EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF AUGUST 9, 1998
AMONG
XXXXXX'X ENTERTAINMENT, INC.,
HEI ACQUISITION CORP. III
AND
RIO HOTEL & CASINO, INC.
TABLE OF CONTENTS
Page
ARTICLE I. THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. The Merger . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Effective Time of the Merger . . . . . . . . . . . . . . . 2
Section 1.3. Closing. . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.4. Effect of the Merger . . . . . . . . . . . . . . . . . . . 2
Section 1.5. Articles of Incorporation and Bylaws of the
Surviving Corporation. . . . . . . . . . . . . . . . . . . 2
Section 1.6. Directors and Officers of the Surviving Corporation. . . . 2
ARTICLE II. EFFECT OF THE MERGER ON SECURITIES OF THE
CONSTITUENT CORPORATIONS. . . . . . . . . . . . . . . . . . . . 3
Section 2.1. Conversion of Securities . . . . . . . . . . . . . . . . . 3
Section 2.2. Exchange of Certificates.. . . . . . . . . . . . . . . . . 4
Section 2.3. Rio Options. . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF RIO. . . . . . . . . . . . . 7
Section 3.1. Organization of Rio and its Subsidiaries . . . . . . . . . 7
Section 3.2. Capitalization.. . . . . . . . . . . . . . . . . . . . . . 8
Section 3.3. Authority; No Conflict; Required Filings and Consents. . . 9
Section 3.4. Public Filings; Financial Statements.. . . . . . . . . . .10
Section 3.5. No Undisclosed Liabilities . . . . . . . . . . . . . . . .11
Section 3.6. Absence of Certain Changes or Events . . . . . . . . . . .11
Section 3.7. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . .12
Section 3.8. Real Property. . . . . . . . . . . . . . . . . . . . . . .14
Section 3.9. Title to Personal Property; Liens. . . . . . . . . . . . .18
Section 3.10. Intellectual Property . . . . . . . . . . . . . . . . . .18
Section 3.11. Agreements, Contracts and Commitments.. . . . . . . . . .19
Section 3.12. Litigation. . . . . . . . . . . . . . . . . . . . . . . .19
Section 3.13. Environmental Matters . . . . . . . . . . . . . . . . . .20
Section 3.14. Employee Benefit Plans. . . . . . . . . . . . . . . . . .20
Section 3.15. Compliance. . . . . . . . . . . . . . . . . . . . . . . .23
Section 3.16. Accounting and Tax Matters. . . . . . . . . . . . . . . .24
Section 3.17. Joint Proxy Statement/Prospectus; Registration
Statement . . . . . . . . . . . . . . . . . . . . . . . .24
Section 3.18. Labor Matters . . . . . . . . . . . . . . . . . . . . . .25
Section 3.19. Insurance . . . . . . . . . . . . . . . . . . . . . . . .25
Section 3.20. Opinion of Financial Advisor. . . . . . . . . . . . . . .25
Section 3.21. No Existing Discussions . . . . . . . . . . . . . . . . .25
Section 3.22. Nevada Takeover Statute . . . . . . . . . . . . . . . . .25
Section 3.23. Brokers . . . . . . . . . . . . . . . . . . . . . . . . .26
Section 3.24. Transactions With Affiliates. . . . . . . . . . . . . . .26
Section 3.25. Year 2000 . . . . . . . . . . . . . . . . . . . . . . . .26
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF XXXXXX'X AND MERGER SUB . . .26
Section 4.1. Organization . . . . . . . . . . . . . . . . . . . . . . .26
Section 4.2. Capitalization . . . . . . . . . . . . . . . . . . . . . .27
Section 4.3. Authority; No Conflict; Required Filings and
Consents.. . . . . . . . . . . . . . . . . . . . . . . . .28
Section 4.4. Public Filings; Financial Statements.. . . . . . . . . . .29
Section 4.5. No Undisclosed Liabilities . . . . . . . . . . . . . . . .29
Section 4.6. Litigation . . . . . . . . . . . . . . . . . . . . . . . .30
Section 4.7. Environmental Matters. . . . . . . . . . . . . . . . . . .30
Section 4.8. Labor Matters. . . . . . . . . . . . . . . . . . . . . . .30
Section 4.9. Insurance. . . . . . . . . . . . . . . . . . . . . . . . .31
Section 4.10. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . .31
Section 4.11. Compliance with ERISA . . . . . . . . . . . . . . . . . .31
Section 4.12. Intellectual Property . . . . . . . . . . . . . . . . . .32
Section 4.13. Absence of Certain Changes or Events. . . . . . . . . . .32
Section 4.14. Compliance. . . . . . . . . . . . . . . . . . . . . . . .33
Section 4.15. Accounting and Tax Matters. . . . . . . . . . . . . . . .34
Section 4.16. Joint Proxy Statement/Prospectus; Registration Statement.34
Section 4.17. Brokers . . . . . . . . . . . . . . . . . . . . . . . . .35
Section 4.18. No Operations of Merger Sub . . . . . . . . . . . . . . .35
Section 4.19. Title to Property . . . . . . . . . . . . . . . . . . . .35
Section 4.20. Agreements, Contracts and Commitments.. . . . . . . . . .35
Section 4.21. Information Regarding HJC . . . . . . . . . . . . . . . .36
Section 4.22. Opinion of Financial Advisor. . . . . . . . . . . . . . .36
ARTICLE V. COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Section 5.1. Conduct of Business of Rio . . . . . . . . . . . . . . . .36
Section 5.2. Conduct of Business of Xxxxxx'x and Merger Sub . . . . . .39
Section 5.3. Cooperation; Notice; Cure. . . . . . . . . . . . . . . . .41
Section 5.4. No Solicitation. . . . . . . . . . . . . . . . . . . . . .41
Section 5.5. Joint Proxy Statement/Prospectus; Registration Statement..43
Section 5.6. Stockholders' Meetings . . . . . . . . . . . . . . . . . .44
Section 5.7. Access to Information. . . . . . . . . . . . . . . . . . .44
Section 5.8. Governmental Approvals.. . . . . . . . . . . . . . . . . .45
Section 5.9. Publicity. . . . . . . . . . . . . . . . . . . . . . . . .46
Section 5.10. Indemnification.. . . . . . . . . . . . . . . . . . . . .46
Section 5.11. Employee Benefits.. . . . . . . . . . . . . . . . . . . .47
Section 5.12. Affiliate Agreements. . . . . . . . . . . . . . . . . . .48
Section 5.13. Pooling Accounting . . . . . . . . . . . . . . . . . . .48
Section 5.14. Tax Treatment of Reorganization.. . . . . . . . . . . . .48
Section 5.15. Further Assurances and Actions. . . . . . . . . . . . . .49
Section 5.16. Stock Exchange Listing . . . . . . . . . . . . . . . . .49
Section 5.17. Letter of Rio's Accountants . . . . . . . . . . . . . . .49
Section 5.18. Letter of Xxxxxx'x Accountants. . . . . . . . . . . . . .50
Section 5.19. Appointment of Xxxxxx'x Director. . . . . . . . . . . . .50
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Section 5.20. Title Insurance . . . . . . . . . . . . . . . . . . . . .50
ARTICLE VI. CONDITIONS TO MERGER. . . . . . . . . . . . . . . . . . . . . .50
Section 6.1. Conditions to Each Party's Obligation to
Effect the Merger. . . . . . . . . . . . . . . . . . . . .50
Section 6.2. Additional Conditions to Obligations of Rio. . . . . . . .51
Section 6.3. Additional Conditions to Obligations of Xxxxxx'x . . . . .52
ARTICLE VII. TERMINATION AND AMENDMENT. . . . . . . . . . . . . . . . . . .53
Section 7.1. Termination. . . . . . . . . . . . . . . . . . . . . . . .53
Section 7.2. Effect of Termination. . . . . . . . . . . . . . . . . . .54
Section 7.3. Fees and Expenses. . . . . . . . . . . . . . . . . . . . .54
Section 7.4. Amendment. . . . . . . . . . . . . . . . . . . . . . . . .56
Section 7.5. Extension; Waiver. . . . . . . . . . . . . . . . . . . . .56
ARTICLE VIII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . .57
Section 8.1. Nonsurvival of Representations, Warranties,
Covenants and Agreements . . . . . . . . . . . . . . . . .57
Section 8.2. Notices. . . . . . . . . . . . . . . . . . . . . . . . . .57
Section 8.3. Interpretation . . . . . . . . . . . . . . . . . . . . . .58
Section 8.4. Counterparts . . . . . . . . . . . . . . . . . . . . . . .58
Section 8.5. Entire Agreement; No Third Party Beneficiaries . . . . . .58
Section 8.6. Governing Law. . . . . . . . . . . . . . . . . . . . . . .58
Section 8.7. Assignment . . . . . . . . . . . . . . . . . . . . . . . .58
Section 8.8. Severability; Enforcement. . . . . . . . . . . . . . . . .59
Section 8.9. Specific Performance . . . . . . . . . . . . . . . . . . .59
EXHIBITS
EXHIBIT A FORM OF STOCKHOLDER SUPPORT AGREEMENT
EXHIBIT B FORM OF AFFILIATE LETTER
EXHIBIT C TITLE INSURANCE
EXHIBIT D RIO REPRESENTATION LETTER
EXHIBIT E XXXXXX'X REPRESENTATION LETTER
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TABLE OF DEFINED TERMS
TERMS CROSS REFERENCE
IN AGREEMENT
Acquisition Agreement Section 5.4(c)
Acquisition Proposal Section 5.4(a)
Affiliate Section 5.12(a)
Affiliate Agreement Section 5.12(a)
Agreement Preamble
Articles of Merger Section 1.2
Assemblage Parcels Section 3.8(k)
Average Xxxxxx'x Common Stock Price Section 2.1(f)
Benefit Arrangement Section 3.14(a)(i)
Certificate Section 2.1(f)
Closing Section 1.3
Closing Date Section 1.3
Code Preamble
Confidentiality Agreements Section 5.4(a)
Development Parcel Section 3.8(k)
Effective Time Section 1.2
Employee Plans Section 3.14(a)(iii)
Environmental Claim Section 3.13
Environmental Condition Section 3.13
Environmental Laws Section 3.13
ERISA Section 3.14(a)(iv)
ERISA Affiliate Section 3.14(a)(v)
Exchange Act Section 2.3
Exchange Agent Section 2.2(a)
Exchange Fund Section 2.2(a)
Exchange Ratio Section 2.1(a)
GAAP Section 3.4(b)
Governmental Approvals Section 5.8(a)
Governmental Entity Section 3.3(c)
Xxxxxx'x Preamble
Xxxxxx'x Alternative Transaction Section 7.3(c)
Xxxxxx'x Balance Sheet Section 4.4(b)
Xxxxxx'x Common Stock Section 2.1(a)
Xxxxxx'x Disclosure Schedule Article IV
Xxxxxx'x Material Adverse Effect Section 4.1
Xxxxxx'x Options Section 4.2(a)
Xxxxxx'x Permits Section 4.14(a)
Xxxxxx'x Preferred Stock Section 4.2(a)
Xxxxxx'x Reporting Subsidiaries Section 4.4(a)
Xxxxxx'x SEC Reports Section 4.4(a)
iv
TERMS CROSS REFERENCE
IN AGREEMENT
Xxxxxx'x Special Stock Section 4.2(a)
Xxxxxx'x Stock Option Plans Section 4.2(b)
Xxxxxx'x Stock Plans Section 4.2(a)
Xxxxxx'x Stockholders' Meeting Section 3.17
HSR Act Section 3.3(c)
Hazardous Materials Section 3.13
Indebtedness Section 3.11(a)
Indemnified Parties Section 5.10(a)
IRS Section 3.7(c)
Joint Proxy Statement/Prospectus Section 3.17
Lease and Operational Documents Section 3.8(c)
Merger Preamble
Merger Consideration Section 2.2(b)
Merger Sub Preamble
Merger Sub Common Stock Section 4.2(c)
Multiemployer Plan Section 3.14(a)(vi)
Notifying Party Section 5.8(a)
NRS Section 1.1
NYSE Section 2.1(f)
Pension Plan Section 3.14(a)(vii)
Phase VI Expansion Plan Section 3.8(k)
Phase VI Land Section 3.8(k)
Registration Statement Section 3.17
Representation Letters Section 5.14
Rio Preamble
Rio Alternative Transaction Section 7.3(c)
Rio Balance Sheet Section 3.4(b)
Rio Class II Preferred Stock Section 3.2(a)
Rio Common Stock Section 2.1(a)
Rio Disclosure Schedule Article III
Rio Gaming Laws Section 3.15(b)
Rio Hotel & Casino, Inc. Section 1.5
Rio Leased Property Section 3.8(a)
Rio Material Adverse Effect Section 3.1
Rio Material Contracts Section 3.11(a)
Rio Option Property Section 3.8(a)
Rio Options Section 2.3
Rio Owned Property Section 3.8(a)
Rio Permits Section 3.15(a)
Rio Preferred Stock Section 3.2(a)
Rio Real Property Section 3.8(a)
Rio SEC Reports Section 3.4(a)
Rio Stock Option Plans Section 2.3
Rio Stockholders' Meeting Section 3.17
v
TERMS CROSS REFERENCE
IN AGREEMENT
Rule 145 Section 5.12
SEC Section 3.3(c)
Securities Act Section 3.3(c)
Series A Special Stock Section 4.2(a)
Stockholder Support Agreements Preamble
Subsidiary Section 3.1
Superior Proposal Section 5.4(a)
Surviving Corporation Section 1.1
Tax Return Section 3.7(c)
Taxes Section 3.7(c)
Third Party Section 5.4(a)
Voting Debt Section 3.2(b)
Welfare Plan Section 3.14(a)(viii)
vi
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of August 9,
1998, by and among XXXXXX'X ENTERTAINMENT, INC., a Delaware corporation
("XXXXXX'X"), XXXXXX'X ACQUISITION CORP. III, a Nevada corporation and a direct
wholly-owned subsidiary of Xxxxxx'x ("MERGER SUB"), and RIO HOTEL & CASINO,
INC., a Nevada corporation ("RIO").
WHEREAS, the Board of Directors of Rio has determined that the merger of
Merger Sub with and into Rio, upon the terms and subject to the conditions set
forth in this Agreement (the "MERGER"), is fair to, and in the best interests
of, Rio and its stockholders;
WHEREAS, the Boards of Directors of Xxxxxx'x and Merger Sub have determined
that the Merger is in the best interests of Xxxxxx'x and Merger Sub and their
respective stockholders;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization described in Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "CODE");
WHEREAS, the Boards of Directors of Xxxxxx'x, Merger Sub and Rio have each
approved and adopted this agreement and approved the Merger and the other
transactions contemplated hereby.
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to each of Xxxxxx'x and Merger Sub's willingness
to enter into this Agreement, certain stockholders of Rio have entered into
Stockholder Support Agreements with Xxxxxx'x dated as of the date of this
Agreement in the form attached hereto as Exhibit A (the "STOCKHOLDER SUPPORT
AGREEMENTS"), pursuant to which such stockholders have agreed, among other
things, to vote all voting securities of Rio beneficially owned by them in favor
of approval and adoption of the Agreement and the Merger;
WHEREAS, for accounting purposes, it is intended that the transactions
contemplated by this Agreement shall be accounted for as a pooling of interests;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:
ARTICLE I.
THE MERGER
SECTION 1.1. THE MERGER. Upon the terms and subject to the provisions of
this Agreement and in accordance with Chapter 92A of the Nevada Revised Statutes
(the "NRS"), at the Effective Time (as defined in Section 1.2), Merger Sub shall
be merged with and into Rio. As a result of the Merger, the separate corporate
existence of Merger Sub shall cease and Rio shall continue as the surviving
corporation (the "SURVIVING CORPORATION").
1
SECTION 1.2. EFFECTIVE TIME OF THE MERGER. Subject to the provisions of
this Agreement (including Section 7.1 hereof), articles of merger with respect
to the Merger in such form as is required by NRS Section 92A.200 (the "ARTICLES
OF MERGER") shall be duly prepared, executed and acknowledged and thereafter
delivered to the Secretary of State of the State of Nevada for filing, as
provided in the NRS, as early as practicable on the Closing Date (as defined in
Section 1.3). The Merger shall become effective at the later of the date of
filing of the Articles of Merger or at such time within 90 days of the date of
filing as is specified in the Articles of Merger (the "EFFECTIVE TIME").
SECTION 1.3. CLOSING. The closing of the Merger (the "CLOSING") will
take place at such time and place to be agreed upon by the parties hereto, on a
date to be specified by Xxxxxx'x and Rio, which shall be no later than the third
business day after satisfaction or, if permissible, waiver of the conditions set
forth in Article VI (the "CLOSING DATE"), unless another date is agreed to by
Xxxxxx'x and Rio.
SECTION 1.4. EFFECT OF THE MERGER. Upon becoming effective, the Merger
shall have the effects set forth in the NRS. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, all properties,
rights, privileges, powers and franchises of Merger Sub and Rio shall vest in
the Surviving Corporation, and all debts, liabilities and duties of Merger Sub
and Rio shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 1.5. ARTICLES OF INCORPORATION AND BYLAWS OF THE SURVIVING
CORPORATION. At the Effective Time, the Articles of Incorporation and Bylaws of
the Surviving Corporation shall be amended to be identical to the Articles of
Incorporation and Bylaws, respectively, of Merger Sub as in effect immediately
prior to the Effective Time (except that the name of the Surviving Corporation
shall be "RIO HOTEL & CASINO, INC."), in each case until duly amended in
accordance with applicable law.
SECTION 1.6. DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The
directors of Merger Sub immediately prior to the Effective Time shall be the
initial directors of the Surviving Corporation, each to hold office in
accordance with the Articles of Incorporation and Bylaws of the Surviving
Corporation, PROVIDED that, at Xxxxxx'x option, the board of directors may
include the existing non-employee directors of Rio for a term not to exceed 90
days following the Effective Time. The officers of Merger Sub immediately prior
to the Effective Time shall be the initial officers of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation.
2
ARTICLE II.
EFFECT OF THE MERGER ON SECURITIES OF THE CONSTITUENT CORPORATIONS
SECTION 2.1. CONVERSION OF SECURITIES. At the Effective Time, by virtue
of the Merger and without any action on the part of any of the parties hereto or
the holders of any of the following:
(a) RIO COMMON STOCK. Each share of common stock, par value $0.01
per share, of Rio ("RIO COMMON STOCK") issued and outstanding immediately prior
to the Effective Time (other than shares to be canceled in accordance with
Section 2.1(b)) shall be converted, subject to Section 2.1(e) and 2.1(f), into
the right to receive one (the "EXCHANGE RATIO") validly issued, fully paid and
non-assessable share of common stock, par value $0.10 per share, of Xxxxxx'x
("XXXXXX'X COMMON STOCK"). All shares of Rio Common Stock, when so converted,
shall no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each holder of a certificate representing any such
shares shall cease to have any ownership or other rights with respect thereto,
except the right to receive the Merger Consideration, as defined in Section
2.2(b), in exchange for such shares upon the surrender of such certificate in
accordance with Section 2.2.
(b) CANCELLATION OF TREASURY STOCK AND XXXXXX'X-OWNED STOCK. All
shares of Rio Common Stock that are owned by Rio as treasury stock and any
shares of Rio Common Stock owned by Xxxxxx'x or any wholly-owned Subsidiary (as
defined in Section 3.1) of Xxxxxx'x shall be canceled and retired and shall
cease to exist and no consideration shall be delivered in exchange therefor.
(c) CAPITAL STOCK OF MERGER SUB. Each issued and outstanding share
of the common stock, par value $.01 per share, of Merger Sub shall be converted
into and become one fully paid and nonassessable share of common stock, par
value $.01 per share, of the Surviving Corporation.
(d) RIO DEBT SECURITIES. All notes and other debt instruments of Rio
that are outstanding at the Effective Time shall continue to be outstanding
subsequent to the Effective Time as debt instruments of the Surviving
Corporation, subject to their respective terms and provisions.
(e) ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio shall be
adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Xxxxxx'x Common Stock or Rio Common Stock, as applicable), reorganization,
recapitalization or any other like change with respect to Xxxxxx'x Common Stock
or Rio Common Stock occurring after the date hereof and prior to the Effective
Time. References to the Exchange Ratio elsewhere in this Agreement shall be
deemed to refer to the Exchange Ratio as it may have been adjusted pursuant to
this Section 2.1(e).
(f) FRACTIONAL SHARES. No certificates or scrip representing
fractional shares of Xxxxxx'x Common Stock shall be issued in connection with
the Merger, and such fractional share interests will not entitle the owner
thereof to vote or to any rights as a stockholder of Xxxxxx'x.
3
In lieu of any such fractional shares, each holder of Rio Common Stock upon
surrender of a certificate (a "CERTIFICATE") for exchange shall be paid an
amount in cash (without interest), rounded up to the nearest cent, determined
by multiplying (i) the average closing price of Xxxxxx'x Common Stock as
reported on the New York Stock Exchange ("NYSE") Composite Tape for the ten
consecutive trading days immediately preceding the second business day prior
to the Effective Time (the "AVERAGE XXXXXX'X COMMON STOCK PRICE") by (ii) the
fractional interest to which such holder would otherwise be entitled (after
taking into account all shares of Rio Common Stock then held of record by
such holder).
SECTION 2.2. EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. At or prior to the Effective Time, Xxxxxx'x
shall deposit with a bank or trust company designated by Xxxxxx'x and reasonably
acceptable to Rio (the "EXCHANGE AGENT"), for the benefit of the holders of
shares of Rio Common Stock outstanding immediately prior to the Effective Time,
for exchange in accordance with this Section 2.2, through the Exchange Agent,
(i) certificates evidencing the shares of Xxxxxx'x Common Stock issuable
pursuant to Section 2.1(a) in exchange for outstanding shares of Rio Common
Stock and (ii) cash in an aggregate amount sufficient to pay for fractional
shares pursuant to Section 2.1(f) (the shares and cash so deposited, together
with any dividends or distributions with respect to such shares of Xxxxxx'x
Common Stock payable after the Effective Time which also shall be deposited with
the Exchange Agent, being hereinafter referred to collectively as the "EXCHANGE
FUND"). Any interest, dividends or other income earned on the investment of
cash or other property held in the Exchange Fund shall be for the account of and
payable to Xxxxxx'x.
(b) EXCHANGE PROCEDURES. Promptly after the Effective Time, Xxxxxx'x
will instruct the Exchange Agent to mail to each holder of record of
Certificates (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as Xxxxxx'x may reasonably specify),
and (ii) instructions to effect the surrender of the Certificates in exchange
for the certificates evidencing shares of Xxxxxx'x Common Stock (plus cash in
lieu of fractional shares, if any, of Xxxxxx'x Common Stock as provided in
Section 2.1(f)). Upon surrender of a Certificate for cancellation to the
Exchange Agent together with such letter of transmittal, duly executed, and such
other customary documents as may be required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in exchange therefor
(A) certificates evidencing that number of whole shares of Xxxxxx'x Common Stock
which such holder has the right to receive in accordance with the Exchange Ratio
in respect of the shares of Rio Common Stock formerly evidenced by such
Certificate, (B) any dividends or distributions to which such holder is entitled
pursuant to Section 2.2(c), and (C) cash in respect of fractional shares as
provided in Section 2.1(f) (such shares of Xxxxxx'x Common Stock, dividends,
distributions, and cash, collectively, the "MERGER CONSIDERATION"), and the
Certificate so registered shall forthwith be canceled. In the event of a
transfer of ownership of shares of Rio Common Stock which is not registered in
the transfer records of Rio as of the Effective Time, the Merger Consideration
may be issued and paid in accordance with this Article II to a transferee if the
Certificate evidencing such shares of Rio Common Stock is presented to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer pursuant to this Section 2.2(b) and by evidence that any
applicable stock transfer taxes have been paid. Until so surrendered, each
outstanding Certificate
4
that prior to the Effective Time represented shares of Rio Common Stock will
be deemed from and after the Effective Time for all corporate purposes (other
than the payment of dividends and subject to Section 2.1(f)) to evidence the
ownership of the number of full shares of Xxxxxx'x Common Stock into which
such shares of Rio Common Stock shall have been so converted.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES OF XXXXXX'X
COMMON STOCK. No dividends or other distributions declared or made after the
Effective Time with respect to shares of Xxxxxx'x Common Stock with a record
date after the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to shares of Xxxxxx'x Common Stock they are entitled to
receive until the holder of such Certificate shall surrender such Certificate.
Subject to applicable law, following surrender of any such Certificate, there
shall be paid to the record holder of the certificates representing whole shares
of Xxxxxx'x Common Stock issued in exchange therefor, without interest, at the
time of such surrender, the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such whole
shares of Xxxxxx'x Common Stock.
(d) TRANSFERS OF OWNERSHIP. At the Effective time, the stock
transfer books of Rio shall be closed, and there shall no further registration
of transfers of Rio Common Stock thereafter on the records of Rio. If any
certificate for shares of Xxxxxx'x Common Stock is to be issued in a name other
than that in which the Certificate surrendered in exchange therefor is
registered, it will be a condition of the issuance thereof that the Certificate
so surrendered will be properly endorsed and otherwise in proper form for
transfer and that the person requesting such exchange will have paid to Xxxxxx'x
or any agent designated by it any transfer or other taxes required by reason of
the issuance of a certificate for Xxxxxx'x shares in any name other than that of
the registered holder of the certificate surrendered, or have established to the
reasonable satisfaction of Xxxxxx'x or any agent designated by it that such tax
has been paid or is not payable.
(e) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
which remains undistributed to the former stockholders of Rio as of the date
which is twelve months after the Effective Time shall be delivered to Xxxxxx'x,
upon demand, and thereafter such former stockholders of Rio who have not
theretofore complied with this Section 2.2 shall be entitled to look only to
Xxxxxx'x for payment of the Merger Consideration to which they are entitled
pursuant hereto.
(f) NO LIABILITY. None of Xxxxxx'x, Merger Sub, Rio or the Exchange
Agent shall be liable to any holder of Rio Common Stock for any Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(g) WITHHOLDING RIGHTS. Xxxxxx'x or the Exchange Agent shall be
entitled to deduct and withhold from the Merger Consideration otherwise payable
pursuant to this Agreement to any holder of Certificates which prior to the
Effective Time represented shares of Rio Common Stock such amounts as Xxxxxx'x
or the Exchange Agent is required to deduct and withhold with respect to the
making of such payment under the Code or any provision of state, local, or
foreign tax law. To the extent that amounts are so withheld by Xxxxxx'x or the
Exchange Agent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of Rio Common Stock in
respect of which such deduction and withholding was made by Xxxxxx'x or the
Exchange Agent.
5
(h) LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
pay in exchange for such lost, stolen or destroyed Certificates, upon the making
of an affidavit of that fact by the holder thereof, such Merger Consideration as
may be required pursuant to Section 2.2; PROVIDED, HOWEVER, that Xxxxxx'x may,
in its discretion, and as a condition precedent to the issuance thereof, require
the owner of such lost, stolen or destroyed Certificates to deliver a bond in
such sum as it may reasonably direct as indemnity against any claim that may be
made against Xxxxxx'x, the Surviving Corporation or the Exchange Agent with
respect to the Certificates alleged to have been lost, stolen or destroyed.
(i) AFFILIATES. Notwithstanding anything herein to the contrary,
Certificates surrendered for exchange by any Affiliate (as defined in Section
5.12) of Rio shall not be exchanged until the later of (i) the date Xxxxxx'x has
received an Affiliate Agreement (as defined in Section 5.12) from such Affiliate
or (ii) the date such shares of Xxxxxx'x Common Stock are transferable pursuant
to the Affiliate Agreement regardless of whether such agreement was executed by
the Affiliate.
SECTION 2.3. RIO OPTIONS. Effective at the Effective Time, subject,
if necessary, to obtaining the consent of the holder thereof, each unexpired
and unexercised outstanding option, whether or not then vested or exercisable
in accordance with its terms, to purchase shares of Rio Common Stock (the
"RIO OPTIONS") previously granted by Rio or its Subsidiaries under Rio's 1991
Non-Statutory Stock Option Plan, as amended, 1991 Directors' Stock Option
Plan, as amended, and 1995 Long-Term Incentive Plan, as amended
(collectively, the "RIO STOCK OPTION PLANS"), shall be converted
automatically into an option to acquire the number of shares of Xxxxxx'x
Common Stock (a "SUBSTITUTE OPTION"), rounded down to the nearest whole
share, determined by multiplying (i) the number of shares of Rio Common Stock
subject to such Rio Option immediately prior to the Effective Time by (ii)
the Exchange Ratio. The exercise price per share of Xxxxxx'x Common Stock
subject to each Substitute Option shall be equal to the exercise price per
share of Rio Common Stock subject to the relevant Rio Option divided by the
Exchange Ratio and then rounded up to the nearest whole cent; PROVIDED,
HOWEVER, that in the case of any Rio Option which is qualified as an
incentive stock option under Section 422 of the Code, the conversion formula
(both as to number of shares to be subject to the related Substitute Option
and the exercise price of the related Substitute Option) shall be adjusted,
if necessary, to comply with Section 424(a) of the Code. After the Effective
Time, each Substitute Option shall be exercisable upon the same terms and
conditions as were applicable to the related Rio Option immediately prior to
the Effective Time (including those terms which may have caused such Rio
Option/Substitute Option to become exercisable in full in connection with the
consummation of the transactions contemplated by this Agreement). As soon as
practicable after the Effective Time, Xxxxxx'x shall deliver to the holders
of the Substitute Options appropriate notice setting forth such holders'
rights pursuant thereto. The conversion shall be effected in a manner
consistent with allowing Xxxxxx'x to account for the Merger as a pooling of
interests. Xxxxxx'x shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Xxxxxx'x Common Stock for delivery
under the Rio Stock Option Plans, which shall be assumed in accordance with
this Section 2.3. Within 30 days after the Effective Time, Xxxxxx'x shall
file a registration statement on Form S-8 (or any successor or other
appropriate forms) with respect to the shares of Xxxxxx'x Common Stock
subject to such options and shall use its best efforts to maintain the
effectiveness of such registration statement (and maintain the current status
of the
6
prospectus or prospectuses contained therein) for so long as such options
remain outstanding. Rio (or, if appropriate, any committee administering the
Rio Stock Option Plans) shall use its best efforts, prior to or as of the
Effective Time, to take all necessary actions, pursuant to and in accordance
with the terms of the Rio Stock Option Plans and the instruments evidencing
the Rio Options, to provide for the conversion of the Rio Options into
options to acquire Xxxxxx'x Common Stock in accordance with this Section 2.3.
Furthermore, Rio shall use its best efforts to obtain the consent of the
holders of the Rio Options if required in connection with such conversion.
The Board of Directors of Rio shall, prior to or as of the Effective Time,
take appropriate action to approve the deemed cancellation of the Rio Options
for purposes of Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"). Xxxxxx'x shall, prior to or as of the Effective
Time, take appropriate action to approve the deemed grant of options to
purchase Xxxxxx'x Common Stock under the Rio Options (as converted pursuant
to this Section 2.3) for purposes of Section 16(b) of the Exchange Act.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF RIO
Rio represents and warrants to Xxxxxx'x and Merger Sub that the statements
contained in this Article III are true and correct except as set forth herein
and in the disclosure schedule delivered by Rio to Xxxxxx'x and Merger Sub on or
before the date of this Agreement (the "RIO DISCLOSURE SCHEDULE"). The Rio
Disclosure Schedule shall be arranged in paragraphs corresponding to the
numbered and lettered paragraphs contained in this Article III and the
disclosure in any paragraph shall qualify other paragraphs in this Article III
only to the extent that it is reasonable from a reading of such disclosure that
it also qualifies or applies to such other paragraphs.
SECTION 3.1. ORGANIZATION OF RIO AND ITS SUBSIDIARIES. Each of Rio
and its Subsidiaries (as defined below) is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization
and has the requisite corporate, partnership or limited liability company
power and authority to carry on its business as now being conducted. Each of
Rio and its Subsidiaries is duly qualified or licensed to do business and is
in good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so
qualified, licensed or in good standing, would not be reasonably likely to
have a material adverse effect on the business or properties (including,
without limitation, Rio's development plans contemplated by the Phase VI
Expansion Plan (as defined) and Rio's development plans of the Phase VI Land
(as defined)), financial condition or results of operations of Rio and its
Subsidiaries, taken as a whole (a "RIO MATERIAL ADVERSE EFFECT"); PROVIDED,
HOWEVER, that the effect of economic changes that are applicable to the
gaming industry generally, or the Las Vegas gaming industry in particular,
shall be excluded from the definition of "Rio Material Adverse Effect" and
from any determination as to whether a Rio Material Adverse Effect has
occurred or may occur with respect to Rio. Rio has delivered to Xxxxxx'x a
true and correct copy of the Articles of Incorporation and Bylaws of Rio, in
each case as amended to the date of this Agreement. Assuming compliance by
Xxxxxx'x with all Rio Gaming Laws (as defined in Section 3.15(b)) (including
obtaining all necessary consents and approvals), the respective
organizational documents of Rio's Subsidiaries do not contain any provision
that would limit or otherwise
7
restrict the ability of Xxxxxx'x, following the Effective Time, from owning
or operating such Subsidiaries on the same basis as Rio. Except as set forth
in Rio SEC Reports (as defined in Section 3.4) filed prior to the date hereof
or in Schedule 3.1 of the Rio Disclosure Schedule, neither Rio nor any of its
Subsidiaries directly or indirectly owns (other than ownership interests in
Rio or in one or more of its Subsidiaries) any equity or similar interest in,
or any interest convertible into or exchangeable or exercisable for, any
corporation, partnership, joint venture or other business association or
entity. As used in this Agreement, the word "Subsidiary" means, with respect
to any party, any corporation or other organization, whether incorporated or
unincorporated, of which (i) such party or any other Subsidiary of such party
is a general partner or (ii) at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of
the Board of Directors or others performing similar functions with respect to
such corporation or other organization is directly or indirectly owned or
controlled by such party or by any one or more of its Subsidiaries, or by
such party and one or more of its Subsidiaries.
SECTION 3.2. CAPITALIZATION.
(a) The authorized capital stock of Rio consists of 100,000,000
shares of Rio Common Stock, $0.01 par value per share, 12,500,000 shares of
8% Cumulative Convertible Preferred Stock, par value $0.01 per share ("RIO
PREFERRED STOCK"), and 10,000,000 of Class II Preferred Stock , par value
$0.01 per share ("RIO CLASS II PREFERRED STOCK"). As of the date hereof, (i)
24,788,433 shares of Rio Common Stock were issued and outstanding, all of
which are validly issued, fully paid and nonassessable, (ii) no shares of Rio
Common Stock were held in the treasury of Rio or by Subsidiaries of Rio, and
(iii) no shares of Rio Preferred Stock or Rio Class II Preferred Stock are
issued and outstanding. Schedule 3.2(a) of the Rio Disclosure Schedule sets
forth the number of shares of Rio Common Stock reserved for future issuance
upon exercise of Rio Options granted and outstanding as of the date hereof
and the Rio Stock Option Plans. Schedule 3.2(a) of the Rio Disclosure
Schedule also sets forth, for each Rio Stock Option Plan, the dates on which
Options under such plan were granted, the number of Options granted on each
such date and the exercise price thereof. As of the date of this Agreement,
Rio has not granted any stock appreciation rights or any other contractual
rights (other than employment, bonus or other compensation arrangements which
are set forth on Schedule 3.2(a) of the Rio Disclosure Schedule) the value of
which is derived from the financial performance of Rio or the value of shares
of Rio Common Stock. Except as disclosed in Schedule 3.2(a) of the Rio
Disclosure Schedule or the Rio SEC Reports, there are no obligations,
contingent or otherwise, of Rio or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any shares of Rio Common Stock or the capital
stock or ownership interests of any Subsidiary or to provide funds to or make
any material investment (in the form of a loan, capital contribution or
otherwise) in any such Subsidiary or any other entity other than guarantees
of bank obligations or indebtedness for borrowed money of Subsidiaries
entered into in the ordinary course of business. All of the outstanding
shares of capital stock (including shares which may be issued upon exercise
of outstanding options) or other ownership interests of each of Rio's
Subsidiaries are duly authorized, validly issued, fully paid and
nonassessable and, except as disclosed in Schedule 3.2 of the Rio Disclosure
Schedule or the Rio SEC Reports, all such shares and ownership interests are
owned by Rio or another Subsidiary of Rio free and clear of all security
interests, liens, claims, pledges, agreements, limitations on Rio's voting
rights, charges or other encumbrances or restrictions on transfer of any
nature.
8
(b) There are no bonds, debentures, notes or other indebtedness
having voting rights (or convertible into securities having such rights)
("VOTING DEBT") of Rio or any of its Subsidiaries issued and outstanding.
Except as set forth in Schedule 3.2(b) of the Rio Disclosure Schedule or the
Rio SEC Reports or as reserved for future grants of options under the Rio
Stock Option Plans as of the date hereof, (i) there are no shares of capital
stock of any class of Rio, or any security exchangeable into or exercisable
for such equity securities, issued, reserved for issuance or outstanding;
(ii) there are no options, warrants, equity securities, calls, rights,
commitments or agreements of any character to which Rio or any of its
Subsidiaries is a party or by which it is bound obligating Rio or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or other ownership interests
(including Voting Debt) of Rio or any of its Subsidiaries or obligating Rio
or any of its Subsidiaries to grant, extend, accelerate the vesting of or
enter into any such option, warrant, equity security, call, right, commitment
or agreement; and (iii) there are no voting trusts, proxies or other voting
agreements or understandings with respect to the shares of capital stock of
Rio to which Rio or any of its Subsidiaries is a party. All shares of Rio
Common Stock subject to issuance as specified in this Section 3.2(b) are duly
authorized and, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, shall be validly issued,
fully paid and nonassessable.
SECTION 3.3. AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Rio has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby by Rio have been duly authorized by
all necessary corporate action on the part of Rio, subject only to the
approval and adoption of this Agreement and the Merger by a majority of Rio's
stockholders. This Agreement has been duly executed and delivered by Rio and
assuming the due authorization, execution and delivery by Xxxxxx'x and Merger
Sub, constitutes the valid and binding obligation of Rio, enforceable against
it in accordance with its terms.
(b) Other than as disclosed in Schedule 3.3(b) of the Rio
Disclosure Schedule, the execution and delivery of this Agreement by Rio does
not, and the consummation of the transactions contemplated hereby will not,
(i) conflict with, or result in any violation or breach of, any provision of
the Articles of Incorporation or Bylaws of Rio or the comparable charter or
organizational documents of any of its Subsidiaries, (ii) result in any
violation or breach of, or constitute (with or without notice or lapse of
time, or both) a default (or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any material
benefit) under, or require a consent or waiver under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease,
contract or other agreement, instrument or obligation to which Rio or any of
its Subsidiaries is a party or by which any of them or any of their
properties or assets may be bound, or (iii) subject to the governmental
filings and other matters referred to in Section 3.3(c), conflict with or
violate any permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Rio or any of its
Subsidiaries or any of its or their properties or assets, except in the case
of clauses (ii) and (iii) for any such conflicts, violations, defaults,
terminations, breaches, cancellations, accelerations or requirements for
consent or waiver not obtained which (x) are not, individually or in the
aggregate, reasonably
9
likely to have a Rio Material Adverse Effect or (y) would not impair or
unreasonably delay the consummation of the Merger.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency,
commission, gaming authority or other governmental authority or
instrumentality ("GOVERNMENTAL ENTITY") is required by or with respect to Rio
or any of its Subsidiaries in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby,
except for (i) the filing of the pre-merger notification report under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended ("HSR ACT"),
(ii) the filing of the Articles of Merger with respect to the Merger with the
Secretary of State of the State of Nevada, (iii) the filing of the Joint
Proxy Statement/Prospectus and the Registration Statement (as such terms are
defined in Section 5.4 below) with the Securities and Exchange Commission
(the "SEC") in accordance with the Securities Act of 1933, as amended (the
"SECURITIES ACT") and the Exchange Act, (iv) any approvals and filing of
notices required under the Rio Gaming Laws (as defined in Section 3.15(b)),
(v) such consents, approvals, orders, authorizations, permits, filings or
registrations related to, or arising out of, compliance with statutes, rules
or regulations regulating the consumption, sale or serving of alcoholic
beverages, (vi) such immaterial filings and consents as may be required under
any environmental health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or the
transactions contemplated by this Agreement, and (vii) such other filings,
consents, approvals, orders, registrations and declarations as may be
required under the laws of any jurisdiction in which Rio or any of its
Subsidiaries or its stockholders conducts any business or owns any assets the
failure of which to obtain would not be reasonably likely to have a Rio
Material Adverse Effect.
SECTION 3.4. PUBLIC FILINGS; FINANCIAL STATEMENTS.
(a) Rio has filed and made available to Xxxxxx'x all forms,
reports and documents required to be filed by Rio and the Rio Reporting
Subsidiaries with the SEC since January 1, 1995 (collectively, the "RIO SEC
REPORTS"). Except as disclosed in Schedule 3.4(a) of the Rio Disclosure
Schedule, none of Rio's Subsidiaries is required to file forms, reports and
documents with the SEC. The Rio SEC Reports (including any financial
statements filed as a part thereof or incorporated by reference therein) (i)
at the time filed, complied in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, as the case may be,
and (ii) did not, at the time they were filed (or if amended or superseded by
a filing prior to the date of this Agreement, then on the date of such
filing), contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such Rio SEC Reports or necessary in
order to make the statements in such Rio SEC Reports, in the light of the
circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in
each case, any related notes) of Rio contained in the Rio SEC Reports
complied as to form in all material respects with the applicable published
rules and regulations of the SEC with respect thereto, was prepared in
accordance with generally accepted accounting principles ("GAAP") applied on
a consistent basis throughout the periods involved (except as may be
indicated in the notes to such financial statements or, in the case of
unaudited statements, as indicated in the Rio SEC Reports) and fairly
presented the consolidated financial position of Rio and its consolidated
Subsidiaries as
10
of the dates and the consolidated results of its operations and cash flows
for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal and recurring year-end adjustments
which, with respect to interim periods since December 31,1997, were not or
are not expected to be material in amount. The audited balance sheet of Rio
as of December 31,1997 is referred to herein as the "RIO BALANCE SHEET."
SECTION 3.5. NO UNDISCLOSED LIABILITIES. Except as disclosed in the
Rio SEC Reports filed prior to the date of this Agreement or in Schedule 3.5
of the Rio Disclosure Schedule, and except for liabilities and obligations
incurred since the date of the Rio Balance Sheet in the ordinary course of
business consistent with past practices, Rio and its consolidated
Subsidiaries do not have any indebtedness, obligations or liabilities of any
kind, whether accrued, contingent or otherwise (whether or not required to be
reflected in financial statements in accordance with GAAP), and whether due
or to become due, which would be reasonably likely to have a Rio Material
Adverse Effect.
SECTION 3.6. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as
disclosed in the Rio SEC Reports filed prior to the date of this Agreement or
in Schedule 3.6 of the Rio Disclosure Schedule, since the date of the Rio
Balance Sheet, Rio and its Subsidiaries have conducted their businesses only
in the ordinary course and in a manner consistent with past practice and,
since such date, there has not been (i) any event, development, state of
affairs or condition, or series or combination of events, developments,
states of affairs or conditions, which, individually or in the aggregate, has
had or is reasonably likely to have a Rio Material Adverse Effect; (ii) any
damage, destruction or loss (whether or not covered by insurance) with
respect to Rio or any of its Subsidiaries which is reasonably likely to have
a Rio Material Adverse Effect; (iii) any material change by Rio in its
accounting methods, principles or practices of which Xxxxxx'x has not
previously been informed; (iv) any revaluation by Rio of any of its assets
which is reasonably likely to have a Rio Material Adverse Effect; (v) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to the equity interests of
Rio or of any of its Subsidiaries, other than dividends paid by wholly owned
Subsidiaries or any redemption, purchase or other acquisition by Rio or any
of its Subsidiaries of any securities of Rio or any of its Subsidiaries; (vi)
any split, combination or reclassification of any of Rio's capital stock or
any issuance or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for, shares of Rio's capital stock;
(vii) any increase in or establishment of, or any liability (caused by a
prior or existing violation of laws or regulations) under, any bonus,
insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option, stock purchase or other employee benefit plan, or any
other increase in the compensation payable or to become payable to any
officers or key employees of Rio or any Subsidiary other than increases which
would not be material, individually or in the aggregate, with respect to such
officers or employees receiving such benefit or compensation (based on a
comparison to benefits and compensation received in the year ended December
31,1997); (viii) any entry into, renewal, modification or extension of, any
material contract, arrangement or agreement with any other party except for
contracts, arrangements or agreements in the ordinary course of business or
as contemplated by this Agreement; or (ix) any settlement of pending or
threatened litigation involving Rio or any of its Subsidiaries (whether
brought by a private party or a Governmental Entity) other than any
settlement which is not reasonably likely to have a Rio Material Adverse
Effect.
11
SECTION 3.7. TAXES.
(a) Except as set forth in Schedule 3.7(a) of the Rio Disclosure
Schedule:
(i) Each of Rio and its Subsidiaries (and any affiliated
group (within the meaning of Section 1504 of the Code)) of which Rio or any
of its Subsidiaries is now or ever has been a member) has timely filed with
the appropriate taxing authorities all federal and other material Tax Returns
(as defined in Section 3.7(c)) required to be filed through the date hereof
and will timely file any such returns required to be filed on or prior to the
Closing Date. All such Tax Returns were (and, to the extent they will be
filed prior to the Effective Time, will be) complete and accurate in all
material respects. None of Rio, its Subsidiaries, nor any affiliated group
(within the meaning of Section 1504 of the Code) of which Rio or any of its
Subsidiaries is now or was a member, has pending any request for an extension
of time within which to file federal income Tax Returns. Rio has provided to
Xxxxxx'x and Merger Sub complete and accurate (in all material respects)
copies of Rio's federal income Tax Returns for the taxable years ended
December 31, 1992 through December 31, 1997.
(ii) All Taxes (as defined in Section 3.7(c)) in respect of
periods beginning before the Closing Date have been paid or will be timely paid,
or an adequate reserve has been or will be established therefor in accordance
with GAAP, by each of Rio and its Subsidiaries subject only to such exceptions
as would not be reasonably likely to have, individually or in the aggregate, a
Rio Material Adverse Effect.
(iii) Rio and each its Subsidiaries have complied in all respects
with all applicable laws, rules and regulations relating to the payment and
withholding of Taxes and have, within the time and the manner prescribed by law,
withheld and paid over to the proper governmental authorities all amounts
required to be so withheld and paid over under applicable laws subject to such
exceptions as would not be reasonably likely to have, individually or in the
aggregate, a Rio Material Adverse Effect.
(iv) No federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of Rio or any of its Subsidiaries, subject to
such exceptions as would not be reasonably likely to have, individually or in
the aggregate, a Rio Material Adverse Effect. Neither Rio nor any of its
Subsidiaries has received a written notice or announcement of any material
audits or proceedings. No requests for waivers of time to assess any Taxes are
pending, none of Rio or any of its Subsidiaries has waived any statute of
limitations with respect to Taxes or agreed to any extension of time with
respect to any Tax assessment or deficiency for any open taxable year. The
statutes of limitations for the federal income Tax Returns of Rio and each of
its Subsidiaries have expired for all taxable years ended on or prior to
December 31, 1991.
(v) Neither the IRS nor any other taxing authority (whether
domestic or foreign) has asserted in writing, or to the best knowledge of Rio,
is threatening in writing to assert, (a) against Rio or any of its Subsidiaries
any deficiency or claim for Taxes in excess of the reserves established therefor
or (b) that Rio or any of its Subsidiaries should have, but did not, file a Tax
Return in a particular jurisdiction where Rio or any such Subsidiary do not
regularly file
12
Tax Returns, except as which would not be reasonably likely to have a Rio
Material Adverse Effect.
(b) Except as set forth in Schedule 3.7(b) of Rio Disclosure
Schedule:
(i) There are no liens for Taxes upon any property or assets of
Rio or any Subsidiary thereof, except for liens for Taxes not yet due and
payable and liens for Taxes that are being contested in good faith by
appropriate proceedings as set forth in Schedule 3.7(a) of Rio Disclosure
Schedule and as to which adequate reserves have been established in accordance
with GAAP except as which would not be reasonably likely to have, individually
or in the aggregate, a Rio Material Adverse Effect.
(ii) Neither Rio nor any of its Subsidiaries is or has been a
member of an affiliated group of corporations filing a consolidated federal
income tax return (or a group of corporations filing a consolidated, combined or
unitary income tax return under comparable provisions of state, local or foreign
tax law) for any taxable period beginning on or after January 1, 1992, other
than a group the common parent of which is or was Rio or any Subsidiary of Rio.
(iii) Neither Rio nor any of its Subsidiaries has (a) any
obligation under any Tax sharing agreement or similar arrangement with any other
person with respect to Taxes of any other person or (b) except as which would
not be reasonably likely to have, individually or in the aggregate, a Rio
Material Adverse Effect, entered into a closing agreement or other similar
agreement related to Taxes with any taxing authority for any open or future
taxable year.
(iv) Neither Rio nor any of its Subsidiaries has, with regard to
any assets or property held or acquired by any of them, filed a consent to the
application of Section 341(f) of the Code, or agreed to have Section 341(f)(2)
of the Code apply to any disposition of a subsection (f) asset (as such term is
defined in Section 341(f)(4) of the Code) owned by Rio or any of its
Subsidiaries;
(v) To the best knowledge of Rio, no member of the Rio
affiliated group (as defined in Section 1504 of the Code) has recognized any
gain in connection with any intercompany transaction that has been deferred for
federal income tax purposes, except for such gains as have been taken into
account on Tax Returns filed prior to the date hereof in accordance with Treas.
Reg. Section 1.1502-13, except as which would not be reasonably likely to have,
individually or in the aggregate, a Rio Material Adverse Effect.
(vi) Rio has no stockholder who has held more than 5% of any
class of Rio stock within the last five years for whom such stock would be
treated as a "United States real property interest" within the meaning of
Section 897(c) of the Code.
(vii) Neither Rio nor any of its Subsidiaries has agreed to, or is
required to make, any adjustments under Section 481 of the Code for any open or
future taxable year, except as which would not be reasonably likely to have,
individually or in the aggregate, a Rio Material Adverse Effect.
(c) "TAXES" shall mean any and all taxes, charges, fees, levies,
duties, liabilities, impositions or other assessments, including, without
limitation, income, gross receipts, profits,
13
alternative or add-on minimum, excise, real (due and payable) or personal
property, environmental, recapture, sales, use, value-added, withholding,
social security, estimated retirement, employment, unemployment, disability,
occupation, service, registration, license, customs duties, net worth,
payroll, franchise, gains, stock, stamp, transfer and recording taxes, fees
and charges, imposed by the Internal Revenue Service ("IRS") or any other
taxing authority (whether domestic or foreign including, without limitation,
any state, county, local or foreign government or any subdivision or taxing
agency thereof (including a United States possession)), whether computed on a
separate, consolidated, unitary, combined or any other basis; and such term
shall include any interest whether paid or received, fines, penalties or
additional amounts attributable to, or imposed upon, or with respect to, any
such taxes, charges, fees, levies or other assessments. "TAX RETURN" shall
mean any report, return, document, declaration or other information or filing
required to be supplied to any taxing authority or jurisdiction (foreign or
domestic) with respect to Taxes, including, without limitation, any
amendments of any such tax or information returns and any schedules, exhibits
or other documents with respect to or accompanying any such tax or
information returns or any payments of estimated Taxes or requests for the
extension of time in which to file any such report, return, document,
declaration or other information.
(d) For purposes of this Section 3.7, the phrase "Rio Material
Adverse Effect" shall include any tax liability or group of tax liabilities
exceeding $1,000,000 for any taxable year or $5,000,000 for all open taxable
years.
SECTION 3.8. REAL PROPERTY.
(a) Schedule 3.8(a) of the Rio Disclosure Schedule identifies all
real property owned by Rio and its Subsidiaries (the "RIO OWNED PROPERTY"),
all real property for which Rio and its Subsidiaries have an option to
purchase or right of first refusal (the "RIO OPTION PROPERTY"), all real
property for which Rio and its Subsidiaries have equitable interests as
contract purchasers under executed purchase and sale agreements (the "RIO
CONTRACT PROPERTY"), all real property for which Rio and its Subsidiaries
have equitable interests as profit participants in the proceeds from any
disposition thereof ("RIO PROFIT PARTICIPATION PROPERTY") and all real
property leased or operated by Rio and its Subsidiaries (the "RIO LEASED
PROPERTY"). The Rio Owned Property, the Rio Option Property, the Rio
Contract Property, the Rio Profit Participation Property and the Rio Leased
Property is referred to herein collectively as the "RIO REAL PROPERTY." For
purposes of this Agreement, "RIO SPACE LEASES" means the leases identified as
such on Schedule 3.8(a) of the Rio Disclosure Schedule. For purposes of this
Agreement, "RIO PERMITTED LIENS" means (a) mechanic's carriers', workers',
repairers', materialmen's, warehousemen's and other similar liens arising or
incurred in the ordinary course of business for sums not yet due and payable
and such liens as are being contested by Rio or its Subsidiaries in good
faith, provided such liens do not individually or in the aggregate have a Rio
Material Adverse Effect, (b) liens arising or resulting from any action taken
by Xxxxxx'x, (c) liens for current taxes not yet due and payable, (d) any
covenants, conditions, restrictions, reservations, rights, liens, easements,
encumbrances, encroachments and other matters affecting title which do not
individually or in the aggregate have a Rio Material Adverse Effect, (e) the
Lease and Operational Documents (as defined in Section 3.8(c) below) and (f)
matters permitted pursuant to Section 5.1 hereof.
14
(b) Rio and its Subsidiaries have good, valid, legal and
marketable fee simple title to the Rio Owned Property, and a valid leasehold
interest in the Rio Leased Property, sufficient to allow each of Rio and its
Subsidiaries to conduct, and to continue to conduct, its business as and
where currently conducted. The interests of Rio and its Subsidiaries in the
Rio Controlled Real Property (as defined in Section 3.8(c) below), and to the
best knowledge of Rio, the interests of Rio and its Subsidiaries in the Rio
Real Property which is not Rio Controlled Real Property, are free and clear
of any and all liens, encumbrances, restrictions, leases, options to
purchase, options to lease, conditions, covenants, assessments, defects,
claims or exceptions, except for the exceptions described in Schedule 3.8(b)
of the Rio Disclosure Schedule and the Rio Permitted Liens. Prior to the
date hereof, Rio has delivered to Xxxxxx'x true and correct copies of all
title reports and policies and surveys currently in Rio's possession for each
respective parcel of Rio Real Property, each of which title reports, title
policies and surveys is listed for each parcel of Rio Real Property in
Schedule 3.8(b) of the Rio Disclosure Schedule. Schedule 3.8(b) of the Rio
Disclosure Schedule sets forth the date of each such title report, title
policy and survey.
(c) Part I of Schedule 3.8(c) of the Rio Disclosure Schedule lists
all of the material documents under which the Rio Owned Property and the Rio
Leased Property is owned, developed, constructed, leased, operated, managed
or licensed (the "LEASE AND OPERATIONAL DOCUMENTS"), true and correct copies
of which have been delivered or made available for review to Xxxxxx'x. Part
II of Schedule 3.8(c) of the Rio Disclosure Schedule lists all of the
material documents relating to the rights and obligations of Rio and its
Subsidiaries with respect to the Rio Option Property, the Rio Contract
Property and the Rio Profit Participation Property (the "EQUITABLE RIGHTS
DOCUMENTS"), true and correct copies of which have been delivered or made
available for review to Xxxxxx'x. The Lease and Operational Documents and
the Equitable Rights Agreements are unmodified (except as set forth in
Schedule 3.8(c) of the Rio Disclosure Schedule), are in full force and
effect, and there are no other material agreements, written or oral, between
Rio or any of its Subsidiaries and any third party with respect to the Rio
Real Property or otherwise relating to the development, construction,
ownership, improvement, use and occupancy of the Rio Real Property. Except
as disclosed on Part III of Schedule 3.8(c) of the Rio Disclosure Schedule,
none of Rio, its Subsidiaries or (to the best knowledge of Rio) any other
party is in material default under the Lease and Operational Documents or the
Equitable Rights Agreements and, to the best knowledge of Rio, no material
defaults (except those subsequently cured) by Rio, its Subsidiaries or any
other party have been alleged thereunder. For purposes of this Agreement,
"RIO CONTROLLED REAL PROPERTY" shall mean (i) all Rio Owned Property; (ii)
all Rio Leased Property; and (iii) all Rio Option Property, Rio Contract
Property and Rio Profit Participation Property where the other party or
parties to the applicable Equitable Rights Document is an Affiliate of Rio.
(d) Except as disclosed in Schedule 3.8(d) of the Rio Disclosure
Schedule, (i) no portion of the Rio Controlled Property (exclusive of Rio Leased
Property under Rio Space Leases), and to the best knowledge of Rio, no portion
of the Rio Real Property which is not Rio Controlled Real Property, is in
violation of any applicable laws, regulations or restrictions (including zoning
laws and regulations), except for such violations which, individually or in the
aggregate, would not be reasonably likely to result in a Rio Material Adverse
Effect; and (ii) there are no defects in the physical condition of the Rio
Controlled Real Property (exclusive of Rio Leased Property under Rio Space
Leases) or the improvements located thereon, and to the best knowledge of Rio,
there are no defects in the physical condition of the Rio Real Property which is
15
not Rio Controlled Real Property or the improvements located thereon, except
for defects which, individually or in the aggregate, would not be reasonably
likely to have a Rio Material Adverse Effect.
(e) Except as disclosed in Schedule 3.8(e) of the Rio Disclosure
Schedule, there is no action, proceeding or litigation pending (or, to the
best knowledge of Rio, overtly contemplated or threatened) (i) to take all or
any portion of any of the respective parcels of the Rio Controlled Real
Property (exclusive of Rio Leased Property under Rio Space Leases), or any
interest therein, by eminent domain; (ii) to modify the zoning of, or other
governmental rules or restrictions applicable to, any of the respective
parcels of the Rio Controlled Real Property (exclusive of Rio Leased Property
under Rio Space Leases) or the use or development thereof; (iii) for any
street widening or changes in highway or traffic lanes or patterns in the
immediate vicinity of any of the respective parcels of the Rio Controlled
Real Property (exclusive of Rio Leased Property under Rio Space Leases); or
(iv) otherwise relating to any of the respective parcels of the Rio
Controlled Real Property (exclusive of Rio Leased Property under Rio Space
Leases) or the interests of Rio and its Subsidiaries therein, or which
otherwise would interfere with the use, ownership, improvement, development
and/or operation of any of the respective parcels of the Rio Controlled Real
Property (exclusive of Rio Leased Property under Rio Space Leases); in each
case except for such actions, proceedings or litigation which, individually
or in the aggregate, would not be reasonably expected to have a Rio Material
Adverse Effect. Except as disclosed in Schedule 3.8(e) of the Rio Disclosure
Schedule, to the best knowledge of Rio, there is no action, proceeding or
litigation pending or overtly contemplated or threatened (w) to take all or
any portion of any of the respective parcels of the Rio Real Property which
is not Rio Controlled Real Property, or any interest therein, by eminent
domain; (x) to modify the zoning of, or other governmental rules or
restrictions applicable to, any of the respective parcels of the Rio Real
Property which is not Rio Controlled Rio Real Property or the use or
development thereof; (y) for any street widening or changes in highway or
traffic lanes or patterns in the immediate vicinity of any of the respective
parcels of the Rio Real Property which is not Rio Controlled Real Property;
or (z) otherwise relating to any of the respective parcels of the Rio Real
Property which is not Rio Controlled Real Property, or the interests of Rio
and its Subsidiaries therein, or which otherwise would interfere with the
use, ownership, improvement, development and/or operation of any of the
respective parcels of the Rio Real Property which is not Rio Controlled Real
Property; in each case except for such actions, proceedings or litigation
which, individually or in the aggregate, would not be reasonably expected to
have a Rio Material Adverse Effect.
(f) Except as disclosed in Schedule 3.8(f) of the Rio Disclosure
Schedule, no portion of any of the respective parcels of the Rio Controlled
Real Property (exclusive of Rio Leased Property under Rio Space Leases), and
to the best knowledge of Rio, no portion of any of the respective parcels of
the Rio Real Property which is not Rio Controlled Real Property: (i) is
situated in a "Special Flood Hazard Area," as set forth on a Federal
Emergency Management Agency Flood Insurance Rate Map or Flood Hazard Boundary
Map; (ii) was the former site of any public or private landfill, dump site,
retention basin or settling pond; (iii) was the former site of any oil or gas
drilling operations; or (iv) was the former site of any experimentation,
processing, refining, reprocessing, recovery or manufacturing operation for
any petrochemicals.
(g) Except as disclosed in Schedule 3.8(g) of the Rio Disclosure
Schedule, each parcel of the Rio Controlled Real Property (exclusive of Rio
Leased Property under Rio Space
16
Leases), and to the best knowledge of Rio, each parcel of Rio Real Property
which is not Rio Controlled Real Property, is assessed separately from all
other adjacent property for purposes of real property taxes.
(h) Except as shown in Part I of Schedule 3.8(h) of the Rio
Disclosure Schedule each of the respective parcels constituting Rio
Controlled Real Property (exclusive of Rio Leased Property under Rio Space
Leases), and to the best knowledge of Rio, each of the respective parcels
constituting Rio Real Property which is not Rio Controlled Real Property, is
connected to and serviced by adequate water, sewage disposal, gas and
electricity facilities. All material systems (heating, air conditioning,
electrical, plumbing and the like) for the basic operation of each of the
businesses currently conducted at each of the respective parcels of the Rio
Controlled Real Property (exclusive of Rio Leased Property under Rio Space
Leases), or the best knowledge of Rio, at each of the respective parcels of
the Rio Real Property which is not Rio Controlled Real Property, are operable
and in satisfactory working condition (ordinary wear and tear excepted),
except as would not be reasonably expected to have a Rio Material Adverse
Effect. Each of the respective parcels constituting Rio Real Property is
zoned as described in Part II of Schedule 3.8(h) of the Rio Disclosure
Schedule.
(i) There are no material commitments to or agreements with any
governmental authority or agency (federal, state or local) affecting any
parcel of the Rio Controlled Real Property (exclusive of Rio Leased Property
under Rio Space Leases) which are not listed in Schedule 3.8(i) of the Rio
Disclosure Schedule. To the best knowledge of Rio, there are no material
commitments to or agreements with any governmental authority or agency
(federal, state or local) affecting any parcel of the Rio Real Property other
than Rio Controlled Real Property which are not listed in Schedule 3.8(i) of
the Rio Disclosure Schedule.
(j) There are no contracts or other obligations outstanding for
the sale, exchange, lease, transfer, hypothecation, financing or other
disposition of any of the respective parcels of the Rio Real Property, or any
portion of any such parcel, or the businesses operated by Rio at each of the
respective parcels of the Rio Real Property, by Rio and its Subsidiaries
except as disclosed on Schedule 3.8(j) of the Rio Disclosure Schedule and
other than contracts and obligations entered into after the date of this
Agreement in compliance with Section 5.1.
(k) Prior to the date hereof, Rio has delivered to Xxxxxx'x a true
and correct copy of its site plan for the expansion of the improvements on
the parcel of Rio Real Property described in Item 1A2c of Schedule 3.8(b) of
the Rio Disclosure Schedule which is described in the Form 10-K for the year
ended December 31, 1997, under the heading "Business--Expansion Strategy"
(the "PHASE VI EXPANSION PLAN"). Except as set forth in Part I of Schedule
3.8(k) of the Rio Disclosure Schedule, Rio and its Subsidiaries hold good,
valid, legal and marketable title in fee simple to all land necessary for the
implementation of the Phase VI Expansion Plan (the "PHASE VI LAND"). Rio and
its Subsidiaries hold all material permits, licenses, authorizations,
approvals, orders, variances and exemptions required by applicable
governmental authorities necessary for the development, construction and
operation of the improvements described Phase VI Expansion Plan to the extent
the same may be necessary and, in light of the current state of development
of said improvements, be lawfully secured as of the date hereof and, to the
extent the same may not, in light of the current state of development of said
improvements, be lawfully secured as of the date hereof, the same will be
secured as and when necessary and appropriate in
17
the ordinary course of business and without payment of any fees, costs, or
expenses other than such as are customary and those disclosed in Part II of
Schedule 3.8(k) of the Rio Disclosure Schedule. The Phase VI Land is
adequately zoned for the development contemplated by the Phase VI Expansion
Plan, and, to the best knowledge of Rio, there are no soil conditions
affecting the Phase VI Land which would materially interfere with the
development contemplated by the Phase VI Expansion Plan. The Phase VI Land
has access adequate for the development contemplated by the Phase VI
Expansion Plan. Part III of Schedule 3.8(k) accurately describes the current
status of the progress made to date in the assemblage of the various parcels
of land described therein (the "ASSEMBLAGE PARCELS"). The Assemblage Parcels
have the contiguity described in Part IV of Schedule 3.8(k) of the Rio
Disclosure Schedule.
(l) Schedule 3.8(l) of the Rio Disclosure Schedule lists all
settlements, understandings, contracts or other agreements in respect of
fees, taxes, charges or other impositions with respect to gaming, hotel,
restaurant or other operations by any applicable Governmental Entity with
jurisdiction thereover.
SECTION 3.9. TITLE TO PERSONAL PROPERTY; LIENS. Rio and each of its
Subsidiaries has sufficiently good and valid title to, or an adequate
leasehold interest (under the leases described in Schedule 3.9 of the Rio
Disclosure Schedule) in, its material tangible personal properties and assets
in order to allow it to conduct, and continue to conduct, its business as and
where currently conducted. Such material tangible personal assets and
properties are free of liens which would not individually or in the aggregate
have a Rio Material Adverse Effect, and the consummation of the transactions
contemplated by this Agreement will not alter or impair the rights of Rio and
its Subsidiaries thereunder in any respect which, individually or in the
aggregate, would be reasonably likely to have a Rio Material Adverse Effect.
There are no defects in the physical condition or operability of such
material tangible personal assets and properties which would impair the use
of such assets and properties as such assets and properties are currently
used, except for such defects which, individually or in the aggregate, would
not be reasonably likely to have a Rio Material Adverse Effect.
SECTION 3.10. INTELLECTUAL PROPERTY. Schedule 3.10 of the Rio
Disclosure Schedule lists all (i) trademark and service xxxx registrations
and applications owned by Rio or any of its Subsidiaries and (ii) material
trademark, service xxxx and trade name license agreements to which Rio or any
of its Subsidiaries is a party. Except as disclosed in Schedule 3.10 of the
Rio Disclosure Schedule, Rio and its Subsidiaries own or possess adequate
rights to use all material trademarks, trademark applications, trade names,
service marks, trade secrets (including customer lists and customer
databases), copyrights, patents, licenses, know-how and other proprietary
intellectual property rights as are necessary in connection with the
businesses of Rio and its Subsidiaries as currently conducted, and, to the
best knowledge of Rio, except as set forth in Schedule 3.10 of the Rio
Disclosure Schedule, there is no infringement of the rights of Rio and its
Subsidiaries therein or any infringement by them of the rights of others
therein which, individually or in the aggregate would be reasonably likely to
have a Rio Material Adverse Effect. Without limiting the generality of the
foregoing, Rio owns a validly registered trademark on the name "Rio Suite
Hotel & Casino (stylized)."
18
SECTION 3.11. AGREEMENTS, CONTRACTS AND COMMITMENTS.
(a) Except as disclosed in the Rio SEC Reports filed prior to the
date of this Agreement or as disclosed in Schedule 3.11(a) of the Rio
Disclosure Schedule, as of the date of this Agreement, neither Rio nor any of
its Subsidiaries is a party to any oral or written (i) agreement, contract,
indenture or other instrument relating to Indebtedness (as defined below) in
an amount exceeding $1,000,000, (ii) partnership, joint venture or limited
liability or management agreement with any person, (iii) agreement, contract,
or other instrument relating to any merger, consolidation, business
combination, share exchange, business acquisition, or for the purchase,
acquisition, sale or disposition of any material assets of Rio or any of its
Subsidiaries outside the ordinary course of business, (iv) other contract,
agreement or commitment to be performed after the date hereof which would be
a material contract (as defined in Item 601(b)(10) of Regulation S-K of the
SEC), (v) agreement, contract, or other instrument relating to any "strategic
alliances" (i.e., cross-marketing, affinity relationships, etc.), (vi)
contract, agreement or commitment which materially restricts (geographically
or otherwise) the conduct of any line of business by Rio or any of its
Subsidiaries or (vii) any contract, agreement or other instrument having as a
party any partnership, joint venture or limited liability company in which
Rio or any of its Subsidiaries is a partner, joint venture party or member
which would otherwise satisfy the criteria in clauses (i), (iii), (iv), (v)
or (vi) if Rio or any of its Subsidiaries were a party to such contract,
agreement or other instrument (collectively, the "RIO MATERIAL CONTRACTS").
"INDEBTEDNESS" means any liability in respect of (A) borrowed money, (B)
capitalized lease obligations, (C) the deferred purchase price of property or
services (other than trade payables in the ordinary course of business) and
(D) guarantees of any of the foregoing incurred by any other person other
than Rio or any of its Subsidiaries.
(b) Except as disclosed in the Rio SEC Reports filed prior to the
date of this Agreement or as disclosed in Schedule 3.11(b) of the Rio
Disclosure Schedule, as of the date of this Agreement, (i) each of the Rio
Material Contracts is valid and binding upon Rio or any of its Subsidiaries
(and, to Rio's best knowledge, on all other parties thereto) in accordance
with its terms and is in full force and effect, (ii) there is no material
breach or violation of or default by Rio or any of its Subsidiaries under any
of the Rio Material Contracts, whether or not such breach, violation or
default has been waived, and (iii) no event has occurred with respect to Rio
or any of its Subsidiaries which, with notice or lapse of time or both, would
constitute a material breach, violation or default, or give rise to a right
of termination, modification, cancellation, foreclosure, imposition of a
lien, prepayment or acceleration under any of the Rio Material Contracts,
which breach, violation or default referred to in clauses (ii) or (iii),
alone or in the aggregate with other such breaches, violations or defaults
referred to in clauses (ii) or (iii), would be reasonably likely to have a
Rio Material Adverse Effect.
SECTION 3.12. LITIGATION. Except as disclosed in the Rio SEC Reports
filed prior to the date of this Agreement or in Schedule 3.12 of the Rio
Disclosure Schedule, (a) there is no action, suit or proceeding, claim,
arbitration or investigation against Rio or any of its Subsidiaries pending,
or as to which Rio or any of its Subsidiaries has received any written notice
of assertion or, to the best knowledge of Rio, threatened against or
affecting, Rio or any of its Subsidiaries or any property or asset of Rio or
any of its Subsidiaries, before any court, arbitrator, or administrative,
governmental or regulatory authority or body, domestic or foreign, that,
individually or in the aggregate, could reasonably be expected to (i) have a
Rio Material Adverse
19
Effect or (ii) prevent the consummation of the transactions contemplated by
this Agreement; and (b) there is no judgment, order, injunction or decree of
any Governmental Entity outstanding against Rio or any of its Subsidiaries
that could reasonably be expected to have any effect referred to in clauses
(i) or (ii) above.
SECTION 3.13. ENVIRONMENTAL MATTERS. Except as disclosed in Schedule
3.13 of the Rio Disclosure Schedule or as would not be reasonably likely to
have a Rio Material Adverse Effect, (a) Rio and its Subsidiaries are in
compliance with all Environmental Laws, (b) there are no Environmental Claims
pending or, to the best knowledge of Rio, threatened against Rio and its
Subsidiaries, (c) there are no Environmental Conditions relating to Rio and
its Subsidiaries or any portion of the Rio Real Property, (d) no asbestos
containing materials, polychlorinated biphenyls (i.e., PCBs) or underground
storage tanks are present at any of the Rio Real Property, (e) none of Rio
and its Subsidiaries has received any notices from any governmental agency or
other third party alleging liability under or violation of any Environmental
Law, or alleging responsibility for the removal, investigation, or
remediation of any Environmental Condition and (f) Rio is not subject to any
enforcement or investigatory action by any governmental agency of which it
has received notice, and is not conducting any removal, investigation or
remediation, regarding an Environmental Condition with respect to any Rio
Real Property.
For purposes of this Section 3.13, the following definitions shall apply:
The term "HAZARDOUS MATERIALS" shall mean, without limitation, all
wastes, substances or materials defined as hazardous, toxic or a pollutant or
contaminant under any Environmental Laws.
"ENVIRONMENTAL LAWS" means all applicable foreign, federal, state and
local statutes or laws, common law, judgments, orders, regulations, licenses,
permits, rules and ordinances relating to pollution or protection of human
health, safety or the environment, including, but not limited to the Federal
Water Pollution Control Act (33 U.S.C. Section 1251 ET SEQ.), Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 ET SEQ.), Safe Drinking
Water Act (42 U.S.C. Section 3000(f) ET SEQ.), Toxic Substances Control Act
(15 U.S.C. Section 2601 ET SEQ.), Clean Air Act (42 U.S.C. Section 7401 ET
SEQ.), Comprehensive Environmental Response, Compensation and Liability Act
(42 U.S.C. Section 9601 ET SEQ.) Nevada Hazardous Materials laws (NRS Chapter
459), Nevada Solid Waste/Disposal of Garbage or Sewage law (NRS 444.440
through 444.650, inclusive), Nevada Water Controls/Pollution law (NRS Chapter
445B), Nevada Control of Asbestos law (NRS 618.750 to 618.850, inclusive),
Nevada Appropriation of Public Waters law (NRS 533.324 to 533.4385,
inclusive), Nevada Artificial Water Body Development Permit law (NRS
502.390), Nevada Protection of Endangered Species, Endangered Wildlife Permit
and Endangered Flora Permit laws (NRS 503.585 and NRS 527.270, respectively),
and other similar state and local statutes, in effect as of the date hereof.
"ENVIRONMENTAL CLAIM" means any claim, action, cause of action,
investigation or notice (written or oral) by any person or entity alleging
potential liability (including, without limitation, potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries or penalties) arising
out of, based on or resulting from (a) the presence or release of any
Hazardous Materials at any location, whether or not owned or operated by Rio
and its Subsidiaries or Xxxxxx'x and its Subsidiaries, or
20
(b) circumstances forming the basis of any violation, or alleged violation,
of any Environmental Law.
"ENVIRONMENTAL CONDITION" means the release into the environment of any
Hazardous Material as a result of which Rio (1) has or may become liable to
any person, (2) is or was in violation of any Environmental Law, (3) has or
may be required to incur response costs for investigation or remediation, or
(4) by reason of which any of the Rio Real Property or other assets of Rio,
may be subject to any lien under Environmental Laws.
SECTION 3.14. EMPLOYEE BENEFIT PLANS.
(a) DEFINITIONS. The following terms, when used in this Section
3.14 shall have the following meanings. Any of these terms may, unless the
context otherwise requires, be used in the singular or the plural depending
on the reference.
(i) BENEFIT ARRANGEMENT. "Benefit Arrangement" shall mean
any employment, consulting, severance or other similar contract, arrangement
or policy (including but not limited to any letter or memorandum relating to
employment) and each plan, program or agreement providing for workers'
compensation, disability benefits, supplemental unemployment benefits,
vacation benefits, retirement benefits, life insurance, health, accident
benefits (including without limitation any "voluntary employees' beneficiary
association" as defined in Section 501(c)(9) of the Code providing for the
same or other benefits), deferred compensation, profit-sharing bonuses, stock
options, stock appreciation rights, stock purchases or other forms of
incentive compensation which (1) is not a Welfare Plan, Pension Plan, or
Multiemployer Plan under which Rio or any ERISA Affiliate may incur any
liability, and (2) covers any employee or former employee of Rio or any ERISA
Affiliate (with respect to their relationship with such entities).
(ii) CODE. "Code" shall have the meaning set forth in the
preamble to this Agreement.
(iii) EMPLOYEE PLANS. "Employee Plans" shall mean all Benefit
Arrangements, Multiemployer Plans, Pension Plans and Welfare Plans.
(iv) ERISA. "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
(v) ERISA AFFILIATE. "ERISA Affiliate" shall mean any entity
which is (or at any relevant time was) a member of a "controlled group of
corporations" with, under "common control" with, or a member of an
"affiliated service group" with, Rio as defined in Section 414(b), (c), (m)
or (o) of the Code or any partnership of which Rio or any of its Subsidiaries
is a general partner.
(vi) MULTIEMPLOYER PLAN. "Multiemployer Plan" shall mean any
"multiemployer plan," as defined in Section 4001(a)(3) of ERISA, under which
Rio or any ERISA Affiliate may incur any liability.
21
(vii) PENSION PLAN. "Pension Plan" shall mean any "employee
pension benefit plan", as defined in Section 3(2) of ERISA, other than a
Multiemployer Plan, under which Rio or any ERISA Affiliate may incur any
liability.
(viii) WELFARE PLAN. "Welfare Plan" shall mean any "employee
welfare benefit plan", as defined in Section 3(1) of ERISA, under which Rio or
any ERISA Affiliate may incur any liability.
(b) DISCLOSURE; DELIVERY OF COPIES OF RELEVANT DOCUMENTS AND OTHER
INFORMATION. Schedule 3.14 of the Rio Disclosure Schedule contains a complete
list of the Employee Plans. Copies of (i) each Employee Plan other than any
Multiemployer Plan, and, if applicable, related trust agreement, and any
amendment thereto, (ii) the most recent determination letter issued by the IRS
with respect to each Employee Plan which is intended to qualify under Section
401(a) of the Code and (iii) the most recent Annual Report on Form 5500 Series
required to be filed with any governmental agency for each Pension Plan and
Welfare Plan have been delivered by Rio to Xxxxxx'x and are true and complete
copies of such documents.
(c) REPRESENTATIONS. Except as set forth in Schedule 3.14(c) of the
Rio Disclosure Schedule:
(i) EMPLOYEE PLANS
(A) No Pension Plan is subject to Title IV of ERISA or the
minimum funding requirements of Section 412 of the Code. Each Pension Plan
(with its related trust) that is intended to qualify under the provisions of
Code Section 401(a) has received a favorable determination letter from the
Internal Revenue Service stating that the Pension Plan is so qualified and the
related trust is exempt from federal income tax under Section 501(a) of the Code
and, to the best knowledge of Rio, nothing has occurred since the date of the
last such determination letter which has resulted in or is likely to result in
the revocation of such determination letter.
(B) Each Employee Plan has been maintained in material
compliance with its terms and, both as to form and in operation, with the
requirements prescribed by any and all applicable laws, including without
limitation ERISA and the Code to the extent applicable.
(ii) MULTIEMPLOYER PLANS
(A) Neither Rio nor any ERISA Affiliate has, at any time,
withdrawn from a Multiemployer Plan in a "complete withdrawal" or a "partial
withdrawal" as defined in Sections 4203 and 4205 of ERISA, respectively, so as
to result in a liability, contingent or otherwise (including without limitation
the obligations pursuant to an agreement entered into in accordance with Section
4204 of ERISA), of Rio or any ERISA Affiliate which has not been fully
satisfied. Neither Rio nor any ERISA Affiliate has engaged in, or is a
successor or parent corporation to an entity that has engaged in, a transaction
described in Section 4212(c) of ERISA.
(B) No Employee Plan is a Multiemployer Plan.
(iii) WELFARE PLANS. None of Rio, any ERISA Affiliate or any
Welfare Plan has any present or future obligation to make any payment to, or
with respect to any present or
22
former employee of Rio or any ERISA Affiliate pursuant to, any retiree
medical benefit plan, or other retiree Welfare Plan, except to the extent
required by the Code or ERISA.
(iv) LITIGATION. To the best knowledge of Rio, there is no
material action, order, writ, injunction, judgment or decree outstanding or
claim, suit, litigation, proceeding, arbitral action, governmental audit or
investigation relating to or seeking benefits under any Employee Plan that is
pending against Rio, any ERISA Affiliate or any Employee Plan other than routine
claims for benefits.
(v) MISCELLANEOUS MATTERS. As of the date hereof (a) all
material payments required to be made on or before the date hereof by or under
any Employee Plan, any related trust, or any collective bargaining agreement
have been made or are being processed in accordance with normal operating
procedures, and except as set forth in Rio's financial statement, all material
amounts required to be reflected thereon have been properly accrued to date as
liabilities under or with respect to each Employee Plan, (b) Rio and its
Subsidiaries have performed all material obligations required to be performed by
them on or before the date hereof under any Employee Plan and (c) Rio and its
Subsidiaries have no liability as a result of any "prohibited transaction" (as
defined in Section 406 of ERISA and Section 4975 of the Code) for any excise tax
or civil penalty.
SECTION 3.15. COMPLIANCE.
(a) Except as set forth on Schedule 3.15 of the Rio Disclosure
Schedule, each of Rio and its Subsidiaries, and each of their respective
directors (but with respect to non-employee directors, only to Rio's best
knowledge), officers, persons performing management functions similar to
officers and, to Rio's best knowledge, partners hold all permits, registrations,
findings of suitability, licenses, variances, exemptions, certificates of
occupancy, orders and approvals of all Governmental Entities (including all
authorizations under Environmental Laws and Rio Gaming Laws) necessary to
conduct the business and operations of Rio and each of its Subsidiaries, each of
which is in full force and effect in all material respects, except for such
permits, registrations, findings of suitability, licenses, variances,
exemptions, certificates of occupancy, orders and approvals the failure of which
to hold would not, individually or in the aggregate, be reasonably likely to
have a Rio Material Adverse Effect (the "RIO PERMITS") and no event has occurred
which permits, or upon the giving of notice or passage of time or both would
permit, revocation, non-renewal, modification, suspension, limitation or
termination of any Rio Permit that currently is in effect the loss of which
either individually or in the aggregate would be reasonably likely to have a Rio
Material Adverse Effect. Each of Rio and its Subsidiaries, and each of their
respective directors (but with respect to non-employee directors, only to Rio's
best knowledge), officers, persons performing management functions similar to
officers and, to Rio's best knowledge, partners, are in compliance with the
terms of the Rio Permits, except for such failures to comply, which singly or in
the aggregate, would not, individually or in the aggregate, be reasonably likely
to have a Rio Material Adverse Effect. Except as disclosed in the Rio SEC
Reports filed prior to the date of this Agreement or as would not be reasonably
likely to have a Rio Material Adverse Effect, the businesses of Rio and its
Subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity (including, without limitation, any Rio
Gaming Laws). To the best knowledge of Rio, no investigation or review by any
Governmental Entity with respect to Rio or any of its Subsidiaries is pending,
or threatened,
23
nor has any Governmental Entity indicated any intention to conduct the same,
other than those the outcome of which would not, individually or in the
aggregate, be reasonably likely to have a Rio Material Adverse Effect.
(b) The term "RIO GAMING LAWS" means any Federal, state, local or
foreign statute, ordinance, rule, regulation, permit, consent, registration,
finding of suitability, approval, license, judgment, order, decree, injunction
or other authorization, including any condition or limitation placed thereon,
governing or relating to the current or contemplated casino and gaming
activities and operations of Rio or any of its Subsidiaries, including, without
limitation, the Nevada Gaming Control Act and the rules and regulations
promulgated thereunder, the Xxxxx County Code and the rules and regulations
promulgated thereunder and any applicable state gaming law and any federal or
state laws relating to currency transactions.
(c) Except as disclosed in Schedule 3.15(c) of the Rio Disclosure
Schedule, neither Rio nor any of its Subsidiaries, nor any director (but with
respect to non-employee directors, only to Rio's best knowledge), officer, key
employee or, to Rio's best knowledge, partners of Rio or any of its Subsidiaries
has received any written claim, demand, notice, complaint, court order or
administrative order from any Governmental Entity in the past three years under,
or relating to any violation or possible violation of any Rio Gaming Laws which
did or would be reasonably likely to result in fines or penalties of $50,000 or
more. To Rio's best knowledge, there are no facts, which if known to the
regulators under the Rio Gaming Laws could reasonably be expected to result in
the revocation, limitation or suspension of a license, finding of suitability,
registration, permit or approval of it or them, or of any officer, director,
other person performing management functions similar to an officer or partner,
under any Rio Gaming Laws. Neither Rio nor any of its Subsidiaries has suffered
a suspension or revocation of any material license, finding of suitability,
registration, permit or approval held under the Rio Gaming Laws.
SECTION 3.16. ACCOUNTING AND TAX MATTERS. To the best knowledge of Rio,
after consulting with its independent auditors with respect to clause (i) below
and its tax advisors with respect to clause (ii) below, except as set forth on
Schedule 3.16 of the Rio Disclosure Schedule, neither Rio nor any of its
Affiliates (as defined in Section 5.12) has taken or agreed to take any action
which would (i) prevent Xxxxxx'x from accounting for the business combination to
be effected by the Merger as a pooling of interests or (ii) prevent the Merger
from qualifying as a reorganization described in Section 368(a) of the Code.
SECTION 3.17. JOINT PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT.
None of the information supplied by Rio or its Subsidiaries to be included or
incorporated by reference in the joint proxy statement/prospectus to be sent to
the stockholders of Xxxxxx'x and Rio in connection with the meeting of Rio's
stockholders (the "RIO STOCKHOLDERS' MEETING") and the meeting of Xxxxxx'x
stockholders (the "XXXXXX'X STOCKHOLDERS' MEETING") to consider the Agreement
and the Merger (the "JOINT PROXY STATEMENT/PROSPECTUS") or any amendment thereof
or supplement thereto, will, on the date it became effective with the SEC, at
the time of the mailing of the Joint Proxy Statement/Prospectus or any amendment
or supplement, at the time of Rio Stockholders' Meeting and the Xxxxxx'x
Stockholders' Meeting and at the Effective Time, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Joint Proxy
Statement/Prospectus will comply as to form in all
24
material respects with the provisions of the Securities Act and the Exchange
Act and the rules and regulations thereunder; PROVIDED, HOWEVER, that Rio
makes no representation with respect to any information supplied or to be
supplied by Xxxxxx'x or Merger Sub for inclusion in the Joint Proxy
Statement/Prospectus or any amendment thereof or supplement thereto. None of
the information supplied by Rio or its Subsidiaries to be included or
incorporated by reference from Rio SEC filings in the registration statement
on Form S-4 pursuant to which shares of Xxxxxx'x Common Stock issued in the
Merger will be registered under the Securities Act (the "REGISTRATION
STATEMENT"), of which the Joint Proxy Statement/Prospectus will form a part,
will, at the time the Registration Statement is declared effective by the
SEC, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made,
not misleading.
SECTION 3.18. LABOR MATTERS. Except as disclosed in Schedule 3.18 of the
Rio Disclosure Schedule or as would not be reasonably likely to have a Rio
Material Adverse Effect, (i) there are no controversies pending or, to the best
knowledge of Rio, threatened between Rio or any of its Subsidiaries and any of
their respective employees; (ii) to the best knowledge of Rio, there are no
activities or proceedings of any labor union to organize any non-unionized
employees; (iii) neither Rio nor any of its Subsidiaries has breached or
otherwise failed to comply with any provision of any collective bargaining
agreement or contract and there are no grievances outstanding against Rio or any
of its Subsidiaries under any such agreement or contract; (iv) there are no
unfair labor practice charges and/or complaints pending against Rio or any of
its Subsidiaries before the National Labor Relations Board, or any similar
foreign labor relations governmental bodies, or any current union representation
questions involving employees of Rio or any of its Subsidiaries; and (v) there
is no strike, slowdown, work stoppage or lockout, or, to the best knowledge of
Rio, threat thereof, by or with respect to any employees of Rio or any of its
Subsidiaries. Rio and its Subsidiaries are not parties to any collective
bargaining agreements, except for collective bargaining agreements disclosed in
Schedule 3.18 of the Rio Disclosure Schedule.
SECTION 3.19. INSURANCE. Rio has provided to Xxxxxx'x accurate and
complete copies of all material fire and casualty, general liability, business
interruption, product liability, and sprinkler and water damage insurance
policies maintained by Rio or any of its Subsidiaries. All such insurance
policies are with reputable insurance carriers and provide coverage as is
reasonably prudent to cover normal risks incident to the business of Rio and its
Subsidiaries and their respective properties and assets.
SECTION 3.20. OPINION OF FINANCIAL ADVISOR. Rio has received the opinion
of Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated, dated the date of this
Agreement, to the effect that the Exchange Ratio is fair to the holders of Rio
Common Stock from a financial point of view.
SECTION 3.21. NO EXISTING DISCUSSIONS. As of the date hereof, Rio is not
engaged, directly or indirectly, in any discussions or negotiations with any
other party with respect to an Acquisition Proposal (as defined in Section 5.4).
SECTION 3.22. NEVADA TAKEOVER STATUTE. As of the date hereof, the
restrictions of Sections 78.378 through 78.3793 of the NRS are, and shall be,
inapplicable to the Merger, and the transactions contemplated by this Agreement.
25
SECTION 3.23. BROKERS. None of Rio or any of its Subsidiaries, or to the
knowledge of Rio, any of their respective officers, directors or employees have
employed any broker, financial advisor or finder or incurred any liability for
any brokerage fees, commissions or finder's fees in connection with the
transactions contemplated by this Agreement, except that Rio has retained
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated as its financial advisor, the
arrangements with which have been disclosed in writing to Xxxxxx'x and Merger
Sub prior to the date of this Agreement.
SECTION 3.24. TRANSACTIONS WITH AFFILIATES. Other than the transactions
contemplated by this Agreement and except to the extent disclosed in the Rio SEC
Documents filed prior to the date of this Agreement or as disclosed in Schedule
3.24 of the Rio Disclosure Schedule, from January 1, 1998 through the date of
this Agreement, there have been no transactions, agreements, arrangements or
understandings between Rio or any of its Subsidiaries, on the one hand, and
Rio's affiliates or other persons, on the other hand, that would be required to
be disclosed under Item 404 of Regulation S-K under the Securities Act.
SECTION 3.25. YEAR 2000. Except as disclosed in Schedule 3.25 of the Rio
Disclosure Schedule, to the knowledge of Rio without any inquiry, as of the date
hereof, all computer software necessary for the conduct of its business (the
"Software") is designed to be used prior to, during, and after the calendar year
2000 A.D., and that the Software will operate during each such time period
without error relating to the year 2000, specifically including any error
relating to, or the product of, date data which represents or references
different centuries or more than one century. Rio further represents and
warrants that as of the date hereof, to its knowledge without any inquiry, the
Software accepts, calculates, sorts, extracts and otherwise processes date
inputs and date values, and returns and displays date values, in a consistent
manner regardless of the dates used, whether before, on, or after January 1,
2000.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF XXXXXX'X AND MERGER SUB
Xxxxxx'x and Merger Sub represent and warrant to Rio that the statements
contained in this Article IV are true and correct except as set forth herein and
in the disclosure schedule delivered by Xxxxxx'x and Merger Sub to Rio on or
before the date of this Agreement (the "XXXXXX'X DISCLOSURE SCHEDULE"). The
Xxxxxx'x Disclosure Schedule shall be arranged in paragraphs corresponding to
the numbered and lettered paragraphs contained in this Article IV and the
disclosure in any paragraph shall qualify other paragraphs in this Article IV
only to the extent that it is reasonable from a reading of such disclosure that
it also qualifies or applies to such other paragraphs. For all purposes of this
Agreement, all references to "Subsidiaries" of Xxxxxx'x shall be deemed to
exclude Xxxxxx'x Jazz Company.
SECTION 4.1. ORGANIZATION. Each of Xxxxxx'x and its Subsidiaries is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has the requisite corporate, partnership
and limited liability company power and authority to carry on its business as
now being conducted. Each of Xxxxxx'x and its Subsidiaries is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or
26
licensing necessary, except where the failure to be so qualified, licensed or
in good standing would not be reasonably likely to have a material adverse
effect on the business, properties, financial condition or results of
operations of Xxxxxx'x and its Subsidiaries, taken as a whole (a "XXXXXX'X
MATERIAL ADVERSE EFFECT"); PROVIDED, HOWEVER, that the effect of economic
changes that are applicable to the gaming industry generally, or the gaming
industry in markets in which Xxxxxx'x or its Subsidiaries conduct business in
particular, shall be excluded from the definition of "Xxxxxx'x Material
Adverse Effect" and from any determination as to whether a Xxxxxx'x Material
Adverse Effect has occurred or may occur with respect to Xxxxxx'x. Xxxxxx'x
has delivered to Rio true and correct copies of the Certificate of
Incorporation and Bylaws of each of Xxxxxx'x and Merger Sub, in each case as
amended to the date of this Agreement.
SECTION 4.2. CAPITALIZATION.
(a) The authorized capital stock of Xxxxxx'x consists of 360,000,000
shares of Xxxxxx'x Common Stock par value $0.10 per share, 150,000 shares of
preferred stock, par value $100 per share ("XXXXXX'X PREFERRED STOCK"),
5,000,000 shares of special stock, par value $1.125 per share ("XXXXXX'X SPECIAL
STOCK"), of which 2,000,000 shares have been designated as "SERIES A SPECIAL
STOCK". As of the date hereof, (i) 101,484,541 shares of Xxxxxx'x Common Stock
were issued and outstanding, all of which are validly issued, fully paid and
nonassessable, (ii) 3,013,378 shares of Xxxxxx'x Common Stock were held in the
treasury of Xxxxxx'x or by Subsidiaries of Xxxxxx'x, and (iii) no shares of
Xxxxxx'x Preferred Stock or Xxxxxx'x Special Stock are issued and outstanding.
Schedule 4.2(a) of the Xxxxxx'x Disclosure Schedule sets forth the number of
shares of Xxxxxx'x Common Stock reserved for issuance (A) upon exercise of
options to acquire shares of Xxxxxx'x Common Stock ("XXXXXX'X OPTIONS") granted
and outstanding as of the date hereof and under Xxxxxx'x stock option plans
("XXXXXX'X STOCK OPTION PLANS"). Since December 31, 1997 through the date of
this Agreement, Xxxxxx'x has not made any grants under any of the Xxxxxx'x Stock
Option Plans. Except as disclosed in Schedule 4.2(a) of the Xxxxxx'x Disclosure
Schedule, there are no obligations, contingent or otherwise, of Xxxxxx'x or any
of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
Xxxxxx'x Common Stock or the capital stock or ownership interests of any
Subsidiary.
(b) There is no Voting Debt of Xxxxxx'x or any of its Subsidiaries
issued and outstanding. Except as set forth in Section 4.2(a) or as reserved for
future grants of options or restricted stock under the Xxxxxx'x Stock Plans and
except for the Common Stock Purchase rights issued and issuable under the Rights
Agreement, dated as of October 5, 1996, between Xxxxxx'x and The Bank of New
York, as amended on February 21, 1997 and April 25, 1997, as of the date hereof,
(i) there are no shares of capital stock of any class of Xxxxxx'x, or any
security exchangeable into or exercisable for such equity securities, issued,
reserved for issuance or outstanding; (ii) there are no options, warrants,
equity securities, calls, rights, commitments or agreements of any character to
which Xxxxxx'x or any of its Subsidiaries is a party or by which it is bound
obligating Xxxxxx'x or any of its Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock or
other ownership interests (including Voting Debt) of Xxxxxx'x or any of its
Subsidiaries or obligating Xxxxxx'x or any of its Subsidiaries to grant, extend,
accelerate the vesting of or enter into any such option, warrant, equity
security, call, right, commitment or agreement; and (iii) there are no voting
trusts, proxies or other voting agreements or understandings with respect to the
shares of capital stock of Xxxxxx'x. All shares of Xxxxxx'x Common Stock
subject to issuance as specified in this
27
Section 4.2(b) are duly authorized and, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
shall be validly issued, fully paid and nonassessable.
(c) The authorized capital stock of Merger Sub consists of 2,500
shares of Common Stock without par value ("MERGER SUB COMMON STOCK"), of which
100 shares are issued and outstanding. Xxxxxx'x owns directly all the
outstanding shares of Merger Sub Common Stock. The outstanding shares of Merger
Sub Common Stock are duly authorized, validly issued, fully paid and assessable
and free of any preemptive rights.
SECTION 4.3. AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Xxxxxx'x and Merger Sub have all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated by this Agreement. The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby by Xxxxxx'x and Merger
Sub have been duly authorized by all necessary corporate action on the part of
Xxxxxx'x and Merger Sub. This Agreement has been duly executed and delivered by
Xxxxxx'x and Merger Sub and assuming the due authorization, execution and
delivery by Rio, constitutes the valid and binding obligation of Xxxxxx'x and
Merger Sub, enforceable against each of them in accordance with its terms.
(b) Other than or as disclosed in Schedule 4.3(b) of the Xxxxxx'x
Disclosure Schedule, the execution and delivery of this Agreement by Xxxxxx'x
and Merger Sub does not, and the consummation of the transactions contemplated
hereby will not, (i) conflict with, or result in any violation or breach of, any
provision of the Certificate of Incorporation or Bylaws of Xxxxxx'x or the
comparable charter or organizational documents of any of its Subsidiaries,
(ii) result in any violation or breach of, or constitute (with or without notice
or lapse of time, or both) a default (or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any material benefit)
under, or require a consent or waiver under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, contract or other
agreement, instrument or obligation to which Xxxxxx'x or any of its Subsidiaries
is a party or by which any of them or any of their properties or assets may be
bound, or (iii) subject to the governmental filings and other matters referred
to in Section 4.3(c), conflict with or violate any permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Xxxxxx'x or any of its Subsidiaries or any of its or
their properties or assets, except in the case of clauses (ii) and (iii) for any
such conflicts, violations, defaults, terminations, breaches, cancellations,
accelerations or requirements for consent or waiver not obtained which (x) are
not, individually or in the aggregate, reasonably likely to have a Xxxxxx'x
Material Adverse Effect or (y) would not impair or unreasonably delay the
consummation of the Merger.
(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to Xxxxxx'x or any of its Subsidiaries in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) the filing of the pre-merger notification
report under the HSR Act, (ii) the filing of the Articles of Merger with
respect to the Merger with the Secretary of State of the State of Nevada,
(iii) any approvals and filing of notices
28
required under the Xxxxxx'x Gaming Laws (as defined in Section 4.14(b)) or
the Rio Gaming Laws, (iv) such consents, approvals, orders, authorizations,
permits, filings, or registrations related to, or arising out of, compliance
with statutes, rules or regulations regulating the consumption, sale or
serving of alcoholic beverages, (v) such immaterial filings and consents as
may be required under any environmental, health or safety law or regulation
pertaining to any notification, disclosure or required approval triggered by
the Merger or the transactions contemplated by this Agreement, and (vi) such
other filings, consents, approvals, orders, registrations and declarations as
may be required under the laws of any jurisdiction in which Xxxxxx'x or any
of its Subsidiaries conducts any business or owns any assets the failure of
which to obtain would not be reasonably likely to have a Xxxxxx'x Material
Adverse Effect.
SECTION 4.4. PUBLIC FILINGS; FINANCIAL STATEMENTS.
(a) Xxxxxx'x and its Subsidiaries that are required to file forms,
reports or other documents with the SEC (the "XXXXXX'X REPORTING SUBSIDIARIES")
have filed and made available to Xxxxxx'x all forms, reports and documents
required to be filed by Xxxxxx'x and the Xxxxxx'x Reporting Subsidiaries with
the SEC since January 1, 1995 (collectively, the "XXXXXX'X SEC REPORTS"). The
Xxxxxx'x SEC Reports (including any financial statements filed as a part thereof
or incorporated by reference therein) (i) at the time filed, complied in all
material respects with the applicable requirements of the Securities Act and the
Exchange Act, as the case may be, and (ii) did not, at the time they were filed
(or if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing), contain any untrue statement of a material
fact or omit to state a material fact required to be stated in such Xxxxxx'x SEC
Reports or necessary in order to make the statements in such Xxxxxx'x SEC
Reports, in the light of the circumstances under which they were made, not
misleading.
(b) Each of the consolidated financial statements (including, in
each case, any related notes) of Xxxxxx'x contained in the Xxxxxx'x SEC
Reports complied as to form in all material respects with the applicable
published rules and regulations of the SEC with respect thereto, was prepared
in accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial
statements or, in the case of unaudited statements, as permitted by Form 10-Q
under the Exchange Act) and fairly presented the consolidated financial
position of Xxxxxx'x and its consolidated Subsidiaries as of the dates and
the consolidated results of its operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which, with respect to
interim periods since December 31, 1997, were not or are not expected to be
material in amount. The audited balance sheet of Xxxxxx'x as of December 31,
1997 is referred to herein as the "XXXXXX'X BALANCE SHEET."
SECTION 4.5. NO UNDISCLOSED LIABILITIES. Except as disclosed in the
Xxxxxx'x SEC Reports filed prior to the date of this Agreement or in Schedule
4.5 of the Xxxxxx'x Disclosure Schedule, and except for liabilities and
obligations incurred since the date of the Xxxxxx'x Balance Sheet in the
ordinary course of business consistent with past practices, Xxxxxx'x and its
consolidated Subsidiaries do not have any indebtedness, obligations or
liabilities of any kind, whether accrued, contingent or otherwise (whether or
not required to be reflected in financial statements in accordance with GAAP),
and whether due or to become due, which would be reasonably likely to have a
Xxxxxx'x Material Adverse Effect.
29
SECTION 4.6. LITIGATION. Except as disclosed in the Xxxxxx'x SEC
Reports filed prior to the date of this Agreement or in Schedule 4.6 of the
Xxxxxx'x Disclosure Schedule, (a) there is no action, suit or proceeding,
claim, arbitration or investigation against Xxxxxx'x or any of its
Subsidiaries pending, or as to which Xxxxxx'x or any of its Subsidiaries has
received any written notice of assertion or, to the best knowledge of
Xxxxxx'x, threatened against or affecting, Xxxxxx'x or any of its
Subsidiaries or any property or asset of Xxxxxx'x or any of its Subsidiaries,
before any court, arbitrator, or administrative, governmental or regulatory
authority or body, domestic or foreign, that, individually or in the
aggregate, could reasonably be expected to (i) have a Xxxxxx'x Material
Adverse Effect or (ii) prevent the consummation of the transactions
contemplated by this Agreement; and (b) there is no judgment, order,
injunction or decree of any Governmental Entity outstanding against Xxxxxx'x
or any of its Subsidiaries that could reasonably be expected to have any
effect referred to in clauses (i) or (ii) above.
SECTION 4.7. ENVIRONMENTAL MATTERS. Except as disclosed in Schedule 4.7
of the Xxxxxx'x Disclosure Schedule or as would not be reasonably likely to have
a Xxxxxx'x Material Adverse Effect, (a) Xxxxxx'x and its Subsidiaries are in
compliance with all Environmental Laws, (b) there are no Environmental Claims
pending or, to the best knowledge of Xxxxxx'x, threatened against Xxxxxx'x and
its Subsidiaries, (c) there are no Environmental Conditions relating to Xxxxxx'x
and its Subsidiaries or any property currently owned or operated by Xxxxxx'x or
its Subsidiaries, (d) no asbestos containing materials, polychlorinated
biphenyls (i.e., PCBs) or underground storage tanks are present at any of the
real properties owned or operated by Xxxxxx'x, (e) none of Xxxxxx'x or its
Subsidiaries has received any notices from any governmental agency or other
third party alleging liability under or violation of any Environmental Law, or
alleging responsibility for the removal, investigation, or remediation of any
Environmental Condition and (f) Xxxxxx'x is not subject to any enforcement or
investigatory action by any governmental agency of which it has received notice,
and is not conducting any removal, investigation or remediation, regarding an
Environmental Condition with respect to any real property owned or operated by
Xxxxxx'x or its Subsidiaries or for which Xxxxxx'x or its Subsidiaries have an
option to purchase or right of first refusal or equitable interests as contract
purchasers or equitable interests as profit participants. Environmental Laws,
Environmental Claims and Environmental Conditions shall have the meanings
assigned to them in Section 3.13.
SECTION 4.8. LABOR MATTERS. Except as disclosed in Schedule 4.8 of the
Xxxxxx'x Disclosure Schedule or as would not have a Xxxxxx'x Material Adverse
Effect, (i) there are no controversies pending or, to the best knowledge of
Xxxxxx'x, threatened between Xxxxxx'x or any of its Subsidiaries and any of
their respective employees; (ii) to the best knowledge of Xxxxxx'x, there are no
activities or proceedings of any labor union to organize any non-unionized
employees, (iii) neither Xxxxxx'x nor any of its Subsidiaries has breached or
otherwise failed to comply with any provision of any collective bargaining
agreement or contract and there are no grievances outstanding against Xxxxxx'x
or any of its Subsidiaries under any such agreement or contract; (iv) there are
no unfair labor practice charges and/or complaints pending against Xxxxxx'x or
any of its Subsidiaries before the National Labor Relations Board, or any
similar foreign labor relations governmental bodies, or any current union
representation questions involving employees of Xxxxxx'x or any of its
Subsidiaries; and (v) there is no strike, slowdown, work stoppage or lockout,
or, to the best knowledge of Xxxxxx'x, threat thereof, by or with respect to any
employees of Xxxxxx'x or any of its Subsidiaries.
30
SECTION 4.9. INSURANCE. Xxxxxx'x maintains insurance in such amounts and
on such terms as is necessary for Xxxxxx'x business as currently conducted and
as is reasonable and customary in the gaming business. All such insurance
policies are with reputable insurance carriers and provide coverage as is
reasonably prudent to cover normal risks incident to the business of Xxxxxx'x
and its Subsidiaries and their respective properties and assets.
SECTION 4.10. TAXES. Except as would not be reasonably likely to have a
Xxxxxx'x Material Adverse Effect or except as disclosed on Schedule 4.10 of the
Xxxxxx'x Disclosure Schedule, (a) each of Xxxxxx'x, its Subsidiaries and any
affiliated group (within the meaning of Section 1504 of the Code) of which
Xxxxxx'x or any of its Subsidiaries is now or ever has been a member (i) has
filed or caused to be filed, or will file or cause to be filed, with the
appropriate taxing authority, on a timely basis, all federal or other material
Tax Returns required to be filed by it on or prior to the Closing Date (which
Tax Returns were or will be correct and complete in all material respects), and
(ii) has paid or caused to be paid or will pay or cause to be paid (x) all Taxes
due for the periods covered thereby and (y) all Taxes pursuant to any assessment
received by Xxxxxx'x or any of its Subsidiaries, excluding in each case under
this clause (ii), any such Taxes that have been contested in good faith and for
which adequate reserves have been established in accordance with generally
accepted accounting principles; (b) as of the date hereof, there is no action,
suit, proceeding, investigation, audit or claim now pending or, to the knowledge
of Xxxxxx'x or any of its Subsidiaries, threatened by any governmental or taxing
authority regarding any Taxes relating to Xxxxxx'x or any of its Subsidiaries
and (c) as of the date hereof, neither Xxxxxx'x nor any of its Subsidiaries has
entered into an agreement or waiver extending any statute of limitations
relating to the payment or collection of any Taxes of Xxxxxx'x or any of its
Subsidiaries.
SECTION 4.11. COMPLIANCE WITH ERISA. Each employee benefit plan, within
the meaning of Section 3(3) of ERISA, other than any multiemployer plan, within
the meaning of Section 4001(a)(3) of ERISA, that is sponsored maintained or
contributed to or with respect to which Xxxxxx'x has an obligation to contribute
has been maintained in material compliance with the requirements of all
applicable statutes, orders, rules and regulations which are applicable to such
employee benefit plan, including but not limited to ERISA and the Code. With
respect to each such employee benefit plan that is an employee pension benefit
plan, within the meaning of Section 3(2) of ERISA, that is regulated under Title
IV of ERISA: (i) Xxxxxx'x and any other entity that, together with Xxxxxx'x as
of the relevant measuring date under ERISA, was or is required to be treated as
single employer under Section 414 of the Code ("XXXXXX'X ERISA AFFILIATE") have
fulfilled their respective obligations under the minimum funding requirements of
Section 302 of ERISA and Section 412 of the Code; (ii) no reportable event, as
defined in Section 4043 of ERISA, has occurred and is continuing; (iii) no
liability to the Pension Benefit Guaranty Corporation has been incurred, and
(iv) no proceedings have been instituted by the Pension Benefit Guaranty
Corporation to terminate any such plan. With respect to any multiemployer plan,
within the meaning of Section 4001(a)(3) of ERISA, to which Xxxxxx'x or a
Xxxxxx'x ERISA Affiliate contributed, or with respect to which Xxxxxx'x or a
Xxxxxx'x ERISA Affiliate has or had an obligation to contribute at any time
within the 6-year period preceding the Closing Date, neither Xxxxxx'x nor any
Xxxxxx'x ERISA Affiliate has (i) incurred any withdrawal liability, as defined
in Part I of Subtitle E of Title IV of ERISA, or (ii) been notified by the
sponsor of any such multiemployer plan that such multiemployer plan is in
reorganization or has been terminated, within the meaning of Title IV of ERISA.
To the best knowledge of Xxxxxx'x, a complete
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withdrawal from each such multiemployer plan would not result in any
liability for Xxxxxx'x, contingent or otherwise, that would be reasonably
likely to have a Xxxxxx'x Material Adverse Effect. Each Pension Plan and
each related trust that are intended to qualify under the provisions of Code
Section 401(a) have received a favorable determination letter from the
Internal Revenue Service stating that the Pension Plan is so qualified and
the related trust is exempt from federal income tax under Section 501(a) of
the Code and, to the best knowledge of Xxxxxx'x, nothing has occurred since
the date of the last such determination letter which has resulted in or is
likely to result in the revocation of such determination letter. None of
Xxxxxx'x, any Xxxxxx'x ERISA Affiliate or any Welfare Plan has any present or
future obligation to make any payment to, or with respect to any present or
former employee of Xxxxxx'x or any Xxxxxx'x ERISA Affiliate pursuant to, any
retiree medical benefit plan, or other retiree Welfare Plan, except to the
extent required by the Code or ERISA and except with respect to certain
former employees, who currently number fewer than thirty (30).
SECTION 4.12. INTELLECTUAL PROPERTY. Except as disclosed in Schedule 4.12
of the Xxxxxx'x Disclosure Schedule or would not be reasonably likely to have a
Xxxxxx'x Material Effect, Xxxxxx'x and its Subsidiaries own or possess adequate
rights to use all material trademarks, trademark applications, trade names,
service marks, trade secrets (including customer lists and customer databases),
copyrights, patents, licenses, know-how and other proprietary intellectual
property rights as are necessary in connection with the businesses Xxxxxx'x and
its Subsidiaries as currently conducted, and, to the best knowledge of Xxxxxx'x,
except as set forth in Schedule 4.12 of the Xxxxxx'x Disclosure Schedule, there
is no infringement of the rights of Xxxxxx'x and its Subsidiaries therein or any
infringement by them of the right of others therein which, individually or in
the aggregate would be reasonably likely to have a Xxxxxx'x Material Adverse
Effect.
SECTION 4.13. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in the Xxxxxx'x SEC Reports filed prior to the date of this Agreement or in
Schedule 4.13 of the Xxxxxx'x Disclosure Schedule, since the date of the
Xxxxxx'x Balance Sheet, Xxxxxx'x and its Subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and, since such date, there has not been (i) any event, development,
state of affairs or condition, or series or combination of events, developments,
states of affairs or conditions, which, individually or in the aggregate, has
had or is reasonably likely to have a Xxxxxx'x Material Adverse Effect; (ii) any
damage, destruction or loss (whether or not covered by insurance) with respect
to Xxxxxx'x or any of its Subsidiaries which is reasonably likely to have a
Xxxxxx'x Material Adverse Effect; (iii) any material change by Xxxxxx'x in its
accounting methods, principles or practices of which Xxxxxx'x has not previously
been informed; (iv) any revaluation by Xxxxxx'x of any of its assets which is
reasonably likely to have a Xxxxxx'x Material Adverse Effect; (v) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to the equity interests of
Xxxxxx'x; (vi) any split, combination or reclassification of any of Xxxxxx'x
capital stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for, shares of Xxxxxx'x
capital stock; (vii) any increase in or establishment of, or any liability
(caused by a prior or existing violation of laws or regulations) under, any
bonus, insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option, stock purchase or other employee benefit plan, or any
other increase in the compensation payable or to become payable to any officers
or key employees of Xxxxxx'x or any Subsidiary other than increases which would
not be material, individually or in the aggregate, with respect to such officers
or employees receiving
32
such benefit or compensation (based on a comparison to benefits and
compensation received in the year ended December 31,1997); or (viii) any
settlement of pending or threatened litigation involving Xxxxxx'x or any of
its Subsidiaries (whether brought by a private party or a Governmental
Entity) other than any settlement which is not reasonably likely to have a
Xxxxxx'x Material Adverse Effect.
SECTION 4.14. COMPLIANCE.
(a) Each of Xxxxxx'x and its Subsidiaries, and each of their
respective directors (but with respect to non-employee directors, only to
Xxxxxx'x best knowledge), officers, persons performing management functions
similar to officers and, to Xxxxxx'x best knowledge, partners hold all permits,
registrations, findings of suitability, licenses, variances, exemptions,
certificates of occupancy, orders and approvals of all Governmental Entities
(including all authorizations under Environmental Laws, Xxxxxx'x Gaming Laws,
the Merchant Marine Act of 1920 and the Shipping Act of 1916 and Certificates of
Inspection issued by the U.S. Coast Guard and permits and approvals issued by
the United States Army Corps of Engineers), necessary to conduct the business
and operations of Xxxxxx'x and each of its Subsidiaries, each of which is in
full force and effect in all material respects, except for such permits,
registrations, findings of suitability, licenses, variances, exemptions,
certificates of occupancy, orders and approvals the failure of which to hold
would not, individually or in the aggregate, be reasonably likely to have a
Xxxxxx'x Material Adverse Effect (the "XXXXXX'X PERMITS") and no event has
occurred which permits, or upon the giving of notice or passage of time or both
would permit, revocation, non-renewal, modification, suspension, limitation or
termination of any Xxxxxx'x Permit that currently is in effect the loss of which
either individually or in the aggregate would be reasonably likely to have a
Xxxxxx'x Material Adverse Effect. Each of Xxxxxx'x and its Subsidiaries, and
each of their respective directors (but with respect to non-employee directors,
only to Xxxxxx'x best knowledge), officers, persons performing management
functions similar to officers and, to Xxxxxx'x best knowledge, partners, are in
compliance with the terms of the Xxxxxx'x Permits, except for such failures to
comply, which singly or in the aggregate, would not, individually or in the
aggregate, be reasonably likely to have a Xxxxxx'x Material Adverse Effect.
Except as disclosed in the Xxxxxx'x SEC Reports filed prior to the date of this
Agreement or as would not be reasonably likely to have a Xxxxxx'x Material
Adverse Effect, the businesses of Xxxxxx'x and its Subsidiaries are not being
conducted in violation of any law, ordinance or regulation of any Governmental
Entity (including, without limitation, any Xxxxxx'x Gaming Laws), except for
possible violations which individually or in the aggregate do not and would not
be reasonably likely to have a Xxxxxx'x Material Adverse Effect. No
investigation or review by any Governmental Entity with respect to Xxxxxx'x or
any of its Subsidiaries is pending, or, to the best knowledge of Xxxxxx'x,
threatened, nor has any Governmental Entity indicated any intention to conduct
the same, other than those the outcome of which would not, individually or in
the aggregate, be reasonably likely to have a Xxxxxx'x Material Adverse Effect.
(b) The term "XXXXXX'X GAMING LAWS" means any Federal, state, local
or foreign statute, ordinance, rule, regulation, permit, consent, registration,
finding of suitability, approval, license, judgment, order, decree, injunction
or other authorization, including any condition or limitation placed thereon,
governing or relating to the current or contemplated casino and gaming
activities and operations of Xxxxxx'x or any of its Subsidiaries, including,
without limitation, the Nevada Gaming Control Act and the rules and regulations
promulgated thereunder, the Xxxxx
33
County Code and the rules and regulations promulgated thereunder, the Xxxxxxx
County Code and the rules and regulations promulgated thereunder, the
Louisiana Economic Development and Gaming Corporation Law and the rules and
regulations promulgated thereunder, the Louisiana Riverboat Economic
Development and Gaming Control Act and the rules and regulations promulgated
thereunder, the New Jersey Casino Control Act and the rules and regulations
promulgated thereunder, the Illinois Riverboat Gambling Act and the rules and
regulations promulgated thereunder, the Mississippi Gaming Control Act and
the rules and regulations promulgated thereunder, the Missouri Riverboat
Gambling Act and the rules and regulations promulgated thereunder, the
Indiana Riverboat Gambling Act and the rules and regulations of the Indiana
Gaming Commission and the codes, rules and regulations promulgated
thereunder, the Casino Control Act 1992 (New South Wales) and the rules and
regulations promulgated thereunder, the Indian Gaming Regulatory Act of 1988
and the rules and regulations promulgated thereunder, any state-tribal gaming
compact and any applicable state gaming law and any federal or state laws
relating to currency transactions.
(c) Except as disclosed in Schedule 4.14(c) of the Xxxxxx'x
Disclosure Schedule, neither Xxxxxx'x nor any of its Subsidiaries, nor any
director (but with respect to non-employee directors, only to Xxxxxx'x best
knowledge), officer, key employee or, to Xxxxxx'x best knowledge, partners of
Xxxxxx'x or any of its Subsidiaries has received any written claim, demand,
notice, complaint, court order or administrative order from any Governmental
Entity in the past three years under, or relating to any violation or possible
violation of any Xxxxxx'x Gaming Laws which did or would be reasonably likely to
result in fines or penalties of $50,000 or more. To Xxxxxx'x best knowledge,
there are no facts, which if known to the regulators under the Xxxxxx'x Gaming
Laws could reasonably be expected to result in the revocation, limitation or
suspension of a license, finding of suitability, registration, permit or
approval of it or them, or of any officer, director, person performing
management functions similar to an officer or partner, under any Xxxxxx'x Gaming
Laws. Neither Xxxxxx'x nor any of its Subsidiaries has suffered a suspension or
revocation of any material license, finding of suitability, registration,
permit or approval held under the Xxxxxx'x Gaming Laws.
SECTION 4.15. ACCOUNTING AND TAX MATTERS. To the best knowledge of
Xxxxxx'x, after consulting with its independent auditors with respect to clause
(i) below and its tax advisors with respect to clause (ii) below, except as set
forth on Schedule 4.15 of the Xxxxxx'x Disclosure Schedule, neither Xxxxxx'x nor
any of its Affiliates has taken or agreed to take any action which would (i)
prevent Xxxxxx'x from accounting for the business combination to be effected by
the Merger as a pooling of interests or (ii) prevent the Merger from qualifying
as a reorganization described in Section 368(a) of the Code.
SECTION 4.16. JOINT PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT.
None of the information supplied by Xxxxxx'x or Merger Sub to be included or
incorporated by reference in the Joint Proxy Statement/Prospectus or any
amendment thereof or supplement thereto, will, on the date it became effective
with the SEC, at the time of the mailing of the Joint Proxy Statement/Prospectus
or any amendment or supplement thereto to the stockholders of Xxxxxx'x or Rio,
at the time of the Xxxxxx'x Stockholders' Meeting and the Rio Stockholders'
Meeting and at the Effective Time, contain any untrue statement of a material
fact, or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. The Joint Proxy
34
Statement/Prospectus will comply as to form in all material respects with the
provisions of the Securities Act and the Exchange Act and the rules and
regulations thereunder; PROVIDED, HOWEVER, that Xxxxxx'x makes no
representation with respect to any information supplied or to be supplied by
Rio for inclusion or incorporated by reference from Rio SEC filings in the
Joint Proxy Statement/Prospectus or any amendment thereof or supplement
thereto. None of the information supplied by Xxxxxx'x or Merger Sub to be
included or incorporated by reference from Xxxxxx'x SEC filings in the
Registration Statement will, at the time the Registration Statement is
declared effective by the SEC, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
SECTION 4.17. BROKERS. None of Xxxxxx'x, any of its Subsidiaries, or any
of their respective officers, directors or employees have employed any broker,
financial advisor or finder or incurred any liability for any brokerage fees,
commissions or finder's fees in connection with the transactions contemplated by
this Agreement, except that Xxxxxx'x has retained XX Xxxxxxxxxx & Co. as
financial advisor, the arrangements with which have been disclosed in writing to
Rio prior to the date hereof.
SECTION 4.18. NO OPERATIONS OF MERGER SUB. Other than in connection with
the transactions contemplated by this Agreement, since its date of
incorporation, Merger Sub has not conducted any business, has not owned, leased
or operated any real property and has not incurred any liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise.
SECTION 4.19. TITLE TO PROPERTY. Xxxxxx'x and its Subsidiaries have good,
valid, legal and marketable title to all of their real properties purported to
be owned by them and good and valid title to other assets purported to be owned
by them, free and clear of all liens, charges and encumbrances, except liens for
taxes not yet due and payable and such liens or other imperfections of title, if
any, as do not materially detract from the value of or interfere with the
present use of the property affected thereby or which could not reasonably be
expected, individually or in the aggregate, to have a Xxxxxx'x Material Adverse
Effect, and except for liens which secure indebtedness reflected in the Xxxxxx'x
Balance Sheet; and all leases pursuant to which Xxxxxx'x or its Subsidiaries
lease from others material amounts of real or personal property are in good
standing, valid and effective in accordance with their respective terms, and
there is not, under any of such leases, any existing material default or event
of default (or event which with notice or lapse of time, or both, would
constitute a material default) by Xxxxxx'x and its Subsidiaries except where the
lack of such good standing, validity and effectiveness, or the existence of such
default or event of default would not reasonably be expected, individually or in
the aggregate, to have a Xxxxxx'x Material Adverse Effect.
SECTION 4.20. AGREEMENTS, CONTRACTS AND COMMITMENTS.
(a) Except as disclosed in the Xxxxxx'x SEC Reports filed prior to
the date of this Agreement or as disclosed in Schedule 4.20(a) of the Xxxxxx'x
Disclosure Schedule, as of the date of this Agreement, neither Xxxxxx'x nor any
of its Subsidiaries is a party to any oral or written contract, agreement or
commitment to be performed after the date hereof which would be a material
contract (as defined in Item 601(b)(10) of Regulation S-K of the SEC,
collectively, the "XXXXXX'X MATERIAL CONTRACTS").
35
(b) Except as disclosed in the Xxxxxx'x SEC Reports filed prior to
the date of this Agreement or as disclosed in Schedule 4.20(b) of the
Xxxxxx'x Disclosure Schedule, as of the date of this Agreement, (i) each of
the Xxxxxx'x Material Contracts is valid and binding upon Xxxxxx'x or any of
its Subsidiaries (and, to Xxxxxx'x best knowledge, on all other parties
thereto) in accordance with its terms and is in full force and effect, (ii)
there is no material breach or violation of or default by Xxxxxx'x or any of
its Subsidiaries under any of the Xxxxxx'x Material Contracts, whether or not
such breach, violation or default has been waived, and (iii) no event has
occurred with respect to Xxxxxx'x or any of its Subsidiaries which, with
notice or lapse of time or both, would constitute a material breach,
violation or default, or give rise to a right of termination, modification,
cancellation, foreclosure, imposition of a lien, prepayment or acceleration
under any of the Xxxxxx'x Material Contracts, which breach, violation or
default referred to in clauses (ii) or (iii), alone or in the aggregate with
other such breaches, violations or defaults referred to in clauses (ii) or
(iii), would be reasonably likely to have a Xxxxxx'x Material Adverse Effect.
SECTION 4.21. INFORMATION REGARDING HJC. Except as disclosed on
Schedule 4.21 of the Xxxxxx'x Disclosure Schedule or as would not be
reasonably likely to have a Xxxxxx'x Adverse Effect, the Xxxxxx'x Form 10-K
filed as of March 10, 1998 and the Xxxxxx'x Form 10-Q filed as of August 7,
1998 did not at the time they were filed (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing),
and do not as of the date hereof, contain any untrue statement of a material
fact relating to HJC or omit to state a material fact relating to HJC
required to be stated in such Form 10-K and Form 10-Q or necessary in order
to make the statements relating to HJC therein, in the light of the
circumstances under which they were made, not misleading.
SECTION 4.22. OPINION OF FINANCIAL ADVISOR. Xxxxxx'x has received the
opinion of XX Xxxxxxxxxx & Co., dated the date of this Agreement, to the
effect that the Exchange Ratio is fair to Xxxxxx'x from a financial point of
view.
ARTICLE V.
COVENANTS
SECTION 5.1. CONDUCT OF BUSINESS OF RIO. During the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement or the Effective Time, Rio agrees as to itself and each of its
Subsidiaries (except to the extent that Xxxxxx'x shall otherwise consent in
writing) to carry on its business in the ordinary course in substantially the
same manner as previously conducted, to pay its debts and taxes when due,
subject to good faith disputes over such debts or taxes, in the ordinary
course in substantially the same manner as previously paid, to pay or perform
its other obligations when due in the ordinary course in substantially the
same manner as previously paid or performed, and, to the extent consistent
with such business, use all reasonable efforts consistent with past practices
and policies to preserve intact its present business organization, keep
available the services of its present officers and key employees and preserve
its relationships with customers, suppliers, distributors, and others having
business dealings with it. Without limiting the generality of the foregoing
and except as expressly contemplated by this Agreement, or as specifically
disclosed on Schedule 5.1 of the Rio Disclosure Schedule, during the period
from the date of this Agreement and continuing until the
36
earlier of the termination of this Agreement or the Effective Time, without
the written consent of Xxxxxx'x, Rio shall not and shall not permit any of
its Subsidiaries to:
(i) adopt any amendment to its Articles of Incorporation or
Bylaws or comparable charter or organizational documents;
(ii) (A) issue, pledge or sell, or authorize the issuance,
pledge or sale of additional shares of capital stock of any class (other than
upon exercise of Options outstanding on the date of this Agreement upon
payment of the exercise price thereof), or securities convertible into
capital stock of any class, or any rights, warrants or options to acquire any
convertible securities or capital stock, or any other securities in respect
of, in lieu of, or in substitution for, shares of Rio Common Stock
outstanding on the date hereof or (B) amend, waive or otherwise modify any of
the terms of any option, warrant or stock option plan of Rio or any of its
Subsidiaries, including without limitation, the Rio Options or the Rio Stock
Option Plans;
(iii) declare, set aside or pay any dividend or other
distribution (whether in cash, securities or property or any combination
thereof) in respect of any class or series of its capital stock other than
between any wholly-owned Subsidiary of Rio and Rio or any other wholly-owned
Subsidiary of Rio;
(iv) split, combine, subdivide, reclassify or redeem, purchase
or otherwise acquire, or propose to redeem or purchase or otherwise acquire,
any shares of its capital stock, or any of its other securities;
(v) increase the compensation or fringe benefits payable or
to become payable to its directors, officers or employees (whether from Rio
or any of its Subsidiaries), or pay any benefit not required by any existing
plan or arrangement (including, without limitation, the granting of stock
options, stock appreciation rights, shares of restricted stock or performance
units) or grant any severance or termination pay to (except pursuant to
existing agreements or policies previously disclosed in writing to Xxxxxx'x,
which shall be interpreted and implemented in a manner consistent with past
practice), or enter into any employment or severance agreement with, any
director, officer or employee of Rio or any of its Subsidiaries or establish,
adopt, enter into, or amend any collective bargaining, bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
savings, welfare, deferred compensation, employment, termination, severance
or other employee benefit plan, agreement, trust, fund, policy or arrangement
for the benefit or welfare of any directors, officers or current or former
employees, including any Benefit Arrangement, Pension Plan or Welfare Plan,
except (i) to the extent required by applicable law or regulation, (ii)
pursuant to any collective bargaining agreements or Employee Plan as in
effect on the date of this Agreement consistent with past practices, (iii)
for salary and benefit increases in the ordinary course of business
consistent with past practice to employees other than executive officers of
Rio, or (iv) pursuant to Section 2.3;
(vi) (A) sell, pledge, lease, dispose of, grant, encumber, or
otherwise authorize the sale, pledge, disposition, grant or encumbrance of
any of the properties or assets of Rio or any of its Subsidiaries, except for
sales of assets in the ordinary course of business in connection with Rio's
gaming operations in an amount not to exceed $500,000 individually or
$2,000,000 in the aggregate or (B) acquire (including, without limitation, by
merger,
37
consolidation, lease or acquisition of stock or assets) any corporation,
partnership, other business organization or any division thereof (or a
substantial portion of the assets thereof) or any other assets, except for
acquisitions of assets in the ordinary course of business in connection with
Rio's gaming operations in an amount individually not to exceed $1,000,000;
(vii) (A) incur, assume or pre-pay any long-term debt or incur
or assume any short-term debt, except that Rio and its Subsidiaries may incur
or pre-pay debt in the ordinary course of business (including Rio's capital
expansion and improvement program which is set forth on Schedule 5.1 of the
Rio Disclosure Schedule) consistent with past practice under existing lines
of credit, (B) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations
of any other person except in the ordinary course of business consistent with
past practice, or (C) make any loans, advances or capital contributions to,
or investments in, any other person except in the ordinary course of business
consistent with past practice (including advances to employees) and except
for loans, advances, capital contributions or investments between any
wholly-owned Subsidiary of Rio and Rio or another wholly-owned Subsidiary of
Rio;
(viii) authorize, recommend, propose or announce an intention to
adopt a plan of complete or partial liquidation or dissolution of Rio or any
of its Subsidiaries;
(ix) make or rescind any material express or deemed election
relating to Taxes, settle or compromise any material claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or controversy
relating to Taxes, or except as may be required by applicable law, make any
change to any of its material methods of reporting income or deductions
(including, without limitation, any change to its methods or basis or
write-offs of accounts receivable) for federal income tax purposes from those
employed in the preparation of its federal income tax return for the taxable
year ending December 31, 1996, PROVIDED, HOWEVER, that Xxxxxx'x shall not
unreasonably withhold or delay its consent to any such matter described in
this Section 5.1 in a manner that would preclude Rio from timely making such
an election, timely filing its Tax Returns or timely paying its Taxes;
(x) pay, discharge or satisfy any material claims,
liabilities or obligations (absolute, accrued, asserted, unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction
in the ordinary course of business and consistent with past practice of
liabilities reflected or reserved against in the consolidated financial
statements of Rio;
(xi) other than in the ordinary course of business and
consistent with past practice, waive any rights of substantial value or make
any payment, direct or indirect, of any material liability of Rio or of any
of its Subsidiaries before the same comes due in accordance with its terms;
(xii) fail to maintain its existing insurance coverage of all
types in effect or, in the event any such coverage shall be terminated or
lapse, to the extent available at reasonable cost, procure substantially
similar substitute insurance policies which in all material respects are in
at least such amounts and against such risks as are currently covered by such
policies;
(xiii) enter into any collective bargaining agreement (other than
as required by law or extensions of existing agreements in the ordinary course
of business);
38
(xiv) take any action, other than reasonable and usual actions
in the ordinary course of business and consistent with past practice, with
respect to accounting policies or procedures, unless required by GAAP or the
SEC;
(xv) modify, amend or terminate any of the Rio Material
Contracts or waive, release or assign any material rights or claims, except
in the ordinary course of business consistent with past practice;
(xvi) take, or agree to commit to take, any action that would
cause the representations and warranties of Rio contained herein,
individually or in the aggregate, which are not qualified by materiality not
to be true and correct in all material respects, or cause those qualified by
materiality or a Rio Material Adverse Effect not to be true and correct, at,
or as of any time prior to, the Effective Time;
(xvii) engage in any transaction with, or enter into any
agreement, arrangement, or understanding with, directly or indirectly, any of
Rio's Affiliates which involves the transfer of consideration or has a
financial impact on Rio, other than pursuant to such agreements,
arrangements, or understandings existing on the date of this Agreement or
disclosed on Schedule 3.24 of the Rio Disclosure Schedule;
(xviii) close, shut down, or otherwise eliminate the casino or
the golf course owned or operated by Rio or any of its Subsidiaries, except
for such closures, shutdowns or eliminations which are (i) required by
action, order, writ, injunction, judgment or decree or otherwise required by
law, (ii) due to acts of God or other force majeure events or (iii) temporary
or seasonal and in the ordinary course of business as set forth in Schedule
5.1(xviii) of the Rio Disclosure Schedule;
(xix) take or agree to take any action that would prevent the
Merger from qualifying as a reorganization as described in Section 368(a) of
the Code;
(xx) settle any litigation relating to the transactions
contemplated hereby other than any settlement which would not (i) be
reasonably likely to have a Rio Material Adverse Effect or (ii) materially
adversely affect the consummation of the transactions contemplated hereby; or
(xxi) enter into an agreement, contract, commitment or
arrangement to do any of the foregoing, or to authorize, recommend, propose
or announce an intention to do any of the foregoing.
SECTION 5.2. CONDUCT OF BUSINESS OF XXXXXX'X AND MERGER SUB. During
the period from the date of this Agreement and continuing until the earlier
of the termination of this Agreement or the Effective Time, Xxxxxx'x agrees
as to itself and each of its Subsidiaries (except to the extent that Rio
shall otherwise consent in writing) to carry on its business in the ordinary
course in substantially the same manner as previously conducted, to pay its
debts and taxes when due, subject to good faith disputes over such debts or
taxes, in the ordinary course in substantially the same manner as previously
paid, to pay or perform its other obligations when due in the ordinary course
in substantially the same manner as previously paid or performed, and, to the
extent consistent with such business, use all reasonable efforts consistent
with past practices and policies
39
to preserve intact its present business organization, keep available the
services of its present officers and key employees and preserve its
relationships with customers, suppliers, distributors, and others having
business dealings with it. Without limiting the generality of the foregoing
and except as expressly contemplated by this Agreement, or as specifically
disclosed on Schedule 5.2 of the Xxxxxx'x Disclosure Schedule or such as
would not be reasonably likely to have a Xxxxxx'x Material Adverse Effect,
during the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Effective Time, without
the written consent of Rio, Xxxxxx'x shall not:
(a) adopt any amendment to its Articles of Incorporation or Bylaws
of Xxxxxx'x or Xxxxxx'x Operating Company;
(b) declare, set aside or pay any dividend or other distribution
(whether in cash, securities or property or any combination thereof) in
respect of any class of or series of its capital stock other than between any
Subsidiary of Xxxxxx'x and Xxxxxx'x or any other Subsidiary of Xxxxxx'x;
(c) take any action or make any change, other than reasonable and
usual actions in the ordinary course of business and consistent with past
practice, with respect to accounting policies and procedures, unless required
by GAAP or the SEC;
(d) authorize, recommend, propose or announce an intention to
adopt a plan of complete or partial liquidation or dissolution of Xxxxxx'x or
Xxxxxx'x Operating Company;
(e) other than in the ordinary course of business and consistent
with past practice, waive any rights of substantial value or make any
payment, direct or indirect, of any material liability of Xxxxxx'x or of any
of its Subsidiaries before the same comes due in accordance with its terms;
(f) fail to maintain insurance in such amounts and on such terms
as is necessary for Xxxxxx'x business as currently conducted and as is
reasonable and customary in the gaming business;
(g) take, or agree to commit to take, any action that would cause
the representations and warranties of Xxxxxx'x contained herein, individually
or in the aggregate, which are not qualified by materiality not to be true
and correct in all material respects or cause those qualified by materiality
or a Xxxxxx'x Material Adverse Effect not to be true and correct at, or as of
any time prior to, the Effective Time;
(h) take or agree to take any action that would prevent the Merger
from qualifying as a reorganization described in Section 368(a) of the Code;
(i) acquire or agree to acquire any business or assets unrelated
to the gaming industry in an amount which exceeds $25 million other than as
set forth in Schedule 5.2(i) of the Xxxxxx'x Disclosure Schedule; for
purposes of this Section 5.2(i), "gaming industry" shall include hotels,
undeveloped land which could be used either currently or in the future in
furtherance of gaming, and any other assets necessary for, in support or in
anticipation of and ancillary to or in preparation for, the gaming business;
or
40
(j) enter into an agreement, contract, commitment or arrangement
to do any of the foregoing, or to authorize, recommend, propose or announce
any intention to do any of the foregoing.
SECTION 5.3. COOPERATION; NOTICE; CURE. Subject to compliance with
applicable law, from the date hereof until the Effective Time, each of
Xxxxxx'x and Rio shall confer on a regular and frequent basis with one or
more representatives of the other party to report on the general status of
ongoing operations. Each of Xxxxxx'x and Rio shall promptly notify the other
in writing of, and will use all commercially reasonable efforts to cure
before the Closing Date, any event, transaction or circumstance, as soon as
practical after it becomes known to such party, that causes or will cause any
covenant or agreement of Xxxxxx'x or Rio, as the case may be, under this
Agreement to be breached in any material respect or that renders or will
render untrue in any material respect any representation or warranty of
Xxxxxx'x or Rio contained in this Agreement. No notice given pursuant to
this paragraph shall have any effect on the representations, warranties,
covenants or agreements contained in this Agreement for purposes of
determining satisfaction of any condition contained herein.
SECTION 5.4. NO SOLICITATION.
(a) Rio shall not, directly or indirectly, through any officer,
director, employee, financial advisor, representative or agent of such party
(i) solicit, initiate, or encourage any inquiries or proposals that
constitute, or could reasonably be expected to lead to, a proposal or offer
for a merger, consolidation, business combination, sale of substantial
assets, sale of shares of capital stock (including without limitation by way
of a tender offer) or similar transaction involving Rio or any of its
material Subsidiaries, other than the transactions contemplated by this
Agreement (any of the foregoing inquiries or proposals being referred to in
this Agreement as an "ACQUISITION PROPOSAL"), (ii) engage in negotiations or
discussions with any person (or group of persons) other than Xxxxxx'x or its
respective affiliates (a "THIRD PARTY") concerning, provide any non-public
information to any person or entity relating to, or take any other action to
facilitate inquiries or the making of any proposal that constitutes, an
Acquisition Proposal, or (iii) enter into any agreement with respect to any
Acquisition Proposal; PROVIDED, HOWEVER, that nothing contained in this
Section 5.4 shall prevent Rio or its Board of Directors from furnishing
non-public information to, or entering into discussions or negotiations with,
any Third Party in connection with an unsolicited bona fide written proposal
for an Acquisition Proposal (as defined below) by such Third Party, if and
only to the extent that (1) such Third Party has made a written proposal to
the Board of Directors of Rio to consummate an Acquisition Proposal, which
proposal identifies a price or range of values to be paid for the outstanding
securities or substantially all of the assets of Rio, (2) the Board of
Directors of Rio determines in good faith, after consultation with a
financial advisor of nationally recognized reputation, that such Acquisition
Proposal is reasonably capable of being completed on substantially the terms
proposed, and would, if consummated, result in a transaction that would
provide greater value to the holders of Rio Common Stock than the transaction
contemplated by this Agreement (a "SUPERIOR PROPOSAL"), (3) the Board of
Directors of Rio determines in good faith, based on the advice of outside
legal counsel, that the failure to take such action would be inconsistent
with its fiduciary duties to Rio's stockholders under applicable law, and (4)
prior to furnishing such non-public information to, or entering into
discussions or negotiations with, such person or entity, such Board of
Directors receives from such person or entity an executed confidentiality and
41
standstill agreement (unless the Board of Directors of Rio determines in good
faith upon the advice of counsel, that requiring such person or entity to
enter into a standstill agreement would violate such Board's fiduciary duty)
with material terms no less favorable to such party than those contained in
the Confidentiality Agreements each dated June 18, 1998 between Xxxxxx'x and
Rio (the "CONFIDENTIALITY AGREEMENTS"). Rio agrees not to release any Third
Party from, or waive any provision of, any standstill agreement to which it
is a party or any confidentiality agreement between it and another person who
has made, or who may reasonably be considered likely to make, an Acquisition
Proposal, unless the Board of Directors of Rio determines in good faith,
based on the advice of outside legal counsel, that the failure to take such
action would be inconsistent with its fiduciary duties to Rio's stockholders
under applicable law.
(b) Rio shall notify Xxxxxx'x promptly after receipt by Rio or
Rio's knowledge of the receipt by any of its advisors of any Acquisition
Proposal or any request for non-public information in connection with an
Acquisition Proposal or for access to the properties, books or records of Rio
by any person or entity that informs such party that it is considering making
or has made an Acquisition Proposal. Such notice shall be made orally and in
writing and shall indicate the identity of the offeror and the terms and
conditions of such proposal, inquiry or contact. Rio shall (i) keep Xxxxxx'x
informed of the status (including any change to the material terms) of any
such Acquisition Proposal or request for non-public information and (ii)
provide to Xxxxxx'x as soon as practicable after receipt or delivery thereof
with copies of all correspondence and other written material (A) sent or
provided to Rio or any of its employees, representatives or agents from any
Third Party in connection with any Acquisition Proposal or request for
non-public information or (B) sent or provided by Rio or any of its
employees, representatives or agents to any Third Party in connection with
any Acquisition Proposal or request for non-public information.
(c) Except as expressly permitted by this Section 5.4, neither the
Board of Directors of Rio nor any committee thereof shall (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Xxxxxx'x,
the approval or recommendation by the Board of Directors of Rio or any such
committee of this Agreement or the Merger, (ii) approve or cause Rio to enter
into letter of intent, agreement in principle or any legally binding
acquisition agreement or similar agreement relating to any Acquisition
Proposal (any such legally binding agreement, an "ACQUISITION AGREEMENT") or
(iii) approve or recommend, or propose to publicly approve or recommend, any
Acquisition Proposal. Notwithstanding the foregoing, if Rio has received a
Superior Proposal, the Board of Directors of Rio may, prior to approval of
the Merger by Rio's stockholders and subject to this and the following
sentences, terminate this Agreement pursuant to Section 7.1(f), but only at a
time that is more than 48 hours following receipt by Xxxxxx'x of written
notice advising Xxxxxx'x that the Board of Directors of Rio is prepared to
accept such Superior Proposal, specifying the material terms and conditions
of such Superior Proposal and identifying the Third Party making such
Superior Proposal; PROVIDED, HOWEVER, that concurrently with or immediately
after such termination, the Board of Directors of Rio shall cause Rio to
enter into an Acquisition Agreement with respect to such Superior Proposal.
(d) Nothing contained in this Section 5.4 shall prohibit Rio from
taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to
Rio's stockholders if, in the good faith judgment of the Board of Directors
of Rio, based on the advice of outside legal counsel, failure to so
42
disclose would be inconsistent with its fiduciary obligations under
applicable law; PROVIDED, HOWEVER, that neither Rio nor the Board of
Directors of Rio (nor any committee thereof) shall withdraw or modify, or
propose publicly to withdraw or modify, its position with respect to this
Agreement or the Merger, or approve or recommend, or propose publicly to
approve or recommend, an Acquisition Proposal.
SECTION 5.5. JOINT PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT.
(a) As promptly as practicable after the execution of this
Agreement, Rio and Xxxxxx'x shall cooperate, prepare and file with the SEC,
the Joint Proxy Statement/Prospectus and the Registration Statement in which
the Joint Proxy Statement/Prospectus will be included as a prospectus,
PROVIDED that Xxxxxx'x may delay the filing of the Registration Statement
until approval of the Joint Proxy Statement/Prospectus by the SEC. Rio and
Xxxxxx'x will cause the Joint Proxy Statement/Prospectus and the Registration
Statement to comply as to form in all material respects with the applicable
provisions of the Securities Act, the Exchange Act and the rules and
regulations thereunder. Each of Xxxxxx'x and Rio shall use all reasonable
efforts to have or cause the Joint Proxy Statement/Prospectus to be cleared
by the SEC and to cause the Registration Statement to become effective as
promptly as practicable. Without limiting the generality of the foregoing,
each of Rio and Xxxxxx'x shall, and shall cause its respective
representatives to, fully cooperate with the other party and its respective
representatives in the preparation of the Joint Proxy Statement/Prospectus
and the Registration Statement, and shall, upon request, furnish the other
party with all information concerning it and its affiliates, directors,
officers and stockholders as the other may reasonably request in connection
with the preparation of the Joint Proxy Statement/Prospectus and the
Registration Statement. The Joint Proxy Statement/Prospectus with respect to
the Merger shall include the determination and recommendation of the Board of
Directors of Rio and the Board of Directors of Xxxxxx'x that their respective
shareholders vote in favor of the approval and adoption of this Agreement and
the Merger. Rio and Xxxxxx'x shall use reasonable efforts to take all
actions required under any applicable federal or state securities or Blue Sky
Laws in connection with the issuance of shares of Xxxxxx'x Common Stock
pursuant to the Merger. As promptly as practicable after the Registration
Statement with respect to the Merger shall have become effective, Rio and
Xxxxxx'x shall cause the Joint Proxy Statement/Prospectus with respect to the
Merger to be mailed to their respective stockholders.
(b) Without limiting the generality of the foregoing, (i) Rio and
Xxxxxx'x shall notify each other as promptly as practicable upon becoming
aware of any event or circumstance which should be described in an amendment
of, or supplement to, the Joint Proxy Statement/Prospectus or the
Registration Statement, and (ii) Rio and Xxxxxx'x shall each notify the other
as promptly as practicable after the receipt by it of any written or oral
comments of the SEC on, or of any written or oral request by the SEC for
amendments or supplements to, the Joint Proxy Statement/Prospectus or the
Registration Statement, and shall promptly supply the other with copies of
all correspondence between it or any of its representatives and the SEC with
respect to any of the foregoing filings.
(c) The information supplied by Rio for inclusion or incorporation
by reference in the Joint Proxy Statement/Prospectus and the Registration
Statement shall not (i) at the time the Registration Statement is declared
effective, (ii) at the time the Joint Proxy Statement/Prospectus
43
(or any amendment thereof or supplement thereto) is first mailed to the
holders of Rio Common Stock and the holders of Xxxxxx'x Common Stock, (iii)
at the time of the Rio Stockholders' Meeting and the Xxxxxx'x Stockholders'
Meeting and (iv) at the Effective Time, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they are made, not misleading. If at any time prior to the Effective
Time any event or circumstance relating to Rio or any if its affiliates or
its or their respective officers and directors should be discovered by Rio
which should be set forth in an amendment to the Registration Statement or a
supplement to the Joint Proxy Statement/Prospectus, Rio shall promptly inform
Xxxxxx'x of such event or circumstance.
(d) The information supplied by Xxxxxx'x for inclusion or
incorporation by reference in the Joint Proxy Statement/Prospectus and the
Registration Statement shall not (i) at the time the Registration Statement
is declared effective, (ii) at the time the Joint Proxy Statement/Prospectus
(or any amendment thereof or supplement thereto) is first mailed to the
holders of Rio Common Stock, (iii) at the time of the Rio Stockholder's
Meeting, and (iv) at the Effective Time, contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they are made, not misleading. If at any time prior to the Effective
Time any event or circumstance relating to Xxxxxx'x or any if its affiliates
or its or their respective officers and directors should be discovered by
Xxxxxx'x which should be set forth in an amendment to the Registration
Statement or a supplement to the Joint Proxy Statement/Prospectus, Xxxxxx'x
shall promptly inform Rio of such event or circumstance.
SECTION 5.6. STOCKHOLDERS' MEETINGS. Rio and Xxxxxx'x shall each call
a meeting of its respective stockholders to be held as promptly as
practicable for the purpose of voting upon this Agreement and the Merger.
Each of Rio and Xxxxxx'x shall, through its respective Board of Directors,
recommend to their respective stockholders adoption of this Agreement and
approval of such matters, shall coordinate and cooperate with the respect to
the timing of such meetings and shall use their best efforts to hold such
meetings on the same day and as soon as practicable after the date hereof.
Each of Rio and Xxxxxx'x shall use all reasonable efforts to solicit from its
stockholders proxies in favor of such matters. Without limiting the
generality of the foregoing, unless this Agreement is terminated pursuant to
Section 7.1(f), Rio agrees that its obligations pursuant to this Section 5.6
shall not be affected by the commencement, public proposal or communication
to Rio of any Acquisition Proposal.
SECTION 5.7. ACCESS TO INFORMATION. Upon reasonable notice, each of
Xxxxxx'x and Rio (and each of their respective Subsidiaries) shall afford to
the other party and its officers, employees, accountants, counsel and other
representatives, reasonable access, during normal business hours during the
period prior to the Effective Time, to all its personnel, properties, books,
contracts, commitments and records and, during such period, each of Xxxxxx'x
and Rio shall, and shall cause each of its respective Subsidiaries to,
furnish promptly to the other (a) copies of monthly financial reports and
development reports, (b) a copy of each report, schedule, registration
statement and other documents filed or received by it during such period
pursuant to the requirements of federal or state securities laws and (c) all
other information concerning its business, properties and personnel as the
other party may reasonably request. Each party making such requests will
hold any such information furnished to it by the other party which
44
is nonpublic in confidence in accordance with the Confidentiality Agreement
binding on such party. No information or knowledge obtained in any
investigation pursuant to this Section 5.7 shall affect or be deemed to
modify any representation or warranty contained in this Agreement or the
conditions to the obligations of the parties to consummate the Merger.
Paragraph 8 of the Confidentiality Agreement binding Xxxxxx'x shall be
terminated and be without effect upon any termination of this Agreement
pursuant to Sections 7.1(d), 7.1(e) or 7.1(f).
SECTION 5.8. GOVERNMENTAL APPROVALS.
(a) The parties hereto shall cooperate with each other and use
their reasonable best efforts (and, with respect to the Rio Gaming Laws and
the Xxxxxx'x Gaming Laws, shall use their reasonable best efforts to cause
their respective directors and officers to do so) to promptly prepare and
file all necessary documentation, to effect all applications, notices,
petitions and filings, to obtain as promptly as practicable all permits,
registrations, licenses, findings of suitability, consents, variances,
exemptions, orders, approvals and authorizations of all third parties and
Governmental Entities which are necessary to consummate the transactions
contemplated by this Agreement, including, without limitation, all filings
required under the HSR Act, the Rio Gaming Laws and the Xxxxxx'x Gaming Laws
("GOVERNMENTAL APPROVALS"), and to comply (and, with respect to the Rio
Gaming Laws and the Xxxxxx'x Gaming Laws, to cause their respective directors
and officers and employees to so comply) with the terms and conditions of all
such Governmental Approvals. Each of the parties hereto shall use their
reasonable best efforts to, and shall use their reasonable best efforts to
cause their respective officers, directors and affiliates to, file within 30
days after the date hereof, and in all events shall file within 60 days after
the date hereof, all required initial applications and documents in
connection with obtaining the Governmental Approvals (including without
limitation under applicable Rio Gaming Laws and Xxxxxx'x Gaming Laws) and
shall act reasonably and promptly thereafter in responding to additional
requests in connection therewith. Rio and Xxxxxx'x shall have the right to
review in advance, and to the extent practicable, each will consult the other
on, in each case subject to applicable laws relating to the exchange of
information, all the information relating to Rio or to Xxxxxx'x, as the case
may be, and any of their respective Subsidiaries, directors, officers and
stockholders which appear in any filing made with, or written materials
submitted to, any third party or any Governmental Entity in connection with
the transactions contemplated by this Agreement. Without limiting the
foregoing, each of Rio and Xxxxxx'x (the "NOTIFYING PARTY") will notify the
other promptly of the receipt of comments or requests from Governmental
Entities relating to Governmental Approvals, and will supply the other party
with copies of all correspondence between the Notifying Party or any of its
representatives and Governmental Entities with respect to Governmental
Approvals; PROVIDED, HOWEVER, that it shall not be required to supply the
other party with copies of correspondence relating to the personal
applications of individual applicants except for evidence of filing.
(b) Rio and Xxxxxx'x shall promptly advise each other upon
receiving any communication from any Governmental Entity whose consent or
approval is required for consummation of the transactions contemplated by
this Agreement which causes such party to believe that there is a reasonable
likelihood that any approval needed from a Governmental Entity will not be
obtained or that the receipt of any such approval will be materially delayed.
Rio and Xxxxxx'x shall take any and all actions reasonably necessary to
vigorously defend, lift, mitigate and rescind the effect of any litigation or
administrative proceeding adversely affecting this Agreement
45
or the transactions contemplated hereby or thereby, including, without
limitation, promptly appealing any adverse court or administrative order or
injunction to the extent reasonably necessary for the foregoing purposes.
(c) Notwithstanding the foregoing or any other provision of this
Agreement, Xxxxxx'x shall have no obligation or affirmative duty under this
Section 5.8 to cease or refrain from the ownership of any assets or
properties, or the association with any person or entity which association is
material to the operations of Xxxxxx'x, whether on the date hereof or at any
time in the future.
SECTION 5.9. PUBLICITY. Xxxxxx'x and Rio shall agree on the form and
content of the initial press release regarding the transactions contemplated
hereby and thereafter shall consult with each other before issuing, and use
all reasonable efforts to agree upon, any press release or other public
statement with respect to any of the transactions contemplated hereby and
shall not issue any such press release or make any such public statement
prior to such consultation, except as may be required by law.
SECTION 5.10. INDEMNIFICATION.
(a) From and after the Effective Time, Xxxxxx'x agrees that it
will, and will cause the Surviving Corporation to, indemnify and hold
harmless each present and former director and officer of Rio (the
"INDEMNIFIED PARTIES"), against any costs or expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities or amounts paid
in settlement incurred in connection with any claim, action, suit, proceeding
or investigation, whether civil, criminal, administrative or investigative,
arising out of or pertaining to matters existing or occurring at or prior to
the Effective Time, whether asserted or claimed prior to, at or after the
Effective Time, to the fullest extent that Rio would have been permitted
under Nevada law and its Articles of Incorporation or Bylaws in effect on the
date hereof to indemnify such Indemnified Party.
(b) For a period of six years after the Effective Time, Xxxxxx'x
shall maintain or shall cause the Surviving Corporation to maintain in effect
a directors' and officers' liability insurance policy covering those persons
who are currently covered by Rio's directors' and officers' liability
insurance policy (copies of which have been heretofore delivered by Rio to
Xxxxxx'x) with coverage in amount and scope at least as favorable as Rio's
existing coverage; PROVIDED that in no event shall Xxxxxx'x or the Surviving
Corporation be required to expend in the aggregate in excess of 200% of the
annual premium currently paid by Rio for such coverage; and if such premium
would at any time exceed 200% of the such amount, then Xxxxxx'x or the
Surviving Corporation shall maintain insurance policies which provide the
maximum and best coverage available at an annual premium equal to 200% of
such amount.
(c) The provisions of this Section 5.10 are intended to be an
addition to the rights otherwise available to the current officers and
directors of Rio by law, charter, statute, bylaw or agreement, and shall
operate for the benefit of, and shall be enforceable by, each of the
Indemnified Parties, their heirs and their representatives.
46
SECTION 5.11. EMPLOYEE BENEFITS.
(a) Xxxxxx'x shall cause the Surviving Corporation and its
Subsidiaries to honor all written employment, consulting, severance and
termination agreements (including change in control provisions) of the
employees of Rio and its Subsidiaries set forth on Schedule 3.14(b)(15) of
the Rio Disclosure Schedule. Xxxxxx'x acknowledges that consummation of the
transactions contemplated by this Agreement will constitute a change in
control (or change of control) of Rio (to the extent such concept is
applicable) for the purpose of the Rio Stock Option Plans and all Employee
Plans (as defined in Section 3.14(a)(iii) (causing all outstanding options to
become vested and exercisable and all restrictions on outstanding restricted
shares to lapse and all participants' accounts in the Supplemental Retirement
and Deferred Compensation Plan to become payable in a lump sum).
(b) For purposes of determining eligibility to participate,
vesting and entitlement to benefits where length of service is relevant under
any employee benefit plan or arrangement of Xxxxxx'x or the Surviving
Corporation, other than for purposes of benefit accrual under any Pension
Plan, employees of Rio and its Subsidiaries as of the Effective Time shall
receive service credit for service with Rio and any of its Subsidiaries to
the same extent such service was granted under the Employee Plans; PROVIDED,
HOWEVER, that such service need not be credited to the extent that it would
result in a duplication of benefits.
(c) Nothing in this Agreement is intended to create any right of
employment for any person or to create any obligation for Xxxxxx'x or the
Surviving Corporation to continue any Employee Plan of Rio following the
Effective Time, except as provided in Sections 2.3 and 5.11(a).
(d) Xxxxxx'x will, or will cause the Surviving Corporation and its
Subsidiaries to, (i) waive all limitations as to preexisting conditions
exclusions and waiting periods with respect to participation and coverage
requirements applicable to the Affected Employees under any Welfare Plans
that such employees may be eligible to participate in after the Closing Date,
other than limitations or waiting periods that are already in effect with
respect to such employees and that have not been satisfied as of the Closing
Date under any Welfare Plan maintained for the Affected Employees immediately
prior to the Closing Date, and (ii) use its best efforts to provide each
Affected Employee with credit for any co-payments and deductibles paid prior
to the Closing Date in satisfying any applicable deductible or out-of-pocket
requirements under any welfare plans that such employees are eligible to
participate in after the Closing Date.
(e) For a period of two years immediately following the Closing
Date, the employer provided group health, life and disability benefits and
the benefits under a qualified cash or deferred arrangement, within the
meaning of Section 401(k) of the Code, exclusive of any benefits provided
only to executives or a select group of management employees, provided to
individuals who were employees of Rio or its Subsidiaries immediately prior
to the Effective Time and who continue after the Closing Date to be employees
of Xxxxxx'x, the Surviving Corporation or any of its subsidiaries (the
"Affected Employees") pursuant to employee benefit plans or arrangements
maintained by Xxxxxx'x, the Surviving Corporation and its subsidiaries shall
be, in the aggregate for all plans combined and for all eligible employees
combined, not materially less favorable for
47
the Affected Employees than those provided to the Affected Employees
immediately prior to the Closing Date.
SECTION 5.12. AFFILIATE AGREEMENTS.
(a) Upon the execution of this Agreement, Rio will deliver to
Xxxxxx'x a list identifying, to Rio's best knowledge, those persons who will
be, at the time of the Rio Stockholders' Meeting, "affiliates" of Rio within
the meaning of Rule 145 (each such person who is an "affiliate" of Rio within
the meaning of Rule 145 is referred to as an "AFFILIATE") promulgated under
the Securities Act ("RULE 145"). Rio shall provide to Xxxxxx'x such
information and documents as Xxxxxx'x shall reasonably request for purposes
of reviewing such list and shall notify the other party in writing regarding
any change in the identity of its Affiliates prior to the Closing Date. Rio
shall use all reasonable efforts to deliver or cause to be delivered to
Xxxxxx'x by October 1, 1998 (and in any case prior to the Effective Time)
from each of its Affiliates, an executed affiliate agreement in substantially
the form attached hereto as Exhibit B attached hereto (an "AFFILIATE
AGREEMENT").
SECTION 5.13. POOLING ACCOUNTING. The parties will use their
reasonable best efforts to cause the Merger to be treated as a pooling of
interests for accounting purposes. Notwithstanding anything to the contrary
in this Agreement (including, without limitation, Sections 5.1 and 5.2 hereof
and Schedule 5.1 of the Rio Disclosure Schedule and Schedule 5.2 of the
Xxxxxx'x Disclosure Schedule), from and after the date hereof and until the
Effective Time, neither Rio nor Xxxxxx'x, nor any of their respective
Subsidiaries or other Affiliates, shall knowingly take any action, or
knowingly fail to take any action, that is reasonably likely to jeopardize
the treatment of the Merger as a pooling of interests for accounting
purposes. Rio and Xxxxxx'x shall each provide reasonable cooperation to
Xxxxxx Xxxxxxxx LLP to enable it to issue the pooling letter referenced in
Section 6.3(f) hereof.
SECTION 5.14. TAX TREATMENT OF REORGANIZATION.
(a) The parties intend the Merger to qualify as a reorganization
under both Section 368(a)(1)(B) of the Code and Sections 368(a)(1)(A) and
368(a)(2)(E) of the Code and shall use their best efforts (and shall cause
their respective Subsidiaries to use their best efforts) to cause the Merger
to so qualify. Neither Rio nor Xxxxxx'x, nor any of their respective
Subsidiaries or other Affiliates, shall take any action, or fail to take any
action, that is not specifically provided for by this Agreement that would or
would be reasonably likely to adversely affect the treatment of the Merger as
a reorganization under Section 368(a) of the Code. Rio and Xxxxxx'x shall,
and shall cause their respective Subsidiaries to, take the position for all
purposes that the Merger qualifies as a reorganization under those Sections
of the Code.
(b) Rio and Xxxxxx'x shall cooperate and use their best efforts in
obtaining the opinions of Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, counsel
to Rio, and Xxxxxx & Xxxxxxx, counsel to Xxxxxx'x, dated as of the Closing
Date, to the effect that the Merger will qualify for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Code. In connection therewith, both Rio and Xxxxxx'x (together with Merger
Sub) shall deliver to Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP and Xxxxxx &
Xxxxxxx representation letters,
48
dated and executed as of the Closing Date, in form and substance
substantially identical to those attached hereto as Exhibits D and E (the
"Representation Letters").
(c) Rio and Xxxxxx'x shall cooperate and use their best efforts to
confirm that there is no Rio stockholder with respect to whom any Tax,
withholding, reporting or other obligation would arise under Sections 897 or
1445 (or related provisions) of the Code as a result of the Merger.
SECTION 5.15. FURTHER ASSURANCES AND ACTIONS.
(a) Subject to the terms and conditions herein, each of the
parties hereto agrees to use its reasonable best efforts to take, or cause to
be taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this
Agreement, including, without limitation, (i) using their respective
reasonable best efforts to obtain all licenses, permits, consents, approvals,
authorizations, qualifications and orders of Governmental Entities and
parties to contracts with each party hereto as are necessary for consummation
of the transactions contemplated by this Agreement, and (ii) to fulfill all
conditions precedent applicable to such party pursuant to this Agreement.
(b) In case at any time after the Effective Date any further
action is necessary to carry out the purposes of this Agreement or to vest
the Surviving Corporation with full title to all properties, assets, rights,
approvals, immunities, franchises of any of the parties to the Merger, the
proper officers and/or directors of Xxxxxx'x, Rio and the Surviving
Corporation shall take all such necessary action.
(c) Notwithstanding anything to the foregoing to the contrary, in
the event that the Merger or any of the other transactions contemplated by
this Agreement will give rise to any default or breach under the terms of the
Indentures governing Rio's 10-5/8% Senior Subordinated Notes due 2005 and
9-1/2% Senior Subordinated Notes due 2007, the seeking of the waiver or
consent of the holders of such indebtedness to such default or breach shall
be on terms and conditions determined by Xxxxxx'x in its sole and absolute
discretion, which may include, subject to such discretion, the repayment or
repurchase of such indebtedness and the amendment of the terms of such
indebtedness which remains outstanding, in each case on terms that are usual
and customary for similar transactions. In the event that a consent or
waiver necessary to satisfy Section 6.3(e) shall not be received on terms and
conditions acceptable to Xxxxxx'x, then Xxxxxx'x shall not be obligated to
consummate the Merger or any other transaction contemplated hereby; PROVIDED,
HOWEVER, that this Section 5.15(c) shall not apply to Section 4.08 of Rio's
Indenture dated July 21, 1995 for the 10-5/8% Senior Subordinated Notes Due
2005, Section 4.08 of Rio's Indenture dated February 11, 1997 for the 9-1/2%
Senior Subordinated Notes Due 2007.
SECTION 5.16. STOCK EXCHANGE LISTING. Xxxxxx'x shall use its best
efforts to list on the NYSE prior to the Effective Time, subject to official
notice issuance, the shares of Xxxxxx'x Common Stock to be issued as Merger
Consideration.
SECTION 5.17. LETTER OF RIO'S ACCOUNTANTS. Rio shall use all
reasonable efforts to cause to be delivered to Xxxxxx'x a letter of Xxxxxx
Xxxxxxxx LLP, Rio's independent auditors, dated a date within two business
days before the date on which the Registration Statement shall become
49
effective and addressed to Xxxxxx'x, in form reasonably satisfactory to
Xxxxxx'x and customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the Registration Statement.
SECTION 5.18. LETTER OF XXXXXX'X ACCOUNTANTS. Xxxxxx'x shall use all
reasonable efforts to cause to be delivered to Rio a letter of Xxxxxx
Xxxxxxxx LLP, Xxxxxx'x independent auditors, dated a date within two business
days before the date on which the Registration Statement shall become
effective and addressed to Rio, in form reasonably satisfactory to Rio and
customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the
Registration Statement.
SECTION 5.19. APPOINTMENT OF XXXXXX'X DIRECTOR. Xxxxxx'x agrees
promptly following the Effective Time to appoint or take such actions as are
necessary to nominate and seek the election of Xxxxxxx Xxxxxxx XX to Xxxxxx'x
Board of Directors for a term expiring at the annual meeting of stockholders
in the year 2000.
SECTION 5.20. TITLE INSURANCE. Rio shall take, or cause to be taken,
all such actions as shall be necessary for Xxxxxx'x to obtain, at the
Effective Time, the title insurance coverage which is described on Exhibit C
attached hereto for each parcel of Rio Real Property (exclusive of Rio Leased
Property under Rio Space Leases) (the "TITLE INSURANCE") to be issued by a
title insurance company or companies selected by Rio and reasonably
acceptable to Xxxxxx'x (collectively, the "TITLE INSURER"). Such actions
required of Rio shall include, without limitation, the provision of such
documentation and other information as shall be reasonably requested by the
Title Insurer and the execution and delivery of such affidavits, indemnity
agreements and other documents as shall be reasonably requested by the Title
Insurer. Rio shall obtain from surveyors reasonably acceptable to Xxxxxx'x
all surveys of the Rio Real Property necessary for the issuance of the Title
Insurance at Rio's cost.
ARTICLE VI.
CONDITIONS TO MERGER
SECTION 6.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligations of each party to this Agreement to effect
the Merger shall be subject to the satisfaction or waiver by each party prior
to the Effective Time of the following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement and the Merger shall
have been approved by the stockholders of Rio and the stockholders of
Xxxxxx'x in the manner required under the NRS and the Articles of
Incorporation of Rio and Xxxxxx'x, respectively.
(b) NO INJUNCTIONS. No Governmental Entity shall have enacted,
issued, promulgated, enforced or entered any order, executive order, stay,
decree, judgment or injunction or statute, rule, regulation which is in
effect and which has the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger.
(c) GOVERNMENTAL APPROVALS. All Governmental Approvals required
to consummate the transactions contemplated hereby shall have been obtained
(including, without
50
limitation, under the Rio Gaming Laws and the Xxxxxx'x Gaming Laws), all such
approvals shall remain in full force and effect, all statutory waiting
periods in respect thereof (including, without limitation, under the HSR Act)
shall have expired and no such approval shall contain any conditions,
limitations or restrictions which will have or would reasonably be expected
to have a Rio Material Adverse Effect or a Xxxxxx'x Material Adverse Effect.
(d) NYSE LISTING. The Xxxxxx'x Common Stock to be issued to
holders of Rio Common Stock in connection with the Merger shall have been
approved for listing on the NYSE, subject only to official notice of issuance.
(e) REGISTRATION STATEMENT. The Registration Statement shall have
become effective under the Securities Act and shall not be the subject of any
stop order or proceeding seeking a stop order.
SECTION 6.2. ADDITIONAL CONDITIONS TO OBLIGATIONS OF RIO. The
obligation of Rio to effect the Merger is subject to the satisfaction of each
of the following conditions prior to the Effective Time, any of which may be
waived in writing exclusively by Rio:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Xxxxxx'x and Merger Sub set forth in this Agreement shall be
true and correct as of the date of this Agreement and, except to the extent
such representations speak as of an earlier date, as of the Closing Date as
though made on and as of the Closing Date, except for (i) changes
contemplated by this Agreement and (ii) other than for representations and
warranties already qualified as to materiality or a Xxxxxx'x Material Adverse
Effect, inaccuracies which, individually or in the aggregate have not had and
are not reasonably likely to have a Xxxxxx'x Material Adverse Effect. Rio
shall have received a certificate signed on behalf of Xxxxxx'x by the chief
executive officer and the chief financial officer of Xxxxxx'x to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF XXXXXX'X. Xxxxxx'x shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and Rio shall
have received a certificate signed on behalf of Xxxxxx'x by the chief
executive officer and the chief financial officer of Xxxxxx'x to such effect.
(c) TAX OPINION REGARDING MERGER. Skadden, Arps, Slate, Xxxxxxx &
Xxxx LLP, counsel to Rio, shall have delivered to Rio an opinion, dated as of
the Closing Date, to the effect that, based upon representations, assumptions
and conditions customary for transactions such as the Merger (including the
Representation Letters), that the Merger will qualify for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code.
(d) NO MATERIAL ADVERSE CHANGE. Between the date of this Agreement
and the Effective Date, there shall not have been any event, development,
condition or state of affairs which resulted in or is reasonably likely to
result in a material adverse change in the business, properties, financial
condition or results of operations of Xxxxxx'x and its Subsidiaries, taken as a
whole, other than changes, if any, resulting from the effect of economic
changes which are applicable to the gaming industry generally or the gaming
industry in markets in which Xxxxxx'x or its Subsidiaries conducts business.
51
(e) THIRD-PARTY CONSENTS. Xxxxxx'x shall have received all
third-party consents and approvals required to be obtained by Xxxxxx'x in
connection with the transactions contemplated hereby, under any contract to
which Xxxxxx'x (or any of its Subsidiaries) may be a party, except for such
third-party consents and approvals as to which the failure to obtain, either
individually or in the aggregate, would not reasonably be expected to result
in a Xxxxxx'x Material Adverse Effect.
SECTION 6.3. ADDITIONAL CONDITIONS TO OBLIGATIONS OF XXXXXX'X. The
obligations of Xxxxxx'x and Merger Sub to effect the Merger are subject to
the satisfaction of each of the following conditions prior to the Effective
Time, any of which may be waived in writing exclusively by Xxxxxx'x:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Xxxxxx'x and Merger Sub set forth in this Agreement shall be
true and correct as of the date of this Agreement and, except to the extent
such representations speak as of an earlier date, as of the Closing Date as
though made on and as of the Closing Date, except for (i) changes
contemplated by this Agreement and (ii) other than for representations and
warranties already qualified as to materiality or a Rio Material Adverse
Effect, inaccuracies which, individually or in the aggregate have not had and
are not reasonably likely to have a Rio Material Adverse Effect. Rio shall
have received a certificate signed on behalf of Xxxxxx'x by the chief
executive officer and the chief financial officer of Xxxxxx'x to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF RIO AND CERTAIN STOCKHOLDERS.
Rio shall have performed in all material respects all obligations required to
be performed by it under this Agreement at or prior to the Closing Date and
Xxxxxx'x shall have received a certificate signed on behalf of Rio by the
chief executive officer and the chief financial officer of Rio to each such
effect. Each of the Rio stockholders that is a party to a Stockholder Support
Agreement shall have performed in all material respects all obligations
required to be performed by it under the Stockholder Support Agreements at or
prior to the Closing Date.
(c) NO MATERIAL ADVERSE CHANGE. Between the date of this
Agreement and the Effective Date, there shall not have been any event,
development, condition or state of affairs which resulted in or is reasonably
likely to result in a material adverse change in the business or properties,
(including, without limitation, Rio's development plans contemplated by the
Phase VI Expansion Plan and the development plans of the Phase VI Land),
financial condition or results of operations of Rio and its Subsidiaries,
taken as a whole, other than changes, if any, resulting from the effect of
economic changes which are applicable to the gaming industry generally or the
Las Vegas gaming industry in particular.
(d) TAX OPINION REGARDING MERGER. Xxxxxx & Xxxxxxx, counsel to
Xxxxxx'x, shall have delivered to Xxxxxx'x an opinion, dated as of the
Closing Date, to the effect that, based upon representations, assumptions and
conditions customary for transactions such as the Merger (including the
Representation Letters), that the Merger will qualify for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code.
(e) THIRD-PARTY CONSENTS. Rio shall have received all third-party
consents and approvals required to be obtained by Rio in connection with the
transactions contemplated
52
hereby, under any contract to which Rio (or any of its Subsidiaries) may be a
party, except for such third-party consents and approvals as to which the
failure to obtain, either individually or in the aggregate, would not
reasonably be expected to result in a Rio Material Adverse Effect.
(f) POOLING LETTER. Xxxxxx'x shall have received a letter from
Xxxxxx Xxxxxxxx LLP addressed to Xxxxxx'x regarding its concurrence with the
conclusions of management of Xxxxxx'x as to the appropriateness of the
pooling of interests accounting under Accounting Principles Board Opinion No.
16 for the transactions contemplated hereby.
ARTICLE VII.
TERMINATION AND AMENDMENT
SECTION 7.1. TERMINATION. This Agreement may be terminated at any
time prior to the Effective Time (with respect to Sections 7.1(b) through
7.1(h), by written notice by the terminating party to the other party),
whether before or after approval of the matters presented in connection with
the Merger by the stockholders of Rio:
(a) by mutual written consent of Rio and Xxxxxx'x; or
(b) by either Xxxxxx'x or Rio if the Merger shall not have been
consummated by January 31, 1999 (PROVIDED that (i) if the Merger shall not
have been consummated because the requisite Governmental Approvals required
under Section 6.1(c) shall not have been obtained and are still being
pursued, either Xxxxxx'x or Rio may extend such date to May 31, 1999 by
providing written notice thereof to the other party on or prior to January
31, 1999 and (ii) the right to terminate this Agreement under this Section
7.1(b) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of or resulted in the
failure of the Merger to occur on or before such date); or
(c) by either Xxxxxx'x or Rio if a court of competent jurisdiction
or other Governmental Entity shall have issued a nonappealable final order,
decree or ruling or taken any other nonappealable final action, in each case
having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger; or
(d) (i) by either Xxxxxx'x or Rio, if, at the Rio Stockholders'
Meeting (including any adjournment or postponement), the requisite vote of
the stockholders of Rio in favor of the approval and adoption of this
Agreement and the Merger shall not have been obtained; or (ii) by either Rio
or Xxxxxx'x, if, at the Xxxxxx'x Stockholders' Meeting (including any
adjournment or postponement), the requisite vote of the stockholders of
Xxxxxx'x in favor of the approval and adoption of this Agreement and the
Merger shall not have been obtained; or
(e) (i) by Xxxxxx'x, if for any reason Rio fails to call and hold
the Rio Stockholders' Meeting by January 31, 1999; PROVIDED, that Xxxxxx'x
right to terminate this Agreement under this clause (e)(i) shall not be
available if at such time Rio would be entitled to terminate this Agreement
under Section 7.1(h); or (ii) by Rio, if for any reason Xxxxxx'x fails to
call and hold the Xxxxxx'x Stockholders' Meeting by January 31, 1999;
PROVIDED, that Rio's right to terminate this
53
Agreement under this clause (e)(ii) shall not be available if at such time
Xxxxxx'x would be entitled to terminate this Agreement under Section 7.1(h);
or
(f) by Rio, in accordance with Section 5.4(c); PROVIDED, HOWEVER,
that no termination to this Section 7.1(f) shall be deemed effective unless
Rio shall have complied with all provisions contained in Section 5.4(c),
including the notice provision therein, and the applicable requirements of
Section 7.3, including the payment of the termination fee pursuant to Section
7.3(b)(iii); or
(g) by Rio, if Xxxxxx'x consolidates or merges with or into, or
sells all or substantially all of its assets directly or through the sale of
capital stock to any person, if after any such transaction, the stockholders
of Xxxxxx'x immediately prior to such transaction do not own at least 50% of
the voting stock of the surviving or acquiring entity immediately after such
transaction; or
(h) by Xxxxxx'x or Rio, if there has been a breach of any
representation, warranty, covenant or agreement on the part of the
non-terminating party set forth in this Agreement, which breach will cause
the conditions set forth in Section 6.2(a) or (b) (in the case of termination
by Rio) or 6.3(a) or (b) (in the case of termination by Xxxxxx'x) not to be
satisfied.
SECTION 7.2. EFFECT OF TERMINATION. In the event of termination of
this Agreement as provided in Section 7.1, this Agreement shall immediately
become void and there shall be no liability or obligation on the part of
Xxxxxx'x, Merger Sub or Rio, or their respective officers, directors,
stockholders or Affiliates, except as set forth in Section 7.3 and except
that such termination shall not limit liability for a willful breach of this
Agreement; PROVIDED that the provisions of this Section 7.2, Section 7.3 of
this Agreement and the Confidentiality Agreements shall remain in full force
and effect and survive any termination of this Agreement.
SECTION 7.3. FEES AND EXPENSES.
(a) Except as set forth in this Section 7.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, whether or not the
Merger is consummated.
(b) Rio shall pay Xxxxxx'x a termination fee of $22.5 million via
wire transfer of same-day funds on the date of the earliest to occur of the
following events:
(i) the termination of this Agreement by Xxxxxx'x or Rio
pursuant to Section 7.1(d)(i), if an Acquisition Proposal involving Rio shall
have been publicly announced prior to the Stockholders' Meeting and either an
Acquisition Agreement for a Rio Alternative Transaction is entered into, or a
Rio Alternative Transaction is consummated, within twelve months of such
termination;
(ii) the termination of this Agreement by Xxxxxx'x pursuant to
Section 7.1(e)(i);
(iii) the termination of this Agreement by Rio pursuant to
Section 7.1(f); or
54
(iv) the termination of this Agreement by Xxxxxx'x pursuant to
Section 7.1(h); PROVIDED that if such termination occurs solely on account of
Rio's breach of a representation or warranty (and Rio has not otherwise
breached any material covenant or agreement, in which case this proviso shall
not apply), such termination fee shall be payable only if an Acquisition
Proposal involving Rio shall have been publicly announced prior to such
termination and either an Acquisition Agreement for a Rio Alternative
Transaction is entered into, or a Rio Alternative Transaction is consummated,
within twelve months of such termination.
Rio's payment of a termination fee pursuant to this subsection shall
be the sole and exclusive remedy of Xxxxxx'x against Rio and any of its
Subsidiaries and their respective directors, officers, employees, agents,
advisors or other representatives with respect to the occurrences giving rise
to such payment; PROVIDED that this limitation shall not apply in the event
of a willful breach of this Agreement by Rio.
(c) Xxxxxx'x shall pay Rio a termination fee of $22.5 million via
wire transfer of same-day funds on the date of the earliest to occur of the
following events:
(i) the termination of this Agreement by Xxxxxx'x or Rio
pursuant to Section 7.1(d)(ii), if an Acquisition Proposal involving Xxxxxx'x
shall have been publicly announced prior to the Stockholders' Meeting and
either an Acquisition Agreement for a Xxxxxx'x Alternative Transaction is
entered into, or a Xxxxxx'x Alternative Transaction is consummated, within
twelve months of such termination;
(ii) the termination of this Agreement by Rio pursuant to
Section 7.1(e)(ii); or
(iii) the termination of this Agreement by Rio pursuant to
Section 7.1(h); PROVIDED that if such termination occurs solely on account of
Xxxxxx'x breach of a representation or warranty (and Xxxxxx'x has not
otherwise breached any material covenant or agreement, in which case this
proviso shall not apply), such termination fee shall be payable only if an
Acquisition Proposal involving Xxxxxx'x shall have been publicly announced
prior to such termination and either an Acquisition Agreement for a Xxxxxx'x
Alternative Transaction is entered into, or an Alternative Transaction is
consummated, within twelve months of such termination.
Xxxxxx'x payment of a termination fee pursuant to this subsection
shall be the sole and exclusive remedy of Rio against Xxxxxx'x and any of its
Subsidiaries and their respective directors, officers, employees, agents,
advisors or other representatives with respect to the occurrences giving rise
to such payment; PROVIDED that this limitation shall not apply in the event
of a willful breach of this Agreement by Xxxxxx'x.
(d) Xxxxxx'x shall pay River a termination fee of $10.0 million
via wire transfer of same-day funds on the date the Merger Agreement is
terminated pursuant to Section 7.1(b) if, at the time of such termination,
the condition set forth in Section 6.3(f) has not been satisfied or waived by
Xxxxxx'x.
(e) As used in this Agreement, "RIO ALTERNATIVE TRANSACTION" means
(i) a transaction pursuant to which any Third Party acquires more than 50% of
the outstanding shares of Rio Common Stock pursuant to a tender offer or
exchange offer or otherwise, (ii) a merger or
55
other business combination involving Rio pursuant to which any Third Party
(or the stockholders of a Third Party) acquires more than 50% of the
outstanding shares of Rio Common Stock or the entity surviving such merger or
business combination, or (iii) any other transaction pursuant to which any
Third Party acquires control of assets (including for this purpose the
outstanding equity securities of Subsidiaries of Rio, and the entity
surviving any merger or business combination including any of them) of Rio
having a fair market value (as determined in good faith by the Board of
Directors of Rio) equal to more than 50% of the fair market value of all the
assets of Rio and its Subsidiaries, taken as a whole, immediately prior to
such transaction.
(f) As used in this Agreement, "XXXXXX'X ALTERNATIVE TRANSACTION"
means (i) a transaction pursuant to which any Third Party acquires more than
50% of the outstanding shares of Xxxxxx'x Common Stock pursuant to a tender
offer or exchange offer or otherwise, (ii) a merger or other business
combination involving Xxxxxx'x pursuant to which any Third Party (or the
stockholders of a Third Party) acquires more than 50% of the outstanding
shares of Xxxxxx'x Common Stock or the entity surviving such merger or
business combination, or (iii) any other transaction pursuant to which any
Third Party acquires control of assets (including for this purpose the
outstanding equity securities of Subsidiaries of Xxxxxx'x, and the entity
surviving any merger or business combination including any of them) of
Xxxxxx'x having a fair market value (as determined in good faith by the Board
of Directors of Xxxxxx'x) equal to more than 50% of the fair market value of
all the assets of Xxxxxx'x and its Subsidiaries, taken as a whole,
immediately prior to such transaction.
(g) The fees payable pursuant to Section 7.3(b) shall be paid
concurrently with the first to occur of the events described in Section
7.3(b)(i), (ii), (iii) or (iv), and the fees payable pursuant to Section
7.3(c) shall be paid concurrently with the first to occur of the events
described in Sections 7.3(c)(i), (ii) or (iii).
SECTION 7.4. AMENDMENT. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of
Directors, at any time before or after approval of the matters presented in
connection with the Merger by the stockholders of Rio, but, after any such
approval, no amendment shall be made which by law requires further approval
by such stockholders without such further approval. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto.
SECTION 7.5. EXTENSION; WAIVER. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their respective
Boards of Directors, may, to the extent legally allowed (i) extend the time
for the performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions contained
here. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed on
behalf of such party.
56
ARTICLE VIII.
MISCELLANEOUS
SECTION 8.1. NONSURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS. None of the representations, warranties, covenants and
agreements in this Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Effective Time, except for the agreements
contained in Sections 1.4, 1.5, 1.6, 2.1, 2.2, 2.3, 5.10, and 5.11 and
Article VIII. The Confidentiality Agreements shall survive the execution and
delivery of this Agreement.
SECTION 8.2. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or mailed by registered or certified mail
(return receipt requested) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) if to Rio, to
Rio Hotel & Casino, Inc.
0000 Xxxx Xxxxxxxx Xxxx
Xxx Xxxxx, Xxxxxx 00000
Attn: Xxxxx X. Xxxxxxx, Xx.
Telecopy: (000) 000-0000
with a copy to
Rio's Counsel
Kummer, Kaempfer, Xxxxxx & Xxxxxxx
0000 Xxxxxx Xxxxxx Xxxxxxx
0xx Xxxxx
Xxx Xxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
Telecopy: (000) 000-0000
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
Telecopy: (000) 000-0000
(b) if to Xxxxxx'x or Merger Sub, to
Xxxxxx'x Entertainment, Inc.
0000 Xxxxxx Xxxx
Xxxxxxx, Xxxxxxxxx 00000
Attn: Xxxxx X. Xxxx
Telecopy: (000) 000-0000
57
with a copy to:
Xxxxxx & Xxxxxxx
000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxxxx Xxxxxxxxxxxx, Xx., Esq.
Telecopy: (000) 000-0000
SECTION 8.3. INTERPRETATION. When a reference is made in this
Agreement to Sections, such reference shall be to a Section of this Agreement
unless otherwise indicated. The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement they shall be
deemed to be followed by the words "without limitation." The phrase "made
available" in this Agreement shall mean that the information referred to has
been made available if requested by the party to whom such information is to
be made available. The phrases "the date of this Agreement", "the date
hereof," and terms of similar import, unless the context otherwise requires,
shall be deemed to refer to August 9, 1998.
SECTION 8.4. COUNTERPARTS. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same
agreement and shall become effective when two or more counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
SECTION 8.5. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This
Agreement and all documents and instruments referred to herein (a) constitute
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, and (b) except as provided in Section 5.10, are not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder; PROVIDED that the Confidentiality Agreements shall remain in full
force and effect until the Effective Time. Each party hereto agrees that,
except for the representations and warranties contained in this Agreement,
none of Xxxxxx'x, Merger Sub or Rio makes any other representations or
warranties, and each hereby disclaims any other representations and
warranties made by itself or any of its officers, directors, employees,
agents, financial and legal advisors or other representatives, with respect
to the execution and delivery of this Agreement or the transactions
contemplated hereby, notwithstanding the delivery or disclosure to any of
them or their respective representatives of any documentation or other
information with respect to any one or more of the foregoing.
SECTION 8.6. GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of Nevada without regard
to any applicable conflicts of law.
SECTION 8.7. ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Merger Sub may assign its
rights and obligations hereunder to any direct or indirect wholly-owned
subsidiary of Xxxxxx'x; PROVIDED that no such assignment shall relieve
Xxxxxx'x of its obligations hereunder. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
58
SECTION 8.8. SEVERABILITY; ENFORCEMENT. Except to the extent that the
application of this Section 8.8 would be reasonably likely to have a Xxxxxx'x
Material Adverse Effect with respect to Xxxxxx'x or a Rio Material Adverse
Effect with respect to Rio, the invalidity of any portion hereof shall not
affect the validity, force or effect of the remaining portions hereof. If it
is ever held that any covenant hereunder is too broad to permit enforcement
of such covenant to its fullest extent, each party agrees that a court of
competent jurisdiction may enforce such covenant to the maximum extent
permitted by law, and each party hereby consents and agrees that such scope
may be judicially modified accordingly in any proceeding brought to enforce
such covenant.
SECTION 8.9. SPECIFIC PERFORMANCE. The parties hereto agree that the
remedy at law for any breach of this Agreement will be inadequate and that
any party by whom this Agreement is enforceable shall be entitled to specific
performance in addition to any other appropriate relief or remedy. Such
party may, in its sole discretion, apply to a court of competent jurisdiction
for specific performance or injunctive or such other relief as such court may
deem just and proper in order to enforce this Agreement or prevent any
violation hereof and, to the extent permitted by applicable laws, each party
hereto waives any objection to the imposition of such relief.
59
IN WITNESS WHEREOF, XXXXXX'X, MERGER SUB AND RIO HAVE CAUSED THIS
AGREEMENT TO BE SIGNED BY THEIR RESPECTIVE DULY AUTHORIZED OFFICERS AS OF THE
DATE FIRST WRITTEN ABOVE.
XXXXXX'X ENTERTAINMENT, INC.
By: /s/ XXXXX X. XXXX
----------------------------------
Xxxxx X. Xxxx
Its: Executive Vice President &
Chief Financial Officer
HEI ACQUISITION CORP. III
By: /s/ XXXXX X. XXXX
-----------------------------------
Xxxxx X. Xxxx
Its: Executive Vice President
RIO HOTEL & CASINO, INC.
By: /s/ XXXXX X. XXXXXXX, XX.
------------------------------------
Its: President
EXHIBIT A
FORM OF STOCKHOLDER SUPPORT AGREEMENT
STOCKHOLDER SUPPORT AGREEMENT, dated as of August 9, 1998 (this
"AGREEMENT"), by _______________ ("STOCKHOLDER") to and for the benefit of
Xxxxxx'x Entertainment, Inc., a Delaware corporation ("XXXXXX'X").
Capitalized terms used and not otherwise defined herein shall have the
respective meanings assigned to them in the Merger Agreement referred to
below.
WHEREAS, as of the date hereof, Stockholder owns of record and
beneficially ________ shares (such shares, together with any other voting or
equity securities of Rio Hotel & Casino, Inc., a Nevada corporation ("RIO"),
hereafter acquired by Stockholder prior to the termination of this Agreement,
being referred to herein collectively as the "SHARES") of common stock, par
value $0.01 per share ("RIO COMMON STOCK");
WHEREAS, concurrently with the execution of this Agreement, Xxxxxx'x,
HEI Acquisition Corp. III, a Nevada corporation and indirect wholly-owned
subsidiary of Xxxxxx'x ("MERGER SUB"), and Rio are entering into an Agreement
and Plan of Merger, dated as of the date hereof (the "MERGER AGREEMENT"),
pursuant to which, upon the terms and subject to the conditions thereof,
Merger Sub will be merged with and into Rio such that Rio will become an
indirect wholly-owned subsidiary of Xxxxxx'x (the "MERGER"); and
WHEREAS, as a condition to the willingness of Rio, Xxxxxx'x and Merger
Sub to enter into the Merger Agreement, Xxxxxx'x has requested the
Stockholder agree, and in order to induce Xxxxxx'x and Merger Sub to enter
into the Merger Agreement, the Stockholder is willing to agree to vote in
favor of adopting the Merger Agreement and approving the Merger, upon the
terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereby agree, severally and not jointly, as follows:
Section 1. VOTING OF SHARES. Until the termination of this
Agreement in accordance with the terms hereof, Stockholder hereby agrees
that, at the Rio Stockholders' Meeting (as defined in the Merger Agreement)
or any other meeting of the stockholders of Rio, however called, and in any
action by written consent of the stockholders of Rio, Stockholder will vote
all of his or her respective Shares (a) in favor of adoption of the Merger
Agreement and approval of the Merger and the other transactions contemplated
by the Merger Agreement, and (b) in favor of any other matter necessary to
the consummation of the transactions contemplated by the Merger Agreement and
considered and voted upon by the stockholders of Rio (or any class thereof).
In addition, Stockholder agrees that it will, upon request by Xxxxxx'x,
furnish written confirmation, in form and substance reasonably acceptable to
Xxxxxx'x, of such Stockholder's vote in favor of the Merger Agreement and the
Merger. Stockholder acknowledges receipt and review of a copy of the Merger
Agreement.
Section 2. TRANSFER OF SHARES. Stockholder represents and warrants
that it has no present intention of taking action, prior to the termination
of this Agreement in accordance with the terms hereof, to, directly or
indirectly, (a) sell, assign, transfer (including by merger, testamentary
disposition, interspousal disposition pursuant to a domestic relations
proceeding or otherwise by operation of law), pledge, encumber or otherwise
dispose of any of the Shares, (b) deposit any of the Shares into a voting
trust or enter into a voting agreement or arrangement with respect to the
Shares or grant any proxy or power of attorney with respect thereto which is
inconsistent with this Agreement or (c) enter into any contract, option or
other arrangement or undertaking with respect to the direct or indirect sale,
assignment, transfer (including by merger, testamentary disposition,
interspousal disposition pursuant to a domestic relations proceeding or
otherwise by operation of law) or other disposition of any Shares.
Section 3. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER.
Stockholder hereby represents and warrants to Xxxxxx'x with respect to
himself or herself and his or her ownership of the Shares as follows:
(a) OWNERSHIP OF SHARES. On the date hereof, the Shares are
owned of record and beneficially by Stockholder. Stockholder has sole voting
power, without restrictions, with respect to all of the Shares.
(b) POWER, BINDING AGREEMENT. Stockholder has the legal
capacity, power and authority to enter into and perform all of his or her
obligations under this Agreement. The execution, delivery and performance of
this Agreement by Stockholder will not violate any other agreement to which
Stockholder is a party, including, without limitation, any voting agreement,
stockholders' agreement, partnership agreement or voting trust. This
Agreement has been duly and validly executed and delivered by Stockholder and
constitutes a valid and binding obligation of Stockholder, enforceable
against Stockholder in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and subject,
as to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
(c) NO CONFLICTS. The execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated
hereby will not, conflict with or result in any violation of, or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, any provision of any loan or credit
agreement, note, bond, mortgage, indenture, lease, or other agreement,
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Stockholder or any
of his or her properties or assets, other than such conflicts, violations or
defaults or terminations, cancellations or accelerations which individually
or in the aggregate do not materially impair the ability of Stockholder to
perform his or her obligations hereunder. Subject to Rio Gaming Laws, no
consent, approval, order or authorization of, or registration, declaration,
or filing with, any governmental entity is required by or with respect to the
execution and delivery of this Agreement by Stockholder and the consummation
by Stockholder of the transactions contemplated hereby.
A-2
Section 4. NO SOLICITATION. Prior to the termination of this
Agreement in accordance with its terms, Stockholder agrees that (i) in his or
her individual capacity he or she will not, nor will he or she authorize or
permit any of his or her employees, agents and representatives to, directly
or indirectly, (a) initiate, solicit or encourage any inquiries or the making
of any Acquisition Proposal (as defined in the Merger Agreement), (b) enter
into any agreement with respect to any Acquisition Proposal, or (c)
participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, any Acquisition Proposal, and (ii) he
or she will notify Xxxxxx'x as soon as possible if any such inquiries or
proposals are received by, any information or documents is requested from, or
any negotiations or discussions are sought to be initiated or continued with,
him or her or any of his or her affiliates in his or her individual capacity.
Section 5. TERMINATION. This Agreement shall terminate upon the
earliest to occur of (i) the Effective Time (as such term is defined in the
Merger Agreement) or (ii) any termination of the Merger Agreement in
accordance with the terms thereof; PROVIDED that the provisions of Sections 6
and 8 of this Agreement shall survive any termination of this Agreement; and
PROVIDED FURTHER that no such termination shall relieve any party of
liability for a breach hereof prior to termination.
Section 6. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties
shall be entitled to specific performance of the terms hereof, in addition to
any other remedy at law or in equity.
Section 7. FIDUCIARY DUTIES. Notwithstanding anything in this
Agreement to the contrary, the covenants and agreements set forth herein
shall not prevent Stockholder from serving on Rio's Board of Directors and
from taking or not taking any action, subject to the applicable provisions of
the Merger Agreement, while acting in such capacity as a director of Rio.
Section 8. MISCELLANEOUS.
(a) This Agreement constitutes the entire agreement between
the parties hereto with respect to the subject matter hereof and supersedes
all prior agreements and understandings, both written and oral, between the
parties with respect thereto. This Agreement may not be amended, modified or
rescinded except by an instrument in writing signed by each of the parties
hereto.
(b) If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that
any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible to the fullest extent permitted by applicable law in a mutually
acceptable manner in order that the terms of this Agreement remain as
originally contemplated to the fullest extent possible.
A-3
(c) This Agreement shall be governed by and construed in
accordance with the laws of the State of Nevada without regard to the
principles of conflicts of law thereof.
(d) This Agreement may be executed in counterparts, each of
which shall be deemed an original and all of which together shall constitute
one and the same instrument.
A-4
IN WITNESS WHEREOF, EACH OF THE PARTIES HERETO HAS CAUSED THIS AGREEMENT TO
BE SIGNED BY THEIR RESPECTIVE DULY AUTHORIZED OFFICERS AS OF THE DATE FIRST
WRITTEN ABOVE.
STOCKHOLDER
-------------------------------------
Agreed and Acknowledged:
XXXXXX'X ENTERTAINMENT, INC.
By:
--------------------------------
Its:
--------------------------------
EXHIBIT B
FORM OF AFFILIATE LETTER
Xxxxxx'x Entertainment, Inc.
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed
to be an "affiliate" of Rio Hotel & Casino, Inc., a Nevada corporation
("RIO"), as the term "affiliate" is defined for purposes of paragraphs (c)
and (d) of Rule 145 of the rules and regulations (the "RULES AND
REGULATIONS") of the Securities and Exchange Commission (the "COMMISSION")
under the Securities Act of 1933, as amended, (the "ACT"). Pursuant to the
terms of the Merger Agreement, dated as of August 9, 1998 (the "AGREEMENT"),
between Xxxxxx'x Entertainment, Inc., a Delaware corporation ("XXXXXX'X"),
Xxxxxx'x Sub Corp., a Nevada corporation ("MERGER SUB"), and Rio, Merger Sub
will be merged with and into Rio (as defined in the Agreement) (the "MERGER").
As a result of the Merger, I may receive shares of Common Stock, par
value $0.10 per share, of Xxxxxx'x (as defined in the Agreement) (the
"XXXXXX'X COMMON STOCK") in exchange for shares owned by me of Common Stock,
par value $0.01 per share, of Rio.
1. COMPLIANCE WITH THE ACT. I represent, warrant and covenant to the
Xxxxxx'x that in the event I receive any Xxxxxx'x Common Stock as a result of
the Merger:
A. I shall not make any sale, transfer or other disposition of the
Xxxxxx'x Common Stock in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Agreement and discussed
the requirements of such documents and other applicable limitations upon my
ability to sell, transfer or otherwise dispose of the Xxxxxx'x Common Stock
to the extent I felt necessary, with my counsel or counsel for Rio.
C. I have been advised that the issuance of Xxxxxx'x Common Stock to
me pursuant to the Merger will be registered with the Commission under the
Act on a Registration Statement on Form S-4. However, I have also been
advised that, since at the time the Merger is submitted for a vote of the
stockholders of Rio, I may be deemed to have been an affiliate of Rio and
the distribution by me of the Xxxxxx'x Common Stock has not been registered
under the Act, I may not sell, transfer or otherwise dispose of the
Xxxxxx'x Common Stock issued to me in the Merger unless (i) such sale,
transfer or other disposition has been registered under the Act, (ii) such
sale, transfer or disposition is made in conformity with Rule 145
promulgated by the Commission under the Act, or (iii) in the opinion of
counsel reasonably acceptable to Xxxxxx'x, or pursuant to a "no action"
letter obtained by the undersigned from the staff of the Commission, such
sale, transfer or other
disposition is otherwise exempt from registration under the Act.
D. I understand that Xxxxxx'x is under no obligation to register the
sale, transfer or disposition of the Xxxxxx'x Common Stock by me or on my
behalf under the Act or to take any other action necessary in order to make
compliance with an exemption from such registration available; PROVIDED,
HOWEVER, that Xxxxxx'x shall meet the requirements of paragraph (c) of Rule
144 promulgated under the Act.
E. I also understand that stop transfer instructions will be given
to the Xxxxxx'x transfer agent with respect to the Xxxxxx'x Common Stock
and that there will be placed on the Certificates for the Xxxxxx'x Common
Stock issued to me, or any substitutions therefor, a legend stating in
substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE
TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED AUGUST
9, 1998 BETWEEN THE REGISTERED HOLDER HEREOF AND XXXXXX'X
ENTERTAINMENT, INC., A COPY OF WHICH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICES OF XXXXXX'X ENTERTAINMENT, INC."
F. I also understand that unless the transfer by me of my Xxxxxx'x
Common Stock has been registered under the Act or is a sale made in
conformity with the provisions of Rule 145, Xxxxxx'x reserves the right to
put the following legend on the certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN
ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION
WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES
ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN
ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933."
It is understood and agreed that the legends set forth in paragraphs E and
F above shall be removed by delivery of substitute certificates without such
legend if such legend is not required for purposes of the Act or this Agreement.
It is understood and agreed that such legends and the stop orders referred to
above will be removed if (i) one year shall have elapsed from the date the
undersigned acquired the Xxxxxx'x Common Stock received in the Merger and the
provisions of Rule 145(d)(2) are then available to the undersigned, (ii) two
years shall have elapsed from the
B-2
date the undersigned acquired Xxxxxx'x Common Stock received in the Merger
and the provisions of Rule 145(d)(3) are then available to the undersigned,
or (iii) Xxxxxx'x has received either an opinion of counsel, which opinion
and counsel shall be reasonably satisfactory to Xxxxxx'x, or a "no action"
letter obtained by the undersigned from the staff of the Commission, to the
effect that the restrictions imposed by Rule 145 under the Act no longer
apply to the undersigned.
2. POOLING REQUIREMENTS. The undersigned will not sell, assign,
transfer or otherwise dispose of or encumber (i) any shares of Rio Common
Stock, whether now owned or hereafter acquired by the undersigned, (ii) any
options, warrants, or other rights to receive such stock, whether now owned
or hereafter acquired by the undersigned, (iii) any shares of Xxxxxx'x Common
Stock, whether now owned or hereafter acquired by the undersigned or (iv) any
options, warrants, or other rights to receive such Xxxxxx'x Common Stock,
whether now owned or hereafter acquired by the undersigned, in each of the
foregoing cases, from thirty (30) days prior to the closing of the Merger
until the consolidated results of operations of Xxxxxx'x and Rio, including
at least thirty (30) days of combined operations after the Effective Time (as
defined in the Agreement), are made available to the public.
3. CERTAIN TAX MATTERS. The undersigned does not intend to take a
position on any federal or state income tax return that is inconsistent with
the treatment of the Merger as a tax-free reorganization for federal or state
income tax purposes.
Execution of this letter should not be considered an admission on my
part that I am an "affiliate" of Rio as described in the first paragraph of
this letter or as a waiver of any rights I may have to object to any claim
that I am such an affiliate on or after the date of this letter.
Very truly yours,
Name:
Accepted this day of
, 1998 by
XXXXXX'X ENTERTAINMENT, INC.
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
B-3
EXHIBIT C
TITLE INSURANCE REQUIREMENTS FOR EACH PARCEL OF
RIO REAL PROPERTY
1. POLICY FORM: ALTA 1970 Form B Owner's Policy in an amount and with
such co-insurance or reinsurance as shall be reasonably requested by
Xxxxxx'x.
2. INSURED: Record holder of parcel or insured interest therein immediately
after the Effective Time.
3. TITLE EXCEPTIONS: Only those exceptions described in Schedule 3.8(b) of
the Rio Disclosure Schedule and the Rio Permitted Liens.
4. ENDORSEMENT COVERAGE:
- Delete Standard Exceptions
- Access (via particular streets or easements as the case may be)
- Survey (insuring the insured premises to be the same as the surveyed
premises and that all easements are located as shown on the survey)
- Contiguity (insuring no strips, gores, gaps within lots or between
apparently contiguous lots)
- Owner's Comprehensive
- No Encroachments
- Legal Lot/Subdivision
- Zoning (ALTA 3.1 for improved premises)
- Going Concern (Special Valuation)
- Corporate Successor (if applicable)
- Sears (agreement to issue new policies)
- Non-Imputation (insuring against non-record matters known to Rio
officers and employees)
- Option (as to option properties)(insuring the validity of any options
held)
- Lessor's Interest (as to leasehold properties)(insuring the priority
of the leasehold)
- Deletion of Paragraph 10 of Conditions and Stipulations
- Agreement as to adequacy of coverage (no coinsurance)
- Mineral Rights
- Affirmative insurance against all loss, cost or damage resulting from
particular exceptions
EXHIBIT D
RIO REPRESENTATION LETTER
[RIO LETTERHEAD]
_______, 1998
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Xxxxxx & Xxxxxxx
000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
On behalf of Rio Hotel & Casino, Inc. ("Target"), the undersigned, an
officer of Target, in connection with the opinions to be delivered by
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP ("Skadden, Arps") and Xxxxxx &
Xxxxxxx pursuant to Section 6.2(c) and 6.3(d), respectively (each, a "Tax
Opinion"), of the Agreement and Plan of Merger (the "Merger Agreement"),
dated as of ___________, 1998, among Xxxxxx'x Entertainment, Inc. ("Parent"),
HEI Acquisition Corp. III ("Merger Sub") and Target, pursuant to which Merger
Sub will merge with and into Target, with Target surviving (the "Merger"),
and recognizing that each of you will, and authorizing each of you to, rely
upon this certificate in rendering your respective Tax Opinion, hereby
certifies that:(1)
1. The facts relating to the Merger described in the combined Proxy
Statement of Target and Prospectus of Parent relating to the Merger (the
"Proxy Statement-Prospectus") and related documents and materials are
accurate and complete in all material respects and will be accurate and
complete in all material respects at the Effective Time.
2. The Merger will be consummated in compliance with the terms and
conditions of the Merger Agreement and as described in the Proxy
Statement-Prospectus, and none of the terms and conditions contained in the
Merger Agreement have been or will be waived or modified (except as set forth
in the schedule attached hereto).
_____________________________
(1) For purposes of this certificate, capitalized terms used and not
otherwise defined herein shall have the meanings specified in the Merger
Agreement.
D-1
3. The aggregate fair market value of the shares of Parent voting
stock received by each stockholder of Target will be approximately equal to
the fair market value of the shares of Target stock surrendered in the
Merger, as determined by arm's-length negotiations between the respective
managements and representatives of Parent and Target.
4. No assets of Target have been sold, transferred or otherwise
disposed of which would prevent Target from continuing its historic business
or from using a significant portion of its historic business assets in a
business following the Merger.
5. Target and the stockholder of Target will pay, and will not be
reimbursed for, their respective expenses, if any, incurred in connection
with the Merger.
6. There is no intercorporate indebtedness existing between Parent or
any of its Subsidiaries, on the one hand, and Target or any of its
Subsidiaries, on the other hand, that was issued, acquired, or will be
settled at a discount.
7. In the Merger, Target stock will be exchanged solely for Parent
voting stock (other than cash paid in lieu of fractional shares of Parent
voting stock). For purposes of this representation, Target stock redeemed for
cash or other property furnished by Parent will be considered as acquired by
Parent.
8. Target is not under the jurisdiction of a court in a Title 11 or
similar case within the meaning of Section 368(a)(3)(A) of Code.
9. At the Effective Time, the aggregate fair market value of the
assets of Target will exceed the sum of its liabilities, plus the amount of
liabilities, if any, to which the assets are subject.
10. The payment of cash in lieu of fractional shares of Parent stock,
if any, is solely for the purpose of avoiding the expense and inconvenience
to Parent of issuing fractional shares and does not represent separately
bargained-for consideration.
11. The payment of cash in lieu of fractional shares of Parent stock,
if any, will not, in the aggregate, exceed one percent of the total fair
market value of the consideration that will be received by the holders of
Target stock in the Merger. No Target stockholder will receive cash in an
amount greater than the fair market value of one share of Xxxxxx'x Common
Stock.
12. None of the compensation received by any stockholder-employee of
Target will be separate consideration for, or allocable to, any of their
shares of Target stock, none of the shares of Parent stock received by any
stockholder-employee of Target will be separate consideration for, or
allocable to, any employment agreement; and the compensation paid to any
stockholder-employee of Target will be for services rendered and will be
commensurate with amounts that would be paid to third parties bargaining at
arm's-length for similar services.
D-2
13. Target is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
14. Target has no plan or intention to issue additional shares of its
stock that would result in Parent losing control of Target within the meaning
of Section 368(c) of the Code.
15. In the Merger, shares of Target stock representing control of
Target, as defined in Section 368(c) of the Code, will be exchanged solely
for voting stock of Parent. For purposes of this representation, shares of
Target stock exchanged for cash or other property originating with Parent
will be treated as outstanding Target stock at the Effective Time.
16. At the Effective Time, Target will not have outstanding any
warrants, options, convertible securities or any other type of rights
pursuant to which any person could acquire stock in Target that, if exercised
or converted, would affect Parent's acquisition or retention of control of
Target, as defined in Section 368(c) of the Code.
17. Prior to and in connection with the Merger, (i) neither Target nor
any person related to Target (within the meaning of Treasury Regulation
Section 1.368-1(e)(3)) has redeemed, purchased or otherwise acquired shares
of Target stock, (ii) no person related to Parent (within the meaning of
Treasury Regulation Section 1.368-1(e)(3)) has acquired any shares of Target
stock with consideration other than Parent stock and (ii) Target has not made
an extraordinary distribution (as described in Treasury Regulation Section
1.368-1T(e)(1)(ii)(A)) with respect to its stock.
18. At the Effective Time, Target will hold at least 90 percent of the
fair market value of its net assets and at least 70 percent of the fair
market value of its gross assets. For purposes of this representation,
amounts paid by Target to dissenters, amounts paid by Target to shareholders
of Target who receive cash or other property, amounts used by Target to pay
reorganization expenses, and all redemptions and distributions (except for
regular, normal dividends, if any) made by Target will be included as assets
of Target immediately prior to the Merger.
19. Target has no authorized stock other than River Common Stock, River
Preferred Stock and River Class II Preferred Stock. Immediately prior to the
Merger, the only stock of Target that will be issued and outstanding will be
River Common Stock.
20. There will be no dissenters' rights in the Merger.
21. Except for the River Common Stock, Target has no issued and
outstanding equity or any outstanding indebtedness, instrument, contract or
other arrangement that could be treated as equity of Target under United
States federal income tax law. Additionally, Target has no outstanding stock,
indebtedness, instrument, contract or other arrangement that Target has
treated as debt for United States federal income tax purposes, but as other
than debt for any other purpose.
D-3
Skadden, Arps and Xxxxxx & Xxxxxxx may rely, without further inquiry, on
the accuracy of the foregoing representations for purposes of rendering their
respective Tax Opinions and the undersigned hereby consents to Skadden, Arps
and Xxxxxx & Xxxxxxx referencing this certificate in their Tax Opinions.
Target will promptly and timely notify Skadden, Arps and Xxxxxx & Xxxxxxx if
it is discovered that any of the above certifications ceases to be true,
correct and complete at or prior to the Effective Time.
IN WITNESS WHEREOF, the undersigned, on behalf of Target signed this
certificate this ______ day of ___________, 1998.
RIO HOTEL & CASINO, INC.
By: _____________________________
Name:
Title:
D-4
EXHIBIT E
XXXXXX'X REPRESENTATION LETTER
[XXXXXX'X LETTERHEAD]
_______, 1998
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Xxxxxx & Xxxxxxx
000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
On behalf of Xxxxxx'x Entertainment, Inc. ("Parent") and HEI Acquisition
Corp. III ("Merger Sub"), the undersigned, an officer of Parent and Merger
Sub, in connection with the opinions to be delivered by Skadden, Arps, Slate,
Xxxxxxx & Xxxx LLP ("Skadden, Arps") and Xxxxxx & Xxxxxxx pursuant to Section
6.2(c) and 6.3(d), respectively (each, a "Tax Opinion"), of the Agreement and
Plan of Merger (the "Merger Agreement"), dated as of _________, 1998, between
Parent, Merger Sub and Rio Hotel & Casino, Inc. ("Target"), pursuant to which
Merger Sub will merge with and into Target with Target surviving (the
"Merger"), and recognizing that each of you will, and authorizing each of you
to, rely upon this certificate in rendering your respective Tax Opinion,
hereby certifies that:(1)
1. The facts relating to the Merger described in the combined Proxy
Statement of Target and Prospectus of Parent relating to the Merger (the
"Proxy Statement-Prospectus") and related documents and materials are
accurate and complete in all material respects and will be accurate and
complete in all material respects at the Effective Time.
2. The Merger will be consummated in compliance with the terms and
conditions of the Merger Agreement and as described in the Proxy
Statement-Prospectus, and none of the terms and conditions contained in the
Merger Agreement have been or will be waived or modified (except as set forth
in the schedule attached hereto)
________________________
(1) For purposes of this certificate, capitalized terms used and not
otherwise defined herein shall have the meaning specified in the Merger
Agreement.
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3. The aggregate fair market value of the shares of Parent stock
received by each stockholder of Target will be approximately equal to the
fair market value of the shares of Target stock surrendered in the Merger, as
determined by arm's length negotiations between the respective managements
and representatives of Parent and Target.
4. Except for cash paid in lieu of fractional shares of Parent stock,
if any, pursuant to the Merger, neither Parent nor any person related to
Parent within the meaning of Treasury Regulation Section 1.368-1(e)(3) has
any plan or intention to purchase, redeem or otherwise acquire any of the
Parent stock that will be issued in the Merger. Following the Merger, any
acquisitions of Parent stock pursuant to any stock repurchased (or other
similar) program of Parent will be directed to Parent shareholders generally
and will not be directed specifically to the holders of Target stock who
receive Parent stock pursuant to the Merger.
5. Parent does not currently have any stock purchase (or other
similar) programs in effect and has no plan or intention to adopt any such
programs.
6. Following the Merger, Parent has no plan or intentions to (i)
liquidate Target, (ii) merger Target with or into another corporation, (iii)
sell or otherwise dispose of any of the stock of Target, except for transfers
described in Section 368(a)(2)(C) of the Code, or (iv) cause Target to sell
or otherwise dispose of any of the assets of Target, except for (A)
dispositions made in the ordinary course of business, (B) arm's-length sales
to persons unrelated to Parent or Target that are consistent with the
requirements of Treasury Regulation Section 1.368-1(d) or (C) transfers to
members of Parent's "qualified group." For purposes of this representation,
Parent's "qualified group" is one or more chains of corporations connected
through stock ownership with Parent, but only if Parent owns directly stock
meeting the requirements of Section 368(c) in at least one other corporation,
and stock meeting the requirements of Section 368(c) in each of the
corporations (except Parent) is owned directly by one of the other
corporations.
7. Following the Merger, Parent will cause Target to continue its
historic business or use a significant portion of its historic business
assets in a business, in each case, within the meaning of Section 1.368-1(d)
of the Treasury Regulations.
8. Parent and Merger Sub will pay, and will not be reimbursed for,
their respective expenses incurred in connection with the Merger. Parent and
Merger Sub will pay or assume in connection with the Merger only those
expenses of Target and Target's stockholders that are solely and directly
related to the Merger in accordance with the guidelines established in Rev.
Rul. 73-54, 1973-1, C.B. 187.
9. There is no intercorporate indebtedness existing between Parent or
any of its Subsidiaries (including Merger Sub), on the one hand, and Target
or any of its Subsidiaries, on the other hand, that was issued, acquired, or
will be settled at a discount.
10. In the Merger, Target stock will be exchanged solely for Parent
voting stock (other than cash paid in lieu of fractional shares of Parent
voting stock). For purposes of
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this representation, Target stock redeemed for cash or other property
furnished by Parent will be considered as acquired by Parent.
11. None of Parent or its Subsidiaries own, or have owned at any time
during the past five years, directly or indirectly, any shares of the stock
of Target.
12. The payment of cash in lieu of fractional shares of Parent stock,
if any, is solely for the purposes of avoiding the expense and inconvenience
to Parent of issuing fractional shares and does not represent separately
bargained-for consideration.
13. The payment of cash in lieu of fractional shares of Parent stock,
if any, will not, in the aggregate, exceed one percent of the total fair
market value of the consideration that will be received by the holders of
Target stock in the Merger. No Target stockholder will receive cash in an
amount greater than the fair market value of one share of Xxxxxx'x Common
Stock.
14. None of the compensation received by any stockholder-employee of
Target will be separate consideration for, or allocable to, any of their
shares of Target stock; none of the shares of Parent stock received by any
stockholder-employee of Target will be separate consideration for, or
allocable to, any employment agreement; and the compensation paid to any
stockholder-employee of Target will be for services actually rendered and
will be commensurate with amounts that would be paid to third parties
bargaining at arm's-length for similar services.
15. Neither Parent nor Merger Sub is an investment company as defined
in Section 368(a)(2)(F)(iii) and (iv) of the Code.
16. Prior to and at the time of the Merger, Parent will own all of the
issue and outstanding stock of Merger Sub and will be in control of Merger
Sub within the meaning of Section 368(c) of the Code. Merger Sub was formed
for the sole purpose of participating in the Merger.
17. Parent has no plan or intention to cause or permit Target to issue
additional shares of its stock after the Merger that would result in Parent
losing control of Target within the meaning of Section 368(c) of the Code.
18. Merger Sub will have no liabilities assumed by Target, and will
not transfer to Target in the Merger any assets subject to liabilities.
19. In the Merger, shares of Target stock representing control of
Target, as defined in Section 368(c) of the Code, will be exchanged solely
for voting stock of Parent. For purposes of this representation, shares of
Target stock exchanged for cash or other property originating with Parent
will be treated as outstanding Target stock at the Effective Time. Further,
no liabilities of Target or the Target stockholders will be assumed by
Parent, nor will any of the Target stock be subject to any liabilities.
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20. There will be dissenter's rights in the Merger.
21. Following the Merger, Target will hold at least 90 percent of the
fair market value of its net and at least 70 percent of the fair market value
of its gross assets and at least 90 percent of the fair market value of
Merger Sub's gross assets held immediately prior to the Merger. For purposes
of this representation, amounts paid by the Merger Sub or Target to
dissenters, amounts paid by Merger Sub or Target to shareholders of Target
who receive cash or other property (including in lieu of fractional share
interests of Parent stock), amounts used by Merger Sub or Target to pay
reorganization expenses, and all redemptions and distributions (except for
regular, normal dividends) made by Target will be included as assets of
Target of Merger Sub, respectively, immediately prior to the Merger.
Skadden, Arps and Xxxxxx & Xxxxxxx may rely, without further
inquiry, on the accuracy of the foregoing representations for purposes of
rending their respective Tax Opinions and the undersigned hereby consents to
Skadden, Arps and Xxxxxx & Xxxxxxx referencing this certificate in their
respective Tax Opinions. Parents will promptly and timely notify Skadden,
Arps and Xxxxxx & Xxxxxxx if it is discovered that any of the above
certifications ceases to be true, correct and complete at or prior to the
Effective Time.
In WITNESS WHEREOF, the undersigned, on behalf of Parent and
Merger Sub signed this certificate this __________ day of ____________,
1998.
XXXXXX'X ENTERTAINMENT, INC.
By: ___________________________________
Name:
Title
HEI ACQUISITION CORP. III
By: ___________________________________
Name:
Title
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