As filed with the Securities and Exchange Commission on _______ __, 1999
Registration No. 333-81613
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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Riviera Black Hawk, Inc.
(Exact name of registrant as specified in its charter)
<TABLE>
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<S> <C> <C> <C>
Colorado 0000899647 86-0886265
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
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444 Main Street
Black Hawk, Colorado 80422
(303) 582-1000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
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William L. Westerman
Chief Executive Officer and Director
Riviera Black Hawk, Inc.
444 Main Street Black Hawk,
Colorado 80422
(303) 582-1000
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
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With Copies to:
Fredric J. Klink
Dechert Price & Rhoads
30 Rockefeller Plaza
New York, New York 10112
(212)698-3500
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration
Statement.
If any of the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box.
If this form is filed to register additional securities or an offering
pursuant to Rule 462(b)under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
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CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C> <C>
- --------------------------------------------------- ----------------- -------------------- ------------------- -------------------
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Offering Price Aggregate Offering Amount of
Securities to be Registered Registered Per Unit (1) Price (1) Registration Fee
- --------------------------------------------------- ----------------- -------------------- ------------------- -------------------
- --------------------------------------------------- ----------------- -------------------- ------------------- -------------------
13% First Mortgage Notes due 2005 With Contingent
Interest....................................... $45,000,000 100% $45,000,000 $12,510
- --------------------------------------------------- ----------------- -------------------- ------------------- -------------------
</TABLE>
(1) Estimated pursuant to Rule 457(f) solely for purposes of calculating the
registration fee.
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The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED ________ __, 1999
PROSPECTUS
Offer to Exchange
13% First Mortgage Notes due 2005 With Contingent Interest for all outstanding
13% First Mortgage Notes due 2005 With Contingent Interest
of
RIVIERA BLACK HAWK, INC.
The exchange offer will expire at 5:00 P.M.,
New York City time, on ______________ __, 1999 (90 days after
the effective date of this Registration Statement), unless extended.
-------------------------
Terms of the exchange offer:
- We will exchange all existing notes that are validly tendered and not
withdrawn prior to the expiration of the exchange offer.
- You may withdraw tenders of existing notes at any time prior to the
expiration of the exchange offer.
- We believe that the exchange of existing notes will not be a taxable
event for U.S. federal income tax purposes, but you should see "United
States Federal Income Tax Considerations" on page 64 for more
information.
- We will not receive any proceeds from the exchange offer.
- The terms of the exchange notes are substantially identical to the
existing notes, except that the exchange notes are registered under
the Securities Act of 1933 and the transfer restrictions and
registration rights applicable to the existing notes do not apply to
the exchange notes.
- Each broker-dealer that receives exchange notes are required to
deliver a prospectus in connection with any resale of such note.
- Each broker-dealer that acquired existing notes as a result of market
making or other trading activities may use the exchange offer
prospectus, as supplemented or amended for resales of exchange notes.
- Broker-dealers that acquired the existing notes directly from the
Company in the initial offering and not as a result of market making
or trading activities cannot use the prospectus for the exchange offer
in connection with resales of the exchange notes and, absent an
exemption, must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with secondary resale
of the exchange notes and cannot rely on the position of the staff in
Exxon Capital Holdings Corporation (avail. April 13, 1989).
-------------------------
See "Risk Factors" beginning on page 8 for a discussion of risks that
should be considered by holders.
-------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
-------------------------
The date of this prospectus is _______ __, 1999.
<PAGE>
TABLE OF CONTENTS
Page
Summary......................................................1
Risk Factors.................................................8
Use Of Proceeds.............................................15
Capitalization..............................................15
Selected Financial Information..............................16
Ratio Of Earnings To Fixed Charges..........................17
Management's Discussion And Analysis Of Financial Condition
And Results Of Operations...................................18
The Exchange Offer..........................................21
Business....................................................28
Gaming And Liquor Regulatory Matters........................33
Material Agreements.........................................37
Management..................................................39
Principal Stockholders......................................41
Relationships And Related Transactions......................43
Description Of Notes........................................44
United States Federal Income Tax Considerations.............64
Plan Of Distribution........................................67
Legal Matters...............................................68
Experts.....................................................68
Available Information.......................................68
You should rely only on the information contained in this prospectus or to which
we have referred you. We have not authorized anyone to provide you with
information that is different. This prospectus may only be used where it is
legal to sell these securities. The information in this prospectus may only be
accurate on the date of this document.
ii
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FORWARD-LOOKING STATEMENTS
We make "forward-looking statements" throughout this prospectus. Whenever
you read a statement that is not simply a statement of historical fact (such as
when we describe what we "believe," "expect" or "anticipate" will occur, and
other similar statements), you must remember that our expectations may not be
correct, even though we believe they are reasonable. We do not guarantee that
the transactions and events described in this prospectus will happen as
described or that they will happen at all. The forward-looking information
contained in this prospectus is generally located in the material set forth
under the headings "Summary," "Risk Factors," "Capitalization," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business" but may be found in other locations as well. These forward-looking
statements generally relate to our plans and objectives for future operations
and are based upon our management's reasonable estimates of future results or
trends. The factors that may affect our expectations of our operations, markets
and services include, among others, the following:
- - local and regional economic and business conditions;
- - changes or developments in laws, regulations or taxes;
- - actions taken or omitted to be taken by third parties, including our
customers, suppliers, competitors and stockholders, as well as governmental
authorities;
- - competition;
- - the loss of any licenses or permits or our failure to obtain our gaming or
liquor license on a timely basis;
- - delays in completing the construction of the casino;
- - changes in our business strategy, capital improvements or development
plans;
- - the availability of additional capital to support capital improvements and
development; and
- - other factors discussed under "Risk Factors" or elsewhere in this
prospectus.
You should read this prospectus completely and with the understanding that
actual future results may be materially different from what we expect. We will
not update these forward-looking statements, even though our situation may
change in the future.
iii
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SUMMARY
This summary highlights selected information from this prospectus and may
not contain all the information that is important to you. You should carefully
read this entire prospectus, including any information to which we refer you,
before deciding to purchase any of the notes. The terms "Company," "our
company," "we" and "us" refer to Riviera Black Hawk, Inc. and the terms "Riviera
Black Hawk" and "our casino" refer to the casino we are constructing in Black
Hawk, Colorado. The term "Riviera Holdings" refers to Riviera Holdings
Corporation, our parent company.
The Exchange Offer
On June 3, 1999, we sold $45.0 million aggregate principal amount of 13%
First Mortgage Notes due 2005 With Contingent Interest (the "existing notes").
In connection with this offering, we entered into a registration rights
agreement with the initial purchaser of the existing notes, Jefferies & Company,
Inc., in which we agreed, among other things, to deliver this prospectus to you
and to complete an exchange offer for the existing notes. We are offering to
exchange $45.0 million aggregate principal amount of our 13% First Mortgage
Notes due 2005 With Contingent Interest, which have been registered under the
Securities Act (the "exchange notes" or the "notes"), for a like aggregate
principal amount of our existing notes (the "exchange offer"). You are entitled
to exchange your existing notes for exchange notes with substantially identical
terms. We urge you to read the discussions under the headings "The exchange
offer" and "The exchange notes" in this Summary for further information
regarding the exchange offer and the exchange notes.
The Company
Our company, a wholly-owned subsidiary of Riviera Holdings, is constructing
and will own and operate a casino with entertainment and parking facilities in
Black Hawk, Colorado, approximately 40 miles west of Denver. Our casino will be
one of the largest in Colorado with approximately 1,000 slot machines and 12
blackjack tables. In Colorado, each slot machine and each table game is
considered one gaming position.
We expect to open our casino in the first quarter of 2000. The total cost
for our casino, excluding capitalized interest, is expected to be $77.1 million.
Riviera Holdings owns all of our stock as a result of a $20 million equity
investment in us (excluding capitalized interest).
Our casino will be managed by a wholly-owned subsidiary of Riviera
Holdings. Riviera Holdings owns and operates the Riviera Hotel & Casino located
on the Las Vegas Strip. Upon completion, our casino will be the only casino in
the Black Hawk/Central City market developed and operated by a Las Vegas Strip
casino company.
The Black Hawk/Central City Market
Limited stakes gaming -- a maximum single bet of $5 -- is permitted in
Colorado in three historic mining towns -- Black Hawk, Central City and Cripple
Creek. 95% of Colorado gaming revenues are attributable to slot play. The Black
Hawk/Central City market primarily caters to "day-trip" customers from Denver,
Boulder, Fort Collins and Golden as well as Cheyenne, Wyoming area.
Approximately 3.3 million people reside within a 100-mile radius of the Black
Hawk/Central City market, of which 1.9 million reside in the Denver metropolitan
area.
Strengths
We believe that the following competitive strengths will contribute to the
success of our casino:
- Our casino is located at the entrance to Black Hawk and will be one of
the first three casinos encountered when traveling from Denver to the
Black Hawk/Central City market.
- The Black Hawk/Central City market lacks adequate parking. Our casino
will feature an attached 175,000 square foot multi-level parking
facility with capacity for approximately 520 vehicles (92% of which
will be covered). In addition to valet parking, we will offer patrons
the convenience of a self-park option. We will not charge for parking.
1
<PAGE>
- Our approximately 1,000 gaming positions will be significantly larger
than the market average of 336 positions per casino as of December 31,
1998, and combined with our ability to place all gaming devices on a
single floor, we will create an atmosphere that is closer to that
found in Las Vegas casinos than that typically found in casinos in the
Black Hawk/Central City market. Unlike most other Central City/Black
Hawk casinos, we will offer food service through our 265-seat casual
dining restaurant and entertainment through our 7,000 square foot
entertainment center.
Weaknesses
- Neither we nor Riviera Holdings has managed a casino in Colorado.
- Our attempt to stress the atmosphere of a Las Vegas casino may not be
accepted in the Black Hawk/Central City market.
- Our cash flow may be insufficient to enable us to pay the $5.85
million of fixed interest per annum on the notes after the first three
years of operation.
- Our equity is limited and Riviera Holdings has made only limited
commitments related to construction and opening and to subsidize cash
flow shortfalls and interest on the notes for the first three years of
operation.
Riviera Holdings Corporation
Riviera Holdings owns the Riviera Hotel & Casino located on the Las Vegas
Strip. Riviera Holdings will be obligated under the completion capital
commitment to contribute to us up to $10.0 million of cash if at any time there
are insufficient funds available to enable our casino to be operating by May 31,
2000. In addition, if our casino is not operating by May 31, 2000, Riviera
Holdings will be obligated to contribute on that date $10.0 million in cash less
any amounts previously contributed under the completion capital commitment.
Furthermore, if (1) we do not have the necessary funds to make a payment of
fixed interest on the notes during our first three years of operations or (2)
our cash flow is less than $9.0 million in any of our first three years of
operations, Riviera Holdings will be obligated under the keep-well agreement to
contribute cash to us to make up those amounts, subject to a maximum of $5.0
million for any one operating year and $10.0 million in the aggregate. Riviera
Holdings has also deposited $5.0 million to insure a title insurance company
against potential mechanics lien claims. As of June 30, 1999, Riviera Holdings
had about $46.6 million of unrestricted cash and short term investments to
support these commitments.
The Transactions
The existing notes were issued on June 3, 1999. The proceeds from the sale
of the existing notes was approximately $45.0 million, which were used as
follows: (1) approximately $31.9 million was deposited into a construction
disbursement account, of which $10.1 million was used to reimburse Riviera
Holdings for amounts advanced to us to cover construction and development costs
incurred prior to the sale of the existing notes, and the remaining $21.8
million has been and will continue to be used to finance the cost to develop,
construct, equip and open the Riviera Black Hawk, (2) $5.0 million was deposited
into a completion reserve account to be held as a reserve in case there are
insufficient funds in the construction disbursement account to complete the
Riviera Black Hawk, (3) $5.1 million was deposited into an interest reserve
account and used to purchase government securities representing funds sufficient
to pay the first two payments of fixed interest on the notes and (4)
approximately $3.0 million was used to pay fees and expenses relating to the
foregoing as well as the sale of the existing notes.
2
<PAGE>
The Exchange Offer
Securities Offered............ Up to $45,000,000 aggregate principal amount
of 13% First Mortgage Notes due 2005 With
Contingent Interest. The terms of the
exchange notes and existing notes are
identical in all material respects, except
for transfer restrictions and registration
rights relating to the existing notes.
The Exchange Offer............. We are offering the exchange notes to you in
exchange for a like principal amount of
existing notes. Existing notes may be
exchanged only in integral multiples of
$1,000.
Expiration date; Withdrawal
of Tender................... The exchange offer will expire at 5:00 p.m.,
New York City time, on ______ __ , 1999 (90
days after the effective date of this
Registration Statement), or such later date
and time to which it may be extended by us
but in no event beyond December 31, 1999. The
tender of existing notes pursuant to the
exchange offer may be withdrawn at any time
prior to the expiration date. Any existing
notes not accepted for exchange for any
reason will be returned without expense to
the tendering holder thereof as promptly as
practicable after the expiration or
termination of the exchange offer.
Conditions to the Exchange
Offer........................ Our obligation to accept for exchange, or to
issue exchange notes in exchange for, any
existing notes is subject to customary
conditions relating to compliance with any
applicable law or any applicable
interpretation by the staff of the Securities
and Exchange Commission, the receipt of any
applicable governmental approvals and the
absence of any actions or proceedings of any
governmental agency or court which could
materially impair our ability to consummate
the exchange offer. We currently expect that
each of the conditions will be satisfied and
that no waivers will be necessary. See "The
Exchange Offer--Conditions to the exchange
offer."
Procedures for Tendering Existing
Notes......................... If you wish to accept the exchange offer and
tender your existing notes, you must
complete, sign and date the Letter of
Transmittal, or a facsimile thereof, in
accordance with its instructions and the
instructions in this prospectus, and mail or
otherwise deliver such Letter of Transmittal,
or such facsimile, together with such
existing notes and any other required
documentation, to the exchange agent at the
address set forth herein. See "The Exchange
Offer--Procedures for Tendering existing
notes."
Use of Proceeds.................. We will not receive any proceeds from the
exchange offer.
Exchange Agent................... IBJ Whitehall Bank & Trust Company is serving
as the exchange agent in connection with the
exchange offer.
Federal Income Tax Consequences.. The exchange of Notes pursuant to the
exchange offer should not be a taxable event
for federal income tax purposes. See "United
States Federal Income Tax Considerations." We
will not receive any proceeds from the
exchange offer.
3
<PAGE>
Consequences of Exchange Offer
Based on certain interpretive letters issued by the staff of the Securities
and Exchange Commission to third parties in unrelated transactions, we are of
the view that holders of existing notes (other than any holder who is an
"affiliate" of our company within the meaning of Rule 405 under the Securities
Act) who exchange their existing notes for exchange notes pursuant to the
exchange offer generally may offer such exchange notes for resale, resell such
exchange notes and otherwise transfer such exchange notes without compliance
with the registration and prospectus delivery provisions of the Securities Act,
provided:
- the exchange notes are acquired in the ordinary course of the holders'
business;
- the holders have no arrangement with any person to participate in a
distribution of such exchange notes; and
- neither the holder nor any other person is engaging in or intends to
engage in a distribution of the exchange notes.
Each broker-dealer that receives exchange notes for its own account in
exchange for existing notes must acknowledge that it will deliver a prospectus
in connection with any resale of such exchange notes. See "Plan of
Distribution." In addition, to comply with the securities laws of certain
jurisdictions, if applicable, the exchange notes may not be offered or sold
unless they have been registered or qualified for sale in such jurisdiction or
in compliance with an available exemption from registration or qualification. We
have agreed, pursuant to the registration rights agreement and subject to
limitations specified in the registration rights agreement, to register or
qualify the exchange notes for offer or sale under the securities or blue sky
laws of such jurisdictions as any holder of the Notes reasonably requests in
writing. If a holder of existing notes does not exchange such existing notes for
exchange notes pursuant to the exchange offer, such existing notes will continue
to be subject to the restrictions on transfer contained in the legend printed on
the existing notes. In general, the existing notes may not be offered or sold,
unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. Holders of existing notes do not have any appraisal or
dissenters' rights under the Colorado Business Corporation Act in connection
with the exchange offer. See "The Exchange Offer--Consequences of Failure to
Exchange; Resales of exchange notes."
The existing notes are currently eligible for trading in the Private
Offerings, Resales and Trading through Automated Linkages ("PORTAL") market.
Following commencement of the exchange offer but prior to its consummation, the
existing notes may continue to be traded in the PORTAL market. Following
consummation of the exchange offer, the exchange notes will not be eligible for
PORTAL trading.
4
<PAGE>
The Exchange Notes
The terms of the exchange notes and the existing notes are identical in all
material respects, except for transfer restrictions and registration rights
relating to the existing notes.
Securities Offered.............. $45.0 million principal amount of 13% First
Mortgage Notes due 2005 With Contingent
Interest.
Maturity Date................... May 1, 2005.
Interest Payment Dates.......... May 1 and November 1 of each year, beginning
on November 1, 1999.
Fixed Interest.................. Fixed interest will be payable on the notes
at a rate of 13% per annum.
Contingent Interest............. Contingent interest will be payable on the
notes on each interest payment date after the
Riviera Black Hawk begins operating. However,
no contingent interest will accrue prior to
the date that the Riviera Black Hawk begins
operating. The amount of contingent interest
will, subject to certain limits, be equal to
5% of our cash flow for the two fiscal
quarters ending prior to the record date
applicable to the relevant interest payment
date. We may defer paying any or all of an
installment of contingent interest under
circumstances described in the section
"Description of Notes-- Principal, Maturity
and Interest."
Ranking......................... The notes will be senior secured obligations,
will rank equal in payment preference with
all of our existing and future senior
indebtedness and will rank senior in right of
payment to all of our existing and future
subordinated indebtedness. Currently, the
notes are our only outstanding senior
indebtedness and we have no existing
subordinated indebtedness.
Security........................ The notes will, with certain exceptions, be
secured by a first priority lien on
substantially all of our existing and future
assets, including, without limitation:
o a pledge of the net proceeds from the sale
of the existing notes which have been
deposited into restricted disbursement
accounts to be used to fund construction
and development of the Riviera Black Hawk
and pay the first two payments of fixed
interest on the notes;
o substantially all of the assets that will
comprise our casino, other than (1)
furniture, fixtures and equipment and (2)
the assets of our future unrestricted
subsidiaries;
o agreements pursuant to which our casino
will be constructed, operated and managed;
and
o licenses and permits relating to the
construction, operation and management of
our casino, other than our Colorado gaming
and liquor licenses.
5
<PAGE>
Completion Capital Commitment... Riviera Holdings, our parent company, will be
obligated under the completion capital
commitment to contribute to us up to $10.0
million of cash if at any time there are
insufficient funds available to enable our
casino to be operating by May 31, 2000. The
contributions will be made at the times
necessary to enable our casino to be
operating by May 31, 2000. In addition, if
our casino is not operating by May 31, 2000,
Riviera Holdings will be obligated to
contribute to us on that date $10.0 million
in cash less any amounts previously
contributed under the completion capital
commitment. See "Description of Notes--
Completion Capital Commitment."
Keep-Well Agreement............. If (1) we do not have the necessary funds to
make a payment of fixed interest on the notes
during our first three years of operations or
(2) our cash flow is less than $9.0 million
in any of our first three years of
operations, Riviera Holdings will be
obligated under the keep-well agreement to
contribute cash to us to make up those
amounts, subject to a maximum of $5.0 million
for any one operating year and $10.0 million
in the aggregate.
Optional Redemption............. On or after May 1, 2002, we may redeem some
or all of the notes at any time at the
redemption prices described in the section
"Description of Notes -- Optional
Redemption."
Prior to May 1, 2001, we may redeem up to 35%
of the notes with the proceeds of a public
offering of our equity or the proceeds
contributed to us of offerings by our parent
company of its equity at the redemption
prices listed in the section "Description of
Notes -- Optional Redemption."
Gaming Redemption............... The notes will be subject to mandatory
disposition and redemption requirements in
accordance with determinations by any gaming
authority.
Change of Control............... If we experience a change of control, we must
offer to repurchase the notes at the prices
listed in the section "Description of Notes--
Repurchase at the Option of Holders-- Change
of Control."
Asset Sales and Events of Loss.. If we sell assets or experience events of
loss, we may be required to offer to
repurchase the notes at the prices listed in
the section "Description of Notes--
Repurchase at the Option of Holders-- Asset
Sales" and "--Events of Loss."
Excess Cash Purchase Offers..... At the end of each four fiscal quarters after
our casino begins operating, we must offer to
repurchase the maximum principal amount of
notes that can be purchased with 50% of our
excess cash flow from that four fiscal
quarter period. The prices for the
repurchases are listed in the section
"Description of Notes-- Repurchase at the
Option of Holders-- Excess Cash Purchase
Offers."
6
<PAGE>
Basic Covenants of the
Indenture..................... We will issue the notes under an indenture
that will, among other things, restrict our
ability to:
borrow money;
pay dividends on or repurchase our capital
stock;
make investments;
use our assets as security in other
transactions; and
sell assets or enter into mergers or
consolidations.
7
<PAGE>
RISK FACTORS
Before you invest in the notes, you should carefully consider the following
factors, in addition to the other information contained in this prospectus.
Substantial leverage and ability to service debt
- We will be substantially leveraged. In addition to our obligation to pay
principal and interest on the notes, we will also be incurring construction and
operating expenses for the Riviera Black Hawk.
- At June 30, 1999, our total indebtedness was $45.8 million, our
stockholders' equity was $23.4 million and our debt to equity ratio was 2.0 to
1.
- The indenture will permit us to incur additional indebtedness, including
up to $15.0 million of indebtedness to finance the purchase of furniture,
fixtures and equipment which, when incurred, will rank equal in payment
preference with the notes. Our substantial indebtedness could have important
consequences to you. For example, it could: (1) make it more difficult for us to
satisfy our obligations with respect to these notes; (2) increase our
vulnerability to general adverse economic and industry conditions; (3) limit our
ability to fund future working capital, capital expenditures and other general
corporate requirements; (4) require us to dedicate a substantial portion of our
cash flow from operations to payments on our indebtedness, thereby reducing the
availability of our cash flow to fund working capital, capital expenditures and
other general corporate purposes; (5) limit our flexibility in planning for, or
reacting to, changes in our business and the industry in which we operate; (6)
place us at a competitive disadvantage compared to our competitors that have
less debt; and (7) limit, along with the financial and other restrictive
covenants in our indebtedness, among other things, our ability to borrow
additional funds.
Completion and operation of our casino
Our ability to make payments on the notes and our other debt obligations
depends upon the timely completion and successful operation of our casino.
Successful operation will depend on prevailing economic conditions and
financial, business, regulatory and other factors beyond our control.
It is difficult for us to predict with accuracy our casino's potential
earning ability given the inherent uncertainties and variables in the factors
affecting such earning ability. The ability to generate profit from slot
machines will determine our cash flow. Table games, food and beverage and
entertainment are all loss leader adjuncts to the generation of slot machine
profits. If our casino cannot generate sufficient cash flow, we may be forced to
reduce or delay planned capital expenditures, restructure or refinance our debt
or obtain additional equity capital. We might not be able to implement any of
these alternatives on satisfactory terms or at all.
Construction and related risks
- We have entered into a construction contract with The Weitz Company, Inc.
to construct our casino and perform all necessary excavation and other site
work. The construction contract provides for our casino to be completed by
January 15, 2000 for a price of $27.6 million. The construction contract allows
for increases in this price if: (1) we make changes to the plans and
specifications; (2) work is delayed due to our actions; or (3) "force majeure"
events occur during construction. See "Business -- Design and Construction
Summary" and "Material Agreements -- Construction Contract."
- The construction of our casino involves significant risks, including cost
overruns, shortages of materials, labor disputes and work stoppages, unforeseen
environmental or engineering conditions, natural disasters, construction
scheduling problems and weather interferences. Any of these risks, if they
occurred, could delay construction or substantially increase the construction
costs of our casino. Furthermore, other items, including offsite improvements,
permit fees and independent testing, are not included in the construction
contract costs.
No loss proceeds
We have no obligation to make any purchase of notes with the net loss
proceeds, following a loss with respect to collateral with a fair market value
between $1.0 million and $20.0 million.
8
<PAGE>
Gaming licenses, permits and approvals
In general we, Riviera Holdings, the principal executive officers of us and
Riviera Holdings, and any of our employees who will be involved in our gaming
operations, will be required to be licensed by the State of Colorado. Colorado
also requires that significant stockholders of Riviera Holdings be licensed or
certified as suitable for licensure. None of such licenses have been obtained
and there can be no assurance that all necessary licenses will be obtained prior
to the time our casino is otherwise ready to open. The licensure process
involves the filling out of a form prescribed by the Colorado Gaming Commission,
an interview of the prospective licensee and an investigation of such licensee
to the extent the Staff of the Colorado Gaming Commission deems necessary. We
pay the investigation costs. If any such officer, director or employee were
found to be unsuitable for licensure by the Colorado Gaming Commission, we would
have to replace such an employee. If the Colorado Gaming Commission objected to
our licensure or that of Riviera Holdings or its significant stockholders, we
might be forced to sell our interest in Riviera Black Hawk and pay off the notes
to the extent of the net sale proceeds. If the objection of the Colorado Gaming
Commission related to licensure or suitability for licensure of any of Riviera
Holdings' significant stockholders, Riviera Holdings might attempt to purchase
or arrange for the purchase of the Riviera Holdings shares owned by the
stockholder to which the Colorado Gaming Commission objected, but Riviera
Holdings' ability to make such purchase is limited and it is uncertain whether
Riviera Holdings could arrange for such stock repurchase.
Competition
- The Black Hawk/Central City gaming market is characterized by intense
competition. If our casino is unable to compete effectively in this market, we
may not be able to generate sufficient cash flow to satisfy our obligations
under the notes. The primary competitive factors in the market are location,
availability and convenience of parking, number of slot machines and gaming
tables, types and pricing of non-gaming amenities, name recognition and overall
atmosphere. Our main competitors will be the larger gaming facilities,
particularly those with considerable on-site or nearby parking and established
reputations in the local market. These facilities have high-profile brand names
in the local market, including the Isle of Capri Casino, Harvey's Wagon Wheel
Casino Hotel, Colorado Central Station, Bullwhackers Black Hawk, Canyon Casino,
Fitzgeralds Casino, the Lodge at Black Hawk and Gilpin Hotel Casino. These
competitors have more gaming experience in the Black Hawk/Central City market
and some have greater financial resources than we do. Construction has also
begun on the "Mardi Gras" casino, which is expected to feature over 600 slot
machines. Other projects have also been announced, proposed, discussed or
rumored for the Black Hawk/Central City market.
- We expect that the gaming facilities near the intersection of Main and
Mill Streets will provide significant competition to our casino. Colorado
Central Station, which has been the most successful casino in Colorado, is
located across the street from our casino and has approximately 700 slot
machines, 20 gaming tables and approximately 700 valet parking spaces. The Isle
of Capri Casino, operated by Casino America, which opened in December 1998, is
located directly across the street from our casino and features approximately
1,100 slot machines, 14 table games and 1,100 parking spaces.
- Casinos offering hotel accommodations for overnight stay may have a
competitive advantage over our casino. The number of hotel rooms currently in
the Black Hawk/Central City market is approximately 170, with only two gaming
facilities providing hotel accommodations to patrons. These include Harvey's
Wagon Wheel Casino Hotel with approximately 120 rooms and the Lodge at Black
Hawk with approximately 50 rooms. In addition, the Isle of Capri Casino began
construction in 1999 of an approximately 240 room hotel on top of its recently
completed casino.
- Customers now drive through Black Hawk to reach Central City. Central
City has proposed the development of a road directly connecting Central City and
Black Hawk with Interstate 70 which would allow customers to reach Central City
without driving by or through Black Hawk.
- Currently, limited stakes gaming in Colorado is constitutionally
authorized in Central City, Black Hawk, Cripple Creek and two Native American
reservations in southwest Colorado. However, gaming could be approved in other
Colorado communities in the future. The legalization of gaming closer to Denver
would likely have a material adverse effect on our future results of operations.
We will also compete with other forms of gaming in Colorado, including lottery
gaming, and horse and dog racing as well as other forms of entertainment.
9
<PAGE>
- Our operations to date have been limited to development activities and
construction. We have had no earnings or operations. Riviera Gaming Management
of Colorado, Inc., which will manage our casino, has no experience operating a
gaming facility in Colorado. If our casino is not successfully marketed and
managed, we may not be able to generate sufficient cash flow to make payments of
principal and interest on the notes.
Dependence upon a single gaming site
We will be solely dependent upon our casino for our cash flow, (except for
the keep well agreement with Riviera Holdings as to the first three years of
operations). Therefore, we will be subject to greater risks than a
geographically diversified gaming company. These greater risks include those
caused by: (1) local economic and competitive conditions; (2) inaccessibility
due to road construction or closure on primary access routes; (3) changes in
local and state governmental laws and regulations; (4) natural and other
disasters; (5) a decline in the number of residents near or visitors to the
Black Hawk/Central City market; or (6) a decrease in gaming activities in the
Black Hawk/Central City market.
Any of such factors could have a material adverse effect on our ability to
generate sufficient cash flow to make payments on the notes.
Adverse weather and road conditions; seasonality
The City of Black Hawk is located in the Colorado Rocky Mountains, which can
be subject to inclement weather. Adverse weather conditions could delay the
construction of our casino, resulting in cost overruns or a delayed opening
date. In addition, severe weather conditions could adversely affect our
operations. The City of Black Hawk is serviced by a single lane winding mountain
road that requires cautious driving, particularly in bad weather. The road has
tunnels that are subject to closure. Congestion on the road leading to our
casino is not uncommon during the peak summer season, holidays and other times
of year and may discourage potential customers from traveling to our casino,
particularly if road construction is in process.
Limitations on the trustee's exercise of rights with respect to collateral
You may be unable to obtain the full value of your notes by foreclosing upon
collateral. The exchange notes, like the existing notes, will be secured by a
first priority lien on substantially all of our assets. Furniture, fixtures and
equipment and the assets of our future unrestricted subsidiaries are excluded.
Gaming law restrictions
Under Colorado gaming laws, the trustee could be precluded from or otherwise
limited or delayed in exercising its rights, including selling slot machines at
a foreclosure sale, since only persons licensed by the Colorado gaming
authorities may have slot machines in their possession. In addition, the trustee
may encounter difficulty in selling collateral due to various legal
restrictions. These restrictions include that the purchaser or the operator of a
gaming facility must be licensed by state authorities or that prior approval of
a sale or disposition of collateral must be obtained. If the trustee sought to
operate, or retain an operator for, our casino, the trustee or its agents would
be required to be licensed under Colorado gaming laws in order to conduct gaming
operations in the casino. Since potential purchasers who wish to operate the
casino must satisfy such requirements, the number of potential purchasers in a
sale of the casino could be less than in the sale of other types of facilities.
Additionally, these requirements may delay the sale of, and may adversely affect
the price paid for, the collateral.
State law restrictions
The ability of the trustee to repossess and dispose of collateral for the
noteholders will also be subject to the procedural and other restrictions of
state real estate and commercial law. If the holders of the notes were
undersecured, the trustee may be entitled to a deficiency judgment under certain
circumstances after application of any proceeds from any foreclosure sale. There
can be no assurance, however, that the trustee would successfully obtain a
deficiency judgment, and we cannot predict what the amount of such judgment
would be. In addition, we might not be able to satisfy any such judgment.
Bankruptcy
10
<PAGE>
- The right of the trustee to repossess and dispose of the collateral is
likely to be significantly impaired by applicable bankruptcy laws if a
proceeding under the United States Bankruptcy Code were to be commenced by or
against us prior to or possibly even after the trustee has repossessed and
disposed of the collateral. If the holders of the notes were undersecured in a
bankruptcy case, the trustee for the noteholders will be entitled to assert a
secured claim to the extent of the value of the collateral and an unsecured
claim for any deficiency. In view of the broad discretionary powers of a
bankruptcy court, we cannot predict, following commencement of and during a
bankruptcy case: (1) whether payments under the notes would be made; (2) whether
or when the trustee could foreclose upon or sell the collateral; (3) whether the
term of the notes could be altered in a bankruptcy case; or (4) whether or to
what extent holders of the notes would be compensated for any delay in payment
or loss of value of the collateral.
- In the event of a bankruptcy case, we may be able to retain collateral
over the claims of the holders of the notes as long as such holders are afforded
"adequate protection." "Adequate protection" is within the discretionary powers
of the bankruptcy court, and payments on the notes may be delayed and
compensation for such a delay is questionable.
- If a bankruptcy court were to determine that the value of the collateral
is not sufficient to repay all amounts due on the notes, the holders of the
notes would be "undersecured" to the extent of any such deficiency. Applicable
federal bankruptcy laws do not permit the payment and/or accrual of interest or
costs and attorneys' fees to the holders of "undersecured" claims against the
debtor during the debtor's bankruptcy case.
- Under the provisions contained in the indenture, we may discharge our
obligations under the indenture or have our obligations released with respect to
covenants in the indenture. To do either of these, among other things, we must
deposit with the trustee enough money or securities to make all of the required
payments on the notes through maturity or a redemption date. It is possible that
the deposit may be subject to recovery or avoidance as a preference or
fraudulent transfer by us, our creditors or a bankruptcy trustee. For example,
if the amount of the deposit exceeds the value of the collateral which has been
pledged to the holders of the notes, it is possible that the excess may be
subject to recovery or avoidance. In addition, because the holders of the notes
will release their liens at the time the funds are deposited into the account,
it is possible that a bankruptcy court would consider a payment on the notes at
redemption or maturity subject to recovery or avoidance. In addition, it is
possible that if we receive the funds for the deposit from a third party, and
that third party subsequently becomes a debtor in a bankruptcy case, the deposit
may be recoverable if the original transfer from the third party to us is a
preferential or fraudulent conveyance. Furthermore, if we were in bankruptcy
after the deposit but before redemption or maturity of the notes, it is possible
that a bankruptcy court would allow us to use the deposited funds during the
pendency of the bankruptcy case as "cash collateral," subject to the right of
the holders of the notes to request adequate protection of their interest in the
deposit.
- We have overlapping officers and directors with our affiliates. In the
event that one of our affiliates is the subject of a bankruptcy proceeding, that
affiliate, its creditors or the trustee in bankruptcy may argue that the assets
and liabilities of the various affiliated entities, including our company,
should be consolidated and our assets made available for satisfaction of claims
against the affiliate that is in bankruptcy. There can be no assurance that a
bankruptcy court would not order consolidation of our assets with those of our
affiliates.
Fraudulent conveyance considerations
In connection with the issuance of the existing notes, we granted security
interests in the collateral to the trustee. Various fraudulent conveyance and
avoidance laws have been enacted for the protection of creditors. Some of these
laws protect parties who were not creditors at the time of the challenged
transfer but who subsequently became creditors. These laws may permit a court to
nullify any transfer of a property interest or any obligation incurred by any of
the parties involved in the transactions described in this prospectus.
Generally, if a court were to find that: (1) the debtor made the challenged
transfer or obligation with the intent of hindering, delaying or defrauding its
present or future creditors; or (2) the debtor (A) received less than reasonably
equivalent value or fair consideration for incurring the challenged obligation
or making the challenged transfer and (B) (i) was insolvent or was rendered
insolvent by reason of incurring the challenged obligation or making the
challenged transfer, (ii) was engaged or about to engage in a business or
transaction for which its assets constituted unreasonably small capital or (iii)
intended to incur, or believed that it would incur, debts beyond its ability to
pay as such debts matured, the court could void the challenged obligation or
transfer in whole or in part. The court could also subordinate any claims with
respect to the challenged obligation or transfer to all other debts of the
debtor. The court's determination as to whether the above is true at any
relevant time will vary depending upon the law applied in any such proceeding.
11
<PAGE>
Generally, a debtor will be considered insolvent if: (1) the sum of its
debts was greater than the fair saleable value of all of its assets at a fair
valuation; or (2) if the present fair saleable value of its assets was less than
the amount that would be required to pay its probable liability on its existing
debts, as they become fixed in amount and nature. Also, a debtor generally will
be considered to have been left with unreasonably small capital if its remaining
capital, including its reasonably projected cash flow, was reasonably likely to
be insufficient for its foreseeable needs, taking into account its foreseeable
business operations and reasonably foreseeable economic conditions.
With respect to our company and Riviera Holdings, the transfers made by
Riviera Holdings in connection with the capitalization of our company present
the most significant possible fraudulent conveyance issues. In capitalizing our
company, Riviera Holdings has contributed $20.0 million of equity capital in
cash, comprised of (1) $15.1 million contributed in August 1997 to purchase the
land and (2) additional contributions of $4.9 million as of June 30, 1999. See
"Capitalization."
There can be no assurance that Riviera Holdings' past contributions to us
will not be found to have constituted either an actual or a constructive
fraudulent transfer. In addition, future contributions by Riviera Holdings,
including amounts contributed under the completion capital commitment and the
keep-well agreement, might also be found to be an actual or constructive
fraudulent transfer. Any such possible fraudulent transfer challenges, even if
ultimately unsuccessful, could lead to a disruption of our business and alter
the manner in which we manage our business and, ultimately, could have a
material adverse effect on our ability to meet our obligations under the notes.
Mechanic's liens
Colorado law provides architects, engineers, contractors, subcontractors
and material suppliers with a lien on real property being improved by their
services or materials in order to secure their right to be paid. These parties
may foreclose their liens if they are not paid in full. The priority of all
mechanic's liens arising out of a particular construction project relates back
to the date on which construction of the project first commenced. Construction
of our casino commenced prior to the recording of the deed of trust securing the
notes. Accordingly, all architects, engineers, contractors, subcontractors and
material suppliers who provide services or materials in connection with our
casino and otherwise comply with the applicable requirements of Colorado law
will have a lien on the project senior in priority to the lien of the deed of
trust securing the notes. Riviera Holdings has deposited $5.0 million to insure
a title insurance company against mechanics liens.
Environmental matters
The site of our casino is located in a 400-square mile watershed basin that
was designated in 1983 by the United States Environmental Protection Agency as a
"National Priorities List" Study Area under the Comprehensive Environmental
Response, Compensation and Liability Act, sometimes also called the Superfund
Act. The Study Area received this designation because of hazardous substance
contamination in the soil, groundwater and surface water caused by historical
mining activity. The EPA has identified several areas of contamination within
the Study Area and in the vicinity of our property that require remediation. The
EPA and the State of Colorado have not required remediation of any contamination
on or from our property as part of their Superfund investigation and remedial
activities. However, sampling of our property disclosed the existence of
contaminated groundwater. The EPA or the State of Colorado could require
remediation for contaminated groundwater or any remaining contaminated soil on
the property some time in the future, and, as the current owner of the property,
we could be required to pay for or perform such remediation.
Legislative issues
Additional legalization of gaming in or near any area from which our casino
is expected to draw customers would affect the profitability of our business and
lead to a failure on our part to satisfy our obligations under the notes.
Currently, Colorado law does not authorize video lottery terminals.
However, Colorado law permits the legislature, with executive approval, to
authorize new types of lottery gaming, such as video lottery terminals, at
certain locations. Video lottery terminals are games of chance, similar to slot
machines, in which the player pushes a button that causes a random set of
numbers or characters to be displayed on a video screen. The player may be
awarded a ticket, which can be exchanged for cash or credit play. This form of
gaming could compete with slot machine gaming.
12
<PAGE>
In 1997, the state legislature passed, but then Governor Romer vetoed, a
bill that would have permitted video lottery terminals in dog and horse race
tracks under certain terms and conditions. Additionally, several cities within
Colorado have active citizens' lobbies that were able to place gaming
initiatives on recent statewide ballots. Although these initiatives have failed,
new initiatives could be introduced on future statewide ballots to allow
expansion of gaming in Colorado or prohibit gaming in the gaming market our
casino would serve. Future initiatives, if passed, could significantly increase
the competition for gaming customers, thereby adversely affecting business in
the gaming market our casino would serve. There can be no assurance against
future legislation that would create additional competition or that would impose
additional restrictions or prohibitions on, or assess additional fees with
respect to our business.
In 1996, Congress created the National Gambling Impact Study Commission
(the "NGISC") to study the economic and social impact of all forms of gambling
in the United States. The NGISC was composed of both individuals who are
associated with the gaming industry and individuals opposed to it. The NGISC
commenced its hearings in June 1997, and on June 18, 1999, presented its final
report (the "Report"). The Report recommended, among other things, that the
regulation of gambling continue to be the responsibility of the states, except
for Internet and Indian issues; that Internet gambling be banned; that there be
increased federal regulation of Indian gambling; and that Congress direct other
agencies to conduct studies of gambling as part of their regular research. The
Report also called upon state and local policy makers to consider a moratorium
on new or expanded forms of gambling in their jurisdictions, pending further
study of gambling. The recommendations of the Report are not binding on any
governmental body, but portions of the report are likely to be cited, in both
Congress and in state legislatures, by those who are opposed to the presence or
expansion of gambling in their jurisdictions and who are seeking additional
limitation, regulation, or taxation of gambling facilities or operations that
may result could have an adverse impact on the gaming industry in general and on
our business or results of operations, in particular.
Additionally, from time to time, some federal legislators have proposed the
imposition of a federal tax on gaming revenues. Any such tax would reduce our
cash flow and could prevent us from fulfilling our obligations under the notes.
State gaming tax issues
The amendment to the Colorado Constitution that legalized limited gaming
also subjects casinos in Colorado to an annual gaming tax of up to 40% of the
total amounts wagered less all payouts to players. With respect to games of
poker, the tax is calculated based on the sums wagered which are retained by the
casino as compensation. Effective July 1 of each year, the Colorado Commission
establishes the gaming tax for the following 12 months. Currently, the gaming
tax is: 2% on the first $2 million of these amounts; 4% on amounts from $2
million to $4 million; 14% on amounts from $4 million to $5 million; 18% on
amounts from $5 million to $10 million; and 20% on amounts over $10 million.
There can be no assurance that tax rates or fees applicable to our casino will
not be increased in the future, either by the Colorado electorate, legislation
or action by the Colorado Commission, reducing the profitability of our
operations.
Reliability of market data
We have based the Black Hawk/Central City market data and other information
in this prospectus, including parking data, on information supplied by the City
of Black Hawk and various public announcements and filings made by some of the
larger casinos in the Black Hawk/Central City market. However, we have not
independently verified any such information, announcements or filings.
Dependence on key personnel
Our success will largely depend upon the efforts and skills of (1) Riviera
Gaming Management of Colorado, Inc. (the "manager") with whom we have a
management contract and its Chairman of the Board of Directors and Chief
Executive Officer, William Westerman, its Chief Operating Officer, (the
"manager") Ronald Johnson, its Chief Financial Officer, Duane Krohn and (2) our
General Manager, Thomas Guth and our Director of Slot Operations, James Davey.
The loss of the services of our manager or any of our key officers could have a
material adverse effect on our operations. There can be no assurance that we
would be able to attract and hire suitable replacements in the event of any such
loss of services.
13
<PAGE>
Difficulty in attracting and retaining qualified employees
The operation of our business requires skilled employees with gaming
industry experience and qualifications to obtain the requisite licenses.
Currently there is a shortage of skilled labor in the gaming industry. We
believe this shortage will make it increasingly difficult and expensive to
attract and retain qualified employees. Increasing competition in the Black
Hawk/Central City and competing markets may lead to higher costs in order to
retain and attract qualified employees. We may incur higher labor costs to
attract qualified employees from existing gaming facilities.
No recourse against Riviera Holdings
You should not expect Riviera Holdings or any of its affiliates to
participate in servicing the principal, fixed interest, contingent interest or
other payments due on the notes. Neither Riviera Holdings nor any of its
affiliates has any obligation to make any payments of any kind to the holders of
the notes except for its limited obligations under the completion capital
commitment and the keep well agreement.
Adverse tax treatment
The notes provide for the payment of both fixed interest and contingent
interest. Contingent interest will be calculated based on a percentage of our
cash flow after we begin operating. The notes and the indenture will have terms
typically contained in instruments evidencing indebtedness and are intended to
create a debtor-creditor relationship between us and the holders of the notes.
We intend to treat the notes as indebtedness for federal income tax purposes.
However, this treatment is not binding on the Internal Revenue Service or any
court and there can be no assurance that the Internal Revenue Service will not
successfully argue that the notes should be treated as equity for federal income
tax purposes. If the notes are treated as equity rather than indebtedness, we
would not be able to deduct the interest on that portion of the notes. This
could have a material adverse effect on our after-tax cash flow and prevent us
from fulfilling our obligations under the notes. In addition, the interest
payments made on the portion of the notes that are treated as equity will be
taxable to the recipient as dividends to the extent of our current and
accumulated earnings and profits. This could adversely affect the timing,
character and amounts includible in the income of a holder of notes.
Holders may be required to include amounts in income prior to receipt of
cash payments attributable to such income.
No prior market for notes
The existing notes are currently eligible for trading in the PORTAL market.
The exchange notes are new securities for which there is no established market.
We have been informed by the initial purchaser that it intends to make a market
in these notes. However, the initial purchaser may cease its market making at
any time. In addition, the liquidity of the trading market in these notes, and
the market price quoted for these notes, may be adversely affected by changes in
the overall market for high yield securities and by changes in our financial
performance or prospects or in the prospects for companies in our industry in
general. As a result, you cannot be sure that an active trading market will
develop for these notes.
Failure to exchange existing notes for exchange notes
If you do not exchange your existing notes for exchange notes pursuant to
the exchange offer, you will not be able to resell, offer to resell or otherwise
transfer the existing notes unless they are registered under the Securities Act
or unless you resell them, offer to resell or otherwise transfer them under an
exemption from the registration requirements of, or in a transaction not subject
to, the Securities Act. We will no longer be under an obligation to register the
existing notes under the Securities Act except in the limited circumstances
provided under the registration rights agreement. In addition, if you want to
exchange your existing notes in the exchange offer for the purpose of
participating in a distribution of the exchange notes, you may be deemed to have
received restricted securities, and, if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction.
To the extent that existing notes are not tendered for exchange and
accepted in the exchange offer, the trading market for the notes could be
adversely affected because of an insufficient float of notes available for
trading.
14
<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the exchange offer. The existing
notes were issued on June 3, 1999.
CAPITALIZATION
The following table sets forth our capitalization at June 30, 1999. This
table should be read in conjunction with the more detailed information and
financial statements, including the notes thereto, included elsewhere in this
prospectus.
At June 30, 1999
----------------
Actual
(dollars in millions)
Cash and cash equivalents................... $ 0.8
Cash, restricted (1)........................ 26.3
Short term investments, restricted (1)...... 5.1
Debt: $ 32.2
========
First Mortgage Notes...................... $ 45.0
Special Improvement District Bonds(2)..... 0.8
--------
Total debt........................ 45.8
Stockholder's equity(3)(4).................. 23.4
--------
Total capitalization.............. $ 69.2
========
- ----------
(1) Includes $21.3 million in the construction disbursement account (after
reimbursement to Riviera Holdings of $10.1 million for amounts advanced to
us to cover construction and development costs incurred as of June 30,
1999), $5.0 million in the completion reserve account and $5.1 million in
the interest reserve account at June 30, 1999.
(2) Our casino and the Isle of Capri Casino, the casino located across the
street from our casino, have entered into development agreements with the
City of Black Hawk to relocate utilities and widen a bridge to access both
properties from the highway. The total estimated cost of these improvements
is approximately $2.9 million which will be shared equally by us and the
Isle of Capri Casino. We will repay our portion of the cost of such
improvements over 10 years beginning in January 2000.
(3) Includes capitalized interest of $3.4 million associated with Riviera
Holdings' investment at June 30, 1999.
(4) Excludes Riviera Holdings' commitment to contribute to us up to $10.0
million of cash if at any time there are insufficient funds available to
enable the Riviera Black Hawk to be operating by May 31, 2000. See
"Description of Notes -- Completion Capital Commitment."
15
<PAGE>
SELECTED FINANCIAL INFORMATION
We were organized in August 1997 for the purpose of developing,
constructing, equipping and operating the Riviera Black Hawk. Since that time,
we have been in the development stage and our activities have been limited to
transactions relating to the development of the Riviera Black Hawk.
The selected financial information presented below at December 31, 1997 and
1998, for the period from August 18, 1997 (Date of Inception) to December 31,
1997, and for the year ended December 31, 1998 has been derived from our audited
financial statements included elsewhere in this prospectus. The financial
statement information at and for the six months ended June 30, 1999 has been
derived from our unaudited financial statements included elsewhere in this
prospectus. The unaudited financial statements have been prepared by us on a
basis consistent with the audited financial statements and including all normal
recurring adjustments necessary for a fair presentation of the information set
forth therein. Operating results for the six months ended June 30, 1999 are not
necessarily indicative of the results that will be achieved for future periods,
including the entire year ending December 31, 1999.
This information is qualified in its entirety by, and should be read in
conjunction with, "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and the financial statements, including the notes
thereto, and other financial information included elsewhere in this prospectus.
<TABLE>
<CAPTION>
At At
June 30, December 31,
1999 1998 1997
--------------- -------------- --------------
(dollars in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash................................... $ 809 $ 543 $ 49
Total assets........................... 28,138 16,632
75,787
Long-term debt, including current 45,784 687 0
maturities.............................
Due to Riviera Holdings................ 62 6,241 0
Total liabilities...................... 52,387 8,138 7
Stockholder's equity (1)............... 23,400 20,000 16,625
</TABLE>
<TABLE>
<CAPTION>
From
For the August 18,
Six 1997 (Date
Months For the Year of Inception)
Ended Ended through
June 30, December 31, December 31,
1999 1998 1997
------------- ------------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C>
Statement of Operations:
General and administrative expenses..... $ (75) $ 0 $ 0
Interest expense, other.................
(193)
Interest income, other.................. 115
------
Loss before taxes....................... (153)
------
Tax benefit............................. 94
------
Net loss................................ 59) 0 0
======
0
</TABLE>
- ----------
(1) Includes capitalized interest of $3.4 million associated with Riviera
Holdings' investment.
16
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, December 31,
1999 1998 1998
---- ---- ----
(in thousands) (in thousands)
<S> <C> <C> <C>
Earnings:
Pre-tax income (loss) (1)............................. (59) - -
Fixed charges.......................................... 1,485 1,300 1,972
Less capitalized interest.............................. (1,485) (1,300) (1,972)
Earnings (loss) available for fixed charges............ (59) - -
Ratio of earnings to fixed charges (2)................. Note(3) Note(3) Note(3)
</TABLE>
Fixed charges include interest expense on indebtedness, plus
amortization of deferred financing costs.
(1) The Company is in the development stage and has not commenced its
intended operations. The net loss is the result of general administrative
expenses incurred prior to the opening of the Casino.
(2) For purposes of determining fixed charges, earnings (losses) are defined
as earnings (loss) before income taxes plus fixed charges.
(3) Since the Company is in the development stage and has not commenced
operations, its earnings were not sufficient to cover fixed charges by
$1,485,000 and $1,300,000 for the six months ended June 30, 1999 and 1998,
respectively, and $1,972,000 for the year ended December 31, 1998.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with, and is
qualified in its entirety by, our financial statements, including the notes
thereto, and the other financial information included elsewhere in this
prospectus.
Development Activities
We were organized in August 1997 and were initially capitalized with $15.1
million of cash contributions from Riviera Holdings. Since that time, our
activities have been limited to development activities with respect to the
Riviera Black Hawk. We purchased the land on which the Riviera Black Hawk is
being constructed in August 1997 and commenced construction in July 1998. We
have completed all site improvements, excavation and foundation work. Erection
of the steel structure began in April 1999, and the building is expected to be
enclosed by mid-August 1999. We will have a 300,000 square foot gaming facility
featuring (1) a 31,000 square foot casino with approximately 1,000 slot machines
and 12 blackjack tables; (2) parking for 520 vehicles (92% of which will be
covered) with convenient self-park and valet options; (3) a 265-seat casual
dining restaurant; (4) two themed bars; and (5) an entertainment center with
seating for approximately 500 customers. Subject to the delays inherent in
construction projects of the magnitude of our casino, and subject to obtaining
the necessary gaming licenses, other permits and financing, we expect to open
our casino in the first quarter of 2000.
Results Of Operations
We are in the development stage and do not have any historical operating
results other than interest income on unused loan proceeds and interest expense
(the majority of which has been capitalized) on our outstanding indebtedness to
Riviera Holdings, the receipt of capital contributions and the capitalization of
other costs and pre-opening general and administrative expenses in the first six
months of 1999 which have been expensed as required under generally accepted
accounting principles. See "-- Recently Issued Accounting Standards." The
capitalized costs have consisted primarily of license and permit applications,
design costs, construction costs and interest during development and
construction. Future operating results are subject to significant business,
economic, regulatory and competitive uncertainties and contingencies, many of
which are beyond our control. We believe that the Riviera Black Hawk, if
completed and opened, will be able to attract a sufficient number of patrons and
achieve the level of activity and revenues necessary to permit us to meet our
obligations, including with respect to the notes. However, there can be no
assurance that we will be able to achieve these results.
Liquidity And Capital Resources
Our purchase of the site and all development expenses to date were financed
by the proceeds from the sale of the existing notes and by capital contributions
and advances from Riviera Holdings. We expect to fund the remaining development
of the Riviera Black Hawk from a combination of (1) $21.8 million of the net
proceeds from the sale of the existing notes, which remained in the construction
disbursement account after reimbursing Riviera Holdings $10.1 million in cash
for advances made to us prior to the sale of the existing notes, (2) $10.1
million of the net proceeds from the sale of the existing notes, which were
deposited into the completion reserve account and the interest reserve account,
(3) furniture, fixtures and equipment financing in the amount of up to $10.6
million and (4) Special Improvement District Bonds in the amount of $1.5
million. In addition, Riviera Holdings will be obligated under the completion
capital commitment to contribute to us up to $10.0 million of cash to us if at
any time there are insufficient funds available to enable our casino to be
operating by May 31, 2000. In addition, if our casino is not operating by May
31, 2000, Riviera Holdings will be obligated to contribute on that date $10.0
million in cash less any amounts previously contributed under the completion
capital commitment. Furthermore, if (1) we do not have the necessary funds to
make a payment of fixed interest on the notes during our first three years of
operations or (2) our cash flow is less than $9.0 million in any of our first
three years of operations, Riviera Holdings will be obligated under the
keep-well agreement to contribute cash to us to make up those amounts, subject
to a maximum of $5.0 million for any one operating year and $10.0 million in the
aggregate.
After our casino opens, we expect to fund our operating and capital needs
from operating cash flow. We intend to have sufficient working capital to
provide for reasonably anticipated short-term liquidity needs. In addition,
Riviera Holdings has committed to provide us with additional financing under the
circumstances described above. However, there can be no assurance that any
additional financing, if needed to meet liquidity needs, will be available to us
on favorable terms or at all. There can be no assurance that our estimate of
foreseeable liquidity needs is accurate or that no new business developments or
other unforeseen events will not
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<PAGE>
occur, any of which could result in the need to raise additional funds. We
expect that the adequacy of our operating cash flow will depend upon customer
acceptance of the Riviera Black Hawk, the continued development of the Black
Hawk/Central City market as a gaming destination, the intensity of our
competition, the efficiency of operations, the depth of customer demand, the
effectiveness of our marketing and promotional efforts and the performance by
Riviera Holdings of its agreements to provide capital to us pursuant to the
completion capital commitment and the keep-well agreement.
Recently Issued Accounting Standards
The American Institute of Certified Public Accountants' Accounting
Standards Executive Committee recently issued Statement of Position No. 98-5,
Reporting on the Costs of Start-Up Activities. This standard provides guidance
on the financial reporting for start-up costs and organization costs. This
standard requires costs of start-up activities and organization costs to be
expensed as incurred, and is effective for fiscal years beginning after December
15, 1998, although earlier application is encouraged. We adopted this standard
effective January 1, 1999. The impact has been to record a general expense of
$75,000 for the six months ended June 30, 1999, that we would have otherwise
deferred as pre-opening costs.
The Financial Accounting Standards Board recently issued FAS No. 137,
`Deferral of FAS 133 Accounting for Derivatives' which delays the implementation
of that pronouncement to June 15, 2000. We have not determined what effect, if
any, that FAS 133 may have on our results of operations.
Year 2000
In the past, many computer software programs were written using two digits
rather than four to define the applicable year. As a result, date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This situation is generally referred to as the "Year 2000 Problem". If
such situation occurs, the potential exists for computer system failures or
miscalculations by computer programs, which could disrupt operations.
We have conducted a comprehensive review of our computer systems and other
systems for the purpose of assessing our potential Year 2000 Problem, and we are
in the process of modifying or replacing those systems which are not Year 2000
compliant. Based upon this review, our management believes such systems will be
compliant by mid-calendar 1999. However, if modifications are not made or not
completed timely, the Year 2000 Problem could have a significant impact on our
operations.
All costs related to the Year 2000 Problem are expensed as incurred, while
the cost of new hardware and software is capitalized and amortized over its
expected useful life. The costs associated with Year 2000 compliance have not
been and are not anticipated to be material to our financial position or results
of operations. As of June 30, 1999, we have incurred costs of approximately
$2,000 (primarily for analysis by internal labor) related to the system
applications and anticipates spending an additional $2,000 to become Year 2000
compliant. The estimated completion date and remaining costs are based upon our
management's best estimates, as well as third party modification plans and other
factors. However, there can be no guarantee that such estimates will occur and
actual results could differ.
In addition, we have communicated with our major vendors and suppliers to
determine their state of readiness relative to the Year 2000 Problem and our
possible exposure to Year 2000 issues of such third parties. However, there can
be no guarantee that the systems of other companies, which our systems may rely
upon, will be timely converted or representations made to us by these parties
are accurate. As a result the failure of a major vendor or supplier to
adequately address their Year 2000 Problem could have a significant adverse
impact on our operations.
As a result of various external risk factors, we could be adversely
impacted and the effect could be material regardless of the readiness of our own
systems. The most reasonable worst case scenario - if one or more of our utility
providers (of electric, natural gas, water, sewer) experiences Year 2000
problems that impact their ability to provide their services, our operations
could be adversely impacted. Furthermore, disruption of services for any of the
markets for our customers could result in an adverse change in customer visits
from the affected market. Automobile traffic to and from the Black Hawk/Central
City market could be disrupted by Year 2000 problems, which would limit the
ability of potential customers to visit our property. The possible long term
disruption of banking services due to Year 2000 problems could ultimately impair
our daily financial transactions, including the deposit of monies and processing
of checks. Furthermore, credit card processing and customers' access to cash via
automated teller machines could also be disrupted. In the event of this type of
disruption, we intend to provide minimal services to our customers and assist
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<PAGE>
them, if possible, with transportation to the metropolitan Denver area as hotel
facilities are extremely limited in the Black Hawk/Central City area.
We have developed, and continue to update and revise, contingency plans to
address the identified risks. However, given the nature of many of the external
risk factors, we do not believe viable alternatives would be available. For
example, we cannot develop a meaningful contingency plan to address a disruption
of utilities services. Consequently, the occurrence of any of the aforementioned
disruptions could, depending upon their severity and duration, have a material
adverse impact on our operating results.
20
<PAGE>
THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
We issued and sold the existing notes to the Initial Purchaser on June 3,
1999 (the "Issue Date"). The Initial Purchaser subsequently sold the existing
notes to qualified institutional buyers in reliance on Rule 144A under the
Securities Act. Because the existing notes are subject to transfer restrictions,
our company and the Initial Purchaser entered into a registration rights
agreement dated June 3, 1999 (the "registration rights agreement"), pursuant to
which we agreed:
- within 45 days after the Issue Date, to prepare and file with the
Securities and Exchange Commission the Registration Statement of which
this prospectus is a part;
- within 150 days after the Issue Date, to use our best efforts to cause
the Registration Statement to become effective under the Securities
Act;
- upon the effectiveness of the Registration Statement, to offer the
exchange notes in exchange for surrender of the existing notes; and
- to keep the exchange offer open for not less than 30 days (or longer
if required by applicable law) after the date notice of the exchange
offer is mailed to the holders of the existing notes.
The Registration Statement is intended to satisfy in part our obligations with
respect to the existing notes under the registration rights agreement.
Under existing interpretations of the Securities and Exchange Commission,
the exchange notes will be freely transferable by holders other than our
affiliates after the exchange offer without further registration under the
Securities Act if the holder of the exchange notes represents that:
- it is acquiring the exchange notes in the ordinary course of its
business;
- it has no arrangement or understanding with any person to participate
in the distribution of the exchange notes;
- it is not an affiliate of the Company, as such terms are interpreted
by the Securities and Exchange Commission; and
- if such holder is not a broker-dealer, then such holder is not engaged
in and does not intend to engage in, a distribution of the exchange
notes.
However, broker-dealers ("Participating Broker-Dealers") receiving exchange
notes in the exchange offer will have a prospectus delivery requirement with
respect to resales of such exchange notes. The Securities and Exchange
Commission has taken the position that Participating Broker-Dealers may fulfill
their prospectus delivery requirements with respect to exchange notes, other
than a resale of an unsold allotment from the original sale of the existing
notes, with this prospectus. Under the registration rights agreement, we are
required to allow Participating Broker-Dealers and other persons, if any, with
similar prospectus delivery requirements to use this prospectus in connection
with the resale of such exchange notes. Each broker-dealer that receives
exchange notes for its own account in exchange for existing notes, where such
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. See "Plan of
Distribution."
Terms of The Exchange Offer; Period For Tendering Existing Notes
Upon the terms and subject to the conditions set forth in this prospectus
and in the accompanying Letter of Transmittal (which together constitute the
exchange offer), we will accept for exchange existing notes which are properly
tendered on or prior to the expiration date and not withdrawn as permitted
below. As used in the prospectus, the term "expiration date" means 5:00 p.m.,
New York City time, on __________ __, 1999 (90 days after the effective date of
this Registration Statement).
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<PAGE>
However, if we, in our sole discretion, have extended the period of time for
which the exchange offer is open, the term "expiration date" means the latest
time and date to which the exchange offer is extended.
As of the date of this prospectus, $45.0 million aggregate principal amount
of the existing notes are outstanding. This prospectus, together with the Letter
of Transmittal, is first being sent on or about ___________ __, 1999, to all
holders of existing notes known to us. Our obligation to accept existing notes
for exchange pursuant to the exchange offer is subject to the conditions as set
forth under "--Conditions to the Exchange Offer" below.
We expressly reserve the right, at any time or from time to time, to extend
the period of time during which the exchange offer is open, and thereby delay
acceptance for any exchange of any existing notes, by giving notice of such
extension to the holders of existing notes as described below. During any such
extension, all existing notes previously tendered will remain subject to the
exchange offer and may be accepted for exchange by us. Any existing notes not
accepted for exchange for any reason will be returned without expense to the
tendering holder as promptly as practicable after the expiration or termination
of the exchange offer.
We expressly reserve the right to amend or terminate the exchange offer,
and not to accept for exchange any existing notes not previously accepted for
exchange, upon the occurrence of any of the conditions of the exchange offer
specified below under "--Conditions to the Exchange Offer." We will give notice
of any extension, amendment, non-acceptance or termination to the holders of the
existing notes as promptly as practicable, such notice in the case of any
extension to be issued no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled expiration date.
Holders of existing notes do not have any appraisal or dissenters' rights
in connection with the exchange offer.
Procedures for Tendering existing notes
The tender to us of existing notes by a holder of existing notes as set
forth below and the acceptance of such tender by us will constitute a binding
agreement between the tendering holder and us upon the terms and subject to the
conditions set forth in this prospectus and in the accompanying Letter of
Transmittal. Except as set forth below, a holder who wishes to tender existing
notes for exchange pursuant to the exchange offer must transmit a properly
completed and duly executed Letter of Transmittal, including all other documents
required by such Letter of Transmittal, to IBJ Whitehall Bank & Trust Company of
New York at one of the addresses set forth below under "--Exchange Agent" on or
prior to the expiration date. In addition, the exchange agent must receive:
- certificates for such existing notes along with the Letter of
Transmittal, or
- prior to the expiration date, a timely confirmation of a book-entry
transfer (a "book-entry confirmation") of such existing notes into the
exchange agent's account at The Depository Trust Company (the
"book-entry transfer facility" or the "Depositary") pursuant to the
procedure for book-entry transfer described below, or
- the holder must comply with the guaranteed delivery procedure
described below.
The method of delivery of existing notes, Letters of Transmittal and all
other required documents is at your election and risk. If such delivery is by
mail, we recommend that you use registered mail, properly insured, with return
receipt requested. In all cases, you should allow sufficient time to assure
timely delivery. You should not send Letters of Transmittal or existing notes to
us.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the existing notes surrendered for
exchange are tendered:
- by a registered holder of the existing notes who has not completed the
box entitled "Special Issuance Instruction" or "Special Delivery
Instruction" on the Letter of Transmittal; or
- for the account of an Eligible Institution.
In the event that signatures on a Letter of Transmittal or a notice of
withdrawal, as the case may be, are required to be guaranteed, such guarantees
must be by a firm which is a member of a registered national securities exchange
or a member of the National Association of Securities Dealers, Inc. or by a
commercial bank or trust company having an office or correspondent in the
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<PAGE>
United States (collectively, "Eligible Institutions"). If existing notes are
registered in the name of a person other than a signer of the Letter of
Transmittal, the existing notes surrendered for exchange must be endorsed by, or
be accompanied by a written instrument or instruments of transfer or exchange,
in satisfactory form as determined by us in our sole discretion, duly executed
by the registered holder with the signature on such existing notes guaranteed by
an Eligible Institution.
Any beneficial owner whose existing notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee, and who wishes
to tender, should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's own behalf, such owner must,
prior to completing and executing the Letter of Transmittal and delivering such
owner's existing notes, either (1) make appropriate arrangements to register
ownership of the existing notes in such owner's name or (2) obtain a properly
completed bond power from the registered holder. The transfer of registered
ownership may take considerable time.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of existing notes tendered for exchange will be
determined by us in our sole discretion. This determination shall be final and
binding. We reserve the absolute right to reject any and all tenders of any
particular existing notes not properly tendered or to not accept any particular
existing notes which acceptance might, in our judgment or our counsel's
judgment, be unlawful. We also reserve the absolute right to waive any defects
or irregularities or conditions of the exchange offer as to any particular
existing notes either before or after the expiration date including the right to
waive the ineligibility of any holder who seeks to tender existing notes in the
exchange offer. The interpretation of the terms and conditions of the exchange
offer as to any particular existing notes either before or after the expiration
date, including the Letter of Transmittal and the instructions to such Letter of
Transmittal, by us shall be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of existing notes for
exchange must be cured within such reasonable period of time as we shall
determine. Neither we, the exchange agent nor any other person shall be under
any duty to give notification of any defect or irregularity with respect to any
tender of existing notes for exchange, nor shall any of them incur any liability
for failure to give such notification.
If the Letter of Transmittal or any existing notes or powers of attorney
are signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
us, proper evidence satisfactory to us of their authority to so act must be
submitted.
By tendering, each holder of existing notes will represent to us in writing
that, among other things:
- the exchange notes acquired pursuant to the exchange offer are being
obtained in the ordinary course of business of the holder and any
beneficial holder;
- neither the holder nor any such beneficial holder has an arrangement
or understanding with any person to participate in the distribution of
such exchange notes; and
- neither the holder nor any such other person is an "affiliate," as
defined under Rule 405 of the Securities Act, of our company. If the
holder is not a broker-dealer, the holder must represent that it is
not engaged in nor does it intend to engage in it distribution of the
exchange notes.
If any holder or any such other person is an "affiliate," as defined under
Rule 405 of the Securities Act of ours, or is engaged in, or intends to engage
in, or has an arrangement or understanding with any person to participate in, a
distribution of such exchange notes to be acquired pursuant to the exchange
offer, such holder or any such other person (1) may not rely on the applicable
interpretations of the staff of the Securities and Exchange Commission and (2)
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction.
If the holder is a broker-dealer, the holder must represent that it will
receive exchange notes for its own account in exchange for existing notes that
were acquired as a result of market-making activities or other trading
activities. Each broker-dealer that receives exchange notes for its own account
in exchange for existing notes, where such existing notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities (an "Exchanging Dealer"), must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. See "Plan of
Distribution."
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Acceptance of existing notes for exchange; Delivery Of exchange notes
Upon satisfaction or waiver of all of the conditions to the exchange offer,
we will accept, promptly after the expiration date, all existing notes property
tendered, and will issue the exchange notes promptly after acceptance of the
existing notes. See "--Conditions to the Exchange Offer" below. For purposes of
the exchange offer, we shall be deemed to have accepted properly tendered
existing notes for exchange when, as and if we have given oral and written
notice to the exchange agent.
The exchange notes will bear interest from the most recent date to which
interest has been paid on the existing notes, or if no interest has been paid on
the existing notes, from June 3, 1999. Accordingly, registered holders of
exchange notes on the relevant record date for the first interest payment date
following the consummation of the exchange offer will receive interest accruing
from the most recent date to which interest has been paid or, if no interest has
been paid, from June 3, 1999. Existing notes accepted for exchange will cease to
accrue interest from and after the date of consummation of the exchange offer.
Holders of existing notes whose existing notes are accepted for exchange will
not receive any payment in respect of accrued interest on such existing notes
otherwise payable on any interest payment date the record date for which occurs
on or after consummation of the exchange offer and will be deemed to have waived
their rights to receive such accrued interest on the existing notes.
In all cases, issuance of exchange notes for existing notes that are
accepted for exchange pursuant to the exchange offer will be made only after
timely receipt by the exchange agent of (1) certificates for such existing notes
or a timely book-entry confirmation of such existing notes into the exchange
agent's account at the book-entry transfer facility, (2) a properly completed
and duly executed Letter of Transmittal and (3) all other required documents. If
any tendered existing notes are not accepted for any reason set forth in the
terms and conditions of the exchange offer or if existing notes are submitted
for a greater principal amount than the holder desires to exchange, such
unaccepted or non-exchanged existing notes will be returned without expense to
the tendering holder of such existing notes (or, in the case of existing notes
tendered by book-entry transfer into the exchange agent's account at the
book-entry transfer facility pursuant to the book-entry transfer procedures
described below, such non-exchanged existing notes will be credited to an
account maintained with such book-entry transfer facility) as promptly as
practicable after the expiration of the exchange offer.
Book-Entry Transfer
Any financial institution that is a participant in the book-entry transfer
facility's systems may make book-entry delivery of existing notes by causing the
book-entry transfer facility to transfer such existing notes into the exchange
agent's account at the book-entry transfer facility in accordance with such
book-entry transfer facility's procedures for transfer. However, although
delivery of existing notes may be effected through book-entry transfer at the
book-entry transfer facility, the Letter of Transmittal or facsimile thereof
with any required signature guarantees and any other required documents must, in
any case, be transmitted to and received by the exchange agent at one of the
addresses set forth below under "--Exchange Agent" on or prior to the expiration
date, unless such holder has strictly complied with the guaranteed delivery
procedures described below.
We understand that the exchange agent has confirmed with the book-entry
transfer facility that any financial institution that is a participant in the
book-entry transfer facility's system may utilize the book-entry transfer
facility's Automated Tender Offer Program ("ATOP") to tender existing notes. We
further understand that the exchange agent will request, within two business
days after the date the exchange offer commences, that the book-entry transfer
facility establish an account with respect to the existing notes for the purpose
of facilitating the exchange offer, and any participant may make book-entry
delivery of existing notes by causing the book-entry transfer facility to
transfer such existing notes into the exchange agent's account in accordance
with the book-entry transfer facility's ATOP procedures for transfer. However,
the exchange of the existing notes so tendered will only be made after timely
confirmation (a "book-entry confirmation") of such book-entry transfer and
timely receipt by the exchange agent of an agent's message, an appropriate
Letter of Transmittal with any required signature guarantee, and any other
documents required. The term "agent's message" means a message, transmitted by
the book-entry transfer facility and received by the exchange agent and forming
part of book-entry confirmation, which states that the book-entry transfer
facility has received an express acknowledgment from a participant tendering
existing notes which are the subject of such book-entry confirmation and that
such participant has received and agrees to be bound by the terms of the Letter
of Transmittal and that we may enforce such agreement against such participant.
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Guaranteed Delivery Procedures
If a registered holder of the existing notes desires to tender such
existing notes and the existing notes are not immediately available, or time
will not permit such holder's existing notes or other required documents to
reach the exchange agent before the expiration date, or the procedure for
book-entry transfer cannot be completed on a timely basis, a tender may
nonetheless be effected if:
- the tender is made through an Eligible Institution;
- prior to the expiration date, the exchange agent received from such
Eligible Institution a properly completed and duly executed Letter of
Transmittal and Notice of Guaranteed Delivery, substantially in the
form provided by us by telegram, telex, facsimile transmission, mail
or hand delivery, setting forth the name and address of the holder of
existing notes and the amount of existing notes tendered, stating that
the tender is being made thereby and guaranteeing that within five New
York Stock Exchange ("NYSE") trading days after the date of execution
of the Notice of Guaranteed Delivery, the certificates for all
physically tendered existing notes, in proper form for transfer, or a
book-entry confirmation, as the case may be, and any other documents
required by the Letter of Transmittal will be deposited by the
Eligible Institution with the exchange agent; and
- the certificates for all physically tendered existing notes, in proper
form for transfer, or a book-entry confirmation, as the case may be,
and all other documents required by the Letter of Transmittal are
received by the exchange agent within five NYSE trading days after the
date of execution of the Notice of Guaranteed Delivery.
Withdrawal Rights
Tenders of existing notes may be withdrawn at any time prior to the
expiration date. For a withdrawal to be effective, a written notice of
withdrawal must be received by the exchange agent at one of the addresses set
forth below under "--Exchange Agent." Any such notice of withdrawal must:
- specify the name of the person having tendered the existing notes to
be withdrawn;
- identify the existing notes to be withdrawn and the principal amount
of such existing notes; and
- where certificates for existing notes have been transmitted specify
the name in which such existing notes are registered, if different
from that of the withdrawing holder.
If certificates for existing notes have been delivered or otherwise
identified to the exchange agent, then, prior to the release of such
certificates, the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such holder is an
Eligible Institution.
If existing notes have been tendered pursuant to the procedure for
book-entry transfer described above, any notice of withdrawal must specify the
name and number of the account at the book-entry transfer facility to be
credited with the withdrawn existing notes and otherwise comply with the
procedures of such facility. All questions as to the validity, form and
eligibility, including time of receipt, of such notices will be determined by
us, whose determination shall be final and binding on all parties. Any existing
notes so withdrawn will be deemed not to have been validly tendered for exchange
for purposes of the exchange offer. Any existing notes which have been tendered
for exchange but which are not exchanged for any reason will be returned to the
holder thereof without cost to such holder (or in the case of existing notes
tendered by book-entry transfer into the exchange agent's account at the
book-entry transfer facility pursuant to the book-entry transfer procedures
described above, such existing notes will be credited to an account maintained
with such book-entry transfer facility for the existing notes) as soon as
practicable after withdrawal, rejection of tender or termination of the exchange
offer. Properly withdrawn existing notes May be retendered by following one of
the procedures described under "--Procedures for Tendering existing notes" above
at any time on or prior to the expiration date.
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Conditions To The Exchange Offer
Notwithstanding any other provision of the exchange offer, we shall not be
required to accept for exchange, or to issue exchange notes in exchange for, any
existing notes. We may terminate or amend the exchange offer if it any time
before the acceptance of such existing notes for exchange or the exchange of
exchange notes for such existing notes, we determine that:
- the exchange offer does not comply with any applicable law or any
applicable interpretation of the staff of the Securities and Exchange
Commission;
- we have not received all applicable governmental approvals; or
- any actions or proceedings of any governmental agency or court exist
which could materially impair our ability to consummate the exchange
offer.
The foregoing conditions are for our sole benefit and may be asserted by us
regardless of the circumstances giving rise to any such condition or may be
waived by us in whole or in part at any time and from time to time in its
reasonable discretion. Our failure at any time to exercise any of the foregoing
rights shall not be deemed a waiver of such right and each such right shall be
deemed an ongoing right which may be asserted at any time and from time to time.
In addition, we will not accept for exchange any existing notes tendered,
and no exchange notes will be issued in exchange for any such existing notes, if
at such time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"). In any such event we are required to use every
reasonable effort to obtain the withdrawal of any stop order at the earliest
possible time.
Exchange Agent
IBJ Whitehall Bank & Trust Company has been appointed as the exchange agent
for the exchange offer. All executed Letters of Transmittal should be directed
to the exchange agent at one of the addresses set forth below. Questions and
requests for assistance, requests for additional copies of this prospectus or of
the Letter of Transmittal and requests for Notices of Guaranteed Delivery should
be directed to the exchange agent addressed as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
By Hand, up to 4:30 p.m.: By Registered or Certified Mail: By Overnight Courier & By Hand after 4:30
p.m. on the expiration date only:
IBJ Whitehall Bank & IBJ Whitehall Bank & IBJ Whitehall Bank &
Trust Company Trust Company Trust Company
One State Street P.O. Box 84 One State Street
New York, New York 10004 Bowling Green Station New York, New York 10004
Attn: Securities Processing Window, New York, New York 10274-0084 Attn: Securities Processing Window,
Subcellar One, (SC-1) Subcellar One, (SC-1)
By Facsimile:
(212) 858-2611
Confirm by Telephone:
(212) 858-2103
</TABLE>
Delivery other than as set forth above will not constitute a valid delivery.
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Fees and Expenses
We will not make any payments to brokers, dealers or others soliciting
acceptances of the exchange offer. The principal solicitation is being made by
mail. However, additional solicitations may be made in person or by telephone by
officers and employees of the Company.
The expenses to be incurred in connection with the exchange offer will be
paid by us. Such expenses include fees and expenses of the exchange agent and
Trustee, accounting and legal fees and printing costs, among others.
Accounting Treatment
The exchange notes will be recorded at the same carrying amount as the
existing notes, which is the principal amount as reflected in our accounting
records on the date of the exchange and, accordingly, no gain or loss will be
recognized. The debt issuance costs will be capitalized and amortized to
interest expense over the term of the exchange notes.
Transfer Taxes
Holders who tender their existing notes for exchange will not be obligated
to pay any transfer taxes in connection therewith, except that holders who
instruct us to register exchange notes in the name of, or request that existing
notes not tendered or not accepted in the exchange offer be returned to, a
person other than the registered tendering holder will be responsible for the
payment of any applicable transfer tax thereon.
Consequences of failure to exchange; Resales of exchange notes
Holders of existing notes who do not exchange their existing notes for
exchange notes in the exchange offer will continue to be subject to the
restrictions on transfer of such existing notes as set forth in the legend
thereon as a consequence of the issuance of the existing notes pursuant to the
exemptions from, or in transactions not subject to, the registration
requirements of, the Securities Act and applicable state securities laws.
Existing notes not exchanged pursuant to the exchange offer will continue to
accrue interest at 13% per annum and will otherwise remain outstanding in
accordance with their terms. Holders of existing notes do not have any appraisal
or dissenters' rights under the Colorado Business Corporation Act in connection
with the exchange offer. In general, the existing notes may not be offered or
sold unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. We do not currently anticipate that we will register the
existing notes under the Securities Act. However, (1) if the Initial Purchaser
so requests with respect to existing notes not eligible to be exchanged for
exchange notes in the exchange offer and held by it following consummation of
the exchange offer or (2) if any holder of existing notes other than an
Exchanging Dealer is not eligible to participate in the exchange offer or, in
the case of any holder of existing notes other than an Exchanging Dealer that
participates in the exchange offer, does not receive exchange notes in exchange
for existing notes that may be sold without restriction under state and federal
securities laws (other than due solely to the status of such holder as an
affiliate of us within the meaning of the Securities Act), we are obligated to
file a shelf registration statement on the appropriate form under the Securities
Act relating to the existing notes held by such persons.
Based on certain interpretive letters issued by the staff of the Securities
and Exchange Commission to third parties in unrelated transactions, we are of
the view that exchange notes issued pursuant to the exchange offer may be
offered for resale, resold or otherwise transferred by holders thereof (other
than (1) any such holder which is our "affiliate" within the meaning of Rule 405
under the Securities Act or (2) any broker-dealer that purchases notes from us
to resell pursuant to Rule 144A or any other available exemption) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such exchange notes are acquired in the ordinary
course of such holders' business and such holders have no arrangement or
understanding with any person to participate in the distribution of such
exchange notes. If any holder has any arrangement or understanding with respect
to the distribution of the exchange notes to be acquired pursuant to the
exchange offer, such holder (1) could not rely on the applicable interpretations
of the staff of the Securities and Exchange Commission and (2) must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. A broker-dealer who holds
existing notes that were acquired for its own account as a result of
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market-making or other trading activities may be deemed to be all
"underwriter" within the meaning of the Securities Act and must, therefore,
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of exchange notes. Each such broker-dealer that
receives exchange notes for its own account in exchange for existing notes,
where such existing notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge in the
Letter of Transmittal that it will deliver a prospectus in connection with any
resale of such exchange notes. See "Plan of Distribution." We have not requested
the staff of the Securities and Exchange Commission to consider the exchange
offer in the context of a no-action letter, and there can be no assurance that
the staff would take positions similar to those taken in the interpretive
letters referred to above if we were to make such a no-action request.
In addition, the exchange notes may not be offered or sold in a
jurisdiction unless they have been registered or qualified for sale in such
jurisdictions or an exemption from registration or qualification is available
and is complied with. We have agreed, pursuant to the registration rights
agreement and subject to the specified limitations therein, to register or
qualify the exchange notes for offer or sale under the securities or blue sky
laws of such jurisdictions in the United States as any selling holder of the
Notes reasonably requests in writing.
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BUSINESS
Riviera Black Hawk
Riviera Black Hawk, is constructing and will own and operate one of the
largest integrated casino, entertainment and parking facilities in the state of
Colorado. Located in Black Hawk, Colorado, approximately 40 miles west of
Denver, our casino will be one of the first three encountered when traveling
from Denver to the adjacent gaming cities of Black Hawk and Central City. Our
casino will feature the second largest number of gaming positions in the market
with approximately 1,000 slot machines and 12 blackjack tables. We also expect
to offer a variety of non-gaming amenities designed to further differentiate our
casino including: (1) parking for 520 vehicles (92% of which will be covered)
with convenient and free self-park and valet options, (2) a 265-seat casual
dining restaurant, (3) two themed bars and (4) an entertainment center with
seating for approximately 500 people.
The initial participants in this market were small, privately held gaming
facilities whose inability to offer convenient parking and a full range of
traditional casino amenities limited the growth of this market. Subsequently,
larger casinos offering such amenities have entered the market, have been
gaining market share and have contributed to the consistent growth in the
overall market. As of June 30, 1999, there were 29 casinos in the Black
Hawk/Central City market, with eight casinos each offering more than 400 gaming
positions. Anchor Gaming's Colorado Central Station, located across the street
from our casino with approximately 700 gaming machines and 700 valet parking
spaces, has been the market leader in terms of win per gaming device. We believe
that our casino will be successful due to our: (1) premier location; (2)
convenient, covered self-parking; and (3) superior size and amenities.
We expect to open our casino in the first quarter of 2000. The total cost
for our casino, excluding capitalized interest, is expected to be $77.1 million,
which includes (1) $15.1 million for the original purchase of the land on which
our casino is being developed, (2) $27.6 million of construction costs, (3)
$10.6 million for furniture, fixtures and equipment, (4) $8.0 million for
project development costs, fees and permits, (5) $2.7 million for pre-opening
costs, opening bankroll and other working capital requirements, (6) $10.1
million for a completion reserve and an interest reserve and (7) $3.0 million
for fees and expenses related to the sale of the existing notes. We believe the
construction budget and timetable for our casino can be achieved based on the
following:
- construction costs will be incurred pursuant to a construction
contract with a maximum price of $27.6 million, except for our changes
in specifications or delays caused by our company or "force majeure"
events;
- the foundation and external structure of the facility has been
substantially completed;
- $14.9 million (54%) of the $27.6 million construction budget had been
expended under the construction contract as of June 30, 1999;
- the construction contract provides for a completion date of January
15, 2000 with incentives for finishing early and penalties for
finishing late.
Description of the Riviera Black Hawk
General. The Riviera Black Hawk is designed to be an integrated gaming
facility, providing customers with a broad selection of gaming activities, food
and entertainment as well as convenient on-site covered parking. Our casino is
being constructed on a 71,000 square foot (1.63 acres) site zoned entirely for
gaming, providing us with the flexibility to add additional gaming space as
allowable under Colorado gaming regulations. Total square footage for the
facility will be 300,000 square feet, which includes a 175,000 square foot
parking structure. The land is not subject to any material encumbrances.
The exterior design of our casino is based on the historic Western
Victorian influence found in the Black Hawk area in the late 19th century.
Patrons will be able to enter the casino from three entrances: (1) a
glass-covered pedestrian entrance facing the Colorado Central Station on the
corner of Main and Mill Street, which will serve as the main entrance for
pedestrians coming from the Colorado Central Station and other casinos across
Mill Street as well as the west entrance of the Isle of Capri Casino; (2) a
valet and pedestrian entrance facing the Isle of Capri Casino across Main
Street, which will serve as the main entrance for our valet customers, bus
customers and pedestrians leaving the Isle of Capri Casino through the north
entrance; and (3) elevator access from our attached self-parking structure.
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The interior of the casino will blend the Western Victorian theme with the
exciting atmosphere of a modern casino, complete with state-of-the-art slot
machines and blackjack tables. The ambiance on the casino floor will be enhanced
by the view of the surrounding mountains offered through large windows. Also
adding to the Western Victorian theme will be a large, ornate bar located in the
center of the casino floor. Our casino will include 30,000 square feet of gaming
space located "Las Vegas-style" on a single floor. We expect to offer one of the
largest selections of gaming in the market with approximately 1,000
state-of-the-art slot machines and 12 blackjack tables. Each slot machine and
each gaming table is considered one gaming position. The slot machines will be
available to customers in numerous denominations, including 5(cent), 25(cent),
$1 and $5 and will be grouped together to generate an atmosphere of excitement
consistent with that typically found in Las Vegas-style casinos.
The Black Hawk/Central City Market
Gaming was first introduced to the Black Hawk/Central City market in
October 1991 following a state-wide referendum where Colorado voters approved
limited stakes gaming for three historic mining towns -- Black Hawk, Central
City and Cripple Creek. Limited stakes gaming is defined as a maximum single bet
of $5. Black Hawk and Central City are contiguous cities located approximately
40 miles west of Denver and about ten miles north of Interstate Highway 70, the
main east-west artery from Denver. Historically, these two gold mining
communities were popular tourist towns. However, since the inception of casino
gaming in October 1991, many of the former tourist-related businesses have been
displaced by gaming establishments.
The first casino in the Black Hawk/Central City market was opened in
October 1991 with 14 casinos open by the end of that year. The pace of expansion
increased further in 1992 with the number of casinos in the market peaking at 42
casinos. However, due to a trend of consolidation in the market and the
displacement of small casinos by the entry of larger, better capitalized
operators, the number of casinos has declined to 29 as of June 30, 1999.
The Black Hawk/Central City market primarily caters to "day-trip" customers
from Denver, Boulder, Fort Collins and Golden as well as Cheyenne, Wyoming.
Approximately 3.3 million people reside within this 100-mile radius of Black
Hawk. Denver provides the market with a demographic base of approximately 1.9
million residents. In addition, residents within a 100 mile radius of the City
of Black Hawk had an average household income in excess of $51,000 per annum in
1998. Daily traffic counts passing the Black Hawk/Central City market on Highway
119, as reported by the Colorado Department of Transportation, averaged over
14,000 vehicles per day in 1998.
The Black Hawk/Central City market's location has contributed to consistent
growth in the market since the legalization of gaming in 1991. Gaming revenues
have grown from $127.6 million in 1992 to $366.0 million in 1998, representing a
19% compound annual growth rate. These revenues represented approximately 76% of
total Colorado gaming revenues (excluding gaming on Native American land).
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The following table sets forth gaming statistics for the Black Hawk/Central
City market and well as the individual cities of Black Hawk and Central City:
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C>
Black Hawk
Gaming revenues (in thousands).. $ 173,703 $195,857 $219,911 $234,631 $272,008
Number of casinos(1)............ 19 19 19 19 19
Number of slots(1).............. 4,231 4,877 5,276 5,340 7,181
Number of tables(1)............. 103 113 111 106 125
Win per slot per day(2)......... $ 97.71 $ 104.70 $ 110.68 $ 113.77 $ 122.24
Win per table per day(2)........ $ 375.06 $ 365.57 $ 365.83 $ 370.50 $ 383.69
Central City
Gaming revenues (in thousands).. $ 69,702 $ 94,468 $ 88,870 $ 87,391 $ 93,980
Number of casinos(1)............ 17 13 12 12 12
Number of slots(1).............. 4,311 3,670 3,259 3,196 3,142
Number of tables(1)............. 92 72 60 58 46
Win per slot per day(2)......... $ 54.63 $ 60.51 $ 66.96 $ 67.97 $ 81.15
Win per table per day(2)........ $ 245.32 $ 282.12 $ 244.14 $ 219.63 $ 224.21
Black Hawk/Central City Market
Gaming revenues (in thousands).. $ 243,405 $290,325 $308,781 $322,022 $365,988
Number of casinos(1)............ 36 32 31 31 31
Number of slots(1).............. 8,542 8,547 8,535 8,536 10,323
Number of tables(1)............. 195 185 171 164 171
</TABLE>
- ----------
(1) As of December 31 for each period shown.
(2) Win per gaming position per day is based on the weighted average number of
units during the period presented. Source: Colorado Division of Gaming and Urban
Systems, Inc.
Slot machines account for approximately 95% of the market's total gaming
revenues. In contrast, as of December 31, 1998, slot machines in the developed
gaming markets of Nevada and New Jersey generate between 65% and 69% of total
revenues while slot revenues in emerging markets such as Iowa and Indiana
account for approximately 78% of total revenues.
Since 1992, the number of gaming positions in the Black Hawk/Central City
market has grown approximately 44.7% from 7,252 positions in 1992 to 10,494
positions in 1998. The total number of slot machines has increased 45.8% since
1992 to 10,323 in 1998 while the total number of tables in the market has
remained relatively flat with 171 tables in the market at the end of 1998. Win
per gaming position per day has continued to grow despite the increase in the
number of gaming positions.
The City of Black Hawk has experienced more significant growth in gaming
revenues than Central City since 1992. The popularity of Black Hawk in
comparison to Central City is due primarily to Black Hawk's superior access to
major highways, as patrons must first pass through Black Hawk to access Central
City from Denver. Due to this superior location, larger casino operators have
focused on building in the City of Black Hawk. As a result, casinos in Black
Hawk now generally feature a larger average number of gaming positions, a wider
variety of high quality amenities and convenient and free parking for patrons.
These factors have contributed to growth in Black Hawk gaming revenues at a
compound annual rate of 30.1% since 1992 compared to a more moderate growth for
Central City of 4.7% over the same period. The number of slot machines and
tables in the City of Black Hawk have increased 125.0% and 50.6%, respectively
since 1992, while the number of slot machines and tables in Central City have
declined 19.1% and 49.5%, respectively over the same period.
The information contained in this discussion of the Black Hawk/Central City
market was derived from publicly available data, except where stated otherwise.
See "Risk Factors -- Competition" and "Risk Factors -- Reliability of Market
Data."
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Marketing Strategy
We plan to attract customers to our casino by implementing marketing
strategies and promotions designed specifically for this market. In doing so, we
hope to create customer loyalty and benefit from repeat visits by our customers.
We intend to capitalize on our superior facilities. Specific marketing programs
to support this strategy include the Riviera Player's Club and "V.I.P." services
offered to repeat gaming customers. The Player's Club is a promotion that
rewards casino play and repeat visits to the casino with various privileges and
amenities such as cash bonuses, logo gift items and invitations to special
events, including free slot tournaments and parties. Riviera Holdings has used
the Player's Club promotion in its casino in Las Vegas and, in its capacity as
manager of the Riviera Black Hawk, will tailor it for the Black Hawk/Central
City market and implement it at our casino. "V.I.P." services will be available
to the highest level of players and will include special valet and self-parking
services, complimentary food and entertainment offerings and special events
specifically designed for this group of customers.
We believe that we will benefit from strong "walk-in" traffic due to the
proximity of our casino to the Colorado Central Station and the Isle of Capri
Casino. We intend to develop specific marketing programs designed to attract
these "walk-in" customers. We further intend to emphasize quality food and
beverage amenities with customer friendly service as a marketing tool. In
addition, we will provide entertainment programs designed to meet the tastes of
the Black Hawk/Central City market, such as live music performances by popular
regional and national groups.
We also intend to utilize proven database marketing techniques previously
implemented by Riviera Holdings at its casino in Las Vegas. Approximately two to
three months prior to opening, we expect to begin to solicit members for our
Players Club using direct mail advertising. Once our casino is opened to the
public, the database will be primarily derived from information supplied by the
Players Club, which will help us to identify our best customers by reference to
levels of play and frequency of visits. We plan to rely on database marketing in
order to best identify target customer segments of the population and to tailor
the casino's promotions and amenities to our core group of customers. We will
use the current database maintained by Riviera Hotel & Casino in Las Vegas to
identify and stratify slot players living in Colorado (approximately 7,000 slot
players have been identified) for appropriate incentives. We will establish a
bus program that will offer bus patrons incentives directed specifically to them
with an accelerated award program based on levels of play. In addition, we plan
to promote our casino by advertising in newspapers and on billboards in the
local areas.
Competition
We believe that the primary competitive factors in the market are casino
location, availability and convenience of parking, number of slot machines and
gaming tables, types and pricing of non-gaming amenities, name recognition and
overall atmosphere. We believe our casino will compete favorably with respect to
each of these factors.
See "Risk Factors" for a description of the competitive factors that could
impact our casino's financial performance.
Design and Construction Summary
We have assembled what we believe to be a qualified team to design and
construct the Riviera Black Hawk.
- The Weitz Company, Inc. has been retained as general contractor to
build the Riviera Black Hawk. Based on industry sources, Weitz is
ranked among the top 50 building contractors in the United States
based on total revenues from general building and is the fifth largest
contractor in the State of Colorado. Weitz has extensive experience
building in mountainous terrain, including projects in Vail, Colorado
and Keystone, Colorado.
- Melick Associates, Inc. has been retained as the architects for the
Riviera Black Hawk. Melick Associates has experience with casino
projects in mountainous terrain, including projects in Black Hawk,
Central City and Cripple Creek.
- John Franzoi, Riviera Operating Corporation's Vice President of
Construction, is managing project development and construction for the
Riviera Black Hawk. Mr. Franzoi has a State of Nevada general
contractors license and has over 30 years of experience in the
construction industry.
- Phillip Harris has been retained as our representative and
construction consultant for the Riviera Black Hawk project. Mr. Harris
is assisting Mr. Franzoi in monitoring the progress of the
construction of the Riviera Black Hawk. Mr. Harris is a construction
consultant with over 30 years construction experience, most recently
as Vice President and Operations Manager for GE Johnson Construction
Company.
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We have entered into a construction contract with Weitz. The construction
contract provides that Weitz and various subcontractors will construct the
Riviera Black Hawk, including site development, excavation and construction of
the casino and parking garage. For a description of the terms of the
construction contract, see "Material Agreements -- Construction Contract."
We have also entered into an architectural contract with Melick Associates
for the architectural design of our casino. The architectural contract covers
architectural and interior design and specifications. Melick Associates will
administer the construction contract and coordinate and integrate its work with
the design build subcontractors. For a description of the terms of our contract
with Melick Associates, see "Material Agreements -- Architectural Contract."
The scope of permits and approvals required for the construction of our
casino is extensive and includes state and local land use permits, excavation,
building and zoning permits, architectural approvals and approval of street and
traffic signals. To date, we have obtained all City of Black Hawk, State of
Colorado and federal permits required to construct our casino.
Management
Riviera Gaming Management of Colorado, Inc. (the "Manager"), which is our
direct corporate parent and an indirect, wholly-owned subsidiary of Riviera
Holdings, will manage the operations of our casino. We have entered into a
management contract for the provision of these management services, which is
described in greater detail under the section "Material Agreements -- Management
Agreement."
Intellectual Property
We have entered into a license agreement with Riviera Operating
Corporation, a subsidiary of Riviera Holdings, which permits us to use the
trademark "Riviera" and other trademarks and logos in connection with our casino
on a royalty free basis. The terms of this license agreement are summarized in
greater detail in the section "Material Agreements -- Intellectual Property
License Agreement."
Property
Our casino is being constructed on a 71,000 square foot (1.63 acres) parcel
of land in Black Hawk, Colorado, which we own. We have no other properties.
Employees
We anticipate that when the Riviera Black Hawk opens, it will have an
average of approximately 350 full-time equivalent employees, with the highest
number of employees expected during the summer season.
Legal Proceedings
We are not a party to any litigation.
Riviera Holdings Corporation
Riviera Holdings, through its wholly-owned subsidiaries, owns and operates
the Riviera Hotel & Casino located on the Las Vegas Strip. Opened in 1955, the
Riviera Hotel & Casino is situated on a 26-acre site located across the Strip
from Circus Circus and across Paradise Road from the Las Vegas Hilton and the
Las Vegas Convention Center.
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<PAGE>
GAMING AND LIQUOR REGULATORY MATTERS
Summary
In general we, Riviera Holdings, our principal executive officers and those
of Riviera Holdings, and any of our employees who will be involved in our gaming
operations, will be required to be licensed by the State of Colorado. Colorado
also requires that significant stockholders of Riviera Holdings be licensed or
certified as suitable for licensure. The licensure process involves the filling
out of a form proscribed by the Colorado Gaming Commission, an interview of the
prospective licensee and an investigation of such licensee to the extent the
Staff of the Colorado Gaming Commission deems necessary. We pay the
investigation costs. If any such officer, director or employee were found to be
unsuitable for licensure by the Colorado Gaming Commission, we would have to
replace such person. If the Colorado Gaming Commission objected to our licensure
or that of Riviera Holdings or its significant stockholders, we might be forced
to sell our interest in Riviera Black Hawk and pay off the notes to the extent
of the net sale proceeds. If the objection of the Colorado Gaming Commission
related to licensure or suitability for licensure of any of Riviera Holdings'
significant stockholders, Riviera Holdings might attempt to purchase or arrange
for the purchase of the Riviera Holdings shares owned by the stockholder to
which the Colorado Gaming Commission objected, but Riviera Holdings' ability to
make such purchase is limited and it is uncertain whether Riviera Holdings could
arrange for such stock repurchase. At present, we have no reason to believe that
we will have any problem with respect to licensure by Colorado. See "Risk
Factors -- Gaming Licenses, Permits and Approvals."
Background
Pursuant to an amendment to the Colorado Constitution (the "Colorado
Amendment"), limited stakes gaming became lawful in the cities of Central City,
Black Hawk and Cripple Creek on October 1, 1991. Limited stakes gaming means a
maximum single bet of five dollars on slot machines and in the card games of
blackjack and poker.
The Colorado Amendment, restricts limited stakes gaming to structures that
conform to the architectural styles and designs that were common to the areas
prior to World War 1, and which conform to the requirements of applicable city
ordinances regardless of the age of the structures. No more than 35% of the
square footage of any building and no more than 50% of any one floor of any
building may be used for limited stakes gaming. The Colorado Amendment also
prohibits limited stakes gaming between the hours of 2:00 a.m. and 8:00 a.m.,
and allows limited stakes gaming to occur in establishments licensed to sell
alcoholic beverages.
Further, the Colorado Amendment provides that, in addition to any other
applicable license fees, up to a maximum of 40% of the total amounts wagered
less payouts to players may be payable by a licensee for conducting limited
stakes gaming. Such percentage is to be established by the Colorado Commission
annually.
Regulatory Structure
The Colorado Amendment subjects the ownership and operation of limited
stakes gaming facilities in Colorado to extensive regulation by the Colorado
Commission and prohibits persons under the age of 21 from participating in
limited stakes gaming. No limited stakes gaming may be conducted in Colorado
unless all appropriate gaming licenses are approved by and obtained from the
Colorado Commission. The Colorado Commission has full and exclusive authority to
promulgate, and has promulgated, rules and regulations governing the licensing,
conducting and operating of limited stakes gaming (the "Colorado Regulations").
Such authority does not require any approval by or delegation of authority from
the Colorado Department of Revenue (the "Colorado Revenue Department"). The
Colorado Amendment also created the Colorado Division of Gaming (the "Division
of Gaming") within the Colorado Revenue Department to license, implement,
regulate and supervise the conduct of limited stakes gaming in Colorado, which
division is supervised and administered by the Director of the Division of
Gaming (the "Division Director").
Gaming Licenses
The Colorado Commission may issue: (1) slot machine or distributor, (2)
operator, (3) retail gaming, (4) support and (5) key employee gaming licenses.
The first three licenses require annual renewal by the Colorado Commission.
Support and key employee licenses are issued for two year periods and are
renewable by the Division Director. The Colorado Commission has broad discretion
to condition, suspend for up to six months, revoke, limit or restrict a license
at any time and also has the authority to impose fines.
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An applicant for a gaming license must complete comprehensive application
forms, pay required fees and provide all information required by the Colorado
Commission and the Division of Gaming. Prior to licensure, applicants must
satisfy the Colorado Commission that they are suitable for licensing. Applicants
have the burden of proving their qualifications and must pay the full cost of
any background investigations. There is no limit on the cost of such background
investigations.
Gaming employees must hold either a support or key employee license. Every
retail gaming licensee must have a key employee licensee in charge of all
limited stakes gaming activities when limited stakes gaming is being conducted.
The Colorado Commission may determine that a gaming employee is a key employee
and, require that such person apply for a key employee license.
A retail gaming license is required for all persons conducting limited
stakes gaming on their premises. In addition, an operator license is required
for all persons who engage in the business of placing and operating slot
machines on the premises of a retailer. However, a retailer is not required to
hold an operator license. No person may have an ownership interest in more than
three retail licenses. A slot machine manufacturer or distributor license is
required for all persons who manufacture, import or distribute slot machines in
Colorado.
The Colorado Amendment requires that every officer, director, and
stockholder of private corporations or equivalent office or ownership holders
for non-corporate applicants, and every officer, director or stockholder holding
either a 5% or greater interest or controlling interest of a publicly traded
corporation or owners of an applicant or licensee shall be a person of good
moral character and submit to a full background investigation conducted by the
Division of Gaming and the Colorado Commission. The Colorado Commission may
require any person having an interest in a license to undergo a full background
investigation and pay the cost of investigation in the same manner as an
applicant.
Persons found unsuitable by the Colorado Commission may be required
immediately to terminate any interest, association, or agreement with or
relationship to a licensee. A finding of unsuitability with respect to any
officer, director, employee, associate, lender or beneficial owner of a licensee
or applicant also may jeopardize the licensee's license or the applicant's
application. A license approval may be conditioned upon the termination of any
relationship with unsuitable persons.
Duties of Licensees
An applicant or licensee must report to the Division of Gaming or Colorado
Commission all leases not later than 30 days after the effective date of the
lease. Also, an applicant or a license, upon the request of the Colorado
Commission or the Division Director, must submit copies of all written gaming
contracts and summaries of all oral gaming contracts to which it is or intends
to become a party. The Division Director or the Colorado Commission may require
changes in the lease or gaming contract before an applicant is approved or
participation in such agreement is allowed or may require termination of the
lease or gaming contract.
The Colorado Amendment and the Colorado Regulations require licensees to
maintain detailed records that account for all business transactions. Records
must be furnished upon demand to the Colorado Commission, the Division of Gaming
and other law enforcement authorities. The Colorado Regulations also establish
extensive playing procedures and rules of play for poker, blackjack and slot
machines. Retail gaming licenses must adopt comprehensive internal control
procedures. Such procedures must be approved in advance by the Division of
Gaming and include the areas of accounting, surveillance, security, cashier
operations, key control and fill and drop procedures, among others. No gaming
devices may be used in limited stakes gaming without the approval of the
Division Director or the Colorado Commission.
Licensees have a continuing duty to immediately report to the Division of
Gaming the name, date of birth and social security number of all persons who
obtain an ownership, financial or equity interest in the licensee of 5% or
greater, who have the ability to control the licensee, who have the ability to
exercise significant influence over the licensee or who loan any money or other
thing of value to the licensee. Licensees must report to the Division of Gaming
all licenses, and all applications for licenses, in foreign jurisdictions.
With limited exceptions applicable to licensees that are publicly traded
entities, no person may sell, lease, purchase, convey or acquire any interest in
a retail gaming or operator license or business without the prior approval of
the Colorado Commission.
All agreements, contracts, leases, or arrangements in violation of the
Colorado Amendment or the Colorado Regulations are void and unenforceable.
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Taxes, Fees and Fines
The Colorado Amendment requires an annual tax of up to 40% on the total
amount wagered less all payouts to players. With respect to games of poker, the
tax is calculated based on the sums wagered which are retained by the licensee
as compensation. Effective July 1 of each year, the Colorado Commission
establishes the gaming tax for the following 12 months. Currently, the gaming
tax is: 2% on the first $2 million of these amounts; 4% on amounts from $2
million to $4 million; 14% on amounts from $4 million to $5 million; 18% on
amounts from $5 million to $10 million; and 20% on amounts over $10 million.
The Colorado Commission requires all gaming licensees to pay an annual
device fee for each slot machine, blackjack table and poker table of $75. The
municipality of Black Hawk assesses an annual device fee of $750 per device.
There is no statutory limit on state or city device fees, which may be increased
at the discretion of the Colorado Commission or the city. In addition, a
business improvement fee of as much as $102 per device and a transportation
authority device fee of $77 per device also may apply depending upon the
location of the licensed premises in Black Hawk. The current annual business
improvement fee is $89.04.
Black Hawk also imposes taxes and fees on other aspects of the businesses
of gaming licensees, such as parking, alcoholic beverage licenses and other
municipal taxes and fees. Significant increases in these fees and taxes, or the
imposition of new taxes and fees, may occur.
Violation of the Colorado Amendment constitutes a class 1 misdemeanor which
may subject the violator to fines or incarceration or both. A licensee who
violates the Colorado Amendment or Colorado Regulations is subject to suspension
of the license for a period of up to six months, fines or both, or to license
revocation.
Requirements for Publicly Traded Corporations
The Colorado Commission has enacted Rule 4.5, which imposes requirements on
publicly traded corporations holding gaming licenses in Colorado and on gaming
licenses owned directly or indirectly by a publicly traded corporation, whether
through a subsidiary or intermediary company. The term "publicly traded
corporation" includes corporations, firms, limited liability companies, trusts,
partnerships and other forms of business organizations even if created under the
laws of a foreign country. Such requirements shall automatically apply to any
ownership interest held by a publicly traded corporation, holding company or
intermediary company thereof, where such ownership interest directly or
indirectly is, or will be upon approval of the Colorado Commission, 5% or more
of the entire licensee. In any event, if the Colorado Commission determines that
a publicly traded corporation, or a subsidiary, intermediary company or holding
company has the actual ability to exercise influence over a licensee, regardless
of the percentage of ownership possessed by said entity, the Colorado Commission
may require that entity to comply with the disclosure regulations contained in
Rule 4.5.
Under Rule 4.5, gaming licensees, affiliated companies and controlling
persons commencing a public offering of voting securities must notify the
Colorado Commission within 10 days of the initial filing of a registration
statement with the Securities and Exchange Commission. Licensed publicly traded
corporations are also required to send proxy statements to the Division of
Gaming within 5 days after distribution of such statement. Licensees to whom
Rule 4.5 applies must include in their articles of organization or similar
charter documents provisions that: restrict the rights of the licensees to issue
voting interests or securities except in accordance with the Colorado Amendment
and the Colorado Regulations; limit the rights of persons to transfer voting
interests or securities of licensees except in accordance with the Colorado
Amendment and the Colorado Regulations; and provide that holders of voting
interests or securities of licensees found unsuitable by the Colorado Commission
may, within 60 days of such finding of unsuitability, be required to sell their
interests or securities back to the issuer at the lesser of the cash equivalent
of the holders' investment or the market price as of the date of the finding of
unsuitability. Alternatively, the holders may, within 60 days after the finding
of unsuitability, transfer the voting interests or securities to a suitable
person (as determined by the Colorado Commission). Until the voting interests or
securities are held by suitable persons, the issuer may not pay dividends or
interest, the securities may not be voted, they may not be included in the
voting or securities of the issuer, and the issuer may not pay any remuneration
in any form to the holders of the securities.
Pursuant to Rule 4.5, persons who acquire direct or indirect beneficial
ownership of (1) 5% or more of any class of voting securities of a publicly
traded corporation are required to include in its articles of organization the
Rule 4.5 charter language provisions or (2) 5% or more of the beneficial
interest in a gaming licensee directly or indirectly through any class of voting
securities of any holding company or intermediary company of a licensee (all
such persons hereinafter referred to as "qualifying
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persons"), shall notify the Division of Gaming within 10 days of such
acquisition, are required to submit all requested information and are subject to
a finding of suitability as required by the Division of Gaming or the Colorado
Commission. Licensees also must notify any qualifying persons of these
requirements. A qualifying person whose interest equals 10% or more must apply
to the Colorado Commission for a finding of suitability within 45 days after
acquiring such securities. Licensees must also notify any qualifying persons of
these requirements. Whether or not notified, qualifying persons are responsible
for complying with these requirements.
A qualifying person who is an institutional investor under Rule 4.5 and who
individually or in association with others, acquires, directly or indirectly,
the beneficial ownership of 15% or more of any class of voting securities must
apply to the Colorado Commission for a finding of suitability within 45 days
after acquiring such interests.
The Colorado Regulations also provide for exemption from the requirements
for a finding of suitability when the Colorado Commission finds such action to
be consistent with the purposes of the Colorado Amendment.
Pursuant to Rule 4.5, persons found unsuitable by the Colorado Commission
must be removed from any position as an officer, director, or employee of a
licensee, or from a holding or intermediary company. Such unsuitable persons
also are prohibited from any beneficial ownership of the voting securities of
any such entities. Licensees, or affiliated entities of licensees, are subject
to sanctions for paying dividends or distributions to persons found unsuitable
by the Colorado Commission, or for recognizing voting rights of, or paying a
salary or any remuneration for services to, unsuitable persons. Licensees or
their affiliated entities also may be sanctioned for failing to pursue efforts
to require unsuitable persons to relinquish their interest. The Colorado
Commission may determine that anyone with a material relationship to, or
material involvement with, a licensee or an affiliated company must apply for a
finding of suitability or must apply for a key employee or associated person
licensee.
Alcoholic Beverage Licenses
The sale of alcoholic beverages in gaming establishments is subject to
strict licensing, control and regulation by state and local authorities and
requires a liquor license. Alcoholic beverage licenses are revocable and
nontransferable. State and local licensing authorities have full power to limit,
condition, suspend for as long as six months or revoke any such licenses.
Violation of state alcoholic beverage laws may constitute a criminal offense
resulting in incarceration or fines or both.
There are various classes of retail liquor licenses which may be issued
under the Colorado Liquor Code. A gaming licensee may sell malt, vinous or
spirituous liquors only by the individual drink for consumption on the premises.
Even though a retail gaming licensee may be issued various classes of retail
liquor licenses, such gaming licensee may only hold liquor licenses of the same
class. An application for an alcoholic beverage license in Colorado requires
notice, posting and a public hearing before the local liquor licensing authority
prior to approval of the same. The Colorado Department of Revenue's Liquor
Enforcement Division must also approve the application.
Riviera Black Hawk Licenses
Currently, no gaming or liquor licenses in Colorado have been granted in
connection with the Riviera Black Hawk, although an application for a restaurant
liquor license has been approved by the local licensing authority and is in the
process of being forwarded to the State Liquor Enforcement Division for
approval. The application for a retail gaming license is pending. Applications
for key employee gaming licenses have also been made. Associated Person License
applications have been submitted for the officers and directors of Riviera
Holdings as well as some of the affiliated companies as required by the Division
Director. Additional gaming Associated Person, Key Employee and support license
applications will have to be made and approved prior to the opening of the
casino.
Before our casino can obtain the final approval of the Colorado Commission,
stockholders of Riviera Holdings who own more than 5% of its common stock must
be found "suitable" or have the person(s) with investment power over the
investment licensed as associated persons by the Colorado Commission. Three of
Riviera Holdings' largest stockholders have submitted (and one will submit)
information to the Colorado Commission for the purpose of establishing
suitability for licensing or are seeking to have the person(s) with investment
power over the investment licensed as associated persons in Colorado. Based upon
our discussions with the staff of the Colorado Commission, we are optimistic
such stockholders will not present a problem with the Colorado Commission. See
"Risk Factors -- Gaming Licenses, Permits and Approvals."
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MATERIAL AGREEMENTS
Construction Contract
We have entered into a construction contract for the construction of the
Riviera Black Hawk. The construction contract provides for the construction of a
casino, parking garage, associated site work and all floor coverings and food
service equipment at a price of $27.6 million, including a contingency allowance
of $0.5 million. The construction cost is fully supported by a payment and
performance bond obtained by the general contractor, Weitz, who is also required
to provide comprehensive public liability insurance, including contractual
liability coverage, in the amount of $2.0 million plus umbrella coverage in the
amount of $20.0 million. As required by the construction contract, we have
obtained builder's all risk insurance to insure against damage to the work in
place during construction. The price is subject to decrease if cost savings can
be achieved during construction, and is subject to material increase if: (1)
there are changes to the plans and specifications; (2) work is delayed due to
actions of the owner; or (3) "force majeure" events occur during construction.
Offsite improvements, permit fees and the cost of independent testing,
furnishings and finish work, and similar items, are excluded from the
construction contract and will be completed by us under separate contracts.
Work under the construction contract has commenced, and approximately $14.9
million, or 54% of the total budget, had been expended as of June 30, 1999. The
construction contract provides for substantial completion of the casino project
on or before January 15, 2000, subject to extensions due to adverse weather,
acts of God, or other causes outside of the general contractor's control as
provided in the construction contract. To discourage delays, liquidated damages
will be payable by the general contractor for each day that substantial
completion is delayed past the scheduled substantial completion date (as it may
be extended under the construction contract), as follows: (1) no penalties if
the casino project is substantially completed on or before January 31, 2000; (2)
$10,000 per day for each day from February 1, 2000, through February 15, 2000,
that the casino project is not substantially completed after January 31, 2000;
and (3) an additional $15,000 for each day from February 15, 2000, through March
31, 2000, that the casino project is not substantially completed. In addition,
to encourage early completion of the casino, incentive fees will be payable to
the general contractor. Specifically, the construction contract provides: (1) if
Weitz achieves substantial completion of the project on or after December 29,
1999, but prior to January 4, 2000, Weitz's lump sum fee shall be increased by
$10,000 for each day that the project is substantially complete prior to January
4, 2000; and (2) if Weitz achieves substantial completion of the project any
time before December 29, 1999, Weitz's lump sum fee shall be increased by
$15,000 for each day the project is substantially complete prior to December 29,
1999, and $10,000 for each day the project is substantially complete between
December 29, 1999, and January 4, 2000.
Architectural Contract
We have entered into an architectural contract with Melick Associates for
the provision of architectural and interior design and specifications for the
casino project at a fee of approximately $1.0 million. Pursuant to the
architectural contract, the architect will also provide structural and
engineering, food service design, water proofing consultants, elevator/escalator
consultants and landscape design. However, the architect is not responsible for
the work of independent electrical and mechanical design build subcontractors.
The architect will administer the construction contract and coordinate its work
with the construction subcontractors. The architect has provided professional
liability insurance in the amount of $1.0 million per occurrence, $2.0 million
aggregate with a $10,000 deductible, and damages under the architectural
contract have been limited to the amount of $1.0 million.
Management Agreement
We have entered into a management agreement with Riviera Gaming Management
of Colorado, Inc.(the "Manager") which will end after the tenth full year
audited financial statements are available after the opening of our casino. The
Manager will have the option of extending the term for up to four additional
terms of five years each by giving 180 days written notice.
The Manager will manage the Riviera Black Hawk in a manner reasonably
consistent with the standards and procedures exercised by other casino operators
in Black Hawk, Colorado. The Manager will supervise the hiring of all personnel
employed at the casino, who will be the employees of Riviera Black Hawk.
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The Manager, at its expense, will supply the level of its own staffing that is
required to carry out the supervision of a full complement of executives
employed and paid by the Riviera Black Hawk.
The Manager may provide goods and services, including centralized computer
systems, service bureau payroll/personnel systems, advertising agency services,
centralized purchasing, licensed promotions, trademarks, service marks, legal
services and other similar services on a competitive price/fee basis.
The management fees will consist of a revenue fee and a performance fee.
The revenue fee will be based on 1% of net revenues (gross revenues less food
and beverage services furnished without charge to customers, but the retail
value of which is included in revenue and is then deducted as promotional
allowances) and is payable quarterly in arrears. The performance fee will be
based on the following percentages of EBITDA (earnings before interest, taxes,
depreciation and amortization, whose components are based on generally accepted
accounting principles): (1) 10% of EBITDA from $5 million to $10 million, (2)
15% of EBITDA from $10 million to $15 million and (3) 20% of EBITDA in excess of
$15 million. The performance fee will be paid based on the preceding quarter's
EBITDA in quarterly installments subject to year-end adjustment.
If there is any default under the management agreement, the Manager will
not be entitled to receive management fees, but the Manager will still be
entitled to payment for inter-company goods and services.
Intellectual Property License Agreement
We have entered into a royalty-free license agreement with Riviera
Operating Corporation, a subsidiary of Riviera Holdings, for the licensing of
the "Riviera" and other trademarks and trade names. The licensing agreement
terminates at the same time as the management agreement or earlier upon a change
in control of the Manager and, in either case, may be extended by the trustee up
to six months thereafter upon foreclosure of the notes.
Tax Sharing Agreement
Riviera Holdings is the parent of a group of companies which includes
ourselves (the "RHC Group") and files consolidated federal income returns.
Pursuant to the tax sharing agreement, we pay Riviera Holdings an amount equal
to our "separate tax liability." Our separate tax liability is that amount of
federal income tax that we would owe if we were to file a tax return independent
of the RHC Group. If the calculation of our separate tax liability for any year
results in a net operating loss, Riviera Holdings will credit the amount of such
loss against any amount which we might otherwise have to pay to Riviera Holdings
in any future tax year, provided that we remain a part of the RHC Group. Our
obligation to make tax payments pursuant to the tax sharing agreement continues
regardless of whether there has been a default in the payment of the notes.
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MANAGEMENT
Executive Officers and Directors of the Company
Set forth below are the names, ages and position of each of our officers
and directors as of the date of this prospectus:
Name Age Position
William L. Westerman.... 67 Chairman of the Board of Directors and
Chief Executive Officer
Ronald P. Johnson....... 50 President and Director of the Company
Duane R. Krohn.......... 53 Chief Financial Officer, Secretary, Treasurer
and Director of the Company
The following information summarizes the business experience during at
least the past five years of each of our directors and executives:
William L. Westerman is our Chairman of the Board of Directors and Chief
Executive Officer and has held those positions since August 18, 1997. Mr.
Westerman has been the Chairman of the Board and Chief Executive Officer of
Riviera Holdings since February 1993. Mr. Westerman was a consultant to Riviera,
Inc., from July 1, 1991, until he was appointed Chairman of the Board and Chief
Executive Officer of Riviera, Inc., on January 1, 1992. From 1973 to June 30,
1991, Mr. Westerman was President and Chief Executive Officer of Cellu-Craft
Inc., a manufacturer of flexible packaging primarily for food products.
Alusuisse, a multi-national aluminum and chemical company, acquired Cellu-Craft
on June 30, 1989. On January 1, 1990, Mr. Westerman was appointed President of
Alusuisse Flexible Packaging (Alusuisse's wholly-owned U.S. subsidiary engaged
in the manufacture of flexible packaging for food and pharmaceutical products).
Additionally, Mr. Westerman was named a member of the team responsible for all
of Alusuisse's multi-national packaging operations with annual sales volume in
excess of $1 billion. Mr. Westerman resigned from all his positions with
Alusuisse on June 30, 1991. Mr. Westerman has undergraduate and graduate degrees
in engineering from Lehigh University and from the University of Ohio,
respectively.
Ronald P. Johnson is our President and a Director and has held those
positions since February 1999. Mr. Johnson became Vice President of Gaming
Operations of Riviera Operating Corporation in September 1994, and Executive
Vice President of Gaming Operations of Riviera Operating Corporation on July 1,
1998. Mr. Johnson became Director of Slots of Riviera Operating Corporation on
June 30, 1993, and was elected Vice President of Slot Operations and Marketing
on April 26, 1994. Mr. Johnson was Vice President -- Slot Operations and
Marketing of Riviera, Inc., from April 1991 until June 30, 1993. Prior to
joining Riviera, Inc., Mr. Johnson held slot management positions with Sands
Hotel & Casino (1989-1991) and Bally's Grand Las Vegas (1986-1989). In addition
to over 12 years of experience in casino operations, Mr. Johnson has 10 years of
experience, serving from 1976 to 1986, in various financial marketing and
administrative management positions in the slot manufacturing industry with
Bally Distributing, Co., International Game Technology and J&T, Inc.
Duane R. Krohn, CPA, is our Chief Financial Officer, Secretary, Treasurer
and a Director and has held those positions since February 1999. Mr. Krohn
assumed the position of Treasurer of Riviera Holdings and Riviera Operating
Corporation on June 30, 1993, and was elected Vice President of Finance of
Riviera Operating Corporation on April 26, 1994, and Executive Vice President of
Finance of Riviera Operating Corporation on July 1, 1998. Mr. Krohn was
initially employed by Riviera, Inc., in April 1990, as Director of Corporate
Finance and served as Vice President -- Finance from March 1992 to June 30,
1993. Mr. Krohn served as Chief Financial Officer of Imperial Palace, Inc.(a
casino/hotel operator in Las Vegas) from February 1987 to March 1990. Prior to
1987, Mr. Krohn was Chief Financial Officer of the Mint and the Dunes in Las
Vegas, Nevada, and Bally's Park Place in Atlantic City, New Jersey.
Management of the Riviera Black Hawk
We have entered into a management agreement with Riviera Gaming Management
of Colorado, Inc.(the "Manager"), under which the Manager will manage the daily
operations of Riviera Black Hawk. The Manager has hired Thomas Guth and James
Davey as the General Manager and Director of Slot Operations for Riviera Black
Hawk.
In addition, we have successfully recruited four other key executives for
the positions of Director of Finance, Director of Training and Compliance,
Facilities Director and Director of Security and Surveillance. Current
management represents a blend of seasoned management experience from both the
Black Hawk/Central City and Las Vegas markets. The following is a brief summary
of the business experience of Thomas Guth and James Davey:
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Mr. Guth is our general manager. Under a letter agreement, dated January
15, 1999, Mr. Guth will be in charge of coordinating pre-opening functions and
will be the senior manager on site after the casino opens. Mr. Guth has over 20
years of casino marketing and casino operations experience. Mr. Guth most
recently was Director of Corporate Special Event Marketing for the Boyd Group
from September 1998 to March 1999. From July 1992 to May 1998, Mr. Guth was Vice
President, Director of Marketing for the Aladdin Hotel & Casino. From 1989 to
1992, Mr. Guth was Director of Special Events/Casino Programs for the Riviera
Hotel & Casino. Mr. Guth also has 11 years of experience in casino operations
with the Sahara Tahoe, Golden Nugget and Harrah's casinos.
James Davey is our director of slot operations and reports to Mr. Guth.
Under a letter agreement, dated January 9, 1999. Mr. Davey will be in charge of
gaming operations. Mr. Davey has over 19 years of experience in slot operations
management, having served in various management positions with the Tropicana,
Imperial Palace, the Riviera Hotel & Casino and the Four Queens in Las Vegas,
Nevada and the Splash casino in Tunica, Mississippi.
Neither of such agreements has a fixed term. Both Messrs. Guth and Davey
have been reimbursed for their relocation expenses and will participate in our
life insurance, medical, 401(K) and profit-sharing employee benefit plans at our
cost.
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PRINCIPAL STOCKHOLDERS
We are an indirect wholly-owned subsidiary of Riviera Holdings. The common
stock of Riviera Holdings is traded on the American Stock Exchange. The table
below sets forth information regarding the beneficial ownership of the common
stock of Riviera Holdings as of June 30, 1999, by (1) each person who, to our
knowledge, beneficially owns more than 5% of such common stock, (2) the
directors and executive officers of our company and (3) all directors and
executive officers of Riviera Holdings and its subsidiary, Riviera Operating
Corporation. Each person listed below has sole voting and investment power for
the shares set forth opposite that person's name unless otherwise indicated.
Shares Beneficially Owned+
Name Number Percentage
- ---- ------------- ------------
William L. Westerman(1)(2)................. 504,200 9.5%
Ronald P. Johnson(1)(3).................... 47,750 *
Duane R. Krohn(1)(4)....................... 39,750 *
Robert Vannucci(1)(5)....................... 26,918 *
Jerome P. Grippe(1)(6)..................... 24,668 *
Robert R. Barengo(1)(7).................... 9,380 *
Richard L. Barovick(1)..................... 10,000 *
James N. Land, Jr.(1)...................... 1,500 *
Keyport Life Insurance Co.(8)............... 857,160 16.9
SunAmerica Life Insurance Company(9)........ 756,920 14.9
Morgens Entities:(10)
Betje Partners............................ 29,360 0.6
Morgens Waterfall Income Partners......... 43,920 0.9
Phoenix Partners, L.P..................... 79,440 1.6
Restart Partners, L.P..................... 177,997 3.5
Restart Partners II, L.P.................. 374,374 7.4
Restart Partners III, L.P................. 298,600 5.9
Endowment Restart LLC..................... 261,109 5.2
-------- ----
Total Morgens Entities................. 1,264,800 25.0
James D. Bennett(11)....................... 497,065 9.8
Allen E. Paulson(12)....................... 463,655 9.1
All executive officers and directors as a group
(11 persons)(2)(3)(4)(5)(6)(7).............. 721,563 13.4
- ----------
+ Based on the number of outstanding shares of Riviera Holdings' common stock on
April 30, 1999 and the shares beneficially owned by such persons on June 30,
1999.
* Less than 1%.
(1) The address for each director and officer of our Company or Riviera
Holdings is c/o Riviera Holdings Corporation, 2901 Las Vegas Boulevard
South, Las Vegas, Nevada 89109.
(2) Includes 240,000 shares which may be acquired within 60 days of April 30,
1999, upon the exercise of outstanding options.
(3) Includes 12,750 shares which may be acquired within 60 days of April 30,
1999, upon the exercise of outstanding options.
(4) Includes 12,750 shares which may be acquired within 60 days of April 30,
1999, upon the exercise of outstanding options.
(5) Includes 12,750 shares which may be acquired within 60 days of April 30,
1999, upon the exercise of outstanding options.
(6) Includes 10,500 shares which may be acquired within 60 days of April 30,
1999, upon the exercise of outstanding options.
(7) Includes 2,400 shares which may be acquired within 60 days of April 30,
1999, upon the exercise of outstanding options.
(8) The address for Keyport Life Insurance Company is 125 High Street, Boston,
Massachusetts 02110. Stein Roe, an affiliate of Keyport, is Keyport's
investment advisor, and, as such, has the power and authority to direct the
disposition of the securities, and accordingly, could be deemed to be a
"beneficial" owner within the meaning of Rule 13d-3 of the Exchange Act.
Stein Roe, however, disclaims actual beneficial ownership of such
securities.
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(9) The address for SunAmerica Life Insurance Company is One Sun America
Center, Century City, California 90067.
(10) The address of Morgens Waterfall is 10 East 50th Street, New York, New York
10022. Morgens Waterfall or its principals are either investment advisors
to, or trustees or general partners of, the eight entities listed in the
above table ("Morgens Entities") that are the owners of common stock of
Riviera Holdings. Morgens Waterfall or its principals have the power and
authority to direct this disposition of these securities and, accordingly,
could be deemed to be "beneficial" owners within the meaning of Rule 13d-3
of the Exchange Act. Each of Morgens Waterfall, its principals and the
Morgens Entities, however, disclaims beneficial ownership with respect to
any securities not actually beneficially owned by it.
(11) Includes (a) 323,003 shares held by Restructuring Capital Associates, L.P.
and Bennett Restructuring Fund, L.P. and (b) 161,262 shares held by Benett
Offshore Restructuring Fund, Inc. The address for Mr. Bennett is c/o
Restructuring Capital Associates, L.P. is 450 Park Avenue, New York, New
York 10022.
(12) The address for Mr. Paulson is Del Mar Country Club, 6001 Clubhouse Drive,
Rancho Santa Fe, California 92067.
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RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to the sale of the existing notes, Riviera Holdings had contributed
$30.1 million to us for (1) the purchase of the land on which the Riviera Black
Hawk is being constructed and (2) for construction costs under the construction
contract. Of the $30.1 million, Riviera Holdings has advanced $20.0 million in
cash equity contributions (excluding capitalized interest) and the remaining
$10.1 million was reimbursed to Riviera Holdings from the proceeds of the sale
of the existing notes.
We have entered into a management agreement with Riviera Gaming Management
of Colorado, Inc. Under this agreement, Riviera Gaming Management of Colorado,
Inc. will manage the operations of our casino. The terms of the management
agreement are described in the section "Material Agreements -- Management
Agreement."
We have entered into a license agreement with Riviera Operating
Corporation, a subsidiary of Riviera Holdings. Under this agreement, we have the
right to use the "Riviera" name and other trademarks, copyrights and trade names
in connection with our casino. The terms of the license agreement are described
in the section "Material Agreements -- Intellectual Property License Agreement."
We have entered into a tax sharing agreement with Riviera Holdings. Under
this agreement, Riviera Holdings will file consolidated federal income tax
returns for us as part of a group of companies and we have agreed to pay Riviera
Holdings for our portion of the group's tax liability. The terms of the tax
sharing agreement are described in the section "Material Agreements -- Tax
Sharing Agreement."
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DESCRIPTION OF NOTES
We issued $45.0 million 13% First Mortgage Notes due 2005 With Contingent
Interest under an indenture with IBJ Whitehall Bank & Trust Company, as trustee.
The terms of the indenture apply to the existing notes and to the exchange notes
(the existing notes and the exchange notes being collectively referred to in
this section as the "notes"). The terms of the notes include those stated in the
indenture and those made part of the indenture by reference to the Trust
Indenture Act of 1939. The notes are secured obligations. The collateral
documents referred to under the caption "Security" define the terms of the
collateral that will secure the notes.
The following description is a summary of the selected provisions of the
indenture, the registration rights agreement and the collateral documents which
are deemed to be important to you. It does not restate any of those agreements
in their entirety. We urge you to read such documents because they, and not this
description, define your rights as holders of the notes. Copies of such
documents are available as set forth below under the caption "-- Additional
Information." See "The Exchange Notes" for a summary of the major note terms.
Principal, Maturity and Interest
The notes issued in this offering and any additional notes subsequently
issued under the indenture will be treated as a single class for all purposes
under the indenture, including, without limitation, waivers, amendments,
redemptions and offers to purchase. We will issue notes in denominations of
$1,000 and integral multiples of $1,000.
The notes will mature on May 1, 2005. Fixed interest on the notes will
accrue at the rate of 13% per annum and will be payable semi-annually in arrears
on May 1 and November 1, commencing on November 1, 1999. We will make each fixed
interest payment to the holders of record on the immediately preceding April 15
and October 15. Fixed interest will accrue from the date of original issuance,
or be computed on the basis of a 360-day year comprised of twelve 30-day months.
The notes will bear contingent interest after we begin operating.
Installments of accrued contingent interest will be payable semi-annually in
arrears on each interest payment date to the holders on the record date
applicable to the relevant interest payment date, unless all or a portion of the
installment is permitted to be deferred. We may defer payment of contingent
interest otherwise due and may continue to defer the payment of any installment
of contingent interest which has already been deferred if, and only to the
extent that: (1) the payment of that portion of contingent interest will cause
our adjusted fixed charge coverage ratio for the four consecutive fiscal
quarters ending immediately prior to the applicable record date to be less than
1.5 to 1.0 on a pro forma basis after giving effect to the assumed payment of
the contingent interest; and (2) the principal amount of the notes corresponding
to that contingent interest has not then matured and become due and payable,
whether at stated maturity, upon acceleration, upon redemption, upon maturity of
repurchase obligation or otherwise.
Contingent interest that is deferred will become due and payable upon the
earlier of: (1) the next succeeding interest payment date on which all or a
portion of that contingent interest is not permitted to be deferred; and (2) the
maturity of the corresponding principal amount of the notes, whether at stated
maturity, upon acceleration, upon redemption, upon maturity of repurchase
obligation or otherwise.
The amount of contingent interest payable for any period will be reduced
pro rata for reductions in the outstanding principal amount of the notes prior
to the immediately preceding record date. No interest will accrue on any
contingent interest that is deferred and which does not become due and payable.
Each installment of contingent interest will be calculated to accrue: (1)
from, but not including, the most recent semiannual period for which contingent
interest has been paid or through which contingent interest had been calculated
and deferred; or (2) if no installment of contingent interest has been paid or
deferred, from and including the date on which we become operating; to, and
including, the earlier of: (a) the last day of the semiannual period immediately
following the semiannual period referred to in clause (1) above if the
corresponding principal amount of the notes has not become due and payable; or
(b) the date of payment if the corresponding principal amount of the notes has
become due and payable, whether at stated maturity, upon acceleration, upon
redemption, upon maturity of repurchase obligation or otherwise.
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Contingent interest will accrue daily on the principal amount of each note
outstanding: (1) for any portion of an accrual period which consists of all or
part of a semiannual period that ends during such accrual period, 1/180 of the
contingent interest with respect to such principal amount for such semiannual
period until fully accrued; and (2) for any other portion of an accrual period,
1/180 of the contingent interest with respect to such principal amount for the
semiannual period that began and last ended after the date on which we began
operating.
Methods of Receiving Payments on the Notes
If a holder has given wire transfer instructions to us, we will pay all
principal, interest, premium and liquidated damages, if any, on that holder's
notes in accordance with those instructions. All other payments on notes will be
made at the office or agency of the Paying Agent and Registrar within the City
and State of New York unless we elect to make interest payments by check mailed
to the holders at their addresses set forth in the register of holders.
Paying Agent and Registrar for the Notes
The trustee will initially act as paying agent and registrar. We may change
the paying agent or registrar without prior notice to the holders, and we may
act as paying agent or registrar.
Transfer and Exchange
A holder may transfer or exchange notes in accordance with the indenture.
We are not required to transfer or exchange any note selected for redemption.
Also, we are not required to transfer or exchange any note for a period of 15
days before a selection of notes to be redeemed.
Security
The notes are secured by a first priority lien on the collateral which,
subject to permitted liens, includes: (1) all funds and securities in the
construction disbursement account, the construction reserve account and the
interest reserve account; (2) all of the real property comprising the Riviera
Black Hawk; (3) all furniture, fixtures and equipment which are part of the
Riviera Black Hawk, other than furniture, fixtures and equipment acquired,
leased or refinanced through FF&E financing; (4) to the extent permitted by law,
the construction contract, the architect agreement, the completion capital
commitment, the keep-well agreement, the license agreement, the management
agreement and certain other agreements entered into us in connection with the
development, construction, ownership and operation of the Riviera Black Hawk;
(5) all licenses and permits relating to the Riviera Black Hawk, other than any
gaming license or liquor license; and (6) all of our accounts receivable,
general intangibles, inventory and other personal property, other than assets of
our future unrestricted subsidiaries.
The indenture contains a requirement that, after we are designated as a
restricted subsidiary (as that term is defined in the Riviera Holdings
Indenture) of Riviera Holdings, the stock of all our then current and future
subsidiaries and the assets of our current and future restricted subsidiaries
must be pledged to secure the debt evidenced by the Riviera Holdings indenture.
The security interests may be subordinate to mechanics' liens which may
have priority over the security interest on the real property comprising the
Riviera Black Hawk, including all additions, improvements and components related
to it. We have obtained title insurance on the property in favor of the trustee
which will insure against losses from the enforcement of mechanics' liens.
If an event of default occurs, the trustee may, in addition to any rights
and remedies available to it under the indenture and the collateral documents,
take such action as it deems advisable to protect and enforce its rights in the
collateral, including the institution of sale or foreclosure proceedings. The
proceeds received by the trustee from any sale or foreclosure will be applied
first to pay the expenses of the sale or foreclosure and fees or any other
amounts then payable to the trustee under the indenture, and thereafter to pay
amounts due and payable with respect to the notes.
The proceeds of any sale of collateral pursuant to the indenture and the
collateral documents following an event of default may not be sufficient to
satisfy payments due on the notes. In addition, the ability of the holders to
realize upon the collateral may be limited pursuant to gaming, bankruptcy and
other laws, all as described below.
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Gaming Law Limitations on Foreclosure
The trustee's ability to foreclose upon the collateral will be limited by
relevant Colorado gaming laws. Therefore, the practical value of realizing on
the collateral may, without the appropriate Colorado gaming approvals, be
limited.
Bankruptcy Limitations on Foreclosure
The right of the trustee to repossess and dispose of collateral upon the
occurrence of an event of default is likely to be significantly impaired by
applicable bankruptcy law if a bankruptcy proceeding were to be commenced by or
us prior to the trustee having repossessed and disposed of the collateral. Under
the Bankruptcy Code, a secured creditor such as the trustee is prohibited from
repossessing its security from a debtor in a bankruptcy case, or from disposing
of security repossessed from such debtor, without bankruptcy court approval. In
addition, the Bankruptcy Code permits the debtor to continue to retain and to
use collateral (and the proceeds, products, offspring, rents or profits of such
collateral) even though the debtor is in default under the applicable debt
instruments, provided that the secured creditor is given "adequate protection."
The meaning of the term "adequate protection" may vary according to
circumstances, but it is intended in general to protect the value of the secured
creditor's interest in the collateral and may include, if approved by the
bankruptcy court, cash payments or the granting of additional security for any
diminution in the value of the collateral as a result of the stay of
repossession or the disposition or any use of the collateral by the debtor
during the pendency of the bankruptcy case. The bankruptcy court has broad
discretionary powers in all these matters, including the valuation of the
collateral or any other collateral that may be substituted for it. In addition,
since the enforcement of the lien of the trustee in the collateral consisting of
cash, deposit accounts and cash equivalents may be limited in a bankruptcy
proceeding, the holders may not have any consent rights with respect to the use
of those funds by us during the pendency of the proceeding. In view of these
considerations, it is impossible to predict how long payments under the notes
could be delayed following commencement of a bankruptcy case, whether or when
the trustee could repossess or dispose of the collateral or whether or to what
extent holders would be compensated for any delay in payment or loss of value of
the collateral.
Completion Capital Commitment
Riviera Holdings has entered into a completion capital commitment in favor
of the trustee for the benefit of the holders providing that if: (1) there are
insufficient available funds (as defined in the indenture) to complete the
development, construction, equipping and opening of the Riviera Black Hawk so
that it is operating by May 31, 2000; (2) we have provided the trustee and the
independent construction consultant with a written notice that it is unlikely
that there will be sufficient available funds to complete the development,
construction, equipping and opening of the Riviera Black Hawk so that it is
operating by May 31, 2000; or (3) (a) the independent construction consultant
has provided the trustee and us with a written notice that it is unlikely that
there will be sufficient available funds (excluding any additional revenues (as
defined in the indenture)) to complete the development, construction, equipping
and opening of the Riviera Black Hawk so that it is operating by May 31, 2000
and (b) within 10 days of our receiving the notice, we have not provided
evidence satisfactory to the independent construction consultant that there will
be sufficient additional funds (including any additional revenues) to complete
the development, construction, equipping and opening of the Riviera Black Hawk
so that it is operating by May 31, 2000; then Riviera Holdings will pay into the
construction disbursement account cash in the amounts and at such times as
determined by the independent construction consultant to be necessary to remedy
the event; provided that the maximum aggregate amount of all such payments is
$10.0 million. The independent construction consultant will set forth in a
written notice to us its determination of the amounts required to be contributed
and the basis of its determination. In addition, if the Riviera Black Hawk is
not operating by May 31, 2000, Riviera Holdings will pay $10.0 million, less any
amounts paid into the construction disbursement account pursuant to the
provisions of the previous paragraph, in cash into the construction disbursement
account. Furthermore, Riviera Holdings will be required to pay $10.0 million,
less any amounts paid into the construction disbursement account pursuant to the
provisions of the previous paragraph, in cash into the construction disbursement
account upon (1) the commencement of a voluntary bankruptcy case by us on or
prior to May 31, 2000, (2) the commencement of an involuntary bankruptcy case
against us which is not dismissed, bonded or discharged on or prior to the
earlier of (A) 60 days after the commencement and (B) May 31, 2000, or (3) the
entry of an order for relief against us on or prior to May 31, 2000, under any
bankruptcy law in effect at any time. Riviera Holdings will not assert any
defenses or setoffs to the payment of those amounts.
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Deposit Account Agreement
Pursuant to a deposit account agreement, dated as of June 3, 1999, among
Bank of America as deposit bank, Riviera Holdings and First American Title
Insurance Company, Riviera Holdings has deposited $5.0 million to insure First
American against mechanics lien claims against our Black Hawk property. If no
mechanics liens are outstanding 30 days after our casino opens, such $5.0
million deposit will be returned to Riviera Holdings.
Keep-Well Agreement
Riviera Holdings has entered into a keep-well agreement in favor of the
trustee for the benefit of the holders. The keep-well agreement provides that:
(1) if, at any time prior to the end of the fourth operating period (as defined
therein), (a) there are not sufficient funds in the interest reserve account to
make a payment of fixed interest on the notes and (b) we do not have sufficient
funds to make the payment of fixed interest, Riviera Holdings will contribute
cash to us in an amount necessary to enable us to make such payment; provided
that the amount of any such contribution will be deducted from the amounts that
Riviera Holdings is required to contribute to us pursuant to clause (2) below
until the total amount of such contributions are deducted; and (2) if our
consolidated cash flow for an operating period is less than the $9.0 million
target consolidated cash flow for such period, Riviera Holdings will contribute
cash to us in an amount equal to the difference; provided that the amount
contributed with respect to any operating period pursuant to clauses (1) and (2)
above will not exceed the contribution limitation and the amounts contributed
with respect to all operating periods will not exceed $10.0 million in the
aggregate. "Contribution limitation" means the product of (1) $1.25 million and
(2) the number of fiscal quarters of Riviera Holdings contained in the relevant
operating period.
Optional Redemption
At any time prior to May 1, 2001, we may redeem up to 35% of the aggregate
principal amount of notes issued under the indenture at a redemption price of
113% of the principal amount thereof, plus accrued and unpaid interest and
liquidated damages, if any, to the redemption date, with the net cash proceeds
of a qualified public offering (as defined in the indenture); provided that: (1)
at least 65% of the aggregate principal amount of notes issued under the
indenture remains outstanding immediately after the occurrence of such
redemption (excluding notes held by us); and (2) the redemption must occur
within 45 days of the date of the closing of such qualified public offering.
On or after May 1, 2002, we may redeem all or a part of the notes upon not
less than 30 nor more than 60 days' notice, at the following redemption prices
(expressed as percentages of principal amount) plus accrued and unpaid interest
and liquidated damages, if any, thereon, to the applicable redemption date: if
redeemed during the twelve-month period beginning on May 1 2002 - 106.5%, the
twelve-month period beginning on May 1, 2003 - 103.25% and at any time after May
1, 2004-100%.
Gaming Redemption
If any gaming authority requires a holder or beneficial owner of notes to
be licensed, qualified or found suitable under any applicable gaming law and
such holder or beneficial owner fails to apply for a license, qualification or
finding of suitability within 30 days after being requested to do so (or such
lesser period as required by the gaming authority), or if such holder or
beneficial owner is notified by a gaming authority that it will not be licensed,
qualified or found suitable, we will have the right, at our option, to: (1)
require the holder or beneficial owner to dispose of such holder's or beneficial
owner's notes within 30 days (or such lesser period as required by the gaming
authority) of: (a) the termination of the period described above for the holder
or beneficial owner to apply for a license, qualification or finding of
suitability; or (b) receipt of the notice from the gaming authority that the
holder or beneficial owner will not be licensed, qualified or found suitable by
the gaming authority; or (2) redeem the notes of the holder or beneficial owner
at a redemption price equal to the lesser of the principal amount thereof or the
price at which the holder or beneficial owner acquired the notes, together with,
in either case, accrued and unpaid interest and liquidated damages, if any,
thereon to the earlier of the date of redemption or such earlier date as is
required by the gaming authority or the date of the finding of unsuitability by
the gaming authority, which may be less than 30 days following the notice of
redemption, if so ordered by the gaming authority. Immediately upon a
determination by a gaming authority that a holder or beneficial owner of notes
will not be licensed, qualified or found suitable, the holder or beneficial
owner will not have any further rights with respect to the notes to: (1)
exercise, directly or indirectly, through any person, any right conferred by the
notes; and (2) receive any interest or any other distribution or payment with
respect to the notes, or any remuneration in any form from us for services
rendered or otherwise, except the redemption price of the notes.
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We are not required to pay or reimburse any holder or beneficial owner of
notes who is required to apply for such license, qualification or finding of
suitability for the costs relating thereto. Those expenses will be the
obligation of the holder or beneficial owner.
Mandatory Redemption
We are not required to make mandatory redemption or sinking fund payments
with respect to the notes.
Repurchase at the Option of Holders
Change of Control
If a change of control occurs, each holder will have the right to require
us to repurchase all or any part (equal to $1,000 or an integral multiple
thereof) of that holder's notes pursuant to a change of control offer on the
terms set forth in the indenture. In the change of control offer, we will offer
a change of control payment in cash equal to 101% of the aggregate principal
amount of notes repurchased plus accrued and unpaid interest and liquidated
damages, if any, thereon, to the date of purchase. We must comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the notes as a result of a
change of control.
Change of control includes the direct or indirect sale, lease, transfer,
conveyance or other disposition of "all or substantially all" of our properties
or assets. Although there is a limited body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a holder of notes to require
us to repurchase such notes as a result of a sale, lease, transfer, conveyance
or other disposition of less than all of our assets may be uncertain. Change of
control also includes the consummation of any transaction the result of which is
that any person other than one or more of our existing significant stockholders
(Morgens Entities named in this prospectus, Sun America Life Insurance Company
and Keyport Life Insurance Company) and any of their affiliates, becomes the
beneficial owner, directly or indirectly, of (a) more than 35% of the
outstanding voting stock of the Riviera Holdings and (b) a greater percentage of
the outstanding voting stock of Riviera Holdings than is beneficially owned by
the existing significant holder holding the largest such percentage.
Asset Sales
We will not consummate an asset sale unless: (1) the Riviera Black Hawk is
operating; (2) we receive consideration at the time of such Asset Sale at least
equal to the fair market value of the assets or equity interests issued or sold
or otherwise disposed of; (3) such fair market value is determined by our board
and evidenced by a resolution of the board set forth in an officers' certificate
delivered to the trustee; and (4) at least 80% of the consideration therefor
received by us in the form of cash or cash equivalents which will include (a)
any liabilities (as shown on our most recent balance sheet, other than
contingent liabilities and liabilities that are by their terms subordinated to
the notes) that are assumed by the transferee of any such assets; and (b) any
securities, notes or other obligations received by us from such transferee that,
within 30 days of receipt, are converted by us into cash (to the extent of the
cash received in that conversion).
Within 180 days after the receipt of any net proceeds from an asset sale,
we may apply such net proceeds to make a capital expenditure, improve real
property or acquire long-term assets that are used or useful in a line of
business permitted by the covenant described below under the caption "--
Principal Covenants -- Line of Business"; provided that we grant to the trustee,
on behalf of the holders, a first priority perfected security interest on any
such property or assets acquired or constructed with the net proceeds of any
such asset sale.
Any such net proceeds that are not applied or invested as provided in the
preceding paragraph will constitute "excess proceeds." When the aggregate amount
of excess proceeds exceeds $5.0 million, we will make an asset sale offer to all
holders the maximum principal amount of notes that may be purchased out of the
excess proceeds. The offer price in any asset sale offer will be equal to 100%
of principal amount plus accrued and unpaid interest and liquidated damages, if
any, to the date of purchase, and will be payable in cash. If any excess
proceeds remain after consummation of an asset sale offer, the company may use
such excess proceeds for any purpose not otherwise prohibited by the indenture
and the collateral documents.
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We will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with each repurchase of notes
pursuant to an asset sale offer.
Finally, our ability to pay cash to the holders of notes upon a repurchase
may be limited by our existing financial resources.
Events of Loss
Within 360 days after any event of loss with respect to any collateral with
a fair market value (or replacement cost, if greater) in excess of $1.0 million,
we may apply the net loss proceeds from such event of loss to the rebuilding,
repair, replacement or construction of improvements to the Riviera Black Hawk,
with no concurrent obligation to make any purchase of any notes; provided that:
(1) we deliver to the trustee within 60 days of such event of loss a written
opinion from a reputable architect that the Riviera Black Hawk with at least the
minimum facilities (as defined in the indenture) can be rebuilt, repaired,
replaced or constructed and operating within 360 days of the event of loss; (2)
an officers' certificate certifying that we have available from net loss
proceeds or other sources sufficient funds to complete the rebuilding, repair,
replacement or construction described in clause (1) above; and (3) the net loss
proceeds are less than $20.0 million. If the net loss proceeds to be used for
rebuilding, repair, replacement or construction exceed $5.0 million, then the
net loss proceeds will be deposited in the construction disbursement account and
disbursed in accordance with the procedures set forth in the cash collateral and
disbursement agreement. Any Net Loss Proceeds that are not reinvested or not
permitted to be reinvested as provided in the first sentence of this paragraph
will be deemed "excess loss proceeds."
When the aggregate amount of excess loss proceeds exceeds $5.0 million, we
will make an offer to holders (an "event of loss offer") to purchase the maximum
principal amount of notes that may be purchased out of the excess loss proceeds,
at a purchase price in cash in an amount equal to 100% of the principal amount
thereof, plus accrued and unpaid interest and liquidated damages, if any,
thereon to the date of purchase. The date of purchase will not be less than 30
or more than 60 days from the date of the event of loss offer. If the aggregate
principal amount of notes tendered pursuant to an Event of Loss Offer exceeds
the excess loss proceeds, the trustee will select the notes to be purchased in
the manner described below under the caption "-- Selection and Notice." If the
aggregate amount of notes tendered pursuant to any event of loss offer is less
than the excess loss proceeds, we may, subject to the other provisions of the
indenture and the collateral documents, use any remaining excess loss proceeds
for general corporate purposes.
Pending any permitted rebuilding, repair, replacement or construction or
the completion of any event of loss offer, we will pledge to the trustee as
additional collateral any net loss proceeds or other cash on hand required for
such permitted rebuilding, repair, replacement or construction pursuant to the
terms of the collateral documents. These pledged funds will be released to us to
pay for or reimburse us for the actual cost of such permitted rebuilding,
repair, replacement or construction, or such event of loss offer, pursuant to
the terms of the collateral documents. Pending the final application of the net
loss proceeds, such proceeds will be invested in cash equivalents which will be
pledged to the trustee as security for the notes. We will grant to the trustee,
on behalf of the holders, a first priority lien, subject to permitted liens, on
any property or asset rebuilt, repaired, replaced or constructed with such net
loss proceeds on the terms set forth in the indenture and the collateral
documents.
The indenture also provides that with respect to any event of loss pursuant
to clause (4) of the definition of "event of loss" that has a fair market value
(or replacement cost, if greater) in excess of $5.0 million we will be required
to receive consideration at least (1) equal to the fair market value (evidenced
by a resolution of the board set forth in an officers' certificate delivered to
the trustee) of the assets subject to the event of loss and (2) at least 90% of
which is in the form of cash equivalents.
Excess Cash Purchase Offers
Within 120 days after each operating year, beginning with the first
operating year after the Riviera Black Hawk becomes operating, we will make an
offer to all holders (the "excess cash flow offer") to purchase the maximum
principal amount of notes that is an integral multiple of $1,000 that may be
purchased with 50% of excess cash flow in respect of the operating year then
ended (the "excess cash flow offer amount"), at a purchase price in cash equal
to 101% of the principal amount of the notes to be purchased, plus accrued and
unpaid interest and liquidated damages, if any, thereon to the date fixed for
the closing of the excess cash flow offer (the "excess cash flow purchase
price"), in accordance with the indenture. If the aggregate principal amount of
notes tendered pursuant to an excess cash flow offer exceeds the excess cash
flow offer amount with respect thereto, the trustee will select the notes to be
repurchased in the manner described below under "-- Selection and Notice." If
the aggregate amount of notes
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tendered pursuant to any excess cash flow offer is less than the excess cash
flow offer amount, we may, subject to the other provisions of the indenture and
the collateral documents, use any remaining excess cash flow for general
corporate purposes.
Excess cash flow means, with respect to our company for any operating year,
the consolidated cash flow of our company and our subsidiaries for such
operating year, minus (1) fixed interest (including the portion of any payments
associated with capital lease obligations) of our company and our subsidiaries
that is paid during such operating year and, without duplication, contingent
interest of our company and our subsidiaries that is paid or deferred in
accordance with the provisions of the indenture during such operating year, but
only to the extent that such contingent interest was not deferred in any prior
operating year, minus (2) up to $4.0 million in capital expenditures of our
company and our subsidiaries paid to maintain or improve our casino that are
actually paid during such operating year (excluding any capital expenditures
made with the proceeds from the sale of the notes), minus (3) principal payments
on indebtedness permitted to be incurred pursuant to the covenant described
above under the caption "-- Incurrence of Indebtedness and Issuance of Preferred
Stock" and minus (4) amounts paid by us to Riviera Holdings pursuant to the tax
sharing agreement.
Selection and Notice
If less than all of the notes are to be redeemed at any time, the trustee
will select notes for redemption as follows: (1) if the notes are listed, in
compliance with the requirements of the principal national securities exchange
on which the notes are listed; or (2) if the notes are not so listed, on a pro
rata basis, by lot or by such method as the trustee shall deem fair and
appropriate.
No notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed at least 30 but not more than 60 days before the redemption date
to each holder of notes to be redeemed at its registered address. If any note is
to be redeemed in part only, the notice of redemption that relates to that note
shall state the portion of the principal amount thereof to be redeemed. A new
note in principal amount equal to the unredeemed portion of the original note
will be issued in the name of the holder thereof upon cancellation of the
original note. Notes called for redemption become due on the date fixed for
redemption. On and after the redemption date, interest ceases to accrue on notes
or portions of them called for redemption.
Restructure Covenants
Restricted Payments
We will not (1) declare or pay any dividend or make any other payment or
distribution on account of our equity interests (including, without limitation,
any payment in connection with any merger or consolidation or to the direct or
indirect holders of our equity interests in any capacity (other than dividends
or distributions payable in equity interests (other than disqualified stock) or
dividends or distributions payable to us); (2) purchase, redeem or otherwise
acquire or retire for value (including, without limitation, in connection with
any merger or consolidation involving us) any equity interests in us or any
direct or indirect parent of us; (3) make any payment on or with respect to, or
purchase, redeem, defease or otherwise acquire or retire for value any
indebtedness that is equal in right of payment preference with or subordinated
to the notes, except a payment of interest or principal at the stated maturity
thereof; or (4) make any restricted investment (all such payments and other
actions set forth in clauses (1) through (4) above being collectively referred
to as "restricted payments"), unless, at the time of and after giving effect to
such restricted payment: (1) we are operating; (2) no default or event of
default shall have occurred and be continuing or would occur as a consequence
thereof; (3) we would, at the time of such restricted payment and after giving
pro forma effect thereto as if such restricted payment had been made at the
beginning of the applicable four-quarter period, have been permitted to incur at
least $1.00 of additional indebtedness pursuant to the fixed charge coverage
ratio test set forth in the first paragraph of the covenant described below
under the caption "-- Incurrence of Indebtedness and Issuance of Preferred
Stock;" and (4) such restricted payment, together with the aggregate amount of
all other restricted payments made by us (excluding restricted payments
permitted by clauses (2) through (7) of the next succeeding paragraph), is less
than the sum, without duplication, of: (a) 50% of our consolidated net income
for the period (taken as one accounting period) from the beginning of the first
fiscal quarter commencing after the date of the indenture to the end of our most
recently ended fiscal quarter for which internal financial statements are
available at the time of such restricted payment (or, if such consolidated net
income for such period is a deficit, less 100% of such deficit), plus (b) 100%
of the aggregate net cash proceeds received by us as a contribution to its
common equity capital (other than pursuant to the completion capital commitment,
the keep-well and any contribution to us from Riviera Holdings of the net
proceeds of a qualified public offering which are used to repurchase notes) or
from the issue or sale of equity interests in us (other than disqualified stock)
or from the issue or sale of convertible or exchangeable disqualified stock or
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convertible or exchangeable debt securities that have been converted into or
exchanged for such equity interests (other than equity interests (or
disqualified stock or debt securities) sold to a subsidiary), plus (c) to the
extent that any restricted investment that was made after the date of the
indenture is sold for cash or otherwise liquidated or repaid for cash, the
lesser of (i) the cash return of capital with respect to such restricted
investment (less the cost of disposition, if any) and (ii) the initial amount of
such restricted investment.
With respect to any payments made pursuant to clauses (1) through (7)
below, so long as no default has occurred and is continuing or would be caused
thereby and, with respect to any payments made pursuant to clause (8) below, no
event of default or default in the payment when due of any principal, interest,
premium or liquidated damages on the notes shall have occurred or be continuing
or would occur as a consequence thereof, the preceding provisions will not
prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration such payment would have
complied with the provisions of the indenture;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any pari passu or subordinated indebtedness or equity
interests of the company in exchange for, or out of the net cash proceeds of
the substantially concurrent sale (other than to one of our subsidiaries)
of, equity interests of the company (other than disqualified stock);
provided that the amount of any such net cash proceeds that are utilized for
any such redemption, repurchase, retirement, defeasance or other acquisition
shall be excluded from clause (4)(b) of the preceding paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of our
Indebtedness that is subordinate or equal in right of payment preference
with the notes with the net cash proceeds from an incurrence of permitted
refinancing indebtedness;
(4) the payment to Riviera Management of amounts owing to it (for
reimbursement of goods and services provided) and (for the payment of
management fees) of the management agreement subject to the terms of the
manager subordination agreement relating thereto between Riviera Management
and the trustee and subject to the requirement that all such payments are
made in compliance with the covenant described below under the caption
"Restriction on Payment of Management Fees;" provided, however, that
management may be made whether or not a default has occurred and is
continuing or would be caused thereby;
(5) any redemption required pursuant to the provisions of the indenture
described under the caption "-- Gaming Redemption" above;
(6) the repayment by us to Riviera Holdings of amounts that Riviera
Holdings had advanced to us prior to the consummation of the offering of the
notes;
(7) the payment by us to Riviera Holdings at any time after the Riviera
Black Hawk has been operating for 180 consecutive days equal to the amount
contained in the completion reserve account at the end of that period if our
fixed charge coverage ratio for our most recently ended four fiscal quarters
after the date on which we became operating for which internal financial
statements are available immediately preceding the date on which such
payment is to be made is at least 1.5 to 1; provided that if at the time of
such payment the Riviera Black Hawk has been operating for less than four
fiscal quarters, such fixed charge coverage ratio will be calculated with
respect to the number of full fiscal quarters (but in no event less than one
full fiscal quarter) for which internal financial statements are available
following the date the we first became operating; and
(8) the payment by us of amounts owing to Riviera Holdings pursuant to
the tax sharing agreement.
The amount of all restricted payments (other than cash) shall be the fair
market value on the date of the restricted payment of the assets or securities
proposed to be transferred or issued to or by us or such restricted subsidiary,
as the case may be, pursuant to the restricted payment. The fair market value of
any assets or securities that are required to be valued by this covenant shall
be determined by our board. Our board's determination must be based upon an
opinion or appraisal issued by an accounting, appraisal or investment banking
firm of national standing if the fair market value exceeds $5.0 million. Not
later than the date of making any restricted payment, we shall deliver to the
trustee an officers' certificate stating that such restricted payment is
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permitted and setting forth the basis upon which the calculations required by
this "restricted payments" covenant were computed, together with a copy of any
fairness opinion or appraisal required by the indenture.
Incurrence of Indebtedness and Issuance of Preferred Stock
We will not, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
acquired debt), and we will not issue any disqualified stock will not permit any
of our Subsidiaries to issue any shares of preferred stock; provided, however,
that, so long as no default or event of default has occurred and is continuing,
we may incur Indebtedness (including acquired debt) or issue disqualified stock,
if:
(1) we are operating;
(2) our fixed charge coverage ratio for our most recently ended four
full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional indebtedness is
incurred or such disqualified stock is issued would have been at least 2.0
to 1, determined on a pro forma basis (including a pro forma application of
the net proceeds therefrom), as if the additional indebtedness had been
incurred or the preferred stock or disqualified stock had been issued, as
the case may be, at the beginning of such four-quarter period; and
(3) the weighted average life to maturity of such indebtedness is
greater than the remaining weighted average life to maturity of the notes.
The first paragraph of this covenant will not prohibit the incurrence of
any of the following items of indebtedness so long as no default or event of
default has occurred and is continuing (collectively, "permitted debt"):
(1) the incurrence by us and our Subsidiaries of (a) indebtedness
represented by the notes to be issued on the date of the indenture and the
exchange notes to and (b) their respective obligations arising under the
collateral documents to the extent such obligations would represent
indebtedness;
(2) the incurrence by us of permitted refinancing indebtedness in
exchange for, or the net proceeds of which are used to refund, refinance or
replace Indebtedness (other than intercompany indebtedness) that was
permitted by the indenture to be incurred under the first paragraph of this
covenant or clauses (1), (2), (6), (8) or (10) of this paragraph;
(3) the incurrence by us of intercompany indebtedness between or among
us and any of our wholly owned restricted subsidiaries; provided, however,
that:
(a) such indebtedness must be expressly subordinated to the prior
payment in full in cash of all obligations with respect to the notes; and
(b) (i) any subsequent issuance or transfer of equity interests that
results in any such indebtedness being held by a person other than the
company or a wholly owned restricted subsidiary thereof, (ii) any sale or
other transfer of any such indebtedness to a person that is not either us
or a wholly owned restricted subsidiary thereof shall be deemed, in each
case, to constitute an incurrence of such indebtedness by the company or
such restricted subsidiary, as the case may be, that was not permitted by
this clause (3) and (iii) if any restricted subsidiary is the obligor on
such indebtedness, such indebtedness is represented by an intercompany
note that is pledged to the trustee as security for the notes;
(4) the incurrence by us of hedging obligations that are incurred for
the purpose of fixing or hedging interest rate risk with respect to any
floating rate indebtedness that is permitted by the terms of;
(5) the incurrence by us of indebtedness solely in respect of
performance or similar bonds or standby letters of credit; provided that any
such bond or standby letter of credit is incurred in the ordinary course of
our business in an aggregate amount not to exceed $2.0 million at any one
time outstanding; and provided, further, that any such bond or standby
letter of credit is incurred on terms customary for operations similar to
ours;
(6) the incurrence by us of FF&E financing; provided, however, that (a)
the principal amount of such Indebtedness does not exceed the cost
(including sales and excise taxes, installation and delivery charges and
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other direct costs of, and other direct expenses paid or charged in
connection with, such purchase) of the FF&E purchased or leased with the
proceeds thereof, (b) no Indebtedness incurred under the notes is utilized
for the purchase or lease of such FF&E and (c) the aggregate principal
amount of such indebtedness, including all permitted refinancing
indebtedness incurred to refund, refinance or replace any indebtedness
incurred pursuant to this clause, does not exceed $15.0 million outstanding
at any time;
(7) bond or surety obligations posted by us in order to prevent the loss
or material impairment of or to obtain a gaming license or as otherwise
required by an order of any gaming authority to the extent required by
applicable law and consistent in character and amount with customary
industry practice so long as such Indebtedness does not result in, and is
not secured by, a lien on any of the collateral;
(8) the incurrence by us of indebtedness solely in respect of special
assessment bonds, including all permitted refinancing indebtedness incurred
to refund, refinance or replace any Indebtedness incurred pursuant to this
clause, and standby letters of credit or surety bonds required to be issued
in connection therewith, in an aggregate amount not to exceed $400,000;
(9) the guarantee by us of indebtedness permitted to be incurred by
another provision of this covenant;
(10) the incurrence by us of additional indebtedness in an aggregate
principal amount (or accreted value, as applicable) at any time outstanding,
including all permitted refinancing indebtedness incurred to refund,
refinance or replace any Indebtedness incurred pursuant to this clause, not
to exceed $2.0 million; and
(11) the incurrence by our unrestricted subsidiaries of non-recourse
debt; provided, however, that if any such indebtedness ceases to be
non-recourse debt, such event shall be deemed to be an incurrence of
indebtedness by our restricted subsidiary that was not permitted by this
clause (11).
We will not incur any indebtedness (including permitted debt) that is
contractually subordinated in right of payment to any other of our indebtedness
of unless such Indebtedness is also contractually subordinated in right of
payment to the notes on substantially identical terms; provided, however, that
no Indebtedness shall be deemed to be contractually subordinated in right of
payment to any other Indebtedness of such solely by virtue of being unsecured.
Liens
We will not, directly or indirectly, create, incur, assume or suffer to
exist any lien of any kind on any asset now owned or hereafter acquired, or any
proceeds, income or profits therefrom or assign or convey any right to receive
income therefrom, except permitted liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries
We will not, and will not permit any of our restricted subsidiaries to,
directly or indirectly, create or permit to exist or become effective any
consensual encumbrance or restriction on the ability of such restricted
subsidiary to:
(1) pay dividends or make any other distributions on its capital stock
to our Subsidiaries, or with respect to any other interest or participation
in, or measured by, its profits, or pay any indebtedness owed to us;
(2) make loans or advances to us; or
(3) transfer any of its properties or assets to us.
Merger, Consolidation or Sale of Assets
We may not, directly or indirectly (i) consolidate or merge with or into
another person (whether or not we are the surviving corporation) or (ii) sell,
assign, transfer, convey or otherwise dispose of all or substantially all of the
properties or our assets to another person; unless:
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(1) either (a) we are the surviving corporation or (b) the person formed
by or surviving any such consolidation or merger (if other than us) or to
which such sale, assignment, transfer, conveyance or other disposition shall
have been made is a corporation organized or existing under the laws of the
United States, any state thereof or the District of Columbia;
(2) the person formed by or surviving any such consolidation or merger
(if other than us) or the person to which such sale, assignment, transfer,
conveyance or other disposition shall have been made assumes all our
obligations under the notes, the indenture and the collateral documents;
(3) immediately after such transaction no default or event of default
exists;
(4) such transaction would not result in the loss or suspension or
material impairment of any gaming license unless a comparable replacement
gaming license is effective prior to or simultaneously with such loss,
suspension or material impairment;
(5) we or the person formed by or surviving any such consolidation or
merger (if other than us), or to which such sale, assignment, transfer,
conveyance or other disposition shall have been made:
(a) will have consolidated net worth immediately after the
transaction equal to or greater than our consolidated net worth
immediately preceding the transaction; and
(b) will, on the date of such transaction after giving pro forma
effect thereto and any related financing transactions as if the same had
occurred at the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the fixed charge coverage ratio test set forth in the first paragraph of
the covenant described above under the caption "-- Incurrence of
Indebtedness and Issuance of Preferred Stock"; and
(6) such transaction would not require any holder or beneficial owner of
notes to obtain a gaming license or be qualified or found suitable under the
law of any applicable gaming jurisdiction; provided that such holder or
beneficial owner would not have been required to obtain a gaming license or
be qualified or found suitable under the laws of any applicable gaming
jurisdiction in the absence of such transaction.
In addition, we may not, directly or indirectly, lease all or substantially
all of its properties or assets, in one or more related transactions, to any
other person. This covenant will not apply to a sale, assignment, transfer,
conveyance or other disposition of assets between or among us and any of our
wholly owned subsidiaries.
Transactions with Affiliates
We will not make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any affiliate (each, an "affiliate transaction"), unless: (1) such affiliate
transaction is on terms that are no less favorable than those that would have
been obtained in a comparable transaction by restricted subsidiary with an
unrelated person; and (2) we deliver to the trustee: (a) with respect to any
affiliate transaction or series of related affiliate transactions involving
aggregate consideration in excess of $1.0 million, a resolution of our board set
forth in an officers' certificate certifying that such affiliate transaction
complies with this covenant and that such affiliate transaction has been
approved unanimously by the board; and (b) with respect to any affiliate
transaction or series of related affiliate transactions involving aggregate
consideration in excess of $5.0 million, an opinion as to the fairness to the
holders of such affiliate transaction from a financial point of view issued by
an accounting, appraisal or investment banking firm of national standing.
The following items shall not be deemed to be affiliate transactions and,
therefore, will not be subject to the provisions of the prior paragraph: (1)
payments made pursuant to the completion capital commitment, the keep-well
agreement, the management agreement, the license agreement and the tax sharing
agreement; (2) purchases of goods and services in the ordinary course of
business; (3) any employment agreement entered into by us in the ordinary course
of business on terms customary in the gaming industry; (4) transactions between
or among us and/or our restricted subsidiaries; (5) restricted payments that are
permitted by the provisions of the indenture described above under the caption
"-- Restricted Payments;" and (6) reasonable fees and compensation (including,
without limitation, bonuses, retirement plans and securities, stock options and
stock ownership plans) paid or issued to and indemnities provided on behalf of
our officers, directors, employees or consultants in the ordinary course of
business. Subject to
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the clauses (1) through (6) in the immediately preceding paragraph, we will not
make any loans, advances or other payments to Riviera Holdings, except as
permitted pursuant to the provisions of the indenture, including covenant
described above under the caption "Restricted Payments."
Limitations on Use of Proceeds
We deposited $5.1 million of the net proceeds from the sale of the existing
notes into the interest reserve account, $31.9 million of the net proceeds from
the sale of the existing notes in the construction disbursement account and $5.0
million of the net proceeds from the sale of the existing notes in the
completion reserve account. The funds in the interest reserve account, the
construction disbursement account and the completion reserve account will be
invested solely in government securities. All funds in the cash collateral
accounts will be disbursed only in accordance with the cash collateral and
disbursement agreement.
Sale and Leaseback Transactions
We will not enter into any sale and leaseback transaction; provided that we
may enter into a sale and leaseback transaction if:
(1) we could have (a) incurred indebtedness in an amount equal to the
attributable debt relating to such sale and leaseback transaction under the
fixed charge ratio test in the first paragraph of the covenant described
above under the caption "-- Incurrence of Indebtedness and Issuance of
Preferred Stock" and (b) incurred a lien to secure such Indebtedness
pursuant to the covenant described above under the caption "-- Liens";
(2) the gross cash proceeds of such sale and leaseback transaction are
at least equal to the fair market value, as determined in good faith by the
board and set forth in an officers' certificate delivered to the trustee, of
the property that is the subject of such sale and leaseback transaction; and
(3) the transfer of assets in such sale and leaseback transaction is
permitted by, and we apply the proceeds of such transaction in compliance
with, the covenant described above under the caption "-- Repurchase at the
Option of Holders -- Asset Sales."
Additional Subsidiary Guarantees
If we create another subsidiary then any such restricted subsidiary must
become a guarantor and execute a supplemental indenture and deliver an opinion
of counsel to the trustee.
Designation of Restricted and Unrestricted Subsidiaries
The board may designate any restricted subsidiary to be an unrestricted
subsidiary if that designation would not cause a default. If a restricted
subsidiary is designated as an unrestricted subsidiary, all outstanding
investments owned by the in the subsidiary so designated will be deemed to be an
Investment made as of the time of such designation and will reduce the amount
available for restricted payments under the first paragraph of the covenant
described above under the caption "-- Restricted Payments" or permitted
investments, as applicable. All such outstanding investments will be valued at
their fair market value at the time of such designation. That designation will
only be permitted if such restricted payment would be permitted at that time and
if such restricted subsidiary otherwise meets the definition of an unrestricted
subsidiary. The board may redesignate any unrestricted subsidiary to be a
restricted subsidiary if the redesignation would not cause a default.
Line of Business
We will not, and will not permit any subsidiary to, engage in any business
or investment activities other than permitted business. We will not, and will
not permit any of our Subsidiaries to, engage in any business, development or
investment activity other than at or in conjunction with the Riviera Black Hawk
until we are operating.
Restriction on Payment of Management Fees
We will not, directly or indirectly, pay to Riviera Management or any of
its affiliates any management fees if at the time of payment: (1) a default or
an event of default shall have occurred and be continuing or shall occur as a
result thereof; or (2) our fixed charge coverage ratio for our most recently
ended four full fiscal quarters for which internal financial statements are
available
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immediately preceding the date on which such management fee is proposed to be
paid would have been less than 1.5 to 1 (calculated on a pro forma basis after
deducting management fees to the extent paid in cash and not deferred and any
management fees deferred from a prior period proposed to be paid in cash during
such period, but excluding any management fees deferred or accrued and not paid
in cash during such period).
Any management fees not permitted to be paid pursuant to this covenant will
be deferred and will accrue and may be paid only at such time that they would
otherwise be permitted to be paid hereunder. The right to receive payment of the
management fee will be subordinate in right of payment to the right of the
holders to receive payments pursuant to the notes. We will not amend the
management agreement to increase amounts to be paid thereunder, or in any other
manner which would be adverse to us or the holders, including without
limitation, to amend the method of computing the management fee.
Reports
Whether or not required by the Commission, so long as any notes are
outstanding, we will furnish to the holders, within the time periods specified
in the Commission's rules and regulations:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and
10-K if we were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and, with respect to the annual information only, a report on the annual
financial statements by our certified independent accountants; and
(2) all current reports that would be required to be filed with the
Commission on Form 8-K if we were required to file such reports.
If we have designated any of its subsidiaries as unrestricted subsidiaries,
then the quarterly and annual financial information required by the preceding
paragraph will include a reasonably detailed presentation, either on the face of
the financial statements or in the footnotes thereto, and in Management's
Discussion and Analysis of Financial Condition and Results of Operations, of our
financial condition, our results of operations and our restricted subsidiaries
separate from the financial condition and results of operations of our
unrestricted subsidiaries.
In addition, following the consummation of this exchange offer, whether or
not required by the Commission, we will file a copy of all of the information
and reports referred to in clauses (1) and (2) above with the Commission for
public availability within the time periods specified in the Commission's rules
and regulations (unless the Commission will not accept such a filing) and make
such information available to securities analysts and prospective investors upon
request. In addition, we have agreed that, for so long as any notes remain
outstanding, it will furnish to the holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Cash Collateral and Disbursement Agreement
Pursuant to the cash collateral and disbursement agreement, $42.0 million
of the net proceeds from the sale of the existing notes were placed into the
cash collateral accounts and invested in government securities. All funds and
securities in the cash collateral accounts have been pledged as security for the
repayment of the notes. Funds in the cash collateral accounts will be disbursed
pursuant to the cash collateral and disbursement agreement.
Construction Disbursement Account
We deposited $31.9 million of the net proceeds from the sale of the existing
notes in the construction disbursement account, of which $10.1 million was used
to reimburse Riviera Holdings for amounts advanced to us to cover construction
and development costs. The disbursement agent will invest the remaining funds in
government securities which will be held in the construction reserve account
until the funds are needed from time to time to pay for the development,
construction and opening of the Riviera Black Hawk and our other operating
expenses. These funds will be disbursed in accordance with the cash collateral
and disbursement agreement. Subject to certain exceptions set forth in the cash
collateral and disbursement agreement, the disbursement agent will authorize the
disbursement of funds from the construction disbursement account only upon the
satisfaction of the disbursement conditions set forth in such agreement.
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Completion Reserve Account
We deposited $5.0 million of the net proceeds from the sale of the existing
notes into the completion reserve account. The disbursement agent invested these
funds in government securities which will be held in the completion reserve
account until the funds are needed from time to time to insure completion of
construction of the Riviera Black Hawk. The disbursement agent will authorize
the disbursement of funds from the completion reserve account to the
construction disbursement account only upon the satisfaction of the disbursement
conditions set forth in the cash collateral and disbursement agreement.
Interest Reserve Account
We deposited $5.1 million of the net proceeds from the sale of the existing
notes into the interest reserve account. These funds as set forth in an
officer's certificate, will provide for payment in full of the fixed interest on
the notes through May 1, 2000.
Excess Funds
If any funds remain in the construction disbursement account on the date
that the Riviera Black Hawk has been operating for at least 30 consecutive days
and (1) there is no ongoing construction (other than maintenance and repairs in
the ordinary course of business and other than construction associated with the
Riviera Black Hawk in an aggregate amount not to exceed $250,000) in connection
with the Riviera Black Hawk and (2) no default or event of default exists under
the indenture or the collateral documents, the disbursement agent will, upon our
direction, subject to certain exceptions set forth in the cash collateral and
disbursement agreement, disburse all remaining funds, if any, in the
construction disbursement account to any account or accounts specified by us.
If any funds remain in the completion reserve account on the date that the
Riviera Black Hawk has been operating for at least 180 consecutive days and (1)
there is no ongoing construction (other than maintenance and repairs in the
ordinary course of business) in connection with the Riviera Black Hawk and (2)
no default or event of default exists under the indenture or the collateral
documents, the disbursement agent will, upon our direction, subject to certain
exceptions set forth in the cash collateral and disbursement agreement, disburse
all remaining funds, if any, in the completion reserve account to any account or
accounts specified by us.
Events of Default - Cash Collateral and Disbursement Agreement
An event of default will exist under the cash collateral and disbursement
agreement if any of the following shall occur:
(1) a default or event of default occurs and is continuing under the
indenture;
(2) the disbursement agent, after appropriate consultation with us and
the independent construction consultant, does not approve a request for a
disbursement of over $50,000 or an amendment to the construction
disbursement budget where the aggregate amount that is the subject of the
amendment is over $50,000, and such failure continues for a period of 30
days;
(3) the independent construction consultant, in reviewing prior
disbursements, reports an exception in excess of $50,000 and such exception
continues for a period of ten days;
(4) if at any time the amount of available funds, together with any
funds contributed into the construction disbursement account pursuant to the
completion capital commitment, is less than the amount required in the
construction disbursement budget to cause the Riviera Black Hawk to be
operating on or before the operating deadline and such deficiency continues
for a period of 30 days from notice thereof;
(5) we fail to perform or observe any of its obligations regarding,
among other things, application of the proceeds of the notes (and such
failure continues for five days after notice thereof) or regarding, among
other things, substitution of accounts;
(6) we fail to deliver documents necessary to perfect the trustee's
security interest in the construction disbursement account, the completion
reserve account, the interest reserve account and the investments in each
and such failure continues for a period of five days;
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(7) we cease to own the property upon which the Riviera Black Hawk is to
be constructed, or we abandon the Riviera Black Hawk or otherwise ceases to
pursue the operations of the Riviera Black Hawk in accordance with standard
industry practice or sells or otherwise disposes of our interest in the
Riviera Black Hawk, except as permitted by the covenant in the indenture
described under the caption "-- Principal Covenants -- Merger, Consolidation
or Sale of Assets";
(8) any construction document relating to the Riviera Black Hawk with a
total contract amount of more than $100,000 is terminated, becomes invalid
or illegal, or otherwise ceases to be in full force and effect, provided
that with respect to any such construction document other than the
construction contract and the architect agreement, no event of default shall
be deemed to have occurred under the cash collateral and disbursement
agreement as a result of such termination if (a) we provide written notice
to the independent construction consultant immediately upon (but in no event
more than two business days after) we become aware of such construction
document ceasing to be in full force or effect that we intend to replace
such construction document (or that such replacement is not necessary) and
(b) in each case if in the reasonable judgment of the independent
construction consultant a replacement is necessary, (i) we obtain a
replacement obligor or obligors reasonably acceptable to the independent
construction consultant, and (ii) we enter into a replacement construction
document on terms no less beneficial to us and the trustee than then current
market terms within 60 days of such termination; or
(9) the independent construction consultant reasonably determines that
the Riviera Black Hawk is likely to become operating no earlier than 60 days
after the operating deadline.
If an event of default exists under the cash collateral and disbursement
agreement and the disbursement agent has received written notice thereof, the
disbursement agent will not be permitted to authorize the disbursement of funds
from the construction disbursement account or the completion reserve account,
provided that the disbursement agent may continue to disburse funds from the
construction reserve account or the completion reserve account (1) in an amount
up to $1.5 million (or such other amount as the trustee approves by written
notice to the disbursement agent) if necessary to prevent the condition of the
Riviera Black Hawk from deteriorating or to preserve work completed on the
Riviera Black Hawk, (2) to pay for work already completed or materials already
purchased, (3) to pay for retainage amounts if an event of default continues for
three consecutive months or more or (4) under certain conditions, to make
interest payments on the notes.
Events of Default and Remedies
Each of the following is an event of default under the indenture:
(1) default for 30 days in the payment when due of interest on, or
liquidated damages with respect to, the notes; provided that payments of
contingent interest that are permitted to be deferred as provided in the
indenture will not become due for this purpose until such payment is
required to be made pursuant to the terms of the indenture;
(2) default in payment when due of the principal of, or premium, if any,
on the notes;
(3) failure by us or any of our subsidiaries to comply with the
provisions described under the captions "-- Repurchase at the Option of
Holders -- Change of Control," "-- Repurchase at the Option of Holders --
Asset Sales," "-- Principal Covenants -- Incurrence of Indebtedness and
Issuance of Preferred Stock," "-- Principal Covenants -- Merger,
Consolidation or Sale of Assets" or "Limitation on Use of Proceeds;"
(4) failure by us or any of our restricted subsidiaries for 30 days
after notice thereof to comply with the provisions described under the
caption "-- Principal Covenants -- Restricted Payments" and any of the other
agreements in the indenture not set forth in clause (3) above;
(5) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by us or any of our restricted subsidiaries
(or the payment of which is guaranteed by us or any of our restricted
subsidiaries) whether such Indebtedness or guarantee now exists, or is
created after the date of the indenture, if that default:
(a) is caused by a failure to pay principal of, or interest or
premium, if any, on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such default (a
"payment default"); or
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(b) results in the acceleration of such indebtedness prior to its
express maturity,
and, in each case, the principal amount of any such Indebtedness, together with
the principal amount of any other such Indebtedness under which there has been a
payment default or the maturity of which has been so accelerated, aggregates
$5.0 million or more;
(6) failure by us or any of our restricted subsidiaries to pay final
judgments aggregating in excess of $5.0 million, which judgments are not
paid, discharged or stayed for a period of 60 days; and
(7) breach by us or any of our affiliates of any representation or
warranty in any material respect in the collateral documents or any
certificates delivered in connection therewith, failure by us or any of our
affiliates for 30 days (or such other period as specifically provided
therein) after notice thereof to comply with any covenant or agreement set
forth in the collateral documents, the repudiation by us of any of its
obligations under the collateral documents, the unenforceability of the
collateral documents against us or the loss of the perfection or priority of
the liens granted by us thereunder for any reason;
(8) certain events of bankruptcy or insolvency with respect us or any
of our restricted subsidiaries;
(9) revocation, termination, suspension or other cessation of
effectiveness for a period of more than 90 consecutive days of any gaming
license which results in the cessation or suspension of gaming operations at
any gaming facility;
(10) default by Riviera Holdings in the performance of its obligations
set forth in, or repudiation of its obligations under, the completion
capital commitment or the keep-well agreement; or
(11) failure of the Riviera Black Hawk to be operating by the operating
deadline or to remain operating thereafter, except (a) as the hours of
operation of the Riviera Black Hawk may be limited by any gaming authority
or gaming law or (b) for a period of time not to exceed 30 days during any
45-day period and not to exceed 60 days during any one-year period;
provided, however, that, in any event, there shall not be an event of
default under this clause if the failure to remain operating during such
period results from an event of loss pursuant to the terms of the indenture.
In the case of an event of default arising from certain events of
bankruptcy or insolvency with respect to us, any restricted subsidiary that is a
significant subsidiary or any group of restricted subsidiaries that, taken
together, would constitute a significant subsidiary, all outstanding notes will
become due and payable immediately without further action or notice. If any
other event of default occurs and is continuing, the trustee or the holders of
at least 25% in principal amount of the then outstanding notes may declare all
the notes to be due and payable immediately.
Holders may not enforce the indenture or the notes except as provided in
the indenture. Subject to certain limitations, holders of a majority in
principal amount of the then outstanding notes may direct the trustee in its
exercise of any trust or power. The trustee may withhold from holders notice of
any continuing default or event of default (except a default or event of default
relating to the payment of principal or interest or liquidated damages) if it
determines that withholding notice is in their interest.
The holders of a majority in aggregate principal amount of the notes then
outstanding by notice to the trustee may on behalf of the holders of all of the
notes waive any existing default or event of default and its consequences under
the indenture, except a continuing default or event of default in the payment of
interest or liquidated damages on, or the principal of, the notes.
In the case of any event of default occurring by reason of any willful
action or inaction taken or not taken by or on behalf of us with the intention
of avoiding payment of the premium that we would have had to pay if we then had
elected to redeem the notes pursuant to the optional redemption provisions of
the indenture, an equivalent premium shall also become and be immediately due
and payable to the extent permitted by law upon the acceleration of the notes.
If an event of default occurs prior to May 1, 2002, by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of us with the
intention of avoiding the prohibition on redemption of the notes prior to May 1,
2002, then the premium specified in the indenture shall also become immediately
due and payable to the extent permitted by law upon the acceleration of the
notes.
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We are required to deliver to the trustee annually a statement regarding
compliance with the indenture. Upon becoming aware of any default or event of
default, the company is required to deliver to the trustee a statement
specifying such default or event of default.
Remedies upon Default Under the Notes
The trustee will be required to initiate a foreclosure against the
collateral in order to enforce its rights under certain of the collateral
documents. A foreclosure against the collateral will be subject to certain
notice and other procedural limitations.
No Personal Liability of Directors, Officers, Employees and Stockholders
None of our directors, officers, employees, incorporators or stockholders,
as such, shall have any liability for any of our obligations under the notes,
the indenture, the collateral documents or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each holder by
accepting a note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the notes. The waiver may not be
effective to waive liabilities under the federal securities laws.
Legal Defeasance and Covenant Defeasance
We may, at our option and at any time, elect to have all of our obligations
discharged with respect to the outstanding notes ("legal defeasance") except
for: (1) the rights of holders of outstanding notes to receive payments in
respect of the principal of, or interest or premium and liquidated damages, if
any, on such notes when such payments are due from the trust referred to below;
(2) our obligations with respect to the notes concerning issuing temporary
notes, registration of notes, mutilated, destroyed, lost or stolen notes and the
maintenance of an office or agency for payment and money for security payments
held in trust; (3) the rights, powers, trusts, duties and immunities of the
trustee, and our obligations in connection therewith; and (4) the legal
defeasance provisions of the indenture.
In addition, we may, at our option and at any time, elect to have our
obligations released with respect to certain covenants that are described in the
indenture ("covenant defeasance") and thereafter any omission to comply with
those covenants shall not constitute a default or event of default with respect
to the notes. In the event covenant defeasance occurs, certain events (not
including non-payment, bankruptcy, receivership, rehabilitation and insolvency
events) described under "events of default" will no longer constitute an event
of default with respect to the notes. In addition, the liens securing the
collateral will be released upon covenant defeasance or legal defeasance.
In order to exercise either legal defeasance or covenant defeasance:
(1) we must irrevocably deposit with the trustee, in trust, for the
benefit of the holders, cash in u.s. dollars, non-callable government
securities, or a combination thereof, in such amounts as will be sufficient,
in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, and fixed interest, the maximum amount
payable as contingent interest and premium and liquidated damages, if any,
on the outstanding notes on the stated maturity or on the applicable
redemption date, as the case may be, and we must specify whether the notes
are being defeased to maturity or to a particular redemption date;
(2) in the case of legal defeasance, we must deliver to the trustee an
opinion of counsel reasonably acceptable to the trustee confirming that (a)
we have received from, or there has been published by, the Internal Revenue
Service a ruling or (b) since the date of the indenture, there has been a
change in the applicable federal income tax law, in either case to the
effect that, and based thereon such opinion of counsel shall confirm that,
the holders of the outstanding notes will not recognize income, gain or loss
for federal income tax purposes as a result of such legal defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such legal
defeasance had not occurred;
(3) in the case of covenant defeasance we shall have delivered to the
trustee an opinion of counsel reasonably acceptable to the trustee
confirming that the holders of the outstanding notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
covenant defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such covenant defeasance had not occurred;
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(4) no default or event of default shall have occurred and be continuing
on the date of such deposit (other than a default or event of default
resulting from the borrowing of funds to be applied to such deposit);
(5) such legal defeasance or covenant defeasance will not result in a
breach or violation of, or constitute a default under any material agreement
or instrument (other than the indenture) to which we or any of our
restricted subsidiaries is a party or by which we or any of our restricted
subsidiaries is bound;
(6) we must deliver to the trustee an officers' certificate stating that
the deposit was not made by us with the intent of preferring the holders
over our other creditors with the intent of defeating, hindering, delaying
or defrauding creditors or others; and
(7) we must deliver to the trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent relating to
the legal defeasance or the covenant defeasance have been complied with.
Amendment, Supplement and Waiver
Except as provided in the next three succeeding paragraphs, the indenture
or the notes may be amended or supplemented with the consent of the holders of
at least a majority in principal amount of the notes then outstanding
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, notes), and any existing default or
compliance with any provision of the indenture or the notes may be waived with
the consent of the holders of a majority in principal amount of the then
outstanding notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, notes).
Without the consent of the holders of at least 66 2/3% in aggregate
principal amount of the notes then outstanding, an amendment or waiver may not
affect the liens in favor of the trustee and the holders created under the
collateral documents in a manner adverse to the holders or release all or
substantially all of the collateral, in each case, other than pursuant to the
release of collateral in accordance with the provisions of the indenture and of
the applicable collateral documents.
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any notes held by a non-consenting holder):
(1) reduce the principal amount of notes whose holders must consent to
an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any note or
alter the provisions with respect to the redemption of the notes (other than
provisions relating to the covenants described above under the caption "--
Repurchase at the Option of Holders");
(3) reduce the rate of or change the time for payment of interest on any
note;
(4) waive a default or event of default in the payment of principal of,
or interest or premium, or liquidated damages, if any, on the notes (except
a rescission of acceleration of the notes by the holders of at least a
majority in aggregate principal amount of the notes and a waiver of the
payment default that resulted from such acceleration);
(5) make any note payable in money other than that stated in the notes;
(6) make any change in the provisions of the indenture relating to
waivers of past defaults or the rights of holders of notes to receive
payments of principal of, or interest or premium or liquidated damages, if
any, on the notes; or
(7) waive a redemption payment with respect to any note (other than a
payment required by one of the covenants described above under the caption
"-- Repurchase at the Option of Holders").
Notwithstanding the preceding, without the consent of any holder of notes,
we and the trustee may amend or supplement the indenture or the notes:
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(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated notes in addition to or in place of
certificated notes;
(3) to provide for the assumption of the our obligations to holders of
notes in the case of a merger or consolidation or sale of all or
substantially all of our assets;
(4) to make any change that would provide any additional rights or
benefits to the holders of notes or that does not adversely affect the legal
rights under the indenture of any such holder; or
(5) to comply with requirements of the Commission in order to effect or
maintain the qualification of the indenture under the Trust indenture Act.
Concerning the Trustee
The holders of a majority in principal amount of the then outstanding notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. The indenture provides that in case an event of default
shall occur and be continuing, the trustee will be required, in the exercise of
its power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, the trustee will be under no obligation to
exercise any of its rights or powers under the indenture at the request of any
holder of notes, unless such holder shall have offered to the trustee security
and indemnity satisfactory to it against any loss, liability or expense.
Anyone who receives this prospectus may obtain a copy of the indenture,
each of the collateral documents and registration rights agreement without
charge by writing to Riviera Black Hawk, Inc., Riviera Hotel & Casino, 2901 Las
Vegas Boulevard South, Las Vegas, NV 89109, Attention: Executive Vice President
of Finance.
Registration Rights; Liquidated Damages
The following description is a summary of selected provisions of the
registration rights agreement deemed important to you. It does not restate that
agreement in its entirety. We urge you to read the proposed form of registration
rights agreement in its entirety because it, and not this description, defines
your registration rights as holders. See "Available Information."
The registration rights agreement provides:
(1) we will file an exchange offer Registration Statement with the
Commission on or prior to 45 days after the sale of the existing notes;
(2) we will use its best efforts to have the exchange offer Registration
Statement declared effective by the Commission on or prior to 150 days after
the sale of the existing notes;
(3) unless the exchange offer would not be permitted by applicable law
or Commission policy, we will
(a) commence the exchange offer; and
(b) use its best efforts to issue on or prior to 30 business days,
or longer, if required by the federal securities laws, after the date on
which the exchange offer Registration Statement was declared effective by
the Commission, exchange notes in exchange for all notes tendered prior
thereto in the exchange offer; and
(4) if obligated to file the shelf registration statement, we will use
its best efforts to file the shelf registration statement with the
Commission on or prior to 45 days after such filing obligation arises and to
cause the shelf registration to be declared effective by the Commission on
or prior to 150 days after such obligation arises.
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If:
(1) we fail to file any of the registration statements required by the
registration rights agreement on or before the date specified for such
filing;
(2) any of such registration statements is not declared effective by the
Commission on or prior to the date specified for such effectiveness (the
"effectiveness target date");
(3) we fail to consummate the exchange offer within 45 business days of
the effectiveness target date with respect to the exchange offer
Registration Statement; or
(4) the exchange offer Registration Statement or the shelf registration
statement is declared effective but thereafter ceases to be effective or
usable in connection with resales of transfer restricted securities during
the periods specified in the registration rights agreement (each such event
referred to in clauses (1) through (4) above, a "registration default"),
then we will pay liquidated damages to each holder, with respect to the first
90-day period immediately following the occurrence of the first registration
default in an amount equal to $.05 per week per $1,000 principal amount of notes
held by such holder.
The amount of the liquidated damages will increase by an additional $.05
per week per $1,000 principal amount of notes with respect to each subsequent
90-day period until all registration defaults have been cured, up to a maximum
amount of liquidated damages for all registration defaults of $.50 per week per
$1,000 principal amount of notes.
All accrued liquidated damages will be paid by us on each interest payment
date.
Following the cure of all registration defaults, the accrual of liquidated
damages will cease.
Holders of notes will be required to make certain representations to us (as
described in the registration rights agreement) in order to participate in the
exchange offer and will be required to deliver certain information to be used in
connection with the shelf registration statement and to provide comments on the
shelf registration statement within the time periods set forth in the
registration rights agreement in order to have their notes included in the shelf
registration statement and benefit from the provisions regarding liquidated
damages set forth above. By acquiring transfer restricted securities, a holder
will be deemed to have agreed to indemnify us against certain losses arising out
of information furnished by such holder in writing for inclusion in any shelf
registration statement. Holders of notes will also be required to suspend their
use of the prospectus included in the shelf registration statement under certain
circumstances upon receipt of written notice to that effect from us.
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UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the material United States federal
income tax consequences of the exchange offer to a holder of existing notes that
is an individual citizen or resident of the United States or a United States
corporation that purchased the existing notes pursuant to their original issue
(a "holder"). It also summarizes the material United States income tax
consequences resulting from the ownership and disposition of the exchange notes.
This discussion is based on the Internal Revenue Code of 1986, as amended to the
date hereof (the "Code"), existing and proposed Treasury regulations, and
judicial and administrative determinations, all of which are subject to change
at any time, possibly on a retroactive basis. The following relates only to the
existing notes, and the exchange notes received in exchange for the existing
notes, that are held as "capital assets" within the meaning of Section 1221 of
the Code by holders. It does not discuss state, local or foreign tax
consequences, nor does it discuss tax consequences to subsequent purchasers
(persons who did not purchase the existing notes pursuant to their original
issue), or to categories of holders that are subject to special rules, such as
foreign persons, tax-exempt organizations, insurance companies, banks, dealers
in stocks and securities and persons holding the notes as part of a "straddle,"
"hedge," or "conversion transaction." Tax consequences may vary depending on the
particular status of an investor.
No rulings will be sought from the IRS with respect to the federal income
tax consequences of the exchange offer and the ownership and disposition of the
exchange noes. There can be no assurance that the IRS will not take positions
contrary to the federal income tax consequences discussed below. In particular,
we intend to treat the notes as indebtedness for federal income tax purposes.
However, this treatment is not binding on the IRS or any court and there can be
no assurance that the IRS will not successfully argue (or that a court will not
hold) that the notes should be treated as equity for federal income tax
purposes. If any portion of the notes is treated as equity rather than
indebtedness, we would not be able to deduct the interest on that portion of the
notes. This could have a material adverse effect on our after-tax cash flow. In
addition, the interest payments made on the portion of the notes that are
treated as equity will be taxable to the recipient as dividends to the extent of
our current and accumulated earnings and profits. This could adversely affect
the timing, character and amounts includible in the income of a holder of notes.
THIS SECTION DOES NOT PURPORT TO DEAL WITH ALL ASPECTS OF FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO AN INVESTOR'S DECISION TO EXCHANGE EXISTING
NOTES FOR EXCHANGE NOTES. EACH INVESTOR SHOULD CONSULT WITH ITS OWN TAX ADVISOR
CONCERNING THE APPLICATION OF THE FEDERAL INCOME TAX LAWS AND OTHER TAX LAWS TO
ITS PARTICULAR SITUATION BEFORE DETERMINING WHETHER TO EXCHANGE EXISTING NOTES
FOR EXCHANGE NOTES.
The Exchange Offer
The exchange of existing notes pursuant to the exchange offer should be
treated as a continuation of the corresponding existing notes because the terms
of the exchange notes are not materially different from the terms of the
existing notes. Accordingly, such exchange should not constitute a taxable event
to holders, and therefore:
- no gain or loss should be realized by holders upon receipt of an
exchange note;
- the holding period of an exchange note should include the holding
period of the existing note for which the exchange note was exchanged;
and
- the adjusted tax basis of the exchange note should be the same as the
adjusted tax basis of the existing note for which the exchange note
was exchanged immediately before the exchange.
Recognition of Interest Income
Certain Treasury Regulations (the "Contingent Payment Regulations") govern
the treatment of debt instruments issued on or after August 13, 1996 that
provide for one or more contingent payments. Because the notes provide for one
or more contingent payments of interest, the Contingent Payment Regulations will
apply to the notes while owned by a holder.. Under the Contingent Payment
Regulations, we must construct a projected payment schedule for the notes, and
holders generally must recognize all interest income with respect to a note on a
constant yield basis based on this projected payment schedule, subject to
adjustments if actual contingent payments differ from those projected. This
interest is treated as "original issue discount."
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In particular, the projected payment schedule will be determined by
including all noncontingent payments and the "expected value" of all contingent
payments on the notes. The projected payment schedule must produce the
"comparable yield," which is the yield at which we would issue a fixed rate debt
instrument with terms and conditions similar to those of the notes. The amount
of interest that accrues each accrual period is the product of the "comparable
yield" and the note's "adjusted issue price" at the beginning of each accrual
period. The "adjusted issue price" of a note is equal to the initial offering
price paid by the holders for a substantial amount of the notes, increased by
interest previously accrued on the note (determined without adjustments for
differences between the projected payment schedule and the actual payments on
the notes), and decreased by the amount of any noncontingent payments and the
projected amount of any contingent payments previously made on the note. Except
for adjustments made for differences between actual and projected payments, the
amount of interest included in income by a holder of a note is the sum of the
"daily portions" of interest income with respect to the note for each day during
the taxable year (or portion thereof) on which the holder held such note. The
"daily portions" of interest income are determined by allocating to each day in
any accrual period a ratable portion of the interest income allocable to that
accrual period. If actual payments differ from projected payments, then holders
will generally be required in any given taxable year either to include
additional interest in gross income (in case the actual payments exceed
projected payments in such taxable year) or to reduce the amount of interest
income otherwise accounted (in case the actual payments are less than the
projected payments in such taxable year). If the negative adjustment exceeds the
interest for the taxable year that would otherwise have been accounted for on
the notes, the excess will be treated as ordinary loss. However, the amount
treated as an ordinary loss in any taxable year is limited to the amount by
which the holder's total interest inclusions on the notes exceed the total
amount of the net negative adjustments treated as ordinary loss in prior years.
Any remaining excess will be a negative adjustment carryforward and treated as a
negative adjustment in the succeeding year. If a note is sold, exchanged, or
retired, any negative adjustment carryforward from the prior year will reduce
the holder's amount realized on the sale, exchange or retirement.
Thus, under the rules described in the preceding paragraph, depending on
the "comparable yield" and "expected value" used to determine the projected
payment schedule, holders of notes may be required to include amounts in income
prior to the receipt of cash payments attributable to such income. We will
provide to holders the projected payment schedule for the notes. The projected
payment schedule for the notes will consist of all fixed interest payments, all
scheduled principal payments and a projected amount and time for each contingent
interest payment. The yield, timing and amounts set forth on the projected
payment schedule are for federal income tax purposes only and are not assurances
by us with respect to any aspect of the notes. Holders will generally be bound
by the projected payment schedule. However, the IRS will not respect a projected
payment schedule which it determines to be unreasonable. Holders are strongly
urged to consult their tax advisors with respect to the application of the
contingent payment rules described above to the notes.
It is possible that the notes may be subject to the provisions of the
Internal Revenue Code dealing with high yield discount obligations in which case
we may not be entitled to claim a deduction with respect to a certain portion of
the interest payments (the "Disqualified Portion"). This could reduce the amount
of cash available to us to meet our obligations under the notes.
Sale, Retirement or Other Taxable Disposition
A holder of a note will generally recognize gain or loss upon the sale,
redemption, retirement, or other taxable disposition of the note in an amount
equal to the difference between (1) the amount of cash and the fair market value
of property received in exchange therefor, except to the extent attributable to
the payment of accrued interest or original issue discount, which generally will
be taxable to the holder as ordinary income, reduced by any negative adjustment
carryforward (as described above) and (2) the holder's adjusted tax basis in the
note. A holder's adjusted tax basis in a note generally will be equal to the
price paid for the note, increased by the amount of original issue discount
previously accrued on the note (determined without adjustments), and decreased
by the amount of any noncontingent payments and the projected amount of any
contingent payments previously made on the note.
If a note is sold or otherwise disposed of when there are remaining
contingent payments under the projected payment schedule, then any gain
recognized under the sale or other disposition will be ordinary interest income.
Any loss recognized will be ordinary loss to the extent the holders' total
interest inclusions on a note exceed the total amount of ordinary loss the
holder took into account under the rules described above with respect to
differences between actual payments and projected payments, and any additional
loss will generally be a capital loss. If, however, a note is sold or otherwise
disposed of after there are no remaining contingent payments due on the note
under the projected payment schedule, the resulting gain or loss will generally
be capital gain or loss and will be long-term capital gain or loss if the note
has been held for more than one year.
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Liquidated Damages
We intend to take the position that the liquidated damages described above
under "Description of Notes -- Registration Rights; Liquidated Damages" will be
taxable to the holder as ordinary income in accordance with the holder's method
of accounting for federal income tax purposes. The IRS may take a different
position, however, which could affect the timing of both the holder's income and
our deduction with respect to the liquidated damages.
Backup Withholding
A holder of notes may be subject to backup withholding at the rate of 31%
with respect to interest paid on, original issue discount accrued on and gross
proceeds from a sale or other disposition of, the notes unless (1) the holder is
a corporation or comes within certain other exempt categories and, when
required, demonstrates this fact or (2) provides a correct taxpayer
identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with applicable requirements of the backup
withholding rules. A holder of notes who does not provide us with his or her
correct taxpayer identification number may be subject to penalties imposed by
the IRS.
We will report to the holders of the notes and the IRS the amount of any
"reportable payments," including any original issue discount accrued on the
notes and any amount withheld with respect to the notes during the calendar
year.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of exchange notes received in
exchange for existing notes where such existing notes were acquired as a result
of market-making activities or other trading activities. We have agreed that,
for a period of 180 days after the expiration date, it will make this
prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, until ___________, 1999 (90
days after the effective date of this Registration Statement), all dealers
effecting transactions in the exchange notes may be required to deliver a
prospectus.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange Noes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the exchange notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such exchange notes. Any broker-dealer
that resells exchange notes that were received by it for its own account
pursuant to the exchange offer and any broker or dealer that participates in a
distribution of such exchange notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any such resale of exchange
notes and any commission or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that, by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the expiration date the Company will
promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the exchange offer (including the expenses of one counsel for the
Holders of the Notes) other than commissions or concessions of any brokers or
dealers and will indemnify the Holders of the Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
Each broker-dealer that receives exchange notes are required to deliver a
prospectus in connection with any resale of such note.
Each broker-dealer that acquired existing notes as a result of market
making or other trading activities may use the exchange offer prospectus, as
supplemented or amended for resales of exchange notes.
Broker-dealers that acquired the existing notes directly from the Company
in the initial offering and not as a result of market making or trading
activities cannot use the prospectus for the exchange offer in connection with
resales of the exchange notes and, absent an exemption, must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with secondary resale of the exchange notes and cannot rely on the
position of the staff in Exxon Capital Holdings Corporation (avail. April 13,
1989).
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LEGAL MATTERS
The validity of the exchange notes offered hereby will be passed upon for
the Company by Dechert Price & Rhoads, New York, New York. Certain legal matters
with respect to Colorado law will be passed upon by Holme, Roberts & Owen LLP,
Denver, Colorado and Verner, Liipfert, Bernhard, McPherson & Hand, Chartered,
Washington, D.C.
EXPERTS
The financial statements of Riviera Black Hawk, Inc. (a development stage
company) as of December 31, 1997 and 1998 and for the period from August 18,
1997 (date of inception) through December 31, 1997 and for the year ended
December 31, 1998, included in this prospectus, have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report included herein
(which report expresses an unqualified opinion and includes an explanatory
paragraph referring to the Company's status as a development stage entity) and
have been so included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The consolidated financial statements of Riviera Holdings Corporation and
Subsidiaries as of December 31, 1997 and 1998 and for each of the three years in
the period ended December 31, 1998 incorporated in this prospectus by reference
from the Annual Report on Form 10-K of Riviera Holdings Corporation and
Subsidiaries have been audited by Deloitte & Touche LLP, independent auditors,
as stated in their report which is incorporated herein by reference and have
been so incorporated in reliance upon the report of such firm given their
authority as experts in accounting and auditing.
The Statements as to matters of law and legal conclusions concerning
Colorado gaming law included under the captions "Risk Factors--Gaming licenses,
permits and approvals," "--Legislative issues" and "--State gaming tax issues"
and "Gaming and Liquor Regulatory Matters" have been prepared by Holme, Roberts
& Owen LLP, Denver, Colorado and Edward McGrath,,Verner, Liipfert, Bernhard,
McPherson & Hand, Chartered, Washington, D.C., gaming counsel for the Company.
AVAILABLE INFORMATION
We are not currently subject to the periodic reporting and other
informational requirements of the Securities and Exchange Act of 1934, as
amended (the "Exchange Act"). We have agreed that, whether or not required to do
so by the rules and regulations of the Securities and Exchange Commission, so
long as any notes remain outstanding, we will furnish to the trustee and deliver
or cause to be delivered to holders of the notes, beginning with respect to our
fiscal quarter ending June 30, 1999, (1) all consolidated quarterly and annual
financial information that would be required to be contained in a filing with
the Securities and Exchange Commission on Forms 10-Q and 10-K if we were
required to file such forms and, with respect to the annual information only, a
report thereon by our certified independent accountants and (2) all reports that
would be required to be filed with the Securities and Exchange Commission on
Form 8-K if we were required to file such reports. From and after the time a
registration statement with respect to the notes is declared effective by the
Securities and Exchange Commission, we will file such information with the
Securities and Exchange Commission, provided the Securities and Exchange
Commission will accept such filing.
We have filed with the SEC a registration statement on Form S-4 under the
Securities Act of 1933, covering the notes to be issued in the exchange offer.
This prospectus, which is a part of the registration statement, does not contain
all of the information included in the registration statement. Any statement
made in this prospectus concerning the contents of any contract, agreement or
other document is not necessarily complete. For further information with respect
to the Company and the notes to be issued in the exchange offer, please
reference the registration statement, including its exhibits. If we have filed
any contract, agreement or other document as an exhibit to the registration
statement, you should read the exhibit for a more complete understanding of the
documents or matter involved.
Copies of the registration statement, including all related exhibits and
schedules, may be inspected without charge at the public reference facilities
maintained by the SEC, or obtained at prescribed rates from the Public Reference
Section of the SEC at the address set forth above. In addition, you may request
a copy of any of these filings, at no cost, by writing or telephoning us at the
following address or phone number:
Riviera Black Hawk, Inc.
444 Main Street
Black Hawk, Colorado 80422
(303) 582-1000
69
<PAGE>
RIVIERA BLACK HAWK, INC.
(A Development Stage Company)
- --------------------------------------------------------------------------------
Page
TABLE OF CONTENTS F-1
INDEPENDENT AUDITORS' REPORT F-2
FINANCIAL STATEMENTS:
Balance Sheets as of June 30, 1999 (Unaudited),
December 31, 1998 and 1997 F-3
Statements of Operations for the Six Months Ended June 30,
1999 (Unaudited)and cumulative from August 18, 1997
(Inception) through June 30, 1999 (Unaudited) F-4
Statements of Stockholder's Equity for the Six Months Ended
June 30, 1999 (Unaudited) and for the Year Ended
December 31, 1998 and for the Period from
August 18, 1997 (Inception) through December 31, 1997 F-5
Statements of Cash Flows for the Six Months Ended June 30, 1999
and 1998 (Unaudited), and for the Year Ended December 31,
1998 and for the Period from August 18, 1997 (Inception)
through December 31, 1997 and cumulative from August 18,
1997 (Inception) through June 30, 1999 (Unaudited) F-6
Notes to Financial Statements F-7-11
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Riviera Black Hawk, Inc.
(A Development Stage Company):
We have audited the accompanying balance sheets of Riviera Black Hawk, Inc.
(a Development Stage Company) (the "Company") as of December 31, 1998 and 1997,
and the related statements of operations, stockholder's equity and of cash flows
for the period from August 18, 1997 (date of inception) through December 31,
1997, and for the year ended December 31, 1998. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1998 and
1997, and the results of its cash flows for the period from August 18, 1997
(date of inception) through December 31, 1997, and for the year ended December
31, 1998, in conformity with generally accepted accounting principles.
The Company is in the development stage at December 31, 1998. As discussed
in Note 1 to the financial statements, successful completion of the Company's
development program and, ultimately, the attainment of profitable operations is
dependent upon future events, including obtaining certain regulatory approvals
and achieving a level of sales adequate to support the Company's cost structure.
Deloitte & Touche LLP
Las Vegas, Nevada
February 19, 1999
F-2
<PAGE>
RIVIERA BLACK HAWK, INC.
(A Development Stage Company)
BALANCE SHEETS
JUNE 30, 1999 (UNAUDITED) AND DECEMBER 31, 1998 AND 1997
(In thousands, except share amounts)
<TABLE>
<CAPTION>
June December 31,
ASSETS 1999 1998 1997
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents...................... $ 809 $ 543 $ 49
Cash, restricted............................... 26,278
Short-term investments, restricted............. 5,119
Prepaid expenses............................... 30 73 _
----------- ----------- ---------
Total current assets....................... 32,236 616 49
PROPERTY AND EQUIPMENT.............................. 39,936 27,112 16,583
DEFERRED FINANCING COSTS............................ 3,114
OTHER ASSETS........................................ 94 3
CASH, RESTRICTED.................................... 407 407 _
----------- ----------- ---------
TOTAL...................................... $ 75,787 $ 28,138 $ 16,632
=========== =========== =========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities....... $ 5,897 $ 1,210 $ 7
Accrued interest expense....................... 455
Accrued expenses, other........................ 189 - -
----------- ----------- ---------
Total current liabilities...................... 6,541 1,210 7
----------- ----------- ---------
NONCURRENT LIABILITIES:
Due to Riviera Holdings Corporation............ 62 6,241
13% First Mortage Notes........................ 45,000
Special improvement district bonds, net of 784 687 -
----------- ----------- ---------
undisbursed funds of $780..................
Total noncurrent liabilities............... 45,846 6,928 -
----------- ----------- ---------
Total liabilities.......................... 52,387 8,138 7
----------- ----------- ---------
COMMITMENTS AND CONTINGENCIES STOCKHOLDER'S EQUITY:
Common stock, $.01 par value; 10,000 shares authorized;
1,000 shares issued and outstanding............
Additional paid-in capital..................... 23,459 20,000 16,625
Accumulated deficit............................ (59) - -
----------- ----------- ---------
Total stockholder's equity................. 23,400 20,000 16,625
----------- ----------- ---------
TOTAL ..................................... $ 75,787 $ 28,138 $ 16,632
=========== =========== =========
</TABLE>
See notes to financialstatements.
F-3
<PAGE>
RIVIERA BLACK HAWK, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999 AND PERIOD FROM AUGUST 18, 1997
(DATE OF INCEPTION) THROUGH JUNE 30, 1999 (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Six Cumulative from
Months August 18, 1997
Ended (Date of
June 30, Inception) through
1999 June 30, 1999
--------- ------------------
<S> <C> <C>
Selling, general and administrative................. $ (75) $ (75)
OTHER INCOME (EXPENSE):
Interest expense.................................... (193) (193)
Interest income..................................... 115 115
Total other income (expense)................... (78) (78)
Loss before taxes................................... (153) (153)
Tax benefit......................................... 94 94
Net loss........................................... $ (59) $ (59)
</TABLE>
See notes to financial statements.
F-4
<PAGE>
RIVIERA BLACK HAWK, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDER'S EQUITY
PERIOD FROM AUGUST 18, 1997 (DATE OF
INCEPTION) THROUGH DECEMBER
31, 1997 AND YEAR ENDED
DECEMBER 31, 1998 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1999
(Unaudited)
(In thousands, except share amounts)
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit Total
------ ------ --------- ----------- -----
<S> <C> <C> <C> <C> <C>
BALANCE, AUGUST 18, 1997
(Date of Inception)................ - $ - $ - $ -
Common stock issued................ 1,000
Contributed capital................ - - 16,625 16,625
-------- ------ -------- --------- --------
BALANCE, DECEMBER 31, 1997.............. 1,000 16,625 16,625
Contributed capital................ - - 3,375 3,375
-------- ------ -------- --------- --------
BALANCE, DECEMBER 31, 1998.............. 1,000 20,000 20,000
Contributed capital (unaudited).... 3,459 3,459
Net loss (unaudited)............... - - - (59) (59)
-------- ------ -------- --------- --------
BALANCE, JUNE 30, 1999..................
(Unaudited)........................ 1,000 $ - $ 23,459 $ (59) $ 23,400
======== ====== ======== ========= ========
</TABLE>
See notes to financial statements.
F-5
<PAGE>
RIVIERA BLACK HAWK, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
PERIOD FROM AUGUST 18, 1997 (DATE OF INCEPTION) THROUGH
DECEMBER 31, 1997 AND YEAR ENDED DECEMBER 31, 1998 AND
SIX MONTHS ENDED JUNE 30, 1999 AND 1998 (UNAUDITED) AND CUMULATIVE FROM
AUGUST 18, 1997 (INCEPTION) THROUGH JUNE 30, 1999 (UNAUDITED) (In thousands)
<TABLE>
<CAPTION>
Cumulative
August 18, from August
Six Six 1997 18, 1997
Months Months (Inception) (Date of
Ended Ended to Inception)
June 30, June 30, December through June
1999 1998 1998 31, 1997 30, 1999
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
NET LOSS.................................... $ (59) $ $ $ $ (59)
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment....... (6,562) (2,040) (6,667) (15,923) (29,152)
Decrease (increase) in prepaid expenses.. 43 (73) (30)
Increase in cash - restricted............ (26,278) (26,278)
Purchase of short-term investments....... (5,119) (5,119)
Deferred financing costs................. (3,114) (3,114)
Increase in restricted cash.............. (407) (407)
Increase in other assets................. (91) (3) (94)
---------- ---------- ---------- ---------- -----------
Net cash used in investing activities (41,121) (2,040) (7,150) (15,923) (64,194)
---------- ---------- ---------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from (payments to) Riviera
Holding Corporation..................... (6,179) 343 6,241 62
Proceeds from long-term borrowings......... 45,000 45,000
Contribution of paid-in capital............ 2,625 2,117 1,403 15,972 20,000
---------- ---------- ---------- ---------- -----------
Net cash provided by financing 41,446 2,460 7,644 15,972 65,062
activities.........................
---------- ---------- ---------- ---------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS....... 266 420 494 49 809
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 543 49 49
---------- ---------- ---------- ---------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD....
$ 809 $ 469 $ 543 $ 49 $ 809
========== ========== ========== ========== ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH
INFORMATION:
Property and equipment purchased using
accounts payable.......................... $ 5,897 $ 1,203 $ 7 $ 5,897
========== ========== ========== ========== ===========
Property acquired using special improvement
district bonds............................ $ 97 $ 687 $ $ 784
========== ========== ========== ========== ===========
CAPITALIZED INTEREST CONTRIBUTED BY RIVIERA
HOLDINGS CORP............................. $ 834 $ 1,300 $ 1,972 $ 653 $ 3,459
========== ========== ========== ========== ===========
CAPITALIZED INTEREST, Other................. $ 644 $ $ $ $ 644
========== ========== ========== ========== ===========
</TABLE>
See notes to financial statements.
F-6
<PAGE>
RIVIERA BLACK HAWK, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
PERIOD FROM AUGUST 18, 1997 (DATE OF INCEPTION) THROUGH
DECEMBER 31, 1997 AND THE YEAR ENDED DECEMBER 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation - On August 18, 1997 (date of
inception), Riviera Black Hawk, Inc. (the "Company") was formed. The
Company is a wholly owned subsidiary of Riviera Holdings Corporation. The
Company is a development stage enterprise that has not commenced
operations and will not commence operations until acceptable financing is
obtained, the casino is constructed, and gaming licenses are obtained. The
principal purpose of the Company is to develop a casino and entertainment
complex in Black Hawk, Colorado, which is anticipated to open in the first
quarter of 2000. The Company has begun construction on this casino in
Black Hawk, Colorado, on a site that was purchased for $15.1 million in
August 1997.
Financial Statements at June 30, 1999 and for the Six Months Ended June
30, 1999 and 1998 - The financial information at June 30, 1999 and for the
six months ended June 30, 1999 and 1998 is unaudited. However, such
information reflects all adjustments (consisting solely of normal
recurring adjustments) that are, in the opinion of management, necessary
for a fair presentation of the financial position, results of operations,
and cash flows for the interim period. The results of operations for the
six months ended June 30, 1999 and 1998 are not necessarily indicative of
the results that will be achieved for the entire year.
Certain Significant Risks and Uncertainties:
Gaming Regulation Licensing - The Company's ability to conduct gaming
operations in the state of Colorado depends on the ability of the
Company and Riviera Holdings Corporation to obtain licensing from the
Colorado gaming authorities. Such licensing and qualifications will be
reviewed periodically by the gaming authorities in Colorado.
Competition - The Black Hawk/Central City, Colorado, market already
has many established casinos. The market is highly competitive, and
other development projects are currently being planned.
Construction Risks - Any construction project entails significant
construction risks, including, but not limited to, cost overruns,
delays in receipt of governmental approvals, shortages of materials or
skilled labor, labor disputes, unforeseen environmental or engineering
problems, work stoppages, fire and other natural disasters,
construction scheduling problems, and weather interferences, any of
which, if they occurred, could delay construction or result in a
substantial increase in costs to the Company.
Completion Capital Commitment - Riviera Holdings Corporation, will be
obligated to contribute to the Company up to $10.0 million of cash if at
any time there are insufficient funds available to enable the casino in
Black Hawk, Colorado to be operating by May 31, 2000. In addition, if the
casino is not operating by May 31, 2000, Riviera Holdings Corporation will
be obligated to contribute to the Company on that date $10.0 million in
cash less any amounts previously contributed under the Completion Capital
Commitment.
Keep-Well Agreement - The Company and Riviera Holdings Corporation will
enter into a Keep-Well Agreement wherein, if (1) the Company does not have
the necessary funds to make a payment of fixed interest on the notes
during our first three years of operations or (2) consolidated cash flow
is less than $9.0 million in any of our first three years of operations,
Riviera Holdings Corporation will be obligated to contribute cash to the
Company to make up those amounts (up to a maximum of $5.0 million for any
one operating year and $10.0 million in the aggregate).
F-7
<PAGE>
Cash and Cash Equivalents - The Company considers cash and all highly
liquid investments with a maturity at the time of purchase of three months
or less to be cash equivalents. At December 31, 1998 and 1997, there were
no cash equivalents.
Property and Equipment - Property and equipment are stated at cost, and
capitalized lease assets are stated at the present value of future minimum
lease payments at the date of lease inception. Interest incurred during
construction of new facilities or major additions to facilities is
capitalized and amortized over the life of the asset. Depreciation will be
computed, upon the commencement of gaming operations, using the
straight-line method over the shorter of the estimated useful lives or
lease terms, if applicable, of the related assets. The costs of normal
maintenance and repairs will be charged to expense as incurred. Gains or
losses on disposals will be recognized as incurred.
Other Assets - The Company is in the development stage and is currently
incurring organizational costs, which are being capitalized until
operations of the casino commence, at which time such organizational costs
will be amortized over a five-year period. Organizational costs consist
primarily of legal fees associated with establishing the gaming licenses
for business.
Restricted Cash - At December 31, 1998, the Company had a deposit with a
commercial bank in the amount of $407,000, which is restricted as to use.
This amount is required by a construction bond.
Estimates and Assumptions - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual
results may differ from estimates.
Recently Issued Accounting Standards - The American Institute of Certified
Public Accountants' Accounting Standards Executive Committee issued
Statement of Position No. 98-5, Reporting on the Costs of Start-Up
Activities. This standard provides guidance on the financial reporting for
start-up costs and organization costs. This standard requires costs of
start-up activities and organization costs to be expensed as incurred, and
is effective for fiscal years beginning after December 15, 1998, although
earlier application is encouraged. Management does not expect that the
effect of adopting this standard will have a material impact on the
Company's financial statements.
Federal Income Taxes - Riviera Holdings Corporation allocated income tax
expense or benefit to the Company as if the Company were filing separate
tax returns pursuant to a tax sharing arrangement. The Company accounts
for income taxes in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes." The Company had
no results of operation through December 31, 1998 that would have created
taxable events. Accordingly, no provision is shown in these financial
statements through December 31, 1998.
F-8
<PAGE>
2. RELATED-PARTY TRANSACTIONS
As of December 31, 1998, Riviera Holdings Corporation has contributed
$15.1 million to acquire land for the casino in Black Hawk and $4.9
million in cash for developing the land for the casino, for a total
capital contribution of $20 million.
At December 31, 1998, the Company owed approximately $6.2 million to
Riviera Holdings Corporation, representing advances made by Riviera
Holdings Corporation for costs related to the development of the Riviera
Black Hawk casino. The advances are bearing interest at 10.6 percent and
are due June 30, 2000.
The Company has entered into a management agreement in principle (the
"Management Agreement") with Riviera Gaming Management of Colorado, Inc.,
(the "Manager") a wholly owned subsidiary of Riviera Holdings Corporation,
which, in exchange for a fee, will manage the Company. The management fee
will consist of a revenue fee and a performance fee. The revenue fee will
be based on 1% of net revenues (gross revenues less complimentaries) and
is payable quarterly in arrears. The performance fee will be based on the
following percentages of EBITDA (earnings before interest, taxes,
depreciation and amortization, whose components are based on generally
accepted accounting principles): (1) 10% of EBITDA from $5 million to $10
million, (2) 15% of EBITDA from $10 million to $15 million and (3) 20% of
EBITDA in excess of $15 million. The performance fee will be based on the
preceding quarter's EBITDA, paid in quarterly installments subject to
year-end adjustment. The management fee will go into effect on the date of
the opening of the Riviera Black Hawk casino.
If there is any default under the management agreement, the manager will
not be entitled to receive management fees, but the manager will still be
entitled to inter-company service fees.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31 (amounts in
thousands):
1998 1997
Land and improvements $15,790 $15,100
Construction in progress 11,322 1,483
------- -------
Total property and equipment $27,112 $16,583
======= =======
In 1998 and 1997, $2.0 million and $.6 million, respectively, in interest
costs were capitalized on the construction project.
4. SPECIAL IMPROVEMENT DISTRICT BONDS
The City of Black Hawk, Colorado, issued Special Improvement District
bonds ("SID bonds") in the amount of $2.9 million in July 1998. The bond
proceeds will be used to finance surface, underground, and utility
improvements, widen and improve a bridge, and improve traffic signals and
other infrastructure projects that benefit the Riviera Black Hawk property
and an adjacent casino. The SID bonds contain a lien provision that
attaches to the property until the bonds are fully paid.
The Company is responsible to repay approximately 50% of the bonds. At
December 31, 1998, $1.4 million of the $2.9 million had been expended on
the designated projects. The remaining bond proceeds were in a controlled
disbursement account managed by the City of Black Hawk. The Company is
recording 50% of the costs of improvements to land improvements and a
corresponding amount to SID bonds payable. The bonds accrue interest at 5%
payable semiannually on June 1, and December 1 commencing December 1,
1998.
F-9
<PAGE>
The Company's share of the debt on the SID bonds, when the project is
complete, is payable over ten years beginning in January 2000, as follows
(amounts in thousands):
1999 $ -
2000 112
2001 120
2002 127
2003 132
Thereafter 979
------
$1,470
======
5. COMMITMENTS AND CONTINGENCIES
The Company has entered into a guaranteed maximum price construction
contract for the construction of the Riviera Black Hawk at a guaranteed
maximum price of $27.6 million, including a contingency allowance of $0.5
million, for the construction of the casino, parking garage, associated
site work and all floor coverings and food service equipment. The
construction cost is fully supported by a payment and performance bond
obtained by the general contractor, Weitz, who is also required to provide
comprehensive public liability insurance, including contractual liability
coverage, in the amount of $2.0 million plus umbrella coverage in the
amount of $20.0 million. The Company has obtained builder's all risk
insurance to insure against damage to the work in place during
construction. The guaranteed maximum price is subject to decrease if there
are changes to the plans and specifications, if the work is delayed due to
actions of the owner or, due to customary contingencies that occur during
construction.
To discourage delays, liquidated damages will be payable by the general
contractor for each day that substantial completion is delayed past the
scheduled substantial completion date (as it may be extended under the
guaranteed maximum price construction contract), as follows: (1) no
penalties if the casino project is substantially completed on or before
January 31, 2000; (2) $10,000 per day each day from February 1, 2000
through February 14, 2000 that the casino project is not substantially
completed after January 31, 2000; and (3) an additional $15,000 for each
day from February 15, 2000 through June 30, 2000. In addition, to
encourage early completion of the casino, incentive fees will be payable
to the general contractor. Specifically, the guaranteed maximum price
construction contract provides: (1) if Weitz achieves substantial
completion of the project on or after December 29, 1999, but prior to
January 4, 2000, Weitz's lump sum fee shall be increased as incentive by
$10,000 for each day that the project is substantially complete prior to
January 4, 2000; and (2) if Weitz achieves substantial completion of the
project any time before December 29, 1999, Weitz's lump sum fee shall be
increased as incentive by $15,000 for each day the project is
substantially complete prior to December 29, 1999, plus the $10,000 for
each day the project is substantially complete between December 29, 1999
and January 4, 2000.
The Company has a contract for architect services for approximately $1.0
million. Substantially all expected services have been rendered and paid
on the contract at December 31, 1998.
6. SUBSEQUENT EVENTS (UNAUDITED)
During the 6 months ended June 30, 1999, Riviera Holdings Corporation
contributed another $3.5 million of additional paid in capital.
The Financial Accounting Standards Board recently issued FAS No. 137,
`Deferral of FAS 133 Accounting for Derivatives' which delays the
implementation of that pronouncement to June 15, 2000. The Company has not
determined what effect, if any, that FAS 133 may have on its results of
operations.
The impact of adopting SOP 98-5 has been to record general expenses of
$75,000 for the first six months of 1999 that the Company would otherwise
have deferred as a pre-opening cost.
F-10
<PAGE>
On June 3, 1999, the Company closed a $45 million private placement of 13%
First Mortgage Notes. The net proceeds of the placement will be used to
fund the completion of RBH's casino project in Black Hawk, Colorado. The
Riviera Holdings Corporation has not guaranteed the $45 million RBH Notes,
but has agreed to a "Capital Completion Commitment" of up to $10 million
and a "Keep Well Agreement" of $5 million per year (or an aggregate
limited to $10 million) for the first 3 years of RBH operations to cover
if (i) the $5.85 million interest on such Notes is not paid by RBH and
(ii) the amount by which RBH cash flow is less than $7.5 million per year.
The notes were issued at a cost in the amount of $3.5 million. The
deferred financing costs are being amortized over the life of the notes on
a straight-line basis which approximates the effective interest method.
The 13% First Mortgage Note Indenture provides that, in certain
circumstances, the Company must offer to repurchase the 13% Notes upon the
occurrence of a change of control or certain other events. In the event of
such mandatory redemption or repurchase prior to maturity, the Company
would be unable to pay the principal amount of the 10% Notes without a
refinancing.
The 13% First Mortgage Note Indenture contains certain covenants, which
limit the ability of the Company and its restricted subsidiaries, subject
to certain exceptions, to: (i) incur additional indebtedness; (ii) pay
dividends or other distributions, repurchase capital stock or other equity
interests or subordinated indebtedness; (iii) enter into certain
transactions with affiliates; (iv) create certain liens; sell certain
assets; and (v) enter into certain mergers and consolidations. As a result
of these restrictions, the ability of the Company to incur additional
indebtedness to fund operations or to make capital expenditures is
limited. In the event that cash flow from operations is insufficient to
cover cash requirements, the Company would be required to curtail or defer
certain of their capital expenditure programs under these circumstances,
which could have an adverse effect on the Company's operations. At June
30, 1999, the Company believes that it is in compliance with the
covenants.
Amounts related to the Riviera Black Hawk casino project in Black Hawk,
Colorado are restricted in use to that project or for the related 13%
First Mortgage Notes interest payments.
Pursuant to a deposit account agreement, dated as of June 3, 1999, among
Bank of America as deposit bank, Riviera Holdings Corporation and First
American Title Insurance Company, Riviera Holdings Corporation has
deposited $5.0 million to insure First American against mechanics lien
claims against the Black Hawk property. If no mechanics liens are
outstanding 30 days after the casino opens, such $5.0 million deposit will
be returned to Riviera Holdings Corporation.
The Company accounts for investment securities in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting
for Certain Investments in Debt and Equity Securities." SFAS No. 115
addresses the accounting and reporting for investments in equity
securities that have readily determinable fair values and for all
investments in debt securities, and requires such securities to be
classified as either held to maturity, trading, or available for sale.
Management determines the appropriate classification of its investment
securities at the time of purchase and re-evaluates such determination at
each balance sheet date. Held-to-maturity securities are carried at
amortized cost. At June 30, 1999, securities classified as held to
maturity comprised debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies, and repurchase agreements, with
an amortized cost of $5,119,000, maturing in three months or more.
******
F-11
<PAGE>
ANNEX A
RIVIERA HOLDINGS CORPORATION
Riviera Holdings Corporation's consolidated financial statements are
incorporated by reference in this prospectus only to illustrate its ability to
service its obligations under the Completion Capital Commitment and the
Keep-Well Agreement. Neither Riviera Holdings Corporation nor any of its
affiliates will participate in servicing the principal, fixed interest,
contingent interest or other payments due on the notes. Neither Riviera Holdings
Corporation nor any of its affiliates has any obligation to make any payments of
any kind to the holders of the notes.
A-1
<PAGE>
================================================================================
We have not authorized any dealer, salesperson or other person to give any
information or represent anything to you other than the information contained in
this prospectus. This prospectus does not offer to buy or sell any notes in any
jurisdiction where it is unlawful. You must not rely on unauthorized information
or representations. The information contained in this prospectus is current only
as of its date.
----------------
TABLE OF CONTENTS
Forward-Looking Statements.................................iii
Summary......................................................1
Risk Factors.................................................8
Use Of Proceeds.............................................15
Capitalization..............................................15
Selected Financial Information..............................16
Ratio Of Earnings To Fixed Charges..........................17
Management's Discussion And Analysis Of Financial Condition
And Results Of Operations..................................18
The Exchange Offer..........................................21
Business....................................................28
Gaming And Liquor Regulatory Matters........................33
Material Agreements.........................................37
Management..................................................39
Principal Stockholders......................................41
Relationships And Related Transactions......................43
Description Of Notes........................................44
United States Federal Income Tax Considerations.............64
Plan Of Distribution........................................67
Legal Matters...............................................68
Experts.....................................................68
Available Information.......................................68
Until _____ __, 1999 (90 days after the effective date of this Registration
Statement), all dealers effecting transactions in the exchange notes,
whether or not participating in the original distribution, may be required
to deliver a prospectus. This is in addition to the obligation of dealers
to deliver a prospectus when acting as underwriters and with respect to
their unsold allotments or subscriptions.
================================================================================
================================================================================
$45,000,000
[LOGO]
Riviera Black Hawk, Inc.
OFFER TO EXCHANGE
13% First Mortgage Notes
due 2005
With Contingent Interest
for all outstanding
13% First Mortgage Notes
due 2005
With Contingent Interest
-------------------------
PROSPECTUS
-------------------------
__________ __, 1999
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Article 109 of the Colorado Business Corporation Act provides in relevant
part that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that such person is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
such person's conduct was unlawful.
In addition, Article 109 provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation.
Article 109 also provides that to the extent a director, officer, employee
or agent of a corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to above, or defense of any
claim issue or matter therein, he shall be indemnified against expenses
(including attorney's fees) actually and reasonably incurred by him in
connection therewith.
The Bylaws of the Company provide for the indemnification of any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (a "proceeding") by reason of the fact that such person is or
was a director or officer of the Company or a constituent corporation absorbed
in a consolidation or merger, or is or was serving at the request of the Company
or a constituent corporation absorbed in a consolidation or merger, as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise, or is or was a director or officer of the Company serving at
its request as an administrator, trustee or other fiduciary of one or more of
the employee benefit plans of the Company or other enterprise, against expenses
(including attorneys' fees), liability and loss actually and reasonably incurred
or suffered by such person in connection with such proceeding, whether or not
the indemnified liability arises or arose from any threatened, pending or
completed proceeding by or in the right of the Company, except to the extent
that such indemnification is prohibited by applicable law. The Bylaws of the
Company also provide that such indemnification shall not be deemed exclusive of
any other rights to which those indemnified may be entitled as a matter of law
or under any by-law, agreement, vote of stockholders or otherwise.
Section 7-108-402 of the Colorado Business Corporation Act provides that a
corporation may in its articles of incorporation eliminate or limit the personal
liability of a director to the corporation or its shareholders for monetary
damages for breach of fiduciary duty as a director except for liability: for any
breach of the director's duty of loyalty to the corporation or its shareholders;
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law; for acts specified in Section 7-108-403 of the
Colorado Business Corporation Act (pertaining to certain prohibited acts
including unlawful payments of dividends or unlawful purchases or redemptions of
the corporation's capital stock); or for any transaction from which the director
derived an improper personal benefit. The Articles of Incorporation of the
Company contains a provision so limiting the personal liability of directors of
the Company.
II-1
<PAGE>
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits:
EXHIBIT INDEX
Exhibit No. Description
- ------------- ----------------------------------------------------------------
3.01 Articles of Amendment to the Articles of Incorporation of the
Company.+
3.02 Articles of Incorporation of the Company.+
3.03 Bylaws of the Company.+
4.01 Indenture, dated as of June 3, 1999, among the Company, Riviera
Holdings and the Initial Purchaser.++
4.02 Form of 13% First Mortgage Note due 2005 with Contingent
Interest (included in Exhibit 4.01).++
4.03 Purchase Agreement, dated as of May 27, 1999, by and among the
Company, Riviera Holdings and the Initial Purchaser.++
4.04 Registration Rights Agreement, dated as of June 3, 1999, by and
between the Company and the Initial Purchaser.++
5.01 Opinion of Dechert Price & Rhoads.++
10.01 The Completion Capital Commitment, dated as of June 3, 1999, by
and between the Company and Riviera Holdings.++
10.02 The Keep-Well Agreement, dated as of June 3, 1999, by and
between the Company and Riviera Holdings.++
10.03 The Tax-Sharing Agreement, dated as of June 3, 1999, by and
between the Company and Riviera Holdings.++
10.04 The Management Agreement, dated as of June 3, 1999, by and
between the Company and Riviera Gaming Management of Colorado,
Inc.++
10.05 The Trademark License Agreement, dated as of June 3, 1999, by
and between the Company and Riviera Operating Corporation.++
10.06 The Deed of Trust, dated as of June 3, 1999, made by the Company
to the Public Trustee of the County of Gilpin, Colorado, for the
benefit of the Trustee.++
10.07 The Assignment of Rents.++
10.08 The Environmental Indemnity, dated as of June 3, 1999, between
the Company and the Trustee.++
10.09 The Cash Collateral and Disbursement Agreement, dated as of June
3, 1999, among the Company, the Trustee and Crss Constructors,
Inc.++
10.10 The Account Agreement, dated as of June 3, 1999, among the
Company, the Trustee and IBJ Whitehall Bank and Trust Company.++
10.11 The Security Agreement, dated as of June 3, 1999, made by the
Company in favor of the Trustee.++
<PAGE>
10.12 The Manager Subordination Agreement, dated as of June 3, 1999,
by Riviera Gaming Management of Colorado in favor of the
Trustee.++
10.13 The Collateral Assignment of Trademark, dated as of June 3,
1999, by and between the Company and the Trustee.++
10.14 The Collateral Assignment, dated as of June 3, 1999, by and
between the Company and the Trustee.++
10.15 The Pledge and Assignment Agreement, dated as of June 3, 1999,
by and between the Company and the Trustee.++
10.16 Deposit Account Agreement, dated as of June 1999, among Bank of
America, Riviera Holdings and First American Title Insurance
Company.+
10.17 Construction Contract, made as of December 29, 1997, among the
Company, Weitz-Cohen Construction Co. and Melick Associates,
Inc.+
23.01 Consent of Dechert Price & Rhoads (included in the opinion filed
as Exhibit 5.01).++
23.02 Consent of Deloitte & Touche LLP for Riviera Black Hawk, Inc.+
23.03 Consent of Deloitte & Touche LLP for Riviera Holdings
Corporation.+
23.04 Consent of Holme Roberts & Owen LLP.+++
23.05 Consent of Verner, Liipfert, Bernhard, McPherson & Hand,
Chartered.+++
99.01 Form of Letter of Transmittal.++
99.02 Form of Notice of Guaranteed Delivery.++
* Pursuant to Item 601(b)(2) of Regulation S-K, the schedules to this
Agreement are omitted. The Exhibit contains a list identifying the
contents of all schedules and the Registrants agree to furnish
supplementally copies of such schedules to the Commission upon request.
- --------------------
+ Filed herewith.
++ Previously filed.
+++ To be filed by amendment.
<PAGE>
(b) Financial Statement Schedules:
Schedules not listed above are omitted because of the absence of the
conditions under which they are required or because the information required by
such omitted schedules is set forth in the financial statements or the notes
thereto.
Item 22. Undertakings
(a) Each of the undersigned registrants hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would
not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration
statement; and
(iii) to include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
each registrant pursuant to the foregoing provisions, or otherwise, each
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrants of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, each registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(c) Each of the undersigned registrants hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11 or 13 of this Form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
(d) Each of the undersigned registrants hereby undertakes to supply by means
of a post-effective amendment all information concerning a transaction, and the
corporation being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
below-named Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Las
Vegas, State of Nevada, on the 30th day of August 1999.
RIVIERA BLACK HAWK, INC.
By: /s/ William L. Westerman
----------------------------------------
William L. Westerman
Chief Executive Officer and Director
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities at the above-named Registrant on the 30th day of August, 1999.
By: /s/ Ronald P. Johnson
----------------------------------------
Ronald P. Johnson
President and Director
By: /s/ Duane R. Krohn
----------------------------------------
Duane R. Krohn
Secretary, Treasurer, Chief Financial Officer
and Director
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
3.01 Articles of Amendment to the Articles of Incorporation of the
Company.+
3.02 Articles of Incorporation of the Company.+
3.03 Bylaws of the Company.+
4.01 Indenture, dated as of June 3, 1999, among the Company, Riviera
Holdings and the Initial Purchaser.++
4.02 Form of 13% First Mortgage Note due 2005 with Contingent Interest
(included in Exhibit 4.01).++
4.03 Purchase Agreement, dated as of May 27, 1999, by and among the
Company, Riviera Holdings and the Initial Purchaser.++
4.04 Registration Rights Agreement, dated as of June 3, 1999, by and
between the Company and the Initial Purchaser.++
5.01 Opinion of Dechert Price & Rhoads.++
10.01 The Completion Capital Commitment, dated as of June 3, 1999, by
and between the Company and Riviera Holdings.++
10.02 The Keep-Well Agreement, dated as of June 3, 1999, by and between
the Company and Riviera Holdings.++
10.03 The Tax-Sharing Agreement, dated as of June 3, 1999, by and
between the Company and Riviera Holdings.++
10.04 The Management Agreement, dated as of June 3, 1999, by and between
the Company and Riviera Gaming Management of Colorado, Inc.++
10.05 The Trademark License Agreement, dated as of June 3, 1999, by and
between the Company and Riviera Operating Corporation.++
10.06 The Deed of Trust, dated as of June 3, 1999, made by the Company
to the Public Trustee of the County of Gilpin, Colorado, for the
benefit of the Trustee.++
10.07 The Assignment of Rents.++
10.08 The Environmental Indemnity, dated as of June 3, 1999, between the
Company and the Trustee.++
10.09 The Cash Collateral and Disbursement Agreement, dated as of June
3, 1999, among the Company, the Trustee and Crss Constructors,
Inc.++
10.10 The Account Agreement, dated as of June 3, 1999, among the
Company, the Trustee and IBJ Whitehall Bank and Trust Company.++
10.11 The Security Agreement, dated as of June 3, 1999, made by the
Company in favor of the Trustee.++
<PAGE>
10.12 The Manager Subordination Agreement, dated as of June 3, 1999, by
Riviera Gaming Management of Colorado in favor of the Trustee.++
10.13 The Collateral Assignment of Trademark, dated as of June 3, 1999,
by and between the Company and the Trustee.++
10.14 The Collateral Assignment, dated as of June 3, 1999, by and
between the Company and the Trustee.++
10.15 The Pledge and Assignment Agreement, dated as of June 3, 1999, by
and between the Company and the Trustee.++
10.16 Deposit Account Agreement, dated as of June 1999, among Bank of
America, Riviera Holdings and First American Title Insurance
Company.+
10.17 Construction Contract, made as of December 29, 1987, among the
Company, Weitz-Cohen Construction Co. and Melick Associates, Inc.+
23.01 Consent of Dechert Price & Rhoads (included in the opinion filed
as Exhibit 5.01).++
23.02 Consent of Deloitte & Touche LLP for Riviera Black Hawk, Inc.+
23.03 Consent of Deloitte & Touche LLP for Riviera Holdings Corporation.+
23.04 Consent of Holme Roberts & Owen LLP.+++
23.05 Consent of Verner, Liipfert, Bernhard, McPherson & Hand,
Chartered.+++
99.01 Form of Letter of Transmittal.++
99.02 Form of Notice of Guaranteed Delivery.++
* Pursuant to Item 601(b)(2) of Regulation S-K, the schedules to this
Agreement are omitted. The Exhibit contains a list identifying the
contents of all schedules and the Registrants agree to furnish
supplementally copies of such schedules to the Commission upon request.
- -------------------
+ Filed herewith.
++ Previously filed.
+++ To be filed by amendment.
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
RIVIERA BLACK HAWK, INC.
Pursuant to the provisions of the Colorado Business Corporation Act,
the undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the corporation is: RIVIERA BLACK HAWK, INC.
SECOND: The following amendment to the Articles of Incorporation was
adopted on February 28, 1999. Such amendment was adopted by
unanimous vote of the sole shareholder.
THIRD: The Articles of Incorporation of the corporation filed on
August 18, 1997, are amended to add a new Article which is numbered
IX to be and read as follows:
ARTICLE IX
Required Transfer Restrictions
The corporation shall not issue any voting securities or other
voting interests except in accordance with the provisions of the Colorado
Limited Gaming Act and the regulations promulgated thereunder. The issuance of
any voting securities or other voting interests in violation thereof shall be
void and such voting securities or other voting interests shall be deemed not to
be issued and outstanding until (a) the corporation shall cease to be subject to
the jurisdiction of the Colorado Limited Gaming Control Commission, or (b) the
Colorado Limited Gaming Control Commission shall, by affirmative action,
validate said issuance or waive any defect in issuance.
No voting securities or other voting interests issued by the
corporation and no interest, claim or charge therein or thereto shall be
transferred in any manner whatsoever except in accordance with the provisions of
the Colorado Limited Gaming Act and the regulations promulgated thereunder. Any
transfer in violation thereof shall be void until (a) the corporation shall
cease to be subject to the jurisdiction of the Colorado Limited Gaming Control
commission, or (b) the Colorado Limited Gaming Control Commission shall, by
affirmative action, validate said transfer or waive any defect in said transfer.
If the Colorado Limited Gaming Control Commission at any time
determines that a holder of voting securities or other voting interests in this
corporation is unsuitable to hold such securities or other voting interests,
then the issuer of such voting securities or other voting interests may, within
sixty (60) days after the finding of unsuitability, purchase such voting
securities or other voting interests of such unsuitable person at the lesser of
<PAGE>
(i) the cash equivalent of such person's investment in the corporation, or (ii)
the current market price as of the date of the finding of unsuitability unless
such voting securities or other voting interests are transferred to a suitable
person (as determined by the Commission) within sixty (60) days after the
finding of unsuitability. Until such voting securities or other voting interests
are owned by persons found by the Commission to be suitable to own them, (a) the
corporation shall not be required or permitted to pay any dividend or interest
with regard to the voting securities or other voting interests, (b) the holder
of such voting securities or other voting interests shall not be entitled to
vote on any matter as the holder of the voting securities or other voting
interests, and such voting securities or other voting interests of the
corporation entitled to vote, and (c) the corporation shall not pay any
remuneration in any form to the holder of the voting securities or other voting
interests except in exchange for such voting securities or other voting
interests as provided in this paragraph.
RIVIERA BLACK HAWK, INC.
By:________________________________
William L. Westerman, President
2
ARTICLES OF INCORPORATION
OF
RIVIERA BLACK HAWK, INC.
The undersigned natural person, being more than 18 years of age,
hereby establishes a corporation pursuant to the Colorado Business Corporation
Act (the "Act") and adopts the following articles of incorporation:
ARTICLE I
Name
The name of the corporation is Riviera Black Hawk, Inc.
ARTICLE II
Capital; Shareholders
2.1 Authorized Capital. The aggregate number of shares that the
corporation shall have authority to issue is 10,000 shares of common stock each
having a par value of $.01.
2.2 Voting of Shares. Each shareholder of record entitled to vote
shall have one vote for each share of stock standing in his name on the books of
the corporation, except that in the election of directors he shall have the
right to vote such number of shares for as many persons as there are directors
to be elected. Cumulative voting shall not be allowed in the election of
directors or for any other purpose.
2.3 Quorum; Vote Required. At all meetings of shareholders, a
majority of the shares entitled to vote at such meeting, represented in person
or by proxy, shall constitute a quorum; and at any meeting at which a quorum is
present the affirmative vote of a majority of the votes cast on the matter
represented at such meeting and entitled to vote on the subject matter shall be
the act of the shareholders, unless the vote of a greater proportion or number
is required by the laws of Colorado.
<PAGE>
ARTICLE III
No Preemptive Rights
No shareholder of the corporation shall have any preemptive or
similar right to acquire or subscribe for any additional unissued shares of
stock, or other securities of any class, or rights, warrants or options to
purchase stock or scrip, or securities of any kind convertible into stock or
carrying stock purchase warrants or privileges.
ARTICLE IV
Board of Directors
The corporate powers shall be exercised by or under the authority
of, and the business and affairs of the corporation shall be managed under the
direction of, a board of directors.
ARTICLE V
Limitation on Liability
To the fullest extent permitted by the Act, as the same exists or
may hereafter be amended, a director of the corporation shall not be personally
liable to the corporation or its shareholders for monetary damages for breach of
fiduciary duty as a director, except that this provision shall not eliminate or
limit the liability of a director to the Corporation or to its shareholders for
monetary damages otherwise existing for (i) any breach of the director's duty of
loyalty to the Corporation or to its shareholders; (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law; (iii) acts specified in Section 7-108-403 of the Act relating to any
unlawful distribution; or (iv) any transaction from which the director directly
or indirectly derived any improper personal benefit. If the Act is hereafter
amended to eliminate or limit further the liability of a director, then, in
addition to the elimination and limitation of liability provided by the
preceding sentence, the liability of each director shall be eliminated or
limited to the fullest extent permitted by the Act as so amended. Any repeal or
modification of this Article by the shareholders of the corporation shall be
prospective only and shall not adversely affect any right or protection of a
director of the corporation existing at the time of such repeal or modification.
2
<PAGE>
ARTICLE VI
INDEMNIFICATION
The corporation shall indemnify officers, directors, employees or
agents to the extent provided in the bylaws.
ARTICLE VII
Offices
7.1 Registered Agent. The street address of the initial registered
office of the corporation is 1675 Broadway, Suite 1200, Denver, CO 80202. The
name of its initial registered agent at such address is CT Corporation Systems.
The written consent of the initial registered agent to the appointment as such
is stated below.
7.2 Principal Office. The address of the corporation's initial
principal office is 1675 Broadway, Suite 1200, Denver, CO 80202.
ARTICLE VIII
Incorporator
The name and address of the incorporator is Thomas A. Richardson,
1700 Lincoln, Suite 4100, Denver, Colorado 80203
Dated: August 7, 1997
---------------------------------
Thomas A. Richardson
3
<PAGE>
REGISTERED AGENT'S ACCEPTANCE OF APPOINTMENT
The undersigned officer of CT Corporation Systems hereby consents to the
corporation's appointment as the initial registered agent for Riviera Gaming
Management of Colorado, Inc.
CT CORPORATION SYSTEMS
By:___________________________
Its:__________________________
4
BYLAWS
OF
RIVIERA BLACK HAWK, INC.
Adopted August 18, 1997
<PAGE>
INDEX TO BYLAWS
OF
RIVIERA BLACK HAWK, INC
ARTICLE I - Offices
Section 1.01 Business Office 1
Section 1.02 Registered Office 1
ARTICLE II - Shareholders
Section 2.01 Annual Meeting 1
Section 2.02 Special Meetings 1
Section 2.03 Place of Meetings 1
Section 2.04 Notice of Meetings 2
Section 2.05 Waiver of Notice 2
Section 2.06 Fixing of Record Date 2
Section 2.07 Voting List 3
Section 2.08 Proxies 3
Section 2.09 Quorum and Voting Rights 3
Section 2.10 Extraordinary Matters; Voting Rights 4
Section 2.11 Conflicting Interest Transaction; Notice Rights 4
Section 2.12 Voting of Shares. 5
Section 2.13 Voting of Shares by Certain Holders 5
Section 2.14 Action Without a Meeting 6
ARTICLE III - Board of Directors
Section 3.01 General Powers 7
Section 3.02 Number, Tenure and Qualifications 7
Section 3.03 Resignation 7
Section 3.04 Removal 7
Section 3.05 Vacancies 7
Section 3.06 Regular Meetings 8
Section 3.07 Special Meetings 8
Section 3.08 Meetings by Telephone 8
Section 3.09 Notice of Meetings 8
Section 3.10 Waiver of Notice 9
Section 3.11 Presumption of Assent 9
Section 3.12 Quorum and Voting Rights 9
Section 3.13 Action Without a Meeting 9
Section 3.14 Executive and Other Committees 10
Section 3.15 Compensation 10
-i-
<PAGE>
ARTICLE IV - Officers
Section 4.01 Number and Qualifications 11
Section 4.02 Appointment and Term of Office 11
Section 4.03 Compensation 11
Section 4.04 Resignation 11
Section 4.05 Removal 11
Section 4.06 Vacancies 12
Section 4.07 Authority and Duties 12
Section 4.08 Surety Bonds 13
ARTICLE V - Stock
Section 5.01 Issuance of Shares 13
Section 5.02 Stock Certificates; Uncertificated Shares 13
Section 5.03 Consideration for Shares 14
Section 5.04 Lost Certificates 14
Section 5.05 Transfer of Shares 14
Section 5.06 Holders of Record 14
Section 5.07 Shares Held for Account of Another 14
Section 5.08 Transfer Agents, Registrars and Paying Agents 15
ARTICLE VI - Indemnification
Section 6.01 Definitions 15
Section 6.02 Right to Indemnification 16
Section 6.03 Advancement of Expenses 16
Section 6.04 Burden of Proof 17
Section 6.05 Notification and Defense of Claim 17
Section 6.06 Notice to Shareholders of Indemnification of
Director 18
Section 6.07 Enforcement 18
Section 6.08 Proceedings by a Party 18
Section 6.09 Subrogation 18
Section 6.10 Other Payments 19
Section 6.11 Insurance 19
Section 6.12 Indemnification of Officers, Employees,
Figuciaries and Agents 19
Section 6.13 Other Rights and Remedies 19
Section 6.14 Applicability; Effect 19
Section 6.15 Severability 20
ARTICLE VII - Miscellaneous
Section 7.01 Voting of Securities by the Corporation 20
Section 7.02 Seal 20
-ii-
<PAGE>
Section 7.03 Fiscal Year 20
Section 7.04 Amendments 20
-iii-
<PAGE>
BYLAWS
OF
RIVIERA BLACK HAWK, INC.
ARTICLE I
Offices
Section 1.01 Business Offices. The corporation may have such
offices, either within or outside Colorado, as the board of directors may from
time to time determine or as the business of the corporation may require.
Section 1.02 Registered Office. The registered office of the
corporation required by the Colorado Business Corporation Act (the "Act") to be
maintained in Colorado shall be as set forth in the articles of incorporation,
unless changed as provided by law.
ARTICLE II
Shareholders
Section 2.01 Annual Meeting. An annual meeting of the shareholders
shall be held in the month of May each year on such date and at such time as the
board of directors shall fix in the notice of meeting, beginning with the year
1998, for the purpose of electing directors and for the transaction of such
other business as may come before the meeting. If the day fixed for the annual
meeting is a legal holiday in Colorado, the meeting shall be held on the next
succeeding business day. If the election of directors shall not be held on the
day designated herein for any annual meeting of the shareholders, or at any
adjournment thereof, the board of directors shall cause the election to be held
at a meeting of the shareholders as soon thereafter as conveniently may be.
Failure to hold an annual meeting as required by these bylaws shall not
invalidate any action taken by the board of directors or officers of the
corporation.
Section 2.02 Special Meetings. Special meetings of the shareholders,
for any purpose or purposes, unless otherwise prescribed by statute, may be
called by the president or the board of directors, and shall be called by the
president or the board of directors at the written, dated and executed, demand
of the holders of not less than one-tenth of all the votes of the corporation
entitled to be cast on any proposed issue to be considered.
Section 2.03 Place of Meetings. Each meeting of the shareholders
shall be held at such place, either within or outside Colorado, as may be
designated in the notice of meeting, or, if no place is designated in the
notice, at the principal office of the corporation if in Colorado or, if the
<PAGE>
principal office is not located in Colorado, at the registered office of the
corporation in Colorado.
Section 2.04 Notice of Meetings. Except as otherwise required by
law, written notice of each meeting of the shareholders stating the place, day
and hour of the meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called shall be given, either personally
(including delivery by private courier) or by first class, certified or
registered mail, to each shareholder of record entitled to notice of such
meeting, not less than 10 nor more than 60 days before the date of the meeting,
except that if the authorized shares of the corporation are to be increased, at
least 30 days notice shall be given, and, if the sale, lease, exchange or other
disposition of all or substantially all of the property and assets of the
corporation not in the usual and regular course of business is to be voted on,
at least 20 days notice shall be given. Such notice shall be deemed to be given
in person when delivered to the shareholder by telephone, telegraph, teletype,
electronically transmitted facsimile or other form of wire or wireless
communication or by mail or private carrier. If mailed, such notice shall be
deemed to be given as to each shareholder when deposited in the United States
mail, addressed to the shareholder at the shareholder's address shown in the
corporation's current record of shareholders, with postage thereon prepaid, but,
if three successive notices mailed to the last-known address of any shareholder
of record are returned as undeliverable, no further notices to such shareholder
shall be necessary until another address for such shareholder is made known to
the corporation. If a meeting is adjourned to another time or place, notice need
not be given if the time and place thereof are announced at the meeting, unless
the adjournment is for more than 30 days or if after the adjournment a new
record date is fixed, in either of which case notice of the adjourned meeting
shall be given to each shareholder of record entitled to vote at the meeting in
accordance with the foregoing provisions of this Section 2.04.
Section 2.05 Waiver of Notice. Whenever notice is required by law,
the articles of incorporation or these bylaws to be given to any shareholder, a
waiver thereof in writing signed by the shareholder entitled to such notice,
whether before, at or after the time stated therein, shall be equivalent to the
giving of such notice. By attending a meeting, a shareholder (a) waives
objection to lack of notice or defective notice of such meeting unless the
shareholder, at the beginning of the meeting, objects to the holding of the
meeting or the transacting of business at the meeting because of lack of notice
or defective notice, and (b) waives objection to consideration at such meeting
of a particular matter not within the purpose or purposes described in the
notice of such meeting unless the shareholder objects to considering the matter
when it is presented.
Section 2.06 Fixing of Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of the shareholders
or any adjournment thereof, or shareholders entitled to receive payment of any
dividend, or in order to make a determination of shareholders for any other
proper purpose, the board of directors may fix in advance a date as the record
date for any such determination of shareholders, such date in any case to be not
more than 70 days prior to the date on which the particular action, requiring
such determination of shareholders, is to be taken. A record date fixed for the
purpose of determining shareholders entitled to notice of a meeting of the
shareholders shall be fixed not less than 10 days immediately preceding such
meeting (30 days if the authorized stock is to be increased, 20 days if the
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sale, lease, exchange or other disposition of all or substantially all of the
property and assets of the corporation not in the usual and regular course of
business is to be considered). If no record date is so fixed, the date on which
notice of the meeting is mailed or the date on which the resolution of the board
of directors declaring the dividend is adopted, as the case may be, shall be the
record date for such determination of shareholders. When a determination of
shareholders entitled to vote at any meeting of the shareholders has been made
as provided in this Section, such determination shall apply to any adjournment
thereof. Notwithstanding the foregoing provisions of this Section, the record
date for determining shareholders entitled to take action without a meeting as
provided in Section 2.14 below shall be the date specified in such Section.
Section 2.07 Voting List. After fixing the record date, the officer
or agent having charge of the stock transfer books for shares of the corporation
shall make a complete record of the shareholders entitled to be given notice of
the meeting or any adjournment thereof. The list shall be arranged by voting
groups and within each voting group by class or series of shares, shall be
alphabetical within each class or series, and shall show the address of, and the
number of shares of each class and series that are held by, each shareholder.
For a period of 10 days before such meeting or two business days after notice of
the meeting is given, whichever is earlier, this record shall be kept on file at
the principal office of the corporation, whether within or outside Colorado, and
shall be subject to inspection by any shareholder or his agent or attorney for
any purpose germane to the meeting at any time during usual business hours. Such
record shall also be produced and kept open at the time and place of the meeting
and any adjournment thereof and shall be subject to the inspection of any
shareholder or his agent or attorney for any purpose germane to the meeting
during the whole time of the meeting. The original stock transfer books shall be
prima facie evidence as to who are the shareholders entitled to examine such
record or transfer books or to vote at any meeting of the shareholders.
Section 2.08 Proxies. At any meeting of the shareholders, a
shareholder may vote by proxy executed in writing by the shareholder or his duly
authorized attorney-in-fact. Such proxy shall be filed with the secretary of the
corporation before or at the time of the meeting. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise provided in the
proxy.
Section 2.09 Quorum and Voting Rights. At all meetings of
shareholders, a majority of the outstanding shares of the corporation entitled
to vote on a matter, represented in person or by proxy, shall constitute a
quorum with respect to each matter. If a quorum is present, action on a matter,
other than the election of directors, by a voting group is approved if the votes
cast within the voting group favoring the action exceed the votes cast within
the voting group opposing the action, unless the vote of a greater proportion or
number is otherwise required by the Act, the articles of incorporation or these
bylaws. Notwithstanding the foregoing, an amendment to the articles of
incorporation that adds, changes or deletes a greater quorum or voting
requirement shall meet the same quorum requirement and be adopted by the same
vote and voting groups required to take action under the quorum and voting
requirements then in effect or proposed to be adopted, whichever is greater. In
the absence of a quorum on any matter, a majority of the shares so represented
may adjourn the meeting with respect to such matter from time to time for a
period not to exceed 60 days at any one adjournment. At any such adjourned
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meeting, at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the original meeting.
Section 2.10 Extraordinary Matters; Voting Rights. Notwithstanding
the provisions of Section 2.09, the following actions shall be approved by each
voting group entitled to vote separately on the subject matter by a majority of
all of the votes entitled to be cast by such voting group: (a) adopting an
amendment or amendments to the articles of incorporation which would create
dissenters' rights; (b) authorizing the sale, lease, exchange or other
disposition of all or substantially all of the property and assets of the
corporation, with or without its goodwill, not in the usual and regular course
of business; (c) approving a plan of merger, consolidation or exchange that is
required to be approved by the shareholders; (d) adopting a resolution submitted
by the board of directors to dissolve the corporation; and (e) adopting a
resolution submitted by the board of directors to revoke voluntary dissolution
proceedings.
Section 2.11 Conflicting Interest Transaction; Notice Rights. A
conflicting interest transaction is any loan or other assistance by the
corporation to a director or to an entity in which a director of the corporation
is a director or officer or has a financial interest; a guaranty by the
corporation of an obligation of a director or of an obligation of an entity in
which a director of the corporation is a director or officer or has a financial
interest; or a contract or transaction between the corporation and a director or
between the corporation and an entity in which a director of the corporation is
a director or officer or has a financial interest.
No conflicting interest transaction shall be void or voidable or be
enjoined, set aside or give rise to an award of damages or other sanctions in a
proceeding by a shareholder or by or in the right of the corporation, solely
because the conflicting interest transaction involves a director of the
corporation or an entity in which a director of the corporation is a director or
officer or has a financial interest or solely because the director is present at
or participates in the meeting of the corporation's board of directors or of the
committee of the board of directors which authorizes, approves or ratifies the
conflicting interest transaction or solely because the director's vote is
counted for such purpose, if: (a) the material facts as to the director's
relationship or interest and as to the conflicting interest transaction are
disclosed or are known to the board of directors or the committee, and the board
of directors or committee in good faith authorizes, approves or ratifies the
conflicting interest transaction by the affirmative vote of a majority of the
disinterested directors, even though the disinterested directors are less than a
quorum; or (b) the material facts as to the director's relationship or interest
and as to the conflicting interest transaction are disclosed or are known to the
shareholders entitled to vote thereon, and the conflicting interest transaction
is specifically authorized, approved or ratified in good faith by a vote of the
shareholders; or (c) the conflicting interest transaction is fair as to the
corporation as of the time it is authorized, approved or ratified by the board
of directors, a committee thereof or the shareholders.
A board of directors or a committee thereof shall not authorize a
loan, by the corporation to a director of the corporation or to an entity in
which a director of the corporation is a director or officer or has a financial
interest, or a guaranty, by the corporation of an obligation of a director of
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the corporation or of an obligation of an entity in which a director of the
corporation is a director or officer or has a financial interest, pursuant to
(a) until at least 10 days after written notice of the proposed authorization of
the loan or guaranty has been given to the shareholders who would be entitled to
vote thereon if the issue of the loan or guaranty were submitted to a vote of
the shareholders.
Section 2.12 Voting of Shares. Subject to the provisions of Section
2.06, each outstanding share of record, regardless of class, is entitled to one
vote, and each outstanding fractional share of record is entitled to a
corresponding fractional vote, on each matter submitted to a vote of the
shareholders either at a meeting thereof or pursuant to Section 2.14, except to
the extent that the voting rights of the shares of any class or classes are
limited, increased or denied by the articles of incorporation as permitted by
the Act. In the election of directors, each record holder of stock entitled to
vote at such election shall have the right to vote the number of shares owned by
him for as many persons as there are directors to be elected, and for whose
election he has the right to vote. Cumulative voting shall not be allowed.
Section 2.13 Voting of Shares by Certain Holders.
(a) Shares Held or Controlled by the Corporation. No shares held by
another corporation shall be voted at any meeting or counted in determining a
quorum if a majority of the shares entitled to vote for the election of
directors of such other corporation is held by this corporation.
(b) Shares Held by Another Corporation. Shares standing in the name
of another corporation may be voted by such officer, agent or proxy as the
bylaws of such corporation may prescribe or, in the absence of such provision,
as the board of directors of such corporation may determine.
(c) Shares Held by More Than One Person. Shares standing of record
in the names of two or more persons, whether fiduciaries, members of a
partnership, joint tenants, tenants in common, tenants by the entirety or
otherwise, or if two or more persons have the same fiduciary relationship
respecting the same shares, voting with respect to the shares shall have the
following effects: (i) if only one person votes, his act binds all; (ii) if two
or more persons vote, the act of the majority so voting binds all; (iii) if two
or more persons vote, but the vote is evenly split on any particular matter,
each faction may vote the shares in question proportionally, or any person
voting the shares of a beneficiary, if any, may apply to any court of competent
jurisdiction in Colorado to appoint an additional person to act with the persons
so voting the shares, in which case the shares shall be voted as determined by a
majority of such persons; and (iv) if a tenancy is held in unequal interests, a
majority or even split for the purposes of subparagraph (iii) shall be a
majority or even split in interest. The foregoing effects of voting shall not be
applicable if the secretary of the corporation is given written notice of
alternative voting provisions and is furnished with a copy of the instrument or
order wherein the alternative voting provisions are stated.
(d) Shares Held in Trust or by a Personal Representative. Shares
held by an administrator, executor, guardian, conservator or other personal
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representative may be voted by him, either in person or by proxy, without a
transfer of such shares into his name. Shares standing in the name of a trustee
may be voted by him, either in person or by proxy, but no trustee shall be
entitled to vote shares held by him without a transfer of such shares into his
name.
(e) Shares Held by a Receiver. Shares standing in the name of a
receiver may be voted by such receiver and shares held by or under the control
of a receiver may be voted by such receiver without the transfer thereof into
his name if authority so to do is contained in an appropriate order of the court
by which such receiver was appointed.
(f) Pledged Shares. A shareholder whose shares are pledged shall be
entitled to vote such shares until the shares have been transferred into the
name of the pledgee, and thereafter the pledgee shall be entitled to vote the
shares so transferred.
(g) Redeemable Shares Called for Redemption. Redeemable shares that
have been called for redemption shall not be entitled to vote on any matter and
shall not be deemed outstanding shares on and after the date on which written
notice of redemption has been mailed to shareholders and a sum sufficient to
redeem such shares has been deposited with a bank, trust company or other
financial institution with irrevocable instruction and authority to pay the
redemption price to the holders of the shares upon surrender of certificates
therefor.
(h) Shares Held in a Fiduciary Capacity. The corporation may vote
any shares, including its own shares, held by it in a fiduciary capacity.
Section 2.14 Action Without a Meeting. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by all of the shareholders
entitled to vote with respect to the subject matter thereof. Such consent (which
may be signed in counterparts) shall have the same force and effect as a
unanimous vote of the shareholders and may be stated as such in any document.
Unless the consent specifies a different effective date, action taken without a
meeting pursuant to a consent in writing as provided herein shall be effective
when all shareholders entitled to vote on the subject matter have signed the
consent. The record date for determining shareholders entitled to take action
without a meeting or entitled to be given notice is the date a writing upon
which the action is taken is first received by the corporation. All consents
signed pursuant to this Section 2.14 shall be either delivered to the
corporation or received by the corporation by electronically transmitted
facsimile or other form of wire or wireless communication providing the
corporation with a complete copy thereof, including a copy of the signatures for
inclusion in the minutes or for filing with the corporate records. Any
shareholder who has signed a writing describing and consenting to action taken
pursuant to this section may revoke such consent by a writing signed by the
shareholder describing the action and stating that the shareholder's prior
consent thereto is revoked, if such writing is received by the corporation
before the corporation has actually received consents signed by all
shareholders, regardless of the effective date reflected in the consents or at
any time before a specified effective date if the date specified in the consent
is subsequent to the date the signed consents are received. Unless otherwise
provided by the articles of incorporation, one or more shareholders may
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participate in a meeting of the shareholders by, or the meeting may be conducted
through the use of, any means of communication equipment by which all persons
participating in the meeting can hear each other at the same time. Such
participation shall constitute presence in person at the meeting.
ARTICLE III
Board of Directors
Section 3.01 General Powers. All corporate powers shall be exercised
by or under the authority of, and the business and affairs of the corporation
shall be managed under the direction of, the board of directors, except as
otherwise provided in the Act, the articles of incorporation or these bylaws.
Section 3.02 Number, Tenure and Qualifications. The number of
directors of the corporation shall be as fixed from time to time by resolution
of the board of directors or shareholders. Except as provided in Sections 2.01
and 3.05, directors shall be elected at each annual meeting of the shareholders.
Each director shall hold office until the next annual meeting of the
shareholders and thereafter until his successor shall have been elected and
qualified, or until his earlier death, resignation or removal. Directors must be
natural persons at least 18 years old but need not be residents of Colorado or
shareholders of the corporation.
Section 3.03 Resignation. Any director may resign at any time by
giving written notice to the corporation. A director's resignation is effective
when it is received by the corporation unless the notice specifies a later
effective date, and the acceptance of such resignation shall not be necessary to
make it effective.
Section 3.04 Removal. At a meeting called expressly for that
purpose, the entire board of directors or any lesser number may be removed, with
or without cause, only if the number of votes cast in favor of removal exceeds
the number of votes cast against removal by those shares then entitled to vote
at an election of directors; except that if the holders of shares of any class
of stock are entitled to elect one or more directors by the provisions of the
articles of incorporation, the provisions of this Section 3.04 shall apply, with
respect to the removal of a director or directors so elected by such class, to
the vote of the holders of the outstanding shares of that class and not to the
vote of the outstanding shares as a whole. Any reduction in the authorized
number of directors shall not have the effect of shortening the term of any
incumbent director unless such director is also removed from office in
accordance with this Section 3.04.
Section 3.05 Vacancies. Unless otherwise required in the articles of
incorporation, any vacancy occurring in the board of directors, including
vacancies due to an increase in the number of directors, may be filled by the
affirmative vote of a majority of the remaining directors though less than a
quorum, or by the affirmative vote of two directors if there are only two
directors remaining, or by a sole remaining director, or by the shareholders if
there are no directors remaining. The term of a director elected by the
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directors in office to fill a vacancy expires at the next annual shareholders'
meeting at which directors are elected. The term of a director elected by the
shareholders to fill a vacancy shall be the unexpired term of his or her
predecessor in office; except that, if the director's predecessor had been
elected by the directors in office to fill a vacancy, the term of a director
elected by the shareholders shall be the unexpired term of the last predecessor
elected by the shareholders. If the vacant office was held by a director elected
by a voting group of shareholders: (a) if one or more of the remaining directors
were elected by the same voting group, only such directors are entitled to vote
to fill the vacancy if it is filled by directors, and they may do so by the
affirmative vote of a majority of such directors remaining in office; and (b)
only the holders of shares of that voting group are entitled to vote to fill the
vacancy if it is filled by the shareholders.
Section 3.06 Regular Meetings. A regular meeting of the board of
directors shall be held immediately after and at the same place as the annual
meeting of the shareholders, or as soon thereafter as conveniently may be, at
the time and place, either within or outside Colorado, determined by the board,
for the purpose of electing officers and for the transaction of such other
business as may come before the meeting. Failure to hold such meeting, however,
shall not invalidate any action taken by any officer then or thereafter in
office. The board of directors may provide, by resolution, the time and place,
either within or outside Colorado, for the holding of additional regular
meetings without other notice than such resolution.
Section 3.07 Special Meetings. Special meetings of the board of
directors may be called by or at the request of the president or any two
directors. The person or persons authorized to call special meetings of the
board of directors may fix any convenient place, either within or outside
Colorado, as the place for holding any special meeting of the board called by
them.
Section 3.08 Meetings by Telephone. Unless otherwise provided by the
articles of incorporation, one or more members of the board of directors may
participate in a meeting of the board by, or the meeting may be conducted
through the use of, any communications equipment by which all persons
participating in the meeting can hear each other at the same time. Such
participation shall constitute presence in person at the meeting.
Section 3.09 Notice of Meetings. Notice of each meeting of the board
of directors (except those regular meetings for which notice is not required)
stating the place, day and hour of the meeting shall be given to each director
at least two days prior thereto by the mailing of written notice by first class,
certified or registered mail, or at least two days prior thereto by personal
delivery (including delivery by private courier to the director or delivered to
the last address of the director furnished by him to the corporation for such
purpose) of written notice or by telephone, telegraph, teletype, electronically
transmitted facsimile or other form of wire or wireless communication, except
that, in the case of a meeting to be held pursuant to Section 3.08, notice may
be given by telephone one day prior thereto. The method of notice need not be
the same to each director. Notice shall be deemed to be given at the earliest of
(a) the date received, but, if the director is no longer at the address of
record, then the date delivery was attempted; (b) five days after mailing; or
(c) the date shown on the return receipt, if mailed by registered or certified
mail, return receipt requested, and the receipt is signed by or on behalf of the
addressee. Neither the business to be transacted at nor the purpose of any
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meeting of the board of directors need be specified in the notice of such
meeting unless otherwise required by statute.
Section 3.10 Waiver of Notice. Whenever notice is required by law,
the articles of incorporation or these bylaws to be given to the directors, a
waiver thereof in writing signed by the director entitled to such notice,
whether before, at or after the time stated therein, shall be equivalent to the
giving of such notice. Such waiver shall be delivered to the corporation for
filing with the corporate records, but such delivery and filing shall not be
conditions of the effectiveness of the waiver. A director's attendance at, or
participation in a meeting, waives any required notice to him or her of the
meeting unless: (a) at the beginning of the meeting, or promptly upon his or her
later arrival, the director objects to holding the meeting or transacting
business at the meeting because of lack of notice or defective notice and does
not thereafter vote for or assent to action taken at the meeting; or (b) if
special notice was required of a particular purpose, the director objects to
transacting business with respect to the purpose for which such special notice
was required and does not thereafter vote for or assent to action taken at the
meeting with respect to such purpose. Neither the business to be transacted at
nor the purpose of any meeting of the board of directors need be specified in
the waiver of notice of such meeting unless otherwise required by statute.
Section 3.11 Presumption of Assent. A director of the corporation
who is present at a meeting of the board of directors at which action on any
corporate matter is taken shall be presumed to have assented to the action taken
unless the director: (a) objects at the beginning of the meeting, or promptly
upon his or her arrival, to holding the meeting or transacting business at the
meeting and does not thereafter vote for or assent to any action taken at the
meeting; (b) contemporaneously requests that his dissent or abstention as to any
specific action taken be entered in the minutes of such meeting; or (c) causes
written notice of his dissent or abstention as to any specific action to be
received by the presiding officer of such meeting before its adjournment or by
the corporation immediately after adjournment of such meeting. The right of
dissent or abstention as to a specific action taken at a meeting of the board is
not available to a director who votes in favor of such action.
Section 3.12 Quorum and Voting Rights. Except as otherwise may be
required by law, the articles of incorporation or these bylaws, a majority of
the number of directors fixed in accordance with these bylaws, present in
person, shall constitute a quorum for the transaction of business at any meeting
of the board of directors, and the vote of a majority of the directors present
at a meeting at which a quorum is present shall be the act of the board of
directors. If less than such majority is present at a meeting, a majority of the
directors present may adjourn the meeting from time to time without further
notice other than an announcement at the meeting, until a quorum shall be
present. No director may vote or act by proxy or power of attorney at any
meeting of directors.
Section 3.13 Action Without a Meeting. Any action required or
permitted to be taken at a meeting of the directors may be taken without a
meeting and without prior notice if a consent in writing, setting forth the
action so taken, shall be signed by all of the directors. Such consent (which
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may be signed in counterparts) shall have the same force and effect as a
unanimous vote of the directors and may be stated as such in any document.
Unless the consent specifies a different effective date, action taken without a
meeting pursuant to a consent in writing as provided herein is effective when
all directors have signed the consent; however, the consent shall not be
effective if, before all of the directors have signed the consent, any director
has revoked his or her consent by a writing signed by the director and received
by the secretary or any other person authorized by the bylaws or the board of
directors to receive such a revocation. All consents signed pursuant to this
Section 3.13 shall be delivered to the secretary of the corporation for
inclusion in the minutes or for filing with the corporate records.
Section 3.14 Executive and Other Committees. The board of directors,
by resolution adopted by a majority of the directors in office when the action
is taken, may designate from among its members an executive committee and one or
more other committees, each of which, to the extent provided in the resolution
establishing such committee, shall have and may exercise all of the authority of
the board of directors in the management of the business and affairs of the
corporation, except that no such committee shall have the power or authority to
(a) authorize distributions, (b) approve or propose to the shareholders actions
or proposals required by law to be approved by the shareholders, (c) fill
vacancies on the board of directors or any committee thereof, including any
committee authorized by this Section 3.14, (d) adopt, amend or repeal the
bylaws, (e) approve a plan of merger not requiring shareholder approval, (f)
amend articles of incorporation to the extent permitted by law to be amended by
the full board of directors, (g) authorize or approve reacquisition of shares of
the corporation, except according to a formula or method prescribed by the board
of directors, or (h) authorize or approve the issuance or sale of shares, or any
contract for the sale of shares, or determine the designation and relative
rights, preferences and limitations of a class or series of shares; except that
the board of directors may authorize a committee or an officer to do so within
limits specifically prescribed by the board of directors. The delegation of
authority to any committee shall not operate to relieve the board of directors
or any member of the board from any responsibility imposed by law. Subject to
the foregoing, the board of directors may provide such powers, limitations and
procedures for such committees as the board deems advisable; except that each
committee shall be governed by the procedures set forth in Sections 3.06 (except
as they relate to an annual meeting) and 3.07 through 3.13 as if the committee
were the board of directors. Each committee shall keep regular minutes of its
meetings, which shall be reported to the board of directors when required and
submitted to the corporation for inclusion in the corporate records.
Section 3.15 Compensation. By resolution of the board of directors,
notwithstanding the provisions of Section 2.11, a director may be paid his
expenses, if any, of attendance at each meeting of the board of directors and
each meeting of any committee of the board of which he is a member and may be
paid a fixed sum for attendance at each such meeting or a stated salary, or both
a fixed sum and a stated salary. Subject to Section 2.11, no such payment shall
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor.
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ARTICLE IV
Officers
Section 4.01 Number and Qualifications. The officers of the
corporation shall consist of a president, a treasurer and a secretary and such
other officers, including a chairman of the board, one or more vice-presidents,
and a controller, as may from time to time be appointed by the board. In
addition, the board of directors or the president may appoint such assistant and
other subordinate officers, including assistant vice-presidents, assistant
secretaries and assistant treasurers, as it or he shall deem necessary or
appropriate. Any number of offices may be held by the same person. An officer
shall be a natural person who is at least 18 years old.
Section 4.02 Appointment and Term of Office. Except as provided in
Sections 4.01 and 4.06, the officers of the corporation shall be appointed by
the board of directors annually at the first meeting of the board held after
each annual meeting of the shareholders as provided in Section 3.06. If the
appointment of officers shall not be held as provided herein, such appointment
shall be held as soon thereafter as conveniently may be. Each officer shall hold
office until his successor shall have been duly appointed and shall have
qualified, or until the expiration of his term in office if appointed for a
specified period of time, or until his earlier death, resignation or removal.
Section 4.03 Compensation. Officers shall receive such compensation
for their services as may be authorized or ratified by the board of directors
and no officer shall be prevented from receiving compensation by reason of the
fact that he is also a director of the corporation. Appointment as an officer
shall not of itself create a contract or other right to compensation for
services performed as such officer.
Section 4.04 Resignation. Any officer may resign at any time,
subject to any rights or obligations under any existing contracts between the
officer and the corporation, by giving written notice of resignation to the
corporation. A resignation of an officer is effective when the notice is
received by the corporation unless the notice specifies a later effective date.
If a resignation is made effective at a later date, the board of directors may
permit the officer to remain in office until the effective date and may fill the
pending vacancy before the effective date if the board of directors provides
that the successor does not take office until the effective date, or the board
of directors may remove the officer at any time before the effective date and
may fill the resulting vacancy. An officer's resignation shall take effect at
the time specified in such notice and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective. An
officer's resignation does not affect the corporation's contract rights, if any,
with the officer.
Section 4.05 Removal. Any officer may be removed with or without
cause at any time by the board of directors or, in the case of assistant and
other subordinate officers, by the board of directors or the president (whether
or not such officer was appointed by the president) whenever in its or his
judgment, as the case may be, the best interests of the corporation will be
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served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. The appointment of an officer shall
not in itself create contract rights.
Section 4.06 Vacancies. A vacancy in any office, however occurring,
may be filled by the board of directors or, if such office may be filled by the
president as provided in Section 4.01, by the president, for the unexpired
portion of the term.
Section 4.07 Authority and Duties. The officers of the corporation
shall have the authority and shall exercise the powers and perform the duties
specified below and as may be additionally specified by the president, the board
of directors or these bylaws (and, in all cases where the duties of any officer
are not prescribed by the bylaws or by the board of directors, such officer
shall follow the orders and instructions of the president), except that in any
event each officer shall exercise such powers and perform such duties as may be
required by law:
(a) President. The president shall, subject to the direction and
supervision of the board of directors, (i) be the chief executive officer of the
corporation and have general and active control of its affairs and business and
general supervision of its officers, agents and employees; (ii) unless there is
a chairman of the board, preside at all meetings of the shareholders and the
board of directors; (iii) see that all orders and resolutions of the board of
directors are carried into effect; and (iv) perform all other duties incident to
the office of president and as from time to time may be assigned to him by the
board of directors.
(b) Vice-Presidents. The vice-president, if any (or, if there is
more than one, then each vice-president), shall assist the president and shall
perform such duties as may be assigned to him by the president or by the board
of directors. The vice-president, if there is one (or, if there is more than
one, then the vice-president designated by the board of directors, or, if there
be no such designation, then the vice-presidents in order of their election),
shall, at the request of the president or, in his absence or inability or
refusal to act, perform the duties of the president and when so acting shall
have all the powers of and be subject to all the restrictions upon the
president. Assistant vice-presidents, if any, shall have such powers and perform
such duties as may be assigned to them by the president or by the board of
directors.
(c) Secretary. The secretary shall: (i) prepare and maintain the
minutes of the proceedings of the shareholders, the board of directors and any
committees of the board; (ii) see that all notices are duly given in accordance
with the provisions of these bylaws or as required by law; (iii) be custodian of
the corporate records and of the seal of the corporation; (iv) keep at the
corporation's registered office or principal place of business within or outside
Colorado a record containing the names and addresses of all shareholders and the
number and class of shares held by each, unless such a record shall be kept at
the office of the corporation's transfer agent or registrar; (v) have general
charge of the stock books of the corporation, unless the corporation has a
transfer agent; (vi) authenticate records of the corporation; and (vii) in
general, perform all duties incident to the office of secretary and such other
duties as from time to time may be assigned to him by the president or by the
board of directors. Assistant secretaries, if any, shall have the same duties
and powers, subject to supervision by the secretary.
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(d) Treasurer. The treasurer shall: (i) be the principal financial
officer of the corporation and have the care and custody of all its funds,
securities, evidences of indebtedness and other personal property and deposit
the same in accordance with the instructions of the board of directors; (ii)
receive and give receipts and acquittances for moneys paid in on account of the
corporation, and pay out of the funds on hand all bills, payrolls and other just
debts of the corporation of whatever nature upon maturity; (iii) unless there is
a controller, be the principal accounting officer of the corporation and as such
prescribe and maintain the methods and systems of accounting to be followed,
keep complete books and records of account, prepare and file all local, state
and federal tax returns, prescribe and maintain an adequate system of internal
audit and prepare and furnish to the president and the board of directors
statements of account showing the financial position of the corporation and the
results of its operations; (iv) upon request of the board, make such reports to
it as may be required at any time; and (v) perform all other duties incident to
the office of treasurer and such other duties as from time to time may be
assigned to him by the board of directors or the president. Assistant
treasurers, if any, shall have the same powers and duties, subject to the
supervision by the treasurer.
Section 4.08 Surety Bonds. The board of directors may require any
officer or agent of the corporation to execute to the corporation a bond in such
sums and with such sureties as shall be satisfactory to the board, conditioned
upon the faithful performance of his duties and for the restoration to the
corporation of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
ARTICLE V
Stock
Section 5.01 Issuance of Shares. The issuance or sale by the
corporation of any shares of its authorized capital stock of any class shall be
made only upon authorization by the board of directors, except as otherwise may
be provided by law. No shares shall be issued until full consideration has been
received therefor. Every issuance of shares shall be recorded on the books
maintained for such purpose by or on behalf of the corporation.
Section 5.02 Stock Certificates; Uncertificated Shares. The shares
of stock of the corporation shall be represented by certificates, except that
the board of directors may authorize the issuance of any class or series of
stock of the corporation without certificates as provided by law. If shares are
represented by certificates, such certificates shall be signed either manually
or in facsimile in the name of the corporation by one or more officers
designated in the bylaws or by the board of directors and sealed with the seal
of the corporation or with a facsimile thereof. If the issuing corporation is
authorized to issue different classes of shares or different series within a
class, the share certificate shall contain a summary, on the front or the back,
of the designations, preferences, limitations and relative rights applicable to
each class, the variations in preferences, limitations and rights determined for
each series, and the authority of the board of directors to determine variations
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for future classes or series. Alternatively, each certificate may state
conspicuously on its front or back that the corporation will furnish to the
shareholder this information on request in writing and without charge. If the
person who signed, either manually or in facsimile, a share certificate no
longer holds office when the certificate is issued, the certificate is
nevertheless valid. Certificates of stock shall be in such form consistent with
law as shall be prescribed by the board of directors.
Section 5.03 Consideration for Shares. Shares shall be issued for
such consideration expressed in dollars as shall be fixed from time to time by
the board of directors. Such consideration shall consist of any tangible or
intangible property or benefit to the corporation, including cash, promissory
notes, services performed and other securities of the corporation; however, the
promissory note of a subscriber or an affiliate of the subscriber for shares
shall not constitute consideration for the shares unless the note is negotiable
and is secured by collateral, other than the shares, having a fair market value
at least equal to the principal amount of the note. For the purposes of this
Section, "promissory note" means a negotiable instrument on which there is an
obligation to pay independent of collateral and does not include a nonrecourse
note.
Section 5.04 Lost Certificates. In case of the alleged loss,
destruction or mutilation of a certificate of stock, the board of directors may
direct the issuance of a new certificate in lieu thereof upon such terms and
conditions in conformity with law as it may prescribe. The board of directors
may in its discretion require a bond in such form and amount and with such
surety as it may determine before issuing a new certificate.
Section 5.05 Transfer of Shares. Upon presentation and surrender to
the corporation or to the corporation's transfer agent of a certificate of stock
duly endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, payment of all transfer taxes, if any, and the
satisfaction of any other requirements of law, including inquiry into and
discharge of any adverse claims of which the corporation has notice, the
corporation or the transfer agent shall issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transfer on the
books maintained for such purpose by or on behalf of the corporation. No
transfer of shares shall be effective until it has been entered on such books.
The corporation or the corporation's transfer agent may require a signature
guaranty or other reasonable evidence that any signature is genuine and
effective before making any transfer. Transfers of uncertificated shares shall
be made in accordance with applicable provisions of law.
Section 5.06 Holders of Record. The corporation shall be entitled to
treat the holder of record of any share of stock as the holder in fact thereof,
and accordingly shall not be bound to recognize any equitable or other claim to
or interest in such share on the part of any other person whether or not it
shall have express or other notice thereof, except as may be required by the
laws of Colorado.
Section 5.07 Shares Held for Account of Another. The board of
directors, in the manner provided by the Act, may adopt a procedure whereby a
shareholder of the corporation may certify in writing to the corporation that
all or a portion of the shares registered in the name of such shareholder are
held for the account of a specified person or persons. Upon receipt by the
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corporation of a certification complying with such procedure, the persons
specified in the certification shall be deemed, for the purpose or purposes set
forth therein, to be the holders of record of the number of shares specified in
place of the shareholder making the certification.
Section 5.08 Transfer Agents, Registrars and Paying Agents. The
board of directors may at its discretion appoint one or more transfer agents,
registrars or agents for making payment upon any class of stock, bond, debenture
or other security of the corporation. Such agents and registrars may be located
either within or outside Colorado. They shall have such rights and duties and
shall be entitled to such compensation as may be agreed.
ARTICLE VI
Indemnification
Section 6.01 Definitions. For purposes of this Article, the
following terms shall have the meanings set forth below:
(a) "Corporation" includes any domestic or foreign entity that is a
predecessor of the Corporation by reason of a merger or other transaction in
which the predecessor's existence ceased upon consummation of the transaction.
(b) "Director" means an individual who is or was a director of the
Corporation or an individual who, while a director of the Corporation, is or was
serving at the Corporation's request as a director, officer, partner, trustee,
employee, fiduciary or agent of another domestic or foreign corporation or other
person or of an employee benefit plan. A director is considered to be serving an
employee benefit plan at the Corporation's request if his or her duties to the
Corporation also impose duties on, or otherwise involve services by, the
director to the plan or to participants in or beneficiaries of the plan.
"Director" includes, unless the context requires otherwise, the estate or
personal representative of a director.
(c) "Expenses" includes counsel fees.
(d) "Liability" means the obligation incurred with respect to a
proceeding to pay a judgment, settlement, penalty, fine, including an excise tax
assessed with respect to an employee benefit plan, or reasonable Expenses.
(e) "Official Capacity" means, when used with respect to a Director,
the office of Director in the Corporation and, when used with respect to a
person other than a Director as contemplated in section 7-109-107 of the Act (an
officer, employee, fiduciary and agent), the office in the Corporation held by
the officer or the employment, fiduciary or agency relationship undertaken by
the employee, fiduciary or agent on behalf of the Corporation. "Official
Capacity" does not include service for any other domestic or foreign corporation
or other person or employee benefit plan.
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(f) "Party" includes a person who was, is or is threatened to be
made a named defendant or respondent in a proceeding.
(g) "Proceeding" means any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative and
whether formal or informal.
Section 6.02 Right to Indemnification. Subject to Section 6.04, the
Corporation shall indemnify any person made a Party because the person is or was
a Director to a Proceeding against Liability incurred in, relating to, or as a
result of, the Proceeding to the fullest extent permitted by law, including
without limitation in circumstances in which, in the absence of this Section
6.02, indemnification would be discretionary under the Act if: (a) the person
conducted himself or herself in good faith; (b) the person reasonably believed:
(I) in the case of conduct in an Official Capacity with the Corporation, that
his or her conduct was in the Corporation's best interests; and (II) in all
other cases, that his or her conduct was at least not opposed to the
Corporation's best interests; and (c) in the case of any criminal Proceeding,
the person had no reasonable cause to believe his or her conduct was unlawful. A
Director's conduct with respect to an employee benefit plan for a purpose the
Director reasonably believed to be in the interests of the participants in or
beneficiaries of the plan is conduct that satisfies the requirement of (b)(II)
above. A Director's conduct with respect to an employee benefit plan for a
purpose that the Director did not reasonably believe to be in the interests of
the participants in or beneficiaries of the plan shall be deemed not to satisfy
the requirements of (a) above. The termination of a Proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent is not, of itself, determinative that the Director did not meet the
standard of conduct described in this section. However, the Corporation may not
indemnify a Director under this section: (a) in connection with a Proceeding by
or in the right of the Corporation in which the Director was adjudged liable to
the Corporation; or (b) in connection with any other Proceeding charging that
the Director derived an improper personal benefit, whether or not involving
action in an Official Capacity, in which Proceeding the Director was adjudged
liable on the basis that he or she derived an improper personal benefit.
Indemnification permitted under this section in connection with a Proceeding by
or in the right of the Corporation is limited to reasonable Expenses incurred in
connection with the Proceeding.
In addition to the foregoing, the Corporation shall indemnify a
person who was wholly successful, on the merits or otherwise, in the defense of
any Proceeding to which the person was a Party because the person is or was a
Director, against reasonable Expenses incurred by him or her in connection with
the Proceeding.
Section 6.03 Advancement of Expenses. The Corporation may pay for or
reimburse the reasonable Expenses incurred by a Director who is a Party to a
Proceeding in advance of final disposition of the Proceeding if: (a) the
Director furnishes to the Corporation a written affirmation of the Director's
good faith belief that he or she has met the standard of conduct described in
section 6.02; (b) the Director furnishes to the Corporation a written
undertaking, executed personally or on the Director's behalf, to repay the
advance if it is ultimately determined that he or she did not meet the standard
of conduct; and (c) a determination is made that the facts then known to those
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making the determination would not preclude indemnification under this article.
The undertaking required by (b) of this section shall be an unlimited general
obligation of the Director but need not be secured and may be accepted without
reference to financial ability to make repayment.
Section 6.04 Burden of Proof. The Corporation may not indemnify a
Director under Section 6.02 unless authorized in the specific case after a
determination has been made that indemnification of the Director is permissible
in the circumstances because the Director has met the standard of conduct set
forth in Section 6.02. The Corporation shall not advance Expenses to a Director
under Section 6.03 unless authorized in the specific case after the written
affirmation and undertaking are received and the determination required by
Section 6.03 has been made. The determinations required by this section shall be
made: (a) by the board of directors by a majority vote of those present at a
meeting at which a quorum is present, and only those Directors not parties to
the Proceeding shall be counted in satisfying the quorum; or (b) if a quorum
cannot be obtained, by a majority vote of a committee of the board of directors
designated by the board of directors, which committee shall consist of two or
more Directors not parties to the Proceeding; except that Directors who are
parties to the Proceeding may participate in the designation of Directors for
the committee. If a quorum cannot be obtained as contemplated in (a) above, and
a committee cannot be established under (b) above, or, even if a quorum is
obtained or a committee is designated, if a majority of the Directors
constituting such quorum or such committee so directs, the determination
required to be made by this section shall be made: by independent legal counsel
selected by a vote of the board of directors or the committee or, if a quorum of
the full board cannot be obtained and a committee cannot be established, by
independent legal counsel selected by a majority vote of the full board of
directors; or by the shareholders. Authorization or indemnification and advance
of Expenses shall be made in the same manner as the determination that
indemnification or advance of Expenses is permissible; except that, if the
determination that indemnification or advance of Expenses is permissible is made
by independent legal counsel, authorization of indemnification and advance of
Expenses shall be made by the body that selected such counsel.
Section 6.05 Notification and Defense of Claim. Promptly after
receipt by a Party of notice of the commencement of any Proceeding, the Party
shall, if a claim in respect thereof is to be made against the Corporation under
this Article, notify the Corporation in writing of the commencement thereof;
provided, however, that delay in so notifying the Corporation shall not
constitute a waiver or release by the Party of any rights under this Article.
With respect to any such Proceeding: (a) the Corporation shall be entitled to
participate therein at its own expense; (b) any counsel representing the Party
to be indemnified in connection with the defense or settlement thereof shall be
counsel mutually agreeable to the Party and to the Corporation; and (c) the
Corporation shall have the right, at its option, to assume and control the
defense or settlement thereof, with counsel satisfactory to the Party. If the
Corporation assumes the defense of the Proceeding, the Party shall have the
right to employ its own counsel, but the fees and Expenses of such counsel
incurred after notice from the Corporation of its assumption of the defense of
such Proceeding shall be at the expense of the Party unless (i) the employment
of such counsel has been specifically authorized by the Corporation, (ii) the
Party shall have reasonably concluded that there may be a conflict of interest
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between the Corporation and the Party in the conduct of the defense of such
Proceeding, or (iii) the Corporation shall not in fact have employed counsel to
assume the defense of such Proceeding. Notwithstanding the foregoing, if an
insurance carrier has supplied directors' and officers' liability insurance
covering a Proceeding and is entitled to retain counsel for the defense of such
Proceeding, then the insurance carrier shall retain counsel to conduct the
defense of such Proceeding unless the Party and the Corporation concur in
writing that the insurance carrier's doing so is undesirable. The Corporation
shall not be liable under this Article for any amounts paid in settlement of any
Proceeding effected without its written consent. The Corporation shall not
settle any Proceeding in any manner that would impose any penalty or limitation
on a Party without the Party's written consent. Consent to a proposed settlement
of any Proceeding shall not be unreasonably withheld by either the Corporation
or the Party.
Section 6.06 Notice to Shareholders of Indemnification of Director.
If the Corporation indemnifies or advances Expenses to a Director under this
Article in connection with a Proceeding by or in the right of the Corporation,
the Corporation shall give written notice of the indemnification or advance to
the shareholders with or before the notice of the next shareholders' meeting. If
the next shareholder action is taken without a meeting at the instigation of the
board of directors, such notice shall be given to the shareholders at or before
the time the first shareholder signs a writing consenting to such action.
Section 6.07 Enforcement. The right to indemnification and
advancement of Expenses granted by this Article shall be enforceable in any
court of competent jurisdiction if the Corporation denies the claim, in whole or
in part, or if no disposition of such claim is made within 90 days after the
written request for indemnification or advancement of Expenses is received. If
successful in whole or in part in such suit, the Party's Expenses incurred in
bringing and prosecuting such claim shall also be paid by the Corporation.
Whether or not the Party has met any applicable standard of conduct, been
adjudged liable to the Corporation or derived improper personal benefit, the
court in such suit may order indemnification or the advancement of Expenses as
the court deems proper (subject to any express limitation of the Act). Further,
the Corporation shall indemnify a Party from and against any and all Expenses
and, if requested by the Party, shall (within 10 business days of such request)
advance such Expenses to the Party which are incurred by the Party in connection
with any claim asserted against or suit brought by the Party for recovery under
any directors' and officers' liability insurance policies maintained by the
Corporation, regardless of whether the Party is unsuccessful in whole or in part
in such claim or suit.
Section 6.08 Proceedings by a Party. The Corporation shall
indemnify, advance or reimburse Expenses incurred by a Director in connection
with an appearance as a witness in a Proceeding at a time when he or she has not
been made a named defendant or respondent in the Proceeding.
Section 6.09 Subrogation. In the event of any payment under this
Article, the Corporation shall be subrogated to the extent of such payment to
all of the rights of recovery of the indemnified Party, who shall execute all
papers and do everything that may be necessary to assure such rights of
subrogation to the Corporation.
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Section 6.10 Other Payments. The Corporation shall not be liable
under this Article to make any payment in connection with any Proceeding against
or involving a Party to the extent the Party has otherwise actually received
payment (under any insurance policy, agreement or otherwise) of the amounts
otherwise indemnifiable hereunder. A Party shall repay to the Corporation the
amount of any payment the Corporation makes to the Party under this Article in
connection with any Proceeding against or involving the Party, to the extent the
Party has otherwise actually received payment (under any insurance policy,
agreement or otherwise) of such amount.
Section 6.11 Insurance. The Corporation may purchase and maintain
insurance on behalf of a person who is or was a Director, officer, employee,
fiduciary or agent of the Corporation, or who, while a Director, officer,
employee, fiduciary or agent of the Corporation, is or was serving at the
request of the Corporation as a Director, officer, partner, trustee, employee,
fiduciary or agent of another domestic or foreign corporation or other person or
of an employee benefit plan, against liability asserted against or incurred by
the person in that capacity or arising from his or her status as a Director,
officer, employee, fiduciary or agent, whether or not the Corporation would have
power to indemnify the person against the same liability under Section 6.02 or
6.12. Any such insurance may be procured from any insurance company designated
by the board of directors, whether such insurance company is formed under the
laws of Colorado or any other jurisdiction of the United States or elsewhere,
including any insurance company in which the Corporation has an equity or any
other interest through stock ownership or otherwise.
Section 6.12 Indemnification of Officers, Employees, Fiduciaries and
Agents. An officer is entitled to mandatory indemnification and to apply for
court-ordered indemnification under the Act, in each case to the same extent as
a Director. The Corporation shall indemnify and advance expenses to an officer,
employee, fiduciary or agent of the Corporation to the same extent as to a
Director. In addition, the Corporation may also indemnify and advance expenses
to an officer, employee, fiduciary or agent who is not a Director to a greater
extent than provided to a Director, if not inconsistent with public policy, and
if provided for by general or specific action of its board of directors or
shareholders, or contract.
Section 6.13 Other Rights and Remedies. The rights to
indemnification and advancement of Expenses provided in this Article shall be in
addition to any other rights to which a Party may have or hereafter acquire
under any law, provision of the articles of incorporation, any other or further
provision of these bylaws, vote of the shareholders or Directors, agreement or
otherwise. The Corporation shall have the right, but shall not be obligated, to
indemnify or advance Expenses to any agent of the Corporation not otherwise
covered by this Article in accordance with and to the fullest extent permitted
by the Act.
Section 6.14 Applicability; Effect. The rights to indemnification
and advancement of Expenses provided in this Article shall be applicable to acts
or omissions that occurred prior to the adoption of this Article, shall continue
as to any Party during the period such Party serves in any one or more of the
capacities covered by this Article, shall continue thereafter so long as the
Party may be subject to any possible Proceeding by reason of the fact that he
served in any one or more of the capacities covered by this Article, and shall
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inure to the benefit of the estate and personal representatives of each such
person. Any repeal or modification of this Article or of any section or
provision hereof shall not affect any rights or obligations then existing. All
rights to indemnification under this Article shall be deemed to be provided by a
contract between the Corporation and each Party covered hereby.
Section 6.15 Severability. If any provision of this Article shall be
held to be invalid, illegal or unenforceable for any reason whatsoever (a) the
validity, legality and enforceability of the remaining provisions of this
Article (including without limitation, all portions of any sections of this
Article containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby, and (b) to the fullest extent
possible, the provisions of this Article (including, without limitation, all
portions of any section of this Article containing any such provision held to be
invalid, illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent of this
Article that each Party covered hereby is entitled to the fullest protection
permitted by law.
ARTICLE VII
Miscellaneous
Section 7.01 Voting of Securities by the Corporation. Unless
otherwise provided by resolution of the board of directors, on behalf of the
corporation the president or any vice-president shall attend in person or by
substitute appointed by him, or shall execute written instruments appointing a
proxy or proxies to represent the corporation at, all meetings of the
shareholders of any other corporation, association or other entity in which the
corporation holds any stock or other securities, and may execute written waivers
of notice with respect to any such meetings. At all such meetings and otherwise,
the president or any vice-president, in person or by substitute or proxy as
aforesaid, may vote the stock or other securities so held by the corporation and
may execute written consents and any other instruments with respect to such
stock or securities and may exercise any and all rights and powers incident to
the ownership of said stock or securities, subject, however, to the
instructions, if any, of the board of directors.
Section 7.02 Seal. The corporate seal of the corporation shall be in
such form as adopted by the board of directors, and any officer of the
corporation may, when and as required, affix or impress the seal, or a facsimile
thereof, to or on any instrument or document of the corporation.
Section 7.03 Fiscal Year. The fiscal year of the corporation shall
be as established by the board of directors.
Section 7.04 Amendments. The directors may amend or repeal these
bylaws unless the articles of incorporation reserve such power exclusively to
the shareholders in whole or in part or the shareholders, in amending or
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repealing a particular bylaw provision, provide expressly that the directors may
not amend or repeal such bylaw. The shareholders may amend or repeal the bylaws
even though the bylaws may also be amended or repealed by the directors.
(END)
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DEPOSIT ACCOUNT AGREEMENT
DEPOSIT ACCOUNT AGREEMENT (this "Agreement") dated as of June 1999
among BANK OF AMERICA, having an office at [ ] (the "Deposit Bank"), RIVIERA
HOLDING S CORPORATION, a Nevada corporation, having an office c/o Riviera Hotel
& Casino, 2901 Las Vegas Blvd. So., Las Vegas, Nevada 89109 ("Riviera"), and
FIRST AMERICAN TITLE INSURANCE COMPANY, having an office at 602 Park Point
Drive, Suite #270, Golden, Colorado 80401 (together with its successors and
assigns, "First American").
W I T N E S E T H:
WHEREAS, Riviera Black Hawk, Inc. ("Riviera Black Hawk") is
constructing a casino and hotel in Black Hawk, Colorado and in connection
therewith has obtained from First American a mortgagee's title insurance policy
(the "Title Policy") insuring the construction mortgage against mechanics' lien
claims; and
WHEREAS, pursuant to an "Indemnity Agreement I
(Construction-Mechanics' Liens)" executed by Riviera, Riviera Black Hawk and
First American, Riviera and Riviera Black Hawk agree to indemnify First American
against claims made against First American under the Title Policy on account of
such mechanics' lien claims ("Claims"); and
WHEREAS, First American requires additional security for the
Indemnity Agreement in the form of a deposit account (the "Deposit Account") to
be held at the Deposit Bank; and
WHEREAS, First American and Riviera desire to retain the Deposit
Bank to provide the services described herein.
NOW THEREFORE, in consideration of the mutual promises contained
herein and for other good and valuable consideration the sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
<PAGE>
Section 1. Duties of the Deposit Bank and First American.
a. Riviera has deposited the sum of $5,000,000.00 into the Deposit
Account which is entitled "Deposit Account for First American Title Company as
Indemnitee of Riviera Holdings, Corporation." The Deposit Bank shall hold
amounts deposited in the Deposit Account in trust for First American and shall
not commingle such amounts with any other amounts held on behalf of First
American or any other person.
b. If a Claim is made, First American after providing notice to, and
a right to cure by, Riviera and Riviera Black Hawk pursuant to the provisions of
the Indemnification Agreement, may, if such claim is not cured within the time
period specified in the Indemnification Agreement, withdraw from the Deposit
Account such funds as First American reasonably determines are required to
satisfy such Claim by directing the Deposit Bank to disburse such amounts from
the Deposit Account pursuant to disbursement instructions substantially in the
form of Schedule 2 attached hereto ("Disbursement Instructions").
c. Riviera may direct Deposit Bank to invest amounts held in the
Deposit Account in Permitted Investments (as defined below). All earnings on
Permitted Investments shall be for the benefit of Riviera and credited to the
Deposit Account. Riviera may withdraw funds from the Deposit Account, provided
the balance thereof does not fall below $5,000,000.00. Any actual losses
sustained on a liquidation of a Permitted Investment (which cause the balance in
the Deposit Account to fall below $5,000,000.00) shall promptly be deposited by
Riviera into the Deposit Account.
d. A "Permitted Investment" means obligations of, or obligations
fully guaranteed as to payment of principal and interest by, the United States
or any agency or instrumentality thereof provided such obligations are backed by
the full faith and credit of the United States of America or such other
obligations as are acceptable as Permitted Investments to First American.
Section 2. Fees.
Riviera hereby agrees to pay the fees and expenses of the Deposit
Bank and any successor thereto, for performing the herein-described services.
Section 3. Termination.
The Deposit Bank may resign from its obligations under this
Agreement at any time after thirty (30) days' prior written notice to the other
parties hereto, but in no event shall the Deposit Bank be released of its
obligations hereunder unless and until a substitute bank has been designated and
assumed the obligations hereunder. Riviera shall designate a substitute Deposit
Bank promptly after receipt of notice of resignation by the Deposit Bank and
shall take all reasonable actions necessary to cause such designated successors
promptly to assume the obligations of the Deposit Bank hereunder. First American
may terminate this Agreement at any time after thirty (30) days' prior written
notice to the other parties hereto. This Agreement shall be terminated upon the
Deposit Bank's receipt of notice from both Riviera and First American that the
"Final CDA Disbursement", as such term is defined in a certain Cash Collateral
and Disbursement Agreement dated June 3, 1999, has been made.
2
<PAGE>
Section 4. Set-off
The Deposit Bank waives any right to offset any claim against
Riviera which it might have against any account maintained hereunder.
Section 5. Indemnification.
The Deposit Bank shall not be liable for any claims, suits, actions,
costs, damages, liabilities or expenses or for any interruption of services, or
incidental, consequential, special or punitive damages ("Liabilities") in
connection with the subject matter of this Agreement other than Liabilities
caused by the negligence or willful misconduct of the Deposit Bank, and Riviera
hereby agrees to indemnify and hold harmless the Deposit Bank and its Affiliates
and the directors, officers, employees and agents of any of them, and the
respective successors and assigns of the Deposit Bank from and against any and
all Liabilities arising from or in connection with any acts or omissions taken
by the Deposit Bank or any Affiliate or any director, officer, employee or agent
of any of them in connection with this Agreement, other than those Liabilities
caused by the negligence or willful misconduct of the Deposit Bank.
Section 6. Successors and Assigns, Assignments.
This Agreement shall bind and inure to the benefit of and be
enforceable by the Deposit Bank, Riviera and First American and their respective
successors and assigns.
Section 7. Amendment.
This Agreement may be amended from time to time in writing by all
parties hereto.
Section 8. Notices.
Notices to the Deposit Bank should be sent to the address
first-above written or by telecopy to [( ) ___-___], Attention: ____________;
notices to Riviera should be sent to the address first-above written or by
telecopy to ( ) ___-____, Attention: ___________; and notices to First American
should be sent to the address first-above written or by telecopy to
(___)___-____, Attention: ___________; or, in each case, to such other address
as shall be designated in writing by the respective party to the other parties
hereto. Unless otherwise expressly provided herein, all such notices, to be
effective, shall be in writing (including by facsimile), and shall be deemed to
have been duly given or made (a) when delivered by hand or by nationally
recognized overnight carrier, (b) upon receipt after being deposited in the
mail, certified mail and postage prepaid or (c) in the case of facsimile notice,
when sent and electronically confirmed, addressed as set forth above.
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Section 9. Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES
APPLIED IN NEW YORK).
Section 10. Certain Matters Affecting the Deposit Bank.
a. The Deposit Bank may rely and shall be protected in acting or
refraining from acting upon any notice (including but not limited to
electronically confirmed facsimiles of such notice) believed by it to be genuine
and to have been signed or presented by the proper party or parties; and
b. The duties and obligations of the Deposit Bank shall be
determined solely by the express provisions of this Agreement. The Deposit Bank
shall not be liable except for the performance of such party's duties and
obligations as are specifically set forth in this Agreement, and except as set
forth in Section 6 hereof, no implied covenants or obligations shall be read
into this Agreement against the Deposit Bank.
Section 11. Interpleader.
If at any time the Deposit Bank, in good faith, is in doubt as to
the action it should take under this Agreement, the Deposit Bank shall have the
right to commence an interpleader action in the United States District Court for
the Southern District of New York and to take no further action except in
accordance with joint instructions from First American and Riviera or in
accordance with the final order of the court in such action.
IN WITNESS WHEREOF, the parties hereto have executed this AGREEMENT
in several counterparts (each of which shall be deemed an original) as from the
date first above written.
BANK OF AMERICA
By: _________________________________
Name:
Title:
4
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RIVIERA HOLDINGS CORPORATION
By: _________________________________
Name:
Title:
FIRST AMERICAN TITLE COMPANY
By: _________________________________
Name:
Title:
5
<PAGE>
SCHEDULE 1
Bank Account Information
<PAGE>
SCHEDULE 2
Disbursement Instructions
[FIRST AMERICAN LETTERHEAD]
, 1999
Bank of America
Gentlemen:
Reference is made to the Deposit Account Agreement (the "Deposit
Account Agreement") dated as of ________ __, 1999, among Bank of America (the
"Deposit Bank"), Riviera Holdings Corporation (the "Riviera") and the
undersigned. Capitalized terms not defined herein have the meanings set forth
for such terms in the Deposit Account Agreement.
As of the day of 5 1999, we hereby authorize and direct the Deposit
Bank to withdraw $ from the Deposit Account and wire such funds to the
undersigned's account at:
[Describe First American's Account]
-----------------------------
-----------------------------
Account of:
Account #:
Such funds are being withdrawn pursuant to the terms of the Deposit
Account Agreement.
Very truly yours,
First American Title Insurance Company
By: ____________________________
Name:
Title:
- --------------------------------------------------------------------------------
AIA Document A III
Standard Form of Agreement
Between Owner and Contractor
where the basis of payment is the
COST OF THE WORK PLUS A FEE
with or without a Guaranteed Maximum Price
1987 EDITION
THIS DOCUMENT HAS IMPORTANT LEGAL CONSEQUENCES; CONSULTATION WITH AN
ATTORNEY IS ENCOURAGED WITH RESPECT TO ITS COMPLETION OR MODIFICATION.
The 1987 Edition of AJA Document A201, General Conditions of the Contract for
Construction, is adopted in this document by reference. Do not use with other
general conditions unless This document is modified. This document has been
approved and endorsed by The Associated General Contractors of America.
- --------------------------------------------------------------------------------
AGREEMENT
made as of the twenty-ninth (29th) day of December in the year of Nineteen
Hundred and Ninety-Seven (1997).
BETWEEN the Owner: Riviera Black Hawk, Inc.
(Name and address) 2901 Las Vegas Boulevard South
Las Vegas, NV 89109
and the Contractor: Weitz-Cohen Construction Co.
(Name and address) 899 Logan Street, Suite 600
Denver, CO 80203
the Project is: Riviera Black Hawk Casino
(Name and address) 444 Main Street
Black Hawk, CO 80422
the Architect is: Melick Associates, Inc.
(Name and address) Suite Four West
1620 Market Street
Denver, CO 80202
The Owner and Contractor agree as set forth below.
- --------------------------------------------------------------------------------
Copyright 1920, 1925, 1951, 1958, 1961, 1963, 1967, 1974, 1978. (C) 1987 by The
American Institute of Architects, 1735 New York Avenue, N.W., Washington, D.C.
20006. Reproduction of the material herein or substantial quotation of its
provisions without written permission of the AIA violates the copyright laws of
the United States and will be subject to legal prosecution.
- --------------------------------------------------------------------------------
<PAGE>
ARTICLE 1
THE CONTRACT DOCUMENTS
1.1. The Contract Documents consist of this Agreement, Conditions of the
Contract (General. Supplementary and other Conditions), Drawings,
Specifications, addenda issued prior to execution of this Agreement, other
documents listed in this Agreement and Modifications issued after execution of
this Agreement; these form the Contract, and are as fully a part of the Contract
as if attached to this Agreement or repeated herein. The Contract represents the
entire and integrated agreement between the parties hereto and supersedes prior
negotiations, representations or agreements, either written or oral. An
enumeration of the Contract Documents. other than Modifications. appears in
Article 16. If anything in the other Contract Documents is inconsistent with
this Agreement, this Agreement shall govern.
ARTICLE 2
THE WORK OF THIS CONTRACT
2.1. The Contractor shall execute the entire Work described in the Contract
Documents, except to the extent specifically indicated in the Contract Documents
to be the responsibility of others. or as follows:
The Contractor will perform all services for site development, parking garage,
casino, and associated areas, as further defined by the Plans and
Specifications.
See Exhibit B, Add Paragraph 2.2 and 2.3.
ARTICLE 3
RELATIONSHIP OF THE PARTIES
3.1. The Contractor accepts the relationship of trust and confidence established
by this Agreement and covenants with the Owner to cooperate with the Architect
and utilize the Contractor's best skill, efforts and judgment in furthering the
interests of the Owner. to furnish efficient business administration and
supervision; and supervision to make best efforts to furnish at all times an
adequate supply of workers and materials; and to perform the Work in the best
way and most expeditious and economical manner consistent with the interests of
the Owner. The Owner agrees to exercise best efforts to enable the Contractor to
perform the Work in the best way and most expeditious manner by furnishing and
approving in a timely way information required by the Contractor and making
payments to the Contractor in accordance with requirements of the Contract
Documents.
ARTICLE 4
DATE OF COMMENCEMENT AND SUBSTANTIAL COMPLETION
4.1. The date of commencement is the date from which the Contract Time of
Subparagraph 4.2 is measured: it shall be the date of this Agreement, as first
written above, unless a different date is stated below or provision is made for
the date to be fixed in a notice to proceed issued by the Owner.
(Insert the date of commencement if it differs from the date of this Agreement
or, if applicable, state that the date will be fixed in a notice for proceed)
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Unless the date of commencement is established by a notice to proceed issued by
the Owner, the contractor shall notify the Owner in writing not less than five
days before commencing the Work to permit the timely filing of mortgages,
mechanic's liens and other security interests.
4.2. The Contractor shall 2chieve Substantial Completion of the entire Work not
later than
(Insert the calendar date or number of calendar days after the date of
commencement. Also insert any requirements for earlier Substantial Completion of
certain portions of the Work, if not stated elsewhere in the Contract
Documents.)
See Exhibit B, Paragraph 4.2.
,subject to adjustments of this Contract Time as provided in the Contract
Documents.
(Insert provisions, if any, for liquidated damages relating to failure to
complete on time.)
ARTICLE 5
CONTRACT SUM
5.1. The Owner shall Pay the Contractor in current funds for the Contractor's
performance of the Contract the Contract Sum consisting of the Cost of the Work
as defined in Article 7 and the Contractor's Fee determined as follows:
(State a lump sum percentage of Cost of the Work or other provision for
determining the Contractor's Fee, and explain how the Contractor's Fee is to be
adjusted for changes in the Work.)
See Exhibit B, Subparagraph 5.1.
5.2. GUARANTEED MAXIMUM PRICE (IF APPLICABLE)
5.2.1. The sum of the Cost of the Work and the Contractor's Fee is guaranteed by
the Contractor not to exceed Twenty-four Million Five Hundred Thousand and
00/000 ________ Dollars ($24,500,000.00 ), subject to additions and deductions
by Change Order as provided in the Contract Documents. Such maximum sum is
referred to in the Contract Documents as the Guaranteed Maximum Price. Costs
which would cause the Guaranteed Maximum Price to be exceeded shall be paid by
the Contractor without reimbursement by the Owner.
(Insert specific provisions if the Contractor is to participate in any savings.)
All savings on the project will be returned to the Owner.
5.2.2. The Guaranteed Maximum Price is based upon the following alternates, if
any, which are described in the Contract Documents and are hereby accepted by
the Owner:
Exhibit F, Paragraph #1, is the basis for the guaranteed maximum price.
5.2.3. The amounts agreed to for unit prices, if any, are as follows:
(State unit prices only if a Guaranteed Maximum Price is inserted in
Subparagraph 5.2.1.)
Does Not Apply.
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<PAGE>
ARTICLE 6
CHANGES IN THE WORK
6.1. CONTRACTS WITH A GUARANTEED MAXIMUM PRICE
6.1.1. Adjustment to the Guaranteed Maximum Price on account of changes in the
Work may be determined by any of the methods listed in Subparagraph 7.3.3. of
the General Condition.
6.1.2. In calculating adjustments to subcontracts (except those awarded with the
Owner's prior consent on the basis of cost plus a fee) the terms "cost" and
"fee" as used in Clause 7.3.3.3. of the General Conditions and the terms "costs"
and "a reasonable allowance for overhead and profit" as used in Subparagraph
7.3.6 of the General Conditions, shall have the meanings assigned to them in the
General Conditions and shall not be modified by Articles 5 and 8 of this
Agreement. Adjustments to subcontracts awarded with the Owner's prior consent on
the basis of cost plus a fee shall be calculated in accordance with the terms of
those subcontracts
6.1.3. In calculating adjustments to this Contract, the terms "cost" and "costs"
as used in the above-referenced provisions of the General Conditions shall mean
the Cost of the Work as defined in Article ___ of this Agreement and the terms
"fee" and "a reasonable allowance for overhead and profit" shall mean the
Contractor's Fee a, defined in Paragraph 5.1 of this Agreement.
ARTICLE 7
COSTS TO BE REIMBURSED
7.1. The term Cost of the Work shall mean costs necessarily incurred by the
Contractor in the proper performance of the Work. Such costs shall be at rates
not higher than the standard paid at the place of the Project except with prior
consent of the Owner. The Cost of the Work shall include only the items set
forth in this Article 7.
7.1.1. LABOR COSTS
See Exhibit B , Paragraph 7.1.1.1.
See Exhibit B, Paragraph 7.1.1.2.
(If it is intended that the wages or salaries of certain personnel stationed at
the Contractor's principal or other offices shall be included in the Cost of the
Work, identify in Article 14 the personnel to be included and whether for all or
only part of their time.)
See Exhibit B, paragraph 7.1.1.3.
7.1.2. SUBCONTRACT COSTS
See Exhibit B. Paragraph 7.1.2.
7.1.3. COSTS OF MATERIALS AND EQUIPMENT INCORPORATED IN THE COMPLETED
CONSTRUCTION
7.1.3.1. Costs, including transportation, of materials and equipment
incorporated or to be incorporated in the completed construction.
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<PAGE>
7.1.3.2. Costs of materials described in the preceding Clause 7.1.3.1 in excess
of those actually installed but required to provide reasonable allowance for
waste and for spoilage. Unused excess materials. if any, shall be handed over to
the Owner at the completion of the Work or, at the owner's option, shall be sold
by the Contractor; amounts realized, if any, from such sales shall be credited
to the Owner as a deduction from the Cost of the Work.
7.1.4. COSTS OF OTHER MATERIALS AND EQUIPMENT, TEMPORARY FACILITIES AND RELATED
ITEMS
7.1.4.1. Costs. including transportation, installation. maintenance. dismantling
and removal of materials, supplies, temporary facilities, machinery, equipment,
and hand tools not customarily owned by the construction workers, which are
provided by the Contractor at the site and fully consumed in the performance of
the Work; and cost less salvage value on such items if not fully consumed,
whether sold to others or retained by the Contractor. Cost for items previously
used by the Contractor shall mean fair market value.
7.1.4.2. Rental charges for temporary facilities, machinery, equipment, and hand
tools not customarily owned by the construction workers. which are provided by
the Contractor at the site, whether rented from the Contractor or others, and
costs of transportation, installation, minor repairs and replacements,
dismantling and removal thereof.
See Exhibit B, Paragraph 7.1.4.2.
7.1.4.3. Costs of removal of debris from the site.
See Exhibit B, Paragraph 7.1.4.4.
7.1.4.4. That portion of the reasonable travel and subsistence expenses of the
Contractor's personnel incurred while traveling in discharge of duties connected
with the Work.
7.1.5. MISCELLANEOUS COSTS
7.1.5.1. That portion directly attributable to this Contract of premiums for
insurance and bonds.
See Exhibit B, Paragraph
7.1.5.2. Sales, use or similar taxes imposed by a governmental authority which
are related to the Work and for which the Contractor is liable.
7.1.5.3. Fees and assessments for the building permit and for other permits,
licenses and inspections for which the Contractor is required by the Contract
Documents to pay.
7.1.5.4. Fees of testing laboratories for tests required by the Contract
Documents, except those related to defective or nonconforming Work for which
reimbursement is excluded by Subparagraph 13.5.3 of the General Conditions or
other provisions of the Contract Documents and which do not fall within the
scope of Subparagraphs 7.2.2 through 7.2.4 below.
7.1.5.5. Royalties and license fees paid for the use of a particular design,
process or product required by the Contract Documents; the cost of defending
suits or claims for infringement of patent rights arising from such requirement
by the Contract Documents; payments made in accordance with legal judgments
against the Contractor resulting from such suits or claims and payments of
settlement made with the
5
<PAGE>
Owner's consent; provided, however, that such costs of legal defenses, judgment
and settlements shall not be included in the calculation of the Contractor's Fee
or of a Guaranteed Maximum Price, if any, and provided that such royalties, fees
and costs are not excluded by the last sentence of Subparagraph 3.17.1 of the
General Conditions or other provisions of the Contract Documents.
7.1.5.6. Deposits lost for causes other than the Contractor's fault or
negligence.
7.1.6. OTHER COSTS
7.1.6.1. Other costs incurred in the performance of the Work if and to the went
approved in advance in writing by the Owner.
See Exhibit B, Add Paragraphs 7.1.6.2 and 7.1.6.3.
7.2. EMERGENCIES: REPAIRS TO DAMAGED, DEFECTIVE OR NONCONFORMING WORK
The Cost of the Work shall also include costs described in Paragraph 7.1 which
are incurred by the Contractor:
7.2.1. In taking action to prevent threatened damage, injury or loss in case of
an emergency affecting the safety of persons and property, as provided in
Paragraph 10.3 of the General Conditions.
7.2.2. In repairing or correcting Work damaged or improperly executed by
construction workers in the employ of the Contractor, provided such damage or
improper execution did not result from the fault or negligence of the Contractor
or the Contractor's foremen, engineers or superintendents, or other supervisory,
administrative or managerial personnel of the Contractor.
Exhibit B, Paraqraph.7.2.2.
7.2.3. In repairing damaged Work other man that described in Subparagraph 7.2.2.
provided such damage did not result from the fault or negligence of the
Contractor or the Contractor's personnel, and only to the extent that the cost
of such repairs is not recoverable by the Contractor from others and the
Contractor is not compensated therefor by insurance or otherwise.
7.2.4. In correcting defective or nonconforming Work performed or supplied by a
Subcontractor or Material supplier and not corrected by them. provided such
defective or nonconforming Work did not result from the fault or neglect of the
Contractor or the Contractor's personnel adequately to supervise and direct the
Work of the Subcontractor or material supplier, and only to the extent that the
cost of correcting the defective or nonconforming Work is not recoverable by the
Contractor from the Subcontractor or Material supplier.
ARTICLE 8
COSTS NOT TO BE REIMBURSED
8.1. The Cost of the Work shall not include:
8.1.1. Salaries and other compensation of the Contractor's personnel stationed
at the Contractor's principal office or offices other than the site office,
except as specifically provided in Clauses 7.1.1.2 and 7.1.1.3 or as may be
provided in Article 14 .
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8.1.2. Expenses of the Contractor's principal office and offices other than the
site office.
8.1.3. Overhead and general expenses, except as may be expressly included in
Article 7.
8.1.4. The Contractor's capital expenses, including interest on the Contractor's
capital employed for the Work.
8.1.5. Rental costs of machinery and equipment, except as specifically provided
in Clause 7.1.4.2.
8.1.6. Except as provided in Subparagraphs 7.2.2 through 7.2.4 and Paragraph
13.5 of this Agreement, costs due to the fault or negligence of the Contractor.
Subcontractors, anyone directly or indirectly employed by any of them, or for
whose acts any of them may be liable, including but not limited to costs for the
correction of damaged, defective or nonconforming Work, disposal and replacement
of materials and equipment incorrectly ordered or supplied, and making good
damage to property not forming part of the Work.
8.1.7. Any cost not specifically and expressly described in Article 7.
8.1.8. Costs which would cause the Guaranteed maximum Price, if any, to be
exceeded.
ARTICLE 9
DISCOUNTS, REBATES AND REFUNDS
9.1. Cash discounts obtained on payments made by the Contractor shall accrue to
the Owner if (1) before making the payment, the Contractor included them in an
Application for Payment and received payment therefor from the Owner, or (2) the
Owner has deposited funds with the Contractor with which to make payments;
otherwise, cash discounts shall accrue to the Contractor. Trade discounts,
rebates, refunds and amounts received from sales of surplus materials and
equipment shall accrue to the Owner, and the Contractor shall make provisions so
that they can be secured.
9.2. Amounts which accrue to the Owner in accordance with the provisions of
Paragraph 9.1 shall be credited to the Owner as deduction from the Cost of the
Work.
ARTICLE 10
SUBCONTRACTS AND OTHER AGREEMENTS
10.1. Those portions of the Work that the Contractor does riot customarily
perform with the Contractor's own personnel shall be performed under
subcontracts or by other appropriate agreements with the Contractor. The
Contractor shall obtain bids from Subcontractors and from suppliers of materials
or equipment fabricated especially for the Work which bids will be accepted. The
Owner may designate specific persons or entities from whom the Contractor shall
obtain bids; however, if a Guaranteed Maximum Price has been established, the
Owner may not prohibit the Contractor from obtaining bids from others. The
Contractor shall not be required to contract with anyone to whom the Contractor
has reasonable objection.
See Exhibit B, Paragraph 10.1.
10.2. If a Guaranteed Maximum Price has been established and a specific bidder
among those whose bids are delivered by the Contractor to the Architect (1) is
recommended to the Owner by the Contractor; (2) is qualified to perform that
portion of the Work; and (3) has submitted a bid which conforms to the
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requirements of the Contract Documents without reservations or exceptions, but
the Owner requires that another bid be accepted; then the Contractor may require
that a Change Order be issued to adjust the Guaranteed Maximum Price by the
difference between the bid of the person or entity recommended to the Owner by
the Contractor and the amount of the subcontract or other agreement actually
signed with the person or entity designated by the Owner.
10.3. Subcontracts or other agreements shall conform to the payment provisions
of Paragraphs 12.7 and 12.8. and shall not be awarded on the basis of cost plus
a fee without the prior consent of the Owner.
See Exhibit B, Add Paragraph 10.4
ARTICLE 11
ACCOUNTING RECORDS
11.1. The Contractor shall keep hill and detailed accounts and exercise such
controls as may be necessary for proper financial management under this
Contract; the accounting and control systems shall be satisfactory to the Owner.
The Owner and the Owner's accountants shall be afforded 2CCCSS to the
Contr2ctor's records, books. correspondence, instructions, drawings. receipts,
subcontracts, purchase orders, vouchers, memoranda and other data relating to
this Contract, and the Contractor shall preserve these for a period of three
VC2rS after final p2vmcnE, or for such longer period as m2% be required b'- law.
ARTICLE 12
PROGRESS PAYMENTS
12.1. Based upon Applications for Payment submitted to the Architect by the
Contractor and Certificates for Payment issued by the Architect, the Owner shall
make progress payments on account of the Contract Sum to the Contractor as
provided below and elsewhere in the Contract Documents.
12.2. The period covered by each Application for Payment shall be one calendar
month ending on the last day of the month, or as follows:
12.3. Provided an Application for Payment is received by the Architect not later
than the tenth (10th) day of a month, the Owner shall make payment to the
Contractor not later than the thirtieth (30th) day of the same month. If an
Application for Payment is received by the Architect after the application date
fixed above, payment shall be made by the Owner not later than twenty (20) days
after the Architect receives the Application for payment.
12.4. With each Application for Payment the Contractor shall submit payrolls,
petty cash accounts, receipted invoices or invoices with check vouchers
attached, and any other evidence required by the Owner or Architect to
demonstrate that cash disbursements already made by the Contractor on account of
the Cost of the Work equal or exceed (1) progress payments already received by
the Contractor; less (2) that portion of those payments attributable to the
Contractor's Fee; plus (3) payrolls for the period covered by the present
Application for Payment; plus (4) retainage provided in Subparagraph 12.5.4, if
any, applicable to prior progress payments.
12.5. CONTRACTS WITH A GUARANTEED MAXIMUM PRICE
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12.5.1. Each Application for Payment shall be based upon the most recent
schedule of values submitted by the Contractor in accordance with the Contract
Documents. The schedule of values shall allocate the entire Guaranteed Maximum
Price among the various portions of the Work, except that the Contractor's Fee
shall be shown as a single separate item. The schedule of values shall be
prepared in such form and supported by such data to substantiate its accuracy as
the Architect may require. This schedule, unless objected to by the Architect,
shall be used as a basis for reviewing the Contractor's Applications for
Payment.
12.5.2. Applications for Payment shall show the percentage completion of each
portion of the Work as of the end of the period covered by the Application for
Payment. The percentage completion shall be the lesser of (1) the percentage of
that portion of the Work which has actually been completed or (2) the percentage
obtained by dividing (a) the expense which has actually been incurred by the
Contractor on account of that portion of the Work for which the Contractor has
made or intends to make actual payment prior to the next Application for Payment
by (b) the share of the Guaranteed Maximum Price allocated to that portion of
the Work in the schedule of values.
12.5.3. Subject to other provisions of the Contract Documents, the amount of
each progress payment shall be computed as follows:
12.5.3.1. Take that portion of the Guaranteed Maximum Price properly allocable
to completed Work as determined by multiplying the percentage completion of each
portion of the Work by the share of the Guaranteed Maximum Price allocated to
that portion of the Work in the schedule of values. Pending final determination
of cost to the Owner of changes in the Work, amounts not in dispute may be
included as provided in Subparagraph 7.3.7 of the General Conditions, even
though the Guaranteed Maximum Price has not yet been adjusted by Change Order.
12.5.3.2. Add that portion of the Guaranteed Maximum Price properly allocable to
materials and equipment delivered and suitably stored at the site for subsequent
incorporation in the Work or, if approved in advance by the Owner, suitably
stored off the site at a location agreed upon in writing.
12.5.3.3. Add the Contractor's Fee, less retainage of ten percent (10%). The
Contractor's Fee shall be computed upon the Cost of the Work described in the
two preceding Clauses at the rate stated in Paragraph 5.1 or, if the
Contractor's Fee is stated as a fixed sum in that Paragraph, shall be an amount
which bears the same ratio to that fixed-sum Fee as the Cost of the Work in the
two preceding Clauses bears to a reasonable estimate of the probable Cost of the
Work upon its completion.
12.5.3.4. Subtract the aggregate of previous Payments Made by the Owner.
12.5.3.5. Subtract the shortfall, if any, indicated by the Contractor in the
documentation required by Paragraph 12.4 to substantiate prior Applications for
Payment. or resulting from errors subsequently discovered by the Owner's
accountants in such documentation.
12.5.3.6. Subtract amounts, if any, for which the Architect has withheld or
nullified a Certificate for Payment as provided in Paragraph 9.5 of the General
Conditions.
12.5.4. Additional retainage, if any, shall be as follows:
(If it is intended to retain additional amounts from progress payments to the
Contractor beyond (1) the retainage from the Contractor's Fee provided in Clause
12.5.3.3(2) the retainage from Subcontractors provided in Paragraph 12.7 below;
and (3) the retainage, if any, provided by other provisions of the Contract,
insert provision for such additional retainage here. Such
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<PAGE>
provision, if made, should also describe any arrangement for limiting or
reducing the amount retained after the Work reaches a certain state of
completion.).
NONE
12.5.4.1. Subtract amounts, if any, for which the Architect has withheld or
withdrawn a Certificate for Payment as provided in the Contract Documents.
12.5.5. Additional retainage, if any, shall be as follows:
NONE
12.6. Except with the Owner's prior approval, payments to Subcontractors
included in the Contractor's Applications for Payment shall not exceed an amount
for each Subcontractor calculated as follows:
12.6.1. Take that portion of the Subcontract Sum properly allocable to completed
Work as determined by multiplying the percentage completion of each portion of
the Subcontractor's Work by the share of the total Subcontract Sum allocated to
that portion in the Subcontractor's schedule of values, less retainage of TEN
percent (10%). Pending final determination of amounts to be paid to the
Subcontractor for changes in the Work, amounts not in dispute may be included as
provided in Subparagraph 7.3.7 of the General Conditions even though the
Subcontract Sum has not yet been adjusted by Change Order.
12.6.2. Add that portion of the Subcontract Sum properly allocable to materials
and equipment delivered and suitably stored at the site for subsequent
incorporation in the Work or, if approved in advance by the Owner, suitably
stored off the Site at a location agreed upon in writing, less retainage of TEN
percent (10%).
12.6.3. Subtract the aggregate of previous payments made by the Contractor to
the Subcontractor.
12.6.4. Subtract amounts, if any, for which the Architect has withheld or
nullified a Certificate for payment by the Owner to the Contractor for reasons
which are the fault of the Subcontractor.
12.6.5. Add, upon Substantial Completion of the entire Work of the Contractor, a
sum sufficient to increase the total payments to the Subcontractor to One
Hundred percent( 100%) of the Subcontract Sum, less amounts, if any, for
incomplete Work and unsettled claims; and, if final completion of the entire
Work is thereafter materially delayed through no fault of the Subcontractor in
accordance with Subparagraph 9.10.3 of the General Conditions.
(if it is intended, prior to Substantial Completion of the entire Work of the
Contractor, to reduce or limit the retainage from Subcontractors resulting from
the percentages inserted in Subparagraphs 12.7.1 and 12/7.2 above, and this is
not explained elsewhere in the Contract Documents, insert here provisions for
such reduction or limitation.)
See Exhibit B. Add paragraphs 1.2.7.6, 12.7.7 and 12.71.8.
The Subcontract Sum is the total amount stipul2ted in the subcontract to be paid
by the Contractor to the Subcontractor for the Subcontractor's performance of
the subcontract.
12.7. Except with the Owner's prior approval, the Contractor shall not make
advance payments to suppliers for materials or equipment which have not been
delivered and stored at the site.
12.8. In taking action on the Contractor's Applications for Payment, the
Architect shall be entitled to rely on the accuracy and completeness of the
information furnished by the Contractor and shall not be
10
<PAGE>
deemed to represent that the Architect has made a detailed examination, audit or
arithmetic verification of the documentation submitted in accordance with
Paragraph 12.4 or other supporting data: that the Architect has made exhaustive
or continuous on-site inspections or that the Architect has made examinations to
ascertain how or for what purposes the Contractor has used amounts previously
paid on account of the Contract. Such examinations, audits and verifications, if
required by the Owner, will be performed by the Owner's accountants acting in
the sole interest of the Owner.
ARTICLE 13
FINAL PAYMENT
13.1. Final payment shall be made by the Owner to the Contractor when (1) the
Contract has been fully performed by the contractor except for the contractor's
responsibility to correct defective or nonconforming Work, as provided in
Subparagraph 12.2.2 of the General Conditions, and to satisfy other
requirements, if any, which necessarily survive final payment: (2) a final
Application for Payment and a final accounting for the Cost of the Work have
been submitted by the Contractor and reviewed by the Owner's accountants; and
(3) a final Certificate for Payment has then been issued by the Architect; such
final payment shall be made by the Owner not more than 30 days after the
issuance of the Architect's final Certificate for Payment:
13.2. The amount of the final Payment shall be calculated as follows:
13.2.1. Take the sum of the Cost of the Work substantiated by the Contractor's
final accounting and the Contractor's Fee; but not more than the Guaranteed
Maximum Price, if any.
13.2.2. Subtract amounts, if any, for which the Architect withholds, in whole or
in part, a final Certificate for Payment as provided in Subparagraph 9.5.1 of
the General Conditions or other provisions of the Contract Documents.
13.2.3. Subtract the aggregate of previous Payments made by the Owner.
If the aggregate Of Previous payments made by the Owner exceeds the amount due
the Contractor, the Contractor shall reimburse the difference to the Owner.
13.3. The Owner's accountants will review and report in writing on the
Contractor's final Accounting within 30 days after delivery of the final
accounting to the Architect by the Contractor. Based upon such Cost of the Work
as the Owner's accountants report to be substantiated by the Contractor's final
accounting, and provided the other conditions of Paragraph 13.1 have been met,
the Architect will, within seven days after receipt of the written report of the
Owner's accountants, either issue to the Owner a final Certificate for Payment
with a copy to the Contractor, or notify the Contractor and Owner in writing of
the Architect's reasons for withholding a Certificate as provided in
Subparagraph 9.5.1 of the General Conditions. The time periods stated in this
Paragraph 13.3 supersede those stated in Subparagraph 9.4.1 of the General
Conditions.
13.4. If the Owner's accountants report the Cost of the Work as substantiated by
the Contractor's final accounting to be less than claimed by the Contractor, the
Contractor shall be entitled to demand arbitration of the disputed amount
without a further decision of the Architect. Such demand for arbitration shall
be made by the Contractor within 30 days after the Contractor's receipt of a
copy of the Architect's final Certificate for Payment; failure to demand
arbitration within this 30-day period shall result in the substantiated amount
reported by the Owner's accountants becoming binding on the
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<PAGE>
Contractor. Pending a final resolution by arbitration. the Owner shall pay the
Contractor the amount certified in the Architect's final Certificate for
Payment.
13.5. If, subsequent to final payment and at the Owner's request, the Contractor
incurs costs described in Article 7 and not excluded by Article 8 to correct
defective or nonconforming Work, the Owner shall reimburse the Contractor such
costs and the Contractor's FCC applicable thereto on the same basis as if such
costs had been incurred prior to final payment, but not in excess of the
Guaranteed Maximum Price, if any. If the Contractor has participated in savings
as provided in Paragraph 5.2, the amount of such savings shall be recalculated
and appropriate credit given to the Owner in determining the net amount to be
paid by the Owner to the Contractor.
ARTICLE 14
MISCELLANEOUS PROVISIONS
14.1. Where reference is made in this Agreement to a provision of the General
Conditions or another Contract Document. the reference refers to that provision
as amended or supplemented by other provisions of the Contract Documents.
14.2. Payments due and unpaid under the Contract shall bear interest from the
date Payment is due at the rate stated below, or in the absence thereof. at the
legal rate prevailing from time to time at the place where the Project is
located.
If the Owner fails to make timely payments, The Contractor shall receive
interest at the Prime Lending Rate plus three percent (3%) for all days the
payments are late. The Prime Rate will be that of the Norwest Bank of Denver as
it is published from time to time, at its current rate.
(Usury laws and requirements under the Federal Truth in Lending Act, similar
state and local consumer credit laws and other regulations at the Owner's and
Contractor's principal laces of business, the location of the Project and
elsewhere may affect the validity of this provision. Legal advice should be
obtained with respect to deletions or modifications, and also regarding
requirements such as written disclosures or waivers.)
14.3. Other provisions:
See Exhibit B, Add Paragraph 14.3.
ARTICLE 15
TERMINATION OR SUSPENSION
15.1. The Contract may be terminated by the Contractor as provided in Article 14
of the General Conditions; however, the amount to be paid to the Contractor
under Subparagraph 14.1.2 of the General Conditions shall not exceed the amount
the Contractor would be entitled to receive under Paragraph 15.3 below, except
that the Contractor's Fee shall be calculated as if the Work had been fully
completed by the Contractor, including a reasonable estimate of the Cost of the
Work for Work not actually completed.
15.2. If a Guaranteed Maximum Price is established in Article 5, the Contract
may be terminated by the Owner for cause as provided in Article 14 of the
General Conditions; however, the amount, if any, to be paid to the Contractor
under Subparagraph 14.2.4 of the General Conditions shall not cause the
Guaranteed Maximum Price to be exceeded, nor shall it exceed the amount the
Contractor would be entitled to receive under Paragraph 15.3 below.
12
<PAGE>
15.3. If no Guaranteed Maximum Price is established in Article 5, the Contract
may be terminated by the Owner for cause provided in Article 14 of the General
Conditions; however, the Owner shall then pay the Contractor an amount
calculated as follows:
15.3.1. Take the Cost of the Work incurred by the Contractor to the date of
termination.
15.3.2. Add the Contractor's Fee computed upon the Cost of the Work to the date
of termination 21 the rate stated in Paragraph 5.1 or, if the Contractor's Fee
is stated as a fixed sum in that Paragraph, an amount which bears the same ratio
to that fixed-sum Fee as the Cost of the Work at the time of termination bears
to a reasonable estimate of the probable Cost of the Work upon its completion.
15.3.3. Subtract the aggregate of previous payments made by the Owner.
The Owner shall also pay the Contractor fair compensation, either by purchase or
rental at the election of the Owner, for any equipment owned by the Contractor
which the Owner elects to retain and which is not otherwise included in the Cost
of the Work under Subparagraph 15.3. 1. To the extent that the Owner elects to
take legal assignment of subcontracts and purchase orders (including rental
agreements), the Contractor shall, as a condition of receiving the payments
referred to in this Article 15, execute and deliver all such papers and take all
such steps, including the legal assignment of such subcontracts and other
contractual rights of the Contractor. as the Owner may require for the purpose
of fully vesting in the Owner the rights and benefits of the Contractor under
such subcontracts or purchase orders.
15.4. The Work may be suspended by the Owner as provided in Article 14 of the
General Conditions; in such case the Guaranteed Maximum Price, if any, shall be
increased as provided in Subparagraph 14.3.2 of the General Conditions except
that the term "cost of performance of the Contract" in that Subparagraph shall
be understood to mean the Cost of the Work and the term "profit" shall be
understood to mean the Contractor's Fee as described in Paragraphs 5.1 and 6.3
of this Agreement.
ARTICLE 16
ENUMERATION OF CONTRACT DOCUMENTS
16.1. The Contract Documents, except for Modifications issued after execution of
this Agreement, are enumerated as follows:
16.1.1. The Agreement is this executed Standard Form of Agreement Between Owner
and Contractor. AIA Document A111, 198 Edition.
16.1.2. The General Conditions are the General Conditions of the Contract for
Construction, AIA Document A201, 198 Edition.
16.1.3. The Supplementary and other Conditions of the Contract are those
contained in the Project Manual dated ___________ and are as follows:
Document Title Pages
TO BE DETERMINED BY CHANGE ORDER.
16.1.4. The Specifications are those contained in the Project Manual dated as in
Paragraph 16.1.3. and are as follows:
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<PAGE>
(Either list the Specifications here or refer to an exhibit attached to the
Agreement.)
Section Title Pages
TO BE DETERMINED BY CHANGE ORDER.
16.1.5. The Drawings are as follows, and are dated __________ unless a different
date is show below:
Number Title Date
Reference Exhibit A.
16.1.6. The addenda, if any, are as follows:
Number Date Pages
TO BE ADDED BY FUTURE CHANGE ORDER AS NEEDED.
Portions of Addenda relating to bidding requirements are not part of the
Contract Documents unless the bidding requirements are also enumerated in this
Article 16.
16.1.7. Other Documents, if any, forming part of the Contract Documents are as
follows:
(List here any additional documents which are intended to form part of the
Contract Documents. The General Conditions provide that bidding requirements
such as advertisement or invitation to bid, instructions to Bidders, same forms
and the Contractor's bid are not part of the Contract Documents unless
enumerated in this Agreement. They should be listed here only if intended to be
part of the contract Documents.)
Exhibit A - Drawing List
Exhibit B - Supplementary Conditions to AIA A111, Standard Form of Agreement
Between Owner and Contractor
Exhibit C - Supplementary conditions to the AIA A201 General Conditions
for the Agreement Between Owner and Contractor
Exhibit D - Contractor's Project Schedule
Exhibit E - Contractor's Project Budget
Exhibit F - Contractor's Qualifications to the Drawings and Specifications
Exhibit G - Small Tools Defined
Exhibit H - Contractor's Equipment Rental Rates
Exhibit I - Data for Basis of Weather Assumptions
Exhibit J - Contractor's Standard Subcontract Agreement Form; Purchase Order
Form; Interim and Final Lien Waivers.
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This Agreement is entered into as of the day and year first written above and is
executed in at least three original copies of which one is to be delivered to
the Contractor, one to the Architect for use in the administration of the
Contract, and the remainder to the Owner.
OWNER-RIVIERA BLACK HAWK, INC. CONTRACTOR - WEITZ-COHEN
CONSTRUCTION CO.
- ---------------------------------- -------------------------------------
(Signature) (Signature)
William L. Westerman, President Gary D. Meggison, Vice President
- ---------------------------------- -------------------------------------
(Printed name and title) (Printed name and title)
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EXHIBIT A
Drawings List
for the Riviera Black Hawk Casino project, Black Hawk, Colorado
Dated: December 29,1997
Page 1 of 2
1. Preliminary/schematic architectural drawings prepared by Melick Associates,
Denver, Colorado.
A0.2 General Information Dated October 8, 1997
A1.1 Site/Development Plan "
A2.1 Parking Level 1 Floor Plan "
A2.2 Parking Level 2 Floor Plan "
A2.3 Parking Level 3 Floor Plan "
A2.4 Casino & Parking Level 4 Floor Plan "
A2.5 Parking Levels 5 & 7 Floor Plan "
A2.6 Upper & Parking Level 6 Floor Plan "
A2.7 Not Used "
A2.8 Not Used "
A2.9 Roof Plan "
A4.1 South Elevations "
A4.2 North Elevation "
A4.3 East & West Elevations "
A5.1 East-West Section "
A5.2 North-South Section Dated October 8, 1997
2. Preliminary/schematic structural drawings prepared by Monroe Newell
Consulting Engineers, Denver, Colorado
<TABLE>
<S> <C> <C>
Unnumbered Foundation Plan - Schematic Design Dated October 13, 1997
Unnumbered Foundation Plan & 2nd Level Framing Plan "
Unnumbered Valet Parking Level Framing Plan "
Unnumbered Parking Level 3 Framing Plan "
Unnumbered Casino Framing Plan Dated October 13, 1997
Unnumbered Casino Level Framing Plan - Steel (Revised) Dated October 20, 1997
Unnumbered Level 4 Framing Plan Dated October 13, 1997
Unnumbered Upper Framing Plan "
Unnumbered Parking Level 6 "
Unnumbered Upper & Parking Level 6 Framing Dated October 13, 1997
Unnumbered Upper Framing Plans - Steel (Revised) Rec.'d October 20, 1997
Unnumbered Roof Plan Dated October 13, 1997
</TABLE>
16
<PAGE>
EXHIBIT A
Drawings List
for the Riviera Black Hawk Casino project, Black Hawk, Colorado
Dated: December 29,1997
Page 2 of 2
3. Preliminary/schematic drawings prepared by Martin/Martin Consulting
Engineers, Wheat Ridge, Colorado.
<TABLE>
<S> <C> <C>
C1.1 Main Street Site Plan Undated - Received October 20, 1997
C2.1 Main Street Overall Grading Plan "
C2.2 Main Street Grading Plan "
C2.3 Main Street Grading Plan "
C3.1 Main Street Overall Utility Plan "
C3.2 Main Suva Utility Plan "
C3.3 Main Street Utility Plan "
C4.1 Main Street Plan/Profile "
C4.2 Main Street Plan/Profile "
C5.1 Main Street Drainage Plans "
C5.2 Main Street - Erosion Control Plans Undated - Received October 20, 1997
</TABLE>
4. Soil Mitigation Plan, dated October 1997, prepared by Stewart Environmental
Consultants, Inc., Ft. Collins, Colorado.
Letter describing construction dewatering plan, dated October 22, 1997,
prepared by Groundwater Specialists, Boulder, Colorado.
6. Request for Proposal, dated August 19, 1997, prepared by Melick Associates,
Denver, Colorado.
7. The budget assumes that the project will be designed and built under the
1991 UBC.
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EXHIBIT B
Supplementary Contract Terms to the AIA Document A111 Agreement
Between Riviera Black Hawk, Inc. and Weitz-Cohen Construction Co.
for the Riviera Black Hawk Casino project, Black Hawk, Colorado
Dated: December 29,1997
Page 1 of 9
These Supplementary Contract Terms modify, change, delete from, or add to those
terms set forth in the "Standard Form of Agreement Between Owner and Contractor,
AIA Document A111, Tenth Edition, 1987, and shall supersede such
Owner/Contractor Agreement to the extent inconsistent or in conflict therewith.
Where any Article, Paragraph, Subparagraph or Clause of the Owner/Contractor
Agreement is modified or deleted by these Supplementary Contract Terms, the
unaltered provisions of that Article, Paragraph, Subparagraph or Clause shall
remain in effect:
o Paragraph 2.2, add the following new paragraph:
"2.2 The Guaranteed maximum Price may be arrived at on the basis of the
Contractor preparing and submitting for the Owners approval certain value
engineering items. The Owner acknowledges that the value engineering
services provided by the Contractor are advisory in nature and are not
professional design services. Should incorporation of any value engineering
item into the drawings and specifications materially affect other aspects
of the work the Contractor will promptly notify the Owner in writing of the
impact and indicate if any adjustment in the Guaranteed Maximum Price or
further refinement of the drawings and specifications is anticipated.
"2.2.1 The Contractor agrees to provide consulting services as listed in
this Paragraph 2.2 to further the interests of the Owner by furnishing the
Contractor's skill and judgment in cooperation with, and in reliance upon,
the services of the Architect. The Contractor agrees to furnish business
administration and management services and to perform preconstruction
services in an expeditious and economical manner consistent with the
interests of the Owner."
"2.2.2 Provide cost evaluations of alternative materials and systems during
the construction period."
"2.2.3 Review designs during creation of construction drawings. Provide
recommendations with respect to minimizing the cost of the work on relative
feasibility of construction methods, availability of materials and labor,
time requirements for procurement, installation and construction, and
factors related to cost including, but not limited to, costs of alternative
designs or materials, preliminary budgets and possible economies."
"2.2.4 Provide for the Architects and the Owner's review and acceptance,
and monthly update, a project schedule that coordinates and integrates the
Contractor's services, the Architects services and the Owner's
responsibilities with the original construction schedule."
"2.2.5 Prepare a detailed cost breakdown of the Guaranteed Maximum Price
based on Design Development Documents prepared by the Architect. Update and
refine this cost breakdown periodically as the Architect prepares
Construction Documents."
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EXHIBIT B
Supplementary Contract Terms to the AIA Document A111 Agreement
Between Riviera Black Hawk, Inc. and Weitz-Cohen Construction Co.
for the Riviera Black Hawk Casino project, Black Hawk, Colorado
Dated: December 29,1997
Page 2 of 9
"2.2.6 Review Construction Documents as they are being prepared and
recommend alternative solutions whenever design details affect construction
feasibility, or the design is likely to exceed the Project budget or
schedule. Make recommendations for corrective action"
"2.2.7 Advise on the method to be used for selecting Subcontractors and
awarding Subcontracts. Review the drawings and specifications and make
recommendations as required to provide that (1) the Work of Subcontractors
is coordinated, (2) the likelihood of jurisdictional disputes has been
minimized, and (3) proper coordination has been provided for phased
construction."
"2.2.8 Make recommendations for pre-qualification criteria for Subcontract
Bidders and develop Subcontract Bidders' interest in the Project. Establish
bidding schedules. Assist the Architect with the receipt of questions from
Subcontract Bidders, and with the issuance of Addenda."
"2.2.9 Assist in obtaining preconstruction building permits, approvals and
special permits."
"2.2.10 If requested, assist the Owner in selecting and retaining the
professional services of surveyors, special consultants and testing
laboratories. Coordinate their services."
o Paragraph 2.3, add the following new paragraph:
"The Work is clarified by Exhibit F, Contractor's Qualifications to the
Drawings and Specifications."
o Paragraph 4.2 is deleted and the following substituted:
"4.2 After the commencement date is fixed in a Notice to Proceed, the
Contractor shall prepare and issue within 10 days a construction schedule
for the Work. The schedule shall establish the time limits for the Work, to
be revised as required by the conditions of the Work and Project. The
Contractor shall achieve Substantial Completion of the entire Work not
later than (To be Determined by Change Order) calendar days from the actual
start of construction, subject to adjustments of this Contract Time as
provided in the Contract Documents. The data in Exhibit I, Weather Data,
shall be the basis for claims due to adverse weather."
o Paragraph 5.1 is deleted and the following substituted:
"5.1 The Owner shall pay the Contractor in current funds for the
Contractor's performance of the Contract the Contract Sum consisting of the
Cost of the Work as defined in Article 7 and a Lump Sum Fee of $805,610.
5.1.2 For any changes to the scope of work, a Fee of 3.4% will be charged
for the sum of the Cost of the Work plus General Conditions costs
chargeable for the revision. Deductive Change Orders will be credited only
the Cost of the Work, there shall be no change in Contractor's Fee or
General Conditions for deleted items."
19
<PAGE>
EXHIBIT B
Supplementary Contract Terms to the AIA Document A111 Agreement
Between Riviera Black Hawk, Inc. and Weitz-Cohen Construction Co.
for the Riviera Black Hawk Casino project, Black Hawk, Colorado
Dated: December 29,1997
Page 3 of 9
o Subparagraphs 7.1.1.1, 7.1.1.2, 7.1.1.3 and 7.1.1.4 are deleted and the
following substituted:
"7.1.1.1 Wages plus fringe benefit charges of construction workers directly
employed by the Contractor to perform the construction of the Work at the
site or at off-site workshops and to make deliveries or pickups for the
Project."
"7.1.1.2 The Contractor's supervisory and administrative personnel at the
following charging rates, no matter where stationed, with adjustments for
staff as assigned to the project:
Construction Manager $85.00/hour
Project Manager $65.00/hour
Chief Estimator $53.00/hour
Estimator $41.64/hour
Project Engineer #1 $43.00/hour
Project Engineer #2 $38.00/hour
Assistant Project Engineer $19.84/hour
Project Superintendent $2,200/week
Assistant Superintendent $1,310/week
Project Accountant $23.00/hour
Project Secretary/Coordinator $23.00/hour
Jobsite Secretary $15.00/hour
Safety Director Included in Contractor's Fee"
"7.1.1.3 Labor burden of 39% for FICA taxes, Workers Compensation Insurance
and unemployment contributions shall be added to costs in 7.1.1.1. Burden
has been included in the charging rates in Subparagraph 7.1.1.2."
o Subparagraph 7.1.2, is deleted and the following substituted:
"7.1.2 SUBCONTRACT COSTS
Payments made by the Contractor to Subcontractors in accordance with the
requirements of the subcontracts and the costs of subcontractor bonds
required by the Owner or Contractor. For the purposes of this Subparagraph,
Subcontractors and subcontracts shall include engineering consultants
engaged by the Contractor or Subcontractor."
o Subparagraph 7.1.4.2, is revised by deleting the last sentence and
inserting in lieu thereof, the following:
"Rental charges for equipment owned by the Contractor shall be as indicated
in Exhibit H, Contractor's Equipment Rental Rates The cost for providing
Small Tools, as defined in Exhibit G, Small Tools Defined, are included in
the Contractor's hourly labor rate for any self performed work."
20
<PAGE>
EXHIBIT B
Supplementary Contract Terms to the AIA Document A111 Agreement
Between Riviera Black Hawk, Inc. and Weitz-Cohen Construction Co.
for the Riviera Black Hawk Casino project, Black Hawk, Colorado
Dated: December 29,1997
Page 4 of 9
o Subparagraph 7.1.4.4, is deleted and the following substituted:
"The costs of telegrams, fax, and long-distance calls; postage, delivery
and express charges; telephone service at the site; printing and copy
charges; petty cash expenses at the site; data processing and computer
usage charges at $1.70 per thousand dollars of the Guaranteed Maximum
Price; photography; computerized scheduling charges; office furniture,
equipment and supplies for the site office; and other similar expenses
related to the Work."
o Subparagraph 7.1.5.1, is deleted and the following substituted:
"7.1.5.1 That portion directly attributable to this Contract of premiums
for insurance and bonds. The Owner and Contractor agree to the following
stipulated rates of costs reimbursement: (i) Contractor's commercial
general liability insurance at the rate of $6.00 per thousand dollars of
the Guaranteed Maximum Price plus the cost of O.C.P. coverage, if required;
(ii) Contractor's Subguard insurance at the rate of $7.50 per thousand
dollars of subcontract sum; and (iii) Contractor's other insurance or
payment bond and performance bond, if required, at actual premium cost.
o Subparagraphs 7.1.6.2, and 7.1.6.3, add the following new subparagraphs:
"7.1.6.2 Utility fees, including but not limited to water, steam, gas, oil,
electricity, snow removal, weather protection, and temporary toilets;
protection and altering of public utilities; protection and repairs of
existing or adjoining property; rental property for storage of materials
and equipment or parking."
"7.1.6.3 That portion of Contractor's AGC dues based on the Contract Sum of
this Project."
o Paragraph 7.2.2, insert "employees, agents, or subcontractors..." in the
third sentence after "...Contractor's foreman..." and before "...engineers
or superintendents..."
o Paragraph 10.1, delete the last eight words of the second sentence, delete
third sentence and add:
"The Contractor shall review bids and proposed subcontract awards and
amendments in excess of $10,000 with the Owner prior to award. Additional
subcontracts (below $10,000) will also be reviewed if required by Owner's
lenders."
21
<PAGE>
EXHIBIT B
Supplementary Contract Terms to the AIA Document A111 Agreement
Between Riviera Black Hawk, Inc. and Weitz-Cohen Construction Co.
for the Riviera Black Hawk Casino project, Black Hawk, Colorado
Dated: December 29,1997
Page 5 of 9
o Paragraph 10.4, add the following new paragraph:
"10.4 Major categories of trade work commonly subcontracted in the location
of the Project shall only be performed by Contractor's own personnel if
approved in advance in writing by the Owner. This paragraph shall not
prevent the Contractor from performing incidental trade work estimated at
less than $10,000 that due to the size or scope of the trade work does not
represent an attractive package for competitive subcontract bidding and
general conditions work with his own personnel."
o Paragraph 12.4, is revised by adding the following after the last sentence:
"The Contractor will present interim lien waivers from subcontractors and
major material suppliers as condition for payment. Samples of Interim Lien
Waivers, Final Lien Waivers and Contractors standard Purchase Order and
Subcontract forms have been included in Exhibit `J'."
o Subparagraph 12.7.6, add the following new subparagraph:
"12.7.6 Notwithstanding Paragraphs 12.7.1 and 12.7.2 above, at such times
as each portion of the Work as set forth in the schedule of values has been
fifty percent (50%) completed to the mutual satisfaction of Owner and
Contractor, Owner may cease further retainage from the progress payments
with respect to such portion of the Work."
o Subparagraph 12.7.7, add the following new subparagraph:
"12.7.7 Upon mutual agreement by Owner and Contractor, payment in full may
be made to those subcontractors whose Work is fully completed during the
early stages of the Project, or any retained amounts reduced with respect
to subcontractors at such times as the parties may mutually agree.
Agreement to any such reduction in retained amounts will not constitute a
waiver of or otherwise prejudice the Owner's right to subsequently
reinstate full retainage, as to that subcontractor, should circumstances
justify such action in the Owner's sole judgment."
o Paragraph 12.7.8, add the following new paragraph:
"12.7.8 The Contractor's Fee; general conditions costs; insurance charges,
bond costs, if any; taxes and costs of permits, fees, testing, inspections
and similar items, if paid by the Contractor, shall not be subject to
retainage."
22
<PAGE>
EXHIBIT B
Supplementary Contract Terms to the AIA Document A111 Agreement
Between Riviera Black Hawk, Inc. and Weitz-Cohen Construction Co.
for the Riviera Black Hawk Casino project, Black Hawk, Colorado
Dated: December 29,1997
Page 6 of 9
o Paragraph 14.3, add the following new paragraphs:
"14.3.1 Owner and Architect are to be listed as `Additional Insured' for
all liability insurance policies purchased by the Contractor. Limits of
liability of insurance required to be carried by the Contractor shall be:"
"14.3.1.1 Workers Compensation: statutory limits, including employer's
liability limits $1,000,000 each accident, $1,000,000 disease policy limit,
$1,000,000 disease each employee."
"14.3.1.2 Comprehensive Public Liability including operations, premises,
products, completed operations, premises, products, completed operations,
independent contractors, contractual, personal injury, and broad form
property damage endorsement: limits $2,000,000 bodily injury and property
damage combined."
"14.3.1.3 Automobile Liability: including owned, hired and non-owned,
limits $1,000,000 bodily injury and property damage combined."
"14.3.1.4 Excess Liability Umbrella policy in the amount normally carried
by the Contractor, but in any event not less than $16,000,000 to cover all
items required to be covered under Subparagraphs 14.3.1.2 and 14.3.1.3."
"14.3.1.5 Thirty days written cancellation notice stating a firm 30 days'
written notice will be furnished to the holder of the certificate."
"14.3.1.6 XCU coverage (required from Subcontractors who have demolition,
excavation, shoring, underpinning, connection with existing utilities or
work in or adjacent to any buildings included in the scope of the Work) to
provide protection for explosion, collapse and underground damage
exposure."
"14.3.2 The Contractor will obtain for the duration of the construction
"builder's risk/all risk" insurance for the Work, with deductibles of
$1,000 for each occurrence, $25,000 for losses due to earthquakes or
$25,000 for losses due to flood. Any deductible amount paid by the
Contractor will be considered a Cost of the Work." The "builder's risk/all
risk" policy is to be presented to the Owner for approval."
"14.3.3 The Owner hereby designates John `Chip' Franzoi as its
representative, with authority to approve Modifications and other changes
in the Work. Such representative shall be available when needed during
working hours at the site of the Work and, in all cases, such
representative's signature shall be final and binding on the Owner."
"14.3.4 Notices required or desired to be made under this Agreement shall,
if mailed, be mailed to the party at the address set forth as follows:
23
<PAGE>
EXHIBIT B
Supplementary Contract Terms to the AIA Document A111 Agreement
Between Riviera Black Hawk, Inc. and Weitz-Cohen Construction Co.
for the Riviera Black Hawk Casino project, Black Hawk, Colorado
Dated: December 29,1997
Page 7 of 9
Riviera Hotel and Casino Weitz-Cohen Construction Company
2901 Las Vegas Boulevard South 899 Logan Street, Suite 600
Las Vegas, NV 89109 Denver, CO 80203
Attention: John `Chip' Franzoi Attention: Gary Meggison
Vice President Construction Vice President
"14.3.5 The Owner and Contractor recognize that, in performing the Work
covered by the Contract Documents, property of the Owner and of the Owner's
separate contractors, including the Work, may be damaged or destroyed. The
loss in such case may or may not be within the coverage or may exceed the
limits of liability under any insurance carried by the Owner or others. It
is agreed by the parties hereto that notwithstanding anything contained in
the Contract Documents to the contrary, the Owner and the Owner's separate
contractors assume all risk of loss or damage to their interest in any and
all of their property and the use and occupancy thereof and hereby release
the Contractor and its agents, employees and Subcontractors ("Released
Parties") from all claims on account of loss or damage thereto, except to
the extent negligently or willfully caused by such released parties."
"14.3.6.1 The following scopes of work ("Design/Build Work") include design
services to be performed as part of this Agreement:
a) Mechanical Systems/HVAC, Plumbing and Temperature Controls
Design services to be performed by Southland Industries, Inc. will be
a Cost of the Work included in the Contract.
b) Fire Protection
Design services to be performed by Frontier Fire Protection, Inc. will
be a Cost of the Work included in the Contract.
c) Electrical Systems/Power, Lighting, Fire Detection and Miscellaneous
Systems
Design services to be performed by Riviera Electric, Inc. will be a
Cost of the Work included in the Contract.
d) Dewatering system and water treatment facility
Design services to be performed by IT Corporation, Inc. will be a Cost
of the Work included in the Contact.
24
<PAGE>
EXHIBIT B
Supplementary Contract Terms to the AIA Document A111 Agreement
Between Riviera Black Hawk, Inc. and Weitz-Cohen Construction Co.
for the Riviera Black Hawk Casino project, Black Hawk, Colorado
Dated: December 29,1997
Page 8 of 9
e) Earth retention and shoring system
Design services to be performed by Coggins and Son, Inc. will be a
Cost of the Work included in the Contract.
14.3.6.2 The Design/Build Work subcontracts shall include:
a) The Subcontractor shall furnish a certificate of insurance to Owner,
which evidences the following minimal professional errors and omission
(or comparable) coverages:
Single Occurrence $1,000,000
Aggregate Limit $2,000,000
b) The Subcontractor shall agree to defend, indemnify and hold Owner
harmless from and against any design errors or omissions of the
Subcontractor and shall grant the Owner the right to pursue such
claims directly against the Subcontractor.
14.3.6.3 The Contractor agrees to administer performance of such
Design/Build Work design services, including (i) administration of the
Design/Build Work subcontracts in the normal course including payment
administration, and (ii) coordination of the Design/Build Work contract
documents prepared by its subcontractors, with the design services of the
Owner's design professionals, including site, architectural, structural,
civil and geotechnical.
14.3.6.4 Owner and Contractor agree to look solely to the Design/Build Work
subcontractors for any design errors or omissions arising out of their
Design/Build Work, and hereby release each other (but not the
subcontractor) therefrom.
14.3.7 The parties acknowledge that Owner may obtain financing for all or a
portion of the amounts payable under this Contract, and that the lender
providing such financing (the "Lender") may seek certain protections to
assure its ability to complete the Work and preserve the value of the
property upon which the Project is located in the event of a default by
Owner. The parties agree to negotiate modifications to this contract in
good faith as may be necessary to provide reasonable Lender protection,
including but not limited to: a) the assignment of this Contract and
subcontracts to Lender and assurances that (contingent upon the continued
performance by Lender under such contracts) Contractor and subcontractors
will continue to perform the Work following default by Owner and acceptance
of the contracts by Lender; b) agreements that Lender or its agents or
consultants may inspect the Work at any reasonable time upon the same terms
as can the Owner and/or Architect under the Contract Documents; c)
providing periodic reports to Lender regarding the percentage completion of
the Work, budgetary matters, payments to subcontractors or materialmen and
similar items; d) making Lender an additional insured under all policies of
insurance maintained by Contractor; or e) reasonable limitations upon the
recourse of Contractor or subcontractors against Lender for defaults by
Owner under the Contract Documents."
25
<PAGE>
EXHIBIT B
Supplementary Contract Terms to the AIA Document A111 Agreement
Between Riviera Black Hawk, Inc. and Weitz-Cohen Construction Co.
for the Riviera Black Hawk Casino project, Black Hawk, Colorado
Dated: December 29,1997
Page 9 of 9
END OF SUPPLEMENTARY CONTRACT TERMS
26
<PAGE>
EXHIBIT C
Supplementary Conditions to the AIA Document A201 General Conditions
for the Agreement Between Riviera Black Hawk, Inc. and Weitz-Cohen Construction
Co. for the Riviera Black Hawk Casino project, Black Hawk, Colorado
Dated: December 29,1997
Page 1 of 5
These Supplementary General Conditions modify, change, delete from or add to the
"General Conditions of the Contract For Construction," AIA Document A201,
Fourteenth Edition, 1987, and shall supersede the General Conditions to the
extent inconsistent or in conflict therewith. Where any Article of the General
Conditions is modified, or any Paragraph, Subparagraph or Clause thereof is
modified or deleted by these Supplementary General Conditions, the unaltered
provisions of that Article, Paragraph, Subparagraph or Clause shall remain in
effect:
o Subparagraph 2.4.1, is revised by changing "seven" in lines 3, 6 and 8 to
"three":
o Subparagraph 3.10.3, delete in its entirety.
o Subparagraph 4.2.1, is revised by deleting Item 1, `during construction"
and Item 2 `until final payment is due'.
o Subparagraph 4.5.8, add as a new subparagraph:
"4.5.8 Procedural Issues. The arbitration shall be held in Denver,
Colorado. Each party shall bear its own direct costs, including attorney's
fees, but general costs of the arbitration shall be shared by both parties
equally; provided, the arbitrator may choose to award the general costs of
arbitration against the losing party if the arbitrator determines that the
proposed resolution urged by the losing party was not reasonable.
Notwithstanding anything in the Contract Documents to the contrary, each
party shall be required to submit its proposed resolutions of each Claim to
the arbitrator, and the arbitrator shall be required to render a decision
adopting in full either one or the other of such proposed resolutions, and
no compromises or alternative resolutions shall be allowed or considered by
the arbitrator. Each party shall be entitled to full discovery and the
process, proceedings, practices and procedures provided for under the
Federal Rules of Civil Procedure in effect at the time notice of demand for
arbitration is filed. Either party may request the selection of up to 3
arbitrators."
27
<PAGE>
EXHIBIT C
Supplementary Conditions to the AIA Document A201 General Conditions
for the Agreement Between Riviera Black Hawk, Inc. and Weitz-Cohen Construction
Co. for the Riviera Black Hawk Casino project, Black Hawk, Colorado
Dated: December 29,1997
Page 2 of 5
o Subparagraph 4.5.9, add as a new subparagraph:
"4.5.9 Limitations on Arbitration. Notwithstanding anything in the Contract
Documents to the contrary, if the (1) Claims involve a proposed, net
aggregate payment or reimbursement in an amount greater than $500,000, or
(2) the Claims involve an interested person or entity (including the
Architect) who has not consented to be joined in the arbitration, then
arbitration shall apply only if both parties consent to arbitration. For
this purpose an "interested person or entity" means any person or entity if
(1) in such interested person or entity's absence, complete relief cannot
be accorded among those already parties, or (2) the interested person or
entity is so situated that the disposition of the Claim without the joinder
of such interested person or entity may leave any of those already parties
subject to a substantial risk of incurring double, multiple or otherwise
inconsistent obligations. If both parties do not consent to arbitration for
such Claim as described herein, then all requirements, conditions, and
conditions precedent pertaining to arbitration shall be deemed
appropriately adjusted to permit either party to pursue such Claims as
otherwise permitted by the Contract Documents or by law."
o Subparagraph 5.2.1, change "promptly" to "within 10 days" in lines 7 and
11.
o Subparagraph 7.3.4, add at the end.
"Notwithstanding the foregoing, if the evidence required by Subparagraph
2.2.1 indicates the Owner will not have sufficient funds to make timely
payment for the Construction Change Directive, the Contractor shall not be
required to proceed with the change in work."
o Subparagraph 8.2.2, delete the third sentence.
o Subparagraph 8.3.1, add at the end:
"Any delay caused by lack of permit or governmental approval, beyond
control of Contractor, shall be grounds for a time extension."
o Paragraph 9.3.1, is revised by adding "and Owner after "Architect" in the
second line.
o Subparagraph 9.3.1.2, insert "within thirty days" in the second sentence
after "...Contractor does not intend to pay..."
28
<PAGE>
EXHIBIT C
Supplementary Conditions to the AIA Document A201 General Conditions
for the Agreement Between Riviera Black Hawk, Inc. and Weitz-Cohen Construction
Co. for the Riviera Black Hawk Casino project, Black Hawk, Colorado
Dated: December 29,1997
Page 3 of 5
o Paragraph 9.3.3, is revised by adding the following sentence:
To the extent that the Owner has paid to Contractor all amounts then due and
payable from Owner to Contractor under the Contract Documents, Contractor shall
save and keep Owner, Owner's loan proceeds and Owner's property free from all
mechanics' liens and materialmen's liens and all other liens and claims, legal
or equitable, arising out of the Work performed by Contractor, its employees or
subcontractors on all tiers. If Owner has paid to Contractor amounts due on
account of work performed or materials provided by a claimant, Contractor shall
remove and discharge any lien, or obtain the release of any Notice to Disburser,
filed by such claimant within thirty days after the same was filed. Samples of
Interim Lien Waivers, Final Lien Waivers and Contractors standard Purchase Order
and Subcontract forms have been included in Exhibit `J'."
o Paragraph 9.6.1, is revised by adding the following at the end of the
Section:
"Notwithstanding the foregoing, if the Contractor is in breach under the
Contract Documents on the date on which the Owner receives the Certificate of
Payment from the Architect, or if the Owner otherwise disputes any amount shown
as due on the Certificate of Payment, the Owner may withhold from the payment
certified by the Architect the amount that the Owner reasonably deems necessary
to cure the Contractor's breach or the amount otherwise disputed, on the
condition that the Owner delivers written notice of the basis for such
withholding and pays to the Contractor all undisputed amounts shown as due on
the Certificate of Payment within the time provided in the Contract Documents
for the payment of progress payments to the Contractor. Except as provided in
Section 14.2.3, any amount so withheld shall promptly be paid over to Contractor
upon the cure of the breach or resolution of the dispute. Notwithstanding any
provision hereof to the contrary, Owner's withholding of payment to the
Contractor pursuant to the terms of this Section shall not be considered the
failure of Owner to pay any amounts certified for payment by the Architect or
constitute a default by Owner under the terms of this Contract"
o Subparagraph 9.7.1, is revised by changing "seven" in lines 2, 4 and 7 to
"three" and change line 6 as follows:
"tified by the Architect or awarded by arbitration, or if the Owner does not
promptly furnish evidence as required by Subparagraph 2.2.1, then the Con-."
o Subparagraphs 10.1.2 through 10.1.6, delete in its entirety and substitute
the following:
10.1.2 If reasonable precautions will be inadequate to prevent foreseeable
bodily injury or death to persons resulting from a material or substance,
including but not limited to asbestos or polychlorinated biphenyl (PCB),
encountered on the site by the Contractor, the Contractor shall, upon
recognizing the condition, immediately stop Work in the affected area and report
the condition to the Owner and Architect in writing.
29
<PAGE>
EXHIBIT C
Supplementary Conditions to the AIA Document A201 General Conditions
for the Agreement Between Riviera Black Hawk, Inc. and Weitz-Cohen Construction
Co. for the Riviera Black Hawk Casino project, Black Hawk, Colorado
Dated: December 29,1997
Page 4 of 5
10.1.3 The Owner shall obtain the services of a licensed laboratory to verify
the presence or absence of the material or substance reported by the Contractor
and, in the event such material or substance is found to be present, to verify
that it has been properly remediated. Unless otherwise required by the Contract
Documents, the Owner shall furnish in writing to the Contractor and Architect
the names and qualifications of persons or entities who are to perform tests
verifying the presence or absence of such material or substance or who are to
perform the task of removal or safe containment of such material or substance.
The Contractor and the Architect will promptly reply to the Owner in writing
stating whether or not either has reasonable objection to the persons or
entities proposed by the Owner. If either the Contractor or Architect has an
objection to a person or entity proposed by the Owner, the Owner shall propose
another whom the Contractor and the Architect have no reasonable objection. When
the material or substance has been reduced to acceptable limits, as determined
by local, state or federal regulations and by Owner's consultant, Work in the
affected area shall resume upon written agreement of the Owner and Contractor.
The Contract Time shall be extended appropriately and the Contract Sum shall be
increased in the amount of the Contractor's reasonable additional costs
shut-down, delay and start-up, which adjustments shall be accomplished as
provided in Article 7.
10.1.4 To the fullest extent permitted by law, the Owner shall indemnify and
hold harmless the Contractor, Subcontractors, Architect, Architect's consultants
and agents and employees of any of them from and against claims, damages, losses
and expenses, including but not limited to attorneys' fees, arising out of or
resulting from performance of the Work in the affected area if in fact the
material or substance presents the risk of bodily injury or death as described
in Subparagraph 10.1.2 and has not been properly remediated, provided that such
claim, damage, loss or expense is attributable to bodily injury, sickness,
disease or death, or to injury to or destruction of tangible property (other
than the Work itself) and provided that such damage, loss or expense is not due
to the sole negligence of a party seeking indemnity.
10.1.5 The Owner shall not be responsible under Paragraph 10.1.4 for materials
and substances brought to the site by the Contractor unless such materials or
substances were required by the Contract Documents.
10.1.6 If, without negligence or wilful misconduct on the part of the
Contractor, the Contractor is held liable for the cost of remediation of a
hazardous material or substance solely by reason of performing Work as required
by the Contract Documents, the Owner shall indemnify the Contractor for all cost
and expense thereby incurred. The obligations of the Owner as set forth in this
paragraph shall survive the termination of the Contract."
o Subparagraph 13.2.1, add at the end:
"Notwithstanding the foregoing, nothing contained in the this Section 13.2.1
shall prohibit or restrict Owner from assigning all or part of its interest
and/or rights under the Contract for the purpose of obtaining project financing
from a bank or other financing source and, accordingly, Contractor's consent
shall not be required for same."
30
<PAGE>
EXHIBIT C
Supplementary Conditions to the AIA Document A201 General Conditions
for the Agreement Between Riviera Black Hawk, Inc. and Weitz-Cohen Construction
Co. for the Riviera Black Hawk Casino project, Black Hawk, Colorado
Dated: December 29,1997
Page 5 of 5
o Subparagraph 13.7, delete in its entirety.
o Subparagraph 14.2.1.1, is revised by deleting "persistently or
repeatedly..." and replacing with "on more than one occasion...":
o Subparagraph 14.2.1.3, is revised by deleting "persistently..." and
replacing with "on more than one occasion
o Subparagraph 14.3.4, add as a new subparagraph:
"14.3.4 The Owner may, at its option, terminate this Contract in whole or
abandon a part of the project by written notice thereof to the Contractor at any
time. Upon any such termination, Contractor agrees to waive any claims for
damages, including loss of anticipated profits, on account thereof, and as sole
right and remedy of Contractor, Owner shall pay Contractor in accordance with
(c) below.
The Provisions of the Contract, which by their nature survive final acceptance
of the Work, shall remain in full force and effect after termination to the
extent provided in such provisions.
a) Upon receipt of such notice, Contractor shall, unless the notice directs
otherwise, immediately discontinue the Work on that date and to the extent
specified in the notice; place no further orders or subcontracts for materials,
equipment, services, or facilities, except as may be necessary for completion
for such portion of the Work as is not discontinued; promptly make every
reasonable effort to procure cancellation upon terms satisfactory to Owner of
all orders and subcontracts to the extent they relate to the performance of the
discontinued portion of the Work and shall thereafter do only such work already
in progress and to protect materials, plants and equipment on the Site or in
transit thereto.
b) Upon such termination, the obligation of the Contract shall continue as to
portions of the Work already performed and as to bona fide obligations assumed
by Contractor prior to date of termination.
c) Upon termination, Contractor shall be entitled to be paid the full cost of
all Work property done by the Contractor to the date of termination not
previously paid for, less sums already received by Contractor on account of the
portion of the Work performed. If at the date of such termination Contractor has
property prepared or fabricated off the Site any goods for subsequent
incorporation in the Work, and if Contractor delivers such goods to the Site or
to such other place as the Owner shall reasonably direct, then Contractor shall
be paid for such goods or materials. Contractor shall also be paid a prorated
portion of the Contractor's Fee based upon percentage completion of the Work as
of the date of termination, minus prior payments to Contractor.
END OF SUPPLEMENTARY GENERAL CONDITIONS
31
<PAGE>
EXHIBIT C
Supplementary Conditions to the AIA Document A201 General Conditions
for the Agreement Between Riviera Black Hawk, Inc. and Weitz-Cohen Construction
Co. for the Riviera Black Hawk Casino project, Black Hawk, Colorado
Dated: December 29, 1997
Page 1 of 4
These Supplementary General Conditions modify, change, delete from or add to the
"General Conditions of the Contract For Construction," AIA Document A201,
Fourteenth Edition, 1987, and shall supersede the General Conditions to the
extent inconsistent or in conflict therewith. Where any Article of the General
Conditions is modified, or any Paragraph, Subparagraph or Clause thereof is
modified or deleted by these Supplementary General Conditions, the unaltered
provisions of that Article, Paragraph, Subparagraph or Clause shall remain in
effect:
o Subparagraph 2.2.1, add at the end:
"This contract is not binding on the Contractor until evidence of financial
arrangements satisfactory to the Contractor is delivered to the Contractor."
o Subparagraph 3.2.1, delete lines 7-15, beginning in line 7 after the term
"Contract Documents."
o Subparagraph 3.10.3, delete in its entirety.
o Subparagraph 4.5.8, add as a new subparagraph:
"4.5.8 Procedural Issues. The arbitration shall be held in Denver, Colorado.
Each party shall bear its own direct costs, including attorney's fees, but
general costs of the arbitration shall be shared by both parties equally;
provided, the arbitrator may choose to award the general costs of arbitration
against. the losing party if the arbitrator determines that the proposed
resolution urged by the losing party was not reasonable. Notwithstanding
anything in the Contract Documents to the contrary, each party shall be required
to submit its proposed resolutions of each Claim to the arbitrator, and the
arbitrator shall be required to render a decision adopting in full either one or
the other of such proposed resolutions, and no compromises or alternative
resolutions shall be allowed or considered by the arbitrator. Each party shall
be entitled to full discovery and the process, proceedings, practices and
procedures provided for under the Federal Rules of Civil Procedure in effect at
the time notice of demand for arbitration is filed. Either party may request the
selection of up to 3 arbitrators."
32
<PAGE>
EXHIBIT C
Supplementary Conditions to the AIA Document A201 General Conditions
for the Agreement Between Riviera Black Hawk, Inc. and Weitz-Cohen Construction
Co. for the Riviera Black Hawk Casino project, Black Hawk, Colorado
Dated: December 29, 1997
Page 2 of 4
o Subparagraph 4.5.9, add as a new subparagraph:
"4.5.9 Limitations on Arbitration. Notwithstanding anything in the Contract
Documents to the contrary, if the (1) Claims involve a proposed, net aggregate
payment or reimbursement in an amount greater than $500,000, or (2) the Claims
involve an interested person or entity (including the Architect) who has not
consented to be joined in the arbitration, then arbitration shall apply only if
both parties consent to arbitration. For this purpose an "interested person or
entity" means any person or entity if (1) in such interested person or entity's
absence, complete relief cannot be accorded among those already parties, or (2)
the interested person or entity is so situated that the disposition of the Claim
without the joinder of such interested person or entity may leave any of those
already parties subject to a substantial risk of incurring double, multiple or
otherwise inconsistent obligations. If both parties do not consent to
arbitration for such Claims as described herein, then all requirements,
conditions, and conditions precedent pertaining to arbitration shall be deemed
appropriately adjusted to permit either party to pursue such Claims as otherwise
permitted by the Contract Documents or by law."
o Subparagraph 5.2.1, change "promptly" to "within 10 days" in lines 7 and
11.
o Subparagraph 7.3.4, add at the end:
"Notwithstanding the foregoing, if the evidence required by Subparagraph 2.2.1
indicates the Owner will not have sufficient funds to make timely payment for
the Construction Change Directive, the Contractor shall not be required to
proceed with the change in work."
o Subparagraph 8.2.2, delete the third sentence.
o Subparagraph 8.3.1, add at the end:
"Any delay caused by lack of permit or governmental approval shall be grounds
for a time extension."
o Subparagraph 9.3.1.2, delete in its entirety.
o Subparagraph 9.7.1, is revised by changing "seven" in lines 2, 4 and 7 to
"three" and change line 6 as follows:
"tified by the Architect or awarded by arbitration, or if the Owner does not
promptly furnish evidence as required by Subparagraph 2.2.1, then the Con-."
33
<PAGE>
EXHIBIT C
Supplementary Conditions to the AIA Document A201 General Conditions
for the Agreement Between Riviera Black Hawk, Inc. and Weitz-Cohen Construction
Co. for the Riviera Black Hawk Casino project, Black Hawk, Colorado
Dated: December 29, 1997
Page 3 of 4
o Subparagraphs 10.1.2 through 10.1.4, delete in its entirety and substitute
the following:
10.1.2 If reasonable precautions will be inadequate to prevent foreseeable
bodily injury or death to persons resulting from a material or substance,
including but not limited to asbestos or polychlorinated biphenyl (PCB),
encountered on the site by the Contractor, the Contractor shall, upon
recognizing the condition, immediately stop Work in the affected area and report
the condition to the Owner and Architect in writing.
10.1.3 The Owner shall obtain the services of a licensed laboratory to verify
the presence or absence of the material or substance reported by the Contractor
and, in the event such material or substance is found to be present, to verify
that it has been rendered harmless. Unless otherwise required by the Contract
Documents, the Owner shall furnish into the Contractor and Architect the names
and qualifications of persons or entities who are to performing tests verifying
the presence or absence of such material or substance or who are to perform the
task of removal or safe, containment material or substance. The Contractor and
the Architect will promptly reply to the Owner in writing stating whether or not
either has reasonable objection to the persons or entities proposed by the
Owner. If either the Contract or Architect has an objection to a person or
entity proposed by the Owner, the Owner shall propose another whom the
Contractor and the Architect have no reasonable objection. When the material or
substance has been rendered harmless, Work in the affected area shall resume
upon written agreement of the Owner and Contractor. The Contract Time shall be
extended appropriately and the Contract Sum shall be increased in the amount of
the Contractor's reasonable additional costs of shut-down, delay and start-up,
which adjustments shall be accomplished as provided in Article 7.
10.1.4 To the fullest extent permitted by law, the Owner shall indemnify and
hold harmless the Contractor, Subcontractors, Architect, Architect's consultants
and agents and employees of any of them from and against claims, damages, losses
and expenses, including but not limited to attorneys' fees, arising out of or
resulting from performance of the Work in the affected area if in fact the
material or substance presents the risk of bodily injury or death as described
in Subparagraph 10.1.2 and has not been rendered harmless, provided that such
claim, damage, loss or expense is attributable to bodily injury, sickness,
disease or death, or to injury to or destruction of tangible property (other
than the Work itself) and provided that such damage, loss or expense is not due
to the sole negligence of a party seeking indemnity.
10.1.5 The Owner shall not be responsible under Paragraph 10.1.4 for materials
and substances brought to the site by the Contractor unless such materials or
substances were required by the Contract Documents.
10.1.6 If, without negligence on the part of the Contractor, the Contractor is
held liable for the cost of remediation of a hazardous material or substance
solely by reason of performing Work as required by the Contract Documents, the
Owner shall indemnify the Contractor for all cost and expense thereby incurred.
The obligations of the Owner as set forth in this paragraph shall survive the
termination of the Contract."
34
<PAGE>
EXHIBIT C
Supplementary Conditions to the AIA Document A201 General Conditions
for the Agreement Between Riviera Black Hawk, Inc. and Weitz-Cohen Construction
Co. for the Riviera Black Hawk Casino project, Black Hawk, Colorado
Dated: December 29, 1997
Page 4 of 4
o Subparagraph 14.1.1, change line 5 as follows:
"of the Work under contract with the Contractor, or for any of the..."
END OF SUPPLEMENTARY GENERAL CONDITIONS
35
<PAGE>
EXHIBIT D
Contractor's Project Schedule
for the Riviera Black Hawk Casino Project, Black Hawk, Colorado
Dated: December 29, 1997
Page 1 of 1
To be added by change order. Reference Exhibit "B", Paragraph 4.2 for procedures
establishing the commencement date and establishing a construction schedule for
the Work.
36
<PAGE>
EXHIBIT E
Contractor's Project Schedule
for the Riviera Black Hawk Casino Project, Black Hawk, Colorado
Dated: December 29, 1997
Page 1 of 1
The Contractor's Project Budget of $24,500,000 has been established by the two
following documents:
Document E-1
o Weitz-Cohen `Schematic Estimate Summary', two pages and Weitz-Cohen
`Detailed Schematic Estimate', 19 pages, each dated October 28, 1997.
o Weitz-Cohen `Schematic Design Phase: Outline Specifications', 110 pages,
dated October 28, 1997
Document E-2
Weitz-Cohen `Value Engineering Options, 8 pages, dated December 29, 1997
37
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 1 to Registration Statement No.
333-81613 of Riviera Black Hawk, Inc. of our report dated February 19, 1999,
(which report expresses an unqualified opinion and includes an explanatory
paragraph referring to Riviera Black Hawk, Inc.'s' status as a development stage
company) appearing in the Prospectus, which is a part of such Registration
Statement, and to the reference to us under the heading "Experts" in such
Prospectus.
DELOITTE & TOUCHE LLP
Las Vegas, Nevada
August 30, 1999
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement No. 333-81613 on Form S-4 of Riviera Black Hawk, Inc. of
our report dated February 19, 1999, appearing in the Annual Report on Form 10-K
of Riviera Holdings Corporation for the year ended December 31, 1998, and to the
reference to us under the heading "Experts" in the Prospectus, which is part of
such Registration Statement.
DELOITTE & TOUCHE LLP
Las Vegas, Nevada
August 30, 1999
