SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 9, 1998
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RIO HOTEL & CASINO, INC.
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(Exact name of Registrant as specified in charter)
Nevada
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(State or other jurisdiction of incorporation)
1-11569 95-3671082
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(Commission File (IRS Employee
Number) 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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Not Applicable
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(Former name or former address, if changed since last report)
THIS DOCUMENT CONSISTS OF 84 PAGES. THE EXHIBIT INDEX IS ON PAGE 4.
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ITEM 5. OTHER EVENTS
On August 9, 1998, Rio Hotel & Casino, Inc., a Nevada
corporation ("Rio"), entered into an Agreement and Plan of Merger
(the "Merger Agreement") with Harrah's Entertainment, Inc., a
Delaware corporation, and HEI Acquisition Corp. III, a Nevada
corporation ("MergerSub"), providing for the merger of MergerSub
with and into Rio (the "Merger"), with Rio to be the surviving
corporation. If the Merger is consummated, each share of common
stock, par value $0.01 per share, of Rio issued and outstanding
immediately prior to the Merger would be converted into the right
to receive one share of the common stock, par value $0.10 per
share, of Harrah's. The Merger is subject to the approval of the
stockholders of Rio and Harrah's, the receipt of all necessary
gaming and other regulatory approvals, and the satisfaction or
waiver of certain other conditions precedent.
For additional information concerning the foregoing,
reference is made to Rio's press release issued August 10, 1998
and the Merger Agreement, copies of which are attached as
exhibits to this Current Report and incorporated herein by
reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(A) Financial Statements of Business Acquired.
Not Applicable.
(b) Pro Forma Financial Information.
Not Applicable.
(c) Exhibits.
2.1 Agreement and Plan of Merger dated as of August 9,
1998, among Rio Hotel & Casino, Inc., Harrah's
Entertainment, Inc. and HEI Acquisition Corp. III,
including as an exhibit the form of Stockholders
Support Agreement.
20.1 Press Release issued August 10, 1998.
2
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
RIO HOTEL & CASINO, INC.
(Registrant)
Date: August 13, 1998 By: /s/ Ronald J. Radcliffe
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Ronald J. Radcliffe
Vice President, Chief
Financial Officer and
Treasurer
3
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EXHIBIT INDEX
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
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2.1 Agreement and Plan of Merger dated as of 5
August 9, 1998, among Rio Hotel & Casino,
Inc., Harrah's Entertainment, Inc. and HEI
Acquisition Corp. III, including as an exhibit
the form of Stockholders Support Agreement.
20.1 Press Release issued August 10, 1998. 78
4
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AGREEMENT AND PLAN OF MERGER
DATED AS OF AUGUST 9, 1998
AMONG
HARRAH'S ENTERTAINMENT, INC.,
HEI ACQUISITION CORP. III
AND
RIO HOTEL & CASINO, INC.
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TABLE OF CONTENTS
PAGE
ARTICLE I. THE MERGER 1
Section 1.1. The Merger 1
Section 1.2. Effective Time of the Merger 2
Section 1.3. Closing 2
Section 1.4. Effect of the Merger 2
Section 1.5. Articles of Incorporation and Bylaws of the
Surviving Corporation 2
Section 1.6. Directors and Officers of the Surviving
Corporation 2
ARTICLE II. EFFECT OF THE MERGER ON SECURITIES OF THE
CONSTITUENT CORPORATIONS 3
Section 2.1. Conversion of Securities 3
Section 2.2. Exchange of Certificates 4
Section 2.3. Rio Options 6
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF RIO 7
Section 3.1. Organization of Rio and its Subsidiaries 7
Section 3.2. Capitalization. 8
Section 3.3. Authority; No Conflict; Required Filings and
Consents. 9
Section 3.4. Public Filings; Financial Statements. 10
Section 3.5. No Undisclosed Liabilities 11
Section 3.6. Absence of Certain Changes or Events 11
Section 3.7. Taxes. 12
Section 3.8. Real Property 14
Section 3.9. Title to Personal Property; Liens 18
Section 3.10. Intellectual Property 18
Section 3.11. Agreements, Contracts and Commitments. 19
Section 3.12. Litigation 19
Section 3.13. Environmental Matters 20
Section 3.14. Employee Benefit Plans. 21
Section 3.15. Compliance. 23
Section 3.16. Accounting and Tax Matters 24
Section 3.17. Joint Proxy Statement/Prospectus;
Registration Statement 24
Section 3.18. Labor Matters 25
Section 3.19. Insurance 25
Section 3.20. Opinion of Financial Advisor 25
Section 3.21. No Existing Discussions 25
Section 3.22. Nevada Takeover Statute 25
Section 3.23. Brokers 26
Section 3.24. Transactions With Affiliates 26
Section 3.25. Year 2000 26
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF
HARRAH'S AND MERGER SUB 26
Section 4.1. Organization 26
Section 4.2. Capitalization 27
Section 4.3. Authority; No Conflict; Required Filings and
Consents 28
Section 4.4. Public Filings; Financial Statements 29
Section 4.5. No Undisclosed Liabilities 29
Section 4.6. Litigation 30
Section 4.7. Environmental Matters 30
Section 4.8. Labor Matters 30
Section 4.9. Insurance 31
Section 4.10. Taxes 31
Section 4.11. Compliance with ERISA 31
Section 4.12. Intellectual Property 32
Section 4.13. Absence of Certain Changes or Events 32
Section 4.14. Compliance 33
Section 4.15. Accounting and Tax Matters 34
Section 4.16. Joint Proxy Statement/Prospectus;
Registration Statement 34
Section 4.17. Brokers 35
Section 4.18. No Operations of Merger Sub 35
Section 4.19. Title to Property 35
Section 4.20. Agreements, Contracts and Commitments 35
Section 4.21. Information Regarding HJC 36
Section 4.22. Opinion of Financial Advisor 36
ARTICLE V. COVENANTS 36
Section 5.1. Conduct of Business of Rio 36
Section 5.2. Conduct of Business of Harrah's and Merger
Sub 39
Section 5.3. Cooperation; Notice; Cure 41
Section 5.4. No Solicitation 41
Section 5.5. Joint Proxy Statement/Prospectus;
Registration Statement 43
Section 5.6. Stockholders' Meetings 44
Section 5.7. Access to Information 44
Section 5.8. Governmental Approvals 45
Section 5.9. Publicity 46
Section 5.10. Indemnification 46
Section 5.11. Employee Benefits 47
Section 5.12. Affiliate Agreements 48
Section 5.13. Pooling Accounting 48
Section 5.14. Tax Treatment of Reorganization 48
Section 5.15. Further Assurances and Actions 49
Section 5.16. Stock Exchange Listing 49
Section 5.17. Letter of Rio's Accountants 49
Section 5.18. Letter of Harrah's Accountants 50
Section 5.19. Appointment of Harrah's Director 50
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Section 5.20. Title Insurance 50
ARTICLE VI. CONDITIONS TO MERGER 50
Section 6.1. Conditions to Each Party's Obligation to
Effect the Merger 50
Section 6.2. Additional Conditions to Obligations of Rio 51
Section 6.3. Additional Conditions to Obligations of
Harrah's 52
ARTICLE VII. TERMINATION AND AMENDMENT 53
Section 7.1. Termination 53
Section 7.2. Effect of Termination 54
Section 7.3. Fees and Expenses. 54
Section 7.4. Amendment 56
Section 7.5. Extension; Waiver 56
ARTICLE VIII. MISCELLANEOUS 57
Section 8.1. Nonsurvival of Representations,
Warranties, Covenants and Agreements 57
Section 8.2. Notices 57
Section 8.3. Interpretation 58
Section 8.4. Counterparts 58
Section 8.5. Entire Agreement; No Third Party
Beneficiaries 58
Section 8.6. Governing Law 58
Section 8.7. Assignment 58
Section 8.8. Severability; Enforcement 59
Section 8.9. Specific Performance 59
EXHIBITS
Exhibit A Form of Stockholder Support Agreement
Exhibit B Form of Affiliate Letter
Exhibit C Title Insurance
Exhibit D Rio Representation Letter
Exhibit E Harrah's Representation Letter
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TABLE OF DEFINED TERMS
CROSS REFERENCE
TERMS IN AGREEMENT
Acquisition Agreement Section 5.4(c)
Acquisition Proposal Section 5.4(a)
Affiliate Section 5.12(a)
Affiliate Agreement Section 5.12(a)
Agreement Preamble
Articles of Merger Section 1.2
Assemblage Parcels Section 3.8(k)
Average Harrah's Common Stock Price Section 2.1(f)
Benefit Arrangement Section 3.14(a)(i)
Certificate Section 2.1(f)
Closing Section 1.3
Closing Date Section 1.3
Code Preamble
Confidentiality Agreements Section 5.4(a)
Development Parcel Section 3.8(k)
Effective Time Section 1.2
Employee Plans Section 3.14(a)(iii)
Environmental Claim Section 3.13
Environmental Condition Section 3.13
Environmental Laws Section 3.13
ERISA Section 3.14(a)(iv)
ERISA Affiliate Section 3.14(a)(v)
Exchange Act Section 2.3
Exchange Agent Section 2.2(a)
Exchange Fund Section 2.2(a)
Exchange Ratio Section 2.1(a)
GAAP Section 3.4(b)
Governmental Approvals Section 5.8(a)
Governmental Entity Section 3.3(c)
Harrah's Preamble
Harrah's Alternative Transaction Section 7.3(c)
Harrah's Balance Sheet Section 4.4(b)
Harrah's Common Stock Section 2.1(a)
Harrah's Disclosure Schedule Article IV
Harrah's Material Adverse Effect Section 4.1
Harrah's Options Section 4.2(a)
Harrah's Permits Section 4.14(a)
Harrah's Preferred Stock Section 4.2(a)
Harrah's Reporting Subsidiaries Section 4.4(a)
Harrah's SEC Reports Section 4.4(a)
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Harrah's Special Stock Section 4.2(a)
Harrah's Stock Option Plans Section 4.2(b)
Harrah's Stock Plans Section 4.2(a)
Harrah's Stockholders' Meeting Section 3.17
HSR Act Section 3.3(c)
Hazardous Materials Section 3.13
Indebtedness Section 3.11(a)
Indemnified Parties Section 5.10(a)
IRS Section 3.7(c)
Joint Proxy Statement/Prospectus Section 3.17
Lease and Operational Documents Section 3.8(c)
Merger Preamble
Merger Consideration Section 2.2(b)
Merger Sub Preamble
Merger Sub Common Stock Section 4.2(c)
Multiemployer Plan Section 3.14(a)(vi)
Notifying Party Section 5.8(a)
NRS Section 1.1
NYSE Section 2.1(f)
Pension Plan Section 3.14(a)(vii)
Phase VI Expansion Plan Section 3.8(k)
Phase VI Land Section 3.8(k)
Registration Statement Section 3.17
Representation Letters Section 5.14
Rio Preamble
Rio Alternative Transaction Section 7.3(c)
Rio Balance Sheet Section 3.4(b)
Rio Class II Preferred Stock Section 3.2(a)
Rio Common Stock Section 2.1(a)
Rio Disclosure Schedule Article III
Rio Gaming Laws Section 3.15(b)
Rio Hotel & Casino, Inc. Section 1.5
Rio Leased Property Section 3.8(a)
Rio Material Adverse Effect Section 3.1
Rio Material Contracts Section 3.11(a)
Rio Option Property Section 3.8(a)
Rio Options Section 2.3
Rio Owned Property Section 3.8(a)
Rio Permits Section 3.15(a)
Rio Preferred Stock Section 3.2(a)
Rio Real Property Section 3.8(a)
Rio SEC Reports Section 3.4(a)
Rio Stock Option Plans Section 2.3
Rio Stockholders' Meeting Section 3.17
v
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Rule 145 Section 5.12
SEC Section 3.3(c)
Securities Act Section 3.3(c)
Series A Special Stock Section 4.2(a)
Stockholder Support Agreements Preamble
Subsidiary Section 3.1
Superior Proposal Section 5.4(a)
Surviving Corporation Section 1.1
Tax Return Section 3.7(c)
Taxes Section 3.7(c)
Third Party Section 5.4(a)
Voting Debt Section 3.2(b)
Welfare Plan Section 3.14(a)(viii)
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of
August 9, 1998, by and among HARRAH'S ENTERTAINMENT, INC., a
Delaware corporation ("HARRAH'S"), HARRAH'S ACQUISITION CORP.
III, a Nevada corporation and a direct wholly-owned subsidiary of
Harrah's ("MERGER SUB"), and RIO HOTEL & CASINO, INC., a Nevada
corporation ("RIO").
WHEREAS, the Board of Directors of Rio has determined that
the merger of Merger Sub with and into Rio, upon the terms and
subject to the conditions set forth in this Agreement (the
"MERGER"), is fair to, and in the best interests of, Rio and its
stockholders;
WHEREAS, the Boards of Directors of Harrah's and Merger Sub
have determined that the Merger is in the best interests of
Harrah's and Merger Sub and their respective stockholders;
WHEREAS, for federal income tax purposes, it is intended
that the Merger shall qualify as a reorganization described in
Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "CODE");
WHEREAS, the Boards of Directors of Harrah's, Merger Sub and
Rio have each approved and adopted this agreement and approved
the Merger and the other transactions contemplated hereby.
WHEREAS, concurrently with the execution and delivery of
this Agreement and as a condition and inducement to each of
Harrah's and Merger Sub's willingness to enter into this
Agreement, certain stockholders of Rio have entered into
Stockholder Support Agreements with Harrah's dated as of the date
of this Agreement in the form attached hereto as Exhibit A (the
"STOCKHOLDER SUPPORT AGREEMENTS"), pursuant to which such
stockholders have agreed, among other things, to vote all voting
securities of Rio beneficially owned by them in favor of approval
and adoption of the Agreement and the Merger;
WHEREAS, for accounting purposes, it is intended that the
transactions contemplated by this Agreement shall be accounted
for as a pooling of interests;
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements
set forth below, the parties agree as follows:
ARTICLE I.
THE MERGER
SECTION 1.1. THE MERGER. Upon the terms and subject to
the provisions of this Agreement and in accordance with Chapter
92A of the Nevada Revised Statutes (the "NRS"), at the Effective
Time (as defined in Section 1.2), Merger Sub shall be merged with
and into Rio. As a result of the Merger, the separate corporate
existence of Merger Sub shall cease and Rio shall continue as the
surviving corporation (the "SURVIVING CORPORATION").
1
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SECTION 1.2. EFFECTIVE TIME OF THE MERGER. Subject to the
provisions of this Agreement (including Section 7.1 hereof),
articles of merger with respect to the Merger in such form as is
required by NRS Section 92A.200 (the "ARTICLES OF MERGER") shall
be duly prepared, executed and acknowledged and thereafter
delivered to the Secretary of State of the State of Nevada for
filing, as provided in the NRS, as early as practicable on the
Closing Date (as defined in Section 1.3). The Merger shall
become effective at the later of the date of filing of the
Articles of Merger or at such time within 90 days of the date of
filing as is specified in the Articles of Merger (the "EFFECTIVE
TIME").
SECTION 1.3. CLOSING. The closing of the Merger (the
"CLOSING") will take place at such time and place to be agreed
upon by the parties hereto, on a date to be specified by Harrah's
and Rio, which shall be no later than the third business day
after satisfaction or, if permissible, waiver of the conditions
set forth in Article VI (the "CLOSING DATE"), unless another date
is agreed to by Harrah's and Rio.
SECTION 1.4. EFFECT OF THE MERGER. Upon becoming
effective, the Merger shall have the effects set forth in the
NRS. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all properties, rights,
privileges, powers and franchises of Merger Sub and Rio shall
vest in the Surviving Corporation, and all debts, liabilities and
duties of Merger Sub and Rio shall become the debts, liabilities
and duties of the Surviving Corporation.
SECTION 1.5. ARTICLES OF INCORPORATION AND BYLAWS OF THE
SURVIVING CORPORATION. At the Effective Time, the Articles of
Incorporation and Bylaws of the Surviving Corporation shall be
amended to be identical to the Articles of Incorporation and
Bylaws, respectively, of Merger Sub as in effect immediately
prior to the Effective Time (except that the name of the
Surviving Corporation shall be "RIO HOTEL & CASINO, INC."), in
each case until duly amended in accordance with applicable law.
SECTION 1.6. DIRECTORS AND OFFICERS OF THE SURVIVING
CORPORATION. The directors of Merger Sub immediately prior to
the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the
Articles of Incorporation and Bylaws of the Surviving
Corporation, PROVIDED that, at Harrah's option, the board of
directors may include the existing non-employee directors of Rio
for a term not to exceed 90 days following the Effective Time.
The officers of Merger Sub immediately prior to the Effective
Time shall be the initial officers of the Surviving Corporation,
each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation.
2
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ARTICLE II.
EFFECT OF THE MERGER ON SECURITIES OF THE CONSTITUENT
CORPORATIONS
SECTION 2.1. CONVERSION OF SECURITIES. At the Effective
Time, by virtue of the Merger and without any action on the part
of any of the parties hereto or the holders of any of the
following:
(a) RIO COMMON STOCK. Each share of common stock, par
value $0.01 per share, of Rio ("RIO COMMON STOCK") issued and
outstanding immediately prior to the Effective Time (other than
shares to be canceled in accordance with Section 2.1(b)) shall be
converted, subject to Section 2.1(e) and 2.1(f), into the right
to receive one (the "EXCHANGE RATIO") validly issued, fully paid
and non-assessable share of common stock, par value $0.10 per
share, of Harrah's ("HARRAH'S COMMON STOCK"). All shares of Rio
Common Stock, when so converted, shall no longer be outstanding
and shall automatically be canceled and retired and shall cease
to exist, and each holder of a certificate representing any such
shares shall cease to have any ownership or other rights with
respect thereto, except the right to receive the Merger
Consideration, as defined in Section 2.2(b), in exchange for such
shares upon the surrender of such certificate in accordance with
Section 2.2.
(b) CANCELLATION OF TREASURY STOCK AND HARRAH'S-OWNED
STOCK. All shares of Rio Common Stock that are owned by Rio as
treasury stock and any shares of Rio Common Stock owned by
Harrah's or any wholly-owned Subsidiary (as defined in
Section 3.1) of Harrah's shall be canceled and retired and shall
cease to exist and no consideration shall be delivered in
exchange therefor.
(c) CAPITAL STOCK OF MERGER SUB. Each issued and
outstanding share of the common stock, par value $.01 per share,
of Merger Sub shall be converted into and become one fully paid
and nonassessable share of common stock, par value $.01 per
share, of the Surviving Corporation.
(d) RIO DEBT SECURITIES. All notes and other debt
instruments of Rio that are outstanding at the Effective Time
shall continue to be outstanding subsequent to the Effective Time
as debt instruments of the Surviving Corporation, subject to
their respective terms and provisions.
(e) ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio
shall be adjusted to reflect fully the effect of any stock split,
reverse split, stock dividend (including any dividend or
distribution of securities convertible into Harrah's Common Stock
or Rio Common Stock, as applicable), reorganization,
recapitalization or any other like change with respect to
Harrah's Common Stock or Rio Common Stock occurring after the
date hereof and prior to the Effective Time. References to the
Exchange Ratio elsewhere in this Agreement shall be deemed to
refer to the Exchange Ratio as it may have been adjusted pursuant
to this Section 2.1(e).
(f) FRACTIONAL SHARES. No certificates or scrip
representing fractional shares of Harrah's Common Stock shall be
issued in connection with the Merger, and such fractional share
interests will not entitle the owner thereof to vote or to any
rights as a stockholder of Harrah's.
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In lieu of any such fractional shares, each holder of Rio Common
Stock upon surrender of a certificate (a "CERTIFICATE") for
exchange shall be paid an amount in cash (without interest),
rounded up to the nearest cent, determined by multiplying (i) the
average closing price of Harrah's Common Stock as reported on the
New York Stock Exchange ("NYSE") Composite Tape for the ten
consecutive trading days immediately preceding the second
business day prior to the Effective Time (the "AVERAGE HARRAH'S
COMMON STOCK PRICE") by (ii) the fractional interest to which
such holder would otherwise be entitled (after taking into
account all shares of Rio Common Stock then held of record by
such holder).
SECTION 2.2. EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. At or prior to the Effective Time,
Harrah's shall deposit with a bank or trust company designated by
Harrah's and reasonably acceptable to Rio (the "EXCHANGE AGENT"),
for the benefit of the holders of shares of Rio Common Stock
outstanding immediately prior to the Effective Time, for exchange
in accordance with this Section 2.2, through the Exchange Agent,
(i) certificates evidencing the shares of Harrah's Common Stock
issuable pursuant to Section 2.1(a) in exchange for outstanding
shares of Rio Common Stock and (ii) cash in an aggregate amount
sufficient to pay for fractional shares pursuant to Section
2.1(f) (the shares and cash so deposited, together with any
dividends or distributions with respect to such shares of
Harrah's Common Stock payable after the Effective Time which also
shall be deposited with the Exchange Agent, being hereinafter
referred to collectively as the "EXCHANGE FUND"). Any interest,
dividends or other income earned on the investment of cash or
other property held in the Exchange Fund shall be for the account
of and payable to Harrah's.
(b) EXCHANGE PROCEDURES. Promptly after the Effective
Time, Harrah's will instruct the Exchange Agent to mail to each
holder of record of Certificates (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper
delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as Harrah's may
reasonably specify), and (ii) instructions to effect the
surrender of the Certificates in exchange for the certificates
evidencing shares of Harrah's Common Stock (plus cash in lieu of
fractional shares, if any, of Harrah's Common Stock as provided
in Section 2.1(f)). Upon surrender of a Certificate for
cancellation to the Exchange Agent together with such letter of
transmittal, duly executed, and such other customary documents as
may be required pursuant to such instructions, the holder of such
Certificate shall be entitled to receive in exchange therefor
(A) certificates evidencing that number of whole shares of
Harrah's Common Stock which such holder has the right to receive
in accordance with the Exchange Ratio in respect of the shares of
Rio Common Stock formerly evidenced by such Certificate, (B) any
dividends or distributions to which such holder is entitled
pursuant to Section 2.2(c), and (C) cash in respect of fractional
shares as provided in Section 2.1(f) (such shares of Harrah's
Common Stock, dividends, distributions, and cash, collectively,
the "MERGER CONSIDERATION"), and the Certificate so registered
shall forthwith be canceled. In the event of a transfer of
ownership of shares of Rio Common Stock which is not registered
in the transfer records of Rio as of the Effective Time, the
Merger Consideration may be issued and paid in accordance with
this Article II to a transferee if the Certificate evidencing
such shares of Rio Common Stock is presented to the Exchange
Agent, accompanied by all documents required to evidence and
effect such transfer pursuant to this Section 2.2(b) and by
evidence that any applicable stock transfer taxes have been paid.
Until so surrendered, each outstanding Certificate
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that prior to the Effective Time represented shares of Rio Common
Stock will be deemed from and after the Effective Time for all
corporate purposes (other than the payment of dividends and
subject to Section 2.1(f)) to evidence the ownership of the
number of full shares of Harrah's Common Stock into which such
shares of Rio Common Stock shall have been so converted.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES OF
HARRAH'S COMMON STOCK. No dividends or other distributions
declared or made after the Effective Time with respect to shares
of Harrah's Common Stock with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Certificate
with respect to shares of Harrah's Common Stock they are entitled
to receive until the holder of such Certificate shall surrender
such Certificate. Subject to applicable law, following surrender
of any such Certificate, there shall be paid to the record holder
of the certificates representing whole shares of Harrah's Common
Stock issued in exchange therefor, without interest, at the time
of such surrender, the amount of dividends or other distributions
with a record date after the Effective Time theretofore paid with
respect to such whole shares of Harrah's Common Stock.
(d) TRANSFERS OF OWNERSHIP. At the Effective time, the
stock transfer books of Rio shall be closed, and there shall no
further registration of transfers of Rio Common Stock thereafter
on the records of Rio. If any certificate for shares of Harrah's
Common Stock is to be issued in a name other than that in which
the Certificate surrendered in exchange therefor is registered,
it will be a condition of the issuance thereof that the
Certificate so surrendered will be properly endorsed and
otherwise in proper form for transfer and that the person
requesting such exchange will have paid to Harrah's or any agent
designated by it any transfer or other taxes required by reason
of the issuance of a certificate for Harrah's shares in any name
other than that of the registered holder of the certificate
surrendered, or have established to the reasonable satisfaction
of Harrah's or any agent designated by it that such tax has been
paid or is not payable.
(e) TERMINATION OF EXCHANGE FUND. Any portion of the
Exchange Fund which remains undistributed to the former
stockholders of Rio as of the date which is twelve months after
the Effective Time shall be delivered to Harrah's, upon demand,
and thereafter such former stockholders of Rio who have not
theretofore complied with this Section 2.2 shall be entitled to
look only to Harrah's for payment of the Merger Consideration to
which they are entitled pursuant hereto.
(f) NO LIABILITY. None of Harrah's, Merger Sub, Rio or
the Exchange Agent shall be liable to any holder of Rio Common
Stock for any Merger Consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar
law.
(g) WITHHOLDING RIGHTS. Harrah's or the Exchange Agent
shall be entitled to deduct and withhold from the Merger
Consideration otherwise payable pursuant to this Agreement to any
holder of Certificates which prior to the Effective Time
represented shares of Rio Common Stock such amounts as Harrah's
or the Exchange Agent is required to deduct and withhold with
respect to the making of such payment under the Code or any
provision of state, local, or foreign tax law. To the extent
that amounts are so withheld by Harrah's or the Exchange Agent,
such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of Rio
Common Stock in respect of which such deduction and withholding
was made by Harrah's or the Exchange Agent.
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(h) LOST, STOLEN OR DESTROYED CERTIFICATES. In the event
any Certificates shall have been lost, stolen or destroyed, the
Exchange Agent shall pay in exchange for such lost, stolen or
destroyed Certificates, upon the making of an affidavit of that
fact by the holder thereof, such Merger Consideration as may be
required pursuant to Section 2.2; PROVIDED, HOWEVER, that
Harrah's may, in its discretion, and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or
destroyed Certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made
against Harrah's, the Surviving Corporation or the Exchange Agent
with respect to the Certificates alleged to have been lost,
stolen or destroyed.
(i) AFFILIATES. Notwithstanding anything herein to the
contrary, Certificates surrendered for exchange by any Affiliate
(as defined in Section 5.12) of Rio shall not be exchanged until
the later of (i) the date Harrah's has received an Affiliate
Agreement (as defined in Section 5.12) from such Affiliate or
(ii) the date such shares of Harrah's Common Stock are
transferable pursuant to the Affiliate Agreement regardless of
whether such agreement was executed by the Affiliate.
SECTION 2.3. RIO OPTIONS. Effective at the Effective Time,
subject, if necessary, to obtaining the consent of the holder
thereof, each unexpired and unexercised outstanding option,
whether or not then vested or exercisable in accordance with its
terms, to purchase shares of Rio Common Stock (the "RIO OPTIONS")
previously granted by Rio or its Subsidiaries under Rio's 1991
Non-Statutory Stock Option Plan, as amended, 1991 Directors'
Stock Option Plan, as amended, and 1995 Long-Term Incentive Plan,
as amended (collectively, the "RIO STOCK OPTION PLANS"), shall be
converted automatically into an option to acquire the number of
shares of Harrah's Common Stock (a "SUBSTITUTE OPTION"), rounded
down to the nearest whole share, determined by multiplying (i)
the number of shares of Rio Common Stock subject to such Rio
Option immediately prior to the Effective Time by (ii) the
Exchange Ratio. The exercise price per share of Harrah's Common
Stock subject to each Substitute Option shall be equal to the
exercise price per share of Rio Common Stock subject to the
relevant Rio Option divided by the Exchange Ratio and then
rounded up to the nearest whole cent; PROVIDED, HOWEVER, that in
the case of any Rio Option which is qualified as an incentive
stock option under Section 422 of the Code, the conversion
formula (both as to number of shares to be subject to the related
Substitute Option and the exercise price of the related
Substitute Option) shall be adjusted, if necessary, to comply
with Section 424(a) of the Code. After the Effective Time, each
Substitute Option shall be exercisable upon the same terms and
conditions as were applicable to the related Rio Option
immediately prior to the Effective Time (including those terms
which may have caused such Rio Option/Substitute Option to become
exercisable in full in connection with the consummation of the
transactions contemplated by this Agreement). As soon as
practicable after the Effective Time, Harrah's shall deliver to
the holders of the Substitute Options appropriate notice setting
forth such holders' rights pursuant thereto. The conversion
shall be effected in a manner consistent with allowing Harrah's
to account for the Merger as a pooling of interests. Harrah's
shall take all corporate action necessary to reserve for issuance
a sufficient number of shares of Harrah's Common Stock for
delivery under the Rio Stock Option Plans, which shall be assumed
in accordance with this Section 2.3. Within 30 days after the
Effective Time, Harrah's shall file a registration statement on
Form S-8 (or any successor or other appropriate forms) with
respect to the shares of Harrah's Common Stock subject to such
options and shall use its best efforts to maintain the
effectiveness of such registration statement (and maintain the
current status of the
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prospectus or prospectuses contained therein) for so long as such
options remain outstanding. Rio (or, if appropriate, any
committee administering the Rio Stock Option Plans) shall use its
best efforts, prior to or as of the Effective Time, to take all
necessary actions, pursuant to and in accordance with the terms
of the Rio Stock Option Plans and the instruments evidencing the
Rio Options, to provide for the conversion of the Rio Options
into options to acquire Harrah's Common Stock in accordance with
this Section 2.3. Furthermore, Rio shall use its best efforts to
obtain the consent of the holders of the Rio Options if required
in connection with such conversion. The Board of Directors of
Rio shall, prior to or as of the Effective Time, take appropriate
action to approve the deemed cancellation of the Rio Options for
purposes of Section 16(b) of the Securities Exchange Act of 1934,
as amended (the "EXCHANGE ACT"). Harrah's shall, prior to or as
of the Effective Time, take appropriate action to approve the
deemed grant of options to purchase Harrah's Common Stock under
the Rio Options (as converted pursuant to this Section 2.3) for
purposes of Section 16(b) of the Exchange Act.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF RIO
Rio represents and warrants to Harrah's and Merger Sub that
the statements contained in this Article III are true and correct
except as set forth herein and in the disclosure schedule
delivered by Rio to Harrah's and Merger Sub on or before the date
of this Agreement (the "RIO DISCLOSURE SCHEDULE"). The Rio
Disclosure Schedule shall be arranged in paragraphs corresponding
to the numbered and lettered paragraphs contained in this Article
III and the disclosure in any paragraph shall qualify other
paragraphs in this Article III only to the extent that it is
reasonable from a reading of such disclosure that it also
qualifies or applies to such other paragraphs.
SECTION 3.1. ORGANIZATION OF RIO AND ITS SUBSIDIARIES.
Each of Rio and its Subsidiaries (as defined below) is duly
organized, validly existing and in good standing under the laws
of the jurisdiction of its organization and has the requisite
corporate, partnership or limited liability company power and
authority to carry on its business as now being conducted. Each
of Rio and its Subsidiaries is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which
the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing
necessary, except where the failure to be so qualified, licensed
or in good standing, would not be reasonably likely to have a
material adverse effect on the business or properties (including,
without limitation, Rio's development plans contemplated by the
Phase VI Expansion Plan (as defined) and Rio's development plans
of the Phase VI Land (as defined)), financial condition or
results of operations of Rio and its Subsidiaries, taken as a
whole (a "RIO MATERIAL ADVERSE EFFECT"); PROVIDED, HOWEVER, that
the effect of economic changes that are applicable to the gaming
industry generally, or the Las Vegas gaming industry in
particular, shall be excluded from the definition of "Rio
Material Adverse Effect" and from any determination as to whether
a Rio Material Adverse Effect has occurred or may occur with
respect to Rio. Rio has delivered to Harrah's a true and correct
copy of the Articles of Incorporation and Bylaws of Rio, in each
case as amended to the date of this Agreement. Assuming
compliance by Harrah's with all Rio Gaming Laws (as defined in
Section 3.15(b)) (including obtaining all necessary consents and
approvals), the respective organizational documents of Rio's
Subsidiaries do not contain any provision that would limit or
otherwise
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restrict the ability of Harrah's, following the Effective Time,
from owning or operating such Subsidiaries on the same basis as
Rio. Except as set forth in Rio SEC Reports (as defined in
Section 3.4) filed prior to the date hereof or in Schedule 3.1 of
the Rio Disclosure Schedule, neither Rio nor any of its
Subsidiaries directly or indirectly owns (other than ownership
interests in Rio or in one or more of its Subsidiaries) any
equity or similar interest in, or any interest convertible into
or exchangeable or exercisable for, any corporation, partnership,
joint venture or other business association or entity. As used
in this Agreement, the word "Subsidiary" means, with respect to
any party, any corporation or other organization, whether
incorporated or unincorporated, of which (i) such party or any
other Subsidiary of such party is a general partner or (ii) at
least a majority of the securities or other interests having by
their terms ordinary voting power to elect a majority of the
Board of Directors or others performing similar functions with
respect to such corporation or other organization is directly or
indirectly owned or controlled by such party or by any one or
more of its Subsidiaries, or by such party and one or more of its
Subsidiaries.
SECTION 3.2. CAPITALIZATION.
(a) The authorized capital stock of Rio consists of
100,000,000 shares of Rio Common Stock, $0.01 par value per
share, 12,500,000 shares of 8% Cumulative Convertible Preferred
Stock, par value $0.01 per share ("RIO PREFERRED STOCK"), and
10,000,000 of Class II Preferred Stock , par value $0.01 per
share ("RIO CLASS II PREFERRED STOCK"). As of the date hereof,
(i) 24,788,433 shares of Rio Common Stock were issued and
outstanding, all of which are validly issued, fully paid and
nonassessable, (ii) no shares of Rio Common Stock were held in
the treasury of Rio or by Subsidiaries of Rio, and (iii) no
shares of Rio Preferred Stock or Rio Class II Preferred Stock are
issued and outstanding. Schedule 3.2(a) of the Rio Disclosure
Schedule sets forth the number of shares of Rio Common Stock
reserved for future issuance upon exercise of Rio Options granted
and outstanding as of the date hereof and the Rio Stock Option
Plans. Schedule 3.2(a) of the Rio Disclosure Schedule also sets
forth, for each Rio Stock Option Plan, the dates on which Options
under such plan were granted, the number of Options granted on
each such date and the exercise price thereof. As of the date of
this Agreement, Rio has not granted any stock appreciation rights
or any other contractual rights (other than employment, bonus or
other compensation arrangements which are set forth on Schedule
3.2(a) of the Rio Disclosure Schedule) the value of which is
derived from the financial performance of Rio or the value of
shares of Rio Common Stock. Except as disclosed in Schedule
3.2(a) of the Rio Disclosure Schedule or the Rio SEC Reports,
there are no obligations, contingent or otherwise, of Rio or any
of its Subsidiaries to repurchase, redeem or otherwise acquire
any shares of Rio Common Stock or the capital stock or ownership
interests of any Subsidiary or to provide funds to or make any
material investment (in the form of a loan, capital contribution
or otherwise) in any such Subsidiary or any other entity other
than guarantees of bank obligations or indebtedness for borrowed
money of Subsidiaries entered into in the ordinary course of
business. All of the outstanding shares of capital stock
(including shares which may be issued upon exercise of
outstanding options) or other ownership interests of each of
Rio's Subsidiaries are duly authorized, validly issued, fully
paid and nonassessable and, except as disclosed in Schedule 3.2
of the Rio Disclosure Schedule or the Rio SEC Reports, all such
shares and ownership interests are owned by Rio or another
Subsidiary of Rio free and clear of all security interests,
liens, claims, pledges, agreements, limitations on Rio's voting
rights, charges or other encumbrances or restrictions on transfer
of any nature.
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(b) There are no bonds, debentures, notes or other
indebtedness having voting rights (or convertible into securities
having such rights) ("VOTING DEBT") of Rio or any of its
Subsidiaries issued and outstanding. Except as set forth in
Schedule 3.2(b) of the Rio Disclosure Schedule or the Rio SEC
Reports or as reserved for future grants of options under the Rio
Stock Option Plans as of the date hereof, (i) there are no shares
of capital stock of any class of Rio, or any security
exchangeable into or exercisable for such equity securities,
issued, reserved for issuance or outstanding; (ii) there are no
options, warrants, equity securities, calls, rights, commitments
or agreements of any character to which Rio or any of its
Subsidiaries is a party or by which it is bound obligating Rio or
any of its Subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or
other ownership interests (including Voting Debt) of Rio or any
of its Subsidiaries or obligating Rio or any of its Subsidiaries
to grant, extend, accelerate the vesting of or enter into any
such option, warrant, equity security, call, right, commitment or
agreement; and (iii) there are no voting trusts, proxies or other
voting agreements or understandings with respect to the shares of
capital stock of Rio to which Rio or any of its Subsidiaries is a
party. All shares of Rio Common Stock subject to issuance as
specified in this Section 3.2(b) are duly authorized and, upon
issuance on the terms and conditions specified in the instruments
pursuant to which they are issuable, shall be validly issued,
fully paid and nonassessable.
SECTION 3.3. AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND
CONSENTS.
(a) Rio has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions
contemplated by this Agreement. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby by Rio have been duly authorized by all
necessary corporate action on the part of Rio, subject only to
the approval and adoption of this Agreement and the Merger by a
majority of Rio's stockholders. This Agreement has been duly
executed and delivered by Rio and assuming the due authorization,
execution and delivery by Harrah's and Merger Sub, constitutes
the valid and binding obligation of Rio, enforceable against it
in accordance with its terms.
(b) Other than as disclosed in Schedule 3.3(b) of the Rio
Disclosure Schedule, the execution and delivery of this Agreement
by Rio does not, and the consummation of the transactions
contemplated hereby will not, (i) conflict with, or result in any
violation or breach of, any provision of the Articles of
Incorporation or Bylaws of Rio or the comparable charter or
organizational documents of any of its Subsidiaries, (ii) result
in any violation or breach of, or constitute (with or without
notice or lapse of time, or both) a default (or give rise to a
right of termination, cancellation or acceleration of any
obligation or loss of any material benefit) under, or require a
consent or waiver under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease,
contract or other agreement, instrument or obligation to which
Rio or any of its Subsidiaries is a party or by which any of them
or any of their properties or assets may be bound, or
(iii) subject to the governmental filings and other matters
referred to in Section 3.3(c), conflict with or violate any
permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Rio or
any of its Subsidiaries or any of its or their properties or
assets, except in the case of clauses (ii) and (iii) for any such
conflicts, violations, defaults, terminations, breaches,
cancellations, accelerations or requirements for consent or
waiver not obtained which (x) are not, individually or in the
aggregate, reasonably
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likely to have a Rio Material Adverse Effect or (y) would not
impair or unreasonably delay the consummation of the Merger.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any court,
administrative agency, commission, gaming authority or other
governmental authority or instrumentality ("GOVERNMENTAL ENTITY")
is required by or with respect to Rio or any of its Subsidiaries
in connection with the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby,
except for (i) the filing of the pre-merger notification report
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended ("HSR ACT"), (ii) the filing of the Articles of Merger
with respect to the Merger with the Secretary of State of the
State of Nevada, (iii) the filing of the Joint Proxy
Statement/Prospectus and the Registration Statement (as such
terms are defined in Section 5.4 below) with the Securities and
Exchange Commission (the "SEC") in accordance with the Securities
Act of 1933, as amended (the "SECURITIES ACT") and the Exchange
Act, (iv) any approvals and filing of notices required under the
Rio Gaming Laws (as defined in Section 3.15(b)), (v) such
consents, approvals, orders, authorizations, permits, filings or
registrations related to, or arising out of, compliance with
statutes, rules or regulations regulating the consumption, sale
or serving of alcoholic beverages, (vi) such immaterial filings
and consents as may be required under any environmental health or
safety law or regulation pertaining to any notification,
disclosure or required approval triggered by the Merger or the
transactions contemplated by this Agreement, and (vii) such other
filings, consents, approvals, orders, registrations and
declarations as may be required under the laws of any
jurisdiction in which Rio or any of its Subsidiaries or its
stockholders conducts any business or owns any assets the failure
of which to obtain would not be reasonably likely to have a Rio
Material Adverse Effect.
SECTION 3.4. PUBLIC FILINGS; FINANCIAL STATEMENTS.
(a) Rio has filed and made available to Harrah's all
forms, reports and documents required to be filed by Rio and the
Rio Reporting Subsidiaries with the SEC since January 1, 1995
(collectively, the "RIO SEC REPORTS"). Except as disclosed in
Schedule 3.4(a) of the Rio Disclosure Schedule, none of Rio's
Subsidiaries is required to file forms, reports and documents
with the SEC. The Rio SEC Reports (including any financial
statements filed as a part thereof or incorporated by reference
therein) (i) at the time filed, complied in all material respects
with the applicable requirements of the Securities Act and the
Exchange Act, as the case may be, and (ii) did not, at the time
they were filed (or if amended or superseded by a filing prior to
the date of this Agreement, then on the date of such filing),
contain any untrue statement of a material fact or omit to state
a material fact required to be stated in such Rio SEC Reports or
necessary in order to make the statements in such Rio SEC
Reports, in the light of the circumstances under which they were
made, not misleading.
(b) Each of the consolidated financial statements
(including, in each case, any related notes) of Rio contained in
the Rio SEC Reports complied as to form in all material respects
with the applicable published rules and regulations of the SEC
with respect thereto, was prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent
basis throughout the periods involved (except as may be indicated
in the notes to such financial statements or, in the case of
unaudited statements, as indicated in the Rio SEC Reports) and
fairly presented the consolidated financial position of Rio and
its consolidated Subsidiaries as
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of the dates and the consolidated results of its operations and
cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and
recurring year-end adjustments which, with respect to interim
periods since December 31,1997, were not or are not expected to
be material in amount. The audited balance sheet of Rio as of
December 31,1997 is referred to herein as the "RIO BALANCE
SHEET."
SECTION 3.5. NO UNDISCLOSED LIABILITIES. Except as
disclosed in the Rio SEC Reports filed prior to the date of this
Agreement or in Schedule 3.5 of the Rio Disclosure Schedule, and
except for liabilities and obligations incurred since the date of
the Rio Balance Sheet in the ordinary course of business
consistent with past practices, Rio and its consolidated
Subsidiaries do not have any indebtedness, obligations or
liabilities of any kind, whether accrued, contingent or otherwise
(whether or not required to be reflected in financial statements
in accordance with GAAP), and whether due or to become due, which
would be reasonably likely to have a Rio Material Adverse Effect.
SECTION 3.6. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except
as disclosed in the Rio SEC Reports filed prior to the date of
this Agreement or in Schedule 3.6 of the Rio Disclosure Schedule,
since the date of the Rio Balance Sheet, Rio and its Subsidiaries
have conducted their businesses only in the ordinary course and
in a manner consistent with past practice and, since such date,
there has not been (i) any event, development, state of affairs
or condition, or series or combination of events, developments,
states of affairs or conditions, which, individually or in the
aggregate, has had or is reasonably likely to have a Rio Material
Adverse Effect; (ii) any damage, destruction or loss (whether or
not covered by insurance) with respect to Rio or any of its
Subsidiaries which is reasonably likely to have a Rio Material
Adverse Effect; (iii) any material change by Rio in its
accounting methods, principles or practices of which Harrah's has
not previously been informed; (iv) any revaluation by Rio of any
of its assets which is reasonably likely to have a Rio Material
Adverse Effect; (v) any declaration, setting aside or payment of
any dividend or other distribution (whether in cash, stock or
property) with respect to the equity interests of Rio or of any
of its Subsidiaries, other than dividends paid by wholly owned
Subsidiaries or any redemption, purchase or other acquisition by
Rio or any of its Subsidiaries of any securities of Rio or any of
its Subsidiaries; (vi) any split, combination or reclassification
of any of Rio's capital stock or any issuance or the
authorization of any issuance of any other securities in respect
of, in lieu of or in substitution for, shares of Rio's capital
stock; (vii) any increase in or establishment of, or any
liability (caused by a prior or existing violation of laws or
regulations) under, any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, stock option,
stock purchase or other employee benefit plan, or any other
increase in the compensation payable or to become payable to any
officers or key employees of Rio or any Subsidiary other than
increases which would not be material, individually or in the
aggregate, with respect to such officers or employees receiving
such benefit or compensation (based on a comparison to benefits
and compensation received in the year ended December 31,1997);
(viii) any entry into, renewal, modification or extension of, any
material contract, arrangement or agreement with any other party
except for contracts, arrangements or agreements in the ordinary
course of business or as contemplated by this Agreement; or
(ix) any settlement of pending or threatened litigation involving
Rio or any of its Subsidiaries (whether brought by a private
party or a Governmental Entity) other than any settlement which
is not reasonably likely to have a Rio Material Adverse Effect.
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SECTION 3.7. TAXES.
(a) Except as set forth in Schedule 3.7(a) of the Rio
Disclosure Schedule:
(i) Each of Rio and its Subsidiaries (and any
affiliated group (within the meaning of Section 1504 of the
Code)) of which Rio or any of its Subsidiaries is now or ever has
been a member) has timely filed with the appropriate taxing
authorities all federal and other material Tax Returns (as
defined in Section 3.7(c)) required to be filed through the date
hereof and will timely file any such returns required to be filed
on or prior to the Closing Date. All such Tax Returns were (and,
to the extent they will be filed prior to the Effective Time,
will be) complete and accurate in all material respects. None of
Rio, its Subsidiaries, nor any affiliated group (within the
meaning of Section 1504 of the Code) of which Rio or any of its
Subsidiaries is now or was a member, has pending any request for
an extension of time within which to file federal income Tax
Returns. Rio has provided to Harrah's and Merger Sub complete
and accurate (in all material respects) copies of Rio's federal
income Tax Returns for the taxable years ended December 31, 1992
through December 31, 1997.
(ii) All Taxes (as defined in Section 3.7(c)) in
respect of periods beginning before the Closing Date have been
paid or will be timely paid, or an adequate reserve has been or
will be established therefor in accordance with GAAP, by each of
Rio and its Subsidiaries subject only to such exceptions as would
not be reasonably likely to have, individually or in the
aggregate, a Rio Material Adverse Effect.
(iii) Rio and each its Subsidiaries have complied
in all respects with all applicable laws, rules and regulations
relating to the payment and withholding of Taxes and have, within
the time and the manner prescribed by law, withheld and paid over
to the proper governmental authorities all amounts required to be
so withheld and paid over under applicable laws subject to such
exceptions as would not be reasonably likely to have,
individually or in the aggregate, a Rio Material Adverse Effect.
(iv) No federal, state, local or foreign audits or
other administrative proceedings or court proceedings are
presently pending with regard to any Taxes or Tax Returns of Rio
or any of its Subsidiaries, subject to such exceptions as would
not be reasonably likely to have, individually or in the
aggregate, a Rio Material Adverse Effect. Neither Rio nor any
of its Subsidiaries has received a written notice or announcement
of any material audits or proceedings. No requests for waivers
of time to assess any Taxes are pending, none of Rio or any of
its Subsidiaries has waived any statute of limitations with
respect to Taxes or agreed to any extension of time with respect
to any Tax assessment or deficiency for any open taxable year.
The statutes of limitations for the federal income Tax Returns of
Rio and each of its Subsidiaries have expired for all taxable
years ended on or prior to December 31, 1991.
(v) Neither the IRS nor any other taxing authority
(whether domestic or foreign) has asserted in writing, or to the
best knowledge of Rio, is threatening in writing to assert, (a)
against Rio or any of its Subsidiaries any deficiency or claim
for Taxes in excess of the reserves established therefor or
(b) that Rio or any of its Subsidiaries should have, but did not,
file a Tax Return in a particular jurisdiction where Rio or any
such Subsidiary do not regularly file
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Tax Returns, except as which would not be reasonably likely to
have a Rio Material Adverse Effect.
(b) Except as set forth in Schedule 3.7(b) of Rio
Disclosure Schedule:
(i) There are no liens for Taxes upon any property or
assets of Rio or any Subsidiary thereof, except for liens for
Taxes not yet due and payable and liens for Taxes that are being
contested in good faith by appropriate proceedings as set forth
in Schedule 3.7(a) of Rio Disclosure Schedule and as to which
adequate reserves have been established in accordance with GAAP
except as which would not be reasonably likely to have,
individually or in the aggregate, a Rio Material Adverse Effect.
(ii) Neither Rio nor any of its Subsidiaries is or has
been a member of an affiliated group of corporations filing a
consolidated federal income tax return (or a group of
corporations filing a consolidated, combined or unitary income
tax return under comparable provisions of state, local or foreign
tax law) for any taxable period beginning on or after January 1,
1992, other than a group the common parent of which is or was Rio
or any Subsidiary of Rio.
(iii) Neither Rio nor any of its Subsidiaries has
(a) any obligation under any Tax sharing agreement or similar
arrangement with any other person with respect to Taxes of any
other person or (b) except as which would not be reasonably
likely to have, individually or in the aggregate, a Rio Material
Adverse Effect, entered into a closing agreement or other similar
agreement related to Taxes with any taxing authority for any open
or future taxable year.
(iv) Neither Rio nor any of its Subsidiaries has, with
regard to any assets or property held or acquired by any of them,
filed a consent to the application of Section 341(f) of the Code,
or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as such term is defined in
Section 341(f)(4) of the Code) owned by Rio or any of its
Subsidiaries;
(v) To the best knowledge of Rio, no member of the
Rio affiliated group (as defined in Section 1504 of the Code) has
recognized any gain in connection with any intercompany
transaction that has been deferred for federal income tax
purposes, except for such gains as have been taken into account
on Tax Returns filed prior to the date hereof in accordance with
Treas. Reg. Section 1.1502-13, except as which would not be
reasonably likely to have, individually or in the aggregate, a
Rio Material Adverse Effect.
(vi) Rio has no stockholder who has held more than 5%
of any class of Rio stock within the last five years for whom
such stock would be treated as a "United States real property
interest" within the meaning of Section 897(c) of the Code.
(vii) Neither Rio nor any of its Subsidiaries has
agreed to, or is required to make, any adjustments under Section
481 of the Code for any open or future taxable year, except as
which would not be reasonably likely to have, individually or in
the aggregate, a Rio Material Adverse Effect.
(c) "TAXES" shall mean any and all taxes, charges, fees,
levies, duties, liabilities, impositions or other assessments,
including, without limitation, income, gross receipts, profits,
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alternative or add-on minimum, excise, real (due and payable) or
personal property, environmental, recapture, sales, use, value-
added, withholding, social security, estimated retirement,
employment, unemployment, disability, occupation, service,
registration, license, customs duties, net worth, payroll,
franchise, gains, stock, stamp, transfer and recording taxes,
fees and charges, imposed by the Internal Revenue Service ("IRS")
or any other taxing authority (whether domestic or foreign
including, without limitation, any state, county, local or
foreign government or any subdivision or taxing agency thereof
(including a United States possession)), whether computed on a
separate, consolidated, unitary, combined or any other basis; and
such term shall include any interest whether paid or received,
fines, penalties or additional amounts attributable to, or
imposed upon, or with respect to, any such taxes, charges, fees,
levies or other assessments. "TAX RETURN" shall mean any report,
return, document, declaration or other information or filing
required to be supplied to any taxing authority or jurisdiction
(foreign or domestic) with respect to Taxes, including, without
limitation, any amendments of any such tax or information returns
and any schedules, exhibits or other documents with respect to or
accompanying any such tax or information returns or any payments
of estimated Taxes or requests for the extension of time in which
to file any such report, return, document, declaration or other
information.
(d) For purposes of this Section 3.7, the phrase "Rio
Material Adverse Effect" shall include any tax liability or group
of tax liabilities exceeding $1,000,000 for any taxable year or
$5,000,000 for all open taxable years.
SECTION 3.8. REAL PROPERTY.
(a) Schedule 3.8(a) of the Rio Disclosure Schedule
identifies all real property owned by Rio and its Subsidiaries
(the "RIO OWNED PROPERTY"), all real property for which Rio and
its Subsidiaries have an option to purchase or right of first
refusal (the "RIO OPTION PROPERTY"), all real property for which
Rio and its Subsidiaries have equitable interests as contract
purchasers under executed purchase and sale agreements (the "RIO
CONTRACT PROPERTY"), all real property for which Rio and its
Subsidiaries have equitable interests as profit participants in
the proceeds from any disposition thereof ("RIO PROFIT
PARTICIPATION PROPERTY") and all real property leased or operated
by Rio and its Subsidiaries (the "RIO LEASED PROPERTY"). The Rio
Owned Property, the Rio Option Property, the Rio Contract
Property, the Rio Profit Participation Property and the Rio
Leased Property is referred to herein collectively as the "RIO
REAL PROPERTY." For purposes of this Agreement, "RIO SPACE
LEASES" means the leases identified as such on Schedule 3.8(a) of
the Rio Disclosure Schedule. For purposes of this Agreement,
"RIO PERMITTED LIENS" means (a) mechanic's carriers', workers',
repairers', materialmen's, warehousemen's and other similar liens
arising or incurred in the ordinary course of business for sums
not yet due and payable and such liens as are being contested by
Rio or its Subsidiaries in good faith, provided such liens do not
individually or in the aggregate have a Rio Material Adverse
Effect, (b) liens arising or resulting from any action taken by
Harrah's, (c) liens for current taxes not yet due and payable,
(d) any covenants, conditions, restrictions, reservations,
rights, liens, easements, encumbrances, encroachments and other
matters affecting title which do not individually or in the
aggregate have a Rio Material Adverse Effect, (e) the Lease and
Operational Documents (as defined in Section 3.8(c) below) and
(f) matters permitted pursuant to Section 5.1 hereof.
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(b) Rio and its Subsidiaries have good, valid, legal and
marketable fee simple title to the Rio Owned Property, and a
valid leasehold interest in the Rio Leased Property, sufficient
to allow each of Rio and its Subsidiaries to conduct, and to
continue to conduct, its business as and where currently
conducted. The interests of Rio and its Subsidiaries in the Rio
Controlled Real Property (as defined in Section 3.8(c) below),
and to the best knowledge of Rio, the interests of Rio and its
Subsidiaries in the Rio Real Property which is not Rio Controlled
Real Property, are free and clear of any and all liens,
encumbrances, restrictions, leases, options to purchase, options
to lease, conditions, covenants, assessments, defects, claims or
exceptions, except for the exceptions described in Schedule
3.8(b) of the Rio Disclosure Schedule and the Rio Permitted
Liens. Prior to the date hereof, Rio has delivered to Harrah's
true and correct copies of all title reports and policies and
surveys currently in Rio's possession for each respective parcel
of Rio Real Property, each of which title reports, title policies
and surveys is listed for each parcel of Rio Real Property in
Schedule 3.8(b) of the Rio Disclosure Schedule. Schedule 3.8(b)
of the Rio Disclosure Schedule sets forth the date of each such
title report, title policy and survey.
(c) Part I of Schedule 3.8(c) of the Rio Disclosure
Schedule lists all of the material documents under which the Rio
Owned Property and the Rio Leased Property is owned, developed,
constructed, leased, operated, managed or licensed (the "LEASE
AND OPERATIONAL DOCUMENTS"), true and correct copies of which
have been delivered or made available for review to Harrah's.
Part II of Schedule 3.8(c) of the Rio Disclosure Schedule lists
all of the material documents relating to the rights and
obligations of Rio and its Subsidiaries with respect to the Rio
Option Property, the Rio Contract Property and the Rio Profit
Participation Property (the "EQUITABLE RIGHTS DOCUMENTS"), true
and correct copies of which have been delivered or made available
for review to Harrah's. The Lease and Operational Documents and
the Equitable Rights Agreements are unmodified (except as set
forth in Schedule 3.8(c) of the Rio Disclosure Schedule), are in
full force and effect, and there are no other material
agreements, written or oral, between Rio or any of its
Subsidiaries and any third party with respect to the Rio Real
Property or otherwise relating to the development, construction,
ownership, improvement, use and occupancy of the Rio Real
Property. Except as disclosed on Part III of Schedule 3.8(c) of
the Rio Disclosure Schedule, none of Rio, its Subsidiaries or (to
the best knowledge of Rio) any other party is in material default
under the Lease and Operational Documents or the Equitable Rights
Agreements and, to the best knowledge of Rio, no material
defaults (except those subsequently cured) by Rio, its
Subsidiaries or any other party have been alleged thereunder.
For purposes of this Agreement, "RIO CONTROLLED REAL PROPERTY"
shall mean (i) all Rio Owned Property; (ii) all Rio Leased
Property; and (iii) all Rio Option Property, Rio Contract
Property and Rio Profit Participation Property where the other
party or parties to the applicable Equitable Rights Document is
an Affiliate of Rio.
(d) Except as disclosed in Schedule 3.8(d) of the Rio
Disclosure Schedule, (i) no portion of the Rio Controlled
Property (exclusive of Rio Leased Property under Rio Space
Leases), and to the best knowledge of Rio, no portion of the Rio
Real Property which is not Rio Controlled Real Property, is in
violation of any applicable laws, regulations or restrictions
(including zoning laws and regulations), except for such
violations which, individually or in the aggregate, would not be
reasonably likely to result in a Rio Material Adverse Effect; and
(ii) there are no defects in the physical condition of the Rio
Controlled Real Property (exclusive of Rio Leased Property under
Rio Space Leases) or the improvements located thereon, and to the
best knowledge of Rio, there are no defects in the physical
condition of the Rio Real Property which is
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not Rio Controlled Real Property or the improvements located
thereon, except for defects which, individually or in the
aggregate, would not be reasonably likely to have a Rio Material
Adverse Effect.
(e) Except as disclosed in Schedule 3.8(e) of the Rio
Disclosure Schedule, there is no action, proceeding or litigation
pending (or, to the best knowledge of Rio, overtly contemplated
or threatened) (i) to take all or any portion of any of the
respective parcels of the Rio Controlled Real Property (exclusive
of Rio Leased Property under Rio Space Leases), or any interest
therein, by eminent domain; (ii) to modify the zoning of, or
other governmental rules or restrictions applicable to, any of
the respective parcels of the Rio Controlled Real Property
(exclusive of Rio Leased Property under Rio Space Leases) or the
use or development thereof; (iii) for any street widening or
changes in highway or traffic lanes or patterns in the immediate
vicinity of any of the respective parcels of the Rio Controlled
Real Property (exclusive of Rio Leased Property under Rio Space
Leases); or (iv) otherwise relating to any of the respective
parcels of the Rio Controlled Real Property (exclusive of Rio
Leased Property under Rio Space Leases) or the interests of Rio
and its Subsidiaries therein, or which otherwise would interfere
with the use, ownership, improvement, development and/or
operation of any of the respective parcels of the Rio Controlled
Real Property (exclusive of Rio Leased Property under Rio Space
Leases); in each case except for such actions, proceedings or
litigation which, individually or in the aggregate, would not be
reasonably expected to have a Rio Material Adverse Effect. Except
as disclosed in Schedule 3.8(e) of the Rio Disclosure Schedule,
to the best knowledge of Rio, there is no action, proceeding or
litigation pending or overtly contemplated or threatened (w) to
take all or any portion of any of the respective parcels of the
Rio Real Property which is not Rio Controlled Real Property, or
any interest therein, by eminent domain; (x) to modify the zoning
of, or other governmental rules or restrictions applicable to,
any of the respective parcels of the Rio Real Property which is
not Rio Controlled Rio Real Property or the use or development
thereof; (y) for any street widening or changes in highway or
traffic lanes or patterns in the immediate vicinity of any of the
respective parcels of the Rio Real Property which is not Rio
Controlled Real Property; or (z) otherwise relating to any of the
respective parcels of the Rio Real Property which is not Rio
Controlled Real Property, or the interests of Rio and its
Subsidiaries therein, or which otherwise would interfere with the
use, ownership, improvement, development and/or operation of any
of the respective parcels of the Rio Real Property which is not
Rio Controlled Real Property; in each case except for such
actions, proceedings or litigation which, individually or in the
aggregate, would not be reasonably expected to have a Rio
Material Adverse Effect.
(f) Except as disclosed in Schedule 3.8(f) of the Rio
Disclosure Schedule, no portion of any of the respective parcels
of the Rio Controlled Real Property (exclusive of Rio Leased
Property under Rio Space Leases), and to the best knowledge of
Rio, no portion of any of the respective parcels of the Rio Real
Property which is not Rio Controlled Real Property: (i) is
situated in a "Special Flood Hazard Area," as set forth on a
Federal Emergency Management Agency Flood Insurance Rate Map or
Flood Hazard Boundary Map; (ii) was the former site of any public
or private landfill, dump site, retention basin or settling pond;
(iii) was the former site of any oil or gas drilling operations;
or (iv) was the former site of any experimentation, processing,
refining, reprocessing, recovery or manufacturing operation for
any petrochemicals.
(g) Except as disclosed in Schedule 3.8(g) of the Rio
Disclosure Schedule, each parcel of the Rio Controlled Real
Property (exclusive of Rio Leased Property under Rio Space
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Leases), and to the best knowledge of Rio, each parcel of Rio
Real Property which is not Rio Controlled Real Property, is
assessed separately from all other adjacent property for purposes
of real property taxes.
(h) Except as shown in Part I of Schedule 3.8(h) of the
Rio Disclosure Schedule each of the respective parcels
constituting Rio Controlled Real Property (exclusive of Rio
Leased Property under Rio Space Leases), and to the best
knowledge of Rio, each of the respective parcels constituting Rio
Real Property which is not Rio Controlled Real Property, is
connected to and serviced by adequate water, sewage disposal, gas
and electricity facilities. All material systems (heating, air
conditioning, electrical, plumbing and the like) for the basic
operation of each of the businesses currently conducted at each
of the respective parcels of the Rio Controlled Real Property
(exclusive of Rio Leased Property under Rio Space Leases), or the
best knowledge of Rio, at each of the respective parcels of the
Rio Real Property which is not Rio Controlled Real Property, are
operable and in satisfactory working condition (ordinary wear and
tear excepted), except as would not be reasonably expected to
have a Rio Material Adverse Effect. Each of the respective
parcels constituting Rio Real Property is zoned as described in
Part II of Schedule 3.8(h) of the Rio Disclosure Schedule.
(i) There are no material commitments to or agreements
with any governmental authority or agency (federal, state or
local) affecting any parcel of the Rio Controlled Real Property
(exclusive of Rio Leased Property under Rio Space Leases) which
are not listed in Schedule 3.8(i) of the Rio Disclosure Schedule.
To the best knowledge of Rio, there are no material commitments
to or agreements with any governmental authority or agency
(federal, state or local) affecting any parcel of the Rio Real
Property other than Rio Controlled Real Property which are not
listed in Schedule 3.8(i) of the Rio Disclosure Schedule.
(j) There are no contracts or other obligations
outstanding for the sale, exchange, lease, transfer,
hypothecation, financing or other disposition of any of the
respective parcels of the Rio Real Property, or any portion of
any such parcel, or the businesses operated by Rio at each of the
respective parcels of the Rio Real Property, by Rio and its
Subsidiaries except as disclosed on Schedule 3.8(j) of the Rio
Disclosure Schedule and other than contracts and obligations
entered into after the date of this Agreement in compliance with
Section 5.1.
(k) Prior to the date hereof, Rio has delivered to
Harrah's a true and correct copy of its site plan for the
expansion of the improvements on the parcel of Rio Real Property
described in Item 1A2c of Schedule 3.8(b) of the Rio Disclosure
Schedule which is described in the Form 10-K for the year ended
December 31, 1997, under the heading "Business-Expansion
Strategy" (the "PHASE VI EXPANSION PLAN"). Except as set forth
in Part I of Schedule 3.8(k) of the Rio Disclosure Schedule, Rio
and its Subsidiaries hold good, valid, legal and marketable title
in fee simple to all land necessary for the implementation of the
Phase VI Expansion Plan (the "PHASE VI LAND"). Rio and its
Subsidiaries hold all material permits, licenses, authorizations,
approvals, orders, variances and exemptions required by
applicable governmental authorities necessary for the
development, construction and operation of the improvements
described Phase VI Expansion Plan to the extent the same may be
necessary and, in light of the current state of development of
said improvements, be lawfully secured as of the date hereof and,
to the extent the same may not, in light of the current state of
development of said improvements, be lawfully secured as of the
date hereof, the same will be secured as and when necessary and
appropriate in
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the ordinary course of business and without payment of any fees,
costs, or expenses other than such as are customary and those
disclosed in Part II of Schedule 3.8(k) of the Rio Disclosure
Schedule. The Phase VI Land is adequately zoned for the
development contemplated by the Phase VI Expansion Plan, and, to
the best knowledge of Rio, there are no soil conditions affecting
the Phase VI Land which would materially interfere with the
development contemplated by the Phase VI Expansion Plan. The
Phase VI Land has access adequate for the development
contemplated by the Phase VI Expansion Plan. Part III of
Schedule 3.8(k) accurately describes the current status of the
progress made to date in the assemblage of the various parcels of
land described therein (the "ASSEMBLAGE PARCELS"). The
Assemblage Parcels have the contiguity described in Part IV of
Schedule 3.8(k) of the Rio Disclosure Schedule.
(l) Schedule 3.8(l) of the Rio Disclosure Schedule lists
all settlements, understandings, contracts or other agreements in
respect of fees, taxes, charges or other impositions with respect
to gaming, hotel, restaurant or other operations by any
applicable Governmental Entity with jurisdiction thereover.
SECTION 3.9. TITLE TO PERSONAL PROPERTY; LIENS. Rio and
each of its Subsidiaries has sufficiently good and valid title
to, or an adequate leasehold interest (under the leases described
in Schedule 3.9 of the Rio Disclosure Schedule) in, its material
tangible personal properties and assets in order to allow it to
conduct, and continue to conduct, its business as and where
currently conducted. Such material tangible personal assets and
properties are free of liens which would not individually or in
the aggregate have a Rio Material Adverse Effect, and the
consummation of the transactions contemplated by this Agreement
will not alter or impair the rights of Rio and its Subsidiaries
thereunder in any respect which, individually or in the
aggregate, would be reasonably likely to have a Rio Material
Adverse Effect. There are no defects in the physical condition
or operability of such material tangible personal assets and
properties which would impair the use of such assets and
properties as such assets and properties are currently used,
except for such defects which, individually or in the aggregate,
would not be reasonably likely to have a Rio Material Adverse
Effect.
SECTION 3.10. INTELLECTUAL PROPERTY. Schedule 3.10 of the
Rio Disclosure Schedule lists all (i) trademark and service mark
registrations and applications owned by Rio or any of its
Subsidiaries and (ii) material trademark, service mark and trade
name license agreements to which Rio or any of its Subsidiaries
is a party. Except as disclosed in Schedule 3.10 of the Rio
Disclosure Schedule, Rio and its Subsidiaries own or possess
adequate rights to use all material trademarks, trademark
applications, trade names, service marks, trade secrets
(including customer lists and customer databases), copyrights,
patents, licenses, know-how and other proprietary intellectual
property rights as are necessary in connection with the
businesses of Rio and its Subsidiaries as currently conducted,
and, to the best knowledge of Rio, except as set forth in
Schedule 3.10 of the Rio Disclosure Schedule, there is no
infringement of the rights of Rio and its Subsidiaries therein or
any infringement by them of the rights of others therein which,
individually or in the aggregate would be reasonably likely to
have a Rio Material Adverse Effect. Without limiting the
generality of the foregoing, Rio owns a validly registered
trademark on the name "Rio Suite Hotel & Casino (stylized)."
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SECTION 3.11. AGREEMENTS, CONTRACTS AND COMMITMENTS.
(a) Except as disclosed in the Rio SEC Reports filed prior
to the date of this Agreement or as disclosed in Schedule 3.11(a)
of the Rio Disclosure Schedule, as of the date of this Agreement,
neither Rio nor any of its Subsidiaries is a party to any oral or
written (i) agreement, contract, indenture or other instrument
relating to Indebtedness (as defined below) in an amount
exceeding $1,000,000, (ii) partnership, joint venture or limited
liability or management agreement with any person,
(iii) agreement, contract, or other instrument relating to any
merger, consolidation, business combination, share exchange,
business acquisition, or for the purchase, acquisition, sale or
disposition of any material assets of Rio or any of its
Subsidiaries outside the ordinary course of business, (iv) other
contract, agreement or commitment to be performed after the date
hereof which would be a material contract (as defined in Item
601(b)(10) of Regulation S-K of the SEC), (v) agreement,
contract, or other instrument relating to any "strategic
alliances" (i.e., cross-marketing, affinity relationships, etc.),
(vi) contract, agreement or commitment which materially restricts
(geographically or otherwise) the conduct of any line of business
by Rio or any of its Subsidiaries or (vii) any contract,
agreement or other instrument having as a party any partnership,
joint venture or limited liability company in which Rio or any of
its Subsidiaries is a partner, joint venture party or member
which would otherwise satisfy the criteria in clauses (i), (iii),
(iv), (v) or (vi) if Rio or any of its Subsidiaries were a party
to such contract, agreement or other instrument (collectively,
the "RIO MATERIAL CONTRACTS"). "INDEBTEDNESS" means any
liability in respect of (A) borrowed money, (B) capitalized lease
obligations, (C) the deferred purchase price of property or
services (other than trade payables in the ordinary course of
business) and (D) guarantees of any of the foregoing incurred by
any other person other than Rio or any of its Subsidiaries.
(b) Except as disclosed in the Rio SEC Reports filed prior
to the date of this Agreement or as disclosed in Schedule 3.11(b)
of the Rio Disclosure Schedule, as of the date of this Agreement,
(i) each of the Rio Material Contracts is valid and binding upon
Rio or any of its Subsidiaries (and, to Rio's best knowledge, on
all other parties thereto) in accordance with its terms and is in
full force and effect, (ii) there is no material breach or
violation of or default by Rio or any of its Subsidiaries under
any of the Rio Material Contracts, whether or not such breach,
violation or default has been waived, and (iii) no event has
occurred with respect to Rio or any of its Subsidiaries which,
with notice or lapse of time or both, would constitute a material
breach, violation or default, or give rise to a right of
termination, modification, cancellation, foreclosure, imposition
of a lien, prepayment or acceleration under any of the Rio
Material Contracts, which breach, violation or default referred
to in clauses (ii) or (iii), alone or in the aggregate with other
such breaches, violations or defaults referred to in clauses (ii)
or (iii), would be reasonably likely to have a Rio Material
Adverse Effect.
SECTION 3.12. LITIGATION. Except as disclosed in the Rio
SEC Reports filed prior to the date of this Agreement or in
Schedule 3.12 of the Rio Disclosure Schedule, (a) there is no
action, suit or proceeding, claim, arbitration or investigation
against Rio or any of its Subsidiaries pending, or as to which
Rio or any of its Subsidiaries has received any written notice of
assertion or, to the best knowledge of Rio, threatened against or
affecting, Rio or any of its Subsidiaries or any property or
asset of Rio or any of its Subsidiaries, before any court,
arbitrator, or administrative, governmental or regulatory
authority or body, domestic or foreign, that, individually or in
the aggregate, could reasonably be expected to (i) have a Rio
Material Adverse
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Effect or (ii) prevent the consummation of the transactions
contemplated by this Agreement; and (b) there is no judgment,
order, injunction or decree of any Governmental Entity
outstanding against Rio or any of its Subsidiaries that could
reasonably be expected to have any effect referred to in clauses
(i) or (ii) above.
SECTION 3.13. ENVIRONMENTAL MATTERS. Except as disclosed
in Schedule 3.13 of the Rio Disclosure Schedule or as would not
be reasonably likely to have a Rio Material Adverse Effect,
(a) Rio and its Subsidiaries are in compliance with all
Environmental Laws, (b) there are no Environmental Claims pending
or, to the best knowledge of Rio, threatened against Rio and its
Subsidiaries, (c) there are no Environmental Conditions relating
to Rio and its Subsidiaries or any portion of the Rio Real
Property, (d) no asbestos containing materials, polychlorinated
biphenyls (i.e., PCBs) or underground storage tanks are present
at any of the Rio Real Property, (e) none of Rio and its
Subsidiaries has received any notices from any governmental
agency or other third party alleging liability under or violation
of any Environmental Law, or alleging responsibility for the
removal, investigation, or remediation of any Environmental
Condition and (f) Rio is not subject to any enforcement or
investigatory action by any governmental agency of which it has
received notice, and is not conducting any removal, investigation
or remediation, regarding an Environmental Condition with respect
to any Rio Real Property.
For purposes of this Section 3.13, the following definitions
shall apply:
The term "HAZARDOUS MATERIALS" shall mean, without
limitation, all wastes, substances or materials defined as
hazardous, toxic or a pollutant or contaminant under any
Environmental Laws.
"ENVIRONMENTAL LAWS" means all applicable foreign, federal,
state and local statutes or laws, common law, judgments, orders,
regulations, licenses, permits, rules and ordinances relating to
pollution or protection of human health, safety or the
environment, including, but not limited to the Federal Water
Pollution Control Act (33 U.S.C. Sec. 1251 ET SEQ.), Resource
Conservation and Recovery Act (42 U.S.C. Sec. 6901 ET SEQ.), Safe
Drinking Water Act (42 U.S.C. Sec. 3000(f) ET SEQ.), Toxic
Substances Control Act (15 U.S.C. Sec. 2601 ET SEQ.), Clean Air
Act (42 U.S.C. Sec. 7401 ET SEQ.), Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. Sec. 9601 ET
SEQ.) Nevada Hazardous Materials laws (NRS Chapter 459), Nevada
Solid Waste/Disposal of Garbage or Sewage law (NRS 444.440
through 444.650, inclusive), Nevada Water Controls/Pollution law
(NRS Chapter 445B), Nevada Control of Asbestos law (NRS 618.750
to 618.850, inclusive), Nevada Appropriation of Public Waters law
(NRS 533.324 to 533.4385, inclusive), Nevada Artificial Water
Body Development Permit law (NRS 502.390), Nevada Protection of
Endangered Species, Endangered Wildlife Permit and Endangered
Flora Permit laws (NRS 503.585 and NRS 527.270, respectively),
and other similar state and local statutes, in effect as of the
date hereof.
"ENVIRONMENTAL CLAIM" means any claim, action, cause of
action, investigation or notice (written or oral) by any person
or entity alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup
costs, governmental response costs, natural resources damages,
property damages, personal injuries or penalties) arising out of,
based on or resulting from (a) the presence or release of any
Hazardous Materials at any location, whether or not owned or
operated by Rio and its Subsidiaries or Harrah's and its
Subsidiaries, or
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(b) circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law.
"ENVIRONMENTAL CONDITION" means the release into the
environment of any Hazardous Material as a result of which Rio
(1) has or may become liable to any person, (2) is or was in
violation of any Environmental Law, (3) has or may be required to
incur response costs for investigation or remediation, or (4) by
reason of which any of the Rio Real Property or other assets of
Rio, may be subject to any lien under Environmental Laws.
SECTION 3.14. EMPLOYEE BENEFIT PLANS.
(a) DEFINITIONS. The following terms, when used in this
Section 3.14 shall have the following meanings. Any of these
terms may, unless the context otherwise requires, be used in the
singular or the plural depending on the reference.
(i) BENEFIT ARRANGEMENT. "Benefit Arrangement" shall
mean any employment, consulting, severance or other similar
contract, arrangement or policy (including but not limited to any
letter or memorandum relating to employment) and each plan,
program or agreement providing for workers' compensation,
disability benefits, supplemental unemployment benefits, vacation
benefits, retirement benefits, life insurance, health, accident
benefits (including without limitation any "voluntary employees'
beneficiary association" as defined in Section 501(c)(9) of the
Code providing for the same or other benefits), deferred
compensation, profit-sharing bonuses, stock options, stock
appreciation rights, stock purchases or other forms of incentive
compensation which (1) is not a Welfare Plan, Pension Plan, or
Multiemployer Plan under which Rio or any ERISA Affiliate may
incur any liability, and (2) covers any employee or former
employee of Rio or any ERISA Affiliate (with respect to their
relationship with such entities).
(ii) CODE. "Code" shall have the meaning set forth in
the preamble to this Agreement.
(iii) EMPLOYEE PLANS. "Employee Plans" shall mean
all Benefit Arrangements, Multiemployer Plans, Pension Plans and
Welfare Plans.
(iv) ERISA. "ERISA" shall mean the Employee
Retirement Income Security Act of 1974, as amended.
(v) ERISA AFFILIATE. "ERISA Affiliate" shall mean
any entity which is (or at any relevant time was) a member of a
"controlled group of corporations" with, under "common control"
with, or a member of an "affiliated service group" with, Rio as
defined in Section 414(b), (c), (m) or (o) of the Code or any
partnership of which Rio or any of its Subsidiaries is a general
partner.
(vi) MULTIEMPLOYER PLAN. "Multiemployer Plan" shall
mean any "multiemployer plan," as defined in Section 4001(a)(3)
of ERISA, under which Rio or any ERISA Affiliate may incur any
liability.
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(vii) PENSION PLAN. "Pension Plan" shall mean any "emp
loyee pension benefit plan", as defined in Section 3(2) of ERISA,
other than a Multiemployer Plan, under which Rio or any ERISA
Affiliate may incur any liability.
(viii) WELFARE PLAN. "Welfare Plan" shall mean any
"employee welfare benefit plan", as defined in Section 3(1) of
ERISA, under which Rio or any ERISA Affiliate may incur any
liability.
(b) DISCLOSURE; DELIVERY OF COPIES OF RELEVANT DOCUMENTS
AND OTHER INFORMATION. Schedule 3.14 of the Rio Disclosure
Schedule contains a complete list of the Employee Plans. Copies
of (i) each Employee Plan other than any Multiemployer Plan, and,
if applicable, related trust agreement, and any amendment
thereto, (ii) the most recent determination letter issued by the
IRS with respect to each Employee Plan which is intended to
qualify under Section 401(a) of the Code and (iii) the most
recent Annual Report on Form 5500 Series required to be filed
with any governmental agency for each Pension Plan and Welfare
Plan have been delivered by Rio to Harrah's and are true and
complete copies of such documents.
(c) REPRESENTATIONS. Except as set forth in Schedule
3.14(c) of the Rio Disclosure Schedule:
(i) EMPLOYEE PLANS
(A) No Pension Plan is subject to Title IV of
ERISA or the minimum funding requirements of Section 412 of the
Code. Each Pension Plan (with its related trust) that is
intended to qualify under the provisions of Code Section 401(a)
has received a favorable determination letter from the Internal
Revenue Service stating that the Pension Plan is so qualified and
the related trust is exempt from federal income tax under
Section 501(a) of the Code and, to the best knowledge of Rio,
nothing has occurred since the date of the last such
determination letter which has resulted in or is likely to result
in the revocation of such determination letter.
(B) Each Employee Plan has been maintained in
material compliance with its terms and, both as to form and in
operation, with the requirements prescribed by any and all
applicable laws, including without limitation ERISA and the Code
to the extent applicable.
(ii) MULTIEMPLOYER PLANS
(A) Neither Rio nor any ERISA Affiliate has, at
any time, withdrawn from a Multiemployer Plan in a "complete
withdrawal" or a "partial withdrawal" as defined in Sections 4203
and 4205 of ERISA, respectively, so as to result in a liability,
contingent or otherwise (including without limitation the
obligations pursuant to an agreement entered into in accordance
with Section 4204 of ERISA), of Rio or any ERISA Affiliate which
has not been fully satisfied. Neither Rio nor any ERISA
Affiliate has engaged in, or is a successor or parent corporation
to an entity that has engaged in, a transaction described in
Section 4212(c) of ERISA.
(B) No Employee Plan is a Multiemployer Plan.
(iii) WELFARE PLANS. None of Rio, any ERISA
Affiliate or any Welfare Plan has any present or
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future obligation to make any payment to, or with respect to any
present or former employee of Rio or any ERISA Affiliate pursuant
to, any retiree medical benefit plan, or other retiree Welfare
Plan, except to the extent required by the Code or ERISA.
(iv) LITIGATION. To the best knowledge of Rio, there
is no material action, order, writ, injunction, judgment or
decree outstanding or claim, suit, litigation, proceeding,
arbitral action, governmental audit or investigation relating to
or seeking benefits under any Employee Plan that is pending
against Rio, any ERISA Affiliate or any Employee Plan other than
routine claims for benefits.
(v) MISCELLANEOUS MATTERS. As of the date hereof
(a) all material payments required to be made on or before the
date hereof by or under any Employee Plan, any related trust, or
any collective bargaining agreement have been made or are being
processed in accordance with normal operating procedures, and
except as set forth in Rio's financial statement, all material
amounts required to be reflected thereon have been properly
accrued to date as liabilities under or with respect to each
Employee Plan, (b) Rio and its Subsidiaries have performed all
material obligations required to be performed by them on or
before the date hereof under any Employee Plan and (c) Rio and
its Subsidiaries have no liability as a result of any "prohibited
transaction" (as defined in Section 406 of ERISA and Section 4975
of the Code) for any excise tax or civil penalty.
SECTION 3.15. COMPLIANCE.
(a) Except as set forth on Schedule 3.15 of the Rio
Disclosure Schedule, each of Rio and its Subsidiaries, and each
of their respective directors (but with respect to non-employee
directors, only to Rio's best knowledge), officers, persons
performing management functions similar to officers and, to Rio's
best knowledge, partners hold all permits, registrations,
findings of suitability, licenses, variances, exemptions,
certificates of occupancy, orders and approvals of all
Governmental Entities (including all authorizations under
Environmental Laws and Rio Gaming Laws) necessary to conduct the
business and operations of Rio and each of its Subsidiaries, each
of which is in full force and effect in all material respects,
except for such permits, registrations, findings of suitability,
licenses, variances, exemptions, certificates of occupancy,
orders and approvals the failure of which to hold would not,
individually or in the aggregate, be reasonably likely to have a
Rio Material Adverse Effect (the "RIO PERMITS") and no event has
occurred which permits, or upon the giving of notice or passage
of time or both would permit, revocation, non-renewal,
modification, suspension, limitation or termination of any Rio
Permit that currently is in effect the loss of which either
individually or in the aggregate would be reasonably likely to
have a Rio Material Adverse Effect. Each of Rio and its
Subsidiaries, and each of their respective directors (but with
respect to non-employee directors, only to Rio's best knowledge),
officers, persons performing management functions similar to
officers and, to Rio's best knowledge, partners, are in
compliance with the terms of the Rio Permits, except for such
failures to comply, which singly or in the aggregate, would not,
individually or in the aggregate, be reasonably likely to have a
Rio Material Adverse Effect. Except as disclosed in the Rio SEC
Reports filed prior to the date of this Agreement or as would not
be reasonably likely to have a Rio Material Adverse Effect, the
businesses of Rio and its Subsidiaries are not being conducted in
violation of any law, ordinance or regulation of any Governmental
Entity (including, without limitation, any Rio Gaming Laws). To
the best knowledge of Rio, no investigation or review by any
Governmental Entity with respect to Rio or any of its
Subsidiaries is pending, or threatened,
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nor has any Governmental Entity indicated any intention to
conduct the same, other than those the outcome of which would
not, individually or in the aggregate, be reasonably likely to
have a Rio Material Adverse Effect.
(b) The term "RIO GAMING LAWS" means any Federal, state,
local or foreign statute, ordinance, rule, regulation, permit,
consent, registration, finding of suitability, approval, license,
judgment, order, decree, injunction or other authorization,
including any condition or limitation placed thereon, governing
or relating to the current or contemplated casino and gaming
activities and operations of Rio or any of its Subsidiaries,
including, without limitation, the Nevada Gaming Control Act and
the rules and regulations promulgated thereunder, the Clark
County Code and the rules and regulations promulgated thereunder
and any applicable state gaming law and any federal or state laws
relating to currency transactions.
(c) Except as disclosed in Schedule 3.15(c) of the Rio
Disclosure Schedule, neither Rio nor any of its Subsidiaries, nor
any director (but with respect to non-employee directors, only to
Rio's best knowledge), officer, key employee or, to Rio's best
knowledge, partners of Rio or any of its Subsidiaries has
received any written claim, demand, notice, complaint, court
order or administrative order from any Governmental Entity in the
past three years under, or relating to any violation or possible
violation of any Rio Gaming Laws which did or would be reasonably
likely to result in fines or penalties of $50,000 or more. To
Rio's best knowledge, there are no facts, which if known to the
regulators under the Rio Gaming Laws could reasonably be expected
to result in the revocation, limitation or suspension of a
license, finding of suitability, registration, permit or approval
of it or them, or of any officer, director, other person
performing management functions similar to an officer or partner,
under any Rio Gaming Laws. Neither Rio nor any of its
Subsidiaries has suffered a suspension or revocation of any
material license, finding of suitability, registration, permit or
approval held under the Rio Gaming Laws.
SECTION 3.16. ACCOUNTING AND TAX MATTERS. To the best
knowledge of Rio, after consulting with its independent auditors
with respect to clause (i) below and its tax advisors with
respect to clause (ii) below, except as set forth on Schedule
3.16 of the Rio Disclosure Schedule, neither Rio nor any of its
Affiliates (as defined in Section 5.12) has taken or agreed to
take any action which would (i) prevent Harrah's from accounting
for the business combination to be effected by the Merger as a
pooling of interests or (ii) prevent the Merger from qualifying
as a reorganization described in Section 368(a) of the Code.
SECTION 3.17. JOINT PROXY STATEMENT/PROSPECTUS;
REGISTRATION STATEMENT. None of the information supplied by Rio
or its Subsidiaries to be included or incorporated by reference
in the joint proxy statement/prospectus to be sent to the
stockholders of Harrah's and Rio in connection with the meeting
of Rio's stockholders (the "RIO STOCKHOLDERS' MEETING") and the
meeting of Harrah's stockholders (the "HARRAH'S STOCKHOLDERS'
MEETING") to consider the Agreement and the Merger (the "JOINT
PROXY STATEMENT/PROSPECTUS") or any amendment thereof or
supplement thereto, will, on the date it became effective with
the SEC, at the time of the mailing of the Joint Proxy
Statement/Prospectus or any amendment or supplement, at the time
of Rio Stockholders' Meeting and the Harrah's Stockholders'
Meeting and at the Effective Time, contain any untrue statement
of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made,
not misleading. The Joint Proxy Statement/Prospectus will comply
as to form in all
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material respects with the provisions of the Securities Act and
the Exchange Act and the rules and regulations thereunder;
PROVIDED, HOWEVER, that Rio makes no representation with respect
to any information supplied or to be supplied by Harrah's or
Merger Sub for inclusion in the Joint Proxy Statement/Prospectus
or any amendment thereof or supplement thereto. None of the
information supplied by Rio or its Subsidiaries to be included or
incorporated by reference from Rio SEC filings in the
registration statement on Form S-4 pursuant to which shares of
Harrah's Common Stock issued in the Merger will be registered
under the Securities Act (the "REGISTRATION STATEMENT"), of which
the Joint Proxy Statement/Prospectus will form a part, will, at
the time the Registration Statement is declared effective by the
SEC, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
SECTION 3.18. LABOR MATTERS. Except as disclosed in
Schedule 3.18 of the Rio Disclosure Schedule or as would not be
reasonably likely to have a Rio Material Adverse Effect,
(i) there are no controversies pending or, to the best knowledge
of Rio, threatened between Rio or any of its Subsidiaries and any
of their respective employees; (ii) to the best knowledge of Rio,
there are no activities or proceedings of any labor union to
organize any non-unionized employees; (iii) neither Rio nor any
of its Subsidiaries has breached or otherwise failed to comply
with any provision of any collective bargaining agreement or
contract and there are no grievances outstanding against Rio or
any of its Subsidiaries under any such agreement or contract;
(iv) there are no unfair labor practice charges and/or complaints
pending against Rio or any of its Subsidiaries before the
National Labor Relations Board, or any similar foreign labor
relations governmental bodies, or any current union
representation questions involving employees of Rio or any of its
Subsidiaries; and (v) there is no strike, slowdown, work stoppage
or lockout, or, to the best knowledge of Rio, threat thereof, by
or with respect to any employees of Rio or any of its
Subsidiaries. Rio and its Subsidiaries are not parties to any
collective bargaining agreements, except for collective
bargaining agreements disclosed in Schedule 3.18 of the Rio
Disclosure Schedule.
SECTION 3.19. INSURANCE. Rio has provided to Harrah's
accurate and complete copies of all material fire and casualty,
general liability, business interruption, product liability, and
sprinkler and water damage insurance policies maintained by Rio
or any of its Subsidiaries. All such insurance policies are with
reputable insurance carriers and provide coverage as is
reasonably prudent to cover normal risks incident to the business
of Rio and its Subsidiaries and their respective properties and
assets.
SECTION 3.20. OPINION OF FINANCIAL ADVISOR. Rio has
received the opinion of Merrill Lynch, Pierce, Fenner & Smith
Incorporated, dated the date of this Agreement, to the effect
that the Exchange Ratio is fair to the holders of Rio Common
Stock from a financial point of view.
SECTION 3.21. NO EXISTING DISCUSSIONS. As of the date
hereof, Rio is not engaged, directly or indirectly, in any
discussions or negotiations with any other party with respect to
an Acquisition Proposal (as defined in Section 5.4).
SECTION 3.22. NEVADA TAKEOVER STATUTE. As of the date
hereof, the restrictions of Sections 78.378 through 78.3793 of
the NRS are, and shall be, inapplicable to the Merger, and the
transactions contemplated by this Agreement.
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SECTION 3.23. BROKERS. None of Rio or any of its
Subsidiaries, or to the knowledge of Rio, any of their respective
officers, directors or employees have employed any broker,
financial advisor or finder or incurred any liability for any
brokerage fees, commissions or finder's fees in connection with
the transactions contemplated by this Agreement, except that Rio
has retained Merrill Lynch, Pierce, Fenner & Smith Incorporated
as its financial advisor, the arrangements with which have been
disclosed in writing to Harrah's and Merger Sub prior to the date
of this Agreement.
SECTION 3.24. TRANSACTIONS WITH AFFILIATES. Other than the
transactions contemplated by this Agreement and except to the
extent disclosed in the Rio SEC Documents filed prior to the date
of this Agreement or as disclosed in Schedule 3.24 of the Rio
Disclosure Schedule, from January 1, 1998 through the date of
this Agreement, there have been no transactions, agreements,
arrangements or understandings between Rio or any of its
Subsidiaries, on the one hand, and Rio's affiliates or other
persons, on the other hand, that would be required to be
disclosed under Item 404 of Regulation S-K under the Securities
Act.
SECTION 3.25. YEAR 2000. Except as disclosed in Schedule
3.25 of the Rio Disclosure Schedule, to the knowledge of Rio
without any inquiry, as of the date hereof, all computer software
necessary for the conduct of its business (the "Software") is
designed to be used prior to, during, and after the calendar year
2000 A.D., and that the Software will operate during each such
time period without error relating to the year 2000, specifically
including any error relating to, or the product of, date data
which represents or references different centuries or more than
one century. Rio further represents and warrants that as of the
date hereof, to its knowledge without any inquiry, the Software
accepts, calculates, sorts, extracts and otherwise processes date
inputs and date values, and returns and displays date values, in
a consistent manner regardless of the dates used, whether before,
on, or after January 1, 2000.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF HARRAH'S AND MERGER SUB
Harrah's and Merger Sub represent and warrant to Rio that
the statements contained in this Article IV are true and correct
except as set forth herein and in the disclosure schedule
delivered by Harrah's and Merger Sub to Rio on or before the date
of this Agreement (the "HARRAH'S DISCLOSURE SCHEDULE"). The
Harrah's Disclosure Schedule shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained
in this Article IV and the disclosure in any paragraph shall
qualify other paragraphs in this Article IV only to the extent
that it is reasonable from a reading of such disclosure that it
also qualifies or applies to such other paragraphs. For all
purposes of this Agreement, all references to "Subsidiaries" of
Harrah's shall be deemed to exclude Harrah's Jazz Company.
SECTION 4.1. ORGANIZATION. Each of Harrah's and its
Subsidiaries is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization
and has the requisite corporate, partnership and limited
liability company power and authority to carry on its business as
now being conducted. Each of Harrah's and its Subsidiaries is
duly qualified or licensed to do business and is in good standing
in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it
makes such qualification or
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licensing necessary, except where the failure to be so qualified,
licensed or in good standing would not be reasonably likely to
have a material adverse effect on the business, properties,
financial condition or results of operations of Harrah's and its
Subsidiaries, taken as a whole (a "HARRAH'S MATERIAL ADVERSE
EFFECT"); PROVIDED, HOWEVER, that the effect of economic changes
that are applicable to the gaming industry generally, or the
gaming industry in markets in which Harrah's or its Subsidiaries
conduct business in particular, shall be excluded from the
definition of "Harrah's Material Adverse Effect" and from any
determination as to whether a Harrah's Material Adverse Effect
has occurred or may occur with respect to Harrah's. Harrah's has
delivered to Rio true and correct copies of the Certificate of
Incorporation and Bylaws of each of Harrah's and Merger Sub, in
each case as amended to the date of this Agreement.
SECTION 4.2. CAPITALIZATION.
(a) The authorized capital stock of Harrah's consists of
360,000,000 shares of Harrah's Common Stock par value $0.10 per
share, 150,000 shares of preferred stock, par value $100 per
share ("HARRAH'S PREFERRED STOCK"), 5,000,000 shares of special
stock, par value $1.125 per share ("HARRAH'S SPECIAL STOCK"), of
which 2,000,000 shares have been designated as "SERIES A SPECIAL
STOCK". As of the date hereof, (i) 101,484,541 shares of
Harrah's Common Stock were issued and outstanding, all of which
are validly issued, fully paid and nonassessable, (ii) 3,013,378
shares of Harrah's Common Stock were held in the treasury of
Harrah's or by Subsidiaries of Harrah's, and (iii) no shares of
Harrah's Preferred Stock or Harrah's Special Stock are issued and
outstanding. Schedule 4.2(a) of the Harrah's Disclosure Schedule
sets forth the number of shares of Harrah's Common Stock reserved
for issuance (A) upon exercise of options to acquire shares of
Harrah's Common Stock ("HARRAH'S OPTIONS") granted and
outstanding as of the date hereof and under Harrah's stock option
plans ("HARRAH'S STOCK OPTION PLANS"). Since December 31, 1997
through the date of this Agreement, Harrah's has not made any
grants under any of the Harrah's Stock Option Plans. Except as
disclosed in Schedule 4.2(a) of the Harrah's Disclosure Schedule,
there are no obligations, contingent or otherwise, of Harrah's or
any of its Subsidiaries to repurchase, redeem or otherwise
acquire any shares of Harrah's Common Stock or the capital stock
or ownership interests of any Subsidiary.
(b) There is no Voting Debt of Harrah's or any of its
Subsidiaries issued and outstanding. Except as set forth in
Section 4.2(a) or as reserved for future grants of options or
restricted stock under the Harrah's Stock Plans and except for
the Common Stock Purchase rights issued and issuable under the
Rights Agreement, dated as of October 5, 1996, between Harrah's
and The Bank of New York, as amended on February 21, 1997 and
April 25, 1997, as of the date hereof, (i) there are no shares of
capital stock of any class of Harrah's, or any security
exchangeable into or exercisable for such equity securities,
issued, reserved for issuance or outstanding; (ii) there are no
options, warrants, equity securities, calls, rights, commitments
or agreements of any character to which Harrah's or any of its
Subsidiaries is a party or by which it is bound obligating
Harrah's or any of its Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of
capital stock or other ownership interests (including Voting
Debt) of Harrah's or any of its Subsidiaries or obligating
Harrah's or any of its Subsidiaries to grant, extend, accelerate
the vesting of or enter into any such option, warrant, equity
security, call, right, commitment or agreement; and (iii) there
are no voting trusts, proxies or other voting agreements or
understandings with respect to the shares of capital stock of
Harrah's. All shares of Harrah's Common Stock subject to
issuance as specified in this
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Section 4.2(b) are duly authorized and, upon issuance on the
terms and conditions specified in the instruments pursuant to
which they are issuable, shall be validly issued, fully paid and
nonassessable.
(c) The authorized capital stock of Merger Sub consists of
2,500 shares of Common Stock without par value ("MERGER SUB
COMMON STOCK"), of which 100 shares are issued and outstanding.
Harrah's owns directly all the outstanding shares of Merger Sub
Common Stock. The outstanding shares of Merger Sub Common Stock
are duly authorized, validly issued, fully paid and assessable
and free of any preemptive rights.
SECTION 4.3. AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND
CONSENTS.
(a) Harrah's and Merger Sub have all requisite corporate
power and authority to enter into this Agreement and to
consummate the transactions contemplated by this Agreement. The
execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby by Harrah's and Merger Sub
have been duly authorized by all necessary corporate action on
the part of Harrah's and Merger Sub. This Agreement has been duly
executed and delivered by Harrah's and Merger Sub and assuming
the due authorization, execution and delivery by Rio, constitutes
the valid and binding obligation of Harrah's and Merger Sub,
enforceable against each of them in accordance with its terms.
(b) Other than or as disclosed in Schedule 4.3(b) of the
Harrah's Disclosure Schedule, the execution and delivery of this
Agreement by Harrah's and Merger Sub does not, and the
consummation of the transactions contemplated hereby will not,
(i) conflict with, or result in any violation or breach of, any
provision of the Certificate of Incorporation or Bylaws of
Harrah's or the comparable charter or organizational documents of
any of its Subsidiaries, (ii) result in any violation or breach
of, or constitute (with or without notice or lapse of time, or
both) a default (or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any
material benefit) under, or require a consent or waiver under,
any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, contract or other agreement,
instrument or obligation to which Harrah's or any of its
Subsidiaries is a party or by which any of them or any of their
properties or assets may be bound, or (iii) subject to the
governmental filings and other matters referred to in Section
4.3(c), conflict with or violate any permit, concession,
franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Harrah's or any of
its Subsidiaries or any of its or their properties or assets,
except in the case of clauses (ii) and (iii) for any such
conflicts, violations, defaults, terminations, breaches,
cancellations, accelerations or requirements for consent or
waiver not obtained which (x) are not, individually or in the
aggregate, reasonably likely to have a Harrah's Material Adverse
Effect or (y) would not impair or unreasonably delay the
consummation of the Merger.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity
is required by or with respect to Harrah's or any of its
Subsidiaries in connection with the execution and delivery of
this Agreement or the consummation of the transactions
contemplated hereby, except for (i) the filing of the pre-merger
notification report under the HSR Act, (ii) the filing of the
Articles of Merger with respect to the Merger with the Secretary
of State of the State of Nevada, (iii) any approvals and filing
of notices
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required under the Harrah's Gaming Laws (as defined in Section
4.14(b)) or the Rio Gaming Laws, (iv) such consents, approvals,
orders, authorizations, permits, filings, or registrations
related to, or arising out of, compliance with statutes, rules or
regulations regulating the consumption, sale or serving of
alcoholic beverages, (v) such immaterial filings and consents as
may be required under any environmental, health or safety law or
regulation pertaining to any notification, disclosure or required
approval triggered by the Merger or the transactions contemplated
by this Agreement, and (vi) such other filings, consents,
approvals, orders, registrations and declarations as may be
required under the laws of any jurisdiction in which Harrah's or
any of its Subsidiaries conducts any business or owns any assets
the failure of which to obtain would not be reasonably likely to
have a Harrah's Material Adverse Effect.
SECTION 4.4. PUBLIC FILINGS; FINANCIAL STATEMENTS.
(a) Harrah's and its Subsidiaries that are required to
file forms, reports or other documents with the SEC (the
"HARRAH'S REPORTING SUBSIDIARIES") have filed and made available
to Harrah's all forms, reports and documents required to be filed
by Harrah's and the Harrah's Reporting Subsidiaries with the SEC
since January 1, 1995 (collectively, the "HARRAH'S SEC REPORTS").
The Harrah's SEC Reports (including any financial statements
filed as a part thereof or incorporated by reference therein)
(i) at the time filed, complied in all material respects with the
applicable requirements of the Securities Act and the Exchange
Act, as the case may be, and (ii) did not, at the time they were
filed (or if amended or superseded by a filing prior to the date
of this Agreement, then on the date of such filing), contain any
untrue statement of a material fact or omit to state a material
fact required to be stated in such Harrah's SEC Reports or
necessary in order to make the statements in such Harrah's SEC
Reports, in the light of the circumstances under which they were
made, not misleading.
(b) Each of the consolidated financial statements
(including, in each case, any related notes) of Harrah's
contained in the Harrah's SEC Reports complied as to form in all
material respects with the applicable published rules and
regulations of the SEC with respect thereto, was prepared in
accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes to such
financial statements or, in the case of unaudited statements, as
permitted by Form 10-Q under the Exchange Act) and fairly
presented the consolidated financial position of Harrah's and its
consolidated Subsidiaries as of the dates and the consolidated
results of its operations and cash flows for the periods
indicated, except that the unaudited interim financial statements
were or are subject to normal and recurring year-end adjustments
which, with respect to interim periods since December 31, 1997,
were not or are not expected to be material in amount. The
audited balance sheet of Harrah's as of December 31, 1997 is
referred to herein as the "HARRAH'S BALANCE SHEET."
SECTION 4.5. NO UNDISCLOSED LIABILITIES. Except as
disclosed in the Harrah's SEC Reports filed prior to the date of
this Agreement or in Schedule 4.5 of the Harrah's Disclosure
Schedule, and except for liabilities and obligations incurred
since the date of the Harrah's Balance Sheet in the ordinary
course of business consistent with past practices, Harrah's and
its consolidated Subsidiaries do not have any indebtedness,
obligations or liabilities of any kind, whether accrued,
contingent or otherwise (whether or not required to be reflected
in financial statements in accordance with GAAP), and whether due
or to become due, which would be reasonably likely to have a
Harrah's Material Adverse Effect.
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SECTION 4.6. LITIGATION. Except as disclosed in the
Harrah's SEC Reports filed prior to the date of this Agreement or
in Schedule 4.6 of the Harrah's Disclosure Schedule, (a) there is
no action, suit or proceeding, claim, arbitration or
investigation against Harrah's or any of its Subsidiaries
pending, or as to which Harrah's or any of its Subsidiaries has
received any written notice of assertion or, to the best
knowledge of Harrah's, threatened against or affecting, Harrah's
or any of its Subsidiaries or any property or asset of Harrah's
or any of its Subsidiaries, before any court, arbitrator, or
administrative, governmental or regulatory authority or body,
domestic or foreign, that, individually or in the aggregate,
could reasonably be expected to (i) have a Harrah's Material
Adverse Effect or (ii) prevent the consummation of the
transactions contemplated by this Agreement; and (b) there is no
judgment, order, injunction or decree of any Governmental Entity
outstanding against Harrah's or any of its Subsidiaries that
could reasonably be expected to have any effect referred to in
clauses (i) or (ii) above.
SECTION 4.7. ENVIRONMENTAL MATTERS. Except as disclosed
in Schedule 4.7 of the Harrah's Disclosure Schedule or as would
not be reasonably likely to have a Harrah's Material Adverse
Effect, (a) Harrah's and its Subsidiaries are in compliance with
all Environmental Laws, (b) there are no Environmental Claims
pending or, to the best knowledge of Harrah's, threatened against
Harrah's and its Subsidiaries, (c) there are no Environmental
Conditions relating to Harrah's and its Subsidiaries or any
property currently owned or operated by Harrah's or its
Subsidiaries, (d) no asbestos containing materials,
polychlorinated biphenyls (i.e., PCBs) or underground storage
tanks are present at any of the real properties owned or operated
by Harrah's, (e) none of Harrah's or its Subsidiaries has
received any notices from any governmental agency or other third
party alleging liability under or violation of any Environmental
Law, or alleging responsibility for the removal, investigation,
or remediation of any Environmental Condition and (f) Harrah's is
not subject to any enforcement or investigatory action by any
governmental agency of which it has received notice, and is not
conducting any removal, investigation or remediation, regarding
an Environmental Condition with respect to any real property
owned or operated by Harrah's or its Subsidiaries or for which
Harrah's or its Subsidiaries have an option to purchase or right
of first refusal or equitable interests as contract purchasers or
equitable interests as profit participants. Environmental Laws,
Environmental Claims and Environmental Conditions shall have the
meanings assigned to them in Section 3.13.
SECTION 4.8. LABOR MATTERS. Except as disclosed in
Schedule 4.8 of the Harrah's Disclosure Schedule or as would not
have a Harrah's Material Adverse Effect, (i) there are no
controversies pending or, to the best knowledge of Harrah's,
threatened between Harrah's or any of its Subsidiaries and any of
their respective employees; (ii) to the best knowledge of
Harrah's, there are no activities or proceedings of any labor
union to organize any non-unionized employees, (iii) neither
Harrah's nor any of its Subsidiaries has breached or otherwise
failed to comply with any provision of any collective bargaining
agreement or contract and there are no grievances outstanding
against Harrah's or any of its Subsidiaries under any such
agreement or contract; (iv) there are no unfair labor practice
charges and/or complaints pending against Harrah's or any of its
Subsidiaries before the National Labor Relations Board, or any
similar foreign labor relations governmental bodies, or any
current union representation questions involving employees of
Harrah's or any of its Subsidiaries; and (v) there is no strike,
slowdown, work stoppage or lockout, or, to the best knowledge of
Harrah's, threat thereof, by or with respect to any employees of
Harrah's or any of its Subsidiaries.
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SECTION 4.9. INSURANCE. Harrah's maintains insurance in
such amounts and on such terms as is necessary for Harrah's
business as currently conducted and as is reasonable and
customary in the gaming business. All such insurance policies
are with reputable insurance carriers and provide coverage as is
reasonably prudent to cover normal risks incident to the business
of Harrah's and its Subsidiaries and their respective properties
and assets.
SECTION 4.10. TAXES. Except as would not be reasonably
likely to have a Harrah's Material Adverse Effect or except as
disclosed on Schedule 4.10 of the Harrah's Disclosure Schedule,
(a) each of Harrah's, its Subsidiaries and any affiliated group
(within the meaning of Section 1504 of the Code) of which
Harrah's or any of its Subsidiaries is now or ever has been a
member (i) has filed or caused to be filed, or will file or cause
to be filed, with the appropriate taxing authority, on a timely
basis, all federal or other material Tax Returns required to be
filed by it on or prior to the Closing Date (which Tax Returns
were or will be correct and complete in all material respects),
and (ii) has paid or caused to be paid or will pay or cause to be
paid (x) all Taxes due for the periods covered thereby and (y)
all Taxes pursuant to any assessment received by Harrah's or
any of its Subsidiaries, excluding in each case under this clause
(ii), any such Taxes that have been contested in good faith and
for which adequate reserves have been established in accordance
with generally accepted accounting principles; (b) as of the date
hereof, there is no action, suit, proceeding, investigation, audit
or claim now pending or, to the knowledge of Harrah's or any of
its Subsidiaries, threatened by any governmental or taxing
authority regarding any Taxes relating to Harrah's or any of its
Subsidiaries and (c) as of the date hereof, neither Harrah's nor
any of its Subsidiaries has entered into an agreement or waiver
extending any statute of limitations relating to the payment or
collection of any Taxes of Harrah's or any of its Subsidiaries.
SECTION 4.11. COMPLIANCE WITH ERISA. Each employee benefit
plan, within the meaning of Section 3(3) of ERISA, other than any
multiemployer plan, within the meaning of Section 4001(a)(3) of
ERISA, that is sponsored maintained or contributed to or with
respect to which Harrah's has an obligation to contribute has
been maintained in material compliance with the requirements of
all applicable statutes, orders, rules and regulations which are
applicable to such employee benefit plan, including but not
limited to ERISA and the Code. With respect to each such
employee benefit plan that is an employee pension benefit plan,
within the meaning of Section 3(2) of ERISA, that is regulated
under Title IV of ERISA: (i) Harrah's and any other entity that,
together with Harrah's as of the relevant measuring date under
ERISA, was or is required to be treated as single employer under
Section 414 of the Code ("HARRAH'S ERISA AFFILIATE") have
fulfilled their respective obligations under the minimum funding
requirements of Section 302 of ERISA and Section 412 of the Code;
(ii) no reportable event, as defined in Section 4043 of ERISA,
has occurred and is continuing; (iii) no liability to the Pension
Benefit Guaranty Corporation has been incurred, and (iv) no
proceedings have been instituted by the Pension Benefit Guaranty
Corporation to terminate any such plan. With respect to any
multiemployer plan, within the meaning of Section 4001(a)(3) of
ERISA, to which Harrah's or a Harrah's ERISA Affiliate
contributed, or with respect to which Harrah's or a Harrah's
ERISA Affiliate has or had an obligation to contribute at any
time within the 6-year period preceding the Closing Date, neither
Harrah's nor any Harrah's ERISA Affiliate has (i) incurred any
withdrawal liability, as defined in Part I of Subtitle E of Title
IV of ERISA, or (ii) been notified by the sponsor of any such
multiemployer plan that such multiemployer plan is in
reorganization or has been terminated, within the meaning of
Title IV of ERISA. To the best knowledge of Harrah's, a complete
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withdrawal from each such multiemployer plan would not result in
any liability for Harrah's, contingent or otherwise, that would
be reasonably likely to have a Harrah's Material Adverse Effect.
Each Pension Plan and each related trust that are intended to
qualify under the provisions of Code Section 401(a) have received
a favorable determination letter from the Internal Revenue
Service stating that the Pension Plan is so qualified and the
related trust is exempt from federal income tax under Section
501(a) of the Code and, to the best knowledge of Harrah's,
nothing has occurred since the date of the last such
determination letter which has resulted in or is likely to result
in the revocation of such determination letter. None of
Harrah's, any Harrah's ERISA Affiliate or any Welfare Plan has
any present or future obligation to make any payment to, or with
respect to any present or former employee of Harrah's or any
Harrah's ERISA Affiliate pursuant to, any retiree medical benefit
plan, or other retiree Welfare Plan, except to the extent
required by the Code or ERISA and except with respect to certain
former employees, who currently number fewer than thirty (30).
SECTION 4.12. INTELLECTUAL PROPERTY. Except as disclosed
in Schedule 4.12 of the Harrah's Disclosure Schedule or would not
be reasonably likely to have a Harrah's Material Effect, Harrah's
and its Subsidiaries own or possess adequate rights to use all
material trademarks, trademark applications, trade names, service
marks, trade secrets (including customer lists and customer
databases), copyrights, patents, licenses, know-how and other
proprietary intellectual property rights as are necessary in
connection with the businesses Harrah's and its Subsidiaries as
currently conducted, and, to the best knowledge of Harrah's,
except as set forth in Schedule 4.12 of the Harrah's Disclosure
Schedule, there is no infringement of the rights of Harrah's and
its Subsidiaries therein or any infringement by them of the right
of others therein which, individually or in the aggregate would
be reasonably likely to have a Harrah's Material Adverse Effect.
SECTION 4.13. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except
as disclosed in the Harrah's SEC Reports filed prior to the date
of this Agreement or in Schedule 4.13 of the Harrah's Disclosure
Schedule, since the date of the Harrah's Balance Sheet, Harrah's
and its Subsidiaries have conducted their businesses only in the
ordinary course and in a manner consistent with past practice
and, since such date, there has not been (i) any event,
development, state of affairs or condition, or series or
combination of events, developments, states of affairs or
conditions, which, individually or in the aggregate, has had or
is reasonably likely to have a Harrah's Material Adverse Effect;
(ii) any damage, destruction or loss (whether or not covered by
insurance) with respect to Harrah's or any of its Subsidiaries
which is reasonably likely to have a Harrah's Material Adverse
Effect; (iii) any material change by Harrah's in its accounting
methods, principles or practices of which Harrah's has not
previously been informed; (iv) any revaluation by Harrah's of any
of its assets which is reasonably likely to have a Harrah's
Material Adverse Effect; (v) any declaration, setting aside or
payment of any dividend or other distribution (whether in cash,
stock or property) with respect to the equity interests of
Harrah's; (vi) any split, combination or reclassification of any
of Harrah's capital stock or any issuance or the authorization of
any issuance of any other securities in respect of, in lieu of or
in substitution for, shares of Harrah's capital stock; (vii) any
increase in or establishment of, or any liability (caused by a
prior or existing violation of laws or regulations) under, any
bonus, insurance, severance, deferred compensation, pension,
retirement, profit sharing, stock option, stock purchase or other
employee benefit plan, or any other increase in the compensation
payable or to become payable to any officers or key employees of
Harrah's or any Subsidiary other than increases which would not
be material, individually or in the aggregate, with respect to
such officers or employees receiving
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such benefit or compensation (based on a comparison to benefits
and compensation received in the year ended December 31,1997); or
(viii) any settlement of pending or threatened litigation
involving Harrah's or any of its Subsidiaries (whether brought by
a private party or a Governmental Entity) other than any
settlement which is not reasonably likely to have a Harrah's
Material Adverse Effect.
SECTION 4.14. COMPLIANCE.
(a) Each of Harrah's and its Subsidiaries, and each of
their respective directors (but with respect to non-employee
directors, only to Harrah's best knowledge), officers, persons
performing management functions similar to officers and, to
Harrah's best knowledge, partners hold all permits,
registrations, findings of suitability, licenses, variances,
exemptions, certificates of occupancy, orders and approvals of
all Governmental Entities (including all authorizations under
Environmental Laws, Harrah's Gaming Laws, the Merchant Marine Act
of 1920 and the Shipping Act of 1916 and Certificates of
Inspection issued by the U.S. Coast Guard and permits and
approvals issued by the United States Army Corps of Engineers),
necessary to conduct the business and operations of Harrah's and
each of its Subsidiaries, each of which is in full force and
effect in all material respects, except for such permits,
registrations, findings of suitability, licenses, variances,
exemptions, certificates of occupancy, orders and approvals the
failure of which to hold would not, individually or in the
aggregate, be reasonably likely to have a Harrah's Material
Adverse Effect (the "HARRAH'S PERMITS") and no event has occurred
which permits, or upon the giving of notice or passage of time or
both would permit, revocation, non-renewal, modification,
suspension, limitation or termination of any Harrah's Permit that
currently is in effect the loss of which either individually or
in the aggregate would be reasonably likely to have a Harrah's
Material Adverse Effect. Each of Harrah's and its Subsidiaries,
and each of their respective directors (but with respect to non-
employee directors, only to Harrah's best knowledge), officers,
persons performing management functions similar to officers and,
to Harrah's best knowledge, partners, are in compliance with the
terms of the Harrah's Permits, except for such failures to
comply, which singly or in the aggregate, would not, individually
or in the aggregate, be reasonably likely to have a Harrah's
Material Adverse Effect. Except as disclosed in the Harrah's SEC
Reports filed prior to the date of this Agreement or as would not
be reasonably likely to have a Harrah's Material Adverse Effect,
the businesses of Harrah's and its Subsidiaries are not being
conducted in violation of any law, ordinance or regulation of any
Governmental Entity (including, without limitation, any Harrah's
Gaming Laws), except for possible violations which individually
or in the aggregate do not and would not be reasonably likely to
have a Harrah's Material Adverse Effect. No investigation or
review by any Governmental Entity with respect to Harrah's or any
of its Subsidiaries is pending, or, to the best knowledge of
Harrah's, threatened, nor has any Governmental Entity indicated
any intention to conduct the same, other than those the outcome
of which would not, individually or in the aggregate, be
reasonably likely to have a Harrah's Material Adverse Effect.
(b) The term "HARRAH'S GAMING LAWS" means any Federal,
state, local or foreign statute, ordinance, rule, regulation,
permit, consent, registration, finding of suitability, approval,
license, judgment, order, decree, injunction or other
authorization, including any condition or limitation placed
thereon, governing or relating to the current or contemplated
casino and gaming activities and operations of Harrah's or any of
its Subsidiaries, including, without limitation, the Nevada
Gaming Control Act and the rules and regulations promulgated
thereunder, the Clark
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County Code and the rules and regulations promulgated thereunder,
the Douglas County Code and the rules and regulations promulgated
thereunder, the Louisiana Economic Development and Gaming
Corporation Law and the rules and regulations promulgated
thereunder, the Louisiana Riverboat Economic Development and
Gaming Control Act and the rules and regulations promulgated
thereunder, the New Jersey Casino Control Act and the rules and
regulations promulgated thereunder, the Illinois Riverboat
Gambling Act and the rules and regulations promulgated
thereunder, the Mississippi Gaming Control Act and the rules and
regulations promulgated thereunder, the Missouri Riverboat
Gambling Act and the rules and regulations promulgated
thereunder, the Indiana Riverboat Gambling Act and the rules and
regulations of the Indiana Gaming Commission and the codes, rules
and regulations promulgated thereunder, the Casino Control Act
1992 (New South Wales) and the rules and regulations promulgated
thereunder, the Indian Gaming Regulatory Act of 1988 and the
rules and regulations promulgated thereunder, any state-tribal
gaming compact and any applicable state gaming law and any
federal or state laws relating to currency transactions.
(c) Except as disclosed in Schedule 4.14(c) of the
Harrah's Disclosure Schedule, neither Harrah's nor any of its
Subsidiaries, nor any director (but with respect to non-employee
directors, only to Harrah's best knowledge), officer, key
employee or, to Harrah's best knowledge, partners of Harrah's or
any of its Subsidiaries has received any written claim, demand,
notice, complaint, court order or administrative order from any
Governmental Entity in the past three years under, or relating to
any violation or possible violation of any Harrah's Gaming Laws
which did or would be reasonably likely to result in fines or
penalties of $50,000 or more. To Harrah's best knowledge, there
are no facts, which if known to the regulators under the Harrah's
Gaming Laws could reasonably be expected to result in the
revocation, limitation or suspension of a license, finding of
suitability, registration, permit or approval of it or them, or
of any officer, director, person performing management functions
similar to an officer or partner, under any Harrah's Gaming Laws.
Neither Harrah's nor any of its Subsidiaries has suffered a
suspension or revocation of any material license , finding of
suitability, registration, permit or approval held under the
Harrah's Gaming Laws.
SECTION 4.15. ACCOUNTING AND TAX MATTERS. To the best
knowledge of Harrah's, after consulting with its independent
auditors with respect to clause (i) below and its tax advisors
with respect to clause (ii) below, except as set forth on
Schedule 4.15 of the Harrah's Disclosure Schedule, neither
Harrah's nor any of its Affiliates has taken or agreed to take
any action which would (i) prevent Harrah's from accounting for
the business combination to be effected by the Merger as a
pooling of interests or (ii) prevent the Merger from qualifying
as a reorganization described in Section 368(a) of the Code.
SECTION 4.16. JOINT PROXY STATEMENT/PROSPECTUS;
REGISTRATION STATEMENT. None of the information supplied by
Harrah's or Merger Sub to be included or incorporated by
reference in the Joint Proxy Statement/Prospectus or any
amendment thereof or supplement thereto, will, on the date it
became effective with the SEC, at the time of the mailing of the
Joint Proxy Statement/Prospectus or any amendment or supplement
thereto to the stockholders of Harrah's or Rio, at the time of
the Harrah's Stockholders' Meeting and the Rio Stockholders'
Meeting and at the Effective Time, contain any untrue statement
of a material fact, or omit to state any material fact required
to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made,
not misleading. The Joint Proxy
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Statement/Prospectus will comply as to form in all material
respects with the provisions of the Securities Act and the
Exchange Act and the rules and regulations thereunder; PROVIDED,
HOWEVER, that Harrah's makes no representation with respect to
any information supplied or to be supplied by Rio for inclusion
or incorporated by reference from Rio SEC filings in the Joint
Proxy Statement/Prospectus or any amendment thereof or supplement
thereto. None of the information supplied by Harrah's or Merger
Sub to be included or incorporated by reference from Harrah's SEC
filings in the Registration Statement will, at the time the
Registration Statement is declared effective by the SEC, contain
any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances
under which they are made, not misleading.
SECTION 4.17. BROKERS. None of Harrah's, any of its
Subsidiaries, or any of their respective officers, directors or
employees have employed any broker, financial advisor or finder
or incurred any liability for any brokerage fees, commissions or
finder's fees in connection with the transactions contemplated by
this Agreement, except that Harrah's has retained BT Wolfensohn &
Co. as financial advisor, the arrangements with which have been
disclosed in writing to Rio prior to the date hereof.
SECTION 4.18. NO OPERATIONS OF MERGER SUB. Other than in
connection with the transactions contemplated by this Agreement,
since its date of incorporation, Merger Sub has not conducted any
business, has not owned, leased or operated any real property and
has not incurred any liabilities or obligations of any nature,
whether or not accrued, contingent or otherwise.
SECTION 4.19. TITLE TO PROPERTY. Harrah's and its
Subsidiaries have good, valid, legal and marketable title to all
of their real properties purported to be owned by them and good
and valid title to other assets purported to be owned by them,
free and clear of all liens, charges and encumbrances, except
liens for taxes not yet due and payable and such liens or other
imperfections of title, if any, as do not materially detract from
the value of or interfere with the present use of the property
affected thereby or which could not reasonably be expected,
individually or in the aggregate, to have a Harrah's Material
Adverse Effect, and except for liens which secure indebtedness
reflected in the Harrah's Balance Sheet; and all leases pursuant
to which Harrah's or its Subsidiaries lease from others material
amounts of real or personal property are in good standing, valid
and effective in accordance with their respective terms, and
there is not, under any of such leases, any existing material
default or event of default (or event which with notice or lapse
of time, or both, would constitute a material default) by
Harrah's and its Subsidiaries except where the lack of such good
standing, validity and effectiveness, or the existence of such
default or event of default would not reasonably be expected,
individually or in the aggregate, to have a Harrah's Material
Adverse Effect.
SECTION 4.20. AGREEMENTS, CONTRACTS AND COMMITMENTS.
(a) Except as disclosed in the Harrah's SEC Reports filed
prior to the date of this Agreement or as disclosed in Schedule
4.20(a) of the Harrah's Disclosure Schedule, as of the date of
this Agreement, neither Harrah's nor any of its Subsidiaries is a
party to any oral or written contract, agreement or commitment to
be performed after the date hereof which would be a material
contract (as defined in Item 601(b)(10) of Regulation S-K of the
SEC, collectively, the "HARRAH'S MATERIAL CONTRACTS").
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(b) Except as disclosed in the Harrah's SEC Reports filed
prior to the date of this Agreement or as disclosed in Schedule
4.20(b) of the Harrah's Disclosure Schedule, as of the date of
this Agreement, (i) each of the Harrah's Material Contracts is
valid and binding upon Harrah's or any of its Subsidiaries (and,
to Harrah's best knowledge, on all other parties thereto) in
accordance with its terms and is in full force and effect,
(ii) there is no material breach or violation of or default by
Harrah's or any of its Subsidiaries under any of the Harrah's
Material Contracts, whether or not such breach, violation or
default has been waived, and (iii) no event has occurred with
respect to Harrah's or any of its Subsidiaries which, with notice
or lapse of time or both, would constitute a material breach,
violation or default, or give rise to a right of termination,
modification, cancellation, foreclosure, imposition of a lien,
prepayment or acceleration under any of the Harrah's Material
Contracts, which breach, violation or default referred to in
clauses (ii) or (iii), alone or in the aggregate with other such
breaches, violations or defaults referred to in clauses (ii) or
(iii), would be reasonably likely to have a Harrah's Material
Adverse Effect.
SECTION 4.21. INFORMATION REGARDING HJC. Except as
disclosed on Schedule 4.21 of the Harrah's Disclosure Schedule or
as would not be reasonably likely to have a Harrah's Adverse
Effect, the Harrah's Form 10-K filed as of March 10, 1998 and
the Harrah's Form 10-Q filed as of August 7, 1998 did not at the
time they were filed (or if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such
filing), and do not as of the date hereof, contain any untrue
statement of a material fact relating to HJC or omit to state a
material fact relating to HJC required to be stated in such Form
10-K and Form 10-Q or necessary in order to make the statements
relating to HJC therein, in the light of the circumstances under
which they were made, not misleading.
SECTION 4.22. OPINION OF FINANCIAL ADVISOR. Harrah's has
received the opinion of BT Wolfensohn & Co., dated the date of
this Agreement, to the effect that the Exchange Ratio is fair to
Harrah's from a financial point of view.
ARTICLE V.
COVENANTS
SECTION 5.1. CONDUCT OF BUSINESS OF RIO. During the
period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Effective
Time, Rio agrees as to itself and each of its Subsidiaries
(except to the extent that Harrah's shall otherwise consent in
writing) to carry on its business in the ordinary course in
substantially the same manner as previously conducted, to pay its
debts and taxes when due, subject to good faith disputes over
such debts or taxes, in the ordinary course in substantially the
same manner as previously paid, to pay or perform its other
obligations when due in the ordinary course in substantially the
same manner as previously paid or performed, and, to the extent
consistent with such business, use all reasonable efforts
consistent with past practices and policies to preserve intact
its present business organization, keep available the services of
its present officers and key employees and preserve its
relationships with customers, suppliers, distributors, and others
having business dealings with it. Without limiting the
generality of the foregoing and except as expressly contemplated
by this Agreement, or as specifically disclosed on Schedule 5.1
of the Rio Disclosure Schedule, during the period from the date
of this Agreement and continuing until the
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earlier of the termination of this Agreement or the Effective
Time, without the written consent of Harrah's, Rio shall not and
shall not permit any of its Subsidiaries to:
(i) adopt any amendment to its Articles of
Incorporation or Bylaws or comparable charter or organizational
documents;
(ii)(A) issue, pledge or sell, or authorize the
issuance, pledge or sale of additional shares of capital stock of
any class (other than upon exercise of Options outstanding on the
date of this Agreement upon payment of the exercise price
thereof), or securities convertible into capital stock of any
class, or any rights, warrants or options to acquire any
convertible securities or capital stock, or any other securities
in respect of, in lieu of, or in substitution for, shares of Rio
Common Stock outstanding on the date hereof or (B) amend, waive
or otherwise modify any of the terms of any option, warrant or
stock option plan of Rio or any of its Subsidiaries, including
without limitation, the Rio Options or the Rio Stock Option
Plans;
(iii) declare, set aside or pay any dividend or
other distribution (whether in cash, securities or property or
any combination thereof) in respect of any class or series of its
capital stock other than between any wholly-owned Subsidiary of
Rio and Rio or any other wholly-owned Subsidiary of Rio;
(iv) split, combine, subdivide, reclassify or redeem,
purchase or otherwise acquire, or propose to redeem or purchase
or otherwise acquire, any shares of its capital stock, or any of
its other securities;
(v) increase the compensation or fringe benefits
payable or to become payable to its directors, officers or
employees (whether from Rio or any of its Subsidiaries), or pay
any benefit not required by any existing plan or arrangement
(including, without limitation, the granting of stock options,
stock appreciation rights, shares of restricted stock or
performance units) or grant any severance or termination pay to
(except pursuant to existing agreements or policies previously
disclosed in writing to Harrah's, which shall be interpreted and
implemented in a manner consistent with past practice), or enter
into any employment or severance agreement with, any director,
officer or employee of Rio or any of its Subsidiaries or
establish, adopt, enter into, or amend any collective bargaining,
bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, savings, welfare, deferred
compensation, employment, termination, severance or other
employee benefit plan, agreement, trust, fund, policy or
arrangement for the benefit or welfare of any directors, officers
or current or former employees, including any Benefit
Arrangement, Pension Plan or Welfare Plan, except (i) to the
extent required by applicable law or regulation, (ii) pursuant to
any collective bargaining agreements or Employee Plan as in
effect on the date of this Agreement consistent with past
practices, (iii) for salary and benefit increases in the ordinary
course of business consistent with past practice to employees
other than executive officers of Rio, or (iv) pursuant to Section
2.3;
(vi)(A) sell, pledge, lease, dispose of, grant,
encumber, or otherwise authorize the sale, pledge, disposition,
grant or encumbrance of any of the properties or assets of Rio or
any of its Subsidiaries, except for sales of assets in the
ordinary course of business in connection with Rio's gaming
operations in an amount not to exceed $500,000 individually or
$2,000,000 in the aggregate or (B) acquire (including, without
limitation, by merger,
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consolidation, lease or acquisition of stock or assets) any
corporation, partnership, other business organization or any
division thereof (or a substantial portion of the assets thereof)
or any other assets, except for acquisitions of assets in the
ordinary course of business in connection with Rio's gaming
operations in an amount individually not to exceed $1,000,000;
(vii) (A) incur, assume or pre-pay any long-term
debt or incur or assume any short-term debt, except that Rio and
its Subsidiaries may incur or pre-pay debt in the ordinary course
of business (including Rio's capital expansion and improvement
program which is set forth on Schedule 5.1 of the Rio Disclosure
Schedule) consistent with past practice under existing lines of
credit, (B) assume, guarantee, endorse or otherwise become liable
or responsible (whether directly, contingently or otherwise) for
the obligations of any other person except in the ordinary course
of business consistent with past practice, or (C) make any loans,
advances or capital contributions to, or investments in, any
other person except in the ordinary course of business consistent
with past practice (including advances to employees) and except
for loans, advances, capital contributions or investments between
any wholly-owned Subsidiary of Rio and Rio or another wholly-
owned Subsidiary of Rio;
(viii) authorize, recommend, propose or announce an
intention to adopt a plan of complete or partial liquidation or
dissolution of Rio or any of its Subsidiaries;
(ix) make or rescind any material express or deemed
election relating to Taxes, settle or compromise any material
claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to Taxes, or except
as may be required by applicable law, make any change to any of
its material methods of reporting income or deductions
(including, without limitation, any change to its methods or
basis or write-offs of accounts receivable) for federal income
tax purposes from those employed in the preparation of its
federal income tax return for the taxable year ending December
31, 1996, PROVIDED, HOWEVER, that Harrah's shall not unreasonably
withhold or delay its consent to any such matter described in
this Section 5.1 in a manner that would preclude Rio from timely
making such an election, timely filing its Tax Returns or timely
paying its Taxes;
(x) pay, discharge or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted,
unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction in the ordinary course of business and
consistent with past practice of liabilities reflected or
reserved against in the consolidated financial statements of Rio;
(xi) other than in the ordinary course of business and
consistent with past practice, waive any rights of substantial
value or make any payment, direct or indirect, of any material
liability of Rio or of any of its Subsidiaries before the same
comes due in accordance with its terms;
(xii) fail to maintain its existing insurance
coverage of all types in effect or, in the event any such
coverage shall be terminated or lapse, to the extent available at
reasonable cost, procure substantially similar substitute
insurance policies which in all material respects are in at least
such amounts and against such risks as are currently covered by
such policies;
(xiii) enter into any collective bargaining
agreement (other than as required by law or extensions of
existing agreements in the ordinary course of business);
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(xiv) take any action, other than reasonable and
usual actions in the ordinary course of business and consistent
with past practice, with respect to accounting policies or
procedures, unless required by GAAP or the SEC;
(xv) modify, amend or terminate any of the Rio
Material Contracts or waive, release or assign any material
rights or claims, except in the ordinary course of business
consistent with past practice;
(xvi) take, or agree to commit to take, any action
that would cause the representations and warranties of Rio
contained herein, individually or in the aggregate, which are not
qualified by materiality not to be true and correct in all
material respects, or cause those qualified by materiality or a
Rio Material Adverse Effect not to be true and correct, at, or as
of any time prior to, the Effective Time;
(xvii) engage in any transaction with, or enter into
any agreement, arrangement, or understanding with, directly or
indirectly, any of Rio's Affiliates which involves the transfer
of consideration or has a financial impact on Rio, other than
pursuant to such agreements, arrangements, or understandings
existing on the date of this Agreement or disclosed on Schedule
3.24 of the Rio Disclosure Schedule;
(xviii) close, shut down, or otherwise eliminate the
casino or the golf course owned or operated by Rio or any of its
Subsidiaries, except for such closures, shutdowns or eliminations
which are (i) required by action, order, writ, injunction,
judgment or decree or otherwise required by law, (ii) due to acts
of God or other force majeure events or (iii) temporary or
seasonal and in the ordinary course of business as set forth in
Schedule 5.1(xviii) of the Rio Disclosure Schedule;
(xix) take or agree to take any action that would
prevent the Merger from qualifying as a reorganization as
described in Section 368(a) of the Code;
(xx) settle any litigation relating to the
transactions contemplated hereby other than any settlement which
would not (i) be reasonably likely to have a Rio Material Adverse
Effect or (ii) materially adversely affect the consummation of
the transactions contemplated hereby; or
(xxi) enter into an agreement, contract, commitment
or arrangement to do any of the foregoing, or to authorize,
recommend, propose or announce an intention to do any of the
foregoing.
SECTION 5.2. CONDUCT OF BUSINESS OF HARRAH'S AND MERGER
SUB. During the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement
or the Effective Time, Harrah's agrees as to itself and each of
its Subsidiaries (except to the extent that Rio shall otherwise
consent in writing) to carry on its business in the ordinary
course in substantially the same manner as previously conducted,
to pay its debts and taxes when due, subject to good faith
disputes over such debts or taxes, in the ordinary course in
substantially the same manner as previously paid, to pay or
perform its other obligations when due in the ordinary course in
substantially the same manner as previously paid or performed,
and, to the extent consistent with such business, use all
reasonable efforts consistent with past practices and policies
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to preserve intact its present business organization, keep
available the services of its present officers and key employees
and preserve its relationships with customers, suppliers,
distributors, and others having business dealings with it.
Without limiting the generality of the foregoing and except as
expressly contemplated by this Agreement, or as specifically
disclosed on Schedule 5.2 of the Harrah's Disclosure Schedule or
such as would not be reasonably likely to have a Harrah's
Material Adverse Effect, during the period from the date of this
Agreement and continuing until the earlier of the termination of
this Agreement or the Effective Time, without the written consent
of Rio, Harrah's shall not:
(a) adopt any amendment to its Articles of Incorporation
or Bylaws of Harrah's or Harrah's Operating Company;
(b) declare, set aside or pay any dividend or other
distribution (whether in cash, securities or property or any
combination thereof) in respect of any class of or series of its
capital stock other than between any Subsidiary of Harrah's and
Harrah's or any other Subsidiary of Harrah's;
(c) take any action or make any change, other than
reasonable and usual actions in the ordinary course of business
and consistent with past practice, with respect to accounting
policies and procedures, unless required by GAAP or the SEC;
(d) authorize, recommend, propose or announce an intention
to adopt a plan of complete or partial liquidation or dissolution
of Harrah's or Harrah's Operating Company;
(e) other than in the ordinary course of business and
consistent with past practice, waive any rights of substantial
value or make any payment, direct or indirect, of any material
liability of Harrah's or of any of its Subsidiaries before the
same comes due in accordance with its terms;
(f) fail to maintain insurance in such amounts and on such
terms as is necessary for Harrah's business as currently
conducted and as is reasonable and customary in the gaming
business;
(g) take, or agree to commit to take, any action that
would cause the representations and warranties of Harrah's
contained herein, individually or in the aggregate, which are not
qualified by materiality not to be true and correct in all
material respects or cause those qualified by materiality or a
Harrah's Material Adverse Effect not to be true and correct at,
or as of any time prior to, the Effective Time;
(h) take or agree to take any action that would prevent
the Merger from qualifying as a reorganization described in
Section 368(a) of the Code;
(i) acquire or agree to acquire any business or assets
unrelated to the gaming industry in an amount which exceeds $25
million other than as set forth in Schedule 5.2(i) of the
Harrah's Disclosure Schedule; for purposes of this Section
5.2(i), "gaming industry" shall include hotels, undeveloped land
which could be used either currently or in the future in
furtherance of gaming, and any other assets necessary for, in
support or in anticipation of and ancillary to or in preparation
for, the gaming business; or
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(j) enter into an agreement, contract, commitment or
arrangement to do any of the foregoing, or to authorize,
recommend, propose or announce any intention to do any of the
foregoing.
SECTION 5.3. COOPERATION; NOTICE; CURE. Subject to
compliance with applicable law, from the date hereof until the
Effective Time, each of Harrah's and Rio shall confer on a
regular and frequent basis with one or more representatives of
the other party to report on the general status of ongoing
operations. Each of Harrah's and Rio shall promptly notify the
other in writing of, and will use all commercially reasonable
efforts to cure before the Closing Date, any event, transaction
or circumstance, as soon as practical after it becomes known to
such party, that causes or will cause any covenant or agreement
of Harrah's or Rio, as the case may be, under this Agreement to
be breached in any material respect or that renders or will
render untrue in any material respect any representation or
warranty of Harrah's or Rio contained in this Agreement. No
notice given pursuant to this paragraph shall have any effect on
the representations, warranties, covenants or agreements
contained in this Agreement for purposes of determining
satisfaction of any condition contained herein.
SECTION 5.4. NO SOLICITATION.
(a) Rio shall not, directly or indirectly, through any
officer, director, employee, financial advisor, representative or
agent of such party (i) solicit, initiate, or encourage any
inquiries or proposals that constitute, or could reasonably be
expected to lead to, a proposal or offer for a merger,
consolidation, business combination, sale of substantial assets,
sale of shares of capital stock (including without limitation by
way of a tender offer) or similar transaction involving Rio or
any of its material Subsidiaries, other than the transactions
contemplated by this Agreement (any of the foregoing inquiries or
proposals being referred to in this Agreement as an "ACQUISITION
PROPOSAL"), (ii) engage in negotiations or discussions with any
person (or group of persons) other than Harrah's or its
respective affiliates (a "THIRD PARTY") concerning, provide any
non-public information to any person or entity relating to, or
take any other action to facilitate inquiries or the making of
any proposal that constitutes, an Acquisition Proposal, or (iii)
enter into any agreement with respect to any Acquisition
Proposal; PROVIDED, HOWEVER, that nothing contained in this
Section 5.4 shall prevent Rio or its Board of Directors from
furnishing non-public information to, or entering into
discussions or negotiations with, any Third Party in connection
with an unsolicited bona fide written proposal for an Acquisition
Proposal (as defined below) by such Third Party, if and only to
the extent that (1) such Third Party has made a written proposal
to the Board of Directors of Rio to consummate an Acquisition
Proposal, which proposal identifies a price or range of values to
be paid for the outstanding securities or substantially all of
the assets of Rio, (2) the Board of Directors of Rio determines
in good faith, after consultation with a financial advisor of
nationally recognized reputation, that such Acquisition Proposal
is reasonably capable of being completed on substantially the
terms proposed, and would, if consummated, result in a
transaction that would provide greater value to the holders of
Rio Common Stock than the transaction contemplated by this
Agreement (a "SUPERIOR PROPOSAL"), (3) the Board of Directors of
Rio determines in good faith, based on the advice of outside
legal counsel, that the failure to take such action would be
inconsistent with its fiduciary duties to Rio's stockholders
under applicable law, and (4) prior to furnishing such non-public
information to, or entering into discussions or negotiations
with, such person or entity, such Board of Directors receives
from such person or entity an executed confidentiality and
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standstill agreement (unless the Board of Directors of Rio
determines in good faith upon the advice of counsel, that
requiring such person or entity to enter into a standstill
agreement would violate such Board's fiduciary duty) with
material terms no less favorable to such party than those
contained in the Confidentiality Agreements each dated June 18,
1998 between Harrah's and Rio (the "CONFIDENTIALITY AGREEMENTS").
Rio agrees not to release any Third Party from, or waive any
provision of, any standstill agreement to which it is a party or
any confidentiality agreement between it and another person who
has made, or who may reasonably be considered likely to make, an
Acquisition Proposal, unless the Board of Directors of Rio
determines in good faith, based on the advice of outside legal
counsel, that the failure to take such action would be
inconsistent with its fiduciary duties to Rio's stockholders
under applicable law.
(b) Rio shall notify Harrah's promptly after receipt by
Rio or Rio's knowledge of the receipt by any of its advisors of
any Acquisition Proposal or any request for non-public
information in connection with an Acquisition Proposal or for
access to the properties, books or records of Rio by any person
or entity that informs such party that it is considering making
or has made an Acquisition Proposal. Such notice shall be made
orally and in writing and shall indicate the identity of the
offeror and the terms and conditions of such proposal, inquiry or
contact. Rio shall (i) keep Harrah's informed of the status
(including any change to the material terms) of any such
Acquisition Proposal or request for non-public information and
(ii) provide to Harrah's as soon as practicable after receipt or
delivery thereof with copies of all correspondence and other
written material (A) sent or provided to Rio or any of its
employees, representatives or agents from any Third Party in
connection with any Acquisition Proposal or request for non-
public information or (B) sent or provided by Rio or any of its
employees, representatives or agents to any Third Party in
connection with any Acquisition Proposal or request for non-
public information.
(c) Except as expressly permitted by this Section 5.4,
neither the Board of Directors of Rio nor any committee thereof
shall (i) withdraw or modify, or propose to withdraw or modify,
in a manner adverse to Harrah's, the approval or recommendation
by the Board of Directors of Rio or any such committee of this
Agreement or the Merger, (ii) approve or cause Rio to enter into
letter of intent, agreement in principle or any legally binding
acquisition agreement or similar agreement relating to any
Acquisition Proposal (any such legally binding agreement, an
"ACQUISITION AGREEMENT") or (iii) approve or recommend, or
propose to publicly approve or recommend, any Acquisition
Proposal. Notwithstanding the foregoing, if Rio has received a
Superior Proposal, the Board of Directors of Rio may, prior to
approval of the Merger by Rio's stockholders and subject to this
and the following sentences, terminate this Agreement pursuant to
Section 7.1(f), but only at a time that is more than 48 hours
following receipt by Harrah's of written notice advising Harrah's
that the Board of Directors of Rio is prepared to accept such
Superior Proposal, specifying the material terms and conditions
of such Superior Proposal and identifying the Third Party making
such Superior Proposal; PROVIDED, HOWEVER, that concurrently with
or immediately after such termination, the Board of Directors of
Rio shall cause Rio to enter into an Acquisition Agreement with
respect to such Superior Proposal.
(d) Nothing contained in this Section 5.4 shall prohibit
Rio from taking and disclosing to its stockholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act
or from making any disclosure to Rio's stockholders if, in the
good faith judgment of the Board of Directors of Rio, based on
the advice of outside legal counsel, failure to so
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disclose would be inconsistent with its fiduciary obligations
under applicable law; PROVIDED, HOWEVER, that neither Rio nor the
Board of Directors of Rio (nor any committee thereof) shall
withdraw or modify, or propose publicly to withdraw or modify,
its position with respect to this Agreement or the Merger, or
approve or recommend, or propose publicly to approve or
recommend, an Acquisition Proposal.
SECTION 5.5. JOINT PROXY STATEMENT/PROSPECTUS;
REGISTRATION STATEMENT.
(a) As promptly as practicable after the execution of this
Agreement, Rio and Harrah's shall cooperate, prepare and file
with the SEC, the Joint Proxy Statement/Prospectus and the
Registration Statement in which the Joint Proxy
Statement/Prospectus will be included as a prospectus, PROVIDED
that Harrah's may delay the filing of the Registration Statement
until approval of the Joint Proxy Statement/Prospectus by the
SEC. Rio and Harrah's will cause the Joint Proxy
Statement/Prospectus and the Registration Statement to comply as
to form in all material respects with the applicable provisions
of the Securities Act, the Exchange Act and the rules and
regulations thereunder. Each of Harrah's and Rio shall use all
reasonable efforts to have or cause the Joint Proxy
Statement/Prospectus to be cleared by the SEC and to cause the
Registration Statement to become effective as promptly as
practicable. Without limiting the generality of the foregoing,
each of Rio and Harrah's shall, and shall cause its respective
representatives to, fully cooperate with the other party and its
respective representatives in the preparation of the Joint Proxy
Statement/Prospectus and the Registration Statement, and shall,
upon request, furnish the other party with all information
concerning it and its affiliates, directors, officers and
stockholders as the other may reasonably request in connection
with the preparation of the Joint Proxy Statement/Prospectus and
the Registration Statement. The Joint Proxy Statement/Prospectus
with respect to the Merger shall include the determination and
recommendation of the Board of Directors of Rio and the Board of
Directors of Harrah's that their respective shareholders vote in
favor of the approval and adoption of this Agreement and the
Merger. Rio and Harrah's shall use reasonable efforts to take
all actions required under any applicable federal or state
securities or Blue Sky Laws in connection with the issuance of
shares of Harrah's Common Stock pursuant to the Merger. As
promptly as practicable after the Registration Statement with
respect to the Merger shall have become effective, Rio and
Harrah's shall cause the Joint Proxy Statement/Prospectus with
respect to the Merger to be mailed to their respective
stockholders.
(b) Without limiting the generality of the foregoing, (i)
Rio and Harrah's shall notify each other as promptly as
practicable upon becoming aware of any event or circumstance
which should be described in an amendment of, or supplement to,
the Joint Proxy Statement/Prospectus or the Registration
Statement, and (ii) Rio and Harrah's shall each notify the other
as promptly as practicable after the receipt by it of any written
or oral comments of the SEC on, or of any written or oral request
by the SEC for amendments or supplements to, the Joint Proxy
Statement/Prospectus or the Registration Statement, and shall
promptly supply the other with copies of all correspondence
between it or any of its representatives and the SEC with respect
to any of the foregoing filings.
(c) The information supplied by Rio for inclusion or
incorporation by reference in the Joint Proxy
Statement/Prospectus and the Registration Statement shall not (i)
at the time the Registration Statement is declared effective,
(ii) at the time the Joint Proxy Statement/Prospectus
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(or any amendment thereof or supplement thereto) is first mailed
to the holders of Rio Common Stock and the holders of Harrah's
Common Stock, (iii) at the time of the Rio Stockholders' Meeting
and the Harrah's Stockholders' Meeting and (iv) at the Effective
Time, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances in
which they are made, not misleading. If at any time prior to the
Effective Time any event or circumstance relating to Rio or any
if its affiliates or its or their respective officers and
directors should be discovered by Rio which should be set forth
in an amendment to the Registration Statement or a supplement to
the Joint Proxy Statement/Prospectus, Rio shall promptly inform
Harrah's of such event or circumstance.
(d) The information supplied by Harrah's for inclusion or
incorporation by reference in the Joint Proxy
Statement/Prospectus and the Registration Statement shall not
(i) at the time the Registration Statement is declared effective,
(ii) at the time the Joint Proxy Statement/Prospectus (or any
amendment thereof or supplement thereto) is first mailed to the
holders of Rio Common Stock, (iii) at the time of the Rio
Stockholder's Meeting, and (iv) at the Effective Time, contain
any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which
they are made, not misleading. If at any time prior to the
Effective Time any event or circumstance relating to Harrah's or
any if its affiliates or its or their respective officers and
directors should be discovered by Harrah's which should be set
forth in an amendment to the Registration Statement or a
supplement to the Joint Proxy Statement/Prospectus, Harrah's
shall promptly inform Rio of such event or circumstance.
SECTION 5.6. STOCKHOLDERS' MEETINGS. Rio and Harrah's
shall each call a meeting of its respective stockholders to be
held as promptly as practicable for the purpose of voting upon
this Agreement and the Merger. Each of Rio and Harrah's shall,
through its respective Board of Directors, recommend to their
respective stockholders adoption of this Agreement and approval
of such matters, shall coordinate and cooperate with the respect
to the timing of such meetings and shall use their best efforts
to hold such meetings on the same day and as soon as practicable
after the date hereof. Each of Rio and Harrah's shall use all
reasonable efforts to solicit from its stockholders proxies in
favor of such matters. Without limiting the generality of the
foregoing, unless this Agreement is terminated pursuant to
Section 7.1(f), Rio agrees that its obligations pursuant to this
Section 5.6 shall not be affected by the commencement, public
proposal or communication to Rio of any Acquisition Proposal.
SECTION 5.7. ACCESS TO INFORMATION. Upon reasonable
notice, each of Harrah's and Rio (and each of their respective
Subsidiaries) shall afford to the other party and its officers,
employees, accountants, counsel and other representatives,
reasonable access, during normal business hours during the period
prior to the Effective Time, to all its personnel, properties,
books, contracts, commitments and records and, during such
period, each of Harrah's and Rio shall, and shall cause each of
its respective Subsidiaries to, furnish promptly to the other
(a) copies of monthly financial reports and development reports,
(b) a copy of each report, schedule, registration statement and
other documents filed or received by it during such period
pursuant to the requirements of federal or state securities laws
and (c) all other information concerning its business, properties
and personnel as the other party may reasonably request. Each
party making such requests will hold any such information
furnished to it by the other party which
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is nonpublic in confidence in accordance with the Confidentiality
Agreement binding on such party. No information or knowledge
obtained in any investigation pursuant to this Section 5.7 shall
affect or be deemed to modify any representation or warranty
contained in this Agreement or the conditions to the obligations
of the parties to consummate the Merger. Paragraph 8 of the
Confidentiality Agreement binding Harrah's shall be terminated
and be without effect upon any termination of this Agreement
pursuant to Sections 7.1(d), 7.1(e) or 7.1(f).
SECTION 5.8. GOVERNMENTAL APPROVALS.
(a) The parties hereto shall cooperate with each other and
use their reasonable best efforts (and, with respect to the Rio
Gaming Laws and the Harrah's Gaming Laws, shall use their
reasonable best efforts to cause their respective directors and
officers to do so) to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and
filings, to obtain as promptly as practicable all permits,
registrations, licenses, findings of suitability, consents,
variances, exemptions, orders, approvals and authorizations of
all third parties and Governmental Entities which are necessary
to consummate the transactions contemplated by this Agreement,
including, without limitation, all filings required under the HSR
Act, the Rio Gaming Laws and the Harrah's Gaming Laws
("GOVERNMENTAL APPROVALS"), and to comply (and, with respect to
the Rio Gaming Laws and the Harrah's Gaming Laws, to cause their
respective directors and officers and employees to so comply)
with the terms and conditions of all such Governmental Approvals.
Each of the parties hereto shall use their reasonable best
efforts to, and shall use their reasonable best efforts to cause
their respective officers, directors and affiliates to, file
within 30 days after the date hereof, and in all events shall
file within 60 days after the date hereof, all required initial
applications and documents in connection with obtaining the
Governmental Approvals (including without limitation under
applicable Rio Gaming Laws and Harrah's Gaming Laws) and shall
act reasonably and promptly thereafter in responding to
additional requests in connection therewith. Rio and Harrah's
shall have the right to review in advance, and to the extent
practicable, each will consult the other on, in each case subject
to applicable laws relating to the exchange of information, all
the information relating to Rio or to Harrah's, as the case may
be, and any of their respective Subsidiaries, directors, officers
and stockholders which appear in any filing made with, or written
materials submitted to, any third party or any Governmental
Entity in connection with the transactions contemplated by this
Agreement. Without limiting the foregoing, each of Rio and
Harrah's (the "NOTIFYING PARTY") will notify the other promptly
of the receipt of comments or requests from Governmental Entities
relating to Governmental Approvals, and will supply the other
party with copies of all correspondence between the Notifying
Party or any of its representatives and Governmental Entities
with respect to Governmental Approvals; PROVIDED, HOWEVER, that
it shall not be required to supply the other party with copies of
correspondence relating to the personal applications of
individual applicants except for evidence of filing.
(b) Rio and Harrah's shall promptly advise each other upon
receiving any communication from any Governmental Entity whose
consent or approval is required for consummation of the
transactions contemplated by this Agreement which causes such
party to believe that there is a reasonable likelihood that any
approval needed from a Governmental Entity will not be obtained
or that the receipt of any such approval will be materially
delayed. Rio and Harrah's shall take any and all actions
reasonably necessary to vigorously defend, lift, mitigate and
rescind the effect of any litigation or administrative proceeding
adversely affecting this Agreement
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or the transactions contemplated hereby or thereby, including,
without limitation, promptly appealing any adverse court or
administrative order or injunction to the extent reasonably
necessary for the foregoing purposes.
(c) Notwithstanding the foregoing or any other provision
of this Agreement, Harrah's shall have no obligation or
affirmative duty under this Section 5.8 to cease or refrain from
the ownership of any assets or properties, or the association
with any person or entity which association is material to the
operations of Harrah's, whether on the date hereof or at any time
in the future.
SECTION 5.9. PUBLICITY. Harrah's and Rio shall agree on
the form and content of the initial press release regarding the
transactions contemplated hereby and thereafter shall consult
with each other before issuing, and use all reasonable efforts to
agree upon, any press release or other public statement with
respect to any of the transactions contemplated hereby and shall
not issue any such press release or make any such public
statement prior to such consultation, except as may be required
by law.
SECTION 5.10. INDEMNIFICATION.
(a) From and after the Effective Time, Harrah's agrees
that it will, and will cause the Surviving Corporation to,
indemnify and hold harmless each present and former director and
officer of Rio (the "INDEMNIFIED PARTIES"), against any costs or
expenses (including attorneys' fees), judgments, fines, losses,
claims, damages, liabilities or amounts paid in settlement
incurred in connection with any claim, action, suit, proceeding
or investigation, whether civil, criminal, administrative or
investigative, arising out of or pertaining to matters existing
or occurring at or prior to the Effective Time, whether asserted
or claimed prior to, at or after the Effective Time, to the
fullest extent that Rio would have been permitted under Nevada
law and its Articles of Incorporation or Bylaws in effect on the
date hereof to indemnify such Indemnified Party.
(b) For a period of six years after the Effective Time,
Harrah's shall maintain or shall cause the Surviving Corporation
to maintain in effect a directors' and officers' liability
insurance policy covering those persons who are currently covered
by Rio's directors' and officers' liability insurance policy
(copies of which have been heretofore delivered by Rio to
Harrah's) with coverage in amount and scope at least as favorable
as Rio's existing coverage; PROVIDED that in no event shall
Harrah's or the Surviving Corporation be required to expend in
the aggregate in excess of 200% of the annual premium currently
paid by Rio for such coverage; and if such premium would at any
time exceed 200% of the such amount, then Harrah's or the
Surviving Corporation shall maintain insurance policies which
provide the maximum and best coverage available at an annual
premium equal to 200% of such amount.
(c) The provisions of this Section 5.10 are intended to be
an addition to the rights otherwise available to the current
officers and directors of Rio by law, charter, statute, bylaw or
agreement, and shall operate for the benefit of, and shall be
enforceable by, each of the Indemnified Parties, their heirs and
their representatives.
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SECTION 5.11. EMPLOYEE BENEFITS.
(a) Harrah's shall cause the Surviving Corporation and its
Subsidiaries to honor all written employment, consulting,
severance and termination agreements (including change in control
provisions) of the employees of Rio and its Subsidiaries set
forth on Schedule 3.14(b)(15) of the Rio Disclosure Schedule.
Harrah's acknowledges that consummation of the transactions
contemplated by this Agreement will constitute a change in
control (or change of control) of Rio (to the extent such concept
is applicable) for the purpose of the Rio Stock Option Plans and
all Employee Plans (as defined in Section 3.14(a)(iii) (causing
all outstanding options to become vested and exercisable and all
restrictions on outstanding restricted shares to lapse and all
participants' accounts in the Supplemental Retirement and
Deferred Compensation Plan to become payable in a lump sum).
(b) For purposes of determining eligibility to
participate, vesting and entitlement to benefits where length of
service is relevant under any employee benefit plan or
arrangement of Harrah's or the Surviving Corporation, other than
for purposes of benefit accrual under any Pension Plan, employees
of Rio and its Subsidiaries as of the Effective Time shall
receive service credit for service with Rio and any of its
Subsidiaries to the same extent such service was granted under
the Employee Plans; PROVIDED, HOWEVER, that such service need not
be credited to the extent that it would result in a duplication
of benefits.
(c) Nothing in this Agreement is intended to create any
right of employment for any person or to create any obligation
for Harrah's or the Surviving Corporation to continue any
Employee Plan of Rio following the Effective Time, except as
provided in Sections 2.3 and 5.11(a).
(d) Harrah's will, or will cause the Surviving Corporation
and its Subsidiaries to, (i) waive all limitations as to
preexisting conditions exclusions and waiting periods with
respect to participation and coverage requirements applicable to
the Affected Employees under any Welfare Plans that such
employees may be eligible to participate in after the Closing
Date, other than limitations or waiting periods that are already
in effect with respect to such employees and that have not been
satisfied as of the Closing Date under any Welfare Plan
maintained for the Affected Employees immediately prior to the
Closing Date, and (ii) use its best efforts to provide each
Affected Employee with credit for any co-payments and deductibles
paid prior to the Closing Date in satisfying any applicable
deductible or out-of-pocket requirements under any welfare plans
that such employees are eligible to participate in after the
Closing Date.
(e) For a period of two years immediately following the
Closing Date, the employer provided group health, life and
disability benefits and the benefits under a qualified cash or
deferred arrangement, within the meaning of Section 401(k) of the
Code, exclusive of any benefits provided only to executives or a
select group of management employees, provided to individuals who
were employees of Rio or its Subsidiaries immediately prior to
the Effective Time and who continue after the Closing Date to be
employees of Harrah's, the Surviving Corporation or any of its
subsidiaries (the "Affected Employees") pursuant to employee
benefit plans or arrangements maintained by Harrah's, the
Surviving Corporation and its subsidiaries shall be, in the
aggregate for all plans combined and for all eligible employees
combined, not materially less favorable for
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the Affected Employees than those provided to the Affected
Employees immediately prior to the Closing Date.
SECTION 5.12. AFFILIATE AGREEMENTS.
(a) Upon the execution of this Agreement, Rio will deliver
to Harrah's a list identifying, to Rio's best knowledge, those
persons who will be, at the time of the Rio Stockholders'
Meeting, "affiliates" of Rio within the meaning of Rule 145 (each
such person who is an "affiliate" of Rio within the meaning of
Rule 145 is referred to as an "AFFILIATE") promulgated under the
Securities Act ("RULE 145"). Rio shall provide to Harrah's such
information and documents as Harrah's shall reasonably request
for purposes of reviewing such list and shall notify the other
party in writing regarding any change in the identity of its
Affiliates prior to the Closing Date. Rio shall use all
reasonable efforts to deliver or cause to be delivered to
Harrah's by October 1, 1998 (and in any case prior to the
Effective Time) from each of its Affiliates, an executed
affiliate agreement in substantially the form attached hereto as
Exhibit B attached hereto (an "AFFILIATE AGREEMENT").
SECTION 5.13. POOLING ACCOUNTING. The parties will use
their reasonable best efforts to cause the Merger to be treated
as a pooling of interests for accounting purposes.
Notwithstanding anything to the contrary in this Agreement
(including, without limitation, Sections 5.1 and 5.2 hereof and
Schedule 5.1 of the Rio Disclosure Schedule and Schedule 5.2 of
the Harrah's Disclosure Schedule), from and after the date hereof
and until the Effective Time, neither Rio nor Harrah's, nor any
of their respective Subsidiaries or other Affiliates, shall
knowingly take any action, or knowingly fail to take any action,
that is reasonably likely to jeopardize the treatment of the
Merger as a pooling of interests for accounting purposes. Rio
and Harrah's shall each provide reasonable cooperation to Arthur
Andersen LLP to enable it to issue the pooling letter referenced
in Section 6.3(f) hereof.
SECTION 5.14. TAX TREATMENT OF REORGANIZATION.
(a) The parties intend the Merger to qualify as a
reorganization under both Section 368(a)(1)(B) of the Code and
Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code and shall use
their best efforts (and shall cause their respective Subsidiaries
to use their best efforts) to cause the Merger to so qualify.
Neither Rio nor Harrah's, nor any of their respective
Subsidiaries or other Affiliates, shall take any action, or fail
to take any action, that is not specifically provided for by this
Agreement that would or would be reasonably likely to adversely
affect the treatment of the Merger as a reorganization under
Section 368(a) of the Code. Rio and Harrah's shall, and shall
cause their respective Subsidiaries to, take the position for all
purposes that the Merger qualifies as a reorganization under
those Sections of the Code.
(b) Rio and Harrah's shall cooperate and use their best
efforts in obtaining the opinions of Skadden, Arps, Slate,
Meagher & Flom LLP, counsel to Rio, and Latham & Watkins, counsel
to Harrah's, dated as of the Closing Date, to the effect that the
Merger will qualify for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code.
In connection therewith, both Rio and Harrah's (together with
Merger Sub) shall deliver to Skadden, Arps, Slate, Meagher & Flom
LLP and Latham & Watkins representation letters,
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dated and executed as of the Closing Date, in form and substance
substantially identical to those attached hereto as Exhibits D
and E (the "Representation Letters").
(c) Rio and Harrah's shall cooperate and use their best
efforts to confirm that there is no Rio stockholder with respect
to whom any Tax, withholding, reporting or other obligation would
arise under Sections 897 or 1445 (or related provisions) of the
Code as a result of the Merger.
SECTION 5.15. FURTHER ASSURANCES AND ACTIONS.
(a) Subject to the terms and conditions herein, each of
the parties hereto agrees to use its reasonable best efforts to
take, or cause to be taken, all appropriate action, and to do, or
cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement, including,
without limitation, (i) using their respective reasonable best
efforts to obtain all licenses, permits, consents, approvals,
authorizations, qualifications and orders of Governmental
Entities and parties to contracts with each party hereto as are
necessary for consummation of the transactions contemplated by
this Agreement, and (ii) to fulfill all conditions precedent
applicable to such party pursuant to this Agreement.
(b) In case at any time after the Effective Date any
further action is necessary to carry out the purposes of this
Agreement or to vest the Surviving Corporation with full title to
all properties, assets, rights, approvals, immunities, franchises
of any of the parties to the Merger, the proper officers and/or
directors of Harrah's, Rio and the Surviving Corporation shall
take all such necessary action.
(c) Notwithstanding anything to the foregoing to the
contrary, in the event that the Merger or any of the other
transactions contemplated by this Agreement will give rise to any
default or breach under the terms of the Indentures governing
Rio's 10 5/8% Senior Subordinated Notes due 2005 and 9 1/2% Senior
Subordinated Notes due 2007, the seeking of the waiver or consent
of the holders of such indebtedness to such default or breach
shall be on terms and conditions determined by Harrah's in its
sole and absolute discretion, which may include, subject to such
discretion, the repayment or repurchase of such indebtedness and
the amendment of the terms of such indebtedness which remains
outstanding, in each case on terms that are usual and customary
for similar transactions. In the event that a consent or waiver
necessary to satisfy Section 6.3(e) shall not be received on
terms and conditions acceptable to Harrah's, then Harrah's shall
not be obligated to consummate the Merger or any other
transaction contemplated hereby; PROVIDED, HOWEVER, that this
Section 5.15(c) shall not apply to Section 4.08 of Rio's
Indenture dated July 21, 1995 for the 10-5/8% Senior Subordinated
Notes Due 2005, Section 4.08 of Rio's Indenture dated February
11, 1997 for the 9-1/2% Senior Subordinated Notes Due 2007.
SECTION 5.16. STOCK EXCHANGE LISTING. Harrah's shall use
its best efforts to list on the NYSE prior to the Effective Time,
subject to official notice issuance, the shares of Harrah's
Common Stock to be issued as Merger Consideration.
SECTION 5.17. LETTER OF RIO'S ACCOUNTANTS. Rio shall use
all reasonable efforts to cause to be delivered to Harrah's a
letter of Arthur Andersen LLP, Rio's independent auditors, dated
a date within two business days before the date on which the
Registration Statement shall become
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effective and addressed to Harrah's, in form reasonably
satisfactory to Harrah's and customary in scope and substance for
letters delivered by independent public accountants in connection
with registration statements similar to the Registration
Statement.
SECTION 5.18. LETTER OF HARRAH'S ACCOUNTANTS. Harrah's
shall use all reasonable efforts to cause to be delivered to Rio
a letter of Arthur Andersen LLP, Harrah's independent auditors,
dated a date within two business days before the date on which
the Registration Statement shall become effective and addressed
to Rio, in form reasonably satisfactory to Rio and customary in
scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to
the Registration Statement.
SECTION 5.19. APPOINTMENT OF HARRAH'S DIRECTOR. Harrah's
agrees promptly following the Effective Time to appoint or take
such actions as are necessary to nominate and seek the election
of Anthony Marnell II to Harrah's Board of Directors for a term
expiring at the annual meeting of stockholders in the year 2000.
SECTION 5.20. TITLE INSURANCE. Rio shall take, or cause to
be taken, all such actions as shall be necessary for Harrah's to
obtain, at the Effective Time, the title insurance coverage which
is described on Exhibit C attached hereto for each parcel of Rio
Real Property (exclusive of Rio Leased Property under Rio Space
Leases) (the "TITLE INSURANCE") to be issued by a title insurance
company or companies selected by Rio and reasonably acceptable to
Harrah's (collectively, the "TITLE INSURER"). Such actions
required of Rio shall include, without limitation, the provision
of such documentation and other information as shall be
reasonably requested by the Title Insurer and the execution and
delivery of such affidavits, indemnity agreements and other
documents as shall be reasonably requested by the Title Insurer.
Rio shall obtain from surveyors reasonably acceptable to Harrah's
all surveys of the Rio Real Property necessary for the issuance
of the Title Insurance at Rio's cost.
ARTICLE VI.
CONDITIONS TO MERGER
SECTION 6.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO
EFFECT THE MERGER. The respective obligations of each party to
this Agreement to effect the Merger shall be subject to the
satisfaction or waiver by each party prior to the Effective Time
of the following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement and the Merger
shall have been approved by the stockholders of Rio and the
stockholders of Harrah's in the manner required under the NRS and
the Articles of Incorporation of Rio and Harrah's, respectively.
(b) NO INJUNCTIONS. No Governmental Entity shall have
enacted, issued, promulgated, enforced or entered any order,
executive order, stay, decree, judgment or injunction or statute,
rule, regulation which is in effect and which has the effect of
making the Merger illegal or otherwise prohibiting consummation
of the Merger.
(c) GOVERNMENTAL APPROVALS. All Governmental Approvals
required to consummate the transactions contemplated hereby shall
have been obtained (including, without
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limitation, under the Rio Gaming Laws and the Harrah's Gaming
Laws), all such approvals shall remain in full force and effect,
all statutory waiting periods in respect thereof (including,
without limitation, under the HSR Act) shall have expired and no
such approval shall contain any conditions, limitations or
restrictions which will have or would reasonably be expected to
have a Rio Material Adverse Effect or a Harrah's Material Adverse
Effect.
(d) NYSE LISTING. The Harrah's Common Stock to be issued
to holders of Rio Common Stock in connection with the Merger
shall have been approved for listing on the NYSE, subject only to
official notice of issuance.
(e) REGISTRATION STATEMENT. The Registration Statement
shall have become effective under the Securities Act and shall
not be the subject of any stop order or proceeding seeking a stop
order.
SECTION 6.2. ADDITIONAL CONDITIONS TO OBLIGATIONS OF RIO.
The obligation of Rio to effect the Merger is subject to the
satisfaction of each of the following conditions prior to the
Effective Time, any of which may be waived in writing exclusively
by Rio:
(a) REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Harrah's and Merger Sub set forth in this
Agreement shall be true and correct as of the date of this
Agreement and, except to the extent such representations speak as
of an earlier date, as of the Closing Date as though made on and
as of the Closing Date, except for (i) changes contemplated by
this Agreement and (ii) other than for representations and
warranties already qualified as to materiality or a Harrah's
Material Adverse Effect, inaccuracies which, individually or in
the aggregate have not had and are not reasonably likely to have
a Harrah's Material Adverse Effect. Rio shall have received a
certificate signed on behalf of Harrah's by the chief executive
officer and the chief financial officer of Harrah's to such
effect.
(b) PERFORMANCE OF OBLIGATIONS OF HARRAH'S. Harrah's
shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior
to the Closing Date, and Rio shall have received a certificate
signed on behalf of Harrah's by the chief executive officer and
the chief financial officer of Harrah's to such effect.
(c) TAX OPINION REGARDING MERGER. Skadden, Arps, Slate,
Meagher & Flom LLP, counsel to Rio, shall have delivered to Rio
an opinion, dated as of the Closing Date, to the effect that,
based upon representations, assumptions and conditions customary
for transactions such as the Merger (including the Representation
Letters), that the Merger will qualify for federal income tax
purposes as a reorganization within the meaning of Section 368(a)
of the Code.
(d) NO MATERIAL ADVERSE CHANGE. Between the date of this
Agreement and the Effective Date, there shall not have been any
event, development, condition or state of affairs which resulted
in or is reasonably likely to result in a material adverse change
in the business, properties, financial condition or results of
operations of Harrah's and its Subsidiaries, taken as a whole,
other than changes, if any, resulting from the effect of
economic changes which are applicable to the gaming industry
generally or the gaming industry in markets in which Harrah's or
its Subsidiaries conducts business.
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(e) THIRD-PARTY CONSENTS. Harrah's shall have received
all third-party consents and approvals required to be obtained by
Harrah's in connection with the transactions contemplated hereby,
under any contract to which Harrah's (or any of its Subsidiaries)
may be a party, except for such third-party consents and
approvals as to which the failure to obtain, either individually
or in the aggregate, would not reasonably be expected to result
in a Harrah's Material Adverse Effect.
SECTION 6.3. ADDITIONAL CONDITIONS TO OBLIGATIONS OF
HARRAH'S. The obligations of Harrah's and Merger Sub to effect
the Merger are subject to the satisfaction of each of the
following conditions prior to the Effective Time, any of which
may be waived in writing exclusively by Harrah's:
(a) REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Harrah's and Merger Sub set forth in this
Agreement shall be true and correct as of the date of this
Agreement and, except to the extent such representations speak as
of an earlier date, as of the Closing Date as though made on and
as of the Closing Date, except for (i) changes contemplated by
this Agreement and (ii) other than for representations and
warranties already qualified as to materiality or a Rio Material
Adverse Effect, inaccuracies which, individually or in the
aggregate have not had and are not reasonably likely to have a
Rio Material Adverse Effect. Rio shall have received a
certificate signed on behalf of Harrah's by the chief executive
officer and the chief financial officer of Harrah's to such
effect.
(b) PERFORMANCE OF OBLIGATIONS OF RIO AND CERTAIN
STOCKHOLDERS. Rio shall have performed in all material respects
all obligations required to be performed by it under this
Agreement at or prior to the Closing Date and Harrah's shall have
received a certificate signed on behalf of Rio by the chief
executive officer and the chief financial officer of Rio to each
such effect. Each of the Rio stockholders that is a party to a
Stockholder Support Agreement shall have performed in all
material respects all obligations required to be performed by it
under the Stockholder Support Agreements at or prior to the
Closing Date.
(c) NO MATERIAL ADVERSE CHANGE. Between the date of this
Agreement and the Effective Date, there shall not have been any
event, development, condition or state of affairs which resulted
in or is reasonably likely to result in a material adverse change
in the business or properties, (including, without limitation,
Rio's development plans contemplated by the Phase VI Expansion
Plan and the development plans of the Phase VI Land), financial
condition or results of operations of Rio and its Subsidiaries,
taken as a whole, other than changes, if any, resulting from the
effect of economic changes which are applicable to the gaming
industry generally or the Las Vegas gaming industry in
particular.
(d) TAX OPINION REGARDING MERGER. Latham & Watkins,
counsel to Harrah's, shall have delivered to Harrah's an opinion,
dated as of the Closing Date, to the effect that, based upon
representations, assumptions and conditions customary for
transactions such as the Merger (including the Representation
Letters), that the Merger will qualify for federal income tax
purposes as a reorganization within the meaning of Section 368(a)
of the Code.
(e) THIRD-PARTY CONSENTS. Rio shall have received all
third-party consents and approvals required to be obtained by Rio
in connection with the transactions contemplated
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hereby, under any contract to which Rio (or any of its
Subsidiaries) may be a party, except for such third-party
consents and approvals as to which the failure to obtain, either
individually or in the aggregate, would not reasonably be
expected to result in a Rio Material Adverse Effect.
(f) POOLING LETTER. Harrah's shall have received a letter
from Arthur Andersen LLP addressed to Harrah's regarding its
concurrence with the conclusions of management of Harrah's as to
the appropriateness of the pooling of interests accounting under
Accounting Principles Board Opinion No. 16 for the transactions
contemplated hereby.
ARTICLE VII.
TERMINATION AND AMENDMENT
SECTION 7.1. TERMINATION. This Agreement may be
terminated at any time prior to the Effective Time (with respect
to Sections 7.1(b) through 7.1(h), by written notice by the
terminating party to the other party), whether before or after
approval of the matters presented in connection with the Merger
by the stockholders of Rio:
(a) by mutual written consent of Rio and Harrah's; or
(b) by either Harrah's or Rio if the Merger shall not have
been consummated by January 31, 1999 (PROVIDED that (i) if the
Merger shall not have been consummated because the requisite
Governmental Approvals required under Section 6.1(c) shall not
have been obtained and are still being pursued, either Harrah's
or Rio may extend such date to May 31, 1999 by providing written
notice thereof to the other party on or prior to January 31, 1999
and (ii) the right to terminate this Agreement under this
Section 7.1(b) shall not be available to any party whose failure
to fulfill any obligation under this Agreement has been the cause
of or resulted in the failure of the Merger to occur on or before
such date); or
(c) by either Harrah's or Rio if a court of competent
jurisdiction or other Governmental Entity shall have issued a
nonappealable final order, decree or ruling or taken any other
nonappealable final action, in each case having the effect of
permanently restraining, enjoining or otherwise prohibiting the
Merger; or
(d) (i) by either Harrah's or Rio, if, at the Rio
Stockholders' Meeting (including any adjournment or
postponement), the requisite vote of the stockholders of Rio in
favor of the approval and adoption of this Agreement and the
Merger shall not have been obtained; or (ii) by either Rio or
Harrah's, if, at the Harrah's Stockholders' Meeting (including
any adjournment or postponement), the requisite vote of the
stockholders of Harrah's in favor of the approval and adoption of
this Agreement and the Merger shall not have been obtained; or
(e) (i) by Harrah's, if for any reason Rio fails to call
and hold the Rio Stockholders' Meeting by January 31, 1999;
PROVIDED, that Harrah's right to terminate this Agreement under
this clause (e)(i) shall not be available if at such time Rio
would be entitled to terminate this Agreement under Section
7.1(h); or (ii) by Rio, if for any reason Harrah's fails to call
and hold the Harrah's Stockholders' Meeting by January 31, 1999;
PROVIDED, that Rio's right to terminate this
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Agreement under this clause (e)(ii) shall not be available if at
such time Harrah's would be entitled to terminate this Agreement
under Section 7.1(h); or
(f) by Rio, in accordance with Section 5.4(c); PROVIDED,
HOWEVER, that no termination to this Section 7.1(f) shall be
deemed effective unless Rio shall have complied with all
provisions contained in Section 5.4(c), including the notice
provision therein, and the applicable requirements of Section
7.3, including the payment of the termination fee pursuant to
Section 7.3(b)(iii); or
(g) by Rio, if Harrah's consolidates or merges with or
into, or sells all or substantially all of its assets directly or
through the sale of capital stock to any person, if after any
such transaction, the stockholders of Harrah's immediately prior
to such transaction do not own at least 50% of the voting stock
of the surviving or acquiring entity immediately after such
transaction; or
(h) by Harrah's or Rio, if there has been a breach of any
representation, warranty, covenant or agreement on the part of
the non-terminating party set forth in this Agreement, which
breach will cause the conditions set forth in Section 6.2(a) or
(b) (in the case of termination by Rio) or 6.3(a) or (b) (in the
case of termination by Harrah's) not to be satisfied.
SECTION 7.2. EFFECT OF TERMINATION. In the event of
termination of this Agreement as provided in Section 7.1, this
Agreement shall immediately become void and there shall be no
liability or obligation on the part of Harrah's, Merger Sub or
Rio, or their respective officers, directors, stockholders or
Affiliates, except as set forth in Section 7.3 and except that
such termination shall not limit liability for a willful breach
of this Agreement; PROVIDED that the provisions of this Section
7.2, Section 7.3 of this Agreement and the Confidentiality
Agreements shall remain in full force and effect and survive any
termination of this Agreement.
SECTION 7.3. FEES AND EXPENSES.
(a) Except as set forth in this Section 7.3, all fees and
expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party
incurring such expenses, whether or not the Merger is
consummated.
(b) Rio shall pay Harrah's a termination fee of $22.5
million via wire transfer of same-day funds on the date of the
earliest to occur of the following events:
(i) the termination of this Agreement by Harrah's or
Rio pursuant to Section 7.1(d)(i), if an Acquisition Proposal
involving Rio shall have been publicly announced prior to the
Stockholders' Meeting and either an Acquisition Agreement for a
Rio Alternative Transaction is entered into, or a Rio Alternative
Transaction is consummated, within twelve months of such
termination;
(ii) the termination of this Agreement by Harrah's
pursuant to Section 7.1(e)(i);
(iii) the termination of this Agreement by Rio
pursuant to Section 7.1(f); or
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(iv) the termination of this Agreement by Harrah's
pursuant to Section 7.1(h); PROVIDED that if such termination
occurs solely on account of Rio's breach of a representation or
warranty (and Rio has not otherwise breached any material
covenant or agreement, in which case this proviso shall not
apply), such termination fee shall be payable only if an
Acquisition Proposal involving Rio shall have been publicly
announced prior to such termination and either an Acquisition
Agreement for a Rio Alternative Transaction is entered into, or a
Rio Alternative Transaction is consummated, within twelve months
of such termination.
Rio's payment of a termination fee pursuant to this
subsection shall be the sole and exclusive remedy of Harrah's
against Rio and any of its Subsidiaries and their respective
directors, officers, employees, agents, advisors or other
representatives with respect to the occurrences giving rise to
such payment; PROVIDED that this limitation shall not apply in
the event of a willful breach of this Agreement by Rio.
(c) Harrah's shall pay Rio a termination fee of $22.5
million via wire transfer of same-day funds on the date of the
earliest to occur of the following events:
(i) the termination of this Agreement by Harrah's or
Rio pursuant to Section 7.1(d)(ii), if an Acquisition Proposal
involving Harrah's shall have been publicly announced prior to
the Stockholders' Meeting and either an Acquisition Agreement for
a Harrah's Alternative Transaction is entered into, or a Harrah's
Alternative Transaction is consummated, within twelve months of
such termination;
(ii) the termination of this Agreement by Rio pursuant
to Section 7.1(e)(ii); or
(iii) the termination of this Agreement by Rio
pursuant to Section 7.1(h); PROVIDED that if such termination
occurs solely on account of Harrah's breach of a representation
or warranty (and Harrah's has not otherwise breached any material
covenant or agreement, in which case this proviso shall not
apply), such termination fee shall be payable only if an
Acquisition Proposal involving Harrah's shall have been publicly
announced prior to such termination and either an Acquisition
Agreement for a Harrah's Alternative Transaction is entered into,
or an Alternative Transaction is consummated, within twelve
months of such termination.
Harrah's payment of a termination fee pursuant to this
subsection shall be the sole and exclusive remedy of Rio against
Harrah's and any of its Subsidiaries and their respective
directors, officers, employees, agents, advisors or other
representatives with respect to the occurrences giving rise to
such payment; PROVIDED that this limitation shall not apply in
the event of a willful breach of this Agreement by Harrah's.
(d) Harrah's shall pay River a termination fee of $10.0
million via wire transfer of same-day funds on the date the
Merger Agreement is terminated pursuant to Section 7.1(b) if, at
the time of such termination, the condition set forth in Section
6.3(f) has not been satisfied or waived by Harrah's.
(e) As used in this Agreement, "RIO ALTERNATIVE
TRANSACTION" means (i) a transaction pursuant to which any Third
Party acquires more than 50% of the outstanding shares of Rio
Common Stock pursuant to a tender offer or exchange offer or
otherwise, (ii) a merger or
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other business combination involving Rio pursuant to which any
Third Party (or the stockholders of a Third Party) acquires more
than 50% of the outstanding shares of Rio Common Stock or the
entity surviving such merger or business combination, or
(iii) any other transaction pursuant to which any Third Party
acquires control of assets (including for this purpose the
outstanding equity securities of Subsidiaries of Rio, and the
entity surviving any merger or business combination including any
of them) of Rio having a fair market value (as determined in good
faith by the Board of Directors of Rio) equal to more than 50% of
the fair market value of all the assets of Rio and its
Subsidiaries, taken as a whole, immediately prior to such
transaction.
(f) As used in this Agreement, "HARRAH'S ALTERNATIVE
TRANSACTION" means (i) a transaction pursuant to which any Third
Party acquires more than 50% of the outstanding shares of
Harrah's Common Stock pursuant to a tender offer or exchange
offer or otherwise, (ii) a merger or other business combination
involving Harrah's pursuant to which any Third Party (or the
stockholders of a Third Party) acquires more than 50% of the
outstanding shares of Harrah's Common Stock or the entity
surviving such merger or business combination, or (iii) any other
transaction pursuant to which any Third Party acquires control of
assets (including for this purpose the outstanding equity
securities of Subsidiaries of Harrah's, and the entity surviving
any merger or business combination including any of them) of
Harrah's having a fair market value (as determined in good faith
by the Board of Directors of Harrah's) equal to more than 50% of
the fair market value of all the assets of Harrah's and its
Subsidiaries, taken as a whole, immediately prior to such
transaction.
(g) The fees payable pursuant to Section 7.3(b) shall be
paid concurrently with the first to occur of the events described
in Section 7.3(b)(i), (ii), (iii) or (iv), and the fees payable
pursuant to Section 7.3(c) shall be paid concurrently with the
first to occur of the events described in Sections 7.3(c)(i),
(ii) or (iii).
SECTION 7.4. AMENDMENT. This Agreement may be amended by
the parties hereto, by action taken or authorized by their
respective Boards of Directors, at any time before or after
approval of the matters presented in connection with the Merger
by the stockholders of Rio, but, after any such approval, no
amendment shall be made which by law requires further approval by
such stockholders without such further approval. This Agreement
may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
SECTION 7.5. EXTENSION; WAIVER. At any time prior to the
Effective Time, the parties hereto, by action taken or authorized
by their respective Boards of Directors, may, to the extent
legally allowed (i) extend the time for the performance of any of
the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions
contained here. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in
a written instrument signed on behalf of such party.
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ARTICLE VIII.
MISCELLANEOUS
SECTION 8.1. NONSURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS. None of the representations,
warranties, covenants and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the
Effective Time, except for the agreements contained in Sections
1.4, 1.5, 1.6, 2.1, 2.2, 2.3, 5.10, and 5.11 and Article VIII.
The Confidentiality Agreements shall survive the execution and
delivery of this Agreement.
SECTION 8.2. NOTICES. All notices and other
communications hereunder shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed) or
mailed by registered or certified mail (return receipt requested)
to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Rio, to
Rio Hotel & Casino, Inc.
3700 West Flamingo Road
Las Vegas, Nevada 89103
Attn: James A. Barrett, Jr.
Telecopy: (702) 252-7633
with a copy to
Rio's Counsel
Kummer, Kaempfer, Bonner & Renshaw
3800 Howard Hughes Parkway
7th Floor
Las Vegas, NV 89109
Attn: Michael J. Bonner, Esq.
Telecopy: (702) 796-7181
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attn: Morris J. Kramer, Esq.
Telecopy: (212 735-2000
(b) if to Harrah's or Merger Sub, to
Harrah's Entertainment, Inc.
1023 Cherry Road
Memphis, Tennessee 38117
Attn: Colin V. Reed
Telecopy: (901) 762-8804
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with a copy to:
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071-2007
Attn: Edward Sonnenschein, Jr., Esq.
Telecopy: (213) 891-8763
SECTION 8.3. INTERPRETATION. When a reference is made in
this Agreement to Sections, such reference shall be to a Section
of this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for
reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement
they shall be deemed to be followed by the words "without
limitation." The phrase "made available" in this Agreement shall
mean that the information referred to has been made available if
requested by the party to whom such information is to be made
available. The phrases "the date of this Agreement", "the date
hereof," and terms of similar import, unless the context
otherwise requires, shall be deemed to refer to August 9, 1998.
SECTION 8.4. COUNTERPARTS. This Agreement may be executed
in two or more counterparts, all of which shall be considered one
and the same agreement and shall become effective when two or
more counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
SECTION 8.5. ENTIRE AGREEMENT; NO THIRD PARTY
BENEFICIARIES. This Agreement and all documents and instruments
referred to herein (a) constitute the entire agreement and
supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter
hereof, and (b) except as provided in Section 5.10, are not
intended to confer upon any person other than the parties hereto
any rights or remedies hereunder; PROVIDED that the
Confidentiality Agreements shall remain in full force and effect
until the Effective Time. Each party hereto agrees that, except
for the representations and warranties contained in this
Agreement, none of Harrah's, Merger Sub or Rio makes any other
representations or warranties, and each hereby disclaims any
other representations and warranties made by itself or any of its
officers, directors, employees, agents, financial and legal
advisors or other representatives, with respect to the execution
and delivery of this Agreement or the transactions contemplated
hereby, notwithstanding the delivery or disclosure to any of them
or their respective representatives of any documentation or other
information with respect to any one or more of the foregoing.
SECTION 8.6. GOVERNING LAW. This Agreement shall be
governed and construed in accordance with the laws of the State
of Nevada without regard to any applicable conflicts of law.
SECTION 8.7. ASSIGNMENT. Neither this Agreement nor any
of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of
law or otherwise) without the prior written consent of the other
parties, except that Merger Sub may assign its rights and
obligations hereunder to any direct or indirect wholly-owned
subsidiary of Harrah's; PROVIDED that no such assignment shall
relieve Harrah's of its obligations hereunder. Subject to the
preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties and their
respective successors and assigns.
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SECTION 8.8. SEVERABILITY; ENFORCEMENT. Except to the
extent that the application of this Section 8.8 would be
reasonably likely to have a Harrah's Material Adverse Effect with
respect to Harrah's or a Rio Material Adverse Effect with respect
to Rio, the invalidity of any portion hereof shall not affect the
validity, force or effect of the remaining portions hereof. If
it is ever held that any covenant hereunder is too broad to
permit enforcement of such covenant to its fullest extent, each
party agrees that a court of competent jurisdiction may enforce
such covenant to the maximum extent permitted by law, and each
party hereby consents and agrees that such scope may be
judicially modified accordingly in any proceeding brought to
enforce such covenant.
SECTION 8.9. SPECIFIC PERFORMANCE. The parties hereto
agree that the remedy at law for any breach of this Agreement
will be inadequate and that any party by whom this Agreement is
enforceable shall be entitled to specific performance in addition
to any other appropriate relief or remedy. Such party may, in
its sole discretion, apply to a court of competent jurisdiction
for specific performance or injunctive or such other relief as
such court may deem just and proper in order to enforce this
Agreement or prevent any violation hereof and, to the extent
permitted by applicable laws, each party hereto waives any
objection to the imposition of such relief.
59
<PAGE>
IN WITNESS WHEREOF, Harrah's, Merger Sub and Rio have
caused this Agreement to be signed by their respective duly
authorized officers as of the date first written above.
HARRAH'S ENTERTAINMENT, INC.
By: /S/ Colin V. Reed
Its: Executive Vice President and
Chief Financial Officer
HEI ACQUISITION CORP. III
By: /S/ Colin V. Reed
Its: Executive Vice President
RIO HOTEL & CASINO, INC.
By: /S/ James A. Barrett, Jr.
Its: President
<PAGE>
EXHIBIT A
FORM OF STOCKHOLDER SUPPORT AGREEMENT
STOCKHOLDER SUPPORT AGREEMENT, dated as of August 9, 1998
(this "AGREEMENT"), by _______________ ("STOCKHOLDER") to and for
the benefit of Harrah's Entertainment, Inc., a Delaware
corporation ("HARRAH'S"). Capitalized terms used and not
otherwise defined herein shall have the respective meanings
assigned to them in the Merger Agreement referred to below.
WHEREAS, as of the date hereof, Stockholder owns of record
and beneficially ________ shares (such shares, together with any
other voting or equity securities of Rio Hotel & Casino, Inc., a
Nevada corporation ("RIO"), hereafter acquired by Stockholder
prior to the termination of this Agreement, being referred to
herein collectively as the "SHARES") of common stock, par value
$0.01 per share ("RIO COMMON STOCK");
WHEREAS, concurrently with the execution of this Agreement,
Harrah's, HEI Acquisition Corp. III, a Nevada corporation and
indirect wholly-owned subsidiary of Harrah's ("MERGER SUB"), and
Rio are entering into an Agreement and Plan of Merger, dated as
of the date hereof (the "MERGER AGREEMENT"), pursuant to which,
upon the terms and subject to the conditions thereof, Merger Sub
will be merged with and into Rio such that Rio will become an
indirect wholly-owned subsidiary of Harrah's (the "MERGER"); and
WHEREAS, as a condition to the willingness of Rio, Harrah's
and Merger Sub to enter into the Merger Agreement, Harrah's has
requested the Stockholder agree, and in order to induce Harrah's
and Merger Sub to enter into the Merger Agreement, the
Stockholder is willing to agree to vote in favor of adopting the
Merger Agreement and approving the Merger, upon the terms and
subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements contained herein, and intending
to be legally bound hereby, the parties hereby agree, severally
and not jointly, as follows:
Section 1. VOTING OF SHARES. Until the termination of
this Agreement in accordance with the terms hereof, Stockholder
hereby agrees that, at the Rio Stockholders' Meeting (as defined
in the Merger Agreement) or any other meeting of the stockholders
of Rio, however called, and in any action by written consent of
the stockholders of Rio, Stockholder will vote all of his or her
respective Shares (a) in favor of adoption of the Merger
Agreement and approval of the Merger and the other transactions
contemplated by the Merger Agreement, and (b) in favor of any
other matter necessary to the consummation of the transactions
contemplated by the Merger Agreement and considered and voted
upon by the stockholders of Rio (or any class thereof). In
addition, Stockholder agrees that it will, upon request by
Harrah's, furnish written confirmation, in form and substance
reasonably acceptable to Harrah's, of such Stockholder's vote in
favor of the Merger Agreement and the Merger. Stockholder
acknowledges receipt and review of a copy of the Merger
Agreement.
<PAGE>
Section 2. TRANSFER OF SHARES. Stockholder represents
and warrants that it has no present intention of taking action,
prior to the termination of this Agreement in accordance with the
terms hereof, to, directly or indirectly, (a) sell, assign,
transfer (including by merger, testamentary disposition,
interspousal disposition pursuant to a domestic relations
proceeding or otherwise by operation of law), pledge, encumber or
otherwise dispose of any of the Shares, (b) deposit any of the
Shares into a voting trust or enter into a voting agreement or
arrangement with respect to the Shares or grant any proxy or
power of attorney with respect thereto which is inconsistent with
this Agreement or (c) enter into any contract, option or other
arrangement or undertaking with respect to the direct or indirect
sale, assignment, transfer (including by merger, testamentary
disposition, interspousal disposition pursuant to a domestic
relations proceeding or otherwise by operation of law) or other
disposition of any Shares.
Section 3. REPRESENTATIONS AND WARRANTIES OF
STOCKHOLDER. Stockholder hereby represents and warrants to
Harrah's with respect to himself or herself and his or her
ownership of the Shares as follows:
(a) OWNERSHIP OF SHARES. On the date hereof, the
Shares are owned of record and beneficially by Stockholder.
Stockholder has sole voting power, without restrictions, with
respect to all of the Shares.
(b) POWER, BINDING AGREEMENT. Stockholder has
the legal capacity, power and authority to enter into and perform
all of his or her obligations under this Agreement. The
execution, delivery and performance of this Agreement by
Stockholder will not violate any other agreement to which
Stockholder is a party, including, without limitation, any voting
agreement, stockholders' agreement, partnership agreement or
voting trust. This Agreement has been duly and validly executed
and delivered by Stockholder and constitutes a valid and binding
obligation of Stockholder, enforceable against Stockholder in
accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally
and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
(c) NO CONFLICTS. The execution and delivery of
this Agreement do not, and the consummation of the transactions
contemplated hereby will not, conflict with or result in any
violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a
material benefit under, any provision of any loan or credit
agreement, note, bond, mortgage, indenture, lease, or other
agreement, instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Stockholder or any of his or her
properties or assets, other than such conflicts, violations or
defaults or terminations, cancellations or accelerations which
individually or in the aggregate do not materially impair the
ability of Stockholder to perform his or her obligations
hereunder. Subject to Rio Gaming Laws, no consent, approval,
order or authorization of, or registration, declaration, or
filing with, any governmental entity is required by or with
respect to the execution and delivery of this Agreement by
Stockholder and the consummation by Stockholder of the
transactions contemplated hereby.
A-2
<PAGE>
Section 4. NO SOLICITATION. Prior to the termination of
this Agreement in accordance with its terms, Stockholder agrees
that (i) in his or her individual capacity he or she will not,
nor will he or she authorize or permit any of his or her
employees, agents and representatives to, directly or indirectly,
(a) initiate, solicit or encourage any inquiries or the making of
any Acquisition Proposal (as defined in the Merger Agreement),
(b) enter into any agreement with respect to any Acquisition
Proposal, or (c) participate in any discussions or negotiations
regarding, or furnish to any person any information with respect
to, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be
expected to lead to, any Acquisition Proposal, and (ii) he or she
will notify Harrah's as soon as possible if any such inquiries or
proposals are received by, any information or documents is
requested from, or any negotiations or discussions are sought to
be initiated or continued with, him or her or any of his or her
affiliates in his or her individual capacity.
Section 5. TERMINATION. This Agreement shall terminate
upon the earliest to occur of (i) the Effective Time (as such
term is defined in the Merger Agreement) or (ii) any termination
of the Merger Agreement in accordance with the terms thereof;
PROVIDED that the provisions of Sections 6 and 8 of this
Agreement shall survive any termination of this Agreement; and
PROVIDED FURTHER that no such termination shall relieve any party
of liability for a breach hereof prior to termination.
Section 6. SPECIFIC PERFORMANCE. The parties hereto
agree that irreparable damage would occur in the event any
provision of this Agreement was not performed in accordance with
the terms hereof and that the parties shall be entitled to
specific performance of the terms hereof, in addition to any
other remedy at law or in equity.
Section 7. FIDUCIARY DUTIES. Notwithstanding anything
in this Agreement to the contrary, the covenants and agreements
set forth herein shall not prevent Stockholder from serving on
Rio's Board of Directors and from taking or not taking any
action, subject to the applicable provisions of the Merger
Agreement, while acting in such capacity as a director of Rio.
Section 8. MISCELLANEOUS.
(a) This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements and
understandings, both written and oral, between the parties with
respect thereto. This Agreement may not be amended, modified or
rescinded except by an instrument in writing signed by each of
the parties hereto.
(b) If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by
any rule of law, or public policy, all other conditions and
provisions of this Agreement shall nevertheless remain in full
force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as
closely as possible to the fullest extent permitted by applicable
law in a mutually acceptable manner in order that the terms of
this Agreement remain as originally contemplated to the fullest
extent possible.
A-3
<PAGE>
(c) This Agreement shall be governed by and
construed in accordance with the laws of the State of Nevada
without regard to the principles of conflicts of law thereof.
(d) This Agreement may be executed in
counterparts, each of which shall be deemed an original and all
of which together shall constitute one and the same instrument.
A-4
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be signed by their respective duly authorized
officers as of the date first written above.
STOCKHOLDER
Agreed and Acknowledged:
HARRAH'S ENTERTAINMENT, INC.
By:
Its:
HARRAH'S TO MERGE WITH RIO
- - BRINGS TOGETHER INDUSTRY LEADING CASINO CUSTOMER DATABASE AND
RELATIONSHIP BUILDING ORGANIZATION WITH PREMIER LAS VEGAS RESORT
CASINO HOTEL -
- - ACCRETIVE TO EARNINGS -
- - COSTS SAVINGS EXPECTED -
- - REVENUE SYNERGIES POTENTIALLY HIGH -
MEMPHIS, Tenn. and LAS VEGAS, Aug. 10 -- Harrah's Entertainment,
Inc. (NYSE:HET) and Rio Hotel and Casino, Inc. (NYSE:RHC) today
announced the signing of a definitive merger agreement. Harrah's
will acquire all Rio shares in a one-for-one stock transaction
valued at $518 million based on Harrah's closing price of $20 1/8
on Friday, August 7, 1998. Harrah's will also assume Rio's debt.
The Boards of Directors of both Harrah's and Rio have approved the
transaction.
Management expects the transaction to be accretive to earnings in
the first year. Based on an average of analyst estimates, the
combined company will have 1999 revenues of approximately $2.9
billion, and approximately $740 million of EBITDA. The transaction
is expected to be tax free to Rio shareholders, and it is the
intent of the parties that it be accounted for under the pooling-
of-interests method. Anthony A. Marnell II, chairman and chief
executive officer of Rio, will become vice chairman of Harrah's
and a member of Harrah's Board of Directors. Along with James A.
Barrett, Jr., president of Rio, Marnell will continue his
executive responsibilities at the Rio. The Rio hotel and casino
will operate as a separate subsidiary of Harrah's and no changes
are expected to its operation.
Philip G. Satre, chairman, president and chief executive officer
of Harrah's, stated, "The combination of Harrah's and Rio is a
natural match of two companies who share a common vision of
leadership and common cultures of providing the highest levels of
customer service. This alignment provides a platform on which we
will be able to exploit unique strategic opportunities that
benefit our shareholders, customers and employees. This
combination is a perfect fit. Our visions are completely aligned.
"Rio is a Las Vegas destination gem, and by all measures, one of
the highest quality and best managed companies in our business.
Utilizing Harrah's strong database management and marketing
expertise, we see an unprecedented opportunity to introduce
Harrah's loyal customers to the Rio's resort-style property, as
well as introduce Rio customers to Harrah's Entertainment's 19
properties. Rio will add 1.3 million additional customers into
Harrah's existing 8 million-customer database. We fully expect to
see significant revenue and growth opportunities from the
integration of our proprietary customer recognition and rewards
program, Total Gold, within the Rio customer network," he said.
"Most important, Rio has many loyal customers and one of the
strongest management teams in the business. We welcome them both
to the Harrah's family. We look forward to Tony Marnell's
involvement as vice chairman and a member of the Harrah's Board of
Directors and his team's continued management of the Rio."
Marnell stated, "The joining of Harrah's and Rio creates
tremendous value and opportunity for customers, employees and
shareholders of both companies. With Harrah's, we see the ability
to accelerate the Rio's demand driven growth plans while
maintaining the high standards of quality service and value for
which we have become known. Harrah's has an incredible customer
recognition system, which will be a significant advantage for the
Rio. We're excited about working with the Harrah's team, which we
have always admired. Harrah's is a first class company."
Colin V. Reed, executive vice president and chief financial
officer of Harrah's, said, "We are excited about the revenue
synergies afforded to Harrah's by this transaction, particularly
the addition of the Rio brand with its strong consumer image
appealing to a complementary demographic segment. More than 50% of
Rio's customers are from Las Vegas and the Los Angeles markets.
Harrah's customers tend to come from the East Coast, Midwest and
Northern California. In addition, we believe there is a
significant opportunity to expand Rio's cross-market play by
capturing revenues from Harrah's customers not already playing at
Harrah's Las Vegas property. We see a lot of new and exciting
elements at Rio that will contribute to our growth including a
state-of-the-art convention center, Palazzo Suites, concierge
floors and 35-plus acres for future expansion when Las Vegas
demand warrants. Furthermore, there is the opportunity to expand
Rio into other markets as conditions in the future warrant.
"While we recognize the importance of preserving the uniqueness of
the Rio property, this transaction also provides for a number of
significant operating efficiencies in addition to the revenue
synergy opportunities," Reed continued. "On the cost side, we
expect to eliminate redundant corporate overhead, equipment and
systems, insurance and other expenses. Further, our lower cost of
capital can provide significant financial synergies to this
combination. We are excited about the future growth prospects
afforded our combined company by this deal and look forward to
working with the Rio management team in integrating the Rio casino
into the Harrah's network."
The transaction is expected to be completed by year-end 1998,
subject to various conditions including regulatory approvals, Rio
and Harrah's shareholder approvals and other third party
approvals. As part of this transaction, Marnell and Barrett have
committed to vote their shares representing approximately 22%
ownership of Rio in favor of this transaction. Each Rio
shareholder will receive one share of Harrah's stock for each
share they own.
BT Wolfensohn acted as financial advisor to Harrah's for the
transaction. Merrill Lynch & Co. acted as financial advisor to
Rio.
Rio, through its wholly-owned subsidiary, owns and operates the
Rio Suite Hotel & Casino. The Rio presently has more than 2,500
suites and 120,000 square feet of gaming space featuring
approximately 2,400 slot machines and 100 table games in addition
to an 18-hole, championship golf course. Since its founding in
1990, Rio has maintained a strategy of providing excellence in
service, value to customers, world-class accommodations and
culinary excellence to the Las Vegas market. Recognized for its
commitment to excellence, Rio has won numerous industry awards
including "Best Value in the World," by Travel & Leisure Magazine,
"Best Overall Hotel" in Las Vegas, by Zagat's, as well as
providing the city's "Best Service," "Best Food" and "Best
Accommodations." Rio is the only casino resort to be honored with
the prestigious American Academy of Hospitality Sciences' "Five
Star Diamond Award." Rio won 13 Las Vegas market first place votes
in the Casino Player Magazine annual survey of its readers.
Harrah's, the premier name in the casino entertainment industry,
is the most geographically diversified casino company in North
America. With 19 properties worldwide, Harrah's operates casinos
in Las Vegas, Reno, Lake Tahoe and Laughlin in Nevada, and
Atlantic City, North Kansas City, St. Louis, Joliet, Vicksburg,
Shreveport, Tunica, Cherokee Smoky Mountains, Phoenix Ak-Chin,
Prairie Band Topeka and Skagit Valley in Washington under the
Harrah's brand name and in Atlantic City, East Chicago and Las
Vegas under the Showboat brand name. A casino in Sydney,
Australia, operates under the name Star City, and is partially
owned and managed by Harrah's. Among Harrah's recent awards and
recognition are seven first places and eight second places in Las
Vegas by readers of Casino Player Magazine, and an unprecedented
15 first places and seven second places in Casino Player
Magazine's Atlantic City rankings.
Statements in this release concerning future events, including the
anticipated completion of the transaction, future performance and
business prospects are forward-looking and are subject to certain
risks and uncertainties. These include, but are not limited to,
anticipated future performance, economic and debt and equity
market conditions, changes in laws or regulations, third party
relations and approvals, decisions of courts, regulators and
governmental bodies, factors affecting leverage, including
interest rates, and effects of competition. These risks and
uncertainties could significantly affect anticipated results or
events in the future and actual results may differ materially from
any forward-looking statements.
Transaction Summary
This is a strategic combination of two companies that share a
single vision, yet offer distinct and highly complementary
products, strengths, attributes and customer bases. On August 10,
1998, Harrah's announced the signing of a definitive agreement to
merge with Rio in a one-for-one stock transaction valued at $518
million based on Harrah's closing price of $20 1/8 on Friday,
August 7, 1998. Under the terms of the agreement, Harrah's will
also assume Rio's debt. The Boards of Directors of both Harrah's
and Rio have approved the transaction. Based on an average of
analysts' estimates, the new Harrah's will have pro forma 1999
revenues of approximately $2.9 billion and approximately $740
million of EBITDA. Management expects the transaction to be
accretive to earnings in the first year.
* New Company at a Glance
* (all figures are pro forma)
* Total Net Revenues $2.9 billion*
* EBITDA $742 million*
* Common Shares Outstanding 126 million
* Fiscal year 12/31
* Headquarters Memphis, TN
* Total Casinos 20
* Geographic Diversity 15 casino markets
* Casino Brands Harrah's, Showboat, Rio
* Total Employees (US) 35,000
* Based on average of analysts' estimates
Highlights of the Transaction
Geographic Distribution: This combination provides Harrah's with a
resort destination that will offer its customers a fully developed
resort alternative to its existing center-strip location. Through
Harrah's unique and innovative recognition and rewards program,
Total Gold, Rio's Las Vegas customer base will have the incentive
to visit Harrah's in the Las Vegas market and when they visit
other casino markets. There are substantial revenue synergies
expected.
Complementary Customer Base: Significant opportunities exist to
strategically expand Rio's cross-market play through Harrah's
database management and marketing strength. Unlike Harrah's, more
than 50% of Rio's customers are from Las Vegas and the Los Angeles
markets. Now Harrah's will offer customers who frequent Las Vegas
two different high-quality experiences, a strip destination and a
resort experience.
Service Quality and Physical Appearance: In creating Rio,
management mirrored Harrah's service excellence and philosophy.
Rio is a special property, truly a Las Vegas gem for its unique
and innovative concept, a flagship-style asset. Rio has also won
"Best Overall Hotel" from Zagat, "Best Value in the World" by
Travel and Leisure and Rio is the only casino resort to receive
the prestigious Academy of Hospitality Sciences' "Five Star
Diamond Award." In the 1998 Casino Player "Best of Gaming"
readers' poll, Rio and Harrah's won 20 first place awards out of
50 categories in Las Vegas. In Atlantic City, Harrah's alone won
15 first place awards, more than any other casino.
Brand Infrastructure: With Harrah's leadership and market
strength, the Rio name will be able to realize its growth
potential outside of Las Vegas and to be selectively extended to
other markets. Adding a third unique brand under the Harrah's
umbrella, Rio provides additional opportunity for aggressive
customer expansion and retention strategy. Harrah's industry-
leading Total Gold program, will extend to Rio's customer base and
provide further incentive for cross-customer loyalty among the
Harrah's, Showboat and Rio brands. Harrah's realizes the value of
keeping the brand identities separate and will focus on retaining
the unique operating characteristics of each brand.
Operational Excellence: Harrah's and Rio management are committed
to the highest quality customer experience as well as investing in
property, plant, marketing and technology. The most critical
element driving the success of these companies is a dedicated team
of employees. It is crucial to the ongoing success of the Rio and
the potential application of the Rio brand to additional locations
that Rio retains its unique culture.
Transaction is accretive and will create significant synergies:
The transaction will be accretive to year one EPS before
extraordinary charges. The transaction is even more accretive long-
term assuming cost efficiencies and revenue synergies are
achieved. Harrah's expects to save $7 million annually
phased-in over two years; year one savings assumed to be
approximately half that amount. In addition, Harrah's expects to
reduce Rio's interest costs by taking advantage of Harrah's lower
cost of debt.
Revenue Synergies Accomplished in Four Ways: From customers who
are Harrah's loyal and stay at Harrah's Las Vegas, but also
venture out to experience a second more resort-style Las Vegas
location to play and dine. From customers who are loyal to
Harrah's in one of Harrah's other casino markets across the
country, but want a destination resort experience when they visit
Las Vegas. From Rio customers who are looking for a second Las
Vegas experience on the strip. From Rio customers who travel
across the United States for gaming experiences, and are not
currently directed or rewarded for any particular choice.
History/Background: Harrah's
Harrah's was founded in 1937 by casino gaming entrepreneur Bill
Harrah. It has grown to become the most geographically diversified
casino company in North America. Harrah's operates casinos in Las
Vegas, Reno, Lake Tahoe and Laughlin, Nevada; and Atlantic City,
North Kansas City, St. Louis, Joliet, Vicksburg, Shreveport,
Tunica, Cherokee Smoky Mountains, Phoenix Ak-Chin and Prairie Band-
Topeka under the Harrah's brand. Atlantic City, East Chicago and
Las Vegas under the Showboat brand. In Sydney, Australia under the
name Star City. Across all its markets, Harrah's casinos comprise
approximately 1,063,000 sq. ft. of gaming space, 27,100 slot
machines and 1,180 table games; complemented by 9,150 hotel rooms;
and supported by 38,000 parking spaces.
Harrah's is the most recognized name in the casino entertainment
industry. Founded more than 60 years ago, Harrah's is focused on
building loyalty and brand value with its targeted customers
through a unique combination of excellent products and services,
unsurpassed distribution, operational excellence and technology
leadership. Harrah's operates casinos under the Harrah's and
Showboat brand names. The heritage of the Harrah's name is one of
innovation, growth, integrity and customer service in the casino
entertainment industry. Harrah's focuses on the gaming experience
for highly valuable target customers, particularly those who play
in more than one market.
History: Rio
Rio, through its wholly-owned subsidiary, owns and operates the
Rio Hotel and Casino, opened in 1990 as the country's only all-
suite hotel casino, with 424 suites on 30 acres of land. Since
1990, the company has acquired additional land and expanded
pursuant to its master plan and customer demand, to its current
status as the 13th largest hotel in the world. The Rio presently
has over 2,500 suites and 120,000 square feet of gaming space
featuring approximately 2,400 slot machines and 100 table games,
in addition to an 18-hole, championship golf course. Rio has 35
acres of land available for future development. Since its
founding, Rio has maintained a strategy of providing excellence in
service, value to customers, world-class accommodations and
culinary excellence to the Las Vegas market. Recognized for its
commitment to excellence, Rio has won numerous industry awards for
its facilities and service excellence.
For more information, call:
(Investors) Charles L. Atwood,
Vice President and Treasurer or
(Media) Ralph Berry,
Vice President, Communications and Public Affairs,
both of Harrah's,
(901) 762-8600
or visit the Company's website at
http://www.harrahs.com
(Investors and Media) James A. Barrett, Jr.,
President of Rio
(702) 252-7733
or visit the Company's website at
http://www.playrio.com
This document contains certain forward-looking statements
regarding the Company's beliefs, goals, anticipated results, and
expectations which involve risks and uncertainties. The Company's
actual results could differ materially from the results
anticipated in these forward looking statements as a result of
certain of the risk factors set forth in the Company's filings
with the Securities and Exchange Commission including quarterly
reports on Form 10-Q, reports on Form 8-K, and annual reports on
Form 10-K.
SOURCE: Harrah's Entertainment, Inc. and Rio Hotel and Casino,
Inc.
