specified, selected or specially
12; PARAGRAPH 12.4. provided for by the Architect, plus a reasonable
allowance for the Contractor's overhead and
4.6.1. The Owner shall furnish the services profit. In addition, a reasonable allowance for
of other consultants when such services are contingencies shall be included for market
reasonable required by the scope of the Project conditions at the time of bidding and for
and are requested by the Architect. changes in the Work during construction.
4.7. The Owner shall furnish structural, 5.13 Construction Cost does not include the
mechanical, chemical, air and water pollution compensation of the Architect and Architect's
tests, tests for hazardous materials, and other consultants, the costs of the land, rights-of-
laboratory and environmental tests, inspections way, financing or other costs which are the
and reports required by law or the Contract responsibility of the Owner as provided in
Documents. Article 4.
4.8. The Owner shall furnish all legal, 5.2 RESPONSIBILITY FOR CONSTRUCTION COST
accounting and insurance counseling services as
may be necessary at any time for the Project, 5.2.1. Evaluations of the Owner's Project
including auditing services the Owner may budget, preliminary estimates of Construction
require to verify the Contractor's Applications Cost and detailed estimates of Construction
for Payment or to ascertain how or for what Cost, if any, prepared by the Architect,
purposes the Contractor has used the money paid represent the Architect's best judgment as a
by or on behalf of the Owner. design professional familiar with the
construction industry. It is recognized,
however, that neither the Architect nor the
Owner has control over the cost of labor,
materials or equipment, over the Contractor's
methods of determining bid prices, or over
competitive bidding, market or negotiating
conditions. Accordingly, the Architect cannot
and does not warrant or
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represent that bids or negotiated prices will Services performed whether or not the
not vary from the Owner's Project budget or Construction Phase is commenced.
from any estimate of Construction Cost or
evaluation prepared or agreed to by the ARTICLE 6
Architect. USE OF ARCHITECT'S DRAWINGS,
SPECIFICATIONS AND OTHER DOCUMENTS
5.2.2. No fixed limit of Construction Cost
shall be established as a condition of this 6.1 The Drawings, Specifications and other
Agreement by the furnishing, proposal or documents prepared by the Architect for this
establishment of a Project budget, unless such Project are instruments of the Architect's
fixed limit has been agreed upon in writing and service for use solely with respect to this
signed by the parties hereto. If such a fixed Project and, unless otherwise provided, the
limit has been established, the Architect shall Architect shall be deemed the author of these
be permitted to include contingencies for documents and shall retain all common law,
design, bidding and price escalation, to statutory and other reserved rights, including
determine what materials, equipment, component the copyright. The Owner shall be permitted to
systems and types of construction are to be retain copies, including reproducible copies, of
included in the Contract Documents, to make the Architect's Drawings, Specifications and
reasonable adjustments in the scope of the other documents for information and reference in
Project and to include in the Contract connection with the Owner's use and occupancy of
Documents alternate bids to adjust the the Project. The Architect's Drawings,
Construction Cost to the fixed limit. Fixed Specifications or other documents shall not be
limits, if any, shall be increased in the used by the Owner or others on other projects,
amount of an increase in the Contract Sum for additions to this Project or for completion
occurring after execution of the Contract for of this Project by others, unless the Architect
Construction. is adjudged to be in default under this
Agreement, except by agreement in writing and
5.2.3. If the Bidding or Negotiation Phase with appropriate compensation to the Architect.
has not commenced within 90 days after the
Architect submits the Construction Documents to 6.2 Submission or distribution of documents to
the Owner, any Project budget or fixed limit of meet official regulatory requirements or for
Construction Cost shall be adjusted to reflect similar purposes in connection with the project
changes in the general level of prices in the is not to be construed as publication in
construction industry between the date of derogation of the Architect's reserved rights.
submission of the Construction Documents to the
Owner and the date on which proposals are ARTICLE 7
sought. ARBITRATION
5.2.4. If a fixed limit of Construction Cost 7.1 Claims, disputes or other matters in
(adjusted as provided in Subparagraph 5.2.3) is question between the parties to this Agreement
exceeded by the lowest bona fide bid or arising out of or relating to this Agreement or
negotiated proposal, the Owner shall: breach thereof shall be subject to and decided
by arbitration in accordance with the
.1 give written approval of an increase Construction Industry Arbitration Rules of the
in such fixed limit; American Arbitration Association currently in
effect unless the parties mutually agree
.2 authorize rebidding or renegotiating otherwise.
of the Project within a reasonable time;
7.2 Demand for arbitration shall be filed in
.3 if the Project is abandoned, writing with the other party to this Agreement
terminate in accordance with Paragraph and with the American Arbitration Association.
8.3; or A demand for arbitration shall be made within a
reasonable time after the claim, dispute or
.4 cooperate in revising the Project other matter in question has arisen. In no
scope and quality as required to reduce event shall the demand for arbitration be made
the Construction Cost. after the date when institution of legal or
equitable proceedings based on such claim,
5.2.5. If the Owner chooses to proceed under dispute or other matter in question would be
Clause 5.2.4.4, the Architect, without barred by the applicable statutes of
additional charge, shall modify the Contract limitations.
Documents as necessary to comply with the fixed
limit, if established as a condition of this
Agreement. The modification of Contract
Documents shall be the limit of the Architect's
responsibility arising out of the establishment
of a fixed limit. The Architect shall be
entitled to compensation in accordance with
this Agreement for all
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7.3 No arbitration arising out of or relating seven days' written notice to the Owner, suspend
to this Agreement shall include, by performance of services under this Agreement.
consolidation, joinder or in any other manner, Unless payment in full is received by the
an additional person or entity not a party to Architect within seven days of the date of the
this Agreement, except by written consent notice, the suspension shall take effect without
containing a specific reference to this further notice. In the event of a suspension of
Agreement signed by the Owner, Architect, and services, the Architect shall have no liability
any other person or entity sought to be joined. to the Owner for delay or damage caused the
Consent to arbitration involving an additional Owner because of such suspension of services.
person or entity shall not constitute consent
to arbitration of any claim, dispute or other 8.6 In the event of termination not the fault
matter in question not described in the written of the Architect, the Architect shall be
consent or with a person or entity not named or compensated for services performed prior to
described therein. The foregoing agreement to termination, together with Reimbursable Expenses
arbitrate and other agreements to arbitrate then due and all Termination Expenses as defined
with an additional person or entity duly in Paragraph 8.7.
consented to by the parties to this Agreement
shall be specifically enforceable in accordance 8.7 Termination Expenses are in addition to
with applicable law in any court having compensation for Basic and Additional Services,
jurisdiction thereof. and include expenses which are directly
attributable to termination. Termination
7.4 The award rendered by the arbitrator or Expenses shall be computed as a percentage of
arbitrators shall be final, and judgment may be the total compensation for Basic Services and
entered upon it in accordance with applicable Additional Services earned to the time of
law in any court having jurisdiction thereof. termination, as follows:
ARTICLE 8 .1 Twenty percent of the total
TERMINATION, SUSPENSION OR compensation for Basic and Additional
ABANDONMENT Services earned to date if termination
occurs before or during the predesign, site
8.1 This Agreement may be terminated by either analysis, or Schematic Design Phases; or
party upon not less than seven days' written
notice should the other party fail .2 Ten percent of the total compensation
substantially to perform in accordance with the for Basic and Additional Services earned to
terms of this Agreement through no fault of the date if termination occurs during the
party initiating the termination. Design Development Phase; or
8.2 If the Project is suspended by the Owner .3 Five percent of the total compensation
for more than 30 consecutive days, the for Basic and Additional Service earned to
Architect shall be compensated for services date if termination occurs during any
performed prior to notice of such suspension. subsequent phase.
When the Project is resumed, the Architect's
compensation shall be equitably adjusted to ARTICLE 9
provide for expenses incurred in the MISCELLANEOUS PROVISIONS
interruption and resumption of the Architect's
services. 9.1 Unless otherwise provided, this Agreement
shall be governed by the law of the principal
8.3 This Agreement may be terminated by the place of business of the Architect.
Owner upon not less than seven days' written
notice to the Architect in the event that the 9.2 [Intentionally omitted.]
Project is permanently abandoned. If the
Project is abandoned by the Owner for more than 9.3 Causes of action between the parties to
90 consecutive days, the Architect may this Agreement pertaining to acts or failures to
terminate this Agreement by giving written act shall be deemed to have accrued and the
notice. applicable statutes of limitations shall
commence to run not later than either the date
8.4 Failure of the Owner to make payments to of Substantial Completion for acts or failures
the Architect in accordance with this Agreement to act occurring prior to Substantial
shall be considered substantial nonperformance Completion, or the date of issuance of the final
and cause for termination. Certificate for Payment for acts or
8.5 If the Owner fails to make payment when
due the Architect for services and expenses,
the Architect may, upon
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failures to act occurring after Substantial PAYMENTS TO THE ARCHITECT
Completion.
10.1 DIRECT PERSONNEL EXPENSE
9.4 The Owner and Architect waive all rights
against each other and against the contractors, 10.1.1 Direct Personnel Expense is defined as
consultants, agents and employees of the other the direct salaries of the Architect's personnel
for damages, but only to the extent covered by engaged on the Project and the portion of the
property insurance during construction. The cost of their mandatory and customary
Owner and Architect each shall require similar contributions and benefits related thereto, such
waivers from their contractors, consultants and as employment taxes and other statutory employee
agents. benefits, insurance, sick leave, holidays,
vacations, pensions and similar contributions
9.5 The Owner and Architect, respectively, and benefits.
bind themselves, their partners, successors,
assigns and legal representatives to the other 10.2 REIMBURSABLE EXPENSES
party to this Agreement and to the partners,
successors, assigns and legal representatives 10.2.1 Reimbursable Expenses are in addition
of such other party with respect to all to compensation for Basic and Additional
covenants of this Agreement. Neither Owner nor Services and include expenses incurred by the
Architect shall assign this Agreement without Architect and Architect's employees and
the written consent of the other. consultants in the interest of the Project, as
identified in the following Clauses.
9.6 This Agreement represents the entire and
integrated agreement between the Owner and 10.2.1.1 Expenses of transportation in
Architect and supersedes all prior connection with the Project; expenses in
negotiations, representations or agreements, connection with authorized out-of-town travel;
either written or oral. This Agreement may be long-distance communications; and fees paid for
amended only by written instrument signed by securing approval of authorities having
both Owner and Architect. jurisdiction over the Project.
9.7 Nothing contained in this Agreement shall 10.2.1.2 Expense of reproducing photographs and
create a contractual relationship with or a other documents other than those used by the
cause of action in favor of a third party Architect for his Consultants or in-house use.
against either the Owner or Architect.
10.2.1.3 If authorized in advance by the Owner,
9.8 Unless otherwise provided in this expense of overtime work requiring higher than
Agreement, the Architect and Architect's regular rates.
consultants shall have no responsibility for
the discovery, presence, handling, removal or 10.2.1.4 Expense of additional renderings,
disposal of or exposure of persons to hazardous artwork, not provided for by Architect, and/or
materials in any form at the Project site, models and mock-ups as specifically requested by
including but not limited to asbestos, asbestos the Owner for his exclusive use on the Project.
products, polychlorinated biphenyl (PCB) or
other toxic substances. 10.2.1.5 Expense of additional insurance
coverage or limits, including professional
9.9 The Architect shall have the right to liability insurance, requested by the Owner in
include representations of the design of the excess of that normally carried by the Architect
Project, including photographs of the exterior and Architect's consultants.
and interior, among the Architect's promotional
and professional materials. The Architect's 10.2.1.6 [Intentionally omitted.]
materials shall not include the Owner's
confidential or proprietary information if the 10.3 PAYMENTS ON ACCOUNT OF BASIC SERVICES
Owner has previously advised the Architect in
writing of the specific information considered 10.3.1 An initial payment as set forth in
by the Owner to be confidential or proprietary. Paragraph 11.1 is the minimum payment under this
The owner shall provide professional credit for Agreement.
the Architect on the construction sign and in
the promotional materials for the Project.
ARTICLE 10
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10.3.2. Subsequent payments for Basic SERVICES
Services shall be made monthly and, where
applicable, shall be in proportion to services 10.4.1 Payments on account of the Architect's
performed within each phase of service, on the Additional Services and for Reimbursable
basis set forth in subparagraph 11.2.2. Expenses shall be made monthly upon presentation
of the Architect's statement of services
10.3.3. If and to the extent that the time rendered or expenses incurred.
initially established in Subparagraph 11.5.1 of
this Agreement is exceeded or extended through 10.5 PAYMENTS WITHHELD
no fault of the Architect, compensation for any
services rendered during the additional period 10.5.1. No deductions shall be made from the
of time shall be computed in the manner set Architect's compensation on account of penalty,
forth in subparagraph 11.3.2. liquidated damages or other sums withheld from
payments to contractors, or on account of the
10.3.4. When compensation is based on a cost of changes in the Work other than those for
percentage of Construction cost and any which the Architect has been found to be liable.
portions of the Project are deleted or
otherwise not constructed, compensation for 10.6 ARCHITECT'S ACCOUNTING RECORDS
those portions of the Project shall be payable
to the extent services are performed on those 10.6.1. Records of Reimbursable Expenses and
portions, in accordance with the schedule set expenses pertaining to Additional Services and
forth in Subparagraph 11.2.2, based on (1) the services performed on the basis of a multiple of
lowest bona fide bid or negotiated proposal, or Direct Personnel Expense shall be available to
(2) if no such bid or proposal is received, the the Owner or the Owner's authorized
most recent preliminary estimate of representative at mutually convenient times.
Construction Cost or detailed estimate of
construction Cost for such portions of the
Project.
10.4 PAYMENTS ON ACCOUNT OF ADDITIONAL
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ARTICLE 11
BASIS OF COMPENSATION
The Owner shall compensate the Architect as follows:
11.1 AN INITIAL PAYMENT of ZERO Dollars ($ -0- ) shall be made
upon execution of this Agreement and credited to the Owner's
account at final payment.
11.2 BASIC COMPENSATION
11.2.1 FOR BASIC SERVICES, as described in Article 2, and any
other services included in Article 12 as part of Basic Services,
Basic Compensation shall be computed as follows: (Insert basis of
compensation, including stipulated sums, multiples or
percentages, and identify phases to which particular methods of
compensation apply, if necessary.)
BASIC COMPENSATION SHALL BE THE ARCHITECTURAL AND ENGINEERING
FEE, CALCULATED AT 4.25 PERCENT (%) OF ACTUAL CONSTRUCTION COSTS
INCLUDING SPECIALTY EQUIPMENT (I.E. FOOD AND BAR SERVICE
EQUIPMENT, ELEVATORS, LIGHTING, SOUND EQUIPMENT, ETC., AND ACTUAL
F.F. & E. BUYOUT, WHICH INCLUDE: WALLCOVERING, CARPET, SPECIALTY
LIGHTING, FIXTURES, FURNISHINGS, MILLWORK AND FINISHER). THIS
ARCHITECTURAL AND ENGINEERING FEE WOULD EQUAL TO 4.25 PERCENT (%)
OF THE CONSTRUCTION/F.F.&E, COSTS, OR (SEE ATTACHMENT 11.2.1A)
11.2.2. Where compensation is based on a stipulated sum or
percentage of Construction Cost, progress payments for Basic
Service in each phase shall total the following percentages of
the total Basic Compensation payable: (Insert additional phases
as appropriate.)
Schematic Design Phase: N/A percent ( %)
Design Development Phase: percent ( %)
Construction Documents Phase: percent ( %)
Bidding or Negotiation Phase: percent ( %)
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Construction Phase: percent ( %)
11.3 COMPENSATION FOR ADDITIONAL SERVICES
11.3.1. FOR PROJECT REPRESENTATION BEYOND BASIC SERVICES, as
described in Paragraph 3.2, compensation shall be computed as
follows:
COMPENSATION SHALL BE PAID TO THE ARCHITECT IN AN AMOUNT AND AT
THE TIMES AS MAY BE AGREED UPON BETWEEN OWNER AND ARCHITECT,
SHOULD PROJECT REPRESENTATION BEYOND BASIC SERVICES BE REQUIRED
AN AUTHORIZED BY OWNER.
11.3.2. FOR ADDITIONAL SERVICES OF THE ARCHITECT, as described
in Articles 3 and 12, other than (1) Additional Project
Representation, as described an Paragraph 3.2, and (2) services
included in Article 12 as part of Basic Services, but excluding
services of consultants, compensation shall be computed as
follows:
(INSERT BASIS OF COMPENSATION, INCLUDING RATES AND/OR MULTIPLES
OF DIRECT PERSONNEL EXPENSE FOR PRINCIPALS AND EMPLOYEES, AND
IDENTIFY PRINCIPALS AND CLASSIFY EMPLOYEES, IF REQUIRED.
IDENTIFY SPECIFIC SERVICES TO WHICH PARTICULAR METHODS OF
COMPENSATION APPLY, IF NECESSARY.)
SCHEDULE OF RATES (AS OF 03/25/98)
PRINCIPAL/MANAGER $125.00 PER HOUR
PROJECT ARCHITECT: $105.00 PER HOUR
DESIGNER/DRAFTSMAN: $ 75.00 PER HOUR
COMPUTER TECHNICIAN: $ 45.00 PER HOUR
SECRETARIAL/CLERK: $ 35.00 PER HOUR
11.3.3 FOR ALL ADDITIONAL SERVICES OF CONSULTANTS, including
additional structural, mechanical and electrical engineering
services and those provided under Subparagraph 3.4.19 or
identified in Article 12 as part of Additional Services, a
multiple of ZERO ( -0-) times the amounts billed to the
Architect for such services.
(IDENTIFY SPECIFIC TYPES OF CONSULTANTS IN ARTICLE 12, IF
REQUIRED)
11.4 REIMBURSABLE EXPENSES
11.4.1 FOR REIMBURSABLE EXPENSES, as described in Paragraph
10.2, and any other items included in Article 12 as Reimbursable
Expenses, a multiple of ZERO ( -0- ) times the expenses incurred
by the Architect, the Architect's employees and consultants in
the interest of the Project.
11.5 ADDITIONAL PROVISIONS
11.5.1. IF THE BASIC SERVICES covered by this Agreement have
not been completed within TWENTY ( 20 ) months of the date
hereof, through no fault of the Architect, extension of the
Architect's services beyond that time shall be compensated as
provided in Subparagraphs 10.3.3 and 11.3.2.
11.5.2. Payments are due and payable TWENTY-ONE ( 21 ) days
from the date of the Architect's invoice. Amounts unpaid TWENTY-
TWO ( 22 ) days after the invoice date shall bear interest at
the rate entered below, or in the absence thereof at the legal
rate prevailing from time to time at the principal place of
business of the Architect.
(INSERT RATE OF INTEREST AGREED UPON.)
CURRENT PRIME RATE OF INTEREST PLUS TWO (2%) PERCENT AS THAT RATE
IS ESTABLISHED BY BANK OF AMERICA OF NEVADA.
(USURY LAWS AND REQUIREMENTS UNDER THE FEDERAL TRUTH IN LENDING
ACT, SIMILAR STATE AND LOCAL CONSUMER CREDIT LAWS AND OTHER
REGULATIONS AT THE OWNER'S AND ARCHITECT'S PRINCIPAL PLACES OF
BUSINESS, THE LOCATION OF THE PROJECT AND ELSEWHERE MAY AFFECT
THE VALIDITY OF THIS PROVISION. SPECIFIC LEGAL ADVICE SHOULD BE
OBTAINED WITH RESPECT TO DELETIONS OR MODIFICATIONS, AND ALSO
REGARDING REQUIREMENTS SUCH AS WRITTEN DISCLOSURE OR WAIVERS.)
11.5.3 The rates and multiples set forth for Additional
Services shall be annually adjusted in accordance with normal
salary review practices of the Architect.
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ARTICLE 12
OTHER CONDITIONS OR SERVICES
(INSERT DESCRIPTIONS OF OTHER SERVICES, IDENTIFY ADDITIONAL
SERVICES INCLUDED WITHIN BASIC COMPENSATION AND MODIFICATIONS TO
THE PAYMENT AND COMPENSATION TERMS INCLUDED IN THIS AGREEMENT.)
ARCHITECT'S RELATIONSHIP WITH CONTRACTOR:
12.1 THE OWNER ACKNOWLEDGES THAT THE ARCHITECT ON THE PROJECT IS
A PROFESSIONAL CORPORATION WHICH IS OWNED BY ANTHONY A. MARNELL
II, WHO, IN ADDITION TO BEING A LICENSED ARCHITECT WITHIN THE
STATE OF NEVADA, IS ALSO THE MAJORITY STOCKHOLDER OF MARNELL
CORRAO ASSOCIATES, INC., THE CONTRACTOR ON THE PROJECT. THE
OWNER ACKNOWLEDGES THIS RELATIONSHIP BETWEEN ARCHITECT AND
CONTRACTOR AND ACCEPTS IN EVERY RESPECT THIS CLOSE ASSOCIATION
BETWEEN TWO OF THEM. IN LIGHT OF THE SPECIAL RELATIONSHIP
EXISTING BETWEEN THE ARCHITECT AND CONTRACTOR, THE OWNER AGREES
THAT IN CASE OF TERMINATION OF THE CONTRACTOR FOR WHATEVER
REASON, THE TERMS AND CONDITIONS OF THIS AGREEMENT WILL, AT THE
OPTION OF THE ARCHITECT, BE RENEGOTIATED, THE OWNER AND
ARCHITECT AGREE THAT ALL DOCUMENTS PROVIDED HEREIN SHALL BE
SOLELY FOR USE ON THIS PROJECT, AND THE OWNER UNDERSTANDS AND
AGREES THAT MARNELL CORRAO ASSOCIATES, INC., SHALL BE THE GENERAL
CONTRACTOR ON THE PROJECT.
OWNER'S PROJECT REPRESENTATIVE:
12.2 THE OWNER SHALL DESIGNATE REPRESENTATIVE(S) AUTHORIZED TO
ACT IN THE OWNER'S BEHALF WITH RESPECT TO THIS PROJECT. THE
OWNER OR SUCH AUTHORIZED REPRESENTATIVE(S) SHALL EXAMINE THE
DOCUMENTS SUBMITTED BY THE ARCHITECT AND SHALL RENDER DECISIONS
PERTAINING THERETO PROMPTLY TO AVOID UNREASONABLE DELAY IN THE
PROGRESS OF THE ARCHITECT'S SERVICES. FOR PURPOSES OF THIS
AGREEMENT, THE REPRESENTATIVE(S) SHALL BE CARY REHM.
INSURANCE:
12.3 THE ARCHITECT SHALL EFFECT AND MAINTAIN INSURANCE TO PROTECT
HIMSELF FROM CLAIMS UNDER WORKMEN'S COMPENSATION ACTS; CLAIMS FOR
DAMAGES BECAUSE OF BODILY INJURY INCLUDING PERSONAL INJURY,
SICKNESS OR DISEASE, OR DEATH OF ANY OF HIS EMPLOYEES, AND FOR
CLAIMS FOR DAMAGES BECAUSE OF INJURY TO OR DESTRUCTION OF
TANGIBLE PROPERTY INCLUDING LOSS OF USE OF RESULTING THEREFROM;
AND FROM CLAIMS ARISING OUT OF THE PERFORMANCE OF PROFESSIONAL
SERVICES CAUSED BY ANY ERRORS, OMISSIONS OR NEGLIGENT ACTS OF THE
ARCHITECT. ARCHITECT SHALL SECURE PROFESSIONAL LIABILITY
INSURANCE IN THE AMOUNT OF ONE MILLION DOLLLARS ($1,000,000) AND
SHALL REMAIN IN FULL FORCES AND EFFECT DURING THE ENTIRE COURSE
OF THE WORK AND SHALL ENDEAVOR TO MAINTAIN THAT DOLLAR AMOUNT OF
INSURANCE FOR A PERIOD OF SEVEN (7) YEARS AFTER COMPLETION OF THE
PROJECT.
OTHER SERVICES:
12.4 THE ARCHITECT SHALL FURNISH THE SERVICES TO PROVIDE AND BE
RESPONSIBLE FOR ANY SUBMISSION AND/OR THE COORDINATION REQUIRED
TO GAIN APPROVAL BY ANY PUBLIC OR PRIVATE COMPANY AND/OR OTHER
GOVERNMENTAL AGENCIES HAVING JURISDICTION OVER THE PROJECT
INCLUDING THE PARADISE TOWN BOARD, CLARK COUNTY PLANNING
COMMISSION; CLARK COUNTY COMMISSIONERS; CLARK COUNTY DEPARTMENT
OF BUILDING AND SAFETY; CLARK COUNTY FIRE DEPARTMENT; STATE OF
NEVADA FIRE MARSHALL; LAS VEGAS VALLEY WATER DISTRICT; CLARK
COUNTY SANITATION DISTRICT; NEVADA POWER COMPANY; CENTRAL
TELEPHONE COMPANY AND SOUTHWEST GAS CORPORATION.
WHERE INDIVIDUALS ARE SPECIFICALLY DESIGNATED, OWNER AND
ARCHITECT GRANT EACH OTHER THE RIGHT TO SUBSTITUTE OTHER
INDIVIDUALS IN THE EVENT OF DEATH, DISABILITY, OR DISMISSAL WITH
APPROVAL OF THE OTHER PARTY WITH SUCH APPROVAL NOT TO BE
UNREASONABLY WITHHELD.
THE ARCHITECT SHALL PROVIDE LIEN RELEASES FOR THE PROJECT FROM
ALL CONSULTANTS UPON COMPLETION AND FINAL PAYMENT FOR THE PROJECT
TO ARCHITECT, ONLY IF REQUESTED BY OWNER.
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This Agreement entered into as of the day and year first written
above.
OWNER ARCHITECT
/S/ John Lipkowitz /S/ Anthony A. Marnell II
(SIGNATURE) John Lipkowitz (SIGNATURE)
(PRINTED NAME AND TITLE) Exec. VP ANTHONY A. MARNELL, ARCHITECT
(PRINTED NAME AND TITLE)
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<PAGE>
STANDARD FORM OF AGREEMENT - BETWEEN OWNER AND ARCHITECT:
RIO NORTH DEVELOPMENT - (PROJECT DESCRIPTION CONT'D.)
ATTACHMENT A1:
WHEREAS. THE OWNER INTENDS TO DESIGN, CONSTRUCT AND MAINTAIN NEW
FACILITIES AS FOLLOWS:
RIO SITE DEVELOPMENT - ARCHITECT'S PROJECT NUMBER 276-97
* Master Plan and develop all remaining Site Areas including new
Swimming Pools, Waterfalls and Pool Courtyards as required to
coordinate with the current ongoing projects:
277-97 Rio Palazzo Suites
278-97 Rio Entertainment / Convention Center
279-97 Rio Valet Garage
* In addition this Project shall include the Preliminary Design
of the Employee Parking Garage. This preliminary design will
confirm space allocation, grade and drainage issues as well
as site circulation in preparation for this future Garage.
RIO PALAZZO SUITES, ARCHITECT'S PROJECT NUMBER 277-97
* The design and construction of a 4-Story Luxury Suite
Building and Connecting Corridor to The Rio Suite Hotel,
consisting of:
* Two (2) - One (1) Bedroom Suites
* Two (2) - Two (2) Bedroom Suites
* Three (3) - Three (3) Bedroom Suites
* Two (2) - six (6) Bedroom Suites
* For a total of Nine (9) Palazzo Suites in a building of some
87,000 sf.
RIO ENTERTAINMENT / CONVENTION CENTER, ARCHITECT'S PROJECT
NUMBER 278-97
* The design and construction of a new Entertainment &
Convention Center with some 99,000 sf Ballrooms and Public Rooms,
+38,000 Public Corridors and Lobbies and +143,000 sf Back Of
House, Basement and Second Levels. This Project also includes
the Design Development of the adjacent Theater of some 1,300
seats. This Design Development will confirm space allocations,
circulation and functional capability with the Entertainment /
Convention Center. In addition, this Project includes the
Remodel of the Spa and Michael's Salon and the addition of some
5,000 sf, as well as the Remodel of the Existing Convention
Hallway.
RIO VALET GARAGE, ARCHITECT'S PROJECT NUMBER 279-97
* The Design and Construction of a Four (4) Level (Partial
Basement Level and Three (3) Elevated Decks) Valet Only Parking
Garage at the South West Corner of the Rio Property (adjacent to
Flamingo and Valley View Boulevard). This Garage will have +572
to 615 Parking Stalls.
<PAGE>
STANDARD FORM OF AGREEMENT - BETWEEN OWNER AND ARCHITECT: RIO
NORTH DEVELOPMENT - ATTACHMENT A1: (CONTINUED PAGE TWO)
Professional Architectural and Engineering services for the
general Scope of the Project and included within the Agreement is
as follows:
RIO SITE DEVELOPMENT - ARCHITECT'S PROJECT NUMBER 276-97
1. Aerial Site Topo Survey Engineering
2. Architectural Design & Coordination
3. Civil Design & Engineering
4. Drainage & Flood Report
5. Electrical Design & Engineering
6. Landscape Design Documents & Specifications
7. Pool Hydraulic Design & Engineering
8. Structural Design & Engineering
9. Traffic Study & Report
RIO PALAZZO SUITES, ARCHITECT'S PROJECT NUMBER 277-97
1. Acoustic Design & Consultation
2. Aerial Site Topo Survey Engineering
3. Architectural Design & Coordination
4. Civil Design & Engineering
5. Drainage & Floor Report
6. Electrical Design & Engineering
7. Food & Beverage Service Equipment Design & Specifications
8. Interior Design Documents & Specifications
9. Landscape Design Documents & Specifications
10. Life Safety Systems Design Consultation
11. Mechanical Design & Engineering
12. On-Site Civil Engineering
13. Plumbing Design & Engineering
14. Pool Hydraulic Design Engineering
15. Soils Investigation & Engineering
16. Specialty Lighting
17. Structural Design & Engineering
18. Traffic Study & Report
19. Vertical Transportation Consultant, Design & Specs
20. MATV System Design
<PAGE>
STANDARD FORM OF AGREEMENT - BETWEEN OWNER AND ARCHITECT: RIO
NORTH DEVELOPMENT - ATTACHMENT A1: (CONTINUED PAGE THREE)
RIO ENTERTAINMENT / CONVENTION CENTER, ARCHITECT'S PROJECT NUMBER
278-97:
1. Acoustic Design & Consultation
2. Aerial Site Topo Survey Engineering
3. Architectural Design & Coordination
4. Civil Design & Engineering
5. Drainage & Floor Report
6. Electrical Design & Engineering
7. Food & Beverage Service Equipment Design & Specifications
8. Interior Design Documents & Specifications
9. Landscape Design Documents & Specifications
10. Life Safety Systems Design Consultation
11. Mechanical Design & Engineering
12. On-Site Civil Engineering
13. Plumbing Design & Engineering
14. Satellite Up-Link / Antenna / Switching & Video Projection
Design Consultation
15. Soils Investigation & Engineering
16. Sound & Page Design Consultation
17. Structural Design & Engineering
18. Theatre Design
19. Traffic Study & Report
20. Vertical Transportation Consultant, Design & Specs
RIO VALET GARAGE, ARCHITECT'S PROJECT NUMBER 279-97
1. Aerial Site Topo Survey Engineering
2. Architectural Design & Coordination
3. Civil Design & Engineering
4. Drainage & Flood Report
5. Electrical Design & Engineering
6. Landscape Design Documents & Specifications
7. One-Site Civil Engineering
8. Plumbing Design & Engineering
9. Structural Design & Engineering
10. Traffic Study & Report
<PAGE>
RIO NORTH DEVELOPMENT
STANDARD FORM OF AGREEMENT - BETWEEN OWNER AND ARCHITECT:
11.2 BASIC COMPENSATION -
ATTACHMENT 11.2.1A
* RIO SITE DEVELOPMENT, AAM 276-97; $669,947.00
A payment equal to 1/18 of the Basic
Compensation shall be paid monthly to the
Architect commencing on 24 October 1997 and
continuing on the 24th day of each and every
month thereafter through and including 24
March 1999.
* RIO PALAZZO SUITES, AAM 277-97; $1,919,803.00
A payment equal to 1/15 of the Basic
Compensation shall be paid monthly to the
Architect commencing on 24 October 1997 and
continuing on the 24th day of each and every
month thereafter through and including 24
December 1998.
* RIO ENTERTAINMENT /CONVENTION CENTER, AAM 278-97; $3,280,248.00
A payment equal to 1/18 of the Basic Compensation
shall be paid monthly to the Architect commencing
on 24 October 1997 and continuing on the 24th day
of each and every month thereafter through and
including 24 March 1999.
* RIO VALET GARAGE, AAM 279-97; $254,111.00
A payment equal to 1/9 of the Basic Compensation
shall be paid monthly to the Architect commencing
on 24 October 1997 and continuing on the 24th day
of each and every month thereafter through and
including 24 June 1998.
TOTAL RIO NORTH DEVELOPMENT ARCHITECTURAL & ENGINEERING FEE:
=============
$6,124,109.00
<PAGE>
ASSIGNMENT OF INTELLECTUAL PROPERTY RIGHTS
AGREEMENT made this ______ day ___________, 19_____, by
and between A.A. Marnell II Chtd., with offices located at 4495
South Polaris Avenue, Las Vegas 89103 (hereinafter call
("Assignor") and RIO PROPERTIES, INC., a Nevada corporation, with
offices located at 3700 W. Flamingo Road, Las Vegas, Nevada 89103
(hereinafter call "Assignee").
RECITALS
WHEREAS, Assignor has created and authored various Works
(hereinafter "Works"), included but not limited to the
hotel and related facility concepts, names, plans,
designs, schematics, blue prints, renderings, color
applications and layouts for the Rio Hotel and Casino
in Las Vegas, Nevada, all of which constitute
protectable intellectual properties including, but not
limited to copyright, patent and trade secret
interests, which may give rise to trademark and trade
dress rights, (hereinafter "Interests"); all pursuant
to Architectural Agreement entered into by and between
Assignor and Assignee dated _________________.
WHEREAS, Assignor desires to transfer entire ownership in
the Work(s), and all Interest therein, to Assignee for
which Assignee has agreed to give Assignor adequate
consideration;
WHEREAS, Assignor and Assignee further acknowledge that such
an Agreement must be in writing and signed by Assignor
in order to be valid and binding, the Parties thus
agree that this Assignment shall constitute that
writing.
IT IS THEREFORE agreed between Assignor and Assignee as
follows:
1. Grant of Rights. Assignor hereby grants, transfers,
assigns, and conveys to Assignee, its successors and assigns, the
entire title, right, interest, ownership and all subsidiary
rights in and to the Works, and all Interests therein, which
Assignor may possess as the author or owner of the Works. Those
Works shall include but not be limited to those Works set forth
in Attachment I attached hereto and incorporated herein by
reference. Said Grant of Rights shall include but not be limited
to Assignor agreeing to assist and aid Assignee in any efforts or
actions undertaken by Assignee to protect the Interests
applicable to the Works, such actions including but not limited
to securing registration of copyrights, trademarks (Federal or
state), trade dress, or patent(s) therein which resulting
registrations shall be in Assignee's name as claimant, and the
right to secure renewals, reissues, and extension of any
Intellectual Property interests in the United States of America
or any foreign country.
1
<PAGE>
2. Consideration. Assignor and Assignee further agree
and acknowledge that the consideration for Assignment by Assignor
shall be deemed to be (20%) twenty percent of architectural fees
to be paid pursuant to above referred Agreements. The Parties
hereto further agree that said consideration is full and adequate
compensation for such Assignment by the Assignor to the Assignee.
3. Warranty of Interests. Assignor hereby confirms
and warrants to Assignee that as of the date of this Assignment,
Assignor is the lawful owner of good and marketable title in and
to all of the Works and Interests there in described and has the
full legal rights to assign the same.
4. Execution of Future Documents. The Assignee agrees
to execute and deliver to Assignor any and all documents that may
be necessary or are helpful to the Assignee in securing or
perfecting the registration of the rights conveyed herein.
5. Miscellaneous Provisions. The following provisions
shall further apply to this assignment:
a. Scope of Agreement. All terms of this agreement
are applicable to any portion or part of the Works, as
well as the Works in their entirety.
b. Construction. For purposes of construction of
this Agreement, the language used herein shall be
construed as the language of both parties and neither
party shall be deemed the draftee.
c. Notices. Any notice which either party desires to
give to the other in connection with this Agreement
shall be give in writing and shall be mailed by
certified mail or by registered mail to the address
herein set forth, return receipt requested, and such
notice shall be deemed to have been received by the
other party upon such mailing. Each party may change
its address by written notice in accords with this
provision.
d. Waiver. The failure of either party to insist on
strict compliance with any of the terms, covenants, or
condition of this agreement by the other party shall
not be deemed a waiver of that term, covenant, or
condition, nor shall any waiver or relinquishment of
any right or power for all or any other time.
e. Arbitration. In the event a dispute arises
between the parties as to any term or condition in this
Agreement, the parties agree to resolve such dispute by
submitting the dispute to binding arbitration before
the Nevada Arbitration Association, or American
Arbitration Association in Las Vegas, Nevada. The
decision of the Arbitration shall be conclusive and
enforceable by any court of competent jurisdiction.
The prevailing party shall be entitled to its
reasonable attorney fees.
2
<PAGE>
f. Interpretation and Enforcement. This Agreement
shall be interpreted under applicable intellectual
property laws of the United States, including but not
limited to the Copyright Act, the Trademark Act as
Revised, patent laws of the United States, as well as
any other and such applicable laws of the State of
Nevada.
g. Severability. All non-material terms and conditions
of this Agreement shall be severable one from the other
so should any provision be held illegal or unenforceable
by a competent court of jurisdiction, the remaining
provisions shall remain in effect.
h. This agreement constitutes the entire agreement
between the Parties hereto relating as to transfer of
Assignor's rights in the Works and supersedes any prior
oral or written agreement or understanding between the
parties relating to such rights in said Works(s).
IN WITNESS WHEREOF and intended to be legally bound by, the
Parties have hereunder set their hands, the day and the first
year written above.
/S/ Anthony A. Marnell II, Assignor /S/ John Lipkowitz, Assignee
- -------------------- -------------------
Anthony A. Marnell II, RIO PROPERTIES, INC.
Chartered By: John Lipkowitz
By: Anthony A. Marnell II Its: Exec. VP
its President
3
<PAGE>
STANDARD FORM OF AGREEMENT BETWEEN OWNER AND ARCHITECT
AIA Document B141 - Electronic Format
THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES: CONSULTATION WITH AN
ATTORNEY IS ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION.
AUTHENTICATION OF THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY
USING AIA DOCUMENT D401.
Copyright 1917, 1926, 1948, 1951, 1953, 1958, 1961, 1963, 1966, 1967, 1970,
1974, 1977, 1987 by The American Institute of Architects, 1735 New York
Avenue, N.W., Washington, D.C., 10006-5292. Reproduction of the material
herein or substantial quotation of its provisions without written
permission of the AIA violates the copyright laws of the United States and
will be subject to legal prosecution.
AGREEMENT
made as of the 25 day of March in the year of Nineteen Hundred
and Ninety-eight.
BETWEEN the Owner:
(NAME AND ADDRESS)
RIO HOTEL & CASINO, INC.
3700 West Flamingo Road
Las Vegas, Nevada 89103
and the Architect:
(NAME AND ADDRESS)
ANTHONY A. MARNELL II, CHTD.
4495 South Polaris Avenue
Las Vegas ,Nevada 89103
For the following Project:
(INCLUDE DETAILED DESCRIPTION OF PROJECT, LOCATION, ADDRESS AND SCOPE.)
RIO LOWRISE REMODELS - Architect's Project No. AAM273-97 -
Rio Job No.9999-1000
WHEREAS, the Owner intends to design, construct and maintain
Interior Remodels including:
<TABLE>
<CAPTION>
<S> <C>
1. Employee Dining Room Upgrades 10. Sushi Bar Addition
2. Lobby Remodel/Concierge Desk 11. Martini's Bar Remodel
3. Restrooms Relocation 12. Marketing Office Remodel
4. High Limit Slots Relocation 13. Poker Tournament Room
5. High Limit Salon Enlargement 14. Village 2nd Floor Exhibit Space
6. Copa Showroom Entry Remodel 15. Carpet Walkway at Casino
7. TV's Addition at Village Bar 16. Garage Lobby Enhancements
8. New Chinese Restaurant 17. Copa Showroom Video Screen Replacement
9. Arcade Relocation 18. Casino Video Wall Relocation
</TABLE>
Professional Architectural and Engineering services for the
general Scope of the Project and included within the Agreement is
as follows:
<TABLE>
<CAPTION>
<S> <C>
1. Architectural Design and Coordination 6. Structural Design & Engineering
2. Electrical Design & Engineering 7. Food & Beverage Service Equipment
3. Mechanical Design and Engineering Documents & Specifications
4. Plumbing Design & Engineering 8. Interior Design Documents & Specifications
5. Life Safety Systems Design Consultation 9. Sound and Page Design Consultation
</TABLE>
For purposes of this agreement, the Scope of Work delineated
above shall be titled: Rio Lowrise Remodels Architect's Project
#AAM273-97;
Rio Job #9999-1000, hereinafter referred to as the "Project".
The Owner and Architect agree as set forth below.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I 2.2.3. The Architect shall review with the
ARCHITECT'S RESPONSIBILITIES Owner alternative approaches to design and
construction of the Project.
1.1. ARCHITECTS' SERVICES
2.2.4. Based on the mutually agreed-upon
1.1.1. The Architect's services consist of program, schedule and construction budget
those services performed by the Architect, requirements, the Architect shall prepare, for
Architect's employees and Architect's approval by the Owner, Schematic Design
consultants as enumerated in Articles 2 and 3 Documents consisting of drawings and other
of this Agreement and any other services documents illustrating the scale and
included in Article 12. relationship of Project components.
1.2.3. The Architect's services shall be 2.2.5. The Architect shall submit to the
performed as expeditiously as is consistent Owner a preliminary estimate of Construction
with professional skill and care and the Cost based on current area, volume or other unit
orderly progress of the Work. Upon request of costs.
the Owner, the Architect shall submit for the
Owner's approval a schedule for the performance 2.3 DESIGN DEVELOPMENT PHASE
of the Architect's services which may be
adjusted as the Project proceeds, and shall 2.3.1. Based on the approved Schematic Design
include allowances for periods of time required Documents and any adjustments authorized by the
for the Owner's review and for approval of Owner in the program, schedule or construction
submissions by authorities having jurisdiction budget, the Architect shall prepare, for
over the Project. Time limits established by approval by the Owner, Design Development
this schedule approved by the Owner shall not, Documents consisting of drawings and other
except for reasonable cause, be exceeded by the documents to fix and describe the size and
Architect or Owner. character of the Project as to architectural,
structural, mechanical and electrical systems,
1.1.3. The services covered by this materials and such other elements as may be
Agreement are subject to the time limitations appropriate.
contained in Subparagraph 11.5.1.
2.3.2. The Architect shall advise the Owner
ARTICLE 2 of any adjustments to the preliminary estimate
SCOPE OF ARCHITECT'S BASIC SERVICES of Construction Cost.
2.1 DEFINITION 2.4 CONSTRUCTION DOCUMENTS PHASE
2.1.1. The Architect's Basic Services 2.4.1. Based on the approved Design
consist of those described in Paragraphs 2.2 Development Documents and any further
through 2.6 and any other services identified adjustments in the scope or quality of the
in Article 12 as part of Basic Services, and Project or in the construction budget authorized
include normal structural, mechanical and by the Owner, the Architect shall prepare, for
electrical engineering services. approval by the Owner, Construction Documents
consisting of Drawings and Specifications
2.2 SCHEMATIC DESIGN PHASE setting forth in detail the requirements for the
construction of the Project.
2.2.1. The Architect shall review the
program furnished by the Owner to ascertain the 2.4.2. The Architect shall assist the Owner,
requirements of the Project and shall arrive at only if requested by the Owner, in the
a mutual understanding of such requirements preparation of the necessary bidding
with the Owner. information, bidding forms, the Conditions of
the Contact, and the form of Agreement between
2.2.2. The architect shall provide a the Owner and Contractor.
preliminary evaluation of the Owner's program,
schedule and construction budget requirements, 2.4.3. The Architect shall advise the Owner
each in terms of the other, subject to the of any adjustments to previous preliminary
limitations set forth in Subparagraph 5.2.1. estimates of Construction
Page #2
<PAGE>
Cost indicated by changes in requirements or and to determine in general if the Work is being
general market conditions. performed in a manner indicating that the Work
when completed will be in accordance with the
2.4.4 The Architect shall assist the Owner Contract Documents. However, the Architect
in connection with the Owner's responsibility shall not be required to make exhaustive or
for filing documents required for the approval continuous on-site inspections to check the
of governmental authorities having jurisdiction quality or quantity of the Work. On the basis
over the Project. of on-site observations as an architect, the
Architect shall keep the Owner informed of the
2.5 BIDDING OR NEGOTIATION PHASE progress and quality of the Work, and shall
endeavor to guard the Owner against defects and
2.5.1. The Architect, following the Owner's deficiencies in the Work. (More extensive site
approval of the Construction Documents and of representation may be agreed to as an Additional
the latest preliminary estimate of Construction Service, as described in Paragraph 3.2.)
Cost, shall assist the Owner and negotiated
Contractor, only if requested by Owner in 2.6.6. The Architect shall not have control
obtaining bids or negotiated proposals and over or charge of and shall not be responsible
assist in awarding and preparing contracts for for construction means, methods, techniques,
construction. sequences or procedures, or for safety
precautions and programs in connection with the
2.6 CONSTRUCTION PHASE-ADMINISTRATION OF THE Work, since these are solely the Contractor's
CONSTRUCTION CONTRACT responsibility under the Contract for
Construction. The Architect shall not be
2.6.1 The Architect's responsibility to responsible for the Contractor's schedules or
provide Basic Services for the Construction failure to carry out the Work in accordance with
Phase under this Agreement commences with the the Contract Documents. The Architect shall not
award of the Contract for Construction and have control over or charge of acts or omissions
terminates at the earlier of the issuance to of the Contractor, Subcontractors, or their
the Owner of the final Certificate for Payment agents or employees, or of any other persons
by the Contractor or 60 days after the date of performing portions of the Work.
Substantial Completion of the Work, unless
extended under the terms of Subparagraph 2.6.7. The Architect shall at all times have
10.3.3. access to the Work wherever it is in preparation
or progress.
2.6.2. The Architect shall provide
administration of the Contract for Construction 2.6.8. Except as may otherwise be provided in
as set forth below unless otherwise provided in the Contract Documents or when direct
this Agreement. communications have been specially authorized,
the Owner and Contractor shall communicate
2.6.3. Duties, responsibilities and through the Architect. Communications by and
limitations of authority of the Architect shall with the Architect's consultants shall be
not be restricted, modified or extended without through the Architect.
written agreement of the Owner and Architect
with consent of the Contractor, which consent 2.6.9. Based on the Architect's observations
shall not be unreasonably withheld. and evaluations of the Contractor's Applications
for Payment, the Architect shall review and
2.6.4. The Architect shall be a certify the amounts due the Contractor., only if
representative of and shall advise and consult requested by the Owner.
with the Owner (1) during construction until
final payment to the Contractor is due, and (2) 2.6.10. [Intentionally omitted]
as an Additional Service at the Owner's
direction from time to time during the
correction period described in the Contract for
Construction. The Architect shall have
authority to act on behalf of the Owner only to
the extent provided in this Agreement unless
otherwise modified by written instrument.
2.6.5 The Architect shall visit the site at
intervals appropriate to the stage of
construction or as otherwise agreed by the
Owner and Architect in writing to become
generally familiar with the progress and
quality of the Work completed
Page #3
<PAGE>
2.6.11. The Architect shall have authority to When professional certification of performance
reject Work which does not conform to the characteristics of materials, systems or
Contract Documents. Whenever the Architect equipment is required by the Contract Documents,
considers it necessary or advisable for the Architect shall be entitled to rely upon
implementation of the intent of the Contract such certification to establish that the
Documents, the Architect will have authority to materials, systems or equipment will meet the
require additional inspection or testing of the performance criteria required by the Contract
Work in accordance with the provisions of the Documents.
Contract Documents, whether or not such Work is
fabricated, installed or completed. However, 2.6.13. The Architect may authorize minor
neither this authority of the Architect nor a changes in the Work not involving an adjustment
decision made in good faith either to exercise in the Contract Sum or an extension of the
or not to exercise such authority shall give Contract Time which are not inconsistent with
rise to a duty or responsibility of the the intent of the Contract Documents.
Architect to the Contractor, Subcontractors,
material and equipment suppliers, their agents 2.6.14. The Architect shall forward to the
or employees or other persons performing Owner for the Owner's review and records, any
portions of the Work. other written warranties and related documents
required by the Contract Documents and not
2.6.12. The Architect shall review and received, assembled and issued directly to the
approve or take other appropriate action upon Owner by the Contractor.
Contractor's submittals such as Shop Drawings,
Product Data and Samples, but only for the 2.6.15. The Architect shall interpret and
limited purpose of checking for conformance decide matters concerning performance of the
with information given and the design concept Owner and Contractor under the requirements of
expressed in the Contract Documents. The the Contract Documents on written request of
Architect's action shall be taken with such either the Owner or Contractor. The Architect's
reasonable promptness as to cause no delay in response to such requests shall be made with
the Work or in the construction of the Owner or reasonable promptness and within any time limits
of separate contractors, while allowing agreed upon.
sufficient time in the Architect's professional
judgment to permit adequate review. Review of 2.6.16. Interpretations and decisions of the
such submittals is not conducted for the Architect shall be consistent with the intent of
purpose of determining the accuracy and and reasonably inferable from the Contract
completeness of other details such as Documents and shall be in writing or in the form
dimensions and quantities or for substantiating of drawings. When making such interpretations
instructions for installation or performance of and initial decisions, the Architect shall
equipment or systems designed by the Contractor endeavor to secure faithful performance by both
to the extent required by the Contract Owner and Contractor, shall not show partiality
Documents. The Architect's review shall not to either, and shall not be liable for results
constitute approval of safety precautions or, of interpretations or decisions so rendered in
unless otherwise specifically stated by the good faith.
Architect, of construction means, methods,
techniques, sequences or procedures. The 2.6.17. The Architect's decisions on matters
architect's approval of a specific item shall relating to aesthetic effect shall be final if
not indicate approval of an assembly of which consistent with the intent expressed in the
item is a component. Contract Documents.
2.6.18. The Architect shall render written
decisions within a reasonable time on all
claims, disputes or other matters in question
between the Owner and Contractor relating to the
execution or progress of the Work as provided in
the Contract Documents.
Page #4
<PAGE>
2.6.19 The Architect's decisions on claims, Agreement.
disputes or other matters, including those in
question between the Owner and Contractor, 3.3 CONTINGENT ADDITIONAL SERVICES
except for those relating to aesthetic effect
as provided in Subparagraph 2.6.17, shall be 3.3.1. Making revisions in Drawings,
subject to arbitration as provided in this Specifications or other documents when such
Agreement and in the Contract Documents. revisions are:
.1 inconsistent with approvals or
ARTICLE 3 instructions previously given by the Owner,
ADDITIONAL SERVICES including revisions made necessary by
adjustments in the Owner's program or
GENERAL Project budget;
3.1.1. The service described in this Article .2 required by the enactment or revision
3 are not included in Basic Services unless so of codes, laws or regulations subsequent to
identified in Article 12, and they shall be the preparation of such documents; or
paid for by the Owner as provided in this
Agreement, in addition to the compensation for .3 due to changes required as a result of
Basic Services. The services described under the Owner's failure to render decisions in
Paragraphs 3.2 and 3.4 shall only be provided a timely manner.
if authorized or confirmed in writing by the
Owner. If services described under Contingent 3.3.2. Providing services required because of
Additional Services in Paragraph 3.3 are significant changes in the Project including,
required due to circumstances beyond the but not limited to, size, quality, complexity,
Architect's control, the Architect shall notify the Owner's schedule, or the method of bidding
the Owner prior to commencing such services. or negotiating and contracting for construction,
If the Owner deems that such services described except for services required under Subparagraph
under Paragraph 3.3 are not required, the Owner 5.2.5.
shall give prompt written notice to the
Architect. If the Owner indicates in writing 3.3.3. Preparing Drawings, Specifications and
that all or part of such Contingent Additional other documentation and supporting data,
Services are not required, the Architect shall evaluating Contractor's proposals, and providing
have no obligation to provide those services. other services in connection with Change Orders
and Construction Change Directives
3.2 PROJECT REPRESENTATION BEYOND BASIC
SERVICES 3.3.4. Providing services in connection with
evaluating substitutions proposed by the
Contractor and making subsequent revisions to
3.2.1. If more extensive representation at Drawings, Specifications and other documentation
the site than is described in Subparagraph resulting within.
2.6.5 is required by the Owner, the Architect
shall provide one or more Project 3.3.5. Providing consultation concerning
Representatives to assist in carrying out such replacement of Work damaged by fire or other
additional on-site responsibilities. cause during construction, and furnishing
services required in connection with the
3.2.2. Project representatives shall be replacement of such Work.
selected, employed and directed by the
Architect, and the Architect shall be 3.3.6. Providing services made necessary by
compensated therefor as agreed by the Owner and the default of the Contractor, by major defects
Architect. or deficiencies in the Work of the Contractor,
or by failure of performance of either the Owner
3.2.3. Through the observations by such or Contractor under the Contract for
Project Representatives, the Architect shall Construction.
endeavor to provide further protection for the
Owner against defects and deficiencies in the 3.3.7 [Intentionally omitted.]
Work, but furnishing of such project
representation shall not modify the rights, 3.3.8. Providing services in connection with
responsibilities or obligations of the a public hearing, arbitration proceeding or
Architect as described elsewhere in this legal proceeding except where the Architect is
party thereto.
Page #5
<PAGE>
3.3.9. Preparing documents for alternate, 3.4.14. Providing services for planning tenant
separate or sequential bids or providing or rental spaces.
services in connection with bidding,
negotiation or construction prior to the 3.4.15. Making investigations, inventories of
completion of the Construction Documents Phase. materials or equipment, or valuations and
detailed appraisals of existing facilities.
3.4 OPTIONAL ADDITIONAL SERVICES
3.4.16. Preparing a set of reproducible record
3.4.1. Providing analyses of the Owner's drawings showing significant changes in the Work
needs and programming the requirements of the made during construction based on marked-up
Project. prints, drawings and other data furnished by the
Contractor to the Architect.
3.4.2. Providing financial feasibility or
other special studies. 3.4.17. Providing assistance in the
utilization of equipment or systems such as
3.4.3. Providing planning surveys, site testing, adjusting and balancing, preparation of
evaluations or comparative studies of operation and maintenance manuals, training
prospective sites. personnel for operation and maintenance, and
consultation during operation.
3.4.4. Providing special surveys,
environmental studies and submissions required 3.4.18. Providing services after issuance to
for approvals of governmental authorities or the Owner of the final Certificate for Payment
others having jurisdiction over the Project BY THE CONTRACTOR, or in the absence of a final
beyond that normally required to gain public Certificate for Payment, more than 60 days after
hearing before the Clark County Planning the date of Substantial Completion of the Work.
Commission and Clark County Commissioners with
regard to Architectural Review, Variance, etc. 3.4.19. Providing services of consultants for
if required. other than architectural, structural, mechanical
and electrical engineering portions of the
3.4.5. Providing services relative to future Project provided as a part of Basic Services.
facilities, systems and equipment.
3.4.20. Providing any other services not
3.3.6. Providing services to investigate otherwise included in this Agreement or not
existing conditions or facilities or to make customarily furnished in accordance with
measured drawings thereof generally accepted architectural practice.
3.4.7. Providing services to verify the
accuracy of drawings or other information ARTICLE 4
furnished by the Owner. OWNER'S RESPONSIBILITIES
3.4.8. Providing coordination of 4.1. The Owner shall provide full information
construction performed by separate contractors regarding requirements for the Project,
or by the Owner's own forces and coordination including a program which shall set forth the
of services required in connection with Owner's objectives, schedule, constraints and
construction performed and equipment supplied criteria, including space requirements and
by the Owner. relationships, flexibility, expandability,
special equipment, systems and site
3.4.9. Providing services in connection with requirements.
the work of a construction manager or separate
consultants retained by the Owner. 4.2. The Owner shall establish and update an
overall budget for the Project, including the
3.4.10. Providing detailed estimates of Construction Cost, the Owner's other costs and
Construction Cost. reasonable contingencies related to all of these
costs.
3.4.11. Providing detailed quantity surveys
or inventories of material, equipment and 4.3. If requested by the Architect, the Owner
labor. shall furnish evidence that financial
arrangements have been made
3.4.12. Providing analyses of owning and
operating costs.
3.4.13. [Intentionally omitted.]
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to fulfill the Owner's obligations under this 4.9 The services, information, surveys and
Agreement. reports required by Paragraphs 4.5 through 4.8
shall be furnished at the Owner's expense, and
4.4. The Owner shall designate a representative the Architect shall be entitled to rely upon the
authorized to act on the Owner's behalf with accuracy and completeness thereof.
respect to the Project. The Owner or such
authorized representative shall render 4.19 Prompt written notice shall be given by the
decisions in a timely manner pertaining to Owner to the Architect if the Owner becomes
documents submitted by the Architect in order aware of any fault or defect in the Project or
to avoid unreasonable delay in the orderly and nonconformance with the Contract Documents.
sequential progress of the Architect's
services. Refer to Article 12; paragraph 12.2. 4.11 The proposed language of certificates or
certifications requested of the Architect or
4.5. The Owner shall furnish surveys describing Architect's consultants shall be submitted to
physical characteristics, legal limitations and the Architect for review and approval at least
utility locations for the site of the Project, 14 days prior to execution. The Owner shall not
and a written legal description of the site. request certifications that would require
The surveys and legal information shall knowledge or services beyond the scope of this
include, as applicable, grades and lines of Agreement.
streets, alleys, pavements and adjoining
property and structures; adjacent drainage; ARTICLE 5
rights-of-way, restrictions, easements, CONSTRUCTION COST
encroachments, zoning, deed restrictions,
boundaries and contours of the site; locations, 5.1 DEFINITION
dimensions, and necessary data pertaining to
existing buildings, other improvements and 5.1.1 The Construction Cost shall be the
trees; and information concerning available total cost or estimated cost to the Owner of all
utility services and lines, both public and elements of the Project designed or specified by
private, above and below grade, including the Architect.
inverts and depths. All information on the
survey shall be referenced to a project 5.1.2 The Construction Cost shall include
benchmark. the cost at current market rates of labor and
materials furnished by the Owner and equipment
4.6 [Intentionally omitted] REFER TO ARTICLE designed, specified, selected or specially
12; PARAGRAPH 12.4. provided for by the Architect, plus a reasonable
allowance for the Contractor's overhead and
4.6.1. The Owner shall furnish the services profit. In addition, a reasonable allowance for
of other consultants when such services are contingencies shall be included for market
reasonable required by the scope of the Project conditions at the time of bidding and for
and are requested by the Architect. changes in the Work during construction.
4.7. The Owner shall furnish structural, 5.13 Construction Cost does not include the
mechanical, chemical, air and water pollution compensation of the Architect and Architect's
tests, tests for hazardous materials, and other consultants, the costs of the land, rights-of-
laboratory and environmental tests, inspections way, financing or other costs which are the
and reports required by law or the Contract responsibility of the Owner as provided in
Documents. Article 4.
4.8. The Owner shall furnish all legal, 5.2 RESPONSIBILITY FOR CONSTRUCTION COST
accounting and insurance counseling services as
may be necessary at any time for the Project, 5.2.1. Evaluations of the Owner's Project
including auditing services the Owner may budget, preliminary estimates of Construction
require to verify the Contractor's Applications Cost and detailed estimates of Construction
for Payment or to ascertain how or for what Cost, if any, prepared by the Architect,
purposes the Contractor has used the money paid represent the Architect's best judgment as a
by or on behalf of the Owner. design professional familiar with the
construction industry. It is recognized,
however, that neither the Architect nor the
Owner has control over the cost of labor,
materials or equipment, over the Contractor's
methods of determining bid prices, or over
competitive bidding, market or negotiating
conditions. Accordingly, the Architect cannot
and does not warrant or
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represent that bids or negotiated prices will Services performed whether or not the
not vary from the Owner's Project budget or Construction Phase is commenced.
from any estimate of Construction Cost or
evaluation prepared or agreed to by the ARTICLE 6
Architect. USE OF ARCHITECT'S DRAWINGS,
SPECIFICATIONS AND OTHER DOCUMENTS
5.2.2. No fixed limit of Construction Cost
shall be established as a condition of this 6.1 The Drawings, Specifications and other
Agreement by the furnishing, proposal or documents prepared by the Architect for this
establishment of a Project budget, unless such Project are instruments of the Architect's
fixed limit has been agreed upon in writing and service for use solely with respect to this
signed by the parties hereto. If such a fixed Project and, unless otherwise provided, the
limit has been established, the Architect shall Architect shall be deemed the author of these
be permitted to include contingencies for documents and shall retain all common law,
design, bidding and price escalation, to statutory and other reserved rights, including
determine what materials, equipment, component the copyright. The Owner shall be permitted to
systems and types of construction are to be retain copies, including reproducible copies, of
included in the Contract Documents, to make the Architect's Drawings, Specifications and
reasonable adjustments in the scope of the other documents for information and reference in
Project and to include in the Contract connection with the Owner's use and occupancy of
Documents alternate bids to adjust the the Project. The Architect's Drawings,
Construction Cost to the fixed limit. Fixed Specifications or other documents shall not be
limits, if any, shall be increased in the used by the Owner or others on other projects,
amount of an increase in the Contract Sum for additions to this Project or for completion
occurring after execution of the Contract for of this Project by others, unless the Architect
Construction. is adjudged to be in default under this
Agreement, except by agreement in writing and
5.2.3. If the Bidding or Negotiation Phase with appropriate compensation to the Architect.
has not commenced within 90 days after the
Architect submits the Construction Documents to 6.2 Submission or distribution of documents to
the Owner, any Project budget or fixed limit of meet official regulatory requirements or for
Construction Cost shall be adjusted to reflect similar purposes in connection with the project
changes in the general level of prices in the is not to be construed as publication in
construction industry between the date of derogation of the Architect's reserved rights.
submission of the Construction Documents to the
Owner and the date on which proposals are ARTICLE 7
sought. ARBITRATION
5.2.4. If a fixed limit of Construction Cost 7.1 Claims, disputes or other matters in
(adjusted as provided in Subparagraph 5.2.3) is question between the parties to this Agreement
exceeded by the lowest bona fide bid or arising out of or relating to this Agreement or
negotiated proposal, the Owner shall: breach thereof shall be subject to and decided
by arbitration in accordance with the
.1 give written approval of an increase Construction Industry Arbitration Rules of the
in such fixed limit; American Arbitration Association currently in
effect unless the parties mutually agree
.2 authorize rebidding or renegotiating otherwise.
of the Project within a reasonable time;
7.2 Demand for arbitration shall be filed in
.3 if the Project is abandoned, writing with the other party to this Agreement
terminate in accordance with Paragraph and with the American Arbitration Association.
8.3; or A demand for arbitration shall be made within a
reasonable time after the claim, dispute or
.4 cooperate in revising the Project other matter in question has arisen. In no
scope and quality as required to reduce event shall the demand for arbitration be made
the Construction Cost. after the date when institution of legal or
equitable proceedings based on such claim,
5.2.5. If the Owner chooses to proceed under dispute or other matter in question would be
Clause 5.2.4.4, the Architect, without barred by the applicable statutes of
additional charge, shall modify the Contract limitations.
Documents as necessary to comply with the fixed
limit, if established as a condition of this
Agreement. The modification of Contract
Documents shall be the limit of the Architect's
responsibility arising out of the establishment
of a fixed limit. The Architect shall be
entitled to compensation in accordance with
this Agreement for all
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7.3 No arbitration arising out of or relating seven days' written notice to the Owner, suspend
to this Agreement shall include, by performance of services under this Agreement.
consolidation, joinder or in any other manner, Unless payment in full is received by the
an additional person or entity not a party to Architect within seven days of the date of the
this Agreement, except by written consent notice, the suspension shall take effect without
containing a specific reference to this further notice. In the event of a suspension of
Agreement signed by the Owner, Architect, and services, the Architect shall have no liability
any other person or entity sought to be joined. to the Owner for delay or damage caused the
Consent to arbitration involving an additional Owner because of such suspension of services.
person or entity shall not constitute consent
to arbitration of any claim, dispute or other 8.6 In the event of termination not the fault
matter in question not described in the written of the Architect, the Architect shall be
consent or with a person or entity not named or compensated for services performed prior to
described therein. The foregoing agreement to termination, together with Reimbursable Expenses
arbitrate and other agreements to arbitrate then due and all Termination Expenses as defined
with an additional person or entity duly in Paragraph 8.7.
consented to by the parties to this Agreement
shall be specifically enforceable in accordance 8.7 Termination Expenses are in addition to
with applicable law in any court having compensation for Basic and Additional Services,
jurisdiction thereof. and include expenses which are directly
attributable to termination. Termination
7.4 The award rendered by the arbitrator or Expenses shall be computed as a percentage of
arbitrators shall be final, and judgment may be the total compensation for Basic Services and
entered upon it in accordance with applicable Additional Services earned to the time of
law in any court having jurisdiction thereof. termination, as follows:
ARTICLE 8 .1 Twenty percent of the total
TERMINATION, SUSPENSION OR compensation for Basic and Additional
ABANDONMENT Services earned to date if termination
occurs before or during the predesign, site
8.1 This Agreement may be terminated by either analysis, or Schematic Design Phases; or
party upon not less than seven days' written
notice should the other party fail .2 Ten percent of the total compensation
substantially to perform in accordance with the for Basic and Additional Services earned to
terms of this Agreement through no fault of the date if termination occurs during the
party initiating the termination. Design Development Phase; or
8.2 If the Project is suspended by the Owner .3 Five percent of the total compensation
for more than 30 consecutive days, the for Basic and Additional Service earned to
Architect shall be compensated for services date if termination occurs during any
performed prior to notice of such suspension. subsequent phase.
When the Project is resumed, the Architect's
compensation shall be equitably adjusted to ARTICLE 9
provide for expenses incurred in the MISCELLANEOUS PROVISIONS
interruption and resumption of the Architect's
services. 9.1 Unless otherwise provided, this Agreement
shall be governed by the law of the principal
8.3 This Agreement may be terminated by the place of business of the Architect.
Owner upon not less than seven days' written
notice to the Architect in the event that the 9.2 [Intentionally omitted.]
Project is permanently abandoned. If the
Project is abandoned by the Owner for more than 9.3 Causes of action between the parties to
90 consecutive days, the Architect may this Agreement pertaining to acts or failures to
terminate this Agreement by giving written act shall be deemed to have accrued and the
notice. applicable statutes of limitations shall
commence to run not later than either the date
8.4 Failure of the Owner to make payments to of Substantial Completion for acts or failures
the Architect in accordance with this Agreement to act occurring prior to Substantial
shall be considered substantial nonperformance Completion, or the date of issuance of the final
and cause for termination. Certificate for Payment for acts or
8.5 If the Owner fails to make payment when
due the Architect for services and expenses,
the Architect may, upon
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failures to act occurring after Substantial PAYMENTS TO THE ARCHITECT
Completion.
10.1 DIRECT PERSONNEL EXPENSE
9.4 The Owner and Architect waive all rights
against each other and against the contractors, 10.1.1 Direct Personnel Expense is defined as
consultants, agents and employees of the other the direct salaries of the Architect's personnel
for damages, but only to the extent covered by engaged on the Project and the portion of the
property insurance during construction. The cost of their mandatory and customary
Owner and Architect each shall require similar contributions and benefits related thereto, such
waivers from their contractors, consultants and as employment taxes and other statutory employee
agents. benefits, insurance, sick leave, holidays,
vacations, pensions and similar contributions
9.5 The Owner and Architect, respectively, and benefits.
bind themselves, their partners, successors,
assigns and legal representatives to the other 10.2 REIMBURSABLE EXPENSES
party to this Agreement and to the partners,
successors, assigns and legal representatives 10.2.1 Reimbursable Expenses are in addition
of such other party with respect to all to compensation for Basic and Additional
covenants of this Agreement. Neither Owner nor Services and include expenses incurred by the
Architect shall assign this Agreement without Architect and Architect's employees and
the written consent of the other. consultants in the interest of the Project, as
identified in the following Clauses.
9.6 This Agreement represents the entire and
integrated agreement between the Owner and 10.2.1.1 Expenses of transportation in
Architect and supersedes all prior connection with the Project; expenses in
negotiations, representations or agreements, connection with authorized out-of-town travel;
either written or oral. This Agreement may be long-distance communications; and fees paid for
amended only by written instrument signed by securing approval of authorities having
both Owner and Architect. jurisdiction over the Project.
9.7 Nothing contained in this Agreement shall 10.2.1.2 Expense of reproducing photographs and
create a contractual relationship with or a other documents other than those used by the
cause of action in favor of a third party Architect for his Consultants or in-house use.
against either the Owner or Architect.
10.2.1.3 If authorized in advance by the Owner,
9.8 Unless otherwise provided in this expense of overtime work requiring higher than
Agreement, the Architect and Architect's regular rates.
consultants shall have no responsibility for
the discovery, presence, handling, removal or 10.2.1.4 Expense of additional renderings,
disposal of or exposure of persons to hazardous artwork, not provided for by Architect, and/or
materials in any form at the Project site, models and mock-ups as specifically requested by
including but not limited to asbestos, asbestos the Owner for his exclusive use on the Project.
products, polychlorinated biphenyl (PCB) or
other toxic substances. 10.2.1.5 Expense of additional insurance
coverage or limits, including professional
9.9 The Architect shall have the right to liability insurance, requested by the Owner in
include representations of the design of the excess of that normally carried by the Architect
Project, including photographs of the exterior and Architect's consultants.
and interior, among the Architect's promotional
and professional materials. The Architect's 10.2.1.6 [Intentionally omitted.]
materials shall not include the Owner's
confidential or proprietary information if the 10.3 PAYMENTS ON ACCOUNT OF BASIC SERVICES
Owner has previously advised the Architect in
writing of the specific information considered 10.3.1 An initial payment as set forth in
by the Owner to be confidential or proprietary. Paragraph 11.1 is the minimum payment under this
The owner shall provide professional credit for Agreement.
the Architect on the construction sign and in
the promotional materials for the Project.
ARTICLE 10
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10.3.2. Subsequent payments for Basic SERVICES
Services shall be made monthly and, where
applicable, shall be in proportion to services 10.4.1 Payments on account of the Architect's
performed within each phase of service, on the Additional Services and for Reimbursable
basis set forth in subparagraph 11.2.2. Expenses shall be made monthly upon presentation
of the Architect's statement of services
10.3.3. If and to the extent that the time rendered or expenses incurred.
initially established in Subparagraph 11.5.1 of
this Agreement is exceeded or extended through 10.5 PAYMENTS WITHHELD
no fault of the Architect, compensation for any
services rendered during the additional period 10.5.1. No deductions shall be made from the
of time shall be computed in the manner set Architect's compensation on account of penalty,
forth in subparagraph 11.3.2. liquidated damages or other sums withheld from
payments to contractors, or on account of the
10.3.4. When compensation is based on a cost of changes in the Work other than those for
percentage of Construction cost and any which the Architect has been found to be liable.
portions of the Project are deleted or
otherwise not constructed, compensation for 10.6 ARCHITECT'S ACCOUNTING RECORDS
those portions of the Project shall be payable
to the extent services are performed on those 10.6.1. Records of Reimbursable Expenses and
portions, in accordance with the schedule set expenses pertaining to Additional Services and
forth in Subparagraph 11.2.2, based on (1) the services performed on the basis of a multiple of
lowest bona fide bid or negotiated proposal, or Direct Personnel Expense shall be available to
(2) if no such bid or proposal is received, the the Owner or the Owner's authorized
most recent preliminary estimate of representative at mutually convenient times.
Construction Cost or detailed estimate of
construction Cost for such portions of the
Project.
10.4 PAYMENTS ON ACCOUNT OF ADDITIONAL
</TABLE>
ARTICLE 11
BASIS OF COMPENSATION
The Owner shall compensate the Architect as follows:
11.1 AN INITIAL PAYMENT of ZERO Dollars ($ -0- ) shall be made
upon execution of this Agreement and credited to the Owner's
account at final payment.
11.2 BASIC COMPENSATION
11.2.1 FOR BASIC SERVICES, as described in Article 2, and any
other services included in Article 12 as part of Basic Services,
Basic Compensation shall be computed as follows: (Insert basis of
compensation, including stipulated sums, multiples or
percentages, and identify phases to which particular methods of
compensation apply, if necessary.)
BASIC COMPENSATION SHALL BE THE ARCHITECTURAL AND ENGINEERING
FEE, CALCULATED AT 4.25 PERCENT (%) OF ACTUAL CONSTRUCTION COSTS
INCLUDING SPECIALTY EQUIPMENT (I.E. FOOD AND BAR SERVICE
EQUIPMENT, ELEVATORS, LIGHTING, SOUND EQUIPMENT, ETC., AND ACTUAL
F.F. & E. BUYOUT, WHICH INCLUDE: WALLCOVERING, CARPET, SPECIALTY
LIGHTING, FIXTURES, FURNISHINGS, MILLWORK AND FINISHER). THIS
ARCHITECTURAL AND ENGINEERING FEE WOULD EQUAL TO 4.25 PERCENT (%)
OF THE CONSTRUCTION/F.F.&E, COSTS, OR FIVE-HUNDRED-NINETEEN-
THOUSAND-ONE-HUNDRED-TWELVE DOLLARS ($519,112.00)
A PAYMENT EQUAL TO 1/6 OF THE BASIC COMPENSATION SHALL BE PAID
MONTHLY TO THE ARCHITECT COMMENCING ON 24 OCTOBER 1997 AND
CONTINUING ON THE 24TH DAY OF EACH AND EVERY MONTH THEREAFTER
THROUGH AND INCLUDING 24 MARCH 1998.
11.2.2. Where compensation is based on a stipulated sum or
percentage of Construction Cost, progress payments for Basic
Service in each phase shall total the following percentages of
the total Basic Compensation payable: (Insert additional phases
as appropriate.)
Schematic Design Phase: N/A percent ( %)
Design Development Phase: percent ( %)
Construction Documents Phase: percent ( %)
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Bidding or Negotiation Phase: percent ( %)
Construction Phase: percent ( %)
11.3 COMPENSATION FOR ADDITIONAL SERVICES
11.3.1. FOR PROJECT REPRESENTATION BEYOND BASIC SERVICES, as
described in Paragraph 3.2, compensation shall be computed as
follows:
COMPENSATION SHALL BE PAID TO THE ARCHITECT IN AN AMOUNT AND AT
THE TIMES AS MAY BE AGREED UPON BETWEEN OWNER AND ARCHITECT,
SHOULD PROJECT REPRESENTATION BEYOND BASIC SERVICES BE REQUIRED
AN AUTHORIZED BY OWNER.
11.3.2. FOR ADDITIONAL SERVICES OF THE ARCHITECT, as described
in Articles 3 and 12, other than (1) Additional Project
Representation, as described an Paragraph 3.2, and (2) services
included in Article 12 as part of Basic Services, but excluding
services of consultants, compensation shall be computed as
follows:
(INSERT BASIS OF COMPENSATION, INCLUDING RATES AND/OR MULTIPLES
OF DIRECT PERSONNEL EXPENSE FOR PRINCIPALS AND EMPLOYEES, AND
IDENTIFY PRINCIPALS AND CLASSIFY EMPLOYEES, IF REQUIRED.
IDENTIFY SPECIFIC SERVICES TO WHICH PARTICULAR METHODS OF
COMPENSATION APPLY, IF NECESSARY.)
SCHEDULE OF RATES (AS OF 03/25/98)
PRINCIPAL/MANAGER $125.00 PER HOUR
PROJECT ARCHITECT: $105.00 PER HOUR
DESIGNER/DRAFTSMAN: $ 75.00 PER HOUR
COMPUTER TECHNICIAN: $ 45.00 PER HOUR
SECRETARIAL/CLERK: $ 35.00 PER HOUR
11.3.3 FOR ALL ADDITIONAL SERVICES OF CONSULTANTS, including
additional structural, mechanical and electrical engineering
services and those provided under Subparagraph 3.4.19 or
identified in Article 12 as part of Additional Services, a
multiple of ZERO ( -0-) times the amounts billed to the
Architect for such services.
(IDENTIFY SPECIFIC TYPES OF CONSULTANTS IN ARTICLE 12, IF
REQUIRED)
11.4 REIMBURSABLE EXPENSES
11.4.1 FOR REIMBURSABLE EXPENSES, as described in Paragraph
10.2, and any other items included in Article 12 as Reimbursable
Expenses, a multiple of ZERO ( -0- ) times the expenses incurred
by the Architect, the Architect's employees and consultants in
the interest of the Project.
11.5 ADDITIONAL PROVISIONS
11.5.1. IF THE BASIC SERVICES covered by this Agreement have
not been completed within TWENTY ( 20 ) months of the date
hereof, through no fault of the Architect, extension of the
Architect's services beyond that time shall be compensated as
provided in Subparagraphs 10.3.3 and 11.3.2.
11.5.2. Payments are due and payable TWENTY-ONE ( 21 ) days
from the date of the Architect's invoice. Amounts unpaid TWENTY-
TWO ( 22 ) days after the invoice date shall bear interest at
the rate entered below, or in the absence thereof at the legal
rate prevailing from time to time at the principal place of
business of the Architect.
(INSERT RATE OF INTEREST AGREED UPON.)
CURRENT PRIME RATE OF INTEREST PLUS TWO (2%) PERCENT AS THAT RATE
IS ESTABLISHED BY BANK OF AMERICA OF NEVADA.
(USURY LAWS AND REQUIREMENTS UNDER THE FEDERAL TRUTH IN LENDING
ACT, SIMILAR STATE AND LOCAL CONSUMER CREDIT LAWS AND OTHER
REGULATIONS AT THE OWNER'S AND ARCHITECT'S PRINCIPAL PLACES OF
BUSINESS, THE LOCATION OF THE PROJECT AND ELSEWHERE MAY AFFECT
THE VALIDITY OF THIS PROVISION. SPECIFIC LEGAL ADVICE SHOULD BE
OBTAINED WITH RESPECT TO DELETIONS OR MODIFICATIONS, AND ALSO
REGARDING REQUIREMENTS SUCH AS WRITTEN DISCLOSURE OR WAIVERS.)
11.5.3 The rates and multiples set forth for Additional
Services shall be annually adjusted in accordance with normal
salary review practices of the Architect.
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ARTICLE 12
OTHER CONDITIONS OR SERVICES
(INSERT DESCRIPTIONS OF OTHER SERVICES, IDENTIFY ADDITIONAL
SERVICES INCLUDED WITHIN BASIC COMPENSATION AND MODIFICATIONS TO
THE PAYMENT AND COMPENSATION TERMS INCLUDED IN THIS AGREEMENT.)
ARCHITECT'S RELATIONSHIP WITH CONTRACTOR:
12.1 THE OWNER ACKNOWLEDGES THAT THE ARCHITECT ON THE PROJECT IS
A PROFESSIONAL CORPORATION WHICH IS OWNED BY ANTHONY A. MARNELL
II, WHO, IN ADDITION TO BEING A LICENSED ARCHITECT WITHIN THE
STATE OF NEVADA, IS ALSO THE MAJORITY STOCKHOLDER OF MARNELL
CORRAO ASSOCIATES, INC., THE CONTRACTOR ON THE PROJECT. THE
OWNER ACKNOWLEDGES THIS RELATIONSHIP BETWEEN ARCHITECT AND
CONTRACTOR AND ACCEPTS IN EVERY RESPECT THIS CLOSE ASSOCIATION
BETWEEN TWO OF THEM. IN LIGHT OF THE SPECIAL RELATIONSHIP
EXISTING BETWEEN THE ARCHITECT AND CONTRACTOR, THE OWNER AGREES
THAT IN CASE OF TERMINATION OF THE CONTRACTOR FOR WHATEVER
REASON, THE TERMS AND CONDITIONS OF THIS AGREEMENT WILL, AT THE
OPTION OF THE ARCHITECT, BE RENEGOTIATED, THE OWNER AND
ARCHITECT AGREE THAT ALL DOCUMENTS PROVIDED HEREIN SHALL BE
SOLELY FOR USE ON THIS PROJECT, AND THE OWNER UNDERSTANDS AND
AGREES THAT MARNELL CORRAO ASSOCIATES, INC., SHALL BE THE GENERAL
CONTRACTOR ON THE PROJECT.
OWNER'S PROJECT REPRESENTATIVE:
12.2 THE OWNER SHALL DESIGNATE REPRESENTATIVE(S) AUTHORIZED TO
ACT IN THE OWNER'S BEHALF WITH RESPECT TO THIS PROJECT. THE
OWNER OR SUCH AUTHORIZED REPRESENTATIVE(S) SHALL EXAMINE THE
DOCUMENTS SUBMITTED BY THE ARCHITECT AND SHALL RENDER DECISIONS
PERTAINING THERETO PROMPTLY TO AVOID UNREASONABLE DELAY IN THE
PROGRESS OF THE ARCHITECT'S SERVICES. FOR PURPOSES OF THIS
AGREEMENT, THE REPRESENTATIVE(S) SHALL BE CARY REHM.
INSURANCE:
12.3 THE ARCHITECT SHALL EFFECT AND MAINTAIN INSURANCE TO PROTECT
HIMSELF FROM CLAIMS UNDER WORKMEN'S COMPENSATION ACTS; CLAIMS FOR
DAMAGES BECAUSE OF BODILY INJURY INCLUDING PERSONAL INJURY,
SICKNESS OR DISEASE, OR DEATH OF ANY OF HIS EMPLOYEES, AND FOR
CLAIMS FOR DAMAGES BECAUSE OF INJURY TO OR DESTRUCTION OF
TANGIBLE PROPERTY INCLUDING LOSS OF USE OF RESULTING THEREFROM;
AND FROM CLAIMS ARISING OUT OF THE PERFORMANCE OF PROFESSIONAL
SERVICES CAUSED BY ANY ERRORS, OMISSIONS OR NEGLIGENT ACTS OF THE
ARCHITECT. ARCHITECT SHALL SECURE PROFESSIONAL LIABILITY
INSURANCE IN THE AMOUNT OF ONE MILLION DOLLLARS ($1,000,000) AND
SHALL REMAIN IN FULL FORCES AND EFFECT DURING THE ENTIRE COURSE
OF THE WORK AND SHALL ENDEAVOR TO MAINTAIN THAT DOLLAR AMOUNT OF
INSURANCE FOR A PERIOD OF SEVEN (7) YEARS AFTER COMPLETION OF THE
PROJECT.
OTHER SERVICES:
12.4 THE ARCHITECT SHALL FURNISH THE SERVICES TO PROVIDE AND BE
RESPONSIBLE FOR ANY SUBMISSION AND/OR THE COORDINATION REQUIRED
TO GAIN APPROVAL BY ANY PUBLIC OR PRIVATE COMPANY AND/OR OTHER
GOVERNMENTAL AGENCIES HAVING JURISDICTION OVER THE PROJECT
INCLUDING THE PARADISE TOWN BOARD, CLARK COUNTY PLANNING
COMMISSION; CLARK COUNTY COMMISSIONERS; CLARK COUNTY DEPARTMENT
OF BUILDING AND SAFETY; CLARK COUNTY FIRE DEPARTMENT; STATE OF
NEVADA FIRE MARSHALL; LAS VEGAS VALLEY WATER DISTRICT; CLARK
COUNTY SANITATION DISTRICT; NEVADA POWER COMPANY; CENTRAL
TELEPHONE COMPANY AND SOUTHWEST GAS CORPORATION.
WHERE INDIVIDUALS ARE SPECIFICALLY DESIGNATED, OWNER AND
ARCHITECT GRANT EACH OTHER THE RIGHT TO SUBSTITUTE OTHER
INDIVIDUALS IN THE EVENT OF DEATH, DISABILITY, OR DISMISSAL WITH
APPROVAL OF THE OTHER PARTY WITH SUCH APPROVAL NOT TO BE
UNREASONABLY WITHHELD.
THE ARCHITECT SHALL PROVIDE LIEN RELEASES FOR THE PROJECT FROM
ALL CONSULTANTS UPON COMPLETION AND FINAL PAYMENT FOR THE PROJECT
TO ARCHITECT, ONLY IF REQUESTED BY OWNER.
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This Agreement entered into as of the day and year first written
above.
OWNER ARCHITECT
/S/ John Lipkowitz /S/ Anthony A. Marnell II
(SIGNATURE) John Lipkowitz (SIGNATURE)
(PRINTED NAME AND TITLE) Exec. VP ANTHONY A. MARNELL, ARCHITECT
(PRINTED NAME AND TITLE)
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<PAGE>
ASSIGNMENT OF INTELLECTUAL PROPERTY RIGHTS
AGREEMENT made this ______ day ___________, 19_____, by
and between A.A. Marnell II Chtd., with offices located at 4495
South Polaris Avenue, Las Vegas 89103 (hereinafter call
("Assignor") and RIO PROPERTIES, INC., a Nevada corporation, with
offices located at 3700 W. Flamingo Road, Las Vegas, Nevada 89103
(hereinafter call "Assignee").
RECITALS
WHEREAS, Assignor has created and authored various Works
(hereinafter "Works"), included but not limited to the
hotel and related facility concepts, names, plans,
designs, schematics, blue prints, renderings, color
applications and layouts for the Rio Hotel and Casino
in Las Vegas, Nevada, all of which constitute
protectable intellectual properties including, but not
limited to copyright, patent and trade secret
interests, which may give rise to trademark and trade
dress rights, (hereinafter "Interests"); all pursuant
to Architectural Agreement entered into by and between
Assignor and Assignee dated _________________.
WHEREAS, Assignor desires to transfer entire ownership in
the Work(s), and all Interest therein, to Assignee for
which Assignee has agreed to give Assignor adequate
consideration;
WHEREAS, Assignor and Assignee further acknowledge that such
an Agreement must be in writing and signed by Assignor
in order to be valid and binding, the Parties thus
agree that this Assignment shall constitute that
writing.
IT IS THEREFORE agreed between Assignor and Assignee as
follows:
1. Grant of Rights. Assignor hereby grants, transfers,
assigns, and conveys to Assignee, its successors and assigns, the
entire title, right, interest, ownership and all subsidiary
rights in and to the Works, and all Interests therein, which
Assignor may possess as the author or owner of the Works. Those
Works shall include but not be limited to those Works set forth
in Attachment I attached hereto and incorporated herein by
reference. Said Grant of Rights shall include but not be limited
to Assignor agreeing to assist and aid Assignee in any efforts or
actions undertaken by Assignee to protect the Interests
applicable to the Works, such actions including but not limited
to securing registration of copyrights, trademarks (Federal or
state), trade dress, or patent(s) therein which resulting
registrations shall be in Assignee's name as claimant, and the
right to secure renewals, reissues, and extension of any
Intellectual Property interests in the United States of America
or any foreign country.
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2. Consideration. Assignor and Assignee further agree
and acknowledge that the consideration for Assignment by Assignor
shall be deemed to be (20%) twenty percent of architectural fees
to be paid pursuant to above referred Agreements. The Parties
hereto further agree that said consideration is full and adequate
compensation for such Assignment by the Assignor to the Assignee.
3. Warranty of Interests. Assignor hereby confirms
and warrants to Assignee that as of the date of this Assignment,
Assignor is the lawful owner of good and marketable title in and
to all of the Works and Interests there in described and has the
full legal rights to assign the same.
4. Execution of Future Documents. The Assignee agrees
to execute and deliver to Assignor any and all documents that may
be necessary or are helpful to the Assignee in securing or
perfecting the registration of the rights conveyed herein.
5. Miscellaneous Provisions. The following provisions
shall further apply to this assignment:
a. Scope of Agreement. All terms of this agreement
are applicable to any portion or part of the Works, as
well as the Works in their entirety.
b. Construction. For purposes of construction of
this Agreement, the language used herein shall be
construed as the language of both parties and neither
party shall be deemed the draftee.
c. Notices. Any notice which either party desires to
give to the other in connection with this Agreement
shall be give in writing and shall be mailed by
certified mail or by registered mail to the address
herein set forth, return receipt requested, and such
notice shall be deemed to have been received by the
other party upon such mailing. Each party may change
its address by written notice in accords with this
provision.
d. Waiver. The failure of either party to insist on
strict compliance with any of the terms, covenants, or
condition of this agreement by the other party shall
not be deemed a waiver of that term, covenant, or
condition, nor shall any waiver or relinquishment of
any right or power for all or any other time.
e. Arbitration. In the event a dispute arises
between the parties as to any term or condition in this
Agreement, the parties agree to resolve such dispute by
submitting the dispute to binding arbitration before
the Nevada Arbitration Association, or American
Arbitration Association in Las Vegas, Nevada. The
decision of the Arbitration shall be conclusive and
enforceable by any court of competent jurisdiction.
The prevailing party shall be entitled to its
reasonable attorney fees.
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f. Interpretation and Enforcement. This Agreement
shall be interpreted under applicable intellectual
property laws of the United States, including but not
limited to the Copyright Act, the Trademark Act as
Revised, patent laws of the United States, as well as
any other and such applicable laws of the State of
Nevada.
g. Severability. All non-material terms and conditions
of this Agreement shall be severable one from the other
so should any provision be held illegal or unenforceable
by a competent court of jurisdiction, the remaining
provisions shall remain in effect.
h. This agreement constitutes the entire agreement
between the Parties hereto relating as to transfer of
Assignor's rights in the Works and supersedes any prior
oral or written agreement or understanding between the
parties relating to such rights in said Works(s).
IN WITNESS WHEREOF and intended to be legally bound by, the
Parties have hereunder set their hands, the day and the first
year written above.
/S/ Anthony A. Marnell II, Assignor /S/ John Lipkowitz, Assignee
- -------------------- -------------------
Anthony A. Marnell II, RIO PROPERTIES, INC.
Chartered By: John Lipkowitz
By: Anthony A. Marnell II Its: Exec. VP
its President
3
<PAGE>
STANDARD FORM OF AGREEMENT BETWEEN OWNER AND ARCHITECT
AIA Document B141 - Electronic Format
THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES: CONSULTATION WITH AN
ATTORNEY IS ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION.
AUTHENTICATION OF THIS ELECTRONICALLY DRAFTED AIA DOCUMENT MAY BE MADE BY
USING AIA DOCUMENT D401.
Copyright 1917, 1926, 1948, 1951, 1953, 1958, 1961, 1963, 1966, 1967, 1970,
1974, 1977, 1987 by The American Institute of Architects, 1735 New York
Avenue, N.W., Washington, D.C., 10006-5292. Reproduction of the material
herein or substantial quotation of its provisions without written
permission of the AIA violates the copyright laws of the United States and
will be subject to legal prosecution.
AGREEMENT
made as of the 25 day of March in the year of Nineteen Hundred
and Ninety-eight.
BETWEEN the Owner:
(NAME AND ADDRESS)
RIO HOTEL & CASINO, INC.
3700 West Flamingo Road
Las Vegas, Nevada 89103
and the Architect:
(NAME AND ADDRESS)
ANTHONY A. MARNELL II, CHTD.
4495 South Polaris Avenue
Las Vegas ,Nevada 89103
For the following Project:
(INCLUDE DETAILED DESCRIPTION OF PROJECT, LOCATION, ADDRESS AND
SCOPE.)
RIO TOWER REMODELS - Architect's Project No. AAM274-97 - Rio Job No.
9999-2000
WHEREAS, the Owner intends to design, construct and maintain Interior
Remodels in the existing Hotel Towers including:
1. Suite 2061 - Addition of new stair to connect to Suite @ 19th Floor
and remodel and finishes upgrades.
19th Floor Suite will include the transformation of two (2) Suites to
one (1) Suite.
2. Connect Storage Room to new Concierge Office.
3. Convert +/- seven (7) Existing Bays at North East Tower (Phase 2)
into one (1) Four (4) Bedroom Suite and other modifications as
required.
4. Refurnish and Remodel all remaining Suites at 20th Floor.
5. 39th Floor Concierge Addition.
6. Refurbishment of Artifacts and Furnishes @ Penthouse Suites (previous
AAM Job #265).
Professional Architectural and Engineering services for the general Scope
of the Project and included within the Agreement is as follows:
<TABLE>
<CAPTION>
<S> <C>
1. Architectural Design and Coordination 5. Plumbing Design & Engineering.
2. Structural Design & Engineering 6. Life Safety Systems Design Consultation.
3. Electrical Design & Engineering. 7. Interior Design Documents & Specifications
4. Mechanical Design & Engineering
</TABLE>
For purposes of this agreement, the Scope of Work delineated
above shall be titled: Rio Tower Remodels Architect's Project
#AAM274-97; Rio Job #9999-2000, hereinafter referred to as the
"Project".
The Owner and Architect agree as set forth below.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I 2.2.3. The Architect shall review with the
ARCHITECT'S RESPONSIBILITIES Owner alternative approaches to design and
construction of the Project.
1.1. ARCHITECTS' SERVICES
2.2.4. Based on the mutually agreed-upon
1.1.1. The Architect's services consist of program, schedule and construction budget
those services performed by the Architect, requirements, the Architect shall prepare, for
Architect's employees and Architect's approval by the Owner, Schematic Design
consultants as enumerated in Articles 2 and 3 Documents consisting of drawings and other
of this Agreement and any other services documents illustrating the scale and
included in Article 12. relationship of Project components.
1.2.3. The Architect's services shall be 2.2.5. The Architect shall submit to the
performed as expeditiously as is consistent Owner a preliminary estimate of Construction
with professional skill and care and the Cost based on current area, volume or other unit
orderly progress of the Work. Upon request of costs.
the Owner, the Architect shall submit for the
Owner's approval a schedule for the performance 2.3 DESIGN DEVELOPMENT PHASE
of the Architect's services which may be
adjusted as the Project proceeds, and shall 2.3.1. Based on the approved Schematic Design
include allowances for periods of time required Documents and any adjustments authorized by the
for the Owner's review and for approval of Owner in the program, schedule or construction
submissions by authorities having jurisdiction budget, the Architect shall prepare, for
over the Project. Time limits established by approval by the Owner, Design Development
this schedule approved by the Owner shall not, Documents consisting of drawings and other
except for reasonable cause, be exceeded by the documents to fix and describe the size and
Architect or Owner. character of the Project as to architectural,
structural, mechanical and electrical systems,
1.1.3. The services covered by this materials and such other elements as may be
Agreement are subject to the time limitations appropriate.
contained in Subparagraph 11.5.1.
2.3.2. The Architect shall advise the Owner
ARTICLE 2 of any adjustments to the preliminary estimate
SCOPE OF ARCHITECT'S BASIC SERVICES of Construction Cost.
2.1 DEFINITION 2.4 CONSTRUCTION DOCUMENTS PHASE
2.1.1. The Architect's Basic Services 2.4.1. Based on the approved Design
consist of those described in Paragraphs 2.2 Development Documents and any further
through 2.6 and any other services identified adjustments in the scope or quality of the
in Article 12 as part of Basic Services, and Project or in the construction budget authorized
include normal structural, mechanical and by the Owner, the Architect shall prepare, for
electrical engineering services. approval by the Owner, Construction Documents
consisting of Drawings and Specifications
2.2 SCHEMATIC DESIGN PHASE setting forth in detail the requirements for the
construction of the Project.
2.2.1. The Architect shall review the
program furnished by the Owner to ascertain the 2.4.2. The Architect shall assist the Owner,
requirements of the Project and shall arrive at only if requested by the Owner, in the
a mutual understanding of such requirements preparation of the necessary bidding
with the Owner. information, bidding forms, the Conditions of
the Contact, and the form of Agreement between
2.2.2. The architect shall provide a the Owner and Contractor.
preliminary evaluation of the Owner's program,
schedule and construction budget requirements, 2.4.3. The Architect shall advise the Owner
each in terms of the other, subject to the of any adjustments to previous preliminary
limitations set forth in Subparagraph 5.2.1. estimates of Construction
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Cost indicated by changes in requirements or and to determine in general if the Work is being
general market conditions. performed in a manner indicating that the Work
when completed will be in accordance with the
2.4.4 The Architect shall assist the Owner Contract Documents. However, the Architect
in connection with the Owner's responsibility shall not be required to make exhaustive or
for filing documents required for the approval continuous on-site inspections to check the
of governmental authorities having jurisdiction quality or quantity of the Work. On the basis
over the Project. of on-site observations as an architect, the
Architect shall keep the Owner informed of the
2.5 BIDDING OR NEGOTIATION PHASE progress and quality of the Work, and shall
endeavor to guard the Owner against defects and
2.5.1. The Architect, following the Owner's deficiencies in the Work. (More extensive site
approval of the Construction Documents and of representation may be agreed to as an Additional
the latest preliminary estimate of Construction Service, as described in Paragraph 3.2.)
Cost, shall assist the Owner and negotiated
Contractor, only if requested by Owner in 2.6.6. The Architect shall not have control
obtaining bids or negotiated proposals and over or charge of and shall not be responsible
assist in awarding and preparing contracts for for construction means, methods, techniques,
construction. sequences or procedures, or for safety
precautions and programs in connection with the
2.6 CONSTRUCTION PHASE-ADMINISTRATION OF THE Work, since these are solely the Contractor's
CONSTRUCTION CONTRACT responsibility under the Contract for
Construction. The Architect shall not be
2.6.1 The Architect's responsibility to responsible for the Contractor's schedules or
provide Basic Services for the Construction failure to carry out the Work in accordance with
Phase under this Agreement commences with the the Contract Documents. The Architect shall not
award of the Contract for Construction and have control over or charge of acts or omissions
terminates at the earlier of the issuance to of the Contractor, Subcontractors, or their
the Owner of the final Certificate for Payment agents or employees, or of any other persons
by the Contractor or 60 days after the date of performing portions of the Work.
Substantial Completion of the Work, unless
extended under the terms of Subparagraph 2.6.7. The Architect shall at all times have
10.3.3. access to the Work wherever it is in preparation
or progress.
2.6.2. The Architect shall provide
administration of the Contract for Construction 2.6.8. Except as may otherwise be provided in
as set forth below unless otherwise provided in the Contract Documents or when direct
this Agreement. communications have been specially authorized,
the Owner and Contractor shall communicate
2.6.3. Duties, responsibilities and through the Architect. Communications by and
limitations of authority of the Architect shall with the Architect's consultants shall be
not be restricted, modified or extended without through the Architect.
written agreement of the Owner and Architect
with consent of the Contractor, which consent 2.6.9. Based on the Architect's observations
shall not be unreasonably withheld. and evaluations of the Contractor's Applications
for Payment, the Architect shall review and
2.6.4. The Architect shall be a certify the amounts due the Contractor., only if
representative of and shall advise and consult requested by the Owner.
with the Owner (1) during construction until
final payment to the Contractor is due, and (2) 2.6.10. [Intentionally omitted]
as an Additional Service at the Owner's
direction from time to time during the
correction period described in the Contract for
Construction. The Architect shall have
authority to act on behalf of the Owner only to
the extent provided in this Agreement unless
otherwise modified by written instrument.
2.6.5 The Architect shall visit the site at
intervals appropriate to the stage of
construction or as otherwise agreed by the
Owner and Architect in writing to become
generally familiar with the progress and
quality of the Work completed
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2.6.11. The Architect shall have authority to When professional certification of performance
reject Work which does not conform to the characteristics of materials, systems or
Contract Documents. Whenever the Architect equipment is required by the Contract Documents,
considers it necessary or advisable for the Architect shall be entitled to rely upon
implementation of the intent of the Contract such certification to establish that the
Documents, the Architect will have authority to materials, systems or equipment will meet the
require additional inspection or testing of the performance criteria required by the Contract
Work in accordance with the provisions of the Documents.
Contract Documents, whether or not such Work is
fabricated, installed or completed. However, 2.6.13. The Architect may authorize minor
neither this authority of the Architect nor a changes in the Work not involving an adjustment
decision made in good faith either to exercise in the Contract Sum or an extension of the
or not to exercise such authority shall give Contract Time which are not inconsistent with
rise to a duty or responsibility of the the intent of the Contract Documents.
Architect to the Contractor, Subcontractors,
material and equipment suppliers, their agents 2.6.14. The Architect shall forward to the
or employees or other persons performing Owner for the Owner's review and records, any
portions of the Work. other written warranties and related documents
required by the Contract Documents and not
2.6.12. The Architect shall review and received, assembled and issued directly to the
approve or take other appropriate action upon Owner by the Contractor.
Contractor's submittals such as Shop Drawings,
Product Data and Samples, but only for the 2.6.15. The Architect shall interpret and
limited purpose of checking for conformance decide matters concerning performance of the
with information given and the design concept Owner and Contractor under the requirements of
expressed in the Contract Documents. The the Contract Documents on written request of
Architect's action shall be taken with such either the Owner or Contractor. The Architect's
reasonable promptness as to cause no delay in response to such requests shall be made with
the Work or in the construction of the Owner or reasonable promptness and within any time limits
of separate contractors, while allowing agreed upon.
sufficient time in the Architect's professional
judgment to permit adequate review. Review of 2.6.16. Interpretations and decisions of the
such submittals is not conducted for the Architect shall be consistent with the intent of
purpose of determining the accuracy and and reasonably inferable from the Contract
completeness of other details such as Documents and shall be in writing or in the form
dimensions and quantities or for substantiating of drawings. When making such interpretations
instructions for installation or performance of and initial decisions, the Architect shall
equipment or systems designed by the Contractor endeavor to secure faithful performance by both
to the extent required by the Contract Owner and Contractor, shall not show partiality
Documents. The Architect's review shall not to either, and shall not be liable for results
constitute approval of safety precautions or, of interpretations or decisions so rendered in
unless otherwise specifically stated by the good faith.
Architect, of construction means, methods,
techniques, sequences or procedures. The 2.6.17. The Architect's decisions on matters
architect's approval of a specific item shall relating to aesthetic effect shall be final if
not indicate approval of an assembly of which consistent with the intent expressed in the
item is a component. Contract Documents.
2.6.18. The Architect shall render written
decisions within a reasonable time on all
claims, disputes or other matters in question
between the Owner and Contractor relating to the
execution or progress of the Work as provided in
the Contract Documents.
Page #4
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2.6.19 The Architect's decisions on claims, Agreement.
disputes or other matters, including those in
question between the Owner and Contractor, 3.3 CONTINGENT ADDITIONAL SERVICES
except for those relating to aesthetic effect
as provided in Subparagraph 2.6.17, shall be 3.3.1. Making revisions in Drawings,
subject to arbitration as provided in this Specifications or other documents when such
Agreement and in the Contract Documents. revisions are:
.1 inconsistent with approvals or
ARTICLE 3 instructions previously given by the Owner,
ADDITIONAL SERVICES including revisions made necessary by
adjustments in the Owner's program or
GENERAL Project budget;
3.1.1. The service described in this Article .2 required by the enactment or revision
3 are not included in Basic Services unless so of codes, laws or regulations subsequent to
identified in Article 12, and they shall be the preparation of such documents; or
paid for by the Owner as provided in this
Agreement, in addition to the compensation for .3 due to changes required as a result of
Basic Services. The services described under the Owner's failure to render decisions in
Paragraphs 3.2 and 3.4 shall only be provided a timely manner.
if authorized or confirmed in writing by the
Owner. If services described under Contingent 3.3.2. Providing services required because of
Additional Services in Paragraph 3.3 are significant changes in the Project including,
required due to circumstances beyond the but not limited to, size, quality, complexity,
Architect's control, the Architect shall notify the Owner's schedule, or the method of bidding
the Owner prior to commencing such services. or negotiating and contracting for construction,
If the Owner deems that such services described except for services required under Subparagraph
under Paragraph 3.3 are not required, the Owner 5.2.5.
shall give prompt written notice to the
Architect. If the Owner indicates in writing 3.3.3. Preparing Drawings, Specifications and
that all or part of such Contingent Additional other documentation and supporting data,
Services are not required, the Architect shall evaluating Contractor's proposals, and providing
have no obligation to provide those services. other services in connection with Change Orders
and Construction Change Directives
3.2 PROJECT REPRESENTATION BEYOND BASIC
SERVICES 3.3.4. Providing services in connection with
evaluating substitutions proposed by the
Contractor and making subsequent revisions to
3.2.1. If more extensive representation at Drawings, Specifications and other documentation
the site than is described in Subparagraph resulting within.
2.6.5 is required by the Owner, the Architect
shall provide one or more Project 3.3.5. Providing consultation concerning
Representatives to assist in carrying out such replacement of Work damaged by fire or other
additional on-site responsibilities. cause during construction, and furnishing
services required in connection with the
3.2.2. Project representatives shall be replacement of such Work.
selected, employed and directed by the
Architect, and the Architect shall be 3.3.6. Providing services made necessary by
compensated therefor as agreed by the Owner and the default of the Contractor, by major defects
Architect. or deficiencies in the Work of the Contractor,
or by failure of performance of either the Owner
3.2.3. Through the observations by such or Contractor under the Contract for
Project Representatives, the Architect shall Construction.
endeavor to provide further protection for the
Owner against defects and deficiencies in the 3.3.7 [Intentionally omitted.]
Work, but furnishing of such project
representation shall not modify the rights, 3.3.8. Providing services in connection with
responsibilities or obligations of the a public hearing, arbitration proceeding or
Architect as described elsewhere in this legal proceeding except where the Architect is
party thereto.
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3.3.9. Preparing documents for alternate, 3.4.14. Providing services for planning tenant
separate or sequential bids or providing or rental spaces.
services in connection with bidding,
negotiation or construction prior to the 3.4.15. Making investigations, inventories of
completion of the Construction Documents Phase. materials or equipment, or valuations and
detailed appraisals of existing facilities.
3.4 OPTIONAL ADDITIONAL SERVICES
3.4.16. Preparing a set of reproducible record
3.4.1. Providing analyses of the Owner's drawings showing significant changes in the Work
needs and programming the requirements of the made during construction based on marked-up
Project. prints, drawings and other data furnished by the
Contractor to the Architect.
3.4.2. Providing financial feasibility or
other special studies. 3.4.17. Providing assistance in the
utilization of equipment or systems such as
3.4.3. Providing planning surveys, site testing, adjusting and balancing, preparation of
evaluations or comparative studies of operation and maintenance manuals, training
prospective sites. personnel for operation and maintenance, and
consultation during operation.
3.4.4. Providing special surveys,
environmental studies and submissions required 3.4.18. Providing services after issuance to
for approvals of governmental authorities or the Owner of the final Certificate for Payment
others having jurisdiction over the Project BY THE CONTRACTOR, or in the absence of a final
beyond that normally required to gain public Certificate for Payment, more than 60 days after
hearing before the Clark County Planning the date of Substantial Completion of the Work.
Commission and Clark County Commissioners with
regard to Architectural Review, Variance, etc. 3.4.19. Providing services of consultants for
if required. other than architectural, structural, mechanical
and electrical engineering portions of the
3.4.5. Providing services relative to future Project provided as a part of Basic Services.
facilities, systems and equipment.
3.4.20. Providing any other services not
3.3.6. Providing services to investigate otherwise included in this Agreement or not
existing conditions or facilities or to make customarily furnished in accordance with
measured drawings thereof generally accepted architectural practice.
3.4.7. Providing services to verify the
accuracy of drawings or other information ARTICLE 4
furnished by the Owner. OWNER'S RESPONSIBILITIES
3.4.8. Providing coordination of 4.1. The Owner shall provide full information
construction performed by separate contractors regarding requirements for the Project,
or by the Owner's own forces and coordination including a program which shall set forth the
of services required in connection with Owner's objectives, schedule, constraints and
construction performed and equipment supplied criteria, including space requirements and
by the Owner. relationships, flexibility, expandability,
special equipment, systems and site
3.4.9. Providing services in connection with requirements.
the work of a construction manager or separate
consultants retained by the Owner. 4.2. The Owner shall establish and update an
overall budget for the Project, including the
3.4.10. Providing detailed estimates of Construction Cost, the Owner's other costs and
Construction Cost. reasonable contingencies related to all of these
costs.
3.4.11. Providing detailed quantity surveys
or inventories of material, equipment and 4.3. If requested by the Architect, the Owner
labor. shall furnish evidence that financial
arrangements have been made
3.4.12. Providing analyses of owning and
operating costs.
3.4.13. [Intentionally omitted.]
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to fulfill the Owner's obligations under this 4.9 The services, information, surveys and
Agreement. reports required by Paragraphs 4.5 through 4.8
shall be furnished at the Owner's expense, and
4.4. The Owner shall designate a representative the Architect shall be entitled to rely upon the
authorized to act on the Owner's behalf with accuracy and completeness thereof.
respect to the Project. The Owner or such
authorized representative shall render 4.19 Prompt written notice shall be given by the
decisions in a timely manner pertaining to Owner to the Architect if the Owner becomes
documents submitted by the Architect in order aware of any fault or defect in the Project or
to avoid unreasonable delay in the orderly and nonconformance with the Contract Documents.
sequential progress of the Architect's
services. Refer to Article 12; paragraph 12.2. 4.11 The proposed language of certificates or
certifications requested of the Architect or
4.5. The Owner shall furnish surveys describing Architect's consultants shall be submitted to
physical characteristics, legal limitations and the Architect for review and approval at least
utility locations for the site of the Project, 14 days prior to execution. The Owner shall not
and a written legal description of the site. request certifications that would require
The surveys and legal information shall knowledge or services beyond the scope of this
include, as applicable, grades and lines of Agreement.
streets, alleys, pavements and adjoining
property and structures; adjacent drainage; ARTICLE 5
rights-of-way, restrictions, easements, CONSTRUCTION COST
encroachments, zoning, deed restrictions,
boundaries and contours of the site; locations, 5.1 DEFINITION
dimensions, and necessary data pertaining to
existing buildings, other improvements and 5.1.1 The Construction Cost shall be the
trees; and information concerning available total cost or estimated cost to the Owner of all
utility services and lines, both public and elements of the Project designed or specified by
private, above and below grade, including the Architect.
inverts and depths. All information on the
survey shall be referenced to a project 5.1.2 The Construction Cost shall include
benchmark. the cost at current market rates of labor and
materials furnished by the Owner and equipment
4.6 [Intentionally omitted] REFER TO ARTICLE designed, specified, selected or specially
12; PARAGRAPH 12.4. provided for by the Architect, plus a reasonable
allowance for the Contractor's overhead and
4.6.1. The Owner shall furnish the services profit. In addition, a reasonable allowance for
of other consultants when such services are contingencies shall be included for market
reasonable required by the scope of the Project conditions at the time of bidding and for
and are requested by the Architect. changes in the Work during construction.
4.7. The Owner shall furnish structural, 5.13 Construction Cost does not include the
mechanical, chemical, air and water pollution compensation of the Architect and Architect's
tests, tests for hazardous materials, and other consultants, the costs of the land, rights-of-
laboratory and environmental tests, inspections way, financing or other costs which are the
and reports required by law or the Contract responsibility of the Owner as provided in
Documents. Article 4.
4.8. The Owner shall furnish all legal, 5.2 RESPONSIBILITY FOR CONSTRUCTION COST
accounting and insurance counseling services as
may be necessary at any time for the Project, 5.2.1. Evaluations of the Owner's Project
including auditing services the Owner may budget, preliminary estimates of Construction
require to verify the Contractor's Applications Cost and detailed estimates of Construction
for Payment or to ascertain how or for what Cost, if any, prepared by the Architect,
purposes the Contractor has used the money paid represent the Architect's best judgment as a
by or on behalf of the Owner. design professional familiar with the
construction industry. It is recognized,
however, that neither the Architect nor the
Owner has control over the cost of labor,
materials or equipment, over the Contractor's
methods of determining bid prices, or over
competitive bidding, market or negotiating
conditions. Accordingly, the Architect cannot
and does not warrant or
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represent that bids or negotiated prices will Services performed whether or not the
not vary from the Owner's Project budget or Construction Phase is commenced.
from any estimate of Construction Cost or
evaluation prepared or agreed to by the ARTICLE 6
Architect. USE OF ARCHITECT'S DRAWINGS,
SPECIFICATIONS AND OTHER DOCUMENTS
5.2.2. No fixed limit of Construction Cost
shall be established as a condition of this 6.1 The Drawings, Specifications and other
Agreement by the furnishing, proposal or documents prepared by the Architect for this
establishment of a Project budget, unless such Project are instruments of the Architect's
fixed limit has been agreed upon in writing and service for use solely with respect to this
signed by the parties hereto. If such a fixed Project and, unless otherwise provided, the
limit has been established, the Architect shall Architect shall be deemed the author of these
be permitted to include contingencies for documents and shall retain all common law,
design, bidding and price escalation, to statutory and other reserved rights, including
determine what materials, equipment, component the copyright. The Owner shall be permitted to
systems and types of construction are to be retain copies, including reproducible copies, of
included in the Contract Documents, to make the Architect's Drawings, Specifications and
reasonable adjustments in the scope of the other documents for information and reference in
Project and to include in the Contract connection with the Owner's use and occupancy of
Documents alternate bids to adjust the the Project. The Architect's Drawings,
Construction Cost to the fixed limit. Fixed Specifications or other documents shall not be
limits, if any, shall be increased in the used by the Owner or others on other projects,
amount of an increase in the Contract Sum for additions to this Project or for completion
occurring after execution of the Contract for of this Project by others, unless the Architect
Construction. is adjudged to be in default under this
Agreement, except by agreement in writing and
5.2.3. If the Bidding or Negotiation Phase with appropriate compensation to the Architect.
has not commenced within 90 days after the
Architect submits the Construction Documents to 6.2 Submission or distribution of documents to
the Owner, any Project budget or fixed limit of meet official regulatory requirements or for
Construction Cost shall be adjusted to reflect similar purposes in connection with the project
changes in the general level of prices in the is not to be construed as publication in
construction industry between the date of derogation of the Architect's reserved rights.
submission of the Construction Documents to the
Owner and the date on which proposals are ARTICLE 7
sought. ARBITRATION
5.2.4. If a fixed limit of Construction Cost 7.1 Claims, disputes or other matters in
(adjusted as provided in Subparagraph 5.2.3) is question between the parties to this Agreement
exceeded by the lowest bona fide bid or arising out of or relating to this Agreement or
negotiated proposal, the Owner shall: breach thereof shall be subject to and decided
by arbitration in accordance with the
.1 give written approval of an increase Construction Industry Arbitration Rules of the
in such fixed limit; American Arbitration Association currently in
effect unless the parties mutually agree
.2 authorize rebidding or renegotiating otherwise.
of the Project within a reasonable time;
7.2 Demand for arbitration shall be filed in
.3 if the Project is abandoned, writing with the other party to this Agreement
terminate in accordance with Paragraph and with the American Arbitration Association.
8.3; or A demand for arbitration shall be made within a
reasonable time after the claim, dispute or
.4 cooperate in revising the Project other matter in question has arisen. In no
scope and quality as required to reduce event shall the demand for arbitration be made
the Construction Cost. after the date when institution of legal or
equitable proceedings based on such claim,
5.2.5. If the Owner chooses to proceed under dispute or other matter in question would be
Clause 5.2.4.4, the Architect, without barred by the applicable statutes of
additional charge, shall modify the Contract limitations.
Documents as necessary to comply with the fixed
limit, if established as a condition of this
Agreement. The modification of Contract
Documents shall be the limit of the Architect's
responsibility arising out of the establishment
of a fixed limit. The Architect shall be
entitled to compensation in accordance with
this Agreement for all
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7.3 No arbitration arising out of or relating seven days' written notice to the Owner, suspend
to this Agreement shall include, by performance of services under this Agreement.
consolidation, joinder or in any other manner, Unless payment in full is received by the
an additional person or entity not a party to Architect within seven days of the date of the
this Agreement, except by written consent notice, the suspension shall take effect without
containing a specific reference to this further notice. In the event of a suspension of
Agreement signed by the Owner, Architect, and services, the Architect shall have no liability
any other person or entity sought to be joined. to the Owner for delay or damage caused the
Consent to arbitration involving an additional Owner because of such suspension of services.
person or entity shall not constitute consent
to arbitration of any claim, dispute or other 8.6 In the event of termination not the fault
matter in question not described in the written of the Architect, the Architect shall be
consent or with a person or entity not named or compensated for services performed prior to
described therein. The foregoing agreement to termination, together with Reimbursable Expenses
arbitrate and other agreements to arbitrate then due and all Termination Expenses as defined
with an additional person or entity duly in Paragraph 8.7.
consented to by the parties to this Agreement
shall be specifically enforceable in accordance 8.7 Termination Expenses are in addition to
with applicable law in any court having compensation for Basic and Additional Services,
jurisdiction thereof. and include expenses which are directly
attributable to termination. Termination
7.4 The award rendered by the arbitrator or Expenses shall be computed as a percentage of
arbitrators shall be final, and judgment may be the total compensation for Basic Services and
entered upon it in accordance with applicable Additional Services earned to the time of
law in any court having jurisdiction thereof. termination, as follows:
ARTICLE 8 .1 Twenty percent of the total
TERMINATION, SUSPENSION OR compensation for Basic and Additional
ABANDONMENT Services earned to date if termination
occurs before or during the predesign, site
8.1 This Agreement may be terminated by either analysis, or Schematic Design Phases; or
party upon not less than seven days' written
notice should the other party fail .2 Ten percent of the total compensation
substantially to perform in accordance with the for Basic and Additional Services earned to
terms of this Agreement through no fault of the date if termination occurs during the
party initiating the termination. Design Development Phase; or
8.2 If the Project is suspended by the Owner .3 Five percent of the total compensation
for more than 30 consecutive days, the for Basic and Additional Service earned to
Architect shall be compensated for services date if termination occurs during any
performed prior to notice of such suspension. subsequent phase.
When the Project is resumed, the Architect's
compensation shall be equitably adjusted to ARTICLE 9
provide for expenses incurred in the MISCELLANEOUS PROVISIONS
interruption and resumption of the Architect's
services. 9.1 Unless otherwise provided, this Agreement
shall be governed by the law of the principal
8.3 This Agreement may be terminated by the place of business of the Architect.
Owner upon not less than seven days' written
notice to the Architect in the event that the 9.2 [Intentionally omitted.]
Project is permanently abandoned. If the
Project is abandoned by the Owner for more than 9.3 Causes of action between the parties to
90 consecutive days, the Architect may this Agreement pertaining to acts or failures to
terminate this Agreement by giving written act shall be deemed to have accrued and the
notice. applicable statutes of limitations shall
commence to run not later than either the date
8.4 Failure of the Owner to make payments to of Substantial Completion for acts or failures
the Architect in accordance with this Agreement to act occurring prior to Substantial
shall be considered substantial nonperformance Completion, or the date of issuance of the final
and cause for termination. Certificate for Payment for acts or
8.5 If the Owner fails to make payment when
due the Architect for services and expenses,
the Architect may, upon
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failures to act occurring after Substantial PAYMENTS TO THE ARCHITECT
Completion.
10.1 DIRECT PERSONNEL EXPENSE
9.4 The Owner and Architect waive all rights
against each other and against the contractors, 10.1.1 Direct Personnel Expense is defined as
consultants, agents and employees of the other the direct salaries of the Architect's personnel
for damages, but only to the extent covered by engaged on the Project and the portion of the
property insurance during construction. The cost of their mandatory and customary
Owner and Architect each shall require similar contributions and benefits related thereto, such
waivers from their contractors, consultants and as employment taxes and other statutory employee
agents. benefits, insurance, sick leave, holidays,
vacations, pensions and similar contributions
9.5 The Owner and Architect, respectively, and benefits.
bind themselves, their partners, successors,
assigns and legal representatives to the other 10.2 REIMBURSABLE EXPENSES
party to this Agreement and to the partners,
successors, assigns and legal representatives 10.2.1 Reimbursable Expenses are in addition
of such other party with respect to all to compensation for Basic and Additional
covenants of this Agreement. Neither Owner nor Services and include expenses incurred by the
Architect shall assign this Agreement without Architect and Architect's employees and
the written consent of the other. consultants in the interest of the Project, as
identified in the following Clauses.
9.6 This Agreement represents the entire and
integrated agreement between the Owner and 10.2.1.1 Expenses of transportation in
Architect and supersedes all prior connection with the Project; expenses in
negotiations, representations or agreements, connection with authorized out-of-town travel;
either written or oral. This Agreement may be long-distance communications; and fees paid for
amended only by written instrument signed by securing approval of authorities having
both Owner and Architect. jurisdiction over the Project.
9.7 Nothing contained in this Agreement shall 10.2.1.2 Expense of reproducing photographs and
create a contractual relationship with or a other documents other than those used by the
cause of action in favor of a third party Architect for his Consultants or in-house use.
against either the Owner or Architect.
10.2.1.3 If authorized in advance by the Owner,
9.8 Unless otherwise provided in this expense of overtime work requiring higher than
Agreement, the Architect and Architect's regular rates.
consultants shall have no responsibility for
the discovery, presence, handling, removal or 10.2.1.4 Expense of additional renderings,
disposal of or exposure of persons to hazardous artwork, not provided for by Architect, and/or
materials in any form at the Project site, models and mock-ups as specifically requested by
including but not limited to asbestos, asbestos the Owner for his exclusive use on the Project.
products, polychlorinated biphenyl (PCB) or
other toxic substances. 10.2.1.5 Expense of additional insurance
coverage or limits, including professional
9.9 The Architect shall have the right to liability insurance, requested by the Owner in
include representations of the design of the excess of that normally carried by the Architect
Project, including photographs of the exterior and Architect's consultants.
and interior, among the Architect's promotional
and professional materials. The Architect's 10.2.1.6 [Intentionally omitted.]
materials shall not include the Owner's
confidential or proprietary information if the 10.3 PAYMENTS ON ACCOUNT OF BASIC SERVICES
Owner has previously advised the Architect in
writing of the specific information considered 10.3.1 An initial payment as set forth in
by the Owner to be confidential or proprietary. Paragraph 11.1 is the minimum payment under this
The owner shall provide professional credit for Agreement.
the Architect on the construction sign and in
the promotional materials for the Project.
ARTICLE 10
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10.3.2. Subsequent payments for Basic SERVICES
Services shall be made monthly and, where
applicable, shall be in proportion to services 10.4.1 Payments on account of the Architect's
performed within each phase of service, on the Additional Services and for Reimbursable
basis set forth in subparagraph 11.2.2. Expenses shall be made monthly upon presentation
of the Architect's statement of services
10.3.3. If and to the extent that the time rendered or expenses incurred.
initially established in Subparagraph 11.5.1 of
this Agreement is exceeded or extended through 10.5 PAYMENTS WITHHELD
no fault of the Architect, compensation for any
services rendered during the additional period 10.5.1. No deductions shall be made from the
of time shall be computed in the manner set Architect's compensation on account of penalty,
forth in subparagraph 11.3.2. liquidated damages or other sums withheld from
payments to contractors, or on account of the
10.3.4. When compensation is based on a cost of changes in the Work other than those for
percentage of Construction cost and any which the Architect has been found to be liable.
portions of the Project are deleted or
otherwise not constructed, compensation for 10.6 ARCHITECT'S ACCOUNTING RECORDS
those portions of the Project shall be payable
to the extent services are performed on those 10.6.1. Records of Reimbursable Expenses and
portions, in accordance with the schedule set expenses pertaining to Additional Services and
forth in Subparagraph 11.2.2, based on (1) the services performed on the basis of a multiple of
lowest bona fide bid or negotiated proposal, or Direct Personnel Expense shall be available to
(2) if no such bid or proposal is received, the the Owner or the Owner's authorized
most recent preliminary estimate of representative at mutually convenient times.
Construction Cost or detailed estimate of
construction Cost for such portions of the
Project.
10.4 PAYMENTS ON ACCOUNT OF ADDITIONAL
</TABLE>
ARTICLE 11
BASIS OF COMPENSATION
The Owner shall compensate the Architect as follows:
11.1 AN INITIAL PAYMENT of ZERO Dollars ($ -0- ) shall be made
upon execution of this Agreement and credited to the Owner's
account at final payment.
11.2 BASIC COMPENSATION
11.2.1 FOR BASIC SERVICES, as described in Article 2, and any
other services included in Article 12 as part of Basic Services,
Basic Compensation shall be computed as follows: (Insert basis of
compensation, including stipulated sums, multiples or
percentages, and identify phases to which particular methods of
compensation apply, if necessary.)
BASIC COMPENSATION SHALL BE THE ARCHITECTURAL AND ENGINEERING
FEE, CALCULATED AT 4.25 PERCENT (%) OF ACTUAL CONSTRUCTION COSTS
INCLUDING SPECIALTY EQUIPMENT (I.E. FOOD AND BAR SERVICE
EQUIPMENT, ELEVATORS, LIGHTING, SOUND EQUIPMENT, ETC., AND ACTUAL
F.F. & E. BUYOUT, WHICH INCLUDE: WALLCOVERING, CARPET, SPECIALTY
LIGHTING, FIXTURES, FURNISHINGS, MILLWORK AND FINISHER). THIS
ARCHITECTURAL AND ENGINEERING FEE WOULD EQUAL TO 4.25 PERCENT (%)
OF THE CONSTRUCTION/F.F.&E, COSTS, OR THREE-HUNDRED-FOUR-THOUSAND-
SIX-HUNDRED-THREE DOLLARS ($304,603.00)
A PAYMENT EQUAL TO 1/6 OF THE BASIC COMPENSATION SHALL BE PAID
MONTHLY TO THE ARCHITECT COMMENCING ON 24 OCTOBER 1997 AND
CONTINUING ON THE 24TH DAY OF EACH AND EVERY MONTH THEREAFTER
THROUGH AND INCLUDING 24 MARCH 1998.
11.2.2. Where compensation is based on a stipulated sum or
percentage of Construction Cost, progress payments for Basic
Service in each phase shall total the following percentages of
the total Basic Compensation payable: (Insert additional phases
as appropriate.)
Schematic Design Phase: N/A percent ( %)
Design Development Phase: percent ( %)
Construction Documents Phase: percent ( %)
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<PAGE>
Bidding or Negotiation Phase: percent ( %)
Construction Phase: percent ( %)
11.3 COMPENSATION FOR ADDITIONAL SERVICES
11.3.1. FOR PROJECT REPRESENTATION BEYOND BASIC SERVICES, as
described in Paragraph 3.2, compensation shall be computed as
follows:
COMPENSATION SHALL BE PAID TO THE ARCHITECT IN AN AMOUNT AND AT
THE TIMES AS MAY BE AGREED UPON BETWEEN OWNER AND ARCHITECT,
SHOULD PROJECT REPRESENTATION BEYOND BASIC SERVICES BE REQUIRED
AN AUTHORIZED BY OWNER.
11.3.2. FOR ADDITIONAL SERVICES OF THE ARCHITECT, as described
in Articles 3 and 12, other than (1) Additional Project
Representation, as described an Paragraph 3.2, and (2) services
included in Article 12 as part of Basic Services, but excluding
services of consultants, compensation shall be computed as
follows:
(INSERT BASIS OF COMPENSATION, INCLUDING RATES AND/OR MULTIPLES
OF DIRECT PERSONNEL EXPENSE FOR PRINCIPALS AND EMPLOYEES, AND
IDENTIFY PRINCIPALS AND CLASSIFY EMPLOYEES, IF REQUIRED.
IDENTIFY SPECIFIC SERVICES TO WHICH PARTICULAR METHODS OF
COMPENSATION APPLY, IF NECESSARY.)
SCHEDULE OF RATES (AS OF 03/25/98)
PRINCIPAL/MANAGER $125.00 PER HOUR
PROJECT ARCHITECT: $105.00 PER HOUR
DESIGNER/DRAFTSMAN: $ 75.00 PER HOUR
COMPUTER TECHNICIAN: $ 45.00 PER HOUR
SECRETARIAL/CLERK: $ 35.00 PER HOUR
11.3.3 FOR ALL ADDITIONAL SERVICES OF CONSULTANTS, including
additional structural, mechanical and electrical engineering
services and those provided under Subparagraph 3.4.19 or
identified in Article 12 as part of Additional Services, a
multiple of ZERO ( -0-) times the amounts billed to the
Architect for such services.
(IDENTIFY SPECIFIC TYPES OF CONSULTANTS IN ARTICLE 12, IF
REQUIRED)
11.4 REIMBURSABLE EXPENSES
11.4.1 FOR REIMBURSABLE EXPENSES, as described in Paragraph
10.2, and any other items included in Article 12 as Reimbursable
Expenses, a multiple of ZERO ( -0- ) times the expenses incurred
by the Architect, the Architect's employees and consultants in
the interest of the Project.
11.5 ADDITIONAL PROVISIONS
11.5.1. IF THE BASIC SERVICES covered by this Agreement have
not been completed within TWENTY ( 20 ) months of the date
hereof, through no fault of the Architect, extension of the
Architect's services beyond that time shall be compensated as
provided in Subparagraphs 10.3.3 and 11.3.2.
11.5.2. Payments are due and payable TWENTY-ONE ( 21 ) days
from the date of the Architect's invoice. Amounts unpaid TWENTY-
TWO ( 22 ) days after the invoice date shall bear interest at
the rate entered below, or in the absence thereof at the legal
rate prevailing from time to time at the principal place of
business of the Architect.
(INSERT RATE OF INTEREST AGREED UPON.)
CURRENT PRIME RATE OF INTEREST PLUS TWO (2%) PERCENT AS THAT RATE
IS ESTABLISHED BY BANK OF AMERICA OF NEVADA.
(USURY LAWS AND REQUIREMENTS UNDER THE FEDERAL TRUTH IN LENDING
ACT, SIMILAR STATE AND LOCAL CONSUMER CREDIT LAWS AND OTHER
REGULATIONS AT THE OWNER'S AND ARCHITECT'S PRINCIPAL PLACES OF
BUSINESS, THE LOCATION OF THE PROJECT AND ELSEWHERE MAY AFFECT
THE VALIDITY OF THIS PROVISION. SPECIFIC LEGAL ADVICE SHOULD BE
OBTAINED WITH RESPECT TO DELETIONS OR MODIFICATIONS, AND ALSO
REGARDING REQUIREMENTS SUCH AS WRITTEN DISCLOSURE OR WAIVERS.)
11.5.3 The rates and multiples set forth for Additional
Services shall be annually adjusted in accordance with normal
salary review practices of the Architect.
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<PAGE>
ARTICLE 12
OTHER CONDITIONS OR SERVICES
(INSERT DESCRIPTIONS OF OTHER SERVICES, IDENTIFY ADDITIONAL
SERVICES INCLUDED WITHIN BASIC COMPENSATION AND MODIFICATIONS TO
THE PAYMENT AND COMPENSATION TERMS INCLUDED IN THIS AGREEMENT.)
ARCHITECT'S RELATIONSHIP WITH CONTRACTOR:
12.1 THE OWNER ACKNOWLEDGES THAT THE ARCHITECT ON THE PROJECT IS
A PROFESSIONAL CORPORATION WHICH IS OWNED BY ANTHONY A. MARNELL
II, WHO, IN ADDITION TO BEING A LICENSED ARCHITECT WITHIN THE
STATE OF NEVADA, IS ALSO THE MAJORITY STOCKHOLDER OF MARNELL
CORRAO ASSOCIATES, INC., THE CONTRACTOR ON THE PROJECT. THE
OWNER ACKNOWLEDGES THIS RELATIONSHIP BETWEEN ARCHITECT AND
CONTRACTOR AND ACCEPTS IN EVERY RESPECT THIS CLOSE ASSOCIATION
BETWEEN TWO OF THEM. IN LIGHT OF THE SPECIAL RELATIONSHIP
EXISTING BETWEEN THE ARCHITECT AND CONTRACTOR, THE OWNER AGREES
THAT IN CASE OF TERMINATION OF THE CONTRACTOR FOR WHATEVER
REASON, THE TERMS AND CONDITIONS OF THIS AGREEMENT WILL, AT THE
OPTION OF THE ARCHITECT, BE RENEGOTIATED, THE OWNER AND
ARCHITECT AGREE THAT ALL DOCUMENTS PROVIDED HEREIN SHALL BE
SOLELY FOR USE ON THIS PROJECT, AND THE OWNER UNDERSTANDS AND
AGREES THAT MARNELL CORRAO ASSOCIATES, INC., SHALL BE THE GENERAL
CONTRACTOR ON THE PROJECT.
OWNER'S PROJECT REPRESENTATIVE:
12.2 THE OWNER SHALL DESIGNATE REPRESENTATIVE(S) AUTHORIZED TO
ACT IN THE OWNER'S BEHALF WITH RESPECT TO THIS PROJECT. THE
OWNER OR SUCH AUTHORIZED REPRESENTATIVE(S) SHALL EXAMINE THE
DOCUMENTS SUBMITTED BY THE ARCHITECT AND SHALL RENDER DECISIONS
PERTAINING THERETO PROMPTLY TO AVOID UNREASONABLE DELAY IN THE
PROGRESS OF THE ARCHITECT'S SERVICES. FOR PURPOSES OF THIS
AGREEMENT, THE REPRESENTATIVE(S) SHALL BE CARY REHM.
INSURANCE:
12.3 THE ARCHITECT SHALL EFFECT AND MAINTAIN INSURANCE TO PROTECT
HIMSELF FROM CLAIMS UNDER WORKMEN'S COMPENSATION ACTS; CLAIMS FOR
DAMAGES BECAUSE OF BODILY INJURY INCLUDING PERSONAL INJURY,
SICKNESS OR DISEASE, OR DEATH OF ANY OF HIS EMPLOYEES, AND FOR
CLAIMS FOR DAMAGES BECAUSE OF INJURY TO OR DESTRUCTION OF
TANGIBLE PROPERTY INCLUDING LOSS OF USE OF RESULTING THEREFROM;
AND FROM CLAIMS ARISING OUT OF THE PERFORMANCE OF PROFESSIONAL
SERVICES CAUSED BY ANY ERRORS, OMISSIONS OR NEGLIGENT ACTS OF THE
ARCHITECT. ARCHITECT SHALL SECURE PROFESSIONAL LIABILITY
INSURANCE IN THE AMOUNT OF ONE MILLION DOLLLARS ($1,000,000) AND
SHALL REMAIN IN FULL FORCES AND EFFECT DURING THE ENTIRE COURSE
OF THE WORK AND SHALL ENDEAVOR TO MAINTAIN THAT DOLLAR AMOUNT OF
INSURANCE FOR A PERIOD OF SEVEN (7) YEARS AFTER COMPLETION OF THE
PROJECT.
OTHER SERVICES:
12.4 THE ARCHITECT SHALL FURNISH THE SERVICES TO PROVIDE AND BE
RESPONSIBLE FOR ANY SUBMISSION AND/OR THE COORDINATION REQUIRED
TO GAIN APPROVAL BY ANY PUBLIC OR PRIVATE COMPANY AND/OR OTHER
GOVERNMENTAL AGENCIES HAVING JURISDICTION OVER THE PROJECT
INCLUDING THE PARADISE TOWN BOARD, CLARK COUNTY PLANNING
COMMISSION; CLARK COUNTY COMMISSIONERS; CLARK COUNTY DEPARTMENT
OF BUILDING AND SAFETY; CLARK COUNTY FIRE DEPARTMENT; STATE OF
NEVADA FIRE MARSHALL; LAS VEGAS VALLEY WATER DISTRICT; CLARK
COUNTY SANITATION DISTRICT; NEVADA POWER COMPANY; CENTRAL
TELEPHONE COMPANY AND SOUTHWEST GAS CORPORATION.
WHERE INDIVIDUALS ARE SPECIFICALLY DESIGNATED, OWNER AND
ARCHITECT GRANT EACH OTHER THE RIGHT TO SUBSTITUTE OTHER
INDIVIDUALS IN THE EVENT OF DEATH, DISABILITY, OR DISMISSAL WITH
APPROVAL OF THE OTHER PARTY WITH SUCH APPROVAL NOT TO BE
UNREASONABLY WITHHELD.
THE ARCHITECT SHALL PROVIDE LIEN RELEASES FOR THE PROJECT FROM
ALL CONSULTANTS UPON COMPLETION AND FINAL PAYMENT FOR THE PROJECT
TO ARCHITECT, ONLY IF REQUESTED BY OWNER.
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<PAGE>
This Agreement entered into as of the day and year first written
above.
OWNER ARCHITECT
/S/ John Lipkowitz /S/ Anthony A. Marnell II
(SIGNATURE) John Lipkowitz (SIGNATURE)
(PRINTED NAME AND TITLE) Exec. VP ANTHONY A. MARNELL, ARCHITECT
(PRINTED NAME AND TITLE)
Page #14
<PAGE>
ASSIGNMENT OF INTELLECTUAL PROPERTY RIGHTS
AGREEMENT made this ______ day ___________, 19_____, by
and between A.A. Marnell II Chtd., with offices located at 4495
South Polaris Avenue, Las Vegas 89103 (hereinafter call
("Assignor") and RIO PROPERTIES, INC., a Nevada corporation, with
offices located at 3700 W. Flamingo Road, Las Vegas, Nevada 89103
(hereinafter call "Assignee").
RECITALS
WHEREAS, Assignor has created and authored various Works
(hereinafter "Works"), included but not limited to the
hotel and related facility concepts, names, plans,
designs, schematics, blue prints, renderings, color
applications and layouts for the Rio Hotel and Casino
in Las Vegas, Nevada, all of which constitute
protectable intellectual properties including, but not
limited to copyright, patent and trade secret
interests, which may give rise to trademark and trade
dress rights, (hereinafter "Interests"); all pursuant
to Architectural Agreement entered into by and between
Assignor and Assignee dated _________________.
WHEREAS, Assignor desires to transfer entire ownership in
the Work(s), and all Interest therein, to Assignee for
which Assignee has agreed to give Assignor adequate
consideration;
WHEREAS, Assignor and Assignee further acknowledge that such
an Agreement must be in writing and signed by Assignor
in order to be valid and binding, the Parties thus
agree that this Assignment shall constitute that
writing.
IT IS THEREFORE agreed between Assignor and Assignee as
follows:
1. Grant of Rights. Assignor hereby grants, transfers,
assigns, and conveys to Assignee, its successors and assigns, the
entire title, right, interest, ownership and all subsidiary
rights in and to the Works, and all Interests therein, which
Assignor may possess as the author or owner of the Works. Those
Works shall include but not be limited to those Works set forth
in Attachment I attached hereto and incorporated herein by
reference. Said Grant of Rights shall include but not be limited
to Assignor agreeing to assist and aid Assignee in any efforts or
actions undertaken by Assignee to protect the Interests
applicable to the Works, such actions including but not limited
to securing registration of copyrights, trademarks (Federal or
state), trade dress, or patent(s) therein which resulting
registrations shall be in Assignee's name as claimant, and the
right to secure renewals, reissues, and extension of any
Intellectual Property interests in the United States of America
or any foreign country.
1
<PAGE>
2. Consideration. Assignor and Assignee further agree
and acknowledge that the consideration for Assignment by Assignor
shall be deemed to be (20%) twenty percent of architectural fees
to be paid pursuant to above referred Agreements. The Parties
hereto further agree that said consideration is full and adequate
compensation for such Assignment by the Assignor to the Assignee.
3. Warranty of Interests. Assignor hereby confirms
and warrants to Assignee that as of the date of this Assignment,
Assignor is the lawful owner of good and marketable title in and
to all of the Works and Interests there in described and has the
full legal rights to assign the same.
4. Execution of Future Documents. The Assignee agrees
to execute and deliver to Assignor any and all documents that may
be necessary or are helpful to the Assignee in securing or
perfecting the registration of the rights conveyed herein.
5. Miscellaneous Provisions. The following provisions
shall further apply to this assignment:
a. Scope of Agreement. All terms of this agreement
are applicable to any portion or part of the Works, as
well as the Works in their entirety.
b. Construction. For purposes of construction of
this Agreement, the language used herein shall be
construed as the language of both parties and neither
party shall be deemed the draftee.
c. Notices. Any notice which either party desires to
give to the other in connection with this Agreement
shall be give in writing and shall be mailed by
certified mail or by registered mail to the address
herein set forth, return receipt requested, and such
notice shall be deemed to have been received by the
other party upon such mailing. Each party may change
its address by written notice in accords with this
provision.
d. Waiver. The failure of either party to insist on
strict compliance with any of the terms, covenants, or
condition of this agreement by the other party shall
not be deemed a waiver of that term, covenant, or
condition, nor shall any waiver or relinquishment of
any right or power for all or any other time.
e. Arbitration. In the event a dispute arises
between the parties as to any term or condition in this
Agreement, the parties agree to resolve such dispute by
submitting the dispute to binding arbitration before
the Nevada Arbitration Association, or American
Arbitration Association in Las Vegas, Nevada. The
decision of the Arbitration shall be conclusive and
enforceable by any court of competent jurisdiction.
The prevailing party shall be entitled to its
reasonable attorney fees.
2
<PAGE>
f. Interpretation and Enforcement. This Agreement
shall be interpreted under applicable intellectual
property laws of the United States, including but not
limited to the Copyright Act, the Trademark Act as
Revised, patent laws of the United States, as well as
any other and such applicable laws of the State of
Nevada.
g. Severability. All non-material terms and conditions
of this Agreement shall be severable one from the other
so should any provision be held illegal or unenforceable
by a competent court of jurisdiction, the remaining
provisions shall remain in effect.
h. This agreement constitutes the entire agreement
between the Parties hereto relating as to transfer of
Assignor's rights in the Works and supersedes any prior
oral or written agreement or understanding between the
parties relating to such rights in said Works(s).
IN WITNESS WHEREOF and intended to be legally bound by, the
Parties have hereunder set their hands, the day and the first
year written above.
/S/ Anthony A. Marnell II, Assignor /S/ John Lipkowitz, Assignee
- -------------------- -------------------
Anthony A. Marnell II, RIO PROPERTIES, INC.
Chartered By: John Lipkowitz
By: Anthony A. Marnell II Its: Exec. VP
its President
3
<PAGE>
EXHIBIT 10.13
<PAGE>
BUILDING CONTRACT
THIS CONTRACT is made and entered into as of this Twenty-
fifth day of March 1998, by and between MARNELL CORRAO
ASSOCIATES, INC., a Nevada Corporation (as General Contractor and
hereinafter referred to as "Contractor"), and Rio Properties,
Inc. d/b/a Rio Suite Hotel & Casino, a Nevada Limited Partnership
(hereinafter referred to as "Owner").
WITNESSETH:
WHEREAS, the Owner intends to construct the RIO NORTH
DEVELOPMENT at the Rio Suite Hotel & Casino, including Rio
Sitework, Convention Center, Expanded Spa, Villas, Twain
Connector, West Utility Corridor, and Valet Parking Garage, being
hereinafter referred to as the Project (OUR PROJECT NOS. 61497,
61597, 61797, 61897, 62097, 62197 AND & 62297), and
WHEREAS, the Owner requests the Contractor to perform the
work and supply said materials and equipment necessary to
complete the Project, and
WHEREAS, the Contractor desires to perform said work and to
supply said materials and equipment,
NOW THEREFORE, in consideration of the mutual benefits
arising therefrom, and for other good and valuable consideration,
it is hereby agreed as follows.
<PAGE>
ARTICLE 1
CONTRACT DOCUMENTS
(A) The documents constituting the Contract between the
Owner and the Contractor (and hereby collectively referred to as
the Contract or this Contract) consist of the following:
1. This Building Contract.
2. Marnell Corrao Associates Rio North Development
Preliminary Magnitude Budget Estimate Revised
31 October 1997, attached hereto as Exhibit 'B'.
3. Project plans entitled: Preliminary Site Grading
Plans, Rio Palazzo Suites, Rio Convention
Center, Rio Valet Parking Garage, Twain West
Connector and West Utility Corridor issued
through 15 October 1997 as prepared by Anthony
A. Marnell II, Chtd., Architect.
(B) In the event of any conflict between or among any of
the terms or conditions of the documents constituting this
Contract, the following order shall be employed in resolving any
such conflict and in determining what terms or conditions will
govern:
1. This Building Contract, inclusive of Exhibit
'B'.
2. The Plans.
(C) This Contract constitutes the entire agreement
between the parties, and no modification of this contract shall
be valid or binding unless such modification is in writing duly
dated and signed by both parties. Neither Owner nor Contractor
shall be bound by prior terms, conditions, statements, or
representations, express or implied, oral or written, not
otherwise contained in this Contract.
2
<PAGE>
ARTICLE 2
CHANGES IN THE WORK
(A) The Owner may, by written instructions or drawings to
the Contractor which, in the reasonable opinion of the
Contractor, do not materially affect the type, design, nature or
scheduling of the Project, make changes in the abovementioned
plans and specifications, issue additional instructions, require
additional work, direct the omission of work previously shown or
ordered, or change work already incorporated into the Project,
and the provisions of this Contract shall apply to any and all
such changes with the same force and effect as though originally
embodied in this Contract.
(B) For changes which involve additional work or a
reduction in work as set forth in Paragraph (A) above, the
Guaranteed Maximum Cost as hereinafter set forth in Article 6
shall be increased or decreased by the Contractor in accordance
with the Contractor's estimate for said work, and the
Contractor's fee shall be appropriately adjusted. All changes in
the work must be authorized by a representative of Owner, who,
for the purposes of this Project, shall be
Mr. Cary Rehm.
(C) However, Owner and Contractor specifically agree that
should a change be requested by Owner which, in the reasonable
opinion of the Contractor, would materially affect the type,
design, nature or schedule of the Project as a whole, the
Contractor reserves the right to renegotiate the terms of the
Contract.
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ARTICLE 3
CONTRACTOR'S DUTIES
(A) The Contractor agrees to provide all labor, materials
and equipment necessary for the proper completion of the Project
in a manner consistent with the requirements of the work to be
performed, subject only to the provisions of Article 18; and
during the course of construction, the Contractor agrees to
furnish its best skill and judgment in effecting this goal.
(B) The Contractor shall maintain at the site for the
Owner one (1) record copy of drawings, specifications, addenda,
change orders and other modifications.
(C) The Contractor shall, during the course of
construction, keep the premises free from accumulation of waste
materials or rubbish caused by its operations. Within a
reasonable period of time after substantial completion of the
Project, the Contractor shall remove its waste materials and
rubbish from and about the Project site as well as all tools,
construction equipment, machinery and surplus materials.
(D) The Contractor shall comply with all applicable laws,
ordinances, rules, codes, regulations and lawful orders of any
public authority relating to construction of the Project.
(E) Irrespective of Paragraph (D) above, it is the
responsibility of the Project Architect to use his best efforts
to make certain that the Project is designed in accordance with
applicable laws, ordinances, rules, statutes, building codes and
regulations. If the Contractor observes that the Project, or any
portion thereof, may be at variance therewith, the Contractor
shall notify the Architect, and any change shall be accomplished
by an appropriate modification as provided in Article 2.
(F) Any other duties as may be set forth in this Contract.
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ARTICLE 4
OWNER'S DUTIES
(A) The Owner shall, at the request of the Contractor,
prior to the time of execution of this Contract, furnish to the
Contractor and Contractor's Surety and Bonding Company acceptable
evidence that the Owner has made suitable financial arrangements
to fulfill its obligations under this Contract.
(B) The Owner shall furnish all surveys to the Architect
describing the physical characteristics, legal limitations and
utility locations for the site of the Project, and a legal
description of the site. A copy of the legal description shall
be attached to this Contract and marked as Exhibit A.
(C) The Owner shall secure and pay for necessary
approvals, easements, assessments and charges required for the
construction, use or occupancy of permanent structures or for
permanent changes in existing facilities.
(D) Information or services under the Owner's control
shall be furnished by the Owner with reasonable promptness so as
to avoid any delay in the orderly progress of the work.
(E) The Owner shall provide the Architect with those
facilities required by Article 5 (A) (3).
(F) Any other duties as may be set forth in this Contract.
(G) The Owner shall pay for and obtain all necessary
utility company extensions or service fees related to
this project; i.e., Clark County Sanitation District,
Nevada Power Company, Sprint Telephone, Southwest Gas
Corporation, Las Vegas Valley Water District, etc.
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ARTICLE 5
ARCHITECT'S DUTIES
The Owner is informed that the Architect on this Project is
Anthony A. Marnell II, who, in addition to being a licensed
Architect within the State of Nevada, is also a majority
stockholder and employee of Contractor. The Owner acknowledges
this relationship between Architect and Contractor on this
Project, and herein accepts in every respect this close
association between the two of them. In light of the special
relationship existing between the Architect and the Contractor,
the Owner agrees that in case of the termination of the
Architect, for whatever reason, at the option of the Contractor
the terms and conditions of this Contract will be renegotiated.
(A) The Architect will provide administration of the
Project as follows:
(1) The Architect shall advise and consult with the
Owner, and shall act on behalf of the Owner and Contractor to the
extent provided in this Contract.
(2) The Architect shall visit the site at intervals
appropriate to the stage of construction or as otherwise agreed
by the Architect in writing to become generally familiar with the
progress and quality of the work and to determine in general if
the work is proceeding in accordance with the Contract. However,
the Architect shall not be required to make exhaustive or
continuous on-site inspections to check the quality or quantity
of the work. On the basis of such on-site observations as an
Architect, the Architect shall keep the Owner informed of the
progress and quality of work. However, the Architect shall not
be responsible for the acts or omissions of the Contractor,
Subcontractors, or any other persons performing any of the work
in the Project, or for failure of any of them to carry out the
work in accordance with this Contract.
(3) The Architect shall at all times have access to
the work wherever it is in preparation or progress, and Owner
shall provide facilities for such access so that the Architect
may perform his functions under this Contract.
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(4) On written request of either the Owner or
Contractor, the Architect shall, with reasonable promptness,
render interpretations of the plans and specifications necessary
for the proper execution or progress of the work.
(5) The Architect's decisions in matters relating to
artistic effect shall be final if consistent with the intent of
this Contract.
(6) The Architect shall have authority to reject
work which does not conform to the requirements of this Contract
and the given standards of the industry; and whenever, in the
Architect's reasonable opinion, it is necessary to evaluate
conformity, the Architect will have authority to require special
inspection or testing of the work in accordance with the
provisions of this Contract, whether or not such work be then
fabricated, installed or completed.
(a) If inspection or testing of the work reveals
a material failure of the work to comply with the requirements of
the Contract and the standards of the industry, the Contractor
shall promptly correct any such deficient work, and the cost
involved in correcting that work shall be borne solely by the
Contractor. However, should the inspection or testing reveal
that the work has been in material compliance with the
requirements of the Contract and standards of the industry, then
the Owner shall bear any and all costs involved in the
inspection, testing, and correction of the work and an
appropriate change order shall be issued as provided in Article
2.
(b) If the law, rules, ordinances,
regulations or orders of any public authority having jurisdiction
require any portion of the work to be inspected, tested or
approved, the Contractor shall arrange for such inspections and
the Owner shall bear all the costs of such inspections, tests or
approval.
(7) The Architect shall review and approve or take
other appropriate action upon the Contractor's submittals such as
shop drawings, product data and samples, for conformance with the
design concept of the work, and with the information given in the
Contract. Such action shall be taken with reasonable promptness
so as to cause no delay in the Project. The Architect's approval
of a
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specific item shall not indicate approval of any assembly of
which the item is a component.
(8) Any other duties as may be set forth in this
Contract.
ARTICLE 6
CONTRACTOR'S FEE
In consideration of the Contractor's performance of its
obligations under this Contract, the Owner agrees to pay the
Contractor as compensation for its services all costs (as costs
are defined in Article 7) plus a fee equal to Seven (7%) percent
of the total cost of the Project. Costs shall be paid to the
Contractor at the time and in the manner set forth in Article 15.
In addition, the Contractor shall be paid ninety percent (90%) of
the proportional amount of its fee with each payment request made
by Contractor until such time that the work is fifty percent
(50%) complete. Thereafter the Contractor shall be paid One
Hundred Percent (100%) of the proportional amount of its fee with
each payment request. The balance of the fee shall be paid at
the time of final payment. The Contractor guarantees that the
maximum cost to the Owner for the completion of the Project,
which cost includes the Contractor's fee, shall not exceed ONE
HUNDRED FIFTY TWO MILLION, FIVE HUNDRED SIXTY FOUR THOUSAND, ONE
HUNDRED FIFTY THREE DOLLARS ($152,564,153.00). This amount,
however, is predicted upon the aforementioned original plans and
the scope of work as outlined in Marnell Corrao Associates Rio
North Development Preliminary Magnitude Budget Estimates Revised
31 October 1997 (Exhibit B), and does not contemplate any changes
as may be requested by the Owner as provided for in Article 2.
As identified in Exhibit 'B', the above stated Contract
Amount includes a Project Contingency in the amount of SEVEN
MILLION DOLLARS ($7,000,000.00). It is understood that the
Contractor shall not utilize funds from this Project Contingency
without the review and approval of the Owner. It is also
understood that the above stated Contract Amount is based on
preliminary project drawings.
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Upon receipt of substantially complete project drawings and
specifications for each element of the project, the Contractor
shall procure pricing from subcontractors and suppliers and
prepare detailed cost estimates for the Owner's review. The
Contractor shall identify within these detailed cost estimates, a
Contingency Amount for each element of the project. The
Contractor shall at that time, request a draw from the Project
Contingency for that element of the project. Utilization of any
additional Project Contingency funds will require the review and
approval of the Owner.
ARTICLE 7
COSTS TO BE REIMBURSED
(A) The Owner agrees to reimburse the Contractor for all
costs incurred in the execution of the work. Such costs include,
but are not limited to, the following items:
ITEM I. Any and all costs of labor, including but not
limited to social security, unemployment insurance, old age
benefits, all applicable taxes, travel time, subsistence wherever
applicable, contributions to labor union benefits, such as health
and welfare, vacation, pension, etc. Weekly payrolls shall be
made up from daily time sheets and shall set forth the name,
classification, social security number, hours worked, travel
time, subsistence, rate of pay, gross amount, all deductions, and
net amount paid for each employee. The payroll sheet shall bear
a sequence number and dates indicating the payroll period.
Contractor is to pay when due all employee
labor tax contributions, all state, county and federal taxes, as
pertains to labor, and all contributions to labor union benefit
funds. Contractor shall submit on its payment request the
billing for aforementioned amounts.
ITEM II. The salary and expenses of one off-site
administrative employee who is to expend whatever time and energy
is required to see that the job is properly administered from the
home office. However, his services are not to be exclusive for
this Project. Services of additional off-site administrative
personnel
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are to be covered by the allowance of the salary of the
administrative employee and may not be added to the cost of the
job.
ITEM III. Any and all materials and supplies purchased
for the Project or required for execution of the work, including
temporary buildings and structures. Cost of materials shall
include all applicable taxes and costs of transportation of these
materials. Fuel or energy for vehicle and equipment shall be
included. All materials paid for, or reimbursed, by the Owner
shall become the property of the Owner.
ITEM IV. The amounts of all subcontracts, said amount
to include all subcontractor's costs and profits.
ITEM V. Premiums on all insurance or bonds required
and or maintained for the Project (see Article 10 and Article
17). Premiums shall be included as costs as to which markup
applies in determining Contractor's fee. The cost of General
Liability Insurance is a reimbursable cost. The rate for the
General Liability Insurance shall be a minimum of $7.50 per
$1,000 dollars of contract value. This rate is subject to
change. Cost to be reimbursed shall be actual cost incurred by
Contractor.
ITEM VI. Transportation, traveling expenses, including
meals and hotel expenses of the Contractor of its officers or
employees incurred in the discharge of duties connected with this
work.
ITEM VII. All expenses incurred for transportation to
and from the work of the personnel required for its prosecution
as pertaining to Article 7, Item VI.
ITEM VIII.Permit fees, plan check fees, royalties,
direct field surveying for construction purposes, county
inspectors, damages for infringement of patents and costs of
defending suits therefore, and for deposits lost for causes
other than the Contractor's negligence.
ITEM IX. Losses and expenses not compensated by
insurance or otherwise sustained by the Contractor in connection
with the work, provided they
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have resulted from causes other than the fault or negligence of
the Contractor. Such losses shall include settlements made with
the written consent and approval of the Owner. No such losses
shall be included in the cost fee, but if after a loss from fire,
flood or similar causes not due to the negligence of the
Contractor, Contractor be required to reconstruct damaged
portions of items, Contractor shall receive for its services a
fee in compliance with Article 6. Such work shall be considered
a change subject to the provision of Article 2, and the
guaranteed maximum cost shall be increased accordingly.
ITEM X. Minor expenses, such as telegrams, telephone
service, expressage, first aid supplies and similar petty cash
items.
ITEM XI. Cost, including transportation and
maintenance, of hand tools not owned by workmen, canvas,
tarpaulins, polyethylene film, and items consumed in the
prosecution of the work. Items used but not consumed remain the
property of Contractor.
ITEM XII. Rentals of tools, vehicles, trucks,
compressors, cranes, hoists, equipment and all construction plant
parts thereof. It is intended that rental shall be charged on
all items required for use in construction of the Project.
Rentals shall be charged on equipment owned by the Contractor as
well as equipment owned by others. Rental rates shall be as
established by prevailing area rates.
ITEM XIII.Interest at a rate in accordance with
Article 15, Paragraph (A), and as can be determined on funds
which the Contractor must provide or borrow in the event that
payments are not made by the Owner on time as provided
hereinafter in Article 15.
ITEM XIV. All items and expenses necessary for
providing of a temporary office at the jobsite. Salaries of
personnel required to maintain the field office shall be
incorporated in the payroll under the provisions of Article 7,
Item I. Supplies for the office shall be provided under the
provisions of Article 7, Item III.
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ITEM XV. Costs incurred due to an emergency affecting
the safety of persons and property.
(B) Owner agrees to reimburse Contractor for all costs
incurred during or arising out of the course of construction,
even though billings for said costs may be submitted to the Owner
after the Contract has otherwise terminated, up to a maximum
period of 60 days after final payment.
ARTICLE 8
COSTS NOT TO BE REIMBURSED
The following are the only costs which the Contractor shall
not be permitted to include as job costs;
ITEM I. Salary of any person employee during the
execution of the work in the main home office, except the one
administrative employee for whom provision is made in article 7,
Item II.
ITEM II. Overhead expenses not expressly included in
Article 7.
ITEM III. Interest on capital employed, except that
provided for in Article 7, Item XIII.
ARTICLE 9
DISCOUNTS, REBATES, REFUNDS
All cash and trade discounts shall accrue to the Owner,
provided payments to the Contractor are timely made according to
the provisions of Article 15. Should any payments to the
Contractor be withheld or delayed for whatever reason, all cash
and trade discounts shall accrue to the Contractor. Should a
discount be disallowed by a supplier due to a delay in payment
from the Owner, the undiscounted amount shall be considered the
cost. Rebates, refunds and all returns from sale of surplus
material shall accrue to the Owner.
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ARTICLE 10
INSURANCE
(A) Property Insurance.
(1) The Owner shall purchase and maintain property
insurance on the entire work to the full insurable value thereof.
This insurance shall include the Owner, the Contractor,
Subcontractors, Sub-subcontractors, and Materialmen. The
insurance shall insure against the perils of fire, extended
coverage and also include "all risk" for physical loss not
limited to theft, earthquake and flood damages. If the Owner and
Contractor agree to waive any coverage's and a loss results from
this uninsured peril or lack of coverage, then the Owner shall be
solely responsible for any and all resulting damage and costs.
(a) The Owner shall file a copy of all policies
with the Contractor before an exposure to loss may occur. Said
policies to be in a form and content satisfactory to Contractor.
(b) If the Owner does not intend to purchase
insurance required by Paragraph (1) above, Owner shall inform the
Contractor in writing prior to the commencement of the work. The
Contractor may then effect such insurance, and the cost shall be
charged to the Owner as a reimbursable cost provided for in
Article 7.
(2) The Owner shall purchase and maintain such
insurance as will insure Owner against loss of use of Owner's
property and/or damage to existing property due to fire or other
hazards, however caused. This insurance shall include the Owner,
the Contractor, Subcontractors, Sub-subcontractors and
Materialmen. The Owner, for itself and on behalf of its
insurance company or companies, waives all rights of recovery or
causes of action against the Contractor for all damage and/or
loss or use of its property, including consequential losses, due
to fire and other hazards, however caused.
(3) The responsibility for payment of any deductible
under Paragraphs (1) and (2) above shall be borne exclusively by
the Owner.
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(4) All policies of insurance obtained under
Paragraphs (1) and (2) above shall be secured with recognized and
established insurance companies and no cancellation or
modification of any policy or policies shall be made by Owner
without thirty (30) days prior written notice to Contractor.
(B) Liability Insurance.
(1) The Owner shall be responsible for purchasing
and maintaining its own liability insurance, which shall include
such insurance as will protect the Owner against claims which
may arise from any operations under this Contract.
(2) The Contractor will provide the Owner with
certificates of insurance evidencing that the Contractor has
liability and automobile liability insurance, which insurance
cannot be canceled by or terminated or the coverage thereof
materially reduced, until the insurance company has attempted to
give thirty (30) days written notice thereof by Registered Mail
addressed to the Contractor and Owner. The Contractor shall
maintain:
(a) Public Liability:
Comprehensive General Liability Insurance
covering the Contractor, Owner and other indemnities, as their
interests may appear, as additional insured, with limits of
liability as follows: Bodily Injury and Property Damage: Not
less than Ten Million Dollars ($10,000,000.00) Combined Single
Limit.
(b) Workmen's Compensation:
Workmen's Compensation Insurance, in minimum
amounts as required by Law.
(c) Automobile Liability:
Automobile Liability and Property Damage
Insurance for all owned, non-owned and hired vehicles covering
the Contractor and the indemnities, as their interest may appear,
as additional insured, against liability for bodily injury and
death and for property damage with limits of liability of not
less than One Million Dollars ($1,000,000.00) Combined Single
Limit.
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(3) Owner agrees to defend, indemnify and hold
Contractor completely free and harmless from and against any and
all expenses, costs, including but not limited to court costs and
reasonable attorney's fees which arise out of or which in any way
relate to any claim or demand being asserted, or lawsuit arises
our of any operations affecting the Project. The agreement to
indemnify and hold the Contractor completely free and harmless
shall apply, save and except where it is legally established by a
Court of competent jurisdiction that the Contractor has itself
been principally negligent. This Paragraph (3) shall survive the
termination of this Contract.
(C) Boiler Insurance.
The Owner shall purchase and maintain boiler and
machinery insurance in an amount necessary to protect the Owner
and Contractor from any and all risks or loss. This insurance
shall include the Owner, the Contractor, Subcontractors, Sub-
subcontractors and Materialmen.
(D) Notification of Any Claim.
Should either party to this Contract suffer injury or
damage to person or property because of any act or omission of
the other party or any of its employees, agents or others for
whose acts either the Owner or Contractor is or may be legally
liable, any claim of injury or damage shall be made in writing to
such other party within a reasonable time after the first
observance of such injury or damage.
ARTICLE 11
SUBCONTRACTS
(A) The Contractor may subcontract all or any portion of
the work at its discretion, and the total price of any and all
such Subcontracts shall be a reimbursable cost as provided for in
Article 7.
(B) Contractor acknowledges that under limited
circumstances the Owner may request the Contractor to use one or
more Subcontractors of the Owner's choice. However, in
recognition of the special relationship that must exist between
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the Contractor and its Subcontractors, the Owner agrees that when
the Owner requests the use of any particular Subcontractor, the
Owner shall seek the advise and obtain the approval of the
Contractor. The Owner further agrees that should the Contractor
agree to use the Owner's Subcontractor, and should the price to
be charged by the Owner's Subcontractor exceed the price with the
Contractor otherwise intended to use, the difference in price
will be added to the Guaranteed Maximum Cost as provided for in
Article 6, and that the Contractor's fees will be increased
accordingly.
(C) Regardless of which Subcontractors may be used on the
Project, there shall be no contractual relationship between the
Owner and the Subcontractors, and the Contractor shall have full,
complete and absolute directing authority over performance of the
work by all Subcontractors.
(D) The organization of the specifications into divisions,
sections and articles, and the arrangement of drawings shall not
control the Contractor in dividing the work among Subcontractors,
or in establishing the extent of the work to be performed by any
trade.
ARTICLE 12
OWNER'S REPRESENTATIVE
During the course of construction, the Owner shall provide
an individual who will be available on a regular basis to consult
with the Contractor concerning all phases of the Project. This
individual shall be the Owner's Representative, and shall be
solely responsible for bringing any problems to the attention of
the Contractor, and for approving any matters for which the
Owner's approval is required or sought. This individual shall
have total familiarity with all aspects of the building process,
and will have authority to represent and bind the Owner in any
and all matters affecting the Owner's rights and responsibilities
under this Contract. For the purposes of this Project, the
Owner's Representative shall be Mr. Cary Rehm. If for any reason
or at any time, this individual will not be available to the
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Contractor, then the Owner shall immediately designate another
individual to take his place and shall notify the Contractor of
such writing.
ARTICLE 13
TITLE OF THE WORK
The title to all work completed and in the course of
construction, and of all materials supplied, for which payment
has been made in full by Owner, shall be in the Owner.
ARTICLE 14
ACCOUNTING-INSPECTION AUDIT
The Contractor shall keep full and detailed accounts and
records of all costs. The Owner shall be afforded reasonable
access to the accounts and records of Contractor as reasonable
times for the purpose of inspecting, and where reasonably
requested by Owner, auditing the same.
However, neither the request for nor the conduct of any
audit shall be cause for failure of Owner to make timely payments
as provided herein. In any and all events, the Owner shall
request, conduct and close any monthly progress payment
accounting review within thirty (30) days after receipt of the
progress payment request. Any FINAL payment request audit shall
be conducted and closed within twenty-five (25) days after
receipt of the request for final payment so as not to delay final
payment including retention which shall be paid Contractor within
thirty (30) days after substantial completion of the Project, and
in no event, later than thirty-nine (39) days after the filing of
the Notice of Completion for the Project.
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ARTICLE 15
APPLICATION FOR PAYMENT
(A) The Contractor shall deliver to the Owner, on or about
the first day of each month, a request for payment on a form
substantially similar to that attached hereto as Exhibit C. The
Contractor shall include with this form an appropriate lien
release covering the work and materials enumerated in the payment
request. The Owner shall promptly approve the payment request so
that there will be no delay in processing of payment and shall,
save and except where a legitimate objection is raised as to a
particular item as provided in Paragraph (B) below, make payment
in full to the Contractor on or before the tenth (10th) day of
each month. Payments not made to the Contractor on or before the
tenth (10th) of the month shall bear interest at the then current
prime rate of interest plus 2% as that rate is established by
First Interstate Bank of Nevada. The inclusion of this interest
shall be in addition to any and all other rights and remedies
which the Contractor may have in the event of delinquent
payments.
(B) The Owner shall determine the amount owning to the
Contractor based on observations at the site and on evaluation of
the Contractor's request for payment. Should the Owner
disapprove an item in any payment request, payment for that
specific item may be withheld for a period not to exceed thirty
(30) days within which time it shall be adjudicated. However,
the balance requested in that payment request must be paid by the
Owner to the Contractor on or before the tenth (10th) day of the
month.
(C) The Contractor specifically reserves the right to
cease work should requested payments be unreasonably withheld or
delayed.
(D) Payments will be made by the Owner for materials or
equipment whether the same have been incorporated into the
Project or suitable stored on or off the site. Payments for said
materials and equipment will be conditioned only upon inspection
of the materials and equipment by the Contractor, and the
Contractor's verification that suitable insurance has been
secured.
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(E) If, after substantial completion of the work, final
completion thereof is materially delayed through no fault of the
Contractor or by issuance of change orders affecting final
completion, the Owner shall, upon application by the Contractor,
and without terminating the Contract, make payment of the balance
due for that portion of the work which has been fully completed.
(F) In the event of a lien or liens for material or labor
is filed against the property, the Owner may withhold from final
payment to Contractor an amount equal to the amount of the lien
plus a reasonable amount to meet the cost of possible litigation.
This amount shall be promptly released to the Contractor upon its
furnishing a bond in favor of the Owner and the lien claimant in
the amount of the lien and probable litigation costs, or upon the
Contractor furnishing the Owner a release of lien from the
claimant.
(G) Final payment shall be paid to the Contractor within
thirty (30) days after substantial completion, as defined in
Article 16, Paragraph (B) and in no event later than thirty-nine
(39) days after, the filing of the Notice of Completion for the
Project.
(H) The making of final payment shall constitute a waiver
of all claims by the Owner except those arising from (1)
unsettled liens, or (2) faulty or defective work appearing after
substantial completion and within the term of the warranty given
by the Contractor, under the terms of Article 19.
(I) A ten percent (10%) retention shall be withheld from
each application for payment for work performed until the work is
fifty percent (50%) complete. Thereafter no retention shall be
withheld. Retention shall be released upon Final Payment.
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ARTICLE 16
NOTICE OF COMPLETION
(A) The Owner shall promptly record a Notice of Completion
when the Project has been substantially completed. Substantial
completion is defined below in Paragraph (B). Final payment
shall be paid to the Contractor within thirty (30) days after
substantial completion, and in no event later than thirty-nine
(39) days after, the filing of Notice of Completion for the
Project.
(B) The date of substantial completion of the work, or any
designated portion thereof, is the date certified by the
Contractor when construction is sufficiently complete, in
accordance with the Contract, so the Owner can occupy or utilize
the Project or designated portion thereof for the use for which
it is intended.
ARTICLE 17
BOND
The Contractor shall endeavor to furnish a Contract
Performance Bond in an amount and form satisfactory to the Owner
at the Owner's expense should the Owner specifically request such
a bond. Should the Owner desire, the Contractor may pay for the
bond; however, in this event, the premium shall become a job cost
under the provision of Article 7, Item V, and the Guaranteed
Maximum Cost as set forth in Article 6, shall be increased
accordingly, treating this as a change subject to the provisions
of Article 2.
ARTICLE 18
PERIOD OF CONSTRUCTION
(A) The Contractor agrees to commence work hereunder
within five (5) work days after receipt of written notice from
the Owner to do so, to prosecute said work thereafter diligently
and continuously to completion and in any and all events to
substantially complete the Project in accordance with the
requirements of the Owner.
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(B) The Owner and Contractor specifically acknowledge,
however, that there are circumstances beyond the reasonable
control of Contractor which may result in a delay of the Project.
Consequently, Owner and Contractor agree that if the Contractor
is delayed or impeded by any acts of the Owner or its agents or
those claiming under agreement from the Owner, or by acts of God
which Contractor could not have reasonably foreseen and provided
against, or by stormy, inclement, or severely cold weather, or by
strike, boycott, or like obstructive actions of employees, third
persons or labor organizations, or for any other cause beyond the
reasonable control of Contractor, the time within which the
Contractor has to complete the Project shall be appropriately
extended.
(C) Should concealed conditions encountered in the
performance of the work below the surface of the ground, or
should concealed or unknown conditions in an existing structure
be at variance with the conditions indicated by the Contract, or
should unknown physical conditions below the surface of the
ground or should concealed or unknown conditions in an existing
structure of an unusual nature, differing materially from those
ordinarily encountered and generally recognized as inherent in
work of the character provided for in this Contract be
encountered, the Contract Sum shall be equitably adjusted under
Article 2, upon claim made within a reasonable time after the
first observance of the condition.
(D) The period of time set forth in Paragraph (A) above
may be necessarily or appropriately extended by any change orders
effected pursuant to Article 2.
(E) The term "day" as used throughout this Contract shall
mean calendar day unless otherwise specifically designated.
ARTICLE 19
WARRANTIES
(A) The entire work is hereby warranted against defects in
materials and workmanship for a period of one (1) year from the
date of substantial completion of the Project or substantial
completion of any designated portion thereof. If, within
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this one (1) year period, any of the work or materials or
equipment (for which approval has not been previously given in
writing by Owner) is proven to be defective and not in accordance
with the Contract, the Contractor shall, at its expense, correct
said defect promptly after receipt of a written notice from the
Owner to do so. The Owner shall give notice promptly after
discovery of any defective condition.
(B) The Contractor warrants to the Owner that all
equipment and materials furnished under this Contract will be new
unless otherwise specified or approved by the Owner.
(C) Articles, materials or methods specified by
proprietary name or by name of vendor or manufacturer will be
furnished or applied by Contractor, except only where equal
substitutions for articles, materials or methods are approved by
the Contractor for use in lieu thereof. In determining the
quality of substitute parts, materials or methods, availability
or procurement shall be a determining factor.
(D) The Contractor shall secure and furnish to the Owner
through the Architect, all applicable written guarantees and
warranties as may be called for by this Contract.
ARTICLE 20
ARBITRATION
(A) All disputes, claims or questions not resolved
informally by Owner and Contractor may be subject to arbitration.
If both Owner and Contractor agree that a particular dispute,
claim or question should be arbitrated, then arbitration shall be
effected as provided in Paragraph (B) below, and the decision
therefrom shall be binding on both parties. If, however, either
the Contractor and/or the Owner elect not to proceed by way of
arbitration, then either or both parties may resort to
appropriate Court action, with the prevailing party being
entitled to receive all reasonable attorneys' fees, Court costs,
and any and all other fees, expenses, and
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costs arising out of or in any way incurred in the institution or
defense of that action.
(B) Should both the Owner and Contractor agree to
arbitration, the following procedures shall be employed:
(1) Notice of the demand for arbitration shall be
filed in writing with the other party to this Contract. This
demand shall be made within a reasonable time after the dispute
has risen, but in no case shall the demand be made later than the
time set in this Contract for final payment. Any demand received
after that time shall not be allowed.
(2) Owner and Contractor shall, within ten (10) days
of the written demand for arbitration, agree upon an arbitrator.
If within this said ten (10) day period the Owner and Contractor
are unable to agree upon a single arbitrator, then the Owner and
Contractor will, within three (3) additional days, each select an
arbitrator, and those two arbitrators will then select a third.
(3) At such time as the arbitrator (or all three
arbitrators) has been selected as provided in Paragraph (2)
above, the election to arbitrate shall become final and
irrevocable.
(4) Unless both Owner and Contractor specifically
agree in writing to the contrary, the arbitration hearing shall
be conducted and the decision rendered therefrom no more than
forty-five (45) days after the written demand for arbitration.
(5) The arbitrator, if he deems that the case
requires it, is authorized to award to the party whose contention
is sustained, such sums as he (or a majority of them) shall deem
proper to compensate the prevailing party for the time and
expense incident to the proceedings, including any and all
reasonable attorneys' fees expended, and, if the arbitration was
demanded without reasonable cause, he may also award damages for
delay. Unless Owner and Contractor specifically agree in writing
to the contrary, the arbitrator shall fix his own
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compensation and shall assess costs and charges of the proceeding
upon either or both parties.
(6) The decision of the arbitrator shall be final,
save and except for the limited right of appeal as provided for
in the Nevada Revised Statutes. In the event the decision of the
arbitrator is appealed, reasonable attorneys' fees and Court
costs, as determined by a Court of competent jurisdiction, shall
be paid to the prevailing party.
(7) Unless Owner and Contractor otherwise agree in
writing to the contrary, the Contractor shall carry on the work
during any arbitration proceedings, and the Owner shall continue
to make timely payments to the Contractor in accordance with the
Contract.
ARTICLE 21
TERMINATION OF THE CONTRACT
(A) Termination by the Contractor.
(1) If the work is stopped for a period of thirty (30)
days under an order of any Court or other public authority having
jurisdiction, or as the result of an act of government, such as
declaration of a national emergency making materials unavailable
through no act or fault of the Contractor or a Subcontractor or
their agents or employees, or any other person performing any of
the work under a contract with the Contractor, or if the work
should be stopped for a period of thirty (30) days by the
Contractor because the Owner has not made payment as provided
herein, then the Contractor may, upon three (3) additional days'
written notice to the Owner, terminate this Contract and recover
from the Owner payment for all work executed, and for any proven
loss sustained upon any materials, equipment, tools, construction
equipment and machinery, including reasonable profit and damages
thereon.
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(B) Termination by the Owner.
(1) If the Contractor is adjudged a bankrupt or makes
a general assignment for the benefit of creditors, or if a
receiver is appointed on account of the Contractor's insolvency,
or if the Contractor persistently and repeatedly refuses or
fails, except in cases for which an extension of time is provided
for in Article 18, to supply enough workmen or materials, or if
the Contractor persistently and repeatedly fails to make payment
to Subcontractors or for materials or labor, or persistently
disregards laws, ordinances, rules, regulations or orders of any
public authority having jurisdiction, or otherwise is guilty of a
substantial violation of the provisions of this Contract, then
the Owner may, without prejudice to any other rights or remedies
he may have, and after giving the Contractor and his surety, if
any, three (3) days' written notice, terminate the employment of
the Contractor and take possession of the site and all materials
for which the Owner has made payment in full.
(C) Any termination of this Contract, whether by
Contractor or Owner, shall be subject to the rights and remedies
available in Article 20.
ARTICLE 22
MISCELLANEOUS PROVISIONS
(None)
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ARTICLE 23
NOTICES
Any and all notices, demands or requests required or
appropriate under this Contract shall be given in writing either
by personal delivery or by registered or certified mail, return
receipt requested, addressed to the following addresses:
To Contractor: MARNELL CORRAO ASSOCIATES, INC.
4495 South Polaris Avenue
Las Vegas, NV 89103
To Owner: RIO PROPERTIES, INC. d/b/a
RIO SUITE HOTEL & CASINO
3700 West Flamingo Road
Las Vegas, NV 89103
When notice has been given by mail, it shall be deemed served the
date following deposit, postage prepaid in the United States
mail. The parties may change the place of notice by notifying
the other party as set forth herein.
ARTICLE 24
PARTIAL INVALIDITY
Should any term, condition, covenant or provision of this Contra
ct, or any application thereof, be held by a Court of competent
jurisdiction to be invalid, void or unenforceable, all
provisions, covenants or conditions of this Contract, and all
applications thereof, not held invalid, void or unenforceable,
shall continue in full force and effect and shall in no way be
effected, impaired or invalidated thereby.
ARTICLE 25
SUCCESSORS IN INTEREST
Neither Owner nor Contractor may transfer or assign this
Contract, or any interest therein, without the prior written
permission of the other. However, this Contract shall insure to
be benefit of, and be binding upon, the successors, assigns
(where permitted) and representatives of both the Owner and
Contractor, and the Owner and Contractor covenant for themselves
and for their successors, assigns
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and representatives, that they will fully perform on the terms
and conditions of this Contract.
ARTICLE 26
CAPTIONS AND PRONOUNS
The captions appearing at the commencement of the Articles hereof
are descriptive only and for convenience in reference to this
Contract, and in no way whatsoever define, limit or describe the
scope or intent of this Contract, or in any way affect this
Contract.
ARTICLE 27
CORPORATE AUTHORIZATION
The parties executing this Contract acknowledge and
represent that all corporate authorization has been obtained for
the execution of this Contract and for the compliance with each
and every term hereof.
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ARTICLE 28
LEGAL SITUS
The terms and conditions of this Contract shall be
construed in accordance with and governed by the laws of the
State of Nevada, and the parties hereto acknowledge that the
Courts of this State shall have exclusive jurisdiction over any
action or proceeding brought under or by reason of this Contract.
IN WITNESS WHEREOF, the Contractor and Owner have executed
this contract as of the day and year first above written.
RIO PROPERTIES, INC. d/b/a MARNELL CORRAO ASSOCIATES,
RIO SUITE HOTEL & CASINO INC.
By /s/ John Lipkowitz By /s/ Perry A. Eiman
Its Exec VP Its Vice President of
Operations
Nevada State Contractor's
License No. 39178
Attachments: Exhibit 'A' Legal Description
Exhibit 'B' Rio North Development Preliminary
Magnitude Budget Estimate Revised
31 October 1997
Exhibit 'C' Billing Format
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EXHIBIT 'A'
(Legal Description)
[NOT INCLUDED]
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EXHIBIT 'B'
(Rio North Development Preliminary Magnitude Budget
Estimate Revised 31 October 1997)
[NOT INCLUDED]
<PAGE>
EXHIBIT 'C'
(Billing Format)
[NOT INCLUDED]
<PAGE>
BUILDING CONTRACT
THIS CONTRACT is made and entered into as of this Twenty-
fifth day of March 1998, by and between MARNELL CORRAO
ASSOCIATES, INC., a Nevada Corporation (as General Contractor and
hereinafter referred to as "Contractor"), and Rio Properties,
Inc. d/b/a Rio Suite Hotel & Casino, a Nevada Limited Partnership
(hereinafter referred to as "Owner").
WITNESSETH:
WHEREAS, the Owner intends to construct various LOWRISE
INTERIOR REMODELS at the Rio Suite Hotel & Casino, including the
Marketing Remodel, Shutters Restroom Relocation,
Reservation/Concierge Desk, High Limit Slot, High Limit Salon,
Martini Bar, 2nd Floor Poker Tournament, Mask Sushi Bar, Chinese
Restaurant, New Carpet Walkway, EDR Upgrades, Garage Lobby
Enhancements, Arcade Relocation, Copa Showroom Entry Remodel,
Village 2nd Floor Exhibit Space, Village Bar Pop-Up TV, Copa
Showroom Video Screen Replacement and Casino Video Wall
Relocation, being hereinafter referred to as the Project (OUR
PROJECT NOS. 87597, 60097, 60197, 60297, 60397, 60497, 60597,
60697, 60797, 60897, 60997, 61197, 61297, 61397, 61697, 62797 &
62997), and
WHEREAS, the Owner requests the Contractor to perform the
work and supply said materials and equipment necessary to
complete the Project, and
WHEREAS, the Contractor desires to perform said work and to
supply said materials and equipment,
NOW THEREFORE, in consideration of the mutual benefits
arising therefrom, and for other good and valuable consideration,
it is hereby agreed as follows.
<PAGE>
ARTICLE 1
CONTRACT DOCUMENTS
(A) The documents constituting the Contract between the
Owner and the Contractor (and hereby collectively referred to as
the Contract or this Contract) consist of the following:
1. This Building Contract.
2. Marnell Corrao Associates Preliminary
Magnitude Budget Estimates dated 15 October 1997,
attached hereto as Exhibit 'B'.
3. Project plans entitled: Marketing
Remodel, Shutters Restroom Relocation,
Reservation/Concierge Desk, High Limit Slot, High
Limit Salon, Martini Bar, 2nd Floor Poker
Tournament, Mask Sushi Bar, Chinese Restaurant,
New Carpet Walkway, EDR Upgrades, Garage Lobby
Enhancements, Arcade Relocation, Copa Showroom
Entry Remodel, Village 2nd Floor Exhibit Space,
Village Bar Pop-Up TV, Copa Showroom Video Screen
Replacement and Casino Video Wall Relocation
issued through 10 October 1997 as prepared by
Anthony A. Marnell II, Chtd., Architect.
(B) In the event of any conflict between or among any of
the terms or conditions of the documents constituting this
Contract, the following order shall be employed in resolving any
such conflict and in determining what terms or conditions will
govern:
1. This Building Contract, inclusive of Exhibit 'B'.
2. The Plans.
(C) This Contract constitutes the entire agreement between
the parties, and no modification of this contract shall be valid
or binding unless such modification is in writing duly dated and
signed by both parties. Neither Owner nor Contractor shall be
bound by prior terms, conditions, statements, or
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representations, express or implied, oral or written, not
otherwise contained in this Contract.
ARTICLE 2
CHANGES IN THE WORK
(A) The Owner may, by written instructions or drawings to
the Contractor which, in the reasonable opinion of the
Contractor, do not materially affect the type, design, nature or
scheduling of the Project, make changes in the abovementioned
plans and specifications, issue additional instructions, require
additional work, direct the omission of work previously shown or
ordered, or change work already incorporated into the Project,
and the provisions of this Contract shall apply to any and all
such changes with the same force and effect as though originally
embodied in this Contract.
(B) For changes which involve additional work or a
reduction in work as set forth in Paragraph (A) above, the
Guaranteed Maximum Cost as hereinafter set forth in Article 6
shall be increased or decreased by the Contractor in accordance
with the Contractor's estimate for said work, and the
Contractor's fee shall be appropriately adjusted. All changes in
the work must be authorized by a representative of Owner, who,
for the purposes of this Project, shall be
Mr. Cary Rehm.
(C) However, Owner and Contractor specifically agree that
should a change be requested by Owner which, in the reasonable
opinion of the Contractor, would materially affect the type,
design, nature or schedule of the Project as a whole, the
Contractor reserves the right to renegotiate the terms of the
Contract.
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ARTICLE 3
CONTRACTOR'S DUTIES
(A) The Contractor agrees to provide all labor, materials
and equipment necessary for the proper completion of the Project
in a manner consistent with the requirements of the work to be
performed, subject only to the provisions of Article 18; and
during the course of construction, the Contractor agrees to
furnish its best skill and judgment in effecting this goal.
(B) The Contractor shall maintain at the site for the Owner
one (1) record copy of drawings, specifications, addenda, change
orders and other modifications.
(C) The Contractor shall, during the course of
construction, keep the premises free from accumulation of waste
materials or rubbish caused by its operations. Within a
reasonable period of time after substantial completion of the
Project, the Contractor shall remove its waste materials and
rubbish from and about the Project site as well as all tools,
construction equipment, machinery and surplus materials.
(D) The Contractor shall comply with all applicable laws,
ordinances, rules, codes, regulations and lawful orders of any
public authority relating to construction of the Project.
(E) Irrespective of Paragraph (D) above, it is the
responsibility of the Project Architect to use his best efforts
to make certain that the Project is designed in accordance with
applicable laws, ordinances, rules, statutes, building codes and
regulations. If the Contractor observes that the Project, or any
portion thereof, may be at variance therewith, the Contractor
shall notify the Architect, and any change shall be accomplished
by an appropriate modification as provided in Article 2.
(F) Any other duties as may be set forth in this Contract.
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ARTICLE 4
OWNER'S DUTIES
(A) The Owner shall, at the request of the Contractor,
prior to the time of execution of this Contract, furnish to the
Contractor and Contractor's Surety and Bonding Company acceptable
evidence that the Owner has made suitable financial arrangements
to fulfill its obligations under this Contract.
(B) The Owner shall furnish all surveys to the Architect
describing the physical characteristics, legal limitations and
utility locations for the site of the Project, and a legal
description of the site. A copy of the legal description shall
be attached to this Contract and marked as Exhibit A.
(C) The Owner shall secure and pay for necessary approvals,
easements, assessments and charges required for the construction,
use or occupancy of permanent structures or for permanent changes
in existing facilities.
(D) Information or services under the Owner's control shall
be furnished by the Owner with reasonable promptness so as to
avoid any delay in the orderly progress of the work.
(E) The Owner shall provide the Architect with those
facilities required by Article 5 (A) (3).
(F) Any other duties as may be set forth in this Contract.
(G) The Owner shall pay for and obtain all necessary utility
company extensions or service fees related to this project; i.e.,
Clark County Sanitation District, Nevada Power Company, Sprint
Telephone, Southwest Gas Corporation, Las Vegas Valley Water
District, etc.
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ARTICLE 5
ARCHITECT'S DUTIES
The Owner is informed that the Architect on this Project is
Anthony A. Marnell II, who, in addition to being a licensed
Architect within the State of Nevada, is also a majority
stockholder and employee of Contractor. The Owner acknowledges
this relationship between Architect and Contractor on this
Project, and herein accepts in every respect this close
association between the two of them. In light of the special
relationship existing between the Architect and the Contractor,
the Owner agrees that in case of the termination of the
Architect, for whatever reason, at the option of the Contractor
the terms and conditions of this Contract will be renegotiated.
(A) The Architect will provide administration of the
Project as follows:
(1) The Architect shall advise and consult with the
Owner, and shall act on behalf of the Owner and Contractor to the
extent provided in this Contract.
(2) The Architect shall visit the site at intervals
appropriate to the stage of construction or as otherwise agreed
by the Architect in writing to become generally familiar with the
progress and quality of the work and to determine in general if
the work is proceeding in accordance with the Contract. However,
the Architect shall not be required to make exhaustive or
continuous on-site inspections to check the quality or quantity
of the work. On the basis of such on-site observations as an
Architect, the Architect shall keep the Owner informed of the
progress and quality of work. However, the Architect shall not
be responsible for the acts or omissions of the Contractor,
Subcontractors, or any other persons performing any of the work
in the Project, or for failure of any of them to carry out the
work in accordance with this Contract.
(3) The Architect shall at all times have access to
the work wherever it is in preparation or progress, and Owner
shall provide facilities for such access so that the Architect
may perform his functions under this Contract.
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(4) On written request of either the Owner or
Contractor, the Architect shall, with reasonable promptness,
render interpretations of the plans and specifications necessary
for the proper execution or progress of the work.
(5) The Architect's decisions in matters relating to
artistic effect shall be final if consistent with the intent of
this Contract.
(6) The Architect shall have authority to reject work
which does not conform to the requirements of this Contract and
the given standards of the industry; and whenever, in the
Architect's reasonable opinion, it is necessary to evaluate
conformity, the Architect will have authority to require special
inspection or testing of the work in accordance with the
provisions of this Contract, whether or not such work be then
fabricated, installed or completed.
(a) If inspection or testing of the work reveals
a material failure of the work to comply with the requirements of
the Contract and the standards of the industry, the Contractor
shall promptly correct any such deficient work, and the cost
involved in correcting that work shall be borne solely by the
Contractor. However, should the inspection or testing reveal
that the work has been in material compliance with the
requirements of the Contract and standards of the industry, then
the Owner shall bear any and all costs involved in the
inspection, testing, and correction of the work and an
appropriate change order shall be issued as provided in Article
2.
(b) If the law, rules, ordinances,
regulations or orders of any public authority having jurisdiction
require any portion of the work to be inspected, tested or
approved, the Contractor shall arrange for such inspections and
the Owner shall bear all the costs of such inspections, tests or
approval.
(7) The Architect shall review and approve or take
other appropriate action upon the Contractor's submittals such as
shop drawings, product data and samples, for conformance with the
design concept of the work, and with the information given in the
Contract. Such action shall be taken with reasonable promptness
so as to cause no delay in the Project. The Architect's approval
of a
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specific item shall not indicate approval of any assembly of
which the item is a component.
(8) Any other duties as may be set forth in this
Contract.
ARTICLE 6
CONTRACTOR'S FEE
In consideration of the Contractor's performance of its
obligations under this Contract, the Owner agrees to pay the
Contractor as compensation for its services all costs (as costs
are defined in Article 7) plus a fee equal to Seven (7%) percent
of the total cost of the Project. Costs shall be paid to the
Contractor at the time and in the manner set forth in Article 15.
In addition, the Contractor shall be paid ninety percent (90%) of
the proportional amount of its fee with each payment request made
by Contractor until such time that the work is fifty percent
(50%) complete. Thereafter the Contractor shall be paid One
Hundred Percent (100%) of the proportional amount of its fee with
each payment request. The balance of the fee shall be paid at
the time of final payment. The Contractor guarantees that the
maximum cost to the Owner for the completion of the Project,
which cost includes the Contractor's fee, shall not exceed TWELVE
MILLION, THREE HUNDRED FOURTEEN THOUSAND, FOUR HUNDRED ONE
DOLLARS ($12,314,401.00). This amount, however, is predicted
upon the aforementioned original plans and the scope of work as
outlined in Marnell Corrao Associates Preliminary Magnitude
Budget Estimates dated 15 October 1997 (Exhibit B), and does not
contemplate any changes as may be requested by the Owner as
provided for in Article 2.
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ARTICLE 7
COSTS TO BE REIMBURSED
(A) The Owner agrees to reimburse the Contractor for all
costs incurred in the execution of the work. Such costs include,
but are not limited to, the following items:
ITEM I. Any and all costs of labor, including but not
limited to social security, unemployment insurance, old age
benefits, all applicable taxes, travel time, subsistence wherever
applicable, contributions to labor union benefits, such as health
and welfare, vacation, pension, etc. Weekly payrolls shall be
made up from daily time sheets and shall set forth the name,
classification, social security number, hours worked, travel
time, subsistence, rate of pay, gross amount, all deductions, and
net amount paid for each employee. The payroll sheet shall bear
a sequence number and dates indicating the payroll period.
Contractor is to pay when due all employee
labor tax contributions, all state, county and federal taxes, as
pertains to labor, and all contributions to labor union benefit
funds. Contractor shall submit on its payment request the
billing for aforementioned amounts.
ITEM II. The salary and expenses of one off-site
administrative employee who is to expend whatever time and energy
is required to see that the job is properly administered from the
home office. However, his services are not to be exclusive for
this Project. Services of additional off-site administrative
personnel are to be covered by the allowance of the salary of the
administrative employee and may not be added to the cost of the
job.
ITEM III. Any and all materials and supplies purchased
for the Project or required for execution of the work, including
temporary buildings and structures. Cost of materials shall
include all applicable taxes and costs of transportation of these
materials. Fuel or energy for vehicle and equipment shall be
included. All materials paid for, or reimbursed, by the Owner
shall become the property of the Owner.
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ITEM IV. The amounts of all subcontracts, said amount
to include all subcontractor's costs and profits.
ITEM V. Premiums on all insurance or bonds required
and or maintained for the Project (see Article 10 and Article
17). Premiums shall be included as costs as to which markup
applies in determining Contractor's fee. The cost of General
Liability Insurance is a reimbursable cost. The rate for the
General Liability Insurance shall be a minimum of $7.50 per
$1,000 dollars of contract value. This rate is subject to
change. Cost to be reimbursed shall be actual cost incurred by
Contractor.
ITEM VI. Transportation, traveling expenses, including
meals and hotel expenses of the Contractor of its officers or
employees incurred in the discharge of duties connected with this
work.
ITEM VII. All expenses incurred for transportation to
and from the work of the personnel required for its prosecution
as pertaining to Article 7, Item VI.
ITEM VIII. Permit fees, plan check fees,
royalties, direct field surveying for construction purposes,
county inspectors, damages for infringement of patents and costs
of defending suits therefore, and for deposits lost for causes
other than the Contractor's negligence.
ITEM IX. Losses and expenses not compensated by
insurance or otherwise sustained by the Contractor in connection
with the work, provided they have resulted from causes other than
the fault or negligence of the Contractor. Such losses shall
include settlements made with the written consent and approval of
the Owner. No such losses shall be included in the cost fee, but
if after a loss from fire, flood or similar causes not due to the
negligence of the Contractor, Contractor be required to
reconstruct damaged portions of items, Contractor shall receive
for its services a fee in compliance with Article 6. Such work
shall be considered a change subject to the provision of Article
2, and the guaranteed maximum cost shall be increased
accordingly.
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ITEM X. Minor expenses, such as telegrams, telephone
service, expressage, first aid supplies and similar petty cash
items.
ITEM XI. Cost, including transportation and
maintenance, of hand tools not owned by workmen, canvas,
tarpaulins, polyethylene film, and items consumed in the
prosecution of the work. Items used but not consumed remain the
property of Contractor.
ITEM XII. Rentals of tools, vehicles, trucks,
compressors, cranes, hoists, equipment and all construction plant
parts thereof. It is intended that rental shall be charged on
all items required for use in construction of the Project.
Rentals shall be charged on equipment owned by the Contractor as
well as equipment owned by others. Rental rates shall be as
established by prevailing area rates.
ITEM XIII. Interest at a rate in accordance with
Article 15, Paragraph (A), and as can be determined on funds
which the Contractor must provide or borrow in the event that
payments are not made by the Owner on time as provided
hereinafter in Article 15.
ITEM XIV. All items and expenses necessary for
providing of a temporary office at the jobsite. Salaries of
personnel required to maintain the field office shall be
incorporated in the payroll under the provisions of Article 7,
Item I. Supplies for the office shall be provided under the
provisions of Article 7, Item III.
ITEM XV. Costs incurred due to an emergency affecting
the safety of persons and property.
(B) Owner agrees to reimburse Contractor for all costs
incurred during or arising out of the course of construction,
even though billings for said costs may be submitted to the Owner
after the Contract has otherwise terminated, up to a maximum
period of 60 days after final payment.
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ARTICLE 8
COSTS NOT TO BE REIMBURSED
The following are the only costs which the Contractor shall
not be permitted to include as job costs;
ITEM I. Salary of any person employee during the
execution of the work in the main home office, except the one
administrative employee for whom provision is made in article 7,
Item II.
ITEM II. Overhead expenses not expressly included in
Article 7.
ITEM III. Interest on capital employed, except that
provided for in Article 7, Item XIII.
ARTICLE 9
DISCOUNTS, REBATES, REFUNDS
All cash and trade discounts shall accrue to the Owner,
provided payments to the Contractor are timely made according to
the provisions of Article 15. Should any payments to the
Contractor be withheld or delayed for whatever reason, all cash
and trade discounts shall accrue to the Contractor. Should a
discount be disallowed by a supplier due to a delay in payment
from the Owner, the undiscounted amount shall be considered the
cost. Rebates, refunds and all returns from sale of surplus
material shall accrue to the Owner.
ARTICLE 10
INSURANCE
(A) Property Insurance.
(1) The Owner shall purchase and maintain property
insurance on the entire work to the full insurable value thereof.
This insurance shall include the Owner, the Contractor,
Subcontractors, Sub-subcontractors, and Materialmen. The
insurance shall insure against the perils of fire, extended
coverage and also include "all risk" for physical loss not
limited to theft, earthquake and flood damages. If the Owner and
Contractor agree to waive any coverage's and a loss results from
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this uninsured peril or lack of coverage, then the Owner shall be
solely responsible for any and all resulting damage and costs.
(a) The Owner shall file a copy of all policies
with the Contractor before an exposure to loss may occur. Said
policies to be in a form and content satisfactory to Contractor.
(b) If the Owner does not intend to purchase
insurance required by Paragraph (1) above, Owner shall inform the
Contractor in writing prior to the commencement of the work. The
Contractor may then effect such insurance, and the cost shall be
charged to the Owner as a reimbursable cost provided for in
Article 7.
(2) The Owner shall purchase and maintain such
insurance as will insure Owner against loss of use of Owner's
property and/or damage to existing property due to fire or other
hazards, however caused. This insurance shall include the Owner,
the Contractor, Subcontractors, Sub-subcontractors and
Materialmen. The Owner, for itself and on behalf of its
insurance company or companies, waives all rights of recovery or
causes of action against the Contractor for all damage and/or
loss or use of its property, including consequential losses, due
to fire and other hazards, however caused.
(3) The responsibility for payment of any deductible
under Paragraphs (1) and (2) above shall be borne exclusively by
the Owner.
(4) All policies of insurance obtained under
Paragraphs (1) and (2) above shall be secured with recognized and
established insurance companies and no cancellation or
modification of any policy or policies shall be made by Owner
without thirty (30) days prior written notice to Contractor.
(B) Liability Insurance.
(1) The Owner shall be responsible for purchasing and
maintaining its own liability insurance, which shall include such
insurance as will protect the Owner against claims which may
arise from any operations under this Contract.
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(2) The Contractor will provide the Owner with certificates
of insurance evidencing that the Contractor has liability and
automobile liability insurance, which insurance cannot be
canceled by or terminated or the coverage thereof materially
reduced, until the insurance company has attempted to give thirty
(30) days written notice thereof by Registered Mail addressed to
the Contractor and Owner. The Contractor shall maintain:
(a) Public Liability:
Comprehensive General Liability Insurance
covering the Contractor, Owner and other indemnities, as their
interests may appear, as additional insured, with limits of
liability as follows: Bodily Injury and Property Damage: Not
less than Ten Million Dollars ($10,000,000.00) Combined Single
Limit.
(b) Workmen's Compensation:
Workmen's Compensation Insurance, in minimum
amounts as required by Law.
(c) Automobile Liability:
Automobile Liability and Property Damage
Insurance for all owned, non-owned and hired vehicles covering
the Contractor and the indemnities, as their interest may appear,
as additional insured, against liability for bodily injury and
death and for property damage with limits of liability of not
less than One Million Dollars ($1,000,000.00) Combined Single
Limit.
(3) Owner agrees to defend, indemnify and hold
Contractor completely free and harmless from and against any and
all expenses, costs, including but not limited to court costs and
reasonable attorney's fees which arise out of or which in any way
relate to any claim or demand being asserted, or lawsuit arises
our of any operations affecting the Project. The agreement to
indemnify and hold the Contractor completely free and harmless
shall apply, save and except where it is legally established by a
Court of competent jurisdiction that the
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Contractor has itself been principally negligent. This Paragraph
(3) shall survive the termination of this Contract.
(C) Boiler Insurance.
The Owner shall purchase and maintain boiler and
machinery insurance in an amount necessary to protect the Owner
and Contractor from any and all risks or loss. This insurance
shall include the Owner, the Contractor, Subcontractors, Sub-
subcontractors and Materialmen.
(D) Notification of Any Claim.
Should either party to this Contract suffer injury or
damage to person or property because of any act or omission of
the other party or any of its employees, agents or others for
whose acts either the Owner or Contractor is or may be legally
liable, any claim of injury or damage shall be made in writing to
such other party within a reasonable time after the first
observance of such injury or damage.
ARTICLE 11
SUBCONTRACTS
(A) The Contractor may subcontract all or any portion of
the work at its discretion, and the total price of any and all
such Subcontracts shall be a reimbursable cost as provided for in
Article 7.
(B) Contractor acknowledges that under limited
circumstances the Owner may request the Contractor to use one or
more Subcontractors of the Owner's choice. However, in
recognition of the special relationship that must exist between
the Contractor and its Subcontractors, the Owner agrees that when
the Owner requests the use of any particular Subcontractor, the
Owner shall seek the advise and obtain the approval of the
Contractor. The Owner further agrees that should the Contractor
agree to use the Owner's Subcontractor, and should the price to
be charged by the Owner's Subcontractor exceed the price with the
Contractor otherwise intended to use, the difference in price
will be added to the Guaranteed
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Maximum Cost as provided for in Article 6, and that the
Contractor's fees will be increased accordingly.
(C) Regardless of which Subcontractors may be used on the
Project, there shall be no contractual relationship between the
Owner and the Subcontractors, and the Contractor shall have full,
complete and absolute directing authority over performance of the
work by all Subcontractors.
(D) The organization of the specifications into divisions,
sections and articles, and the arrangement of drawings shall not
control the Contractor in dividing the work among Subcontractors,
or in establishing the extent of the work to be performed by any
trade.
ARTICLE 12
OWNER'S REPRESENTATIVE
During the course of construction, the Owner shall provide
an individual who will be available on a regular basis to consult
with the Contractor concerning all phases of the Project. This
individual shall be the Owner's Representative, and shall be
solely responsible for bringing any problems to the attention of
the Contractor, and for approving any matters for which the
Owner's approval is required or sought. This individual shall
have total familiarity with all aspects of the building process,
and will have authority to represent and bind the Owner in any
and all matters affecting the Owner's rights and responsibilities
under this Contract. For the purposes of this Project, the
Owner's Representative shall be Mr. Cary Rehm. If for any reason
or at any time, this individual will not be available to the
Contractor, then the Owner shall immediately designate another
individual to take his place and shall notify the Contractor of
such writing.
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ARTICLE 13
TITLE OF THE WORK
The title to all work completed and in the course of
construction, and of all materials supplied, for which payment
has been made in full by Owner, shall be in the Owner.
ARTICLE 14
ACCOUNTING-INSPECTION AUDIT
The Contractor shall keep full and detailed accounts and
records of all costs. The Owner shall be afforded reasonable
access to the accounts and records of Contractor as reasonable
times for the purpose of inspecting, and where reasonably
requested by Owner, auditing the same.
However, neither the request for nor the conduct of any
audit shall be cause for failure of Owner to make timely payments
as provided herein. In any and all events, the Owner shall
request, conduct and close any monthly progress payment
accounting review within thirty (30) days after receipt of the
progress payment request. Any FINAL payment request audit shall
be conducted and closed within twenty-five (25) days after
receipt of the request for final payment so as not to delay final
payment including retention which shall be paid Contractor within
thirty (30) days after substantial completion of the Project, and
in no event, later than thirty-nine (39) days after the filing of
the Notice of Completion for the Project.
ARTICLE 15
APPLICATION FOR PAYMENT
(A) The Contractor shall deliver to the Owner, on or about
the first day of each month, a request for payment on a form
substantially similar to that attached hereto as Exhibit C. The
Contractor shall include with this form an appropriate lien
release covering the work and materials enumerated in the payment
request. The Owner shall promptly approve the payment request so
that there will be no delay in processing of payment and shall,
save and except where a legitimate objection is
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raised as to a particular item as provided in Paragraph (B)
below, make payment in full to the Contractor on or before the
tenth (10th) day of each month. Payments not made to the
Contractor on or before the tenth (10th) of the month shall bear
interest at the then current prime rate of interest plus 2% as
that rate is established by First Interstate Bank of Nevada. The
inclusion of this interest shall be in addition to any and all
other rights and remedies which the Contractor may have in the
event of delinquent payments.
(B) The Owner shall determine the amount owning to the
Contractor based on observations at the site and on evaluation of
the Contractor's request for payment. Should the Owner
disapprove an item in any payment request, payment for that
specific item may be withheld for a period not to exceed thirty
(30) days within which time it shall be adjudicated. However,
the balance requested in that payment request must be paid by the
Owner to the Contractor on or before the tenth (10th) day of the
month.
(C) The Contractor specifically reserves the right to cease
work should requested payments be unreasonably withheld or
delayed.
(D) Payments will be made by the Owner for materials or
equipment whether the same have been incorporated into the
Project or suitable stored on or off the site. Payments for said
materials and equipment will be conditioned only upon inspection
of the materials and equipment by the Contractor, and the
Contractor's verification that suitable insurance has been
secured.
(E) If, after substantial completion of the work, final
completion thereof is materially delayed through no fault of the
Contractor or by issuance of change orders affecting final
completion, the Owner shall, upon application by the Contractor,
and without terminating the Contract, make payment of the balance
due for that portion of the work which has been fully completed.
(F) In the event of a lien or liens for material or labor
is filed against the property, the Owner may withhold from final
payment to Contractor an amount equal to the amount of the lien
plus a reasonable amount to meet the cost of
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possible litigation. This amount shall be promptly released to
the Contractor upon its furnishing a bond in favor of the Owner
and the lien claimant in the amount of the lien and probable
litigation costs, or upon the Contractor furnishing the Owner a
release of lien from the claimant.
(G) Final payment shall be paid to the Contractor within
thirty (30) days after substantial completion, as defined in
Article 16, Paragraph (B) and in no event later than thirty-nine
(39) days after, the filing of the Notice of Completion for the
Project.
(H) The making of final payment shall constitute a waiver
of all claims by the Owner except those arising from (1)
unsettled liens, or (2) faulty or defective work appearing after
substantial completion and within the term of the warranty given
by the Contractor, under the terms of Article 19.
(I) A ten percent (10%) retention shall be withheld from
each application for payment for work performed until the work is
fifty percent (50%) complete. Thereafter no retention shall be
withheld. Retention shall be released upon Final Payment.
ARTICLE 16
NOTICE OF COMPLETION
(A) The Owner shall promptly record a Notice of Completion
when the Project has been substantially completed. Substantial
completion is defined below in Paragraph (B). Final payment
shall be paid to the Contractor within thirty (30) days after
substantial completion, and in no event later than thirty-nine
(39) days after, the filing of Notice of Completion for the
Project.
(B) The date of substantial completion of the work, or any
designated portion thereof, is the date certified by the
Contractor when construction is sufficiently complete, in
accordance with the Contract, so the Owner can occupy or utilize
the Project or designated portion thereof for the use for which
it is intended.
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ARTICLE 17
BOND
The Contractor shall endeavor to furnish a Contract
Performance Bond in an amount and form satisfactory to the Owner
at the Owner's expense should the Owner specifically request such
a bond. Should the Owner desire, the Contractor may pay for the
bond; however, in this event, the premium shall become a job cost
under the provision of Article 7, Item V, and the Guaranteed
Maximum Cost as set forth in Article 6, shall be increased
accordingly, treating this as a change subject to the provisions
of Article 2.
ARTICLE 18
PERIOD OF CONSTRUCTION
(A) The Contractor agrees to commence work hereunder within
five (5) work days after receipt of written notice from the Owner
to do so, to prosecute said work thereafter diligently and
continuously to completion and in any and all events to
substantially complete the Project in accordance with the
requirements of the Owner.
(B) The Owner and Contractor specifically acknowledge,
however, that there are circumstances beyond the reasonable
control of Contractor which may result in a delay of the Project.
Consequently, Owner and Contractor agree that if the Contractor
is delayed or impeded by any acts of the Owner or its agents or
those claiming under agreement from the Owner, or by acts of God
which Contractor could not have reasonably foreseen and provided
against, or by stormy, inclement, or severely cold weather, or by
strike, boycott, or like obstructive actions of employees, third
persons or labor organizations, or for any other cause beyond the
reasonable control of Contractor, the time within which the
Contractor has to complete the Project shall be appropriately
extended.
(C) Should concealed conditions encountered in the
performance of the work below the surface of the ground, or
should concealed or unknown conditions
20
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in an existing structure be at variance with the conditions
indicated by the Contract, or should unknown physical conditions
below the surface of the ground or should concealed or unknown
conditions in an existing structure of an unusual nature,
differing materially from those ordinarily encountered and
generally recognized as inherent in work of the character
provided for in this Contract be encountered, the Contract Sum
shall be equitably adjusted under Article 2, upon claim made
within a reasonable time after the first observance of the
condition.
(D) The period of time set forth in Paragraph (A) above may
be necessarily or appropriately extended by any change orders
effected pursuant to Article 2.
(E) The term "day" as used throughout this Contract shall
mean calendar day unless otherwise specifically designated.
ARTICLE 19
WARRANTIES
(A) The entire work is hereby warranted against defects in
materials and workmanship for a period of one (1) year from the
date of substantial completion of the Project or substantial
completion of any designated portion thereof. If, within this
one (1) year period, any of the work or materials or equipment
(for which approval has not been previously given in writing by
Owner) is proven to be defective and not in accordance with the
Contract, the Contractor shall, at its expense, correct said
defect promptly after receipt of a written notice from the Owner
to do so. The Owner shall give notice promptly after discovery
of any defective condition.
(B) The Contractor warrants to the Owner that all equipment
and materials furnished under this Contract will be new unless
otherwise specified or approved by the Owner.
(C) Articles, materials or methods specified by proprietary
name or by name of vendor or manufacturer will be furnished or
applied by Contractor, except only where equal substitutions for
articles, materials or methods are approved by
21
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the Contractor for use in lieu thereof. In determining the
quality of substitute parts, materials or methods, availability
or procurement shall be a determining factor.
(D) The Contractor shall secure and furnish to the Owner
through the Architect, all applicable written guarantees and
warranties as may be called for by this Contract.
ARTICLE 20
ARBITRATION
(A) All disputes, claims or questions not resolved
informally by Owner and Contractor may be subject to arbitration.
If both Owner and Contractor agree that a particular dispute,
claim or question should be arbitrated, then arbitration shall be
effected as provided in Paragraph (B) below, and the decision
therefrom shall be binding on both parties. If, however, either
the Contractor and/or the Owner elect not to proceed by way of
arbitration, then either or both parties may resort to
appropriate Court action, with the prevailing party being
entitled to receive all reasonable attorneys' fees, Court costs,
and any and all other fees, expenses, and costs arising out of or
in any way incurred in the institution or defense of that action.
(B) Should both the Owner and Contractor agree to
arbitration, the following procedures shall be employed:
(1) Notice of the demand for arbitration shall be
filed in writing with the other party to this Contract. This
demand shall be made within a reasonable time after the dispute
has risen, but in no case shall the demand be made later than the
time set in this Contract for final payment. Any demand received
after that time shall not be allowed.
(2) Owner and Contractor shall, within ten (10) days
of the written demand for arbitration, agree upon an arbitrator.
If within this said ten (10) day period the Owner and Contractor
are unable to agree upon a single arbitrator, then
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<PAGE>
the Owner and Contractor will, within three (3) additional days,
each select an arbitrator, and those two arbitrators will then
select a third.
(3) At such time as the arbitrator (or all three
arbitrators) has been selected as provided in Paragraph (2)
above, the election to arbitrate shall become final and
irrevocable.
(4) Unless both Owner and Contractor specifically
agree in writing to the contrary, the arbitration hearing shall
be conducted and the decision rendered therefrom no more than
forty-five (45) days after the written demand for arbitration.
(5) The arbitrator, if he deems that the case requires
it, is authorized to award to the party whose contention is
sustained, such sums as he (or a majority of them) shall deem
proper to compensate the prevailing party for the time and
expense incident to the proceedings, including any and all
reasonable attorneys' fees expended, and, if the arbitration was
demanded without reasonable cause, he may also award damages for
delay. Unless Owner and Contractor specifically agree in writing
to the contrary, the arbitrator shall fix his own compensation
and shall assess costs and charges of the proceeding upon either
or both parties.
(6) The decision of the arbitrator shall be final,
save and except for the limited right of appeal as provided for
in the Nevada Revised Statutes. In the event the decision of the
arbitrator is appealed, reasonable attorneys' fees and Court
costs, as determined by a Court of competent jurisdiction, shall
be paid to the prevailing party.
(7) Unless Owner and Contractor otherwise agree in
writing to the contrary, the Contractor shall carry on the work
during any arbitration proceedings, and the Owner shall continue
to make timely payments to the Contractor in accordance with the
Contract.
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ARTICLE 21
TERMINATION OF THE CONTRACT
(A) Termination by the Contractor.
(1) If the work is stopped for a period of thirty (30)
days under an order of any Court or other public authority having
jurisdiction, or as the result of an act of government, such as
declaration of a national emergency making materials unavailable
through no act or fault of the Contractor or a Subcontractor or
their agents or employees, or any other person performing any of
the work under a contract with the Contractor, or if the work
should be stopped for a period of thirty (30) days by the
Contractor because the Owner has not made payment as provided
herein, then the Contractor may, upon three (3) additional days'
written notice to the Owner, terminate this Contract and recover
from the Owner payment for all work executed, and for any proven
loss sustained upon any materials, equipment, tools, construction
equipment and machinery, including reasonable profit and damages
thereon.
(B) Termination by the Owner.
(1) If the Contractor is adjudged a bankrupt or makes
a general assignment for the benefit of creditors, or if a
receiver is appointed on account of the Contractor's insolvency,
or if the Contractor persistently and repeatedly refuses or
fails, except in cases for which an extension of time is provided
for in Article 18, to supply enough workmen or materials, or if
the Contractor persistently and repeatedly fails to make payment
to Subcontractors or for materials or labor, or persistently
disregards laws, ordinances, rules, regulations or orders of any
public authority having jurisdiction, or otherwise is guilty of a
substantial violation of the provisions of this Contract, then
the Owner may, without prejudice to any other rights or remedies
he may have, and after giving the Contractor and his surety, if
any, three (3) days' written notice, terminate the employment of
the Contractor and take possession of the site and all materials
for which the Owner has made payment in full.
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(C) Any termination of this Contract, whether by Contractor
or Owner, shall be subject to the rights and remedies available
in Article 20.
ARTICLE 22
MISCELLANEOUS PROVISIONS
(None)
ARTICLE 23
NOTICES
Any and all notices, demands or requests required or
appropriate under this Contract shall be given in writing either
by personal delivery or by registered or certified mail, return
receipt requested, addressed to the following addresses:
To Contractor: MARNELL CORRAO ASSOCIATES, INC.
4495 South Polaris Avenue
Las Vegas, NV 89103
To Owner: RIO PROPERTIES, INC. d/b/a
RIO SUITE HOTEL & CASINO
3700 West Flamingo Road
Las Vegas, NV 89103
When notice has been given by mail, it shall be deemed served the
date following deposit, postage prepaid in the United States
mail. The parties may change the place of notice by notifying
the other party as set forth herein.
ARTICLE 24
PARTIAL INVALIDITY
Should any term, condition, covenant or provision of this Contra
ct, or any application thereof, be held by a Court of competent
jurisdiction to be invalid, void or unenforceable, all
provisions, covenants or conditions of this Contract, and all
applications thereof, not held invalid, void or unenforceable,
shall continue in full force and effect and shall in no way be
effected, impaired or invalidated thereby.
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ARTICLE 25
SUCCESSORS IN INTEREST
Neither Owner nor Contractor may transfer or assign this
Contract, or any interest therein, without the prior written
permission of the other. However, this Contract shall insure to
be benefit of, and be binding upon, the successors, assigns
(where permitted) and representatives of both the Owner and
Contractor, and the Owner and Contractor covenant for themselves
and for their successors, assigns and representatives, that they
will fully perform on the terms and conditions of this Contract.
ARTICLE 26
CAPTIONS AND PRONOUNS
The captions appearing at the commencement of the Articles hereof
are descriptive only and for convenience in reference to this
Contract, and in no way whatsoever define, limit or describe the
scope or intent of this Contract, or in any way affect this
Contract.
ARTICLE 27
CORPORATE AUTHORIZATION
The parties executing this Contract acknowledge and
represent that all corporate authorization has been obtained for
the execution of this Contract and for the compliance with each
and every term hereof.
26
<PAGE> ARTICLE 28
LEGAL SITUS
The terms and conditions of this Contract shall be construed
in accordance with and governed by the laws of the State of
Nevada, and the parties hereto acknowledge that the Courts of
this State shall have exclusive jurisdiction over any action or
proceeding brought under or by reason of this Contract.
IN WITNESS WHEREOF, the Contractor and Owner have executed
this contract as of the day and year first above written.
RIO PROPERTIES, INC. d/b/a MARNELL CORRAO ASSOCIATES,
INC.
RIO SUITE HOTEL & CASINO
By /s/ John Lipkowitz By /s/ Perry A. Eiman
Its Exec VP Its Vice President of Operations
Nevada State Contractor's
License No. 39178
Attachments: Exhibit 'A' Legal Description
Exhibit 'B' Preliminary Magnitude Budget Estimates
dated 10/15/97
Exhibit 'C' Billing Format
Exhibit 'D' Exclusion List
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EXHIBIT 'A'
(Legal Description)
[NOT INCLUDED]
28
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EXHIBIT 'B'
RIO LOWRISE INTERIOR REMODEL PROJECTS (1997)
PRIMARY MAGNITUDE BUDGET ESTIMATE
[NOT INCLUDED]
<PAGE>
EXHIBIT 'C'
FORM OF APPLICATION AND CERTIFICATE FOR PAYMENT
[NOT INCLUDED]
<PAGE>
EXHIBIT 'D'
LOWRISE REMODEL PROJECTS
EXCLUSION LIST
[NOT INCLUDED]
<PAGE>
BUILDING CONTRACT
THIS CONTRACT is made and entered into as of this Twenty-
fifth day of March 1998, by and between MARNELL CORRAO
ASSOCIATES, INC., a Nevada Corporation (as General Contractor and
hereinafter referred to as "Contractor"), and Rio Properties,
Inc. d/b/a Rio Suite Hotel & Casino, a Nevada Limited Partnership
(hereinafter referred to as "Owner").
WITNESSETH:
WHEREAS, the Owner intends to construct various TOWER
INTERIOR REMODELS at the Rio Suite Hotel & Casino, including the
2-Story Penthouse Refurbishment, Masquerade Suite Upgrades, 39th
Floor Suite Upgrades, 50/51st Floor Suite Upgrades, 20th Floor
Suites Remodel, 20th Floor Corridor/Concierge Area, 20th
Additional One-Bedroom Suite, 20th Floor Entourage Rooms, 20th
Floor Standard Suite Upgrade, 39th Floor Concierge Area (Spa Room
Conversion) and 39th Floor Corridor Upgrade, being hereinafter
referred to as the Project (OUR PROJECT NOS. 88497, 88197, 61097
& 62897), and
WHEREAS, the Owner requests the Contractor to perform the
work and supply said materials and equipment necessary to
complete the Project, and
WHEREAS, the Contractor desires to perform said work and to
supply said materials and equipment,
NOW THEREFORE, in consideration of the mutual benefits
arising therefrom, and for other good and valuable consideration,
it is hereby agreed as follows.
<PAGE>
ARTICLE 1
CONTRACT DOCUMENTS
(A) The documents constituting the Contract between the
Owner and the Contractor (and hereby collectively referred to as
the Contract or this Contract) consist of the following:
1. This Building Contract.
2. Marnell Corrao Associates Preliminary Magnitude
Budget Estimates dated 15 October 1997,
attached hereto as Exhibit 'B'.
3. Project plans entitled: 2-Story Penthouse
Refurbishment, Masquerade Suite Upgrades, 39th
Floor Suite Upgrades, 50/51st Floor Suite
Upgrades, 20th Floor Suites Remodel, 20th
Floor Corridor/Concierge Area, 20th Additional
One-Bedroom Suite, 20th Floor Entourage Rooms,
20th Floor Standard Suite Upgrade, 39th Floor
Concierge Area (Spa Room Conversion) and 39th
Floor Corridor Upgrade issued through 10 October
1997 as prepared by Anthony A. Marnell II,
Chtd., Architect.
(B) In the event of any conflict between or among any of
the terms or conditions of the documents constituting this
Contract, the following order shall be employed in resolving any
such conflict and in determining what terms or conditions will
govern:
1. This Building Contract, inclusive of Exhibit 'B'.
2. The Plans.
(C) This Contract constitutes the entire agreement
between the parties, and no modification of this contract shall
be valid or binding unless such modification is in writing duly
dated and signed by both parties. Neither Owner nor Contractor
shall be bound by prior terms, conditions, statements, or
representations, express or implied, oral or written, not
otherwise contained in this Contract.
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ARTICLE 2
CHANGES IN THE WORK
(A) The Owner may, by written instructions or drawings to
the Contractor which, in the reasonable opinion of the
Contractor, do not materially affect the type, design, nature or
scheduling of the Project, make changes in the abovementioned
plans and specifications, issue additional instructions, require
additional work, direct the omission of work previously shown or
ordered, or change work already incorporated into the Project,
and the provisions of this Contract shall apply to any and all
such changes with the same force and effect as though originally
embodied in this Contract.
(B) For changes which involve additional work or a
reduction in work as set forth in Paragraph (A) above, the
Guaranteed Maximum Cost as hereinafter set forth in Article 6
shall be increased or decreased by the Contractor in accordance
with the Contractor's estimate for said work, and the
Contractor's fee shall be appropriately adjusted. All changes in
the work must be authorized by a representative of Owner, who,
for the purposes of this Project, shall be
Mr. Cary Rehm.
(C) However, Owner and Contractor specifically agree that
should a change be requested by Owner which, in the reasonable
opinion of the Contractor, would materially affect the type,
design, nature or schedule of the Project as a whole, the
Contractor reserves the right to renegotiate the terms of the
Contract.
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<PAGE>
ARTICLE 3
CONTRACTOR'S DUTIES
(A) The Contractor agrees to provide all labor, materials
and equipment necessary for the proper completion of the Project
in a manner consistent with the requirements of the work to be
performed, subject only to the provisions of Article 18; and
during the course of construction, the Contractor agrees to
furnish its best skill and judgment in effecting this goal.
(B) The Contractor shall maintain at the site for the
Owner one (1) record copy of drawings, specifications, addenda,
change orders and other modifications.
(C) The Contractor shall, during the course of
construction, keep the premises free from accumulation of waste
materials or rubbish caused by its operations. Within a
reasonable period of time after substantial completion of the
Project, the Contractor shall remove its waste materials and
rubbish from and about the Project site as well as all tools,
construction equipment, machinery and surplus materials.
(D) The Contractor shall comply with all applicable laws,
ordinances, rules, codes, regulations and lawful orders of any
public authority relating to construction of the Project.
(E) Irrespective of Paragraph (D) above, it is the
responsibility of the Project Architect to use his best efforts
to make certain that the Project is designed in accordance with
applicable laws, ordinances, rules, statutes, building codes and
regulations. If the Contractor observes that the Project, or any
portion thereof, may be at variance therewith, the Contractor
shall notify the Architect, and any change shall be accomplished
by an appropriate modification as provided in Article 2.
(F) Any other duties as may be set forth in this
Contract.
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ARTICLE 4
OWNER'S DUTIES
(A) The Owner shall, at the request of the Contractor,
prior to the time of execution of this Contract, furnish to the
Contractor and Contractor's Surety and Bonding Company acceptable
evidence that the Owner has made suitable financial arrangements
to fulfill its obligations under this Contract.
(B) The Owner shall furnish all surveys to the Architect
describing the physical characteristics, legal limitations and
utility locations for the site of the Project, and a legal
description of the site. A copy of the legal description shall
be attached to this Contract and marked as Exhibit A.
(C) The Owner shall secure and pay for necessary
approvals, easements, assessments and charges required for the
construction, use or occupancy of permanent structures or for
permanent changes in existing facilities.
(D) Information or services under the Owner's control
shall be furnished by the Owner with reasonable promptness so as
to avoid any delay in the orderly progress of the work.
(E) The Owner shall provide the Architect with those
facilities required by Article 5 (A) (3).
(F) Any other duties as may be set forth in this
Contract.
(G) The Owner shall pay for and obtain all necessary
utility company extensions or service fees related to
this project; i.e., Clark County Sanitation District,
Nevada Power Company, Sprint Telephone, Southwest Gas
Corporation, Las Vegas Valley Water District, etc.
5
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ARTICLE 5
ARCHITECT'S DUTIES
The Owner is informed that the Architect on this Project is
Anthony A. Marnell II, who, in addition to being a licensed
Architect within the State of Nevada, is also a majority
stockholder and employee of Contractor. The Owner acknowledges
this relationship between Architect and Contractor on this
Project, and herein accepts in every respect this close
association between the two of them. In light of the special
relationship existing between the Architect and the Contractor,
the Owner agrees that in case of the termination of the
Architect, for whatever reason, at the option of the Contractor
the terms and conditions of this Contract will be renegotiated.
(A) The Architect will provide administration of the
Project as follows:
(1) The Architect shall advise and consult with the
Owner, and shall act on behalf of the Owner and Contractor to the
extent provided in this Contract.
(2) The Architect shall visit the site at intervals
appropriate to the stage of construction or as otherwise agreed
by the Architect in writing to become generally familiar with the
progress and quality of the work and to determine in general if
the work is proceeding in accordance with the Contract. However,
the Architect shall not be required to make exhaustive or
continuous on-site inspections to check the quality or quantity
of the work. On the basis of such on-site observations as an
Architect, the Architect shall keep the Owner informed of the
progress and quality of work. However, the Architect shall not
be responsible for the acts or omissions of the Contractor,
Subcontractors, or any other persons performing any of the work
in the Project, or for failure of any of them to carry out the
work in accordance with this Contract.
(3) The Architect shall at all times have access to
the work wherever it is in preparation or progress, and Owner
shall provide facilities for such access so that the Architect
may perform his functions under this Contract.
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(4) On written request of either the Owner or
Contractor, the Architect shall, with reasonable promptness,
render interpretations of the plans and specifications necessary
for the proper execution or progress of the work.
(5) The Architect's decisions in matters relating to
artistic effect shall be final if consistent with the intent of
this Contract.
(6) The Architect shall have authority to reject work
which does not conform to the requirements of this Contract and
the given standards of the industry; and whenever, in the
Architect's reasonable opinion, it is necessary to evaluate
conformity, the Architect will have authority to require special
inspection or testing of the work in accordance with the
provisions of this Contract, whether or not such work be then
fabricated, installed or completed.
(a) If inspection or testing of the work reveals
a material failure of the work to comply with the requirements of
the Contract and the standards of the industry, the Contractor
shall promptly correct any such deficient work, and the cost
involved in correcting that work shall be borne solely by the
Contractor. However, should the inspection or testing reveal
that the work has been in material compliance with the
requirements of the Contract and standards of the industry, then
the Owner shall bear any and all costs involved in the
inspection, testing, and correction of the work and an
appropriate change order shall be issued as provided in Article
2.
(b) If the law, rules, ordinances,
regulations or orders of any public authority having jurisdiction
require any portion of the work to be inspected, tested or
approved, the Contractor shall arrange for such inspections and
the Owner shall bear all the costs of such inspections, tests or
approval.
(7) The Architect shall review and approve or take
other appropriate action upon the Contractor's submittals such as
shop drawings, product data and samples, for conformance with the
design concept of the work, and with the information given in the
Contract. Such action shall be taken with reasonable promptness
so as to cause no delay in the Project. The Architect's approval
of a
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specific item shall not indicate approval of any assembly of
which the item is a component.
(8) Any other duties as may be set forth in this
Contract.
ARTICLE 6
CONTRACTOR'S FEE
In consideration of the Contractor's performance of its
obligations under this Contract, the Owner agrees to pay the
Contractor as compensation for its services all costs (as costs
are defined in Article 7) plus a fee equal to Seven (7%) percent
of the total cost of the Project. Costs shall be paid to the
Contractor at the time and in the manner set forth in Article 15.
In addition, the Contractor shall be paid ninety percent (90%) of
the proportional amount of its fee with each payment request made
by Contractor until such time that the work is fifty percent
(50%) complete. Thereafter the Contractor shall be paid One
Hundred Percent (100%) of the proportional amount of its fee with
each payment request. The balance of the fee shall be paid at
the time of final payment. The Contractor guarantees that the
maximum cost to the Owner for the completion of the Project,
which cost includes the Contractor's fee, shall not exceed SEVEN
MILLION, ONE HUNDRED SIXTY SEVEN THOUSAND, ONE HUNDRED TWENTY
FIVE DOLLARS ($7,167,125.00). This amount, however, is predicted
upon the aforementioned original plans and the scope of work as
outlined in Marnell Corrao Associates Preliminary Magnitude
Budget Estimates dated 15 October 1997 (Exhibit B), and does not
contemplate any changes as may be requested by the Owner as
provided for in Article 2.
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ARTICLE 7
COSTS TO BE REIMBURSED
(A) The Owner agrees to reimburse the Contractor for all
costs incurred in the execution of the work. Such costs include,
but are not limited to, the following items:
ITEM I. Any and all costs of labor, including but
not limited to social security, unemployment insurance, old age
benefits, all applicable taxes, travel time, subsistence wherever
applicable, contributions to labor union benefits, such as health
and welfare, vacation, pension, etc. Weekly payrolls shall be
made up from daily time sheets and shall set forth the name,
classification, social security number, hours worked, travel
time, subsistence, rate of pay, gross amount, all deductions, and
net amount paid for each employee. The payroll sheet shall bear
a sequence number and dates indicating the payroll period.
Contractor is to pay when due all employee
labor tax contributions, all state, county and federal taxes, as
pertains to labor, and all contributions to labor union benefit
funds. Contractor shall submit on its payment request the
billing for aforementioned amounts.
ITEM II. The salary and expenses of one off-site
administrative employee who is to expend whatever time and energy
is required to see that the job is properly administered from the
home office. However, his services are not to be exclusive for
this Project. Services of additional off-site administrative
personnel are to be covered by the allowance of the salary of the
administrative employee and may not be added to the cost of the
job.
ITEM III. Any and all materials and supplies
purchased for the Project or required for execution of the work,
including temporary buildings and structures. Cost of materials
shall include all applicable taxes and costs of transportation of
these materials. Fuel or energy for vehicle and equipment shall
be included. All materials paid for, or reimbursed, by the Owner
shall become the property of the Owner.
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ITEM IV. The amounts of all subcontracts, said
amount to include all subcontractor's costs and profits.
ITEM V. Premiums on all insurance or bonds required
and or maintained for the Project (see Article 10 and Article
17). Premiums shall be included as costs as to which markup
applies in determining Contractor's fee. The cost of General
Liability Insurance is a reimbursable cost. The rate for the
General Liability Insurance shall be a minimum of $7.50 per
$1,000 dollars of contract value. This rate is subject to
change. Cost to be reimbursed shall be actual cost incurred by
Contractor.
ITEM VI. Transportation, traveling expenses,
including meals and hotel expenses of the Contractor of its
officers or employees incurred in the discharge of duties
connected with this work.
ITEM VII. All expenses incurred for transportation
to and from the work of the personnel required for its
prosecution as pertaining to Article 7, Item VI.
ITEM VIII. Permit fees, plan check fees,
royalties, direct field surveying for construction purposes,
county inspectors, damages for infringement of patents and costs
of defending suits therefore, and for deposits lost for causes
other than the Contractor's negligence.
ITEM IX. Losses and expenses not compensated by
insurance or otherwise sustained by the Contractor in connection
with the work, provided they have resulted from causes other than
the fault or negligence of the Contractor. Such losses shall
include settlements made with the written consent and approval of
the Owner. No such losses shall be included in the cost fee, but
if after a loss from fire, flood or similar causes not due to the
negligence of the Contractor, Contractor be required to
reconstruct damaged portions of items, Contractor shall receive
for its services a fee in compliance with Article 6. Such work
shall be considered a change subject to the provision of Article
2, and the guaranteed maximum cost shall be increased
accordingly.
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ITEM X. Minor expenses, such as telegrams,
telephone service, expressage, first aid supplies and similar
petty cash items.
ITEM XI. Cost, including transportation and
maintenance, of hand tools not owned by workmen, canvas,
tarpaulins, polyethylene film, and items consumed in the
prosecution of the work. Items used but not consumed remain the
property of Contractor.
ITEM XII. Rentals of tools, vehicles,
trucks, compressors, cranes, hoists, equipment and all
construction plant parts thereof. It is intended that rental
shall be charged on all items required for use in construction
of the Project. Rentals shall be charged on equipment owned by
the Contractor as well as equipment owned by others. Rental
rates shall be as established by prevailing area rates.
ITEM XIII.Interest at a rate in accordance with
Article 15, Paragraph (A), and as can be determined on funds
which the Contractor must provide or borrow in the event that
payments are not made by the Owner on time as provided
hereinafter in Article 15.
ITEM XIV. All items and expenses necessary for
providing of a temporary office at the jobsite. Salaries of
personnel required to maintain the field office shall be
incorporated in the payroll under the provisions of Article 7,
Item I. Supplies for the office shall be provided under the
provisions of Article 7, Item III.
ITEM XV. Costs incurred due to an emergency
affecting the safety of persons and property.
(B) Owner agrees to reimburse Contractor for all costs
incurred during or arising out of the course of construction,
even though billings for said costs may be submitted to the Owner
after the Contract has otherwise terminated, up to a maximum
period of 60 days after final payment.
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ARTICLE 8
COSTS NOT TO BE REIMBURSED
The following are the only costs which the Contractor shall
not be permitted to include as job costs;
ITEM I. Salary of any person employee during the
execution of the work in the main home office, except the one
administrative employee for whom provision is made in article 7,
Item II.
ITEM II. Overhead expenses not expressly included
in Article 7.
ITEM III. Interest on capital employed, except that
provided for in Article 7, Item XIII.
ARTICLE 9
DISCOUNTS, REBATES, REFUNDS
All cash and trade discounts shall accrue to the Owner,
provided payments to the Contractor are timely made according to
the provisions of Article 15. Should any payments to the
Contractor be withheld or delayed for whatever reason, all cash
and trade discounts shall accrue to the Contractor. Should a
discount be disallowed by a supplier due to a delay in payment
from the Owner, the undiscounted amount shall be considered the
cost. Rebates, refunds and all returns from sale of surplus
material shall accrue to the Owner.
ARTICLE 10
INSURANCE
(A) Property Insurance.
(1) The Owner shall purchase and maintain property
insurance on the entire work to the full insurable value thereof.
This insurance shall include the Owner, the Contractor,
Subcontractors, Sub-subcontractors, and Materialmen. The
insurance shall insure against the perils of fire, extended
coverage and also include "all risk" for physical loss not
limited to theft, earthquake and flood damages. If the Owner and
Contractor agree to waive any coverage's and a loss results from
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this uninsured peril or lack of coverage, then the Owner shall be
solely responsible for any and all resulting damage and costs.
(a) The Owner shall file a copy of all policies
with the Contractor before an exposure to loss may occur. Said
policies to be in a form and content satisfactory to Contractor.
(b) If the Owner does not intend to purchase
insurance required by Paragraph (1) above, Owner shall inform the
Contractor in writing prior to the commencement of the work. The
Contractor may then effect such insurance, and the cost shall be
charged to the Owner as a reimbursable cost provided for in
Article 7.
(2) The Owner shall purchase and maintain such
insurance as will insure Owner against loss of use of Owner's
property and/or damage to existing property due to fire or other
hazards, however caused. This insurance shall include the Owner,
the Contractor, Subcontractors, Sub-subcontractors and
Materialmen. The Owner, for itself and on behalf of its
insurance company or companies, waives all rights of recovery or
causes of action against the Contractor for all damage and/or
loss or use of its property, including consequential losses, due
to fire and other hazards, however caused.
(3) The responsibility for payment of any deductible
under Paragraphs (1) and (2) above shall be borne exclusively by
the Owner.
(4) All policies of insurance obtained under
Paragraphs (1) and (2) above shall be secured with recognized and
established insurance companies and no cancellation or
modification of any policy or policies shall be made by Owner
without thirty (30) days prior written notice to Contractor.
(B) Liability Insurance.
(1) The Owner shall be responsible for purchasing
and maintaining its own liability insurance, which shall include
such insurance as will protect the Owner against claims which
may arise from any operations under this Contract.
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(2) The Contractor will provide the Owner with
certificates of insurance evidencing that the Contractor has
liability and automobile liability insurance, which insurance
cannot be canceled by or terminated or the coverage thereof
materially reduced, until the insurance company has attempted to
give thirty (30) days written notice thereof by Registered Mail
addressed to the Contractor and Owner. The Contractor shall
maintain:
(a) Public Liability:
Comprehensive General Liability Insurance
covering the Contractor, Owner and other indemnities, as their
interests may appear, as additional insured, with limits of
liability as follows: Bodily Injury and Property Damage: Not
less than Ten Million Dollars ($10,000,000.00) Combined Single
Limit.
(b) Workmen's Compensation:
Workmen's Compensation Insurance, in minimum
amounts as required by Law.
(c) Automobile Liability:
Automobile Liability and Property Damage
Insurance for all owned, non-owned and hired vehicles covering
the Contractor and the indemnities, as their interest may appear,
as additional insured, against liability for bodily injury and
death and for property damage with limits of liability of not
less than One Million Dollars ($1,000,000.00) Combined Single
Limit.
(3) Owner agrees to defend, indemnify and hold
Contractor completely free and harmless from and against any and
all expenses, costs, including but not limited to court costs and
reasonable attorney's fees which arise out of or which in any way
relate to any claim or demand being asserted, or lawsuit arises
our of any operations affecting the Project. The agreement to
indemnify and hold the Contractor completely free and harmless
shall apply, save and except where it is legally established by a
Court of competent jurisdiction that the
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Contractor has itself been principally negligent. This Paragraph
(3) shall survive the termination of this Contract.
(C) Boiler Insurance.
The Owner shall purchase and maintain boiler and
machinery insurance in an amount necessary to protect the Owner
and Contractor from any and all risks or loss. This insurance
shall include the Owner, the Contractor, Subcontractors, Sub-
subcontractors and Materialmen.
(D) Notification of Any Claim.
Should either party to this Contract suffer injury or
damage to person or property because of any act or omission of
the other party or any of its employees, agents or others for
whose acts either the Owner or Contractor is or may be legally
liable, any claim of injury or damage shall be made in writing to
such other party within a reasonable time after the first
observance of such injury or damage.
ARTICLE 11
SUBCONTRACTS
(A) The Contractor may subcontract all or any portion of
the work at its discretion, and the total price of any and all
such Subcontracts shall be a reimbursable cost as provided for in
Article 7.
(B) Contractor acknowledges that under limited
circumstances the Owner may request the Contractor to use one or
more Subcontractors of the Owner's choice. However, in
recognition of the special relationship that must exist between
the Contractor and its Subcontractors, the Owner agrees that when
the Owner requests the use of any particular Subcontractor, the
Owner shall seek the advise and obtain the approval of the
Contractor. The Owner further agrees that should the Contractor
agree to use the Owner's Subcontractor, and should the price to
be charged by the Owner's Subcontractor exceed the price with the
Contractor otherwise intended to use, the difference in price
will be added to the Guaranteed
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Maximum Cost as provided for in Article 6, and that the
Contractor's fees will be increased accordingly.
(C) Regardless of which Subcontractors may be used on the
Project, there shall be no contractual relationship between the
Owner and the Subcontractors, and the Contractor shall have full,
complete and absolute directing authority over performance of the
work by all Subcontractors.
(D) The organization of the specifications into divisions,
sections and articles, and the arrangement of drawings shall not
control the Contractor in dividing the work among Subcontractors,
or in establishing the extent of the work to be performed by any
trade.
ARTICLE 12
OWNER'S REPRESENTATIVE
During the course of construction, the Owner shall provide
an individual who will be available on a regular basis to consult
with the Contractor concerning all phases of the Project. This
individual shall be the Owner's Representative, and shall be
solely responsible for bringing any problems to the attention of
the Contractor, and for approving any matters for which the
Owner's approval is required or sought. This individual shall
have total familiarity with all aspects of the building process,
and will have authority to represent and bind the Owner in any
and all matters affecting the Owner's rights and responsibilities
under this Contract. For the purposes of this Project, the
Owner's Representative shall be Mr. Cary Rehm. If for any reason
or at any time, this individual will not be available to the
Contractor, then the Owner shall immediately designate another
individual to take his place and shall notify the Contractor of
such writing.
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ARTICLE 13
TITLE OF THE WORK
The title to all work completed and in the course of
construction, and of all materials supplied, for which payment
has been made in full by Owner, shall be in the Owner.
ARTICLE 14
ACCOUNTING-INSPECTION AUDIT
The Contractor shall keep full and detailed accounts and
records of all costs. The Owner shall be afforded reasonable
access to the accounts and records of Contractor as reasonable
times for the purpose of inspecting, and where reasonably
requested by Owner, auditing the same.
However, neither the request for nor the conduct of any
audit shall be cause for failure of Owner to make timely payments
as provided herein. In any and all events, the Owner shall
request, conduct and close any monthly progress payment
accounting review within thirty (30) days after receipt of the
progress payment request. Any FINAL payment request audit shall
be conducted and closed within twenty-five (25) days after
receipt of the request for final payment so as not to delay final
payment including retention which shall be paid Contractor within
thirty (30) days after substantial completion of the Project, and
in no event, later than thirty-nine (39) days after the filing of
the Notice of Completion for the Project.
ARTICLE 15
APPLICATION FOR PAYMENT
(A) The Contractor shall deliver to the Owner, on or about
the first day of each month, a request for payment on a form
substantially similar to that attached hereto as Exhibit C. The
Contractor shall include with this form an appropriate lien
release covering the work and materials enumerated in the payment
request. The Owner shall promptly approve the payment request so
that there will be no delay in processing of payment and shall,
save and except where a legitimate objection is
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raised as to a particular item as provided in Paragraph (B)
below, make payment in full to the Contractor on or before the
tenth (10th) day of each month. Payments not made to the
Contractor on or before the tenth (10th) of the month shall bear
interest at the then current prime rate of interest plus 2% as
that rate is established by First Interstate Bank of Nevada. The
inclusion of this interest shall be in addition to any and all
other rights and remedies which the Contractor may have in the
event of delinquent payments.
(B) The Owner shall determine the amount owning to the
Contractor based on observations at the site and on evaluation of
the Contractor's request for payment. Should the Owner
disapprove an item in any payment request, payment for that
specific item may be withheld for a period not to exceed thirty
(30) days within which time it shall be adjudicated. However,
the balance requested in that payment request must be paid by the
Owner to the Contractor on or before the tenth (10th) day of the
month.
(C) The Contractor specifically reserves the right to
cease work should requested payments be unreasonably withheld or
delayed.
(D) Payments will be made by the Owner for materials or
equipment whether the same have been incorporated into the
Project or suitable stored on or off the site. Payments for said
materials and equipment will be conditioned only upon inspection
of the materials and equipment by the Contractor, and the
Contractor's verification that suitable insurance has been
secured.
(E) If, after substantial completion of the work, final
completion thereof is materially delayed through no fault of the
Contractor or by issuance of change orders affecting final
completion, the Owner shall, upon application by the Contractor,
and without terminating the Contract, make payment of the balance
due for that portion of the work which has been fully completed.
(F) In the event of a lien or liens for material or labor
is filed against the property, the Owner may withhold from final
payment to Contractor an amount equal to the amount of the lien
plus a reasonable amount to meet the cost of
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possible litigation. This amount shall be promptly released to
the Contractor upon its furnishing a bond in favor of the Owner
and the lien claimant in the amount of the lien and probable
litigation costs, or upon the Contractor furnishing the Owner a
release of lien from the claimant.
(G) Final payment shall be paid to the Contractor within
thirty (30) days after substantial completion, as defined in
Article 16, Paragraph (B) and in no event later than thirty-nine
(39) days after, the filing of the Notice of Completion for the
Project.
(H) The making of final payment shall constitute a waiver
of all claims by the Owner except those arising from (1)
unsettled liens, or (2) faulty or defective work appearing after
substantial completion and within the term of the warranty given
by the Contractor, under the terms of Article 19.
(I) A ten percent (10%) retention shall be withheld from
each application for payment for work performed until the work is
fifty percent (50%) complete. Thereafter no retention shall be
withheld. Retention shall be released upon Final Payment.
ARTICLE 16
NOTICE OF COMPLETION
(A) The Owner shall promptly record a Notice of Completion
when the Project has been substantially completed. Substantial
completion is defined below in Paragraph (B). Final payment
shall be paid to the Contractor within thirty (30) days after
substantial completion, and in no event later than thirty-nine
(39) days after, the filing of Notice of Completion for the
Project.
(B) The date of substantial completion of the work, or any
designated portion thereof, is the date certified by the
Contractor when construction is sufficiently complete, in
accordance with the Contract, so the Owner can occupy or utilize
the Project or designated portion thereof for the use for which
it is intended.
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ARTICLE 17
BOND
The Contractor shall endeavor to furnish a Contract
Performance Bond in an amount and form satisfactory to the Owner
at the Owner's expense should the Owner specifically request such
a bond. Should the Owner desire, the Contractor may pay for the
bond; however, in this event, the premium shall become a job cost
under the provision of Article 7, Item V, and the Guaranteed
Maximum Cost as set forth in Article 6, shall be increased
accordingly, treating this as a change subject to the provisions
of Article 2.
ARTICLE 18
PERIOD OF CONSTRUCTION
(A) The Contractor agrees to commence work hereunder
within five (5) work days after receipt of written notice from
the Owner to do so, to prosecute said work thereafter diligently
and continuously to completion and in any and all events to
substantially complete the Project in accordance with the
requirements of the Owner.
(B) The Owner and Contractor specifically acknowledge,
however, that there are circumstances beyond the reasonable
control of Contractor which may result in a delay of the Project.
Consequently, Owner and Contractor agree that if the Contractor
is delayed or impeded by any acts of the Owner or its agents or
those claiming under agreement from the Owner, or by acts of God
which Contractor could not have reasonably foreseen and provided
against, or by stormy, inclement, or severely cold weather, or by
strike, boycott, or like obstructive actions of employees, third
persons or labor organizations, or for any other cause beyond the
reasonable control of Contractor, the time within which the
Contractor has to complete the Project shall be appropriately
extended.
(C) Should concealed conditions encountered in the
performance of the work below the surface of the ground, or
should concealed or unknown conditions
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in an existing structure be at variance with the conditions
indicated by the Contract, or should unknown physical conditions
below the surface of the ground or should concealed or unknown
conditions in an existing structure of an unusual nature,
differing materially from those ordinarily encountered and
generally recognized as inherent in work of the character
provided for in this Contract be encountered, the Contract Sum
shall be equitably adjusted under Article 2, upon claim made
within a reasonable time after the first observance of the
condition.
(D) The period of time set forth in Paragraph (A) above
may be necessarily or appropriately extended by any change orders
effected pursuant to Article 2.
(E) The term "day" as used throughout this Contract shall
mean calendar day unless otherwise specifically designated.
ARTICLE 19
WARRANTIES
(A) The entire work is hereby warranted against defects in
materials and workmanship for a period of one (1) year from the
date of substantial completion of the Project or substantial
completion of any designated portion thereof. If, within this
one (1) year period, any of the work or materials or equipment
(for which approval has not been previously given in writing by
Owner) is proven to be defective and not in accordance with the
Contract, the Contractor shall, at its expense, correct said
defect promptly after receipt of a written notice from the Owner
to do so. The Owner shall give notice promptly after discovery
of any defective condition.
(B) The Contractor warrants to the Owner that all
equipment and materials furnished under this Contract will be new
unless otherwise specified or approved by the Owner.
(C) Articles, materials or methods specified by
proprietary name or by name of vendor or manufacturer will be
furnished or applied by Contractor, except only where equal
substitutions for articles, materials or methods are approved by
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the Contractor for use in lieu thereof. In determining the
quality of substitute parts, materials or methods, availability
or procurement shall be a determining factor.
(D) The Contractor shall secure and furnish to the Owner
through the Architect, all applicable written guarantees and
warranties as may be called for by this Contract.
ARTICLE 20
ARBITRATION
(A) All disputes, claims or questions not resolved
informally by Owner and Contractor may be subject to arbitration.
If both Owner and Contractor agree that a particular dispute,
claim or question should be arbitrated, then arbitration shall be
effected as provided in Paragraph (B) below, and the decision
therefrom shall be binding on both parties. If, however, either
the Contractor and/or the Owner elect not to proceed by way of
arbitration, then either or both parties may resort to
appropriate Court action, with the prevailing party being
entitled to receive all reasonable attorneys' fees, Court costs,
and any and all other fees, expenses, and costs arising out of or
in any way incurred in the institution or defense of that action.
(B) Should both the Owner and Contractor agree to
arbitration, the following procedures shall be employed:
(1) Notice of the demand for arbitration shall be
filed in writing with the other party to this Contract. This
demand shall be made within a reasonable time after the dispute
has risen, but in no case shall the demand be made later than the
time set in this Contract for final payment. Any demand received
after that time shall not be allowed.
(2) Owner and Contractor shall, within ten (10) days
of the written demand for arbitration, agree upon an arbitrator.
If within this said ten (10) day period the Owner and Contractor
are unable to agree upon a single arbitrator, then
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the Owner and Contractor will, within three (3) additional days,
each select an arbitrator, and those two arbitrators will then
select a third.
(3) At such time as the arbitrator (or all three
arbitrators) has been selected as provided in Paragraph (2)
above, the election to arbitrate shall become final and
irrevocable.
(4) Unless both Owner and Contractor specifically
agree in writing to the contrary, the arbitration hearing shall
be conducted and the decision rendered therefrom no more than
forty-five (45) days after the written demand for arbitration.
(5) The arbitrator, if he deems that the case
requires it, is authorized to award to the party whose contention
is sustained, such sums as he (or a majority of them) shall deem
proper to compensate the prevailing party for the time and
expense incident to the proceedings, including any and all
reasonable attorneys' fees expended, and, if the arbitration was
demanded without reasonable cause, he may also award damages for
delay. Unless Owner and Contractor specifically agree in writing
to the contrary, the arbitrator shall fix his own compensation
and shall assess costs and charges of the proceeding upon either
or both parties.
(6) The decision of the arbitrator shall be final,
save and except for the limited right of appeal as provided for
in the Nevada Revised Statutes. In the event the decision of the
arbitrator is appealed, reasonable attorneys' fees and Court
costs, as determined by a Court of competent jurisdiction, shall
be paid to the prevailing party.
(7) Unless Owner and Contractor otherwise agree in
writing to the contrary, the Contractor shall carry on the work
during any arbitration proceedings, and the Owner shall continue
to make timely payments to the Contractor in accordance with the
Contract.
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ARTICLE 21
TERMINATION OF THE CONTRACT
(A) Termination by the Contractor.
(1) If the work is stopped for a period of thirty (30)
days under an order of any Court or other public authority having
jurisdiction, or as the result of an act of government, such as
declaration of a national emergency making materials unavailable
through no act or fault of the Contractor or a Subcontractor or
their agents or employees, or any other person performing any of
the work under a contract with the Contractor, or if the work
should be stopped for a period of thirty (30) days by the
Contractor because the Owner has not made payment as provided
herein, then the Contractor may, upon three (3) additional days'
written notice to the Owner, terminate this Contract and recover
from the Owner payment for all work executed, and for any proven
loss sustained upon any materials, equipment, tools, construction
equipment and machinery, including reasonable profit and damages
thereon.
(B) Termination by the Owner.
(1) If the Contractor is adjudged a bankrupt or makes
a general assignment for the benefit of creditors, or if a
receiver is appointed on account of the Contractor's insolvency,
or if the Contractor persistently and repeatedly refuses or
fails, except in cases for which an extension of time is provided
for in Article 18, to supply enough workmen or materials, or if
the Contractor persistently and repeatedly fails to make payment
to Subcontractors or for materials or labor, or persistently
disregards laws, ordinances, rules, regulations or orders of any
public authority having jurisdiction, or otherwise is guilty of a
substantial violation of the provisions of this Contract, then
the Owner may, without prejudice to any other rights or remedies
he may have, and after giving the Contractor and his surety, if
any, three (3) days' written notice, terminate the employment of
the Contractor and take possession of the site and all materials
for which the Owner has made payment in full.
24
<PAGE>
(C) Any termination of this Contract, whether by Contractor
or Owner, shall be subject to the rights and remedies available
in Article 20.
ARTICLE 22
MISCELLANEOUS PROVISIONS
(None)
ARTICLE 23
NOTICES
Any and all notices, demands or requests required or
appropriate under this Contract shall be given in writing either
by personal delivery or by registered or certified mail, return
receipt requested, addressed to the following addresses:
To Contractor: MARNELL CORRAO ASSOCIATES, INC.
4495 South Polaris Avenue
Las Vegas, NV 89103
To Owner: RIO PROPERTIES, INC. d/b/a
RIO SUITE HOTEL & CASINO
3700 West Flamingo Road
Las Vegas, NV 89103
When notice has been given by mail, it shall be deemed served the
date following deposit, postage prepaid in the United States
mail. The parties may change the place of notice by notifying
the other party as set forth herein.
ARTICLE 24
PARTIAL INVALIDITY
Should any term, condition, covenant or provision of this Contra
ct, or any application thereof, be held by a Court of competent
jurisdiction to be invalid, void or unenforceable, all
provisions, covenants or conditions of this Contract, and all
applications thereof, not held invalid, void or unenforceable,
shall continue in full force and effect and shall in no way be
effected, impaired or invalidated thereby.
25
<PAGE>
ARTICLE 25
SUCCESSORS IN INTEREST
Neither Owner nor Contractor may transfer or assign this
Contract, or any interest therein, without the prior written
permission of the other. However, this Contract shall insure to
be benefit of, and be binding upon, the successors, assigns
(where permitted) and representatives of both the Owner and
Contractor, and the Owner and Contractor covenant for themselves
and for their successors, assigns and representatives, that they
will fully perform on the terms and conditions of this Contract.
ARTICLE 26
CAPTIONS AND PRONOUNS
The captions appearing at the commencement of the Articles hereof
are descriptive only and for convenience in reference to this
Contract, and in no way whatsoever define, limit or describe the
scope or intent of this Contract, or in any way affect this
Contract.
ARTICLE 27
CORPORATE AUTHORIZATION
The parties executing this Contract acknowledge and
represent that all corporate authorization has been obtained for
the execution of this Contract and for the compliance with each
and every term hereof.
26
<PAGE>
ARTICLE 28
LEGAL SITUS
The terms and conditions of this Contract shall be
construed in accordance with and governed by the laws of the
State of Nevada, and the parties hereto acknowledge that the
Courts of this State shall have exclusive jurisdiction over any
action or proceeding brought under or by reason of this Contract.
IN WITNESS WHEREOF, the Contractor and Owner have executed
this contract as of the day and year first above written.
RIO PROPERTIES, INC. d/b/a MARNELL CORRAO ASSOCIATES,
RIO SUITE HOTEL & CASINO INC.
By /s/ John Lipkowitz By /s/ Perry A. Eiman
Its Exec VP Its Vice President of
Operations
Nevada State Contractor's
License No. 39178
Attachments: Exhibit 'A' Legal Description
Exhibit 'B' Preliminary Magnitude Budget
Estimates dated 10/15/97
Exhibit 'C' Billing Format
Exhibit 'D' Exclusion List
27
<PAGE>
EXHIBIT 'A'
(Legal Description)
[NOT INCLUDED]
28
<PAGE>
EXHIBIT 'B'
(Preliminary Magnitude Budget Estimates dated 10/15/97)
[NOT INCLUDED]
<PAGE>
EXHIBIT 'C'
(Billing Format)
[NOT INCLUDED]
<PAGE>
EXHIBIT 'D'
(Exclusion List)
[NOT INCLUDED]
<PAGE>
EXHIBIT 21.01
<PAGE>
SUBSIDIARIES
OF
RIO HOTEL & CASINO, INC.
STATE OF PARENT
NAME INCORPORATION COMPANY
- ----------------------------------------------------------------------
Rio Properties, Inc. Nevada Rio Hotel & Casino, Inc.
Rio Leasing, Inc. Nevada Rio Hotel & Casino, Inc.
Rio Development Company, Inc. Nevada Rio Hotel & Casino, Inc.
Rio Resort Properties, Inc. Nevada Rio Hotel & Casino, Inc.
Cinderlane, Inc. Nevada Rio Properties, Inc.
HLG, Inc. Nevada Rio Properties, Inc.
<PAGE>
EXHIBIT 23.01
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports dated February 24, 1998 (1997 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-8
(File No. 333-12011), Form S-3 (File No. 33-70192), Form S-3
(File No. 33-51092), Form S-3 (File No. 33-36598), Form S-3
(File No. 333-869), and Form S-3 (File No. 333-39279).
ARTHUR ANDERSEN LLP
Las Vegas, Nevada
March 30, 1998
<PAGE>
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