<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
RIO HOTEL & CASINO, INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- ------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction
applies:______________________________________________________
________________________________________________________________________
(2) Aggregate number of securities to which
transaction applies:__________________________________________
________________________________________________________________________
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state
how it was determined):_________________________________
________________________________________________________________________
<PAGE>
(4) Proposed maximum aggregate value of transaction:
___________________________________________________________________
(5) Total fee paid:
___________________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
(1) Amount Previously Paid:_______________________________________
(2) Form, Schedule or Registration Statement No.:_________________
(3) Filing Party:_________________________________________________
(4) Date Filed:___________________________________________________
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 21, 1998
To the Stockholders of Rio Hotel & Casino, Inc.:
The Annual Meeting of the Stockholders (the "Annual
Meeting") of Rio Hotel & Casino, Inc. (the "Company") will be
held at the Rio Suite Hotel & Casino, 3700 West Flamingo Road,
Las Vegas, Nevada 89103, on Thursday, May 21, 1998 at 10:00 a.m.
local time, for the following purposes:
(1) To elect James A. Barrett, Jr., John A. Stuart
and Peter M. Thomas as directors of the
Company;
(2) To approve and ratify an amendment to the
Company's 1995 Long-Term Incentive Plan to
increase the number of shares of the Company's
common stock authorized for issuance from
2,000,000 shares to 4,000,000 shares;
(3) To approve and ratify the Company's Annual
Performance-Based Incentive Plan; and
(4) To transact such other business as may properly
come before the Annual Meeting and any
adjournments thereof.
Only stockholders of record at the close of business on
April 1, 1998 are entitled to notice of and to vote at the Annual
Meeting. The stock transfer books will not be closed.
Stockholders are cordially invited to attend the Annual
Meeting in person. STOCKHOLDERS DESIRING TO VOTE IN PERSON MUST
REGISTER AT THE ANNUAL MEETING WITH THE INSPECTORS OF ELECTION
PRIOR TO COMMENCEMENT OF THE ANNUAL MEETING. IF YOU WILL NOT BE
ABLE TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE REQUESTED TO
EXECUTE AND DATE THE ENCLOSED FORM OF PROXY AND TO FORWARD IT TO
THE SECRETARY OF THE COMPANY WITHOUT DELAY SO THAT YOUR SHARES
MAY BE REGULARLY VOTED AT THE ANNUAL MEETING.
A copy of the 1997 Annual Report to Stockholders, including
financial statements for the twelve months ended December 31,
1997, is enclosed.
By order of the Board of Directors,
/s/ I. Scott Bogatz
I. Scott Bogatz
Secretary
Dated: April 1, 1998
<PAGE>
RIO HOTEL & CASINO, INC.
PROXY STATEMENT
TABLE OF CONTENTS
PAGE
----
VOTING SECURITIES...............................................3
ELECTION OF DIRECTORS...........................................6
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND EXECUTIVE
OFFICERS...................................................7
Directors..................................................7
Non-Director Executive Officers............................8
Compensation of Non-Employee Directors.....................8
Rio Hotel & Casino, Inc. 1991 Directors' Stock
Option Plan..............................................9
Board of Directors Meetings................................9
Committees of the Board of Directors.......................9
Compensation of Executive Officers........................10
Employment Agreements.....................................13
Report on Executive Compensation..........................14
Compliance with Section 16(a) of the Securities
Exchange Act of 1934....................................15
Stock Performance Chart...................................16
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................17
General...................................................17
Construction and Architectural Services to and
by Affiliates...........................................17
Transactions with and Services Provided by
Related Parties.........................................17
Indemnification of Directors and Officers.................18
Transaction Review........................................18
APPROVAL AND RATIFICATION OF THE AMENDMENT TO THE RIO HOTEL &
CASINO, INC. 1995 LONG-TERM INCENTIVE PLAN...................19
APPROVAL AND RATIFICATION OF THE RIO HOTEL & CASINO, INC. ANNUAL
PERFORMANCE-BASED INCENTIVE PLAN.............................23
INDEPENDENT PUBLIC ACCOUNTANTS.................................24
VOTING PROCEDURES..............................................25
1999 ANNUAL MEETING OF STOCKHOLDERS............................25
OTHER BUSINESS.................................................25
EXHIBIT A: RIO HOTEL & CASINO, INC. ANNUAL PERFORMANCE-BASED
INCENTIVE PLAN...............................................27
2
<PAGE>
RIO HOTEL & CASINO, INC.
3700 West Flamingo Road
Las Vegas, Nevada 89103
___________________________
PROXY STATEMENT
This Proxy Statement is furnished to the stockholders of Rio
Hotel & Casino, Inc. (the "Company") in connection with the
Annual Meeting of Stockholders of the Company (the "Annual
Meeting") to be held at the Rio Suite Hotel & Casino, 3700 West
Flamingo Road, Las Vegas, Nevada on Thursday, May 21, 1998 at
10:00 a.m. local time, and any adjournments thereof, for the
purposes indicated in the Notice of Annual Meeting of
Stockholders.
THE ACCOMPANYING PROXY IS SOLICITED BY THE BOARD OF
DIRECTORS OF THE COMPANY. This Proxy Statement and the
accompanying form of proxy are being mailed to stockholders on or
about April 1, 1998. Any stockholder giving a proxy has the power
to revoke it prospectively by giving written notice to the
Company, addressed to I. Scott Bogatz, Secretary, at the
Company's principal address before the Annual Meeting, by
delivering to the Company a duly executed proxy bearing a later
date, by notifying the Company at the Annual Meeting prior to the
commencement of the Annual Meeting, or by voting in person by
ballot at the Annual Meeting after notifying the inspectors of
election of the stockholder's intention to do so prior to the
commencement of the Annual Meeting. The shares represented by
the enclosed proxy will be voted if the proxy is properly
executed and received by the Company prior to the commencement of
the Annual Meeting, or any adjournment thereof.
None of the proposals to be voted on at the Annual Meeting
create a right of appraisal under Nevada law. A vote "FOR" or
"AGAINST" any of the proposals set forth herein will only affect
the outcome of the proposal.
The expenses of making the solicitation will consist of the
costs of preparing, printing, and mailing the proxies and proxy
statements and the charges and expenses of brokerage houses,
custodians, nominees or fiduciaries for forwarding such documents
to security owners. These are the only contemplated expenses of
solicitation, and they will be paid by the Company.
VOTING SECURITIES
-----------------
The close of business on April 1, 1998 has been fixed by the
Board of Directors of the Company (the "Board of Directors") as
the record date for determination of stockholders entitled to
vote at the Annual Meeting. The securities entitled to vote at
the Annual Meeting consist of shares of common stock, par value
$.01 ("Common Stock"), of the Company, with each share entitling
its owner to one vote. Common Stock is the only outstanding
class of voting securities authorized by the Company's Articles
of Incorporation. The Company's Articles of Incorporation grant
to the Board of Directors the discretion to issue Class II
Preferred Stock, in series, with various rights, preferences and
privileges, including, among others, voting rights. However,
none of the Class II Preferred Stock is presently outstanding.
The 8% Cumulative Convertible Preferred Stock, which is
authorized by the Company's Articles of Incorporation but not
presently outstanding, does not possess general voting rights.
The number of outstanding shares of Common Stock at the
close of business on February 27, 1998 was 24,766,141. The
number of shares outstanding may change between such date and
April 1, 1998 if any currently exercisable options to purchase
the Company's Common Stock are exercised, if the Company
3
<PAGE>
elects to repurchase and cancel any shares in open market or
privately negotiated transactions, or if the Company otherwise
authorizes the issuance or repurchase of any shares. The
stockholders do not possess the right to cumulate their votes for
the election of directors.
The following is a list of the beneficial stock ownership as
of February 27, 1998 of (1) all persons who beneficially owned
more than 5% of the outstanding Common Stock of the Company,
(2) all directors, (3) all executive officers named in the
Summary Compensation Table (see page 11) and (4) all officers and
directors as a group at the close of business on February 27,
1998, according to record-ownership listings as of that date,
according to the Securities and Exchange Commission Forms 3 and 4
and Schedules 13D and 13G, of which the Company has received
copies, and according to verifications as of February 27, 1998,
which the Company solicited and received from each officer and
director:
<TABLE>
<CAPTION>
TITLE OF AMOUNT AND NATURE OF PERCENT OF
CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP<F1>,<F2> CLASS<F2>
----- ---------------- ----------------------------- ---------
<S> <C> <C> <C>
Common Anthony A. Marnell II 5,134,618<F3> 20.7%
4495 S. Polaris Avenue
Las Vegas, Nevada 89103
Common James A. Barrett, Jr. 4,752,899<F4> 19.2%
3700 West Flamingo Road
Las Vegas, Nevada 89103
Common David P. Hanlon 200,000<F5> *
Common John A. Stuart 40,000<F6> *
Common Thomas Y. Hartley 16,000<F7> *
Common Peter M. Thomas 15,000<F8> *
Common I. Scott Bogatz 3,000<F9> *
Common Ronald J. Radcliffe 0<F10> *
Common Chilton Investment Co., Inc. 1,802,899<F11> 7.3%
320 Park Avenue, 22nd Floor
New York, New York 10022
Common Private Capital Management, Inc. 1,678,300<F12> 6.8%
3003 Tamiami Trail North
Naples, Florida 33940
Common The Capital Group Companies, Inc. 1,463,900<F13> 5.9%
333 South Hope Street
Los Angeles, California 90071
Common All executive officers and directors as a group 5,532,706<F14> 22.3%
(8 persons)
*Less than one percent.
4
<PAGE>
<FN>
<F1> Unless otherwise noted, the persons identified in this
table have sole voting and sole investment power with regard to
the shares beneficially owned by them.
<F2> Includes shares issuable upon exercise of options which
are exercisable within 60 days of the stated date.
<F3> Includes options to purchase 488,000 shares issuable to
Mr. Marnell under the Non-Statutory Stock Option Plan (the
"NSOP"). In addition to the options, Mr. Marnell beneficially
owns 4,646,618 shares which are held of record by the Anthony A.
Marnell II, IRA - 15,500 shares, Austi, LLC - 4,628,811, and Mr.
Marnell's spouse and children - 2,307 shares. Austi, LLC is owned
as follows: 24.30% by certain family trusts established for the
benefit of Mr. Marnell's family, 30.93% by the Anthony A. Marnell
II Living Trust, 38.50% by Austi International, Inc. ("Austi
International"), 4.59% by the Barrett Family Trust, and 1.68% by
Barrett, Inc. Messrs. Marnell and Barrett are co-managers of
Austi, LLC.
<F4> Includes options to purchase 103,000 shares issuable to
Mr. Barrett under the NSOP. Of the shares of the Company
currently held by Mr. Barrett, 2,000 shares are held in his
individual retirement account; 6,538 shares are held in certain
of his spouse's and children's accounts; 12,500 shares are held
by Barrett, Inc.; 50 shares are held by the Barrett Family
Revocable Living Trust; and 4,628,811 shares are held by Austi,
LLC. As noted in Note 3, Messrs. Marnell and Barrett are co-
managers of Austi, LLC. Not included are 3,000 shares held in
certain trusts for which Mr. Barrett is sole trustee.
<F5> Mr. Hanlon currently holds options to purchase 500,000
shares issued under the Company's 1995 Long-Term Incentive Plan
(the "Incentive Plan"), of which options to purchase 200,000
shares are currently exercisable.
<F6> Mr. Stuart currently holds options to purchase 38,000
shares issued under the Company's 1991 Directors' Stock Option
Plan (the "Directors' Plan"), of which options to purchase 33,000
shares are currently exercisable.
<F7> Includes options to purchase 18,000 shares issued to
Mr. Hartley under the Directors' Plan, of which options to
purchase 13,000 shares are currently exercisable. The 3,000
shares currently held by Mr. Hartley are held in an individual
retirement account.
<F8> Mr. Thomas currently holds options to purchase 20,000
shares issued under the Directors' Plan, of which options to
purchase 15,000 shares are currently exercisable.
<F9> Mr. Bogatz currently holds options to purchase 15,000
shares issued under the Incentive Plan, of which options to
purchase 3,000 shares are currently exercisable.
<F10> Mr. Radcliffe currently holds options to purchase 20,000
shares issued under the Incentive Plan, of which none are
currently exercisable.
<F11> Chilton Investment Co., Inc. ("Chilton") reported on
Schedule 13D/A (Amendment No. 2), dated February 23, 1998, that
Richard L. Chilton, Jr., as sole stockholder and president of
Chilton, possessed sole voting power and sole dispositive power
with respect to 1,802,899 shares.
<F12> Private Capital Management, Inc. reported on Schedule
13G/A dated February 17, 1998, that it shared dispositive power
with respect to 1,669,300 shares with Bruce S. Sherman. Mr.
Sherman had sole dispositive power with respect to 9,000 shares
and beneficially owned 1,678,300 shares.
<F13> The Capital Group Companies, Inc. reported on Schedule
13G/A (Amendment No. 2), dated February 11, 1998, that it,
through wholly owned subsidiaries, had sole voting power with
respect to 200,000 shares and sole dispositive power with respect
to 1,463,900 shares. Capital Research and Management Company and
Capital Guardian Trust Company, both wholly owned subsidiaries of
The Capital Group Companies, Inc., are the beneficial owners of
1,213,900 shares and 250,000 shares, respectively.
<F14> Includes options to purchase 591,000 shares under the
NSOP, options to purchase 203,000 shares under the Incentive
Plan, and options to purchase 61,000 shares under the Directors'
Plan.
</FN>
</TABLE>
5
<PAGE>
ELECTION OF DIRECTORS
---------------------
The Board of Directors presently consists of six persons.
The Bylaws of the Company provide for a Board of Directors
consisting of one to ten persons who are elected generally for a
term of two years. Directors are to serve until their successors
are elected and have qualified.
The Company's Bylaws were amended by the Board of Directors
on March 20, 1997 to provide for a staggered board of directors.
Directors are divided into two classes, with each class elected
in separate years for two year terms. A staggered board of
directors may have the effect of delaying or preventing a change
of control of the Company.
If the enclosed proxy is duly executed and received in time
for the Annual Meeting and if no contrary specification is made
as provided therein, the proxy will be voted in favor of electing
the nominees James A. Barrett, Jr., John A. Stuart and Peter M.
Thomas for terms of office expiring in 2000. If any such nominee
shall decline or be unable to serve, the proxy will be voted for
such person as shall be designated by the Board of Directors to
replace any such nominee. The Board of Directors presently has
no knowledge or reason to believe that any of the nominees will
refuse or be unable to serve. Any vacancies on the Board of
Directors which occur during the year will be filled, if at all,
by the Board of Directors through an appointment of an individual
to serve only until the next Annual Meeting.
The Company, through a wholly owned subsidiary, Rio
Properties, Inc. ("Rio Properties"), owns and operates the Rio
Suite Hotel & Casino (the "Rio") in Las Vegas, Nevada. The
Company and each director who has been required by the Nevada
State Gaming Control Board and the Nevada Gaming Commission
(collectively the "Nevada Gaming Authorities") to be "found
suitable," and each controlling person have been "found suitable"
by the Nevada Gaming Authorities. Future new members of the
Board of Directors, if any, may be required to be found suitable
in the discretion of the Nevada Gaming Authorities. Should any
such new director not be found suitable or should any director
later be found not to be suitable by the Nevada Gaming
Authorities, that person will not be eligible to continue serving
on the Board of Directors and a majority of the remaining
directors may appoint a qualified replacement to serve as a
director until the next Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE ELECTION
OF MESSRS. BARRETT, STUART AND THOMAS TO THE BOARD OF DIRECTORS
6
<PAGE>
INFORMATION CONCERNING THE BOARD
--------------------------------
OF DIRECTORS AND EXECUTIVE OFFICERS
-----------------------------------
The following information is furnished with respect to each
member of the Board of Directors and the Company's executive
officers who are not directors. There are no family
relationships between or among any directors or executive
officers of the Company.
DIRECTORS
<TABLE>
<CAPTION>
NAME AGE DIRECTOR POSITION
---- --- SINCE --------
-----
<S> <C> <C> <C>
Anthony A. Marnell II 48 1986 Chairman of the Board and Chief
(Term expiring 1999) Executive Officer
James A. Barrett, Jr. 46 1986 President and Director
(Nominee for term expiring in 2000)
David P. Hanlon 53 1996 Executive Vice President, Chief
(Term expiring 1999) Operating Officer and Director
John A. Stuart 47 1989 Director
(Nominee for term expiring in 2000)
Thomas Y. Hartley 64 1990 Director
(Term expiring 1999)
Peter M. Thomas 48 1995 Director
(Nominee for term expiring in 2000)
</TABLE>
ANTHONY A. MARNELL II has been Chairman of the Board of the
Company and its subsidiaries since 1986 and Chief Executive
Officer since 1990. Since 1982, Mr. Marnell has been controlling
stockholder of Austi International and Marnell Corrao Associates,
Inc. ("Marnell Corrao"), a leading hotel-casino general
contractor, and President and controlling stockholder of Anthony
A. Marnell II, Chtd. ("Marnell Chartered"), an architectural
firm, each of which is based in Las Vegas, Nevada. Mr. Marnell
is a licensed architect and is a director of Marnell Corrao,
Marnell Chartered and Focus 2000.
JAMES A. BARRETT, JR. is President of the Company and a
director of the Company and each of its subsidiaries.
Mr. Barrett has been President of the Company since July 1986.
From October 1990 to October 1996, Mr. Barrett was Chief
Operating Officer of the Company. Since August 1989, Mr. Barrett
has been a director of Austi International and Marnell Corrao.
Mr. Barrett has been a certified public accountant since 1975.
DAVID P. HANLON has been Executive Vice President, Chief
Operating Officer and a director of the Company, and President
and Chief Operating Officer of Rio Properties, since October
1996. From December 1994 until February 1996, Mr. Hanlon was
President, Chief Executive Officer and a director of
International Game Technology, Reno, Nevada. From October 1993
until December 1994, Mr. Hanlon was a consultant to Hospitality
Franchise Systems, Inc., Parsipany, New Jersey. From November
1988 until October 1993, Mr. Hanlon was President and Chief
Executive Officer of Resorts International, Inc., Atlantic City,
New Jersey.
7
<PAGE>
JOHN A. STUART has been a member of the Board of Directors
of the Company since 1989. Since June 1997, Mr. Stuart has been
President of Talbot of Nevada/John Stuart & Company, Inc., a
wholly owned subsidiary of Talbot Insurance & Financial Services,
Inc. From February 1991 to June 1997, Mr. Stuart served as the
President of John Stuart & Company, Inc., a firm specializing
in employee benefits, consulting and insurance brokerage. Prior
thereto, Mr. Stuart was the President of Insurance Services
Corporation of Nevada, Inc., a full service insurance brokerage
firm also located in Las Vegas, Nevada.
THOMAS Y. HARTLEY has been a member of the Board of
Directors since 1990. Since April 1991, Mr. Hartley has served
as President and Chief Operating Officer of Colbert Golf Design
and Development, a Las Vegas-based golf course design and
development company. From September 1988 to April 1991,
Mr. Hartley served as President and Chief Operating Officer of
Jim Colbert Golf, Inc., a Las Vegas-based golf course development
and management company. Prior to 1988, Mr. Hartley was area
managing partner for the Las Vegas, Phoenix, Tucson, and Reno
offices of Deloitte, Haskins & Sells, now known as Deloitte &
Touche, an international certified public accounting firm.
Mr. Hartley has been a member of the Boards of Directors of
Southwest Gas Corporation, Las Vegas, Nevada, since March 1991;
Sierra Health Services, Inc., Las Vegas, Nevada, since June 1992;
and of AmeriTrade Holding Corporation, Omaha, Nebraska, since
November 1996.
PETER M. THOMAS has been a member of the Board of Directors
of the Company since 1995. Mr. Thomas served as President and
Chief Operating Officer of Bank of America, Nevada from March
1992 until May 1995. Since May 1995, Mr. Thomas has been
Managing Director of the Thomas and Mack Company, a family owned
commercial real estate management and development company.
Mr. Thomas received his law degree in 1975 and is currently a
member of the Nevada, Utah and District of Columbia Bar
Associations.
NON-DIRECTOR EXECUTIVE OFFICERS
RONALD J. RADCLIFFE, age 54, has been Vice President,
Treasurer and Chief Financial Officer of the Company and Rio
Properties since May 1996. From August 1995 to May 1996,
Mr. Radcliffe was self-employed as an independent accounting
consultant. Mr. Radcliffe served as Vice President, Treasurer
and Chief Financial Officer of Mikohn Gaming Corporation from
October 1993 to August 1995. Mr. Radcliffe served as Executive
Vice President, Chief Financial Officer, Secretary/Treasurer and
member of the Board of Directors of several predecessor companies
to Santa Fe Gaming Corporation from September 1977 to September
1993. He is a certified public accountant licensed in Nevada and
California.
I. SCOTT BOGATZ, age 34, has been Vice President, Secretary
and General Counsel of the Company and Rio Properties since
August 1996. From August 1990 until August 1996, Mr. Bogatz was
initially an associate attorney and later a shareholder with the
law firm of Hale, Lane, Peek, Dennison, Howard, Anderson & Pearl,
Las Vegas, Nevada. Mr. Bogatz has been licensed as an attorney
by the State Bar of Nevada since September 1988.
The Company's Bylaws, as amended, currently provide for a
staggered board of directors divided into two classes: Class A
consisting of three directors and Class B consisting of three
directors. Each director serves two-year terms. Executive
officers serve at the pleasure of the Board of Directors.
COMPENSATION OF NON-EMPLOYEE DIRECTORS
Directors' fees were $3,000 per month for 1997 and are
$3,300 per month for 1998, and are paid to directors who are not
employees of the Company. The non-employee directors have been
granted
8
<PAGE>
options to purchase Common Stock under the Directors' Plan.
Directors who are employees of the Company or its subsidiaries do
not receive compensation for their services as directors.
RIO HOTEL & CASINO, INC. 1991 DIRECTORS' STOCK OPTION PLAN
The Directors' Plan authorizes in the aggregate options to
purchase up to 200,000 shares of Common Stock to be granted to
members of the Board of Directors who are not employed as regular
salaried officers or employees of the Company (i.e., non-employee
directors). The purpose of the Directors' Plan is to encourage
non-employee directors to take a long-term view of the affairs of
the Company, to attract and retain non-employee directors, and to
aid in rewarding non-employee directors for their services to the
Company.
The Directors' Plan is administered by a committee (the
"Directors' Plan Committee") of not less than two directors of
the Company selected by, and serving at the pleasure of, the
Board of Directors. Anthony A. Marnell II and James A. Barrett,
Jr. currently serve on the Directors' Plan Committee.
Messrs. Marnell and Barrett are not eligible to participate in
the Directors' Plan due to their status as employees of the
Company. The Directors' Plan Committee, unless permitted by
holders of the majority of outstanding Common Stock, does not
have any discretion to determine or vary any matters which are
fixed under the terms of the Directors' Plan, including, without
limitation, which individuals will receive option awards, the
number of shares of the Company's Common Stock subject to each
such option award, the exercise price of Common Stock covered by
an option, or the means of payment which may be used in
connection with the exercise of an option.
Upon election to the Board of Directors by stockholders of
the Company, an eligible director receives an initial option
grant to purchase 20,000 shares of Common Stock. Thereafter, on
the first business day after January 1 of each year, each
eligible director receives an annual option grant to purchase
5,000 shares of Common Stock.
The exercise price of options granted under the Directors'
Plan is 100% of the fair market value of the Common Stock on the
date of grant. The options may not be exercised until six months
and one day after the date of the grant. All options granted
under the Directors' Plan are non-qualified options, the tax
treatment of which is determined under Section 422 of the
Internal Revenue Code of 1986, as amended.
In 1997, options were granted for directors Hartley, Stuart
and Thomas to each purchase 5,000 shares of Common Stock. On
January 2, 1998, options to purchase 5,000 shares were
automatically granted to each of the same persons. As of
February 27, 1998, options representing 76,000 shares were
outstanding, of which options representing 61,000 shares were
exercisable. Options for the remaining 15,000 shares may not be
exercised until July 3, 1998.
BOARD OF DIRECTORS MEETINGS
The Board of Directors generally meets monthly, and in the
twelve months ended December 31, 1997, the Board of Directors
held ten meetings. All directors attended at least 75% of the
meetings held.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has five standing committees: the
Audit Committee, the Compensation Committee, the Directors' Plan
Committee, the Incentive Plan Committee and the Performance Plan
Committee.
9
<PAGE>
The Audit Committee met ten times during the twelve months
ended December 31, 1997. The Audit Committee's function is to
review reports of certified public accountants to the Company; to
review Company financial practices, internal controls and
policies with officers and key employees; to review such matters
with the Company's auditors to determine scope of compliance with
any deficiencies; to consider selection of independent public
accountants; to review related party transactions; and to make
periodic reports on such matters to the Board of Directors. The
members of the Audit Committee are John A. Stuart, Thomas Y.
Hartley and Peter M. Thomas.
The Compensation Committee met four times during the twelve
months ended December 31, 1997. The Compensation Committee's
function is to review and make recommendations to the Board of
Directors with respect to the salaries and bonuses of the
Company's executive officers. The members of the Compensation
Committee are John A. Stuart, Thomas Y. Hartley and Peter M.
Thomas.
The Directors' Plan Committee held one meeting and took one
action by written consent during the twelve months ended
December 31, 1997. The Directors' Plan Committee administers the
Directors' Plan. The members of the Directors' Plan Committee
are Anthony A. Marnell II and James A. Barrett, Jr.
The Incentive Plan Committee met ten times during the twelve
months ended December 31, 1997. The Incentive Plan Committee is
comprised of John A. Stuart, Thomas Y. Hartley and Peter M.
Thomas, and its function is to administer the Company's Incentive
Plan and the NSOP, including determining such matters as the
persons to whom awards shall be granted, the number of shares to
be awarded, when the awards shall be granted, when the awards
shall vest, and the terms and provisions of the instruments
evidencing the awards under both plans. The Incentive Plan
Committee reports to the Company's Board of Directors regarding
all decisions concerning awards granted to Incentive Plan and
NSOP participants.
The Performance Plan Committee, appointed by the Board of
Directors in March 1998, consists of John A. Stuart and Thomas Y.
Hartley. In March 1998, the Performance Plan Committee adopted
the Rio Hotel & Casino, Inc. Annual Performance-Based Incentive
Plan (the "Performance Plan"). Upon approval of the Performance
Plan by stockholders, see "Approval and Ratification of the Rio
Hotel & Casino, Inc Annual Performance-Based Incentive Plan," the
Performance Plan Committee shall have full power and authority to
administer and interpret the Performance Plan.
COMPENSATION OF EXECUTIVE OFFICERS
The following tables set forth compensation received by
Anthony A. Marnell II, the Company's Chief Executive Officer, and
other executive officers of the Company whose total compensation
for the year ended December 31, 1997, exceeded $100,000.
10
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation awarded to,
earned by or paid to, the Company's chief executive officer and
its four other most highly-compensated executive officers for
services rendered in all capacities during its fiscal years ended
December 31, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
========================================================================================================================
Annual Compensation Long Term Compensation
--------------------------------------- ----------------------------------
Awards Payouts
----------------------- ---------
Other Securities
Annual Restricted Under- All Other
Compen- Stock lying LTIP Compen-
Name and Principal Year Salary Bonus sation Award(s) Options/ Payouts sation
Position ($) ($) ($)<F1> ($) SARs (#)<F2> ($) ($)
- ------------------ ---- ------- ----------- ------- ---------- ------------ ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
Anthony A. Marnell II, 1997 843,268 349,775<F3> -0- -0- 500,000 -0- -0-
Chairman of the Board and
Chief Executive Officer 1996 587,116 250,000 -0- -0- -0- -0- -0-
1995 464,522 112,500 -0- -0- -0- -0- -0-
- ------------------------------------------------------------------------------------------------------------------------
James A. Barrett, Jr., 1997 592,259 246,900<F3> -0- -0- 500,000 -0- 2,375<F4>
President
1996 311,298 150,000 -0- -0- -0- -0- 2,375<F4>
1995 256,845 62,500 -0- -0- -0- -0- 2,310<F4>
- ------------------------------------------------------------------------------------------------------------------------
David P. Hanlon,<F5> 1997 811,570 329,200<F3> -0- -0- -0- -0- 16,630<F6>
Executive Vice President
and Chief Operating 1996 118,447 -0- -0- -0- 500,000 -0- -0-
Officer
1995 -0- -0- -0- -0- -0- -0- -0-
- ------------------------------------------------------------------------------------------------------------------------
Ronald J. Radcliffe,<F7> 1997 224,916 50,000<F3> -0- -0- -0- -0- 2,375<F4>
Vice President, Treasurer
and Chief Financial 1996 108,490 20,000 -0- -0- 25,000 -0- 27,000<F8>
Officer
1995 -0- -0- -0- -0- -0- -0- -0-
- ------------------------------------------------------------------------------------------------------------------------
I. Scott Bogatz,<F9> 1997 154,707 30,000<F3> -0- -0- -0- -0- 1,192<F4>
Vice President, Secretary
and General Counsel 1996 45,810 3,000 -0- -0- 15,000 -0- -0-
1995 -0- -0- -0- -0- -0- -0- -0-
========================================================================================================================
<FN>
<F1> The Company provides certain perquisites and other personal
benefits to some or all of the executives. The unreimbursed
incremental cost to the Company of providing perquisites and
other personal benefits did not exceed, as to any of the
executives for any year, the lesser of $50,000 or 10% of the
total salary and bonus paid to such executive for such year.<F
<F2> These numbers represent only options granted pursuant to the
Incentive Plan and/or the NSOP; there are no stock appreciation
rights.
<F3> The amounts represent the total bonus earned by the
executive. The executives received a portion of these amounts
and elected to defer payment on the remaining portion.
<F4> These amounts represent the Company's contribution to the
401(k) plan accounts of the executives.
<F5> Mr. Hanlon was appointed Executive Vice President and Chief
Operating Officer of the Company and President and Chief
Operating Officer of Rio Properties on October 8, 1996.
<F6> This amount represents the Company's payment of Mr. Hanlon's
life insurance policy premium.
<F7> Mr. Radcliffe was appointed Vice President, Treasurer and
Chief Financial Officer of the Company on June 25, 1996.
<F8> This amount represents consulting fees paid to Mr. Radcliffe
prior to the date he was hired.
<F9> Mr. Bogatz was appointed Vice President, Secretary and
General Counsel of the Company on August 26, 1996.
</FN>
</TABLE>
11
<PAGE>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding grants
of stock options during the fiscal year ended December 31, 1997
made to the named executive officers under the Company's
Incentive Plan and/or NSOP. There are no stock appreciation
rights.
<TABLE>
<CAPTION>
==============================================================================================================
Potential Realizable Value at
Individual Grants Assumed Annual Rates of Stock
Price Appreciation for Option
Term<F1>
----------------------------------------------------- -----------------------------
Number of
Securities Percent of Total
Underlying Options/SARs
Options/ Granted to Exercise
Name SARs Employees in or Base
---- Granted Fiscal Year<F2> Price Expiration 5% 10%
(#) ($/Share) Date ($) ($)
---------- --------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Anthony A. Marnell II 500,000 34.3% 15.50 07/22/07 4,873,933 12,351,504
- --------------------------------------------------------------------------------------------------------------
James A. Barrett, Jr. 500,000 34.3% 15.50 07/22/07 4,873,933 12,351,504
- --------------------------------------------------------------------------------------------------------------
David P. Hanlon -0- -0- -0- -0- -0- -0-
- --------------------------------------------------------------------------------------------------------------
Ronald J. Radcliffe -0- -0- -0- -0- -0- -0-
- --------------------------------------------------------------------------------------------------------------
I. Scott Bogatz -0- -0- -0- -0- -0- -0-
==============================================================================================================
<FN>
<F1>The amounts shown represent assumed rates of appreciation in
the Company's Common Stock. The actual value, if any, on stock
option exercises will depend on the future performance of the
Company's Common Stock, as well as the option holders' continued
employment through the five-year vesting period. There can be no
assurance that the value, if any, ultimately realized by the
executive will be at or near the values shown above.
<F2> The total number of options granted to employees by the
Company for the year ended December 31, 1997 was 1,457,500
options.
</FN>
</TABLE>
12
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR-END OPTION/SAR VALUES
The following table sets forth information concerning each
exercise of stock options by the Company's named executive
officers during the fiscal year ended December 31, 1997 and the
fiscal year-end value of unexercised stock options. The
information set forth in the table represents only options
granted pursuant to the NSOP and/or the Incentive Plan. There
are no stock appreciate rights.
<TABLE>
<CAPTION>
============================================================================================================
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options/SARs
Options/SARs at Fiscal Year- at Fiscal Year-End ($)<F1>
Shares Value End(#)
Acquired on Realized ---------------------------- ---------------------------
Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ -------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Anthony A. Marnell II 50,000 543,950<F2> 488,000 602,000 4,122,000 3,465,500
- ------------------------------------------------------------------------------------------------------------
James A. Barrett, Jr. 65,000 658,950<F2> 103,000 517,000 1,053,000 2,878,250
- ------------------------------------------------------------------------------------------------------------
David P. Hanlon -0- -0- 200,000 300,000 1,100,000 1,650,000
- ------------------------------------------------------------------------------------------------------------
Ronald J. Radcliffe -0- -0- 5,000 20,000 27,500 110,000
- ------------------------------------------------------------------------------------------------------------
I. Scott Bogatz -0- -0- 3,000 12,000 16,500 66,000
============================================================================================================
<FN>
<F1> Based on a closing bid price of $21.00 on December 31, 1997,
the last trading day in 1997, minus the exercise price of in-the-
money options.
<F2> Based on the market value of the underlying securities at
time of sale minus the exercise price of the options.
</FN>
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements (the
"Agreements") with David P. Hanlon, Ronald J. Radcliffe and I.
Scott Bogatz (collectively, the "Employees"). Mr. Hanlon's
Agreement is for a five-year term commencing on October 8, 1996
and the other Agreements are for three-year terms commencing on
January 1, 1997. The Agreements are thereafter renewed, unless
terminated, on an annual basis. The Agreements provide for
severance benefits if the Employee is terminated by the Company,
other than for Cause (as defined in the Agreements), or upon the
occurrence of a Change of Control (as defined in the Agreements).
Under the Agreements, the Employees are paid a Base Salary (as
defined in the Agreements) and a performance bonus calculated
according to the terms of a management incentive compensation
plan to be approved by the Compensation Committee of the Board of
Directors and ratified by the Board of Directors.
Mr. Hanlon's Agreement provides that, in the event he is
terminated by the Company other than for Cause, he will receive
200% of his Base Salary for the remaining term of the Agreement;
provided that the actual amount received by Mr. Hanlon will be no
less than $1 million and no more than $2 million. The Agreements
for Messrs. Radcliffe and Bogatz provide that, in the event they
are terminated by the Company other than for Cause, they will
receive an amount equal to one year of Base Salary. In the event
of a Change of Control, Mr. Hanlon's Agreement provides that he
will be entitled to a lump sum payment equal to 200% of the Base
Salary due him over the remaining term of the Agreement; provided
that the amount payable will be no less than an amount equal to
200% of Base Salary payments for a period of 12
13
<PAGE>
months. The Agreements for Messrs. Radcliffe and Bogatz provide
that, in the event of a Change of Control, they will be entitled
to a lump sum payment equal to Base Salary for the remaining term
of the Agreement; provided that the actual amount received shall
be no less than $300,000 for Mr. Radcliffe and $200,000 for Mr.
Bogatz.
Certain provisions of the Agreements could have the effect
of delaying or preventing a Change of Control of the Company.
Based upon the compensation levels as of February 27, 1998,
assuming a Change in Control of the Company, Messrs. Hanlon,
Radcliffe and Bogatz would be entitled to receive a maximum lump
sum payment of $5,766,667, $440,000 and $311,666, respectively,
under the Agreements.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF
THE COMPANY'S PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
THAT MIGHT INCORPORATE FUTURE FILINGS, INCLUDING THIS PROXY
STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING COMPENSATION
COMMITTEE AND INCENTIVE PLAN COMMITTEE REPORT ON EXECUTIVE
COMPENSATION AND THE STOCK PERFORMANCE CHART ON PAGE 16 SHALL NOT
BE INCORPORATED BY REFERENCE INTO ANY SUCH FILINGS.
REPORT ON EXECUTIVE COMPENSATION
The Compensation, Incentive Plan and Performance Plan
Committees' philosophy regarding executive compensation
incorporates the following themes:
* Compensation should be competitive within the
industry.
* Compensation should provide incentives to
management to increase stockholder value.
* The level of compensation should be directly
linked to the level of performance by the Company.
* The level of compensation should be reflective of
the contribution made by the executive officer
toward the achievement of the Company's goals.
* Certain long-term incentives should be included in
a compensation package to encourage executive
officers to remain with the Company.
Executive compensation is evaluated at least annually.
Similar methodology is followed by both the Compensation and
Incentive Plan Committees in arriving at recommendations for
executive compensation. Existing compensation levels are
reviewed annually and compared with compensation levels of
executives in similar capacities with other publicly-held gaming
companies. The Company's current financial position and
performance for the past year is reviewed, including growth in
revenues, operating cash flow generated, and earnings per share.
In addition, plans for performance for the upcoming year and
future periods are reviewed as to revenue growth and earnings.
An evaluation is made as to the degree that the executive,
including the Chief Executive Officer, contributes to the
achievement of the Company's results and other Company goals.
Annual salary recommendations are made to insure that the
salaries paid to the Company's executive officers are competitive
within the gaming industry. Annual bonus recommendations are
made to provide a financial reward for individual achievement
above Company-wide goals. Long-term incentives are provided
through participation in the Incentive Plan. This allows the
executive officer to have the opportunity to receive
compensation, the amount of which is directly linked to the
appreciation of the Company's Common Stock. This component of
the executive compensation package is designed to promote a
commitment to the Company beyond the short-term.
14
<PAGE>
The Compensation Committee retained an independent
consultant to review and to provide recommendations concerning
both the form and amount of compensation to be paid in 1997 and
thereafter. Based on the findings of the independent consultant,
the Compensation Committee established the Chief Executive
Officer's annual salary at $850,000 and that his annual bonus
would be determined pursuant to a formula based on EBITDA
results. For the year ended 1997, the EBITDA calculation
resulted in an annual bonus of $349,775. The independent
consultant also recommended that he be granted the option to
purchase 500,000 shares of the Company's Common Stock at an
exercise price of $15.50 per share to vest over a five-year
period commencing on July 22, 1998.
The Compensation Committee reviewed compensation information
from the public filings of other companies in the gaming
industry. Based on the meeting with and the recommendation from
its independent consultant and the Compensation Committee's
review of available information regarding other companies in the
gaming industry, the Compensation Committee believes that
compensation received by the Company's executive officers in 1997
was appropriate. Section 162(m) of the Internal Revenue Code, as
amended, generally disallows a tax deduction to public companies
for compensation over $1 million paid to the Company's Chief
Executive Officer and four other most highly compensated
executive officers. Qualifying performance-based compensation
will not be subject to the deduction limitation if certain
requirements are met. The Compensation and Performance Plan
Committees' current policy is to structure the performance-based
portion of the compensation of its executive officers in a manner
that complies with the statute whenever, in the judgment of the
Performance Plan Committee, to do so would be consistent with the
objectives of the compensation plan under which the compensation
would be payable. For information concerning the adoption by the
Performance Plan Committee and the Board of Directors of a
performance-based bonus plan which is being submitted to
stockholders for approval at the Annual Meeting and which is
intended to make the bonuses awarded pursuant thereto fully
deductible under Section 162(m), see "Approval and Ratification
of the Rio Hotel & Casino, Inc. Annual Performance-Based
Incentive Plan."
COMPENSATION AND INCENTIVE PLAN COMMITTEES John A. Stuart
Thomas Y. Hartley
Peter M. Thomas
PERFORMANCE PLAN COMMITTEE John A. Stuart
Thomas Y. Hartley
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF
1934
Section 16(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), requires the Company's reporting
directors and executive officers, and persons who own more than
ten percent of a registered class of the Company's equity
securities, to file initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities
of the Company with the Securities and Exchange Commission (the
"SEC"). Officers, directors and stockholders holding more than
10% of the class of stock are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on review of the
copies of such reports furnished to the Company and written
representations that no other reports were required, during the
fiscal year ended December 31, 1997, all reports required under
Section 16(a) were filed as required.
15
<PAGE>
STOCK PERFORMANCE CHART
In order to provide a representative comparison of the
Company's stock performance, the following chart compares the
cumulative stockholder return on the Company's Common Stock for
the last five years with the cumulative return on the Standard &
Poor's 500 Composite Index and an industry peer group index
(based upon companies which are traded on a listed exchange with
the same four-digit standard industrial code ("SIC") as the
Company (SIC 7990 - Miscellaneous Amusement & Recreation
Services)). (F1) The following chart assumes $100 invested
December 31, 1992 in each of the above groups. The total return
assumes the reinvestment of dividends.
- ---------------------------
(F1) The Company has traditionally used the following companies
in its peer group: Alliance Gaming Corporation, Argosy Gaming
Corporation, Aztar Corporation, Bally Entertainment Corporation,
Black Hawk Gaming & Development Company Inc., Boomtown Inc.,
Capital Gaming International Inc., Casino America Inc., Casino
Magic Corporation, Circus Circus Enterprises Inc., Full House
Resorts Inc., Grand Casinos Inc., Griffin Gaming & Entertainment,
Harrah's Entertainment, Inc., Hollywood Casino Corp., ITT
Corporation, Jackpot Enterprises Inc., Lady Luck Gaming
Corporation, LS Capital Corporation, Mirage Resorts Inc., Monarch
Casino & Resort, Inc., MTR Gaming Group, Inc., President Casinos
Inc., Santa Fe Gaming Corporation, Sands Regent, Showboat Inc.,
and Station Casinos Inc. Although no companies were added to the
peer group from the group presented in the Company's proxy
statement from last year, Bally Entertainment Corporation,
Boomtown, Inc. and Griffin Gaming & Entertainment were acquired
in 1996 and, therefore, have been eliminated from 1997.
[ORIGINAL CONTAINS A LINE GRAPH STOCK PERFORMANCE CHART
BASED ON THE FOLLOWING INFORMATION]
16
<PAGE>
<TABLE>
<CAPTION>
====================================================================================
1992 1993 1994 1995 1996 1997
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Rio Hotel & Casino, Inc. 100.00 158.02 119.75 117.28 146.91 207.41
- ------------------------------------------------------------------------------------
S&P 500 Composite Index 100.00 110.08 111.53 153.45 188.68 251.63
- ------------------------------------------------------------------------------------
Peer Group 100.00 151.07 100.31 125.68 124.07 148.79
====================================================================================
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
GENERAL
Anthony A. Marnell II, Chairman of the Board, Chief
Executive Officer, and largest stockholder of the Company, is the
controlling stockholder and Chief Executive Officer of Marnell
Chartered, Austi International and Marnell Corrao, and is co-
manager of Austi, LLC, a Nevada limited liability company.
James A. Barrett, Jr., President and a director of the Company,
is co-manager of Austi, LLC, and is a director of Austi
International and Marnell Corrao.
CONSTRUCTION AND ARCHITECTURAL SERVICES TO AND BY AFFILIATES
Marnell Chartered, Austi International and Marnell Corrao
have provided design and construction services for various Rio
construction and expansion projects. The design and construction
contracts for the Phase V Expansion were for a total of $192.3
million and the contract for completion of the Rio Secco Golf
Club was for approximately $13.2 million. In the year ended
December 31, 1997, the Company paid a total of $64.7 million in
connection with these architectural and construction contracts.
The Company has entered into additional agreements with these
affiliates for the expansion of the Rio pursuant to the New Rio
Master Plan for an estimated cost of $158.7 million.
TRANSACTIONS WITH AND SERVICES PROVIDED BY RELATED PARTIES
In 1994, prior to the time Peter M. Thomas joined the Board
of Directors, the Company entered into a five year land lease
with an entity in which Mr. Thomas possesses a less than ten
percent ownership interest. The Company has constructed two
billboards on the leased land. Payments made under the lease for
the year ended December 31, 1997 were approximately $166,000.
In 1996, the Company entered into a two year agreement with
entities in which John A. Stuart, a director of the Company, was
a principal stockholder and executive officer. These entities
were acquired in 1997 by a non-affiliated third party, and Mr.
Stuart is now a non-owner employee. These entities earned
commissions totaling $188,000 for the year ended December 31,
1997 arising out of the acquisition and administration of various
insurance coverages by the Company.
In October, 1997, the Company entered into a lease with
entities controlled by Messrs. Marnell and Barrett for certain
warehouse space with such lease including an option to purchase
the warehouse. The Company paid this entity $57,200 in the year
ended December 31, 1997.
In May 1995, the Company repurchased from Marnell Corrao
approximately one-half of a 125-acre property located on Boulder
Highway southeast of Las Vegas (the "Old Vegas Site") for $5.3
million. The purchase price equaled Marnell Corrao's costs plus
defined holding costs and was significantly below
17
<PAGE>
the independent appraisal valuation. The Company retained a
right of first refusal to purchase the other half of the Old
Vegas Site from Marnell Corrao and amended a pre-existing
agreement with Marnell Corrao to provide for a 50% participation
in the event of a subsequent sale by Marnell Corrao of the
remaining half of the site. The Old Vegas Site is currently
being held for sale.
An affiliate of Mr. Marnell rents a building located on the
Las Vegas Strip to the Company which is utilized as a station for
transporting customers by bus to and from the Rio. In addition,
this affiliate provided real estate brokerage and administration
services to the Company in connection with the purchase of 38
acres adjacent to the Rio. Rent and fees paid to this affiliate,
including the reimbursement of expenses, were $0.9 million for
the year ended December 31, 1997. Expense reimbursements were
reimbursed at the affiliate's cost, and real estate brokerage
commissions are believed to be on terms at least as favorable as
would have been obtained from non-affiliated parties.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 78.751 of Chapter 78 of the Nevada Revised Statutes,
Article XII of the Company's Articles of Incorporation and
Article XIII of the Company's Bylaws contain provisions for
indemnification of officers, directors, employees and agents of
the Company. The Articles of Incorporation provision requires
the Company to indemnify such persons to the full extent
permitted by Nevada Law. Each person will be indemnified in any
proceeding if he acted in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best
interest of the Company. Indemnification would cover expenses,
including attorneys' fees, judgments, fines and amounts paid in
settlement.
The Company's Articles of Incorporation also provide that
the Board of Directors may cause the Company to purchase and
maintain insurance on behalf of any present or past director or
officer insuring against any liability asserted against such
person incurred in the capacity of director or officer or arising
out of such status, whether or not the corporation would have the
power to indemnify such person. The Company presently has
directors' and officers' liability insurance in effect.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons
controlling the Company pursuant to the foregoing provisions, the
Company has been informed that in the opinion of the SEC such
indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
TRANSACTION REVIEW
The Company believes that the transactions described above
are on terms at least as favorable as would have been obtainable
from non-related parties. The Company requires that the Audit
Committee of the Board of Directors review related party
transactions.
18
<PAGE>
APPROVAL AND RATIFICATION OF AMENDMENT TO THE RIO HOTEL & CASINO,
- -----------------------------------------------------------------
INC. 1995 LONG-TERM INCENTIVE PLAN
----------------------------------
INTRODUCTION
In the opinion of the Board of Directors, the Company and
its stockholders have benefited substantially from the grant of
stock options to certain officers, employees, and third parties.
Such options and rights, in the opinion of the Board of
Directors, have secured the benefits of the incentive resulting
from stock appreciation by such officers and employees who are
largely responsible for the Company's growth and success. In
1995, the Board of Directors and stockholders of the Company
adopted the Incentive Plan. The Incentive Plan, as adopted,
authorized the grant of options for 2,000,000 shares of the
Company's Common Stock. As of February 27, 1998, options to
purchase only 13,000 shares are available under the Incentive
Plan.
In view of the limited number of shares available for grant
under the Incentive Plan, the Board adopted on February 25, 1998,
subject to stockholder approval, an amendment to the Incentive
Plan, which adds 2,000,000 shares of Common Stock to the
authorized number of shares available under the Incentive Plan
for a total of 4,000,000 shares. The Board believed it advisable
to make these shares available for the purpose of granting
further stock options to officers, employees and third parties
who have been or are optionees, consistent with their present
responsibilities, and to other employees who assume or who, as a
result of promotion, will assume new and important
responsibilities. The following summary of the principal
features of the Incentive Plan is not intended to be complete and
is qualified in its entirety by reference to the Incentive Plan.
A copy of the Incentive Plan may be obtained from the Company
upon the written request of any stockholder received by the
Company before the upcoming Annual Meeting.
PURPOSE
The Incentive Plan is intended to promote the interests of
the Company and its subsidiaries by offering those executive
officers, employees, and third parties of the Company who are
primarily responsible for the management, growth, and success of
the business of the Company, the opportunity to participate in a
long-term incentive plan designed to reward them for their
services and to encourage them to continue in the employ of, or
to provide services to, the Company.
Options and restricted stock are intended to be granted
primarily to those persons who possess the capacity to contribute
significantly to the successful performance of the Company.
Because persons to whom grants of options and restricted stock
awards are to be made are to be determined from time to time by
the Incentive Plan Committee, in its discretion, it is impossible
at this time to indicate the precise number, names, or positions
of persons who will receive options or restricted stock awards or
the number of shares for which options or restricted stock awards
will be granted to any such employee or consultant.
ADMINISTRATION
The Incentive Plan is administered by the Incentive Plan
Committee consisting of not less than two non-employee directors
of the Company selected by, and serving at, the pleasure of the
Company's Board of Directors. Directors who are also employees
of the Company or any of its subsidiaries, or who have been such
employees within one year, may not serve on the Incentive Plan
Committee. Based upon the recommendations from the Company and
its operating subsidiaries, the Incentive Plan Committee
determines the persons to whom awards shall be granted
("Participants"), the number of shares to be awarded, when the
awards shall be granted, when the awards shall vest, and the
terms and provisions of the
19
<PAGE>
instruments evidencing the awards. The Incentive Plan Committee
also interprets the Incentive Plan and makes recommendations for
its administration.
ELIGIBILIITY
Only persons who are employees, outside consultants,
officers or employee-directors of the Company or its operating
subsidiaries are eligible for selection as Participants in the
Incentive Plan. Any person holding an option granted under the
Incentive Plan is an "Optionee."
OPTION PRICE AND OPTION TERM
Options granted under the Incentive Plan will have an
exercise price equal to at least the last reported sale price of
the Common Stock on the New York Stock Exchange, or such other
stock exchange on which the Common Stock may be listed from time
to time, on the date of grant. Options may be exercised by
payment of the option price in full (i) in cash, (ii) in Common
Stock, including Common Stock underlying the option being
exercised, having a fair market value equal to such option price,
or (iii) a combination of cash and Common Stock, including the
Common Stock underlying the option being exercised.
Unless otherwise provided in the instrument of grant for
special circumstances, an option may be exercised no earlier than
six months and one day from the date of grant. Although an
option may not be transferred or assigned other than by will or
the laws of descent and distribution, a non-statutory option may,
under certain circumstances, be transferred to specified members
of the Optionee's immediate family, trusts solely for the benefit
of the Optionee and said members of the Optionee's immediate
family, and entities whose only stakeholders are the Optionee and
said members of the Optionee's immediate family. Except in
special circumstances, each option shall expire on the tenth
anniversary of the date of its grant and shall be exercisable
according to a vesting schedule to be determined by the Incentive
Plan Committee. The Incentive Plan Committee may include in any
option instrument, initially or by amendment at any time, a
provision making any installment exercisable at such earlier
date, if the Incentive Plan Committee deems such provision to be
in the interest of the Company or its subsidiaries, or necessary
to realize the reasonable expectation of the Optionee.
TERMINATION OF OPTION
If an Optionee ceases to be employed by the Company or a
subsidiary, except by reason of death or retirement, the Optionee
must exercise any vested options as vested as of date of
termination within the earlier of either the tenth anniversary
after the date of grant, or three months after the date such
Optionee's employment ends. In the event of termination of
employment due to retirement, all options granted to such
Optionee and exercisable on the date of the Optionee's retirement
shall expire on the earlier of the tenth anniversary after the
date of grant or the date of the second anniversary of such
Optionee's retirement. Any installment not exercisable on the
date of such termination or retirement shall expire and
thenceforth be unexercisable. In the event of termination of
employment due to the death of the Optionee, the option may be
exercised, to the extent of the number of shares that the
Optionee could have exercised on the date of the Optionee's
death, by the Optionee's estate, personal representative, or
beneficiary who acquires the option by will or by the laws of
descent and distribution. Such exercise must be made at any time
prior to the earlier of the tenth anniversary after the date of
grant or the first anniversary of such Optionee's death. On the
earlier of such dates, the option shall terminate.
20
<PAGE>
FEDERAL TAX CONSEQUENCES
Optionees of incentive stock options will not recognize
taxable income as a result of the grant or exercise of such
options. If the Optionee does not dispose of the stock
transferred to the Optionee within two years from the date of the
grant and within one year after the stock is transferred to the
Optionee, then any gain or loss recognized on the disposition of
the stock will be a long-term capital gain or loss equal to the
difference between the amount realized by the Optionee and the
option price. However, the difference between the option
exercise price and the fair market value of the shares on the
option exercise date will be treated as a tax preference item
subject to alternative minimum tax. The Company will not be
entitled to any tax deduction in connection with the grant or
exercise of any incentive stock option. However, if stock
acquired pursuant to an incentive stock option is disposed of
before the holding periods described above expire, then the
excess of fair market value (but not in excess of the sales
proceeds) of such stock on the option exercise date over the
option price will be treated as compensation income to the
Optionee in the year in which such disposition occurs and the
Company will be entitled to a commensurate income tax deduction.
Any difference between the sales proceeds and the fair market
value of the stock on the option exercise date will be treated as
a long-term capital gain or loss if the shares were held more
than one year after the option exercise date.
Except as provided in the next paragraph below, the Optionee
of a non-statutory stock option, upon exercise, must include in
ordinary income subject to federal taxation an amount equal to
the excess of the fair market value of the stock acquired at date
of exercise over the aggregate price paid pursuant to the option
for such stock. Accordingly, the Company may, as a condition to
the exercise of a non-statutory stock option, deduct from
payments otherwise due to the Optionee the amount of taxes to be
withheld by virtue of such exercise or require that the Optionee
pay such withholding to the Company or make other arrangements
satisfactory to the Company regarding the payment of such taxes.
When an officer or director who is subject to Section 16(b)
of the Exchange Act exercises a non-statutory stock option, no
income is recognized for federal income tax purposes at the time
of exercise unless the Optionee makes an appropriate election
within thirty days after the date of exercise, in which case the
rules described in the preceding paragraph would apply. If such
an election is not made, the Optionee will recognize ordinary
income on the date that is six months after the date of the
exercise (generally, the first day that the sale of such shares
not create liability under Section 16(b) of the Exchange Act).
The ordinary income recognized will be the excess, if any, of the
fair market value of the shares on such later date over the
option exercise price, and the Company's tax deduction will also
be deferred until such later date.
The effect of the alternative minimum tax may not be delayed
for six months after exercise of incentive stock options by an
officer or director subject to Section 16 of the Exchange Act.
Optionees should consult their own tax counsel as to the
consequences under federal, state and local tax laws upon the
grant and exercise of the options on the subsequent sale of the
stock.
RESTRICTED SHARE AWARDS
Under the Incentive Plan, the Incentive Plan Committee may
also award Participants restricted shares of Common Stock. Under
the Incentive Plan, all restricted shares will be forfeited to
the Company or the applicable operating subsidiary if a
Participant fails to be continuously employed with the Company or
any of its subsidiaries during the restriction period.
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The restricted shares may not be sold, assigned, bequeathed,
transferred, pledged, hypothecated, or otherwise disposed of by a
Participant during the longer of the restriction period relating
to a restricted share award as determined by the Incentive Plan
Committee, or six months and one day from the date of the
restricted share award.
The Incentive Plan Committee may require a Participant to
enter into an escrow agreement in which the restricted shares are
to remain in the physical custody of the Company. Each
restricted share certificate shall bear a legend referring to
such restrictions.
Notwithstanding the restrictions, a recipient of a
restricted share award will have all the rights of a stockholder
of the Company including the right to vote the restricted shares
and the right to receive all dividends or other distributions
made with respect to the restricted shares.
The Incentive Plan Committee may, in its discretion, remove
the share restrictions in the event a Participant terminates
employment due to death, total and permanent disability,
retirement, or discharge other than discharge for cause.
Moreover, the Incentive Plan Committee may shorten the
restriction period or remove any or all share restrictions if, in
the exercise of its absolute discretion, the Incentive Plan
Committee determines that such action is in the best interest of
the Company and equitable to the Participant.
A Participant may, with the consent of the Incentive Plan
Committee, designate a person or persons to receive, in the event
of death of the Participant, any vested restricted shares to
which the Participant would then be entitled.
CHANGE IN CONTROL OF THE COMPANY
In the event of a change in control, as defined under the
Incentive Plan, all restrictions on restricted shares will lapse
and vesting on all stock options which have not yet vested will
accelerate to the change of control date.
TERM AND AMENDMENT OF PLAN
The Incentive Plan shall expire on January 30, 2005, except
with respect to options and restricted shares outstanding on that
date. The Board of Directors may terminate or amend the
Incentive Plan in any respect, at any time; provided, however,
without the approval of the holders of a majority of the
outstanding Common Stock; the total number of shares that may be
sold, issued, or transferred under the Incentive Plan may not be
increased (except for proportional adjustment for stock dividend
or split, recapitalization, merger, consolidation, spin-off, or
other similar corporate changes); the eligibility requirements
for participation may not be modified; the exercise price of an
option cannot be reduced; and the termination date of the
Incentive Plan may not be extended.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE APPROVAL
AND RATIFICATION OF THE AMENDMENT TO THE RIO HOTEL & CASINO, INC.
1995 LONG-TERM INCENTIVE PLAN.
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APPROVAL AND RATIFICATION OF THE RIO HOTEL & CASINO, INC. ANNUAL
- ----------------------------------------------------------------
PERFORMANCE-BASED INCENTIVE PLAN
--------------------------------
INTRODUCTION
Upon the authorization of the Board of Directors, the
Performance Plan Committee adopted the Rio Hotel & Casino, Inc.
Annual Performance-Based Incentive Plan (the "Performance Plan"),
subject to stockholder approval at the Annual Meeting. The
Performance Plan Committee has approved the Performance Plan for
submission to the stockholders in order to maintain the full
deductibility of compensation paid to covered executive officers.
The following summary is subject to the full statement of the
Performance Plan, as amended, a copy of which is included with
this Proxy Statement as Exhibit A.
PURPOSE
The Performance Plan is an annual bonus plan designed to
provide certain senior executive officers with incentive
compensation based upon the achievement of pre-established
performance goals. The Performance Plan is intended to provide an
incentive for profitable growth and to motivate participating
executive officers toward even higher achievement and operating
results, to tie their goals and interests to those of the Company
and its stockholders and to enable the Company to attract and
retain highly qualified executive officers.
The Performance Plan is designed to comply with Section
162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), which limits the tax deductibility by the Company of
compensation paid to certain executive officers to $1,000,000 per
officer. Compensation paid pursuant to a plan approved by the
stockholders that meets the requirements of Section 162(m) is
exempted from this limitation and is fully deductible.
ELIGIBILITY
The Chief Executive Officer and other executive officers of
the Company who are among the four most highly compensated are
eligible to participate and receive cash bonuses in the
Performance Plan.
ADMINISTRATION
The Performance Plan will be administered by the Performance
Plan Committee. The Performance Plan Committee will approve the
specific executive officers who will participate in the
Performance Plan in a given year prior to, or at the time of, the
establishment of the performance objectives for such year.
Within 90 days of the beginning of each calendar year, the
Performance Plan Committee will approve performance goals
including specific performance objectives and establish
computation formulae or methods for determining each
participant's bonus for that year. The objectives include any
one or more of the following business criteria for the Company as
a whole or any of its subsidiaries or operating units: stock
price; market share; gross revenue; pretax operating income; cash
flow; earnings before interest, taxes, depreciation and
amortization; earnings per share; return on equity; return on
invested capital or assets; return on revenues; cost reductions
and savings; and productivity. In addition, to the extent
consistent with the goal of providing for deductibility of
compensation under the Code, performance goals may include a
participant's attainment of personal objectives with respect to
any of the foregoing performance goals or negotiating
transactions and sales or developing long-term business goals.
At or after the end of each calendar year, the Performance
Plan Committee is required by the terms of the Performance Plan
to certify in writing whether the pre-established performance
goals and objectives
23
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have been satisfied in such year. When establishing performance
goals and approving the achievement of such goals, the
Performance Plan Committee, in its sole discretion, may ignore
extraordinary items, property transactions, changes in accounting
standards and losses or gains arising from discontinued
operations. The actual bonus award for any participant for such
year shall then be determined based upon the pre-established
computation formulae or methods. In no event will any bonus
award for any plan year exceed 100% of the participant's annual
base salary as in effect at the beginning of the plan year. The
Performance Plan Committee has no discretion to increase the
amount of any participant's bonus as so determined, but may
reduce the amount of, or totally eliminate, such bonus if the
Performance Plan Committee determines, in its absolute
discretion, that such a reduction or elimination is appropriate
in order to reflect the participant's performance or
unanticipated factors.
PAYMENT OF BONUSES
Approved bonus awards under the Performance Plan are payable
in cash as soon as practicable after the end of each calendar
year and after the Performance Plan Committee has certified in
writing that the relevant performance goals were achieved.
Awards that are otherwise payable to a participant who is not
employed by the Company as of the last day of the calendar year
will be prorated or eliminated pursuant to rules established by
the Performance Plan Committee in accordance with the Performance
Plan. Each participant will recognize ordinary taxable income
upon receipt of payments under the Performance Plan.
Since the Performance Plan requires performance goals to be
set and participants to be selected for each year, it is not
determinable what benefits, if any, would have been paid to any
executive officer if the Performance Plan had been in effect for
1997.
AMENDMENT OF PLAN
Amendments can be made to the Performance Plan that can
increase the cost of the plan to the Company and can alter the
allocation of benefits among participating executive officers.
However, no such amendment that is inconsistent with its purpose
or with its compliance with applicable law and the requirements
of Section 162(m) will be made without stockholder approval.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE APPROVAL
AND RATIFICATION OF THE RIO HOTEL & CASINO, INC. ANNUAL
PERFORMANCE-BASED INCENTIVE PLAN.
INDEPENDENT PUBLIC ACCOUNTANTS
------------------------------
The Company's independent accountants are Arthur Andersen
LLP. Arthur Andersen LLP has audited the Company's financial
statements since 1988, and is expected to have a representative
present at the Annual Meeting who will have the opportunity to
make a statement if such representative desires to do so and is
expected to be available to respond to appropriate questions.
The Company has not yet formally engaged an accountant to
audit the Company's financial statements for the year ended
December 31, 1998.
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VOTING PROCEDURES
-----------------
A majority of a quorum of stockholders present in person or
represented by proxy voting "FOR" the election of the nominees to
the Board of Directors is sufficient to approve the matters being
voted on at the meeting. A quorum of stockholders exists when a
majority of the stock issued and outstanding and entitled to vote
at a meeting is present, in person or represented by proxy, at
the meeting. Abstentions are effectively treated as votes
"AGAINST" the election of the nominees to the Board of Directors.
Neither the Company's Articles of Incorporation, Bylaws, nor
Nevada corporate statutes address the treatment and effect of
abstentions and broker non-votes.
The Company will appoint three inspectors of election to:
determine the number of shares outstanding and the voting power
of each, the shares represented at the meeting, the existence of
a quorum, and the authenticity, validity, and effect of a proxy;
receive votes, ballots, or consents; hear and determine all
challenges and questions in any way arising in connection with
the right to vote; count and tabulate all votes or consents;
determine when the polls shall close; determine the results; and
do any other act which may be proper to conduct the election or
vote with fairness to all stockholders.
1999 ANNUAL MEETING OF STOCKHOLDERS
-----------------------------------
The next Annual Meeting of Stockholders will be held on or
about May 20, 1999. Stockholders desiring to present proper
proposals at that meeting and to have their proposals included in
the Company's proxy statement and form of proxy for that meeting
must meet the eligibility and other criteria under Rule 14a-8 of
the Exchange Act and must submit the proposal to the Company and
such proposal must be received no later than December 2, 1998.
OTHER BUSINESS
--------------
The Board of Directors does not know of any other business
which will be presented for action by the stockholders at this
Annual Meeting. However, if any business other than that set
forth in the Notice of Annual Meeting of Stockholders should be
presented at the Annual Meeting, the proxy committee named in the
enclosed proxy intends to take such action as will be in harmony
with the policies of the Board of Directors of the Company, and
in that connection will use their discretion and vote all proxies
in accordance with their judgment.
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The Company's 1997 Annual Report to Stockholders, including
financial statements at and for the periods ended December 31,
1997, accompanies these proxy materials, which are being mailed
to all stockholders of the Company as of April 1, 1998.
By order of the Board of Directors,
/s/ I. Scott Bogatz
I. Scott Bogatz
Secretary
Dated: April 1, 1998
THE COMPANY'S ANNUAL REPORT ON SEC FORM 10-K, INCLUDING THE
FINANCIAL STATEMENTS AND THE SCHEDULES THERETO, FOR THE 12 MONTHS
ENDED DECEMBER 31, 1997, WILL BE FURNISHED WITHOUT CHARGE TO ANY
BENEFICIAL OWNER OF SECURITIES ENTITLED TO VOTE AT THIS ANNUAL
MEETING. TO OBTAIN A COPY OF THE FORM 10-K, WRITTEN REQUEST MUST
BE MADE TO THE COMPANY AND THE REQUESTING PERSON MUST REPRESENT
IN WRITING THAT SUCH PERSON WAS A BENEFICIAL OWNER OF THE
COMPANY'S SECURITIES AS OF APRIL 1, 1998.
REQUESTS SHOULD BE ADDRESSED TO:
Rio Hotel & Casino, Inc.
Attention: I. Scott Bogatz, Secretary
3700 West Flamingo Road
Las Vegas, Nevada 89103
26
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EXHIBIT A
---------
RIO HOTEL & CASINO, INC.
ANNUAL PERFORMANCE-BASED
INCENTIVE PLAN
PURPOSE
1.1 This Annual Performance-Based Incentive Plan (this "Plan")
is designed to reward executive officers of Rio Hotel & Casino,
Inc. (the "Company") for achieving corporate performance
objectives. The Plan is intended to provide an incentive for
superior work and to motivate participating officers toward even
higher achievement and business results, to tie their goals and
interests to those of the Company and its stockholders, and to
enable the Company to attract and retain highly qualified
executive officers. The Plan is also intended to secure the full
deductibility of bonus compensation payable to the Company's
Chief Executive Officer and the four (4) highest compensated
executive officers (collectively the "Covered Employees") whose
compensation is required to be reported in the Company's proxy
statement and all compensation payable hereunder to such persons
is intended to qualify as "performance-based compensation" as
described in Section 162(m)(4)(C) of the Internal Revenue Code of
1986, as amended (the "Code").
ELIGIBILITY AND PARTICIPATION
2.1 Only those executive officers of the Company who are
officers at the level of vice president or above shall be
eligible to participate in the Plan. Prior to or at the time
performance objectives are established for a "Performance
Period", as defined below, the Committee designated under Section
7.1 (the "Committee") of the Company's Board of Directors (the
"Board") will designate in writing which executive officers among
those who may be eligible to participate in the Plan shall in
fact be participants for such Performance Period.
PLAN YEAR, PERFORMANCE PERIODS AND PERFORMANCE OBJECTIVES
3.1 The fiscal year of the Plan (the "Plan Year") shall be the
fiscal year beginning on January 1 and ending on December 31. The
performance period (the "Performance Period") with respect to
which bonuses may be payable under the Plan shall generally be
the Plan Year; provided however, that the Committee shall have
the authority to designate different Performance Periods under
the Plan.
3.2 Within the first ninety (90) days of each Performance Period
the Committee shall establish in writing, with respect to such
Performance Period, one or more performance goals, a specific
target objective or objectives with respect to such performance
goals and an objective formula or method for computing the amount
of bonus compensation payable to each participant under the Plan
if the performance goals are attained. Notwithstanding the
foregoing sentence, for any Performance Period which is less than
one year in length, such goals, objectives and computation
formulae or methods must be established within that number of
days, beginning on the first day of such Performance Period,
which is no more than twenty-five percent (25%) of the total
number of days in such Performance Period.
3.3 Performance goals shall be based upon one or more of the
following business criteria for the Company as a whole or any of
its subsidiaries, operating divisions or other operating units:
Stock price,
27
<PAGE>
market share, gross revenue, pretax income, operating income,
cash flow, earnings per share, return on equity, return on
invested capital or assets, cost reductions and savings, return
on revenues or productivity. In addition, to the extent
consistent with the goal of providing for deductibility under
Section 162(m) of the Code, performance goals may be based upon a
participant's attainment of personal objectives with respect to
any of the foregoing performance goals or implementing policies
and plans, negotiating transactions and sales, developing long-
term business goals or exercising managerial responsibility.
Measurements of the Company's or a participant's performance
against the performance goals established by the Committee shall
be objectively determinable and shall be determined according to
generally accepted accounting principles ("GAAP") as in existence
on the date on which the performance goals are established and
without regard to any changes in such principles after such date.
DETERMINATION OF BONUS AWARDS
4.1 As soon as practicable after the end of each Performance
Period, the Committee shall certify in writing to what extent the
Company and the participants have achieved the performance goal
or goals for such Performance Period, including the specific
target objective or objectives and the satisfaction of any other
material terms of the bonus award and the Committee shall
calculate the amount of each participant's bonus for such
Performance Period based upon the performance goals, objectives
and computation formulae or methods for such Performance Period.
The Committee shall have no discretion to increase the amount any
participant's bonus as so determined, but may reduce the amount
of or totally eliminate such bonus, if it determines, in its
absolute and sole discretion, that such a reduction or
elimination is appropriate in order to reflect the participant's
performance or unanticipated factors.
4.2 No participant's bonus for any Plan Year shall exceed one
hundred percent (100%) of the participant's base annual salary as
in effect as of the first day of such Plan Year.
PAYMENT OF AWARDS
5.1 Approved bonus awards shall be payable by the Company in
cash to each participant, or to his estate in the event of his
death, after the Committee has certified in writing pursuant to
Section 4.1 that the relevant performance goals were achieved and
in the manner provided for in the Treasury Regulations
promulgated under Section 162(m) of the Code.
5.2 A bonus award that would otherwise be payable to a
participant who is not employed by the Company or one of its
subsidiaries on the last day of a Performance Period shall be
prorated, or not paid, as follows:
(a) Terminated due Prorated based on active service
to disability during Performance Period
(b) Retirement in Prorated based on active service
accordance with the during Performance Period
Company's retirement
policies
(c) Voluntary or No award
involuntary
resignation or
termination prior to
retirement without
mutualwritten
agreement
(d) Resignation pursuant Prorated based on active service
to mutual written during Performance Period
agreement
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(e) Leave of absence Prorated based on active service
during Performance Period
(f) Death of participant Prorated based on active service
during Performance Period
OTHER TERMS AND CONDITIONS
6.1 No bonus awards shall be paid under the Plan unless and
until the material terms (within the meaning of Section
162(m)(4)(C) of the Code) of the Plan, including the business
criteria described in Section 3.3 of the Plan, are disclosed to
the Company's stockholders and are approved by the stockholders
by a majority of votes cast in person or by proxy (including
abstentions to the extent abstentions are counted as voting under
applicable state law).
6.2 No person shall have any legal claim to be granted an award
under the Plan and the Committee shall have no obligation to
treat participants uniformly. Except as may be otherwise required
by law, bonus awards under the Plan shall not be subject in any
manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, charge, garnishment, execution, or levy of
any kind, either voluntary or involuntary. Bonuses awarded under
the Plan shall be payable from the general assets of the Company
and no participant shall have any claim with respect to any
specific assets of the Company.
6.3 Neither the Plan nor any action taken under the Plan shall
be construed as giving any employee the right to be retained in
the employ of the Company or any subsidiary or to maintain any
participant's compensation at any level.
6.4 The Company or any of its subsidiaries may deduct from any
award any applicable withholding taxes or any amounts owed by the
employee to the Company or any of its subsidiaries.
ADMINISTRATION
7.1 All members of the Committee shall be persons who qualify as
"outside directors" as defined under Section 162(m) of the Code
and the regulations promulgated thereunder. Until changed by the
Board, the Performance Plan Committee of the Board shall
constitute the Committee hereunder.
7.2 The Committee shall have full power and authority to
administer and interpret the provisions of the Plan and to adopt
such rules, regulations, agreements, guidelines and instruments
for the administration of the Plan and for the conduct of its
business as the Committee deems necessary or advisable.
7.3 The Committee shall hold its meetings at such times and
places as it may determine, shall keep minutes of its meetings
and shall adopt, amend and revoke such rules or procedures as it
may deem proper; provided, however, that it may take action only
upon the agreement of a majority of the whole Committee. Any
action that the Committee shall take through a written instrument
signed by a majority of its members shall be as effective as
though it had been taken at a meeting duly called and held. The
Committee shall report all actions taken by it to the Board as
they relate to this Plan.
7.4 Except with respect to matters which under Section
162(m)(4)(C) of the Code are required to be determined in the
sole and absolute discretion of the Committee, the Committee
shall have full power to delegate to any officer or employee of
the Company the authority to administer and interpret the
procedural
29
<PAGE>
aspects of the Plan, subject to the Plan's terms, including
adopting and enforcing rules to decide procedural and
administrative issues.
7.5 The Committee may rely on opinions, reports or statements of
officers or employees of the Company or any subsidiary thereof
and of Company counsel (inside or retained counsel), public
accountants and other professional or expert persons.
7.6 The Board reserves the right to amend or terminate the Plan
in whole or in part at any time. Unless otherwise prohibited by
applicable law, any amendment required to conform the Plan to the
requirements of Section 162(m) of the Code may be made by the
Committee. No amendment may be made to the class of individuals
who are eligible to participate in the Plan, the performance
criteria specified in Section 3.3 or the maximum bonus payable to
any participant as specified in Section 4.2 without stockholder
approval unless stockholder approval is not required in order for
bonuses paid to Covered Employees to constitute qualified
performance-based compensation under Section 162(m) of the Code.
7.7 No member of the Committee shall be liable for any action
taken or omitted to be taken or for any determination made by him
or her in good faith with respect to the Plan, and the Company
shall indemnify and hold harmless each member of the Committee
against any cost or expense (including counsel fees) or liability
(including any sum paid in settlement of a claim with the
approval of the Committee) arising out of any act or omission in
connection with the administration or interpretation of the Plan,
unless arising out of such person's own fraud or bad faith.
7.8 The place of administration of the Plan shall be in the
State of Nevada, and the validity, construction, interpretation,
administration and effect of the Plan and of its rules and
regulations, and rights relating to the Plan, shall be determined
solely in accordance with the laws of the State of Nevada.
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RIO HOTEL & CASINO, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS, MAY 21, 1998
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned stockholder of Rio Hotel & Casino, Inc.
hereby acknowledges receipt of the Notice of Annual Meeting of
Stockholders, Proxy Statement, and Annual Report to Stockholders
in connection with the Annual Meeting of Stockholders to be held
at the Rio Suite Hotel & Casino, Las Vegas, Nevada, on Thursday,
May 21, 1998, at 10:00 o'clock in the morning, local time, and
hereby appoints Anthony A. Marnell II and James A. Barrett, Jr.,
and each or any of them, proxies, with power of substitution, to
attend and to vote all shares the undersigned would be entitled
to vote if personally present at said Annual Meeting and at any
adjournment thereof. The proxies are instructed to vote as
follows:
(1) Election of Directors: FOR WITHHELD
[ ] [ ]
NOMINEES: James A. Barrett, Jr., John A. Stuart, and Peter M.
Thomas
(INSTRUCTION: to withhold authority to vote for any individual
nominee, write that nominee's name on the space provided below):
_____________________________________________________
(2) Approve and ratify the amendment to the Rio Hotel & Casino,
Inc. 1995 Long-Term Incentive Plan.
For [ ] Against [ ] Abstain [ ]
(3) Approve and ratify the Rio Hotel & Casino, Inc. Annual
Performance-Based Incentive Plan.
For [ ] Against [ ] Abstain [ ]
(4) In their discretion, upon such other matters as may properly
come before the Annual Meeting.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED.
IF NO SPECIFICATION IS MADE, THE SHARES REPRESENTED BY THIS PROXY
WILL BE VOTED IN FAVOR OF ALL NOMINEES LISTED, IN FAVOR OF THE
APPROVAL AND RATIFICATION OF AN AMENDMENT TO THE RIO HOTEL &
CASINO, INC. 1995 LONG-TERM INCENTIVE PLAN, IN FAVOR OF THE
APPROVAL AND RATIFICATION OF THE RIO HOTEL & CASINO, INC. ANNUAL
PERFORMANCE-BASED INCENTIVE PLAN, AND, IN THE DISCRETION OF THE
PROXIES, ON OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE
ANNUAL MEETING.
Date: ___________________________, 1998
Signature(s)_________________________
_________________________
_________________________
NOTE: PLEASE SIGN PROXY EXACTLY AS YOUR NAME APPEARS.
----------------------------------------------
Date the Proxy in the space provided. If shares are held in the
name of two or more persons, all must sign. When signing as
attorney, executor, administrator, trustee, or guardian, give
full title as such. If signer is a corporation, sign full
corporate name by duly authorized officer.
31
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