SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) September 15,
1997
Riviera Holdings Corporation
(Exact Name of Registrant as Specified in Charter)
Nevada 00021430 88-0296885
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(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification
Incorporation No.)
2901 Las Vegas Boulevard South, Las Vegas, Nevada 89109
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (702) 734-5110
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(Former Name or Former Address, if Changed Since Last Report)
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Item 5 Other Events
On September 15, 1997, the registrant entered into an
Agreement and Plan of Merger with R&E Gaming Corp. and
Riviera Acquisition Sub, Inc., entities controlled by
Allen E. Paulson, pursuant to which the registrant would
be acquired by R&E Gaming and the registrant stockholders
would receive $15 per share in cash for each share of the
registrant's common stock owned by them, plus an amount
equal to 7% per annum from June 1, 1997 to the date of
the closing. See Press release dated September 16, 1997
attached as Exhibit 99.1.
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Item 7 Financial Statements, Pro Forma Financial Information
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and Exhibits
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(c) Exhibits
10.1 Agreement and Plan of Merger, dated September 15, 1997, by and
among R&E Gaming Corp., Riviera Acquisitions Sub, Inc., and
Riviera Holdings Corporation.
10.2 Escrow Agreement, dated September 15, 1997, by and among R&E
Gaming Corp., Riviera Holdings Corporation, and State Street Bank
and Trust Company of California.
99.1 Press Release, dated September 16, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
RIVIERA HOLDINGS CORPORATION
(Registrant)
Date: September 29, 1997 s/Duane Krohn
(Signature)
Duane Krohn,
Treasurer and Chief Financial Officer
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EXHIBITS INDEX
Exhibit
Number Description Page
10.1 Agreement and Plan of Merger, dated September 15,
1997, by and among R&E Gaming Corp., Riviera
Acquisitions Sub, Inc., and Riviera Holdings
Corporation.
10.2 Escrow Agreement, dated September 15, 1997, by and
among r&E Gaming Corp., Riviera Holdings
Corporation, and State Street Bank and Trust
Company of California.
99.1 Press Release, dated September 16, 1997.
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================================================================================
AGREEMENT AND PLAN OF MERGER
by and among
R&E GAMING CORP.,
RIVIERA ACQUISITION SUB, INC.
and
RIVIERA HOLDINGS CORPORATION
Dated as of September 15, 1997
================================================================================
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of September 15, 1997 (the
"Agreement"), by and among R&E Gaming Corp., a Delaware corporation ("Gaming"),
Riviera Acquisition Sub, Inc., a Nevada corporation and a wholly owned
subsidiary of Gaming ("RAS"), and Riviera Holdings Corporation, a Nevada
corporation (the "Company").
WHEREAS, the respective Boards of Directors of Gaming, RAS and the
Company have each approved the transactions contemplated by the terms and
conditions set forth in this Agreement;
WHEREAS, in furtherance thereof, upon the terms and subject to the
conditions of this Agreement, (i) RAS would be merged (the "Riviera Merger")
with and into the Company, (ii) each share of common stock, par value $.001 per
share, of the Company (the "Common Stock"), issued and outstanding immediately
prior to the Effective Time (as defined herein) (the "Shares") would, except as
otherwise expressly provided herein, be converted into the right to receive the
Merger Consideration (as defined herein) and (iii) Riviera Operating Corporation
, a Nevada corporation and a wholly owned subsidiary of the Company ("ROC"),
will, as a result of the Riviera Merger, become a wholly owned subsidiary of the
surviving corporation of the Riviera Merger (the "Surviving Corporation");
WHEREAS, Gaming and RAS are unwilling to enter into this Agreement
unless Gaming, contemporaneously with the execution and delivery of this
Agreement, enters into an Option and Voting Agreement (the "Riviera Option
Agreement") with Morgens, Waterfall, Vintiadis & Company, Inc., on behalf of
certain investment accounts ("Morgens Waterfall"), Keyport Life Insurance
Company on behalf of a certain investment account ("Keyport"), and SunAmerica
Life Insurance Company ("SunAmerica" and, together with Morgens Waterfall and
Keyport, the "Option Sellers"), providing for, among other things, (i) the grant
by the Option Sellers to Gaming of an option to purchase all of the Shares
owned, directly or indirectly, by the Option Sellers and (ii) the agreement by
the Option Sellers to cause the Shares owned by them to be present for quorum
purposes at any meeting of the stockholders of the Company (the "Company
Stockholders") called to vote upon the Riviera Merger, and to vote for the
transactions contemplated by this Agreement and against any Alternative
Transaction (as defined in Section 4.9(b) hereof) and any other action which may
be adverse to the transactions contemplated in this Agreement; and the Board of
Directors of the Company (the "Board") has approved the execution and delivery
of the Riviera Option Agreement which is being executed contemporaneously with
the execution hereof; and
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WHEREAS, the Board has determined that the Riviera Merger and the
consideration to be received by the holders of the Shares are fair to, and in
the best interests of, the Company and the Company Stockholders.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
representations, warranties and covenants contained herein, and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
ARTICLE I
THE MERGER
Section 1.1 The Riviera Merger. At the Effective Time and upon the
terms and subject to the conditions of this Agreement, and in accordance with
the applicable provisions of Nevada law, RAS shall be merged with and into the
Company, whereupon the separate existence of RAS shall cease and the Company
shall continue as the Surviving Corporation, and shall be a wholly owned
subsidiary of Gaming, and, further, immediately after the Effective Time, ROC
shall continue its existence as a wholly owned subsidiary of the Surviving
Corporation.
Section 1.2 Effective Time; Closing. Unless this Agreement shall have
been terminated pursuant to Section 6.1 hereof, as soon as practicable after the
satisfaction or (if permissible) waiver of the conditions set forth in Article V
of this Agreement, the Company will file articles of merger with the Secretary
of State of the State of Nevada in accordance with the provisions of Section
92A.005 et seq. of the Nevada Revised Statutes (the "Nevada Merger Law") and
make all other filings or recordings required by law in connection with the
Riviera Merger. The Riviera Merger shall become effective at such time (the
"Effective Time") as the articles of merger are filed with the Secretary of
State of the State of Nevada in accordance with the provisions of Chapter 92A of
the Nevada Revised Statutes, or such later date as set forth in such filing, but
in no event later than April 1, 1998, unless extended as provided in Section
6.1(c) hereof. Prior to such filing, but no later than 30 days after the
satisfaction or (if permissible) waiver of the conditions set forth in Article V
of this Agreement, a closing (the "Closing") shall be held at the offices of
Skadden, Arps, Slate, Meagher & Flom LLP, 300 South Grand Avenue, Los Angeles,
California 90071, or such other place as the parties to this Agreement shall
agree, for the purpose of confirming the satisfaction or waiver of the
conditions set forth in this Agreement. The date on which the Closing occurs
shall be referred to herein as the "Closing Date."
Section 1.3 Escrow. (a) Contemporaneously with the execution of this
Agreement and the Riviera Option Agreement, (a) Gaming and the Company
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have entered into an Escrow Agreement in substantially the form attached as
Exhibit A hereto (the "Escrow Agreement"), with First Trust National
Association, a national association, as escrow agent (the "Escrow Agent"), under
which Gaming has deposited with the Escrow Agent, pursuant to the terms of the
Escrow Agreement, such amount in cash or irrevocable letters of credit (the
"Escrow Consideration"), containing terms reasonably acceptable to the Company,
as set forth in the Escrow Agreement and (b) Gaming will cause to be issued
irrevocable letters of credit in accordance with the terms of the Riviera Option
Agreement.
(b) Contemporaneously with the execution of this Agreement and the
Riviera Option Agreement, Gaming will cause to be issued an irrevocable letter
of credit in accordance with the terms of the Riviera Option Agreement.
Section 1.4 Effects of the Riviera Merger. The Riviera Merger shall
have the effects set forth in the Nevada Merger Law. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, except
as otherwise provided herein, all of the property, rights, privileges, powers
and franchises of a public as well as of a private nature, and the title to any
real estate vested by deed or otherwise in the Company and RAS shall vest in the
Surviving Corporation, and all debts, liabilities and duties of the Company and
RAS shall become the debts, liabilities and duties of the Surviving Corporation.
Section 1.5 Articles of Incorporation and Bylaws. (a) The Articles of
Incorporation of RAS in effect immediately prior to the Effective Time, attached
hereto as Exhibit B, shall be the Articles of Incorporation of the Surviving
Corporation (the "Surviving Corporation Articles of Incorporation"), until
amended in accordance with Nevada law, except that Article I thereof shall be
amended to read in its entirety as follows: "The name of the corporation shall
be Riviera Holdings Corporation."
(b) The Bylaws of RAS in effect at the Effective Time, attached hereto
as Exhibit C, shall be the Bylaws of the Surviving Corporation (the "Surviving
Corporation Bylaws"), until amended in accordance with Nevada law and the
Surviving Corporation Articles of Incorporation.
Section 1.6 Directors. The directors of the Company at the Effective
Time, and, subject to the requirements of Gaming Laws (as defined herein), any
additional individuals designated by Gaming at or prior to the Effective Time,
shall be the initial directors of the Surviving Corporation, each to hold office
in accordance with the Surviving Corporation Articles of Incorporation and the
Surviving Corporation Bylaws and until his or her successor is duly elected and
qualified.
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Section 1.7 Officers. The officers of the Company at the Effective
Time, and, subject to the requirements of Gaming Laws, any additional
individuals designated by Gaming at or prior to the Effective Time, shall be the
initial officers of the Surviving Corporation from and after the Effective Time,
each to hold office in accordance with the Surviving Corporation Articles of
Incorporation and the Surviving Corporation Bylaws and until his or her
successor is duly appointed and qualified.
Section 1.8 Consideration for the Merger. At the Effective Time, by
virtue of the Riviera Merger and without any action on the part of Gaming, RAS,
the Company or the holder of any of the following securities:
(a) Each Share (other than Shares to be cancelled pursuant to Section
1.8(b) hereof) shall be converted into and represent the right to receive the
Merger Consideration (as defined below). From and after the Effective Time, all
Shares shall no longer be outstanding and shall automatically be cancelled and
retired and shall cease to exist, and each holder of a certificate representing
any of the Shares (a "Certificate") shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration payable to the
holder thereof, without interest, upon surrender of such Certificate in the
manner provided in Section 1.9 hereof. As used herein, "Merger Consideration"
means the amount of $15.00 in cash per Share, plus an amount of additional
consideration (the "Additional Consideration") equal to the daily portion of the
accrual on $15.00 at 7% compounded annually, accruing from June 1, 1997 to the
Effective Time; provided, that the Merger Consideration paid to each Option
Seller shall be reduced by the amount of Additional Consideration paid to such
Option Seller pursuant to Section 1.2(b) of the Riviera Option Agreement. It
being understood that, assuming consummation of the Riviera Merger, the proviso
in the preceding sentence shall have the effect of causing the consideration per
Share to be received hereunder and under the Riviera Option Agreement by the
Option Sellers from Gaming on account of the Shares owned by the Option Sellers
to be equal to the consideration per Share received by the Company Stockholders
(other than the Option Sellers) hereunder from Gaming on account of the Shares
owned by the Company Stockholders (other than the Option Sellers). Each of
Gaming and RAS represents and warrants that the Merger Consideration to be
received hereunder by the Option Sellers for each Share owned by the Option
Sellers and any other consideration paid by Gaming or RAS to the Option Sellers
for such Shares (but excluding consideration paid under the Riviera Option
Agreement) shall be equal to the Merger Consideration received by the other
holders of Shares.
(b) Each Share owned by Gaming, RAS or their stockholders or affiliates
(the "Paulson Shares"), or which is held in the treasury of the Company or any
of its subsidiaries, shall be cancelled and retired and shall cease to exist,
and no payment of any consideration shall be made with respect thereto.
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(c) Each share of capital stock of RAS issued and outstanding
immediately prior to the Effective Time shall be converted into and shall become
one validly issued, fully paid and nonassessable share of common stock, par
value $.001 per share, of the Surviving Corporation.
Section 1.9 Exchange of Shares. (a) At or prior to the Effective Time,
Gaming shall designate a bank or trust company reasonably acceptable to the
Company to serve as exchange agent (the "Exchange Agent") for the Shares. As
soon as reasonably practicable after the Effective Time, Gaming shall deposit,
or shall cause to be deposited, with the Exchange Agent for the benefit of the
holders of Certificates, cash or immediately available funds in United States
dollars in an amount that equals the aggregate Merger Consideration. Such funds
(the "Payment Fund") shall be invested by the Exchange Agent as directed by
Gaming in obligations of or obligations guaranteed by the United States of
America, in commercial paper obligations rated A-1 or P-1 or better by Moody's
Investor Services, Inc. or Standard & Poor's Corporation, respectively, or in
certificates of deposit, bank repurchase agreements, or bankers acceptances of
commercial banks with capital exceeding $500 million; provided, however, that in
the event that the Payment Fund shall realize a loss on such investment, Gaming
shall promptly thereafter deposit in the Payment Fund cash in an amount
sufficient to enable the Payment Fund to satisfy all remaining obligations
originally contemplated to be paid out of the Payment Fund.
(b) Promptly after the Effective Time, the Surviving Corporation shall
instruct the Exchange Agent to mail to each record holder of outstanding
Certificates as of the Effective Time, a form of letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Exchange Agent) and instructions for use in effecting the surrender of the
Certificates for payment therefor. Upon surrender to the Exchange Agent of a
Certificate, together with such letter of transmittal duly executed, the holder
of such Certificate shall be entitled to receive in exchange therefor the amount
of cash that such holder has the right to receive under this Article I, and such
Certificate shall forthwith be cancelled. If payment (or any portion thereof) is
to be made to a person other than the person in whose name the Certificate
surrendered is registered, it shall be a condition of payment that the
Certificate so surrendered shall be properly endorsed or otherwise in proper
form for transfer and that the person requesting such payment shall pay to the
Exchange Agent any transfer or other taxes required by reason of the payment to
a person other than the registered holder of the Certificate surrendered or such
person shall establish to the satisfaction of the Exchange Agent that such tax
has been paid or is not applicable. Until surrendered in accordance with the
provisions of this Section 1.9, each Certificate (other than Certificates
representing Shares to be cancelled pursuant to Section 1.8(b) hereof) shall
represent, for all purposes, the
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right to receive the Merger Consideration multiplied by the number of Shares
previously evidenced by such Certificate, without any interest thereon.
(c) All cash paid upon the surrender of the Certificates in accordance
with the terms of this Article I shall be deemed to have been paid in full
satisfaction of all rights pertaining to the Shares theretofore represented by
such Certificates, and there shall be no further registration of transfers on
the stock transfer books of the Surviving Corporation of the Shares which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be cancelled and exchanged as provided in this Article I, except as
otherwise provided by Nevada law.
(d) At any time following the date six months after the Effective Time,
the Surviving Corporation shall be entitled to require the Exchange Agent to
deliver to it any funds (including any interest received with respect thereto)
that have been made available to the Exchange Agent and that have not been
disbursed to holders of Certificates and, thereafter, such holders shall be
entitled to look to the Surviving Corporation (subject to abandoned property,
escheat or other similar laws) only as general creditors thereof with respect to
the Merger Consideration payable upon surrender of their Certificates.
Notwithstanding the foregoing, neither the Surviving Corporation nor the
Exchange Agent shall be liable to any holder of a Certificate for the Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
Section 1.10 Company Plans. (a) At the Effective Time, each outstanding
option (an "Employee Option"), issued, awarded or granted pursuant to the
Company's 1993 Stock Option Plan, as in effect on the date hereof (the "Company
Plan"), to purchase shares of Common Stock shall be cancelled, and the Surviving
Corporation shall pay to each holder of a cancelled Employee Option an amount in
cash (less applicable withholding Taxes, as defined in Section 2.12 hereof)
equal to the product of (i) the number of shares of Common Stock previously
subject to such Employee Option, on the basis of full vesting, and (ii) the
excess, if any, of the Merger Consideration over the exercise price per share of
Common Stock previously subject to such Employee Option.
(b) At the Effective Time, each outstanding option (a "Directors'
Option"), issued, awarded or granted pursuant to the Company's Nonqualified
Stock Options Plan For Non-Employee Directors, as in effect on the date hereof
("Directors' Plan"), to purchase shares of Common Stock shall be cancelled and
the Surviving Corporation shall pay to each holder of a cancelled Directors'
Option an amount in cash equal to the product of (i) the number of shares of
Common Stock previously subject to such Directors' Option, on the basis of full
vesting, and (ii) the excess, if any, of the Merger Consideration over the
exercise price per share of Common Stock previously subject to such Directors'
Option.
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(c) At the Effective Time, each Share issued pursuant to the Company's
Employee Stock Purchase Plan, as in effect on the date hereof (the "Company
Stock Plan"), shall be cancelled, and the Surviving Corporation shall pay to
each owner of each Share issued pursuant to the Company Stock Plan an amount in
cash equal to (A) the product of (i) the number of such Shares issued pursuant
to the Company Stock Plan owned by such person, and (ii) the Merger
Consideration per Share, less (B) any unpaid balance of any loans by the Company
to any such owner.
(d) At the Effective Time, each Share issued pursuant to the Company's
Stock Compensation Plan for Directors Serving on the Compensation Committee, as
in effect on the date hereof (the "Compensation Committee Plan"), shall be
cancelled, and the Surviving Corporation shall pay to each owner of each Share
issued pursuant to the Compensation Committee Plan an amount in cash equal to
(A) the product of (i) the number of such shares of Common Stock issued pursuant
to the Compensation Committee Plan on the basis of full vesting owned by such
person, and (ii) the Merger Consideration per Share less (B) any unpaid balance
of any loans by the Company to any such owner.
(e) A listing of all outstanding options, warrants or other rights to
acquire shares of Common Stock or other equity interests of the Company and its
subsidiaries as of June 30, 1997, showing what portions of such stock options,
warrants or other rights are exercisable as of the dates upon which such stock
options, warrants or other rights expire, and the exercise price of such stock
options, warrants or other rights, is set forth in Schedule 1.10 hereto.
Section 1.11 Stockholders' Meeting. The Company, acting through the
Board, shall, in accordance with applicable law, the Amended and Restated
Articles of Incorporation of the Company in effect on the date hereof (the
"Company Articles of Incorporation") and the Bylaws of the Company in effect on
the date hereof (the "Company Bylaws"), as soon as practicable following the
date hereof:
(a) duly call, give notice of, convene and hold an annual or special
meeting of the Company Stockholders (the "Stockholders' Meeting") for the
purpose of approving and adopting this Agreement and the transactions
contemplated hereby;
(b) subject to the fiduciary duties of the Board under applicable law,
recommend that the Company Stockholders vote in favor of approving and adopting
this Agreement and the transactions contemplated hereby; and
(c) subject to the fiduciary duties of the Board under applicable law,
use its reasonable best efforts to obtain the necessary approvals by the Company
Stockholders of this Agreement and the transactions contemplated hereby.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Gaming as follows:
Section 2.1 Organization and Qualification; Subsidiaries. (a) Each of
the Company and its subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted,
except where the failure to be so organized, existing and in good standing or to
have such power and authority would not, individually or in the aggregate, have
a Company Material Adverse Effect (as defined herein). When used in this
Agreement, the term "Company Material Adverse Effect" means any change or effect
that would (i) be materially adverse to the business, results of operations, or
financial condition of the Company and its subsidiaries, taken as a whole, or
(ii) impair the ability of the Company to consummate the transactions
contemplated hereby.
(b) Each of the Company and its subsidiaries is duly qualified or
licensed (excluding gaming and liquor licenses, which are covered by Section 2.5
hereof) and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, and to perform all of its
obligations under any contract under which the Company or any of its
subsidiaries (a) has or may acquire any rights, (b) has or may become subject to
any obligation or liability or (c) is or may, or any of the assets used or owned
by it are or may, become bound, except where the failure to be so duly qualified
or licensed and in good standing or to effect such performance would not,
individually or in the aggregate, have a Company Material Adverse Effect.
(c) The Company has heretofore furnished or made available to Gaming
complete and correct copies of the Company Articles of Incorporation and the
Company Bylaws and the equivalent organizational documents of each of its
subsidiaries, each as amended to the date hereof. The Company Articles of
Incorporation, the Company Bylaws and equivalent organizational documents are in
full force and effect. The Company is not in violation of any of the provisions
of the Company Articles of Incorporation or the Company Bylaws, and no
subsidiary of the Company is in violation of any of the provisions of such
subsidiary's equivalent organizational documents. The organizational documents
of the subsidiaries of the Company do not contain any provision limiting or
otherwise restricting the ability of the Company to control such subsidiaries.
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(d) The Company has heretofore furnished or made available to Gaming a
complete and correct list of the subsidiaries of the Company, which list sets
forth the amount of capital stock of or other equity interests in such
subsidiaries owned by the Company, directly or indirectly.
Section 2.2 Capitalization of the Company and its Subsidiaries. The
authorized capital stock of the Company consists of (i) 20,000,000 shares of
Common Stock of which, as of July 31, 1997, 4,910,880 shares of Common Stock
were issued and outstanding. All outstanding shares of capital stock of the
Company have been validly issued, and are fully paid, nonassessable and free of
preemptive rights. Set forth in Schedule 2.2(a) are all outstanding options,
warrants, or other rights to purchase Riviera Stock. Except as set forth above
or in Schedule 2.2, and except as a result of the exercise of Employee Options,
Directors' Options and such rights under the Company Stock Plan and the
Compensation Committee Plan outstanding as of July 31, 1997, there are
outstanding (i) no shares of capital stock or other voting securities of the
Company, (ii) no securities of the Company convertible into or exchangeable for
shares of capital stock or voting securities of the Company, (iii) no options,
subscriptions, warrants, convertible securities, calls or other rights to
acquire from the Company, and no obligation of the Company to issue, deliver or
sell, any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company, and (iv) no
equity equivalents, performance shares, interests in the ownership or earnings
of the Company or other similar rights issued by the Company (collectively,
"Company Securities"). Except as set forth on Schedule 2.2 hereto, there are no
outstanding obligations of the Company or any of its subsidiaries to repurchase,
redeem or otherwise acquire any Company Securities. Except as set forth on
Schedule 2.2 hereto, each of the outstanding shares of capital stock of each of
the Company's subsidiaries is duly authorized, validly issued, fully paid and
nonassessable and is directly or indirectly owned by the Company, free and clear
of all security interests, liens, claims, pledges, charges, voting agreements or
other encumbrances of any nature whatsoever (collectively, "Liens"). Except as
set forth on Schedules 1.10 and 2.2 hereto, there are no existing options, calls
or commitments of any character relating to the issued or unissued capital stock
or other equity securities of any subsidiary of the Company.
Section 2.3 Power and Authority. The Company has the requisite
corporate power and authority to execute and deliver this Agreement and, subject
to approval of this Agreement by the Company Stockholders, to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement by the Company and the consummation by the Company of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of the Company, subject, in the case of this
Agreement, to approval of this Agreement by the Company Stockholders. This
Agreement has been duly executed and delivered by the Company and, assuming this
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Agreement constitutes a valid and binding obligation of Gaming and RAS,
constitutes the valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except as such enforcement may be
limited by bankruptcy, insolvency, moratorium or other similar laws affecting or
relating to the enforcement of creditors' rights generally (collectively, the
"Bankruptcy Exceptions") and subject to the general principles of equity.
Section 2.4 Approval of Options. The Company has taken all action
necessary to authorize and approve the grant of options to acquire Shares
pursuant to the Riviera Option Agreement and the sale of such Shares upon the
exercise of such options.
Section 2.5 Compliance. (a) Except as set forth in Schedule 2.5(a),
since January 1, 1994, the Company, its subsidiaries and affiliates and their
respective officers or directors or, to the best knowledge of the Company, their
respective agents or employees (if any), have been and are in compliance with
all applicable laws and regulations of foreign, Federal, state and local
governmental authorities applicable to the businesses conducted by any of the
Company and its subsidiaries (including without limitation any federal, state,
local or foreign statute, ordinance, rule, regulation, permit, consent,
approval, license, judgment, order, decree, injunction or other authorization
governing or relating to the current or contemplated casino, liquor related
activities and gaming activities and operations, including, without limitation,
the Nevada Gaming Control Act, as amended (the "Nevada Act"), and the rules and
regulations promulgated thereunder, or applicable to the properties owned or
leased and used by the Company or its subsidiaries (collectively, "Gaming
Laws")), and neither the Company, nor, to the best knowledge of the Company, any
of its subsidiaries or affiliates, is aware of any claim of violation, or of any
actual violation, of any such laws and regulations, by the Company or any of its
subsidiaries, except where such failure or violation (whether actual or claimed)
would not have a Company Material Adverse Effect. None of the Company or its
subsidiaries, any employee, officer, director or stockholder or, to the best
knowledge of the Company or affiliate thereof, has received any written claim,
demand, notice, complaint, court order or administrative order from any
governmental authority since January 1, 1994, asserting that a license of it or
them, as applicable, under any Gaming Laws should be revoked or suspended. The
Company, based upon its current operations, is not obligated to file any
documents under the Indian Gaming Regulatory Act.
(b) Except as set forth in Schedule 2.5(b), since January 1, 1994, each
of the Company and its subsidiaries has and currently possesses, and is current
on all fees with regard to, all franchises, certificates, licenses, permits and
other authorizations from any governmental authorities and all patents,
trademarks, service marks, trade names, copyrights, licenses and other rights
that are necessary to each of the Company and its subsidiaries for the present
ownership, maintenance and
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operation of its business, properties and assets (including without limitation
all gaming and liquor licenses), except where the failure to possess such
franchises, certificates, licenses, permits, and other authorizations, patents,
trademarks, service marks, trade names, copyrights, licenses and other rights
(other than those required to be obtained from the Nevada Gaming Commission (the
"Gaming Commission"), the Nevada State Gaming Control Board (the "Control
Board"), the Clark County Liquor and Gaming Licensing Board (the "CCB"), and the
City of Las Vegas ("Las Vegas") (the Gaming Commission, the Control Board, the
CCB, and Las Vegas are collectively referred to as the "Gaming Authorities"),
including approvals under the Gaming Laws) would not have a Company Material
Adverse Effect; and none of the Company and its subsidiaries is in violation of
any thereof, except where such violation would not have a Company Material
Adverse Effect.
(c) Since January 1, 1994, neither the Company nor any of its
subsidiaries is in violation of, or has violated (with or without notice or
lapse of time), any applicable provisions of (i) any laws, rules, statutes,
orders, ordinances or regulations, or (ii) any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise, or other instrument or
obligations to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or its or any of their respective
properties are bound or affected, which, individually or in the aggregate, would
have a Company Material Adverse Effect.
(d) Except as set forth in Schedule 2.5(d), since January 1, 1994: (i)
the Company and each of its subsidiaries is, and has been, in full compliance
with all of the terms and requirements of each award, decision, injunction,
judgment, order, ruling, subpoena, or verdict (each, an "Order") entered,
issued, made, or rendered by any court, administrative agency, or other
governmental entity, officer or authority or by any arbitrator to which it, or
any of the assets owned or used by it, is or has been subject, and (ii) no event
has occurred or circumstance exists that may constitute or result in (with or
without notice or lapse of time) a violation of or failure to comply with any
term or requirement of any Order to which the Company or its subsidiaries, or
any of the assets owned or used by the Company or its subsidiaries, is subject,
except where such non-compliance, violation or failure to comply would not have
a Company Material Adverse Effect.
(e) Neither the Company nor any of its subsidiaries has received, at
any time since January 1, 1994, any notice or other communication (whether oral
or written) regarding any actual, alleged, possible, or potential violation of,
or failure to comply with, any term or requirement of any Order to which the
Company or its subsidiaries, or any of the assets owned or used by the Company
or its subsidiaries, is or has been subject and which would have a Company
Material Adverse Effect.
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(f) No investigation or review by any government entity, officer or
authority with respect to the Company or its subsidiaries is pending or, to the
knowledge of the Company, threatened, nor, to the knowledge of the Company, has
any government entity, officer or authority indicated an intention to conduct
the same, other than, in each case, those which would not have a Company
Material Adverse Effect.
Section 2.6 Non-Contravention; Required Filings and Consents. (a)
Except as set forth in Schedule 2.6 hereto and as contemplated by Section
2.6(b), the execution, delivery and performance by the Company of this Agreement
and the consummation of the transactions contemplated hereby (including, without
limitation, the Riviera Option Agreement and the Riviera Merger) do not and will
not (i) contravene or conflict with the Company Articles of Incorporation or the
Company Bylaws or the equivalent organizational documents of any of its
subsidiaries or any resolution adopted by the Board or the Company Stockholders
or the board of directors or stockholders of any of the Company's subsidiaries,
(ii) contravene or conflict with or constitute a violation of any provision of
any law, regulation, judgment, injunction, order or decree binding upon or
applicable to the Company, any of its subsidiaries or any of their respective
properties, (iii) contravene, conflict with, or result in a violation of any of
the terms or requirements of, or give any governmental entity, official or
authority right to revoke, withdraw, suspend, cancel, terminate or modify, any
authorization that is held by the Company or any of its subsidiaries, or that
otherwise relates to the business of, or any of the assets owned by, the Company
or any of its subsidiaries, (iv) conflict with, or result in the breach or
termination of any provision of or constitute a default (with or without the
giving of notice or the lapse of time or both) under, or give rise to any right
of termination, cancellation, or loss of any benefit to which the Company or any
of its subsidiaries is entitled under any provision of any agreement, contract,
license or other instrument binding upon the Company, any of its subsidiaries or
any of their respective properties, or allow the acceleration of the performance
of, any obligation of the Company or any of its subsidiaries under any
indenture, mortgage, deed of trust, lease, license, contract, instrument or
other agreement to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or any of their respective assets
or properties is subject or bound, or (v) result in the creation or imposition
of any Lien on any asset of the Company or any of its subsidiaries, except in
the case of clauses (i), (ii), (iii) and (iv) for any such contraventions,
conflicts, violations, breaches, terminations, defaults, cancellations, losses,
accelerations and Liens which would not, individually or in the aggregate, have
a Company Material Adverse Effect or be reasonably expected to prevent the
consummation by the Company of the transactions contemplated by this Agreement.
(b) The execution, delivery and performance by the Company of this
Agreement and the consummation of the transactions contemplated hereby
(including, without limitation, the Riviera Option Agreement, the Escrow
Agreement
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and the Riviera Merger) by the Company require no action by or in respect of, or
filing with, any governmental entity, official or authority (either domestic or
foreign) other than (i) the filing of articles of merger in accordance with the
Nevada Merger Law, (ii) compliance with any applicable requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (iii) compliance with any applicable requirements of the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder (the "Exchange Act"), and state securities, takeover and Blue Sky
laws, (iv) obtaining all necessary gaming approvals, including those required by
the Gaming Authorities, including approvals under the Gaming Laws, and (v) such
additional actions or filings which, if not taken or made, would not,
individually or in the aggregate, have a Company Material Adverse Effect or be
reasonably expected to prevent the consummation by the Company of the
transactions contemplated by this Agreement.
Section 2.7 SEC Reports. (a) The Company has filed all required forms,
reports and documents with the Securities and Exchange Commission (the "SEC")
since January 1, 1994. The Company has made available to Gaming, in the form
filed with the SEC, the Company's (i) Annual Reports on Form 10-K for the fiscal
years ended December 31, 1996, 1995 and 1994, (ii) all Quarterly Reports on Form
10-Q filed by the Company with the SEC since January 1, 1994, (iii) all proxy
statements relating to meetings of the Company's stockholders since January 1,
1994 and (iv) all Current Reports on Form 8-K and registration statements filed
by the Company with the SEC since January 1, 1994 (collectively and as amended
as required, the "SEC Reports"). As of their respective dates, the SEC Reports
complied in all material respects with all applicable requirements of the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the "Securities Act"), and the Exchange Act, each as in effect on
the dates such SEC Reports were filed. As of their respective dates, none of the
SEC Reports, including, without limitation, any financial statements or
schedules included therein, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. No subsidiary of the Company is required, as of
the date hereof, to file any form, report, or other document with the SEC under
Section 12 of the Exchange Act. The audited consolidated financial statements
and unaudited consolidated interim financial statements of the Company included
in the SEC Reports fairly present, in all material respects, in conformity with
GAAP (as defined in Section 4.11 of this Agreement) applied on a consistent
basis (except as may be indicated in the notes thereto), the consolidated
financial position of the Company and its consolidated subsidiaries as of the
dates thereof and their consolidated results of operations and cash flows for
the periods then ended (subject to normal year-end adjustments in the case of
any unaudited interim financial statements). The Company has heretofore made
available or promptly will make available to Gaming a complete and correct
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copy of any amendments or modifications, which are required to be filed with the
SEC but have not yet been filed with the SEC, to the SEC Reports.
(b) Except as set forth in Schedule 2.7(b) hereto, the Company and its
subsidiaries have no liabilities of any nature (whether accrued, absolute,
contingent or otherwise), except for (i) liabilities set forth in the audited
balance sheet of the Company dated December 31, 1996 or on the notes thereto,
contained in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, (ii) liabilities incurred in the ordinary course of business
consistent with past practice since January 1, 1997 and (iii) liabilities which
would not, individually or in the aggregate, have a Company Material Adverse
Effect.
Section 2.8 Absence of Certain Changes. Except as set forth in Schedule
2.8 hereto, since January 1, 1997, the Company and its subsidiaries have
conducted their respective businesses only in the ordinary course, and there has
not been (i) any declaration, setting aside or payment of any dividend or other
distribution with respect to its capital stock, (ii) any incurrence, assumption
or guarantees by the Company or any of its subsidiaries of any indebtedness for
borrowed money other than in the ordinary course of business, (iii) any making
of any loan, advance or capital contributions to, or investments in, any other
person, (iv) any split, combination or reclassification of any of its capital
stock or any issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, (v) (x) any granting by the Company or any of its subsidiaries to
any officer of the Company or any of its subsidiaries of any increase in
compensation, except in the ordinary course of business (including in connection
with promotions) consistent with past practice or as was required under
employment agreements in effect as of the date of the most recent audited
financial statements included in the SEC Reports filed and publicly available
prior to the date of this Agreement, (y) any granting by the Company or any of
its subsidiaries to any such officer of any increase in severance or termination
pay, except as part of a standard employment package to any person promoted or
hired, or as was required under employment, severance or termination agreements
in effect as of the date of the most recent audited financial statements
included in the SEC Reports filed or (z) except termination arrangements in the
ordinary course of business consistent with past practice with employees other
than any executive officer of the Company, any entry by the Company or any of
its subsidiaries into any employment, severance or termination agreement with
any such officer, (vi) any damage, destruction or loss, whether or not covered
by insurance, that would be expected to have a Company Material Adverse Effect,
(vii) any transaction or commitment made, or any contract or agreement entered
into, by the Company or any of its subsidiaries relating to any of their assets
or business (including the acquisition or disposition of any assets) or any
relinquishment by the Company or any of its subsidiaries or any contract or
other right, in either case, material to the Company and its subsidiaries, taken
as a whole, other than transactions and
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commitments in the ordinary course of business and those contemplated by this
Agreement, (viii) any change in accounting methods, principles or practices by
the Company materially affecting its assets, liabilities or business, except
insofar as may have been required by a change in generally accepted accounting
principles or (ix) any other change which would have a Company Material Adverse
Effect.
Section 2.9 Proxy Statement. The proxy or information statement or
similar materials distributed to the Company's Stockholders in connection with
the Riviera Merger, including any amendments or supplements thereto (the "Proxy
Statement"), shall not, at the time filed with the SEC, at the time mailed to
the Company Stockholders, at the time of the Stockholders' Meeting or at the
Effective Time, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading. Notwithstanding the foregoing, the Company makes no
representation or warranty with respect to any information provided by Gaming
specifically for use in the Proxy Statement. The Proxy Statement will comply as
to form in all material respects with the provisions of the Exchange Act.
Section 2.10 No Brokers. Except for the engagement of Ladenburg,
Thalmann & Co. Inc. ("Ladenburg"), pursuant to an engagement letter, a copy of
which has previously been delivered to Gaming, the fees and expenses of such
engagement will be paid by the Company, the Company has not employed any broker,
finder or financial advisor or incurred any liability for any brokerage fees,
commissions, finders' or financial advisory fees in connection with the
transactions contemplated hereby. No amendment has been or shall be made to the
Company's agreement with Ladenburg that would increase the amount of fees or
other compensation required thereunder.
Section 2.11 Absence of Litigation. Except as disclosed in Schedule
2.11 hereto, since January 1, 1997, there has not been any action, suit, claim,
investigation or proceeding pending against, or to the knowledge of the Company,
threatened against, the Company or any of its subsidiaries or any of their
respective properties or the Board before any court or arbitrator or any
administrative, regulatory or governmental body, or any agency or official
which, individually or in the aggregate, would have a Company Material Adverse
Effect. Except as disclosed in Schedule 2.11 hereto, since January 1, 1997,
there has not been any action, suit, claim, investigation or proceeding pending
against, or to the knowledge of the Company, threatened against, the Company or
any of its subsidiaries or any of their respective properties or the Board
before any court or arbitrator or any administrative, regulatory or governmental
body, or any agency or official which (i) challenges or seeks to prevent,
enjoin, alter or delay the Riviera Merger or any of the other transactions
contemplated hereby or (ii) alleges any criminal action or inaction. Except as
disclosed in Schedule 2.11 hereto, since January 1, 1997,
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neither the Company nor any of its subsidiaries nor any of their respective
properties has been subject to any order, writ, judgment, injunction, decree,
determination or award having, or which would have a Company Material Adverse
Effect or which would prevent or delay the consummation of the transactions
contemplated hereby.
Section 2.12 Taxes. Except as set forth in Schedule 2.12 hereto, (a)
the Company and its subsidiaries have filed, been included in or sent, all
material returns, material declarations and reports and information returns and
statements required to be filed or sent by or relating to any of them relating
to any Taxes (as defined herein) with respect to any material income, properties
or operations of the Company or any of its subsidiaries (collectively,
"Returns"); (b) as of the time of filing, the Returns correctly reflected in all
material respects the facts regarding the income, business, assets, operations,
activities and status of the Company and its subsidiaries and any other material
information required to be shown therein; (c) the Company and its subsidiaries
have timely paid or made provision for all material Taxes that have been shown
as due and payable on the Returns that have been filed; (d) the Company and its
subsidiaries have made or will make provision for all material Taxes payable for
any periods that end before the Effective Time for which no Returns have yet
been filed and for any periods that begin before the Effective Time and end
after the Effective Time to the extent such Taxes are attributable to the
portion of any such period ending at the Effective Time; (e) the charges,
accruals and reserves for Taxes reflected on the books of the Company and its
subsidiaries are adequate under generally accepted accounting principles to
cover the Tax liabilities accruing or payable by the Company and its
subsidiaries; (f) neither the Company nor any of its subsidiaries is delinquent
in the payment of any material Taxes or has requested any extension of time
within which to file or send any material Return (other than extensions granted
to the Company for the filing of its Returns as set forth in Schedule 2.12),
which Return has not since been filed or sent; (g) no material deficiency for
any Taxes has been proposed, asserted or assessed in writing against the Company
or any of its subsidiaries other than those Taxes being contested in good faith
by appropriate proceedings and set forth in Schedule 2.12 (which shall set forth
the nature of the proceeding, the type of return, the deficiencies proposed,
asserted or assessed and the amount thereof, and the taxable year in question);
(h) neither the Company nor any of its subsidiaries has granted any extension of
the limitation period applicable to any material Tax claims other than those
Taxes being contested in good faith by appropriate proceedings; and (i) neither
the Company nor any of its subsidiaries is subject to liability for Taxes of any
person (other than the Company or its subsidiaries).
For purposes of this Agreement, "Tax" or "Taxes" means all Federal,
state, local and foreign taxes, and other assessments of a similar nature
(whether imposed directly or through withholding), including any interest,
additions to tax, or penalties applicable thereto, imposed by any Tax Authority.
"Tax Authority"
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means the Internal Revenue Service and any other domestic or foreign
governmental authority responsible for the administration of any Taxes.
Section 2.13 Employee Benefits. (a) Schedule 2.13(a) hereto contains a
true and complete list of each bonus, deferred compensation, incentive
compensation, stock purchase, stock option, severance or termination pay,
hospitalization or other medical, dental, life, disability or other insurance,
supplemental unemployment benefits, profit-sharing, pension, savings or
retirement plan, program, agreement or arrangement, and each other employee
benefit plan, program, agreement or arrangement, sponsored, maintained or
contributed to or required to be contributed to by the Company or by any trade
or business, whether or not incorporated (an "ERISA Affiliate"), that together
with the Company would be deemed a "single employer" within the meaning of
section 4001 of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), for the benefit of any employee or terminated employee of the Company
or any ERISA Affiliate (the "Plans"). Schedule 2.13(a) hereto identifies each of
the Plans that is an "employee benefit plan," as that term is defined in section
3(3) of ERISA (the "ERISA Plans"). Neither the Company nor any ERISA Affiliate
has ever maintained, administered, contributed to or had any contingent
liability with respect to any employee pension benefit plan subject to Title IV
of ERISA or Section 412 of the Code, other than the multiemployer plans (as
defined in Section 3(37)(A) of ERISA) which are identified on Schedule 2.13(a)
hereto.
(b) With respect to each Plan, the Company has heretofore delivered or
made available to Gaming true and complete copies of each of the following
documents (to the extent applicable):
(i) a copy thereof;
(ii) a copy of the most recent annual report and actuarial
report, if required under ERISA, and the most recent report prepared with
respect thereto in accordance with Statement of Financial Accounting
Standards No. 87, Employer's Accounting for Pensions;
(iii) a copy of the most recent actuarial report prepared with
respect thereto in accordance with Statement of Financial Accounting
Standards No. 106, Employer's Accounting for Non-Pension Postretirement
Benefits;
(iv) a copy of the most recent Summary Plan Description;
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(v) if the Plan is funded through a trust or any third party
funding vehicle, a copy of the trust or other funding agreement and the
latest financial statements thereof; and
(vi) the most recent determination letter received from the
Internal Revenue Service with respect to each Plan intended to qualify
under section 401(a) of the Internal Revenue Code of 1986, as amended (the
"Code").
(c) Neither the Company nor any ERISA Affiliate has incurred any
liability under Title IV of ERISA, including any "withdrawal liability" (within
the meaning of Section 4201 of ERISA) with respect to any Benefit Plan, and, to
the knowledge of the Company, no condition exists that presents a material risk
to the Company or any ERISA Affiliate of incurring a material liability under
such Title.
(d) Neither the Company nor any ERISA Affiliate, nor, to the knowledge
of the Company, any ERISA Plan, any trust created thereunder, nor any trustee or
administrator thereof has engaged in a transaction in connection with which the
Company or any ERISA Affiliate, any ERISA Plan, any such trust, or any trustee
or administrator thereof, or any party dealing with any ERISA Plan or any such
trust would be subject to either a civil penalty assessed pursuant to section
409 or 502(i) of ERISA or a Tax imposed pursuant to section 4975 or 4976 of the
Code, except for such penalties and Taxes which would not, individually or in
the aggregate, have a Company Material Adverse Effect.
(e) All contributions required to be made with respect to any ERISA
Plan (whether pursuant to the terms of any ERISA Plan or otherwise) on or prior
to the Effective Time have been timely made.
(f) To the knowledge of the Company, each Plan has been operated and
administered in all material respects in accordance with its terms and
applicable law, including but not limited to ERISA and the Code except where
such noncompliance would not be expected to have a Company Material Adverse
Effect.
(g) Each ERISA Plan intended to be "qualified" within the meaning of
section 401(a) of the Code has been drafted with the intention to be so
qualified and has received a favorable determination letter from the Internal
Revenue Service on or before the date hereof.
(h) To the Company's knowledge, except as reasonably estimated and as
set forth in Schedule 2.13(h), no amounts payable under the Plans as a result of
the consummation of the transactions contemplated by this Agreement will fail to
be deductible for federal income tax purposes by application of section 280G of
the Code.
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(i) Except as set forth on Schedule 2.13(i) hereto, no Plan
provides benefits, including without limitation death or medical benefits
(whether or not insured), with respect to current or former employees of
the Company or any ERISA Affiliate beyond their retirement or other
termination of service (other than (i) coverage mandated by applicable law
or (ii) death benefits or retirement benefits under any "employee pension
plan," as that term is defined in section 3(2) of ERISA).
(j) Except as provided in Schedule 2.13(j) hereto, the consummation of
the transactions contemplated by this Agreement will not (i) entitle any current
or former employee or officer of the Company or any ERISA Affiliate to severance
pay, unemployment compensation or any other payment, or (ii) accelerate the time
of payment or vesting, or increase the amount of compensation due any such
employee or officer.
(k) There are no pending or, to the knowledge of the Company,
threatened claims by or on behalf of any Plan, by any employee or beneficiary
covered under any such Plan, or otherwise involving any such Plan (other than
routine claims for benefits).
(l) The Company has reserved the right to amend or terminate any Plan
which is a welfare benefit plan, as that term is defined in section 3(l) of
ERISA.
Section 2.14 Intellectual Property. Except as disclosed in the SEC
Reports filed prior to the date of this Agreement or as set forth in Schedule
2.14 hereto, the Company and each of its subsidiaries owns, or is licensed or
has the right to use (in each case, free and clear of any Liens), all
Intellectual Property (as defined below) used in or necessary for the conduct of
its business substantially as currently conducted, to the knowledge of the
Company, the use of any Intellectual Property by the Company and its
subsidiaries does not infringe on or otherwise violate the rights of any person;
and, to the knowledge of the Company, no person is challenging, infringing on or
otherwise violating any right of the Company or any of its subsidiaries with
respect to any Intellectual Property owned by and/or licensed to the Company and
its subsidiaries, except in each case for such infringements or failures to own
or be licensed as would not, individually or in the aggregate, have a Company
Material Adverse Effect. For purposes of this Agreement, "Intellectual Property"
shall mean trademarks, service marks, brand names, certification marks, trade
dress, assumed names, trade names and other indications of origin, the goodwill
associated with the foregoing and any registration in any jurisdiction of, and
applications in any jurisdiction to register, the foregoing, including any
extension, modification or renewal of any such registration or application;
inventions, discoveries and ideas, whether patentable or not in any
jurisdiction; patents, applications for patents (including, without limitation,
divisions, continua-
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tions, continuations in part and renewal applications), and any renewals,
extensions or reissues thereof, in any jurisdiction; nonpublic information,
trade secrets and confidential information and rights in any jurisdiction to
limit the use or disclosure thereof by any person; writings and other works,
whether copyrightable or not in any jurisdiction; registrations or applications
for registration of copyrights in any jurisdiction, and any renewals or
extensions thereof; and any similar intellectual property or proprietary rights.
Section 2.15 Material Contracts. Except as set forth in Schedule 2.15
hereto, there are no (i) agreements of the Company or any of its subsidiaries
containing an unexpired covenant not to compete or similar restriction applying
to the Company or any of its subsidiaries, (ii) interest rate, currency or
commodity hedging, swap or similar derivative transactions to which the Company
or any of its subsidiaries is a party nor (iii) other contracts or amendments
thereto that would be required to be filed and have not been filed as an exhibit
to a Form 10-K filed by the Company with the SEC as of the date of this
Agreement (collectively, the "Material Contracts"). Assuming each Material
Contract constitutes a valid and binding obligation of each other party thereto,
each Material Contract is a valid and binding obligation of the Company or a
subsidiary of the Company, as the case may be. To the Company's knowledge, each
Material Contract is a valid and binding obligation of each other party thereto,
and each such Material Contract is in full force and effect and is enforceable
by the Company or its subsidiaries in accordance with its terms, except as such
enforcement may be limited by the Bankruptcy Exceptions and subject to the
general principles of equity. There are no existing defaults (or circumstances
or events that, with the giving of notice or lapse of time or both would become
defaults) of the Company or any of its subsidiaries (or, to the knowledge of the
Company, any other party thereto) under any of the Material Contracts except for
defaults that would not, individually or in the aggregate, have a Company
Material Adverse Effect.
Section 2.16 Insurance. The Company and its subsidiaries have obtained
and maintained in full force and effect insurance with responsible and reputable
insurance companies or associations in such amounts, on such terms and covering
such risks, including fire and other risks insured against by extended coverage,
as is consistent with industry practice for companies (i) engaged in similar
businesses and (ii) of at least similar size to that of the Company and its
Subsidiaries, and has maintained in full force and effect public liability
insurance, insurance against claims for personal injury or death or property
damage occurring in connection with any of the activities of the Company or its
subsidiaries or any of any properties owned, occupied or controlled by the
Company or its subsidiaries, in such amount as reasonably deemed necessary by
the Company or its subsidiaries. Schedule 2.16 hereto sets forth a complete and
correct list of all material insurance policies (including a brief summary of
the nature and terms thereof and any amounts paid or payable to the Company or
any of its subsidiaries thereunder) providing
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coverage in favor of the Company or any of its subsidiaries or any of their
respective properties. Each such policy is in full force and effect, no notice
of termination, cancellation or reservation of rights has been received with
respect to any such policy, there is no default with respect to any provision
contained in any such policy, and there has not been any failure to give any
notice or present any claim under any such policy in a timely fashion or in the
manner or detail required by any such policy, except for any such failures to be
in full force and effect, any such terminations, cancellations, reservations or
defaults, or any such failures to give notice or present claims which would not,
individually or in the aggregate, have a Company Material Adverse Effect.
Section 2.17 Labor Matters. (a) Except as set forth in Schedule 2.17(a)
hereto, neither the Company nor any of its subsidiaries is a party to any
collective bargaining or other labor union contract applicable to persons
employed by the Company or any of its subsidiaries, no collective bargaining
agreement is being negotiated by the Company or any of its subsidiaries and the
Company has no knowledge of any material activities or proceedings (i) involving
any unorganized employees of the Company or its subsidiaries seeking to certify
a collective bargaining unit or (ii) of any labor union to organize any of the
employees of the Company or its subsidiaries. There is no labor dispute, strike
or work stoppage against the Company or any of its subsidiaries pending or, to
the Company's knowledge, threatened which may interfere with the respective
business activities of the Company or any of its subsidiaries, except where such
dispute, strike or work stoppage would not have a Company Material Adverse
Effect.
(b) Except as set forth in Schedule 2.17(b) hereto, the Company and
each of its subsidiaries have paid in full, or fully accrued for in their
financial statements, all wages, salaries, commissions, bonuses, severance
payments, vacation payments, holiday pay, sick pay, pay in lieu of compensatory
time and other compensation due or to become due to all current and former
employees of the Company and each Subsidiary for all services performed by any
of them on or prior to the date hereof. The Company and its subsidiaries are in
compliance with all applicable federal, state, local and foreign laws, rules and
regulations relating to the employment of labor, including without limitation,
laws, rules and regulations relating to payment of wages, employment and
employment practices, terms and conditions of employment, hours, immigration,
discrimination, child labor, occupational health and safety, collective
bargaining and the payment and withholding of Taxes and other sums required by
governmental authorities.
Section 2.18 Real Property. Schedule 2.18 hereto identifies all real
property owned, leased or used by the Company or its subsidiaries in the conduct
of its business. Except as set forth in Schedule 2.18, the Company and each of
its subsidiaries have good and marketable title to all of their properties and
assets, free and clear of all Liens, except for those disclosed in the financial
statements and
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except Liens for taxes not yet due and payable and such Liens or other
imperfections of title, if any, as do not materially detract from the value of
or interfere with the present use of the property affected thereby or which,
individually or in the aggregate, would not have a Company Material Adverse
Effect; and all leases pursuant to which the Company or any of its subsidiaries
lease from others real or personal property are in good standing, valid and
effective in accordance with their respective terms, and there is not, to the
knowledge of the Company, under any of such leases, any existing material
default or event of default (or event which with notice or lapse of time, or
both, would constitute a material default and in respect of which the Company or
such subsidiary has not taken adequate steps to prevent such a default from
occurring) except where the lack of such good standing, validity and
effectiveness, or the existence of such default or event, would not have a
Company Material Adverse Effect.
Section 2.19 Environmental Matters. (a) Except as set forth on Schedule
2.19(a) (i) the Company and its subsidiaries are in compliance with all
Environmental Laws (as defined herein), except where the failure to be in
compliance would not have a Company Material Adverse Effect, and (ii) to the
best knowledge of the Company, there are not, with respect to the Company or any
of its subsidiaries, any past violations of Environmental Laws, releases of any
material into the environment, actions, activities, circumstances, conditions,
events, incidents, contractual obligations or other legal requirements that may
give rise to any liability, cost or expense under any Environmental Laws, which
liabilities, costs or expenses, either individually or in the aggregate, would
have a Company Material Adverse Effect.
(b) As used in this Section 2.19, the term "Environmental Laws" means
the applicable common law and all applicable Federal, state, local and foreign
laws relating to pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata), including, without limitation, laws relating to
emissions, discharges, releases or threatened releases of, or exposure to,
chemicals, pollutants, contaminants, asbestos-containing materials or
industrial, toxic or hazardous substances or wastes into the environment, as
well as all applicable authorizations or codes, decrees, injunctions, judgments,
licenses, orders, permits or regulations in effect thereunder.
Section 2.20 Representations Complete. None of the representations or
warranties made by the Company herein or in any Schedule or Exhibit hereto
contains or will contain at the Effective Time any untrue statement of a
material fact, or omits or will omit at the Effective Time any material fact or
necessary in order to make the statements contained herein or therein, in light
of the circumstances under which they are made, not misleading.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF GAMING AND RAS
Each of Gaming and RAS represents and warrants to the Company as
follows:
Section 3.1 Organization; Power and Authority. Each of Gaming and RAS
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, and has all requisite corporate
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby,
except where the failure to be so organized, existing and in good standing or to
have such power and authority would not, individually or in the aggregate, have
a Gaming Material Adverse Effect (as defined herein). When used in this
Agreement, the term "Gaming Material Adverse Effect" means any change or effect
that would (i) be materially adverse to the business, results of operations, or
financial condition of Gaming and RAS and their subsidiaries, taken as a whole,
or (ii) impair the ability of Gaming and RAS to consummate the transactions
contemplated hereby. Each of Gaming and RAS has the requisite corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by all necessary corporate action on the part
of each of Gaming and RAS and by the sole stockholder of each of Gaming and RAS,
and no other corporate proceedings on the part of Gaming or RAS are necessary to
authorize this Agreement or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by each of Gaming and
RAS and, assuming this Agreement constitutes a valid and binding agreement of
the other parties hereto, constitutes a legal, valid and binding agreement of
each of Gaming and RAS, enforceable against each of Gaming and RAS in accordance
with its terms, except as such enforcement may be limited by the Bankruptcy
Exceptions and subject to the general principles of equity.
Section 3.2 Non-Contravention; Required Filings and Consents. (a)
Except as set forth on Schedule 3.2(a) hereto, the execution, delivery and
performance by each of Gaming and RAS of this Agreement and the consummation of
the transactions contemplated hereby (including, without limitation, the Riviera
Option Agreement, the Escrow Agreement and the Riviera Merger) do not and will
not: (i) contravene or conflict with the Certificate of Incorporation or Bylaws
of Gaming or the equivalent organizational documents of RAS, or any resolution
adopted by the board of directors or stockholders of Gaming or RAS, (ii)
assuming that all consents, authorizations and approvals contemplated by
subsection (b) below have
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been obtained and all filings described therein have been made, contravene or
conflict with or constitute a violation of any provision of any law, regulation,
judgment, injunction, order or decree binding upon or applicable to Gaming or to
RAS or any of their respective properties, (iii) contravene, conflict with, or
result in a violation of any of the terms or requirements of, or give any
governmental entity, official or authority right to revoke, withdraw, suspend,
cancel, terminate or modify, any authorization that is held by Gaming or RAS or
that otherwise relates to the business of, or any of the assets owned by Gaming
or RAS, (iv) conflict with, or result in the breach or termination of any
provision of or constitute a default (with or without the giving of notice or
the lapse of time or both) under, or give rise to any right of termination,
cancellation, or loss of any benefit to which either Gaming or RAS is entitled
under any provision of any agreement, contract, license or other instrument
binding upon either Gaming or RAS, or allow the acceleration of the performance
of, any obligation of either Gaming or RAS under any other agreement to which
Gaming or RAS is a party or by which Gaming or RAS is subject or bound, or (v)
result in the creation or imposition of any Lien on any asset of Gaming or RAS,
except in the case of clauses (ii), (iii) and (iv) for any such contraventions,
conflicts, violations, breaches, terminations, defaults, cancellations, losses,
accelerations and Liens which would not individually or in the aggregate have a
Gaming Material Adverse Effect or be reasonably expected to prevent the
consummation by Gaming or by RAS of the transactions contemplated by this
Agreement.
(b) The execution, delivery and performance by Gaming and by RAS of
this Agreement and the consummation of the transactions contemplated hereby
(including the Riviera Option Agreement, the Escrow Agreement and the Riviera
Merger) by Gaming and by RAS require no action by or in respect of, or filing
with, any governmental entity, official or authority (either domestic or
foreign), other than: (i) the filing of Articles of Merger in accordance with
the Nevada Merger Law; (ii) compliance with any applicable requirements of the
HSR Act; (iii) compliance with any applicable requirements of the Exchange Act
and state securities, takeover and Blue Sky laws; (iv) obtaining all necessary
gaming approvals, including those required by the Gaming Authorities, including,
without limitation, approvals under the Gaming Laws, if any; and (v) such
additional actions or filings which, if not taken or made, would not
individually or in the aggregate have a Gaming Material Adverse Effect or be
reasonably expected to prevent the consummation by Gaming or by RAS of the
transactions contemplated by this Agreement.
Section 3.3 Absence of Litigation. Since January 1, 1997, there has not
been any action, suit, claim, investigation or proceeding pending against, or to
the knowledge of Gaming or RAS, threatened against, Gaming or RAS or any of
their subsidiaries or any of their respective properties, or their respective
boards of directors, before any court or arbitrator or any administrative,
regulatory or
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governmental body, or any agency or official which, individually or in the
aggregate, would have a Gaming Material Adverse Effect. Since January 1, 1997,
neither Gaming nor RAS nor any of their subsidiaries nor any of their respective
properties has been subject to any order, writ, judgment, injunction, decree,
determination or award having, or which would have, a Gaming Material Adverse
Effect or which would prevent or delay the consummation of the transactions
contemplated hereby.
Section 3.4 Proxy Statement. None of the information provided by Gaming
specifically for use in the Proxy Statement shall, at the time filed with the
SEC, at the time mailed to the Company Stockholders, at the time of the
Stockholders' Meeting or at the Effective Time, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
Section 3.5 No Prior Activities. Since the date of its incorporation,
neither Gaming nor RAS has engaged in any activities other than in connection
with or as contemplated by this Agreement or in connection with arranging any
financing required to consummate the transactions contemplated hereby.
Section 3.6 No Brokers. Except for Jefferies & Co., Inc. neither Gaming
nor RAS has employed any broker or finder, nor has it incurred any liability for
any brokerage fees, commissions or finders' fees in connection with the
transactions contemplated by this Agreement.
Section 3.7 Capitalization of Gaming. On the Closing Date and at the
Effective Time, Gaming will have cash or immediately available funds in an
amount not less than the sum of (i) the aggregate amount of Merger Consideration
to be paid hereunder and (ii) the aggregate amount to be paid at the Effective
Time pursuant to Section 1.10 hereof.
Section 3.8 Representations Complete. None of the representations or
warranties made by either Gaming or RAS herein or any Exhibit hereto contains or
will contain at the Effective Time any untrue statement of a material fact, or
omits or will omit at the Effective Time any material fact necessary in order to
make the statements contained herein, in light of the circumstances under which
they are made, not misleading.
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ARTICLE IV
COVENANTS
Section 4.1 Conduct of Business of the Company. Except as otherwise
expressly provided in this Agreement, during the period from the date hereof to
the Effective Time, the Company and its subsidiaries will each conduct their
respective operations according to its ordinary course of business consistent
with past practice, and the Company and its subsidiaries will each use its
reasonable best efforts to preserve intact its business organization, to keep
available the services of its officers and employees and to maintain existing
relationships with licensors, licensees, suppliers, contractors, distributors,
and others having business relationships with it. Without limiting the
generality of the foregoing, and except as otherwise expressly provided in this
Agreement, or as set forth in Schedule 4.1 hereto, prior to the Effective Time,
neither the Company nor any of its subsidiaries will, without the prior written
consent of Gaming:
(a) amend its Articles of Incorporation or Bylaws or other comparable
organizational documents;
(b) authorize for issuance, issue, pledge, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or otherwise)
or otherwise encumber, any capital stock of any class or any other securities or
equity equivalents (including, without limitation, stock appreciation rights),
except as required by option agreements or the Company Stock Plan, warrants or
other securities listed on Schedule 2.2, as such are in effect as of the date
hereof, or amend any of the terms of any such securities or agreements
outstanding as of the date hereof;
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in cash,
stock, or property or any combination thereof) in respect of its capital stock,
or, redeem, repurchase or otherwise acquire any of its securities or any
securities of its subsidiaries;
(d) (i) except as set forth in Schedule 4.1(d)(i) hereto or in the
ordinary course of business consistent with past practice or for the senior
mortgage note offering (the "Note Offering") described in the offering circular
dated August 8, 1997 (the "Note Offering Circular"), create or incur any
Indebtedness (as defined herein), (ii) make any loans, advances or capital
contributions to, or investments in, any other person, (iii) pledge or otherwise
encumber any shares of capital stock of the Company or any of its subsidiaries,
or (iv) mortgage or pledge any of its assets, tangible or intangible, or create
or suffer to exist any Lien thereupon;
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(e) except as otherwise provided in this Section 4.1, enter into any
transaction, other than in the ordinary course of business consistent with past
practice, or make any investment, which individually or in the aggregate exceeds
the amount of $500,000;
(f) enter into, adopt or (except as may be required by law or by the
terms of any such arrangement) amend or terminate any bonus, profit-sharing,
compensation, severance, termination, stock option, pension, retirement,
deferred compensation, employment or other employee benefit agreement, trust,
plan, fund or other arrangement for the benefit or welfare of any director,
officer or employee, or increase in any manner the compensation or benefits of
any director, officer or employee, or grant any benefit or termination or
severance pay to any director, officer, or employee not required by any plan or
arrangement as in effect as of the date hereof (including, without limitation,
the granting of stock options) or by law;
(g) acquire, sell, lease or dispose of, or encumber any assets outside
the ordinary course of business or any assets which in the aggregate are
material to the Company and its subsidiaries, taken as a whole, or enter into
any contract, agreement, commitment or transaction outside the ordinary course
of business;
(h) change any of the accounting principles or practices used by the
Company, except as may be required as a result of a change in law, SEC
guidelines or GAAP;
(i) (A) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any corporation, partnership
or other business organization or division thereof; (B) except in connection
with the construction of a casino in Black Hawk, Colorado, authorize any new
capital expenditure or expenditures which are in excess of the amounts estimated
in the Company's capital expenditure budget, dated as of August 28, 1997 and the
capital expenditure budget, dated as of August 28, 1997, relating to the
development of the Company's property in Black Hawk, Colorado, previously
provided to Gaming in excess of $500,000 or, in the aggregate, are in excess of
$1,500,000; (C) settle any litigation for amounts in excess of $100,000
individually or $500,000 in the aggregate after giving effect to insurance
recoveries; or (iv) enter into or amend any contract, agreement, commitment or
arrangement with respect to any of the foregoing;
(j) make any Tax election or settle or compromise any Tax liability,
other than in the ordinary course of business;
(k) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business
consistent with past practice or in accordance with their terms, of liabilities
set forth in Schedule 2.8
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hereto or reflected or reserved against in the financial statements (or the
notes thereto) of the Company and its subsidiaries or incurred in the ordinary
course of business consistent with past practice;
(l) terminate, modify, amend or waive compliance with any provision of
any Material Contract, or fail to take any action necessary to preserve the
benefits of any such Material Contract to the Company or any of its
subsidiaries;
(m) fail to comply with any laws, ordinances or other governmental
regulations applicable to the Company or any of its subsidiaries, including, but
not limited to, the Gaming Laws and any regulations promulgated thereunder, that
may have a Company Material Adverse Effect; or
(n) take, or agree in writing or otherwise to take, any of the actions
described in this Section 4.1.
Section 4.2 Proxy Statement. (a) The Company shall, as promptly as
practicable following the date hereof, prepare and file the Proxy Statement with
the SEC under the Exchange Act. Gaming and RAS shall use their respective
reasonable best efforts to cooperate with the Company in the preparation of the
Proxy Statement. As soon as practicable following completion of review of the
Proxy Statement by the SEC, the Company shall mail the Proxy Statement to its
stockholders who are entitled to vote at the Stockholders' Meeting. Subject to
the fiduciary obligations of the Board under applicable law, the Proxy Statement
shall contain the recommendation of the Board that the Company Stockholders
approve this Agreement and the transactions contemplated hereby.
(b) The Company shall use its reasonable best efforts to promptly
obtain and furnish the information required to be included in the Proxy
Statement and to respond promptly to any comments from, or requests made by the
SEC with respect to the Proxy Statement. The Company shall promptly notify
Gaming of the receipt of comments from, or any requests by, the SEC with respect
to the Proxy Statement, and shall promptly supply Gaming with copies of all
correspondence between the Company (or its representatives) and the SEC (or its
staff) relating thereto. The Company agrees to correct any information provided
by it for use in the Proxy Statement which shall have become, or is, false or
misleading; provided, however, that the Company shall first use its reasonable
best efforts to consult with Gaming about the form and substance of each such
correction.
Section 4.3 Access to Information. (a) Subject to applicable law and
the agreements set forth in Section 4.3(b), between the date hereof and the
Effective Time, the Company will give Gaming and its counsel, financial
advisors, auditors and other authorized representatives reasonable access
(during regular business hours upon reasonable notice) to all employees, offices
and other facilities and to all books
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and records of the Company and its subsidiaries, will permit Gaming and its
counsel, financial advisors, auditors and other authorized representatives to
make such inspections Gaming may reasonably require, and will cause the
Company's officers and those of its subsidiaries to furnish Gaming or its
representatives with such financial and operating data and other information
with respect to the business and properties of the Company and any of its
subsidiaries as Gaming may from time to time reasonably request. No
investigation pursuant to this Section 4.3 shall affect any representations or
warranties of the Company herein or the conditions to the obligations of Gaming
or RAS hereunder.
(b) The parties hereto each agree that the provisions of the
Confidentiality Agreement, dated as of April 21, 1997 and attached hereto as
Exhibit D (the "Confidentiality Agreement"), between the Company and Mr. Allen
E. Paulson shall apply to and be binding on Gaming and RAS, and that the terms
of the Confidentiality Agreement are incorporated herein by reference.
Section 4.4 Reasonable Best Efforts. Subject to the terms and
conditions contained herein, each of the parties hereto agrees to use its
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, all things reasonably necessary, proper or advisable under
all applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement as soon as reasonably practicable.
Without limiting the generality of the foregoing, the parties hereto shall
cooperate with one another (i) in the preparation and filing of any required
filings under the HSR Act, the Gaming Laws and the other laws referred to in
Sections 2.5 and 3.2 hereof, (ii) in determining whether action by or in respect
of, or filing with, any governmental body, agency, official or authority is
required, proper or advisable, or any actions, consents, waivers or approvals
are required to be obtained from parties to any contracts in connection with the
transactions contemplated by this Agreement, (iii) in seeking to obtain any such
actions, consents and waivers and in making any such filings, and (iv) in
seeking to lift any order, decree or ruling restraining, enjoining, or otherwise
prohibiting the Riviera Merger. If at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each party hereto shall take all
such necessary action.
Section 4.5 Public Announcements. Each of the parties hereto agrees
that it will not issue any press release or otherwise make any public statement
with respect to this Agreement or the transactions contemplated hereby without
the prior consent of the other party, which consent shall not be unreasonably
withheld or delayed; provided, however, that such disclosure can be made without
obtaining such prior consent if (i) the disclosure is required by law, and (ii)
the party making such disclosure has first used its reasonable best efforts to
consult with the other party about the form and substance of such disclosure.
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Section 4.6 Indemnification; Insurance. (a) From and after the
Effective Time, the Surviving Corporation shall indemnify and hold harmless each
person who is, or has been at any time prior to the date hereof or who becomes
prior to the Effective Time, an officer, director or employee of the Company or
any of its subsidiaries (collectively, the "Indemnified Parties" and
individually, an "Indemnified Party") against all losses, liabilities, expenses
(including attorneys' fees), claims or damages in connection with any claim,
suit, action, proceeding or investigation based in whole or in part upon the
fact that such Indemnified Party is or was a director, officer or employee of
the Company or any of its subsidiaries and arising out of acts or omissions
occurring prior to and including the Effective Time (including but not limited
to the transactions contemplated by this Agreement) to the fullest extent
permitted by Nevada law, for a period of not less than six years following the
Effective Time; provided, that in the event any claim or claims are asserted or
made within such six-year period, all rights to indemnification in respect of
any such claim or claims shall continue until final disposition of any and all
such claims.
(b) The provisions of the Surviving Corporation Articles of
Incorporation and the Surviving Corporation Bylaws with respect to
indemnification and exculpation shall not be amended, repealed or otherwise
modified for a period of six years after the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who at the Effective
Time are or were current or former directors or officers of the Company in
respect of actions or omissions occurring at or prior to the Effective Time
(including, without limitation, the transactions contemplated by this
Agreement), unless such modification is required by law.
(c) For six years after the Effective Time, the Surviving Corporation
shall cause to be maintained the current policies of directors' and officers'
liability insurance maintained by the Company covering the current and former
directors and officers of the Company with respect to matters occurring prior to
the Effective Time (provided, that the Surviving Corporation may substitute
therefor policies of at least the same coverage containing terms and conditions
which are no less advantageous to the current and former directors and officers
of the Company than the policy in effect on the date hereof with respect to acts
or failures to act prior to the Effective Time (including dollar amount and
scope of coverage), to the extent such policies are available; provided, that in
no event shall the Surviving Corporation be required to expend, in order to
maintain or procure insurance coverage pursuant to this Section 4.6(c), any
amount per annum greater than 150% of the current annual premiums paid by the
Company for such insurance (which the Company represents and warrants to be not
more than $225,000). If for any reason during such period the Surviving
Corporation is unable to obtain such insurance for an annual premium of not more
than $337,500, it shall notify William L. Westerman, who will act as authorized
representative of all such directors and officers (the
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"Representative"). The Representative may require either that the Surviving
Corporation shall (i) pay $337,500 in annual premiums for such insurance, with
the insured directors and officers paying any excess, or (ii) deposit $337,500
per annum in an escrow account with an independent escrow agent as a fund to
cover counsel fees and other litigation expenses of, or judgments or settlements
paid by, such directors and officers for claims made against them during such
six-year period by reason of their having been directors and officers of the
Company or its subsidiaries prior to the Effective Time, which expenses are not
paid by the Surviving Corporation pursuant to its indemnification obligations to
such directors and officers.
(d) From and after the Effective Time, no Indemnified Party shall be
liable to Gaming, RAS or the Surviving Corporation (or anyone claiming rights
through any of them, including Allen E. Paulson) for breach of any of the
representations, warranties, covenants or agreements contained in this
Agreement. It is the express understanding of the parties that the sole remedy
of Gaming and RAS under this Agreement (or anyone claiming rights under this
Agreement through Gaming or RAS) in the event of a breach or alleged breach by
the Company of its representations, warranties, covenants or agreements, shall
be to refuse to consummate the Riviera Merger, subject, however, to Gaming's
rights under Article VI hereof.
(e) This Section 4.6 is intended to benefit the Indemnified Parties and
their respective heirs, executors and personal representatives, and shall be
binding on the successors and assigns of the Company and the Surviving
Corporation.
Section 4.7 Notification of Certain Matters. The Company shall give
prompt notice to Gaming and RAS, and Gaming and RAS shall give prompt notice to
the Company, upon becoming aware of: (i) the occurrence or non-occurrence, of
any event the occurrence, or non-occurrence of which would cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate, and (ii) any failure of the Company or Gaming and RAS, as the case
may be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, that the delivery of any
notice pursuant to this Section 4.7 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
Section 4.8 Termination of Stock Plans. Except as may be otherwise
agreed to by Gaming and the Company, the Company Plan, the Directors' Plan, the
Company Stock Plan and the Compensation Committee Plan shall terminate as of the
Effective Time. Prior to the Effective Time, the Board (or, if appropriate, any
committee thereof) shall adopt such resolutions or take such other actions as
are required to: (i) effect the transactions contemplated by Section 1.10 hereof
and (ii) with respect to any stock option, stock appreciation or other stock
benefit plan of the
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Company or any of its subsidiaries not addressed by the preceding clause (i),
ensure that, following the Effective Time, no participant therein shall have any
right thereunder to acquire any capital stock of the Surviving Corporation or
any subsidiary thereof.
Section 4.9 No Solicitation. (a) The Company and its subsidiaries and
affiliates will not, and the Company and its subsidiaries and affiliates will
use their reasonable best efforts to ensure that their respective officers,
directors, employees, investment bankers, attorneys, accountants and other
agents do not, directly or indirectly: (i) initiate, solicit or encourage, or
take any action to facilitate the making of, any offer or proposal which
constitutes or is reasonably likely to lead to any Alternative Transaction (as
defined below) with respect to the Company or any of its subsidiaries or an
inquiry with respect thereto, or, (ii) in the event of an unsolicited
Alternative Transaction for the Company or any of its subsidiaries, engage in
negotiations or discussions with, or provide any information or data to any
person relating to any Alternative Transaction, subject to the Board's good
faith determination, after consulting with outside legal counsel to the Company,
that the failure to engage in such negotiations or discussions or provide such
information would likely result in a breach of the Board's fiduciary duties
under applicable law if such Alternative Transaction would provide the Company
Stockholders with a purchase price per Share that is higher (the amount of such
excess in the purchase price per Share is hereinafter referred to as the
"Spread") than the Merger Consideration to be received by the Company
Stockholders. The Company shall notify Gaming and RAS orally and in writing of
any such inquiries, offers or proposals (including, without limitation, the
terms and conditions thereof and the identity of the person making such), within
twenty four hours of the receipt thereof. The Company shall, and shall cause its
subsidiaries and affiliates, and their respective officers, directors,
employees, investment bankers, attorneys, accountants and other agents to,
immediately cease and cause to be terminated all existing discussions and
negotiations, if any, with any parties conducted heretofore with respect to any
Alternative Transaction relating to the Company or any of its subsidiaries.
Notwithstanding anything to the contrary, nothing contained in this Section 4.9
shall prohibit the Company or the Board from communicating to the Company
Stockholders a position as required by Rules 14d-9 and 14a-2 promulgated under
the Exchange Act.
(b) As used in this Agreement, "Alternative Transaction" shall mean any
tender or exchange offer for the Common Stock or for the equivalent securities
of any of the Company's subsidiaries, any proposal for a merger, consolidation
or other business combination involving any such person, any proposal or offer
to acquire in any manner a ten percent or more equity interest in, or ten
percent or more of the business or assets of, such person, any proposal or offer
with respect to any recapitalization or restructuring with respect to such
person or any proposal or offer with respect to any other transaction similar to
any of the foregoing with respect to such person or any subsidiary of such
person; provided, however, that, as
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used in this Agreement, the term "Alternative Transaction" shall not apply to
any transaction of the type described in this subsection (b) involving Gaming,
RAS or their affiliates.
Section 4.10 Projected Results. In connection with the monthly
projections of the Company's consolidated statement of operations (the
"Projected Results") for the twelve months ending March 31, 1998, which have
been previously delivered to Gaming, the Company shall (i) deliver to Gaming, no
earlier than ten and no later than five business days prior to the Closing Date,
a certificate, in form satisfactory to Gaming, from the Company's Chief
Executive Officer and Chief Financial Officer specifying the Company's actual
monthly Consolidated EBITDA (as defined herein) since April 1, 1997 on a
cumulative basis and (ii) provide Gaming, RAS and their representatives with all
information which may be reasonably requested by Gaming, RAS or their
representatives to allow them to verify and analyze the Consolidated EBITDA for
the period of March 31, 1997 through and including the earlier of (x) the Latest
Fiscal Month (as defined herein) and (y) March 31, 1998 (the "Projected
Period").
"Consolidated EBITDA" means, in each case for the Projected Period, the
Consolidated Net Income (as defined herein) of the Company adjusted, (x) to add
thereto (to the extent deducted from net revenues in determining Consolidated
Net Income), without duplication, the sum of the Company's (i) Consolidated
Fixed Charges (as defined herein), (ii) consolidated income tax expense and
(iii) consolidated depreciation and amortization expense and (y) to subtract
therefrom, to the extent included in the determination of Consolidated Net
Income, any interest earned on any asset set aside with respect to any defeased
obligation, provided that consolidated depreciation and amortization of a
subsidiary of the Company that is a less than wholly owned subsidiary of the
Company shall only be added to the extent of the pro rata equity interest of the
Company in such subsidiary.
"Consolidated Net Income" means, in each case for the Projected Period,
the net income (or loss) of the Company (determined on a consolidated basis in
accordance with GAAP) adjusted to exclude (only to the extent included in
computing such net income (or loss), and without duplication): (a) all gains and
not losses which are either extraordinary (as determined in accordance with
GAAP) or are either unusual or nonrecurring (including any gain from the sale or
other disposition of assets outside the ordinary course of business, including
the gain, if any, from the Company's warrants to purchase shares of common stock
of Elsinore Corporation, a Nevada corporation, provided, however, that the
exclusion relating to such warrants set forth in the preceding clause shall not
effect the calculation of executive incentive compensation, pursuant to
executive compensation agreements in effect on the date hereof, and provided,
further, that the amount of executive incentive compensation, as so calculated,
during the Projected Period shall be taken into account in the calculation of
Consolidated Net Income, or from the issuance or
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sale of any capital stock), (b) the net income of an entity (other than a wholly
owned subsidiary of the Company) in which the Company or any of its consolidated
subsidiaries has an interest, except to the extent of the amount of any
dividends or distributions actually paid in cash to the Company or a wholly
owned subsidiary of the Company during such period, but in any case not in
excess of the Company's or such wholly owned subsidiary's pro rata share of such
entity's net income for such period, (c) the net income, if positive, of any
consolidated subsidiary of the Company to the extent that the declaration or
payment of dividends or similar distributions is not at the time permitted by
operation of the terms of its charter or bylaws or any other agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to such subsidiary of the Company; provided, that, charges relating
to the following expenses shall not be included: (i) the transactions
contemplated by this Agreement; (ii) the offering of $175,000,000 10% First
Mortgage Notes due 2004 (the "New Notes") (provided, however, that interest
accrued with respect to the New Notes during the Projected Period shall be taken
into account in the calculation of Consolidated Net Income), and the defeasance
(the "Defeasance") as of June 1, 1998 for the price specified in the Note
Offering Circular of the 11% Notes and the costs (including premium, if any)
associated therewith; (iii) the transactions contemplated in the Black Hawk
Agreement; (iv) the proposed public offering of shares of Common Stock which was
terminated in April 1997; and (v) any costs related to the extinguishment of the
Company's obligation to Bank of America.
"Consolidated Fixed Charges" means, for the Projected Period, the
aggregate amount (without duplication and determined in each case in accordance
with GAAP) of interest expensed, paid, accrued, or scheduled to be paid or
accrued (including, in accordance with the following sentence, interest
attributable to capitalized lease obligations) of the Company and its
consolidated subsidiaries during such period, including (i) original issue
discount and non-cash interest payments or accruals on any Indebtedness (as
defined herein), (ii) the interest portion of all deferred payment obligations,
and (iii) all commissions, discounts and other fees and charges owed with
respect to bankers' acceptances and letters of credit financings and currency
and Interest Swap and Hedging Obligations (as defined below), in each case to
the extent attributable to such period. For purposes of this definition, (x)
interest on a capitalized lease obligation shall be deemed to accrue at an
interest rate reasonably determined in good faith by the Company to be the rate
of interest implicit in such capitalized lease obligation in accordance with
GAAP and (y) interest expense attributable to any Indebtedness (as defined
herein) represented by the guaranty by the Company or any of its subsidiaries of
an obligation of another person shall be deemed to be the interest expense
attributable to the Indebtedness guaranteed.
"Interest Swap and Hedging Obligation" means any obligation of the
Company or its subsidiaries pursuant to any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement, interest rate
exchange agreement,
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currency exchange agreement or any other agreement or arrangement designed to
protect against fluctuations in interest rates or currency values, including,
without limitation, any arrangement whereby, directly or indirectly, the Company
or its subsidiaries are entitled to receive from time to time periodic payments
calculated by applying either a fixed or floating rate of interest on a stated
notional amount in exchange for periodic payments made by the Company or its
subsidiaries calculated by applying a fixed or floating rate of interest on the
same notional amount.
"Indebtedness" of any person means, without duplication, (a) all
liabilities and obligations, contingent or otherwise, of such any person, (i) in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such person or only to a portion thereof), (ii) evidenced
by bonds, notes, debentures or similar instruments, (iii) representing the
balance deferred and unpaid of the purchase price of any property or services,
except (other than accounts payable or other obligations to trade creditors
which have remained unpaid for greater than 60 days past their original due
date) those incurred in the ordinary course of its business that would
constitute ordinarily a trade payable to trade creditors, (iv) evidenced by
bankers' acceptances or similar instruments issued or accepted by banks, (v)
relating to any capitalized lease obligation, or (vi) evidenced by a letter of
credit or a reimbursement obligation of such person with respect to any letter
of credit; (b) all net obligations of such person under Interest Swap and
Hedging Obligations; (c) all liabilities and obligations of others of the kind
described in the preceding clause (a) or (b) that such person has guaranteed or
that is otherwise its legal liability or which are secured by any assets or
property of such person and all obligations to purchase, redeem or acquire any
equity interests; (d) all equity interest of such person that, by its terms or
the terms of any security into which it is convertible, exercisable or
exchangeable, is, or upon the happening of an event or the passage of time would
be, required to be redeemed or repurchased (including at the option of the
holder thereof), measured at the greater of its voluntary or involuntary maximum
fixed repurchase price or, if there is no fixed purchase price, at fair market
value to be determined in good faith by the board of directors of the issuer (or
managing general partner of the issuer) of such equity interest plus accrued and
unpaid dividends; and (e) any and all deferrals, renewals, extensions,
refinancing and refunding (whether direct or indirect) of, or amendments,
modifications or supplements to, any liability of the kind described in any of
the preceding clauses (a), (b) (c) or (d), or this clause (e), whether or not
between or among the same parties.
"Latest Fiscal Month" means the month immediately preceding the Closing
Date unless the Closing Date occurs prior to twenty-one days after a month's
end, in which event, it shall mean the second preceding month.
As used in this Agreement "GAAP" means United States generally accepted
accounting principles set forth in the opinions and pronouncements of the
Accounting
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Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as approved by a significant segment
of the accounting profession in the United States as in effect on the date
hereof.
If there is a dispute as to the Company's Projected Results or the
Company's actual Consolidated EBITDA, such dispute will be resolved by a "Big
Six" accounting firm mutually selected by the Company and Gaming (the "Outside
CPA"). The Company and Gaming will each pay 50% of the fees of the Outside CPA
whose decision will be reached on an expedited basis and will be final and
binding upon the parties hereto.
Section 4.11 Compliance with Gaming Laws. None of Gaming, RAS
or their officers, directors or stockholders will attempt to influence, direct
or cause the direction of the management or policies of the Company or ROC
pending receipt of all required approvals of the Gaming Authorities, pursuant to
the Gaming Laws, for the transactions contemplated by this Agreement and the
Riviera Option Agreement.
ARTICLE V
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 5.1 Conditions to each Party's Obligation to Effect the Riviera
Merger. The respective obligation of each party to effect the Riviera Merger is
subject to the satisfaction or waiver on or prior to the Effective Time of the
following conditions:
(a) Any waiting period applicable to the consummation of the Riviera
Merger under the HSR Act shall have expired or been terminated, and no action
shall have been instituted by the Department of Justice or Federal Trade
Commission challenging or seeking to enjoin the consummation of this
transaction, which action shall have not been withdrawn or terminated.
(b) At the Stockholders' Meeting, this Agreement shall have been
approved and adopted by the affirmative vote of the holders of at least sixty
percent of all Shares, excluding the Paulson Shares.
(c) There shall not have been any statute, rule, regulation, judgment,
order or injunction promulgated, entered, enforced, enacted or issued applicable
to the Riviera Merger by any governmental entity which, directly or indirectly,
(i) prohibits the consummation of the Riviera Merger or the transactions
contemplated by the Riviera Option Agreement, (ii) prohibits or materially
limits the ownership
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or operation by the Company, or any of its respective subsidiaries of a material
portion of the business or assets of the Company and its subsidiaries, taken as
a whole, or seeks to compel the Company or Gaming or RAS to dispose of or hold
separate any material portion of the business or assets of the Company or Gaming
or RAS and its subsidiaries, taken as a whole, as a result of the Riviera Merger
or any of the other transactions contemplated by this Agreement, or (iii)
prohibits Gaming or RAS from effectively controlling in any material respect the
business or operations of the Company, taken as a whole; provided, that the
parties hereto shall have used their reasonable best efforts to cause any such
statute, rule, regulation, judgment, order or injunction to be repealed, vacated
or lifted.
(d) At or prior to the Effective Time, the Company shall have
irrevocably deposited the funds for the Defeasance as specified in the Note
Offering.
(e) Other than the filing of the articles of merger in accordance with
the Nevada Merger Law, all licenses, permits, registrations, authorizations,
consents, waivers, orders or other approvals required to be obtained, and all
filings, notices or declarations required to be made by Gaming, RAS, Mr. Allen
E. Paulson, the Company and any of its subsidiaries in order to consummate the
Riviera Merger and the transactions contemplated by this Agreement, and in order
to permit the Company and its subsidiaries to conduct their respective business
in the jurisdictions regulated by the Gaming Authorities after the Effective
Time in the same manner as conducted by the Company or its subsidiaries prior to
the Effective Time shall have been obtained or made.
Section 5.2 Conditions to Obligations of Gaming and RAS to Effect the
Riviera Merger. The obligations of Gaming and RAS to effect the Riviera Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following additional conditions:
(a) The Company shall have performed in all material respects all of
its obligations under this Agreement required to be performed by it at or prior
to the Effective Time and the representations and warranties of the Company
contained in this Agreement shall be true and correct in all material respects
as of the date of this Agreement and at and as of the Effective Time as if made
at and as of such time, except (i) for changes specifically permitted by this
Agreement and (ii) that those representations and warranties which address
matters only as of a particular date shall remain true and correct as of such
date.
(b) The actual Consolidated EBITDA reflected in the consolidated
statement of operations of the Company for the Projected Period shall not have
declined by 7.5% or more when compared to the Projected Results for the
Projected Period.
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(c) The Option Sellers shall have entered into the Riviera Option
Agreement concurrent with the execution of this Agreement, and the Riviera
Option Agreement shall be in full force and effect and the Option Sellers shall
have complied in all respects with the terms thereof;
(d) Mr. Allen E. Paulson shall not have become deceased or Disabled (as
defined herein). As used herein, "Disabled" means Mr. Allen E. Paulson's
incapacity due to physical or mental illness, injury or disease, which
incapacity renders him unable to perform the requisite duties of the chief
executive officer of Gaming for a consecutive period of 90 days or more. Any
question as to the existence, extent or potentiality of Mr. Allen E. Paulson's
disability upon which Gaming and the Company cannot agree shall be determined by
a qualified, independent physician selected by the Company approved by Gaming
and the disputing Option Sellers (each of whose approval shall not be
unreasonably withheld or delayed). The determination of such physician shall be
final and conclusive for all purposes of this Agreement.
(e) Gaming shall have received such documents as Gaming or RAS may
reasonably request for the purpose of (i) evidencing the accuracy at any time on
or prior to the Closing Date of any of the Company's representations and
warranties, (ii) evidencing the performance by the Company of, or the compliance
by the Company with, any covenant or obligation required to be performed or
complied with by the Company, (iii) evidencing the satisfaction of any condition
referred to in Sections 5.1 and 5.2 hereof or (iv) otherwise facilitating the
consummation or performance of any of the transactions contemplated hereby.
Section 5.3 Conditions to Obligations of the Company to Effect the
Riviera Merger. The obligations of the Company to effect the Riviera Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following additional conditions:
(a) Each of Gaming and RAS shall have performed in all material
respects all of its obligations under this Agreement required to be performed by
it at or prior to the Effective Time and the representations and warranties of
Gaming and RAS contained in this Agreement shall be true and correct in all
respects as of the date of this Agreement and at and as of the Effective Time as
if made at and as of such time, except (i) for changes specifically permitted by
this Agreement, and (ii) that those representations and warranties made only as
of a particular date shall remain true and correct as of such particular date.
(b) At the Closing Date, Gaming shall have in cash or immediately
available funds, an amount equal to the sum of (i) the aggregate amount of
Merger Consideration to be paid hereunder and (ii) the aggregate amount to be
paid at the Effective Time pursuant to Section 1.10 hereof.
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(c) The Company shall have received such documents as the Company may
reasonably request for the purpose of (i) evidencing the accuracy of any of
Gaming's and RAS' representations and warranties, (ii) evidencing the
performance by Gaming and RAS of, or the compliance by Gaming and RAS with, any
covenant or obligation required to be performed or complied with by Gaming and
RAS, (iv) evidencing the satisfaction of any condition referred to in Sections
5.1 and 5.3 hereof, or (v) otherwise facilitating the consummation or
performance of any of the transactions contemplated hereby.
ARTICLE VI
TERMINATION; AMENDMENT; WAIVER
Section 6.1 Termination. This Agreement may be terminated and the
Riviera Merger may be abandoned at any time prior to the Effective Time,
notwithstanding approval thereof by the Company Stockholders:
(a) by mutual written consent of Gaming and RAS, on the one hand, and
the Company, on the other hand;
(b) by Gaming and RAS, on the one hand, and the Company, on the other
hand, if any court or governmental authority of competent jurisdiction shall
have issued an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the Riviera Merger and such order, decree,
ruling or other action shall have become final and nonappealable; provided, that
Gaming and the Company shall have used their reasonable best efforts to have
such injunction lifted;
(c) by Gaming and RAS, on the one hand, and the Company, on the other
hand, at any time after April 1, 1998, (the "Termination Date") if the Riviera
Merger shall not have occurred by such date; provided, that if the Riviera
Merger has not occurred solely by virtue of the fact that the required approvals
of one or more of the Gaming Authorities have not been obtained and the Gaming
Authorities have informed Mr. Allen E. Paulson, Gaming or the Company that a
review of the applications for such approvals is scheduled by the appropriate
Gaming Authorities for a later date, then the Termination Date shall be extended
until such approvals have been granted or denied, except that under no
circumstances shall such extension continue after June 1, 1998; and, provided,
further, that the right to terminate this Agreement under this subparagraph (c)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement has been the principal cause of the failure of the Riviera
Merger to have occurred by such date;
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(d) by Gaming and RAS if (i) there shall have been a breach of any
representation or warranty of the Company contained herein which would have a
Company Material Adverse Effect or prevent the consummation of the Riviera
Merger or the transactions contemplated hereby, which shall not have been cured
on or prior to ten business days following notice from Gaming of such breach,
(ii) there shall have been a breach of any covenant or agreement of the Company
contained herein which would have a Company Material Adverse Effect or prevent
the consummation of the Riviera Merger or the transactions contemplated hereby,
which shall not have been cured on or prior to ten business days following
notice of such breach, (iii) the Board shall have withdrawn or modified, in a
manner materially adverse to Gaming, its approval or recommendation of this
Agreement, the Riviera Merger or the transactions contemplated hereby or shall
have recommended, or the Company shall have entered into an agreement providing
for, an Alternative Transaction, or the Board shall have resolved to do any of
the foregoing, (iv) the Stockholders Meeting shall have been held and the vote
described in Section 5.1(b) shall not have been obtained or (v) Mr. Allen E.
Paulson shall have become deceased or Disabled; or
(e) by the Company if (i) there shall have been a breach of any
representation or warranty of Gaming or RAS contained herein which would have a
Gaming Material Adverse Effect or prevent the consummation of the Riviera Merger
or the transactions contemplated hereby, which shall not have been cured on or
prior to ten business days following notice from the Company of such breach,
(ii) there shall have been a breach of any covenant or agreement of Gaming or
RAS contained herein which would have a Gaming Material Adverse Effect or
prevent the consummation of the Riviera Merger or the transactions contemplated
hereby, which shall not have been cured on or prior to ten business days
following notice of such breach, (iii) the Board determines, in good faith,
after consulting with outside legal counsel to the Company, that it is required,
in the exercise of its fiduciary duties under applicable law, to enter into a
definitive agreement with respect to an Alternative Transaction or (iv) the
Stockholders Meeting shall have been held and the vote described in Section
5.1(b) shall not have been obtained.
(f) by the Company if the Closing has not occurred within 30 days after
receipt of required approvals of the Gaming Authorities; provided, however, that
all of the conditions to Gaming's obligation to effect the Riviera Merger
contained in Sections 5.1 and 5.2 hereof shall have been satisfied or waived by
Gaming.
Section 6.2 Effect of Termination; Termination Fee. (a) In the event of
the termination and abandonment of this Agreement pursuant to Section 6.1, this
Agreement shall forthwith become void and have no effect, without any liability
on the part of any party hereto, other than pursuant to the provisions set forth
in Section 6.2(b) and Section 6.3 hereof.
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(b) In the event this Agreement is terminated pursuant to Sections
6.1(d)(iii) or 6.1(e)(iii) hereof, the Company shall pay to Gaming immediately
upon the closing of an Alternative Transaction an aggregate amount equal to
three percent of the consideration for the equity of the Company which is
received by the Company or its stockholders in the Alternative Transaction
valued at the higher of the value of the consideration on the date of (i) the
execution of the definitive agreement with respect to an Alternative Transaction
and (ii) the closing of the Alternative Transaction (the "Termination Fee").
(c) The ability of Gaming and RAS to terminate their obligations
without triggering the right of the Company Stockholders to receive the Escrow
Consideration under Section 6.1(c) is predicated upon the accuracy of the
following representation and performance by Mr. Allen E. Paulson of the
following agreement: (A) Mr. Allen E. Paulson has represented that prior to the
execution of this Agreement, he has discussed in detail with his Nevada counsel
his background and knows of no reason why he should not be able to obtain all
necessary Gaming Authorities approvals prior to April 1, 1998; and (B) Mr. Allen
E. Paulson has agreed that he will pursue vigorously and will give complete and
prompt attention to requests of Gaming Authorities for information and will do
nothing which might delay receipt of all necessary Gaming Authorities approvals.
Section 6.3 Fees and Expenses. Except as set forth herein, each party
shall bear its own expenses and costs, including brokers' fees, in connection
with this Agreement and the transactions contemplated hereby. In the event this
Agreement is terminated pursuant to Sections 6.1(d)(i), 6.1(d)(ii), 6.1(d)(iii)
or 6.1(e)(iii) hereof, and as a condition to such termination, the Company
shall, immediately upon (i) the execution of a definitive agreement with respect
to an Alternative Transaction or (ii) the approval or recommendation by the
Board, directly or indirectly, of such an Alternative Transaction, reimburse
Gaming, RAS and Mr. Allen E. Paulson the documented out-of-pocket expenses (the
"Expenses") of Gaming, RAS and Mr. Allen E. Paulson, incurred from April 15,
1997, in connection with (i) the transactions contemplated by this Agreement and
(ii) the Letter of Intent, dated May 15, 1997, by and between Mr. Allen E.
Paulson and the Company; such reimbursement and the Termination Fee being the
sole remedy upon such termination.
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ARTICLE VII
MISCELLANEOUS
Section 7.1 Survival. Subject to the following sentence, the
representations, warranties, covenants and agreements contained herein, shall
not survive beyond the Effective Time. The covenants and agreements contained
herein which by their terms contemplate performance after the Effective Time
(including by the Surviving Corporation after the Riviera Merger) shall survive
the Effective Time. In addition, Sections 6.2 and 6.3 hereof shall survive
termination of this Agreement.
Section 7.2 Entire Agreement; Assignment. This Agreement (including the
Schedules and Exhibits hereto) (i) shall constitute the entire agreement among
the parties hereto with respect to the subject matter hereof, and supersedes all
other prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof and (ii) shall not be assigned
by operation of law or otherwise and any purported assignment shall be null and
void, except that Gaming and RAS may assign this Agreement to any of their
affiliates without the prior written consent of the Company; provided, that (i)
no such assignment shall relieve Gaming and RAS of their obligations hereunder
if such assignee does not perform such obligations, and (ii) such assignment
will not result in any delay in (a) the consummation of the transactions
contemplated hereby by more than one month as determined by the Company's
counsel or (b) the ability to satisfy the condition contained in Section 5.1(e)
hereof by more than one month as determined by the Company's counsel; and,
provided further that, such delay shall not extend beyond the Termination Date
as extended under Section 6.1(c) hereof.
Section 7.3 Amendment. This Agreement may be amended by action taken by
the Company, Gaming and RAS at any time before or after adoption of the Riviera
Merger by the Company Stockholders but, after any such approval, no amendment
shall be made which decreases the Merger Consideration or changes the form
thereof or which adversely affects the rights of the Company Stockholders
hereunder without the approval of the Company Stockholders. This Agreement may
not be amended except by an instrument in writing signed on behalf of each of
the parties hereto.
Section 7.4 Extension or Waiver. At any time prior to the Effective
Time, the Company, on the one hand, and Gaming, on the other hand, may (i)
extend the time for the performance of any of the obligations or other acts of
the other party, (ii) waive any inaccuracies in the representations and
warranties of the other party contained herein or in any document, certificate
or writing delivered pursuant hereto, or (iii), subject to applicable law, waive
compliance by the other party with any of the agreements or conditions contained
herein. Any agreement on the part of any party hereto to any such extension or
waiver shall be valid only if set
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forth in an instrument in writing signed on behalf of such party. The failure of
any party hereto to assert any of its rights hereunder shall not constitute a
waiver of such rights.
Section 7.5 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by overnight
courier with receipt requested, by facsimile transmission (with receipt
confirmed by telephone) or two business days after being sent by registered or
certified mail (postage prepaid, return receipt requested), to the other party
as follows:
if to Gaming:
P.O. Box 9660
Rancho Santa Fe, CA 92067
Fax: (619) 756-3194
Attention: Mr. Allen E. Paulson
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue
Los Angeles, California 90071
Fax (213) 687-5600
Attention: Brian J. McCarthy, Esq.
if to the Company:
2901 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Fax: (702) 794-9277
Attention: Mr. William L. Westerman
with a copy to:
Dechert Price & Rhoads
30 Rockefeller Plaza
New York, New York 10112
Fax: (212) 698-3599
Attention: Fredric Klink, Esq.
or to such other address as the party to whom notice is given may have
previously furnished to the other party in writing in the manner set forth
above.
Section 7.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Nevada, without regard to
the principles of conflicts of law thereof. Each of the parties
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hereto hereby irrevocably and unconditionally consents to submit to jurisdiction
of the courts of the State of Nevada and of the United States of America located
in the State of Nevada for any litigation arising out of or relating to this
Agreement and the transactions contemplated hereby.
Section 7.7 Parties in Interest. This Agreement shall be binding upon
and shall inure solely to the benefit of each party hereto and its successors
and permitted assigns, and, except as set forth in Section 4.6, nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement; provided, that, in addition to Gaming and RAS, the
Option Sellers are intended beneficiaries of the representation and warranty
contained in Section 2.4 hereof.
Section 7.8 Subsequent Actions. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of the Company or RAS acquired or to be acquired by
the Surviving Corporation as a result of or in connection with the Riviera
Merger, or otherwise to carry out this Agreement, the officers and directors of
the Surviving Corporation shall be authorized to execute and deliver, in the
name and on behalf of the Company or RAS, all such deeds, bills of sale,
assignments, assumption agreements and assurances, and to take and do, in the
name and on behalf of each of such corporations or otherwise, all such other
actions and things as may be necessary or desirable to vest, perfect or confirm
any and all right, title and interest in, to and under such rights, properties
or assets of the Surviving Corporation or otherwise to carry out this Agreement.
Section 7.9 Remedies. The parties hereto agree that irreparable damage
would occur in the event any provision of this Agreement was not performed in
accordance with the terms hereof and that the parties shall be entitled to
specific performance of the terms hereof, in addition to any other remedy at law
or in equity.
Section 7.10 Severability. The provisions of this Agreement shall be
deemed severable, and the invalidity or unenforceability of any provision shall
not affect the validity and enforceability of the other provisions hereof. If
any provision of this Agreement, or the application thereof to any person or
entity or any circumstance, is invalid or unenforceable, (a) a suitable and
equitable provision shall be substituted therefor in order to carry out, so far
as may be valid and enforceable, the intent and purpose of such invalid and
unenforceable provision and (b) the
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remainder of this Agreement and the application of such provision to other
persons, entities or circumstances shall not be affected by such invalidity or
unenforceability.
Section 7.11 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
Section 7.12 Certain Definitions. For purposes of this Agreement, the
term:
(a) "affiliate" of a person means a person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned person;
(b) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise;
(c) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d)(3) of the Exchange Act); and
(d) "subsidiary" or "subsidiaries" of any person means any corporation,
partnership, joint venture or other legal entity of which such person (either
alone or through or together with any other subsidiary), owns, directly or
indirectly, fifty percent or more of the stock or other equity interests, the
holder of which is generally entitled to vote for the election of the board of
directors or other governing body of such corporation, partnership, joint
venture or other legal entity.
Section 7.13 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same Agreement.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officers as of the date first
above written.
R&E GAMING CORP.
By: -----------------------------------
Name:
Title:
RIVIERA ACQUISITION SUB, INC.
By:
-----------------------------------
Name:
Title:
RIVIERA HOLDINGS CORPORATION
By:
-----------------------------------
Name:
Title:
<PAGE>
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of September 15, 1997 (this "Agreement"), by
and among R&E Gaming Corp., a Delaware corporation ("Gaming"), Riviera Holdings
Corporation, a Nevada corporation (the "Company"), and State Street Bank and
Trust Company of California, N.A., as escrow agent (the "Escrow Agent").
RECITALS:
WHEREAS, concurrently with the execution and delivery of this
Agreement, Gaming is entering into (i) the Agreement and Plan of Merger (the
"Riviera Merger Agreement") with Riviera Acquisition Sub, Inc., a Nevada
corporation and a wholly owned subsidiary of Gaming ("RAS") and the Company,
pursuant to which RAS has agreed to merge with and into the Company (the
"Riviera Merger"), whereupon the separate existence of RAS shall cease and the
Company shall continue as the surviving corporation and shall be a wholly owned
subsidiary of Gaming, upon the terms and subject to the conditions set forth in
the Riviera Merger Agreement and (ii) the Option and Voting Agreement (the
"Riviera Option Agreement"), with Morgens, Waterfall, Vintiadis & Company, Inc.,
on behalf of certain investment accounts identified on the signature pages
thereto ("Morgens, Waterfall"), Keyport Life Insurance Company, on behalf of a
certain investment account identified on the signature pages thereto ("Keyport")
and SunAmerica Life Insurance Company, an Arizona corporation ("SunAmerica," and
together with Morgens, Waterfall and Keyport, the "Option Sellers"); and
WHEREAS, as a condition to the execution and delivery of the Riviera
Merger Agreement and the Riviera Option Agreement, Gaming and the Company desire
and have agreed to enter into this Agreement, to, among other things, appoint
the Escrow Agent and set forth the terms for the payment or return, as
applicable, of the Escrow Consideration (as defined in Section 1 hereof);
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
<PAGE>
Section 1. Appointment of Escrow Agent. (a) The Escrow Agent is hereby
appointed by each of Gaming and the Company and the Escrow Agent hereby accepts
its appointment to act as escrow agent for Gaming and the Company with respect
to the escrow consideration (the "Escrow Consideration") deposited on the date
hereof, and on such other dates as set forth in (ii) below, into this escrow
("Escrow"), consisting of (i) cash or one or more letters of credit in
substantially the form attached hereto as Exhibit A (the "Riviera Letter of
Credit"), issued by City National Bank (the "LC Issuer"), in the amount of
$4,666,755, plus interest in an amount equal to 7% per annum on $23,333,775 from
June 1, 1997 through the date immediately preceding the execution date hereof
and (ii) cash or letters of credit (the "Additional Amounts" and, together with
the Riviera Letter of Credit, the "Letters of Credit"), each such Additional
Amount in the amount of $4,474.97 multiplied by the number of days in the month
prior to each Anniversary Date (as defined below) (except as set forth below),
to be deposited into Escrow and to become part of the Escrow not later than the
fifth business day following each monthly anniversary (an "Anniversary Date") of
the date hereof, until (and upon) the occurrence of (x) the time that the
articles of merger are filed with the Secretary of State of the State of Nevada
in accordance with the provisions of Chapter 92A of the Nevada Revised Statutes,
or such later date as set forth in such filing, but in no event later than April
1, 1998, unless extended as provided in Section 6.1(c) of the Riviera Merger
Agreement (the "Effective Time") or (y) the termination (the "Termination") of
the Riviera Merger Agreement in accordance with Article VI thereof (the date on
which the earlier of (x) or (y) shall occur is hereinafter referred to as the
"Escrow Termination Date"); provided, that, if the Effective Time or the
Termination, as applicable, shall occur on a date other than an Anniversary
Date, the Additional Amount for the period from the last Anniversary Date with
respect to which an Additional Amount was deposited into Escrow, to the date
immediately preceding the Effective Time or the Termination, as applicable (the
"Partial Period"), shall be in an amount equal to $4,474.97, multiplied by the
number of days in the Partial Period. Immediately upon the occurrence of the
Effective Time or the Termination, as applicable, Gaming shall furnish to the
Escrow Agent a certificate setting forth the particulars of such event and the
date on which it occurred.
(b) If any part of the Escrow Consideration consists of cash ("Cash"),
immediately upon the receipt of any Cash, any Escrow Agent shall deposit such
Cash in a money market mutual fund registered under the Investment Company Act
of 1940, the principal of which is invested solely in obligations of the United
States or its agencies. All interest earned in such account (the "Cash
Interest") shall be for the benefit of Gaming, shall not be part of the Escrow
Consideration and shall be
2
<PAGE>
paid to Gaming at the same time as the delivery or release of the Escrow
Consideration or the funds underlying the Escrow Consideration.
Section 2. Treatment of Letters of Credit. The Letters of Credit shall
be delivered to and held by the Escrow Agent until (i) the funds issued to the
Escrow Agent from the LC Issuer pursuant to the Letters of Credit are paid as
provided in Section 3 hereof to the holders (the "Stockholders") of outstanding
shares of common stock, par value $.001 per share (the "Common Stock"), of the
Company, other than shares of Common Stock beneficially owned by the Option
Sellers, Gaming, RAS or Mr. Allen E. Paulson (the "Disqualified Holders") or
(ii) the Escrow Consideration, together with the Cash Interest, if any, are
returned to Gaming as provided in Section 4 hereof (in which case the Letters of
Credit shall immediately be terminated and cancelled and the cash portion, if
any, thereof returned to Gaming).
The Escrow Agent may assume without inquiry that no Stockholder is a
Disqualified Holder until it receives (and has a reasonable opportunity to act
upon) a certificate setting forth the identity of each Disqualified Holder and
how and by whom his or her shares of Common Stock are held.
Section 3. Delivery of Escrow Consideration Funds to the Stockholders.
Upon the receipt of a certificate from the Company, certifying that the Riviera
Merger Agreement has been terminated pursuant to a termination event which is
not a Non-Payment Termination Event (as defined herein) (the "Company
Certificate") (a copy of which shall be simultaneously delivered to Gaming), the
Escrow Agent shall deliver notice to the LC Issuer as provided in the Letters of
Credit (the "Notice") and, upon receipt of the funds from the Letters of Credit,
shall deliver such funds to the Company (upon the Company's receipt of such
funds from the Escrow Agent, the Company shall distribute such funds to the
Stockholders, other than the Disqualified Holders), subject to the provisions of
Section 5 hereof, and shall pay to Gaming the Cash Interest, if any; provided,
that, the Escrow Agent shall not make a request for payment pursuant to the
Letters of Credit if the Escrow Agent has received from Gaming, within ten
business days following receipt by Gaming of the Company Certificate, a
certificate contesting the action to be taken by the Escrow Agent (a "Gaming
Contesting Certificate"), in which case the Escrow Agent shall not deliver the
Notice to the LC Issuer. A "Non-Payment Termination Event" shall mean the
termination of the Riviera Merger Agreement pursuant to Sections 6.1(a), 6.1(b),
6.1(c) (because of the failure to satisfy Sections 5.1(a), 5.1(c), 5.1(d),
5.2(b), or 5.2(c)), 6.1(d), 6.1(e)(iii) or 6.1(e)(iv) thereof. In addition, in
the event that the Riviera Merger Agreement is terminated pursuant to
3
<PAGE>
Section 6.1(c) because of the failure of Gaming, RAS or Mr. Allen E. Paulson to
obtain the required approvals of the Gaming Authorities, then such event shall
constitute a Non-Payment Termination Event, unless Mr. Allen E. Paulson is in
breach of his representation and covenant contained in Section 6.2(c) of the
Riviera Merger Agreement. The Escrow Agent may rely on a Company Certificate
without inquiry and need not verify that any of the events described therein
actually occurred.
Section 4. Delivery of Escrow Consideration to Gaming. Upon the receipt
of a certificate from Gaming certifying that (a) the Effective Time has occurred
or (b) the Riviera Merger Agreement has been terminated other than in a manner
pursuant to which the Escrow Consideration funds are to be delivered to the
Stockholders in accordance with Section 3 hereof (the "Gaming Certificate") (a
copy of which shall be simultaneously delivered to the Company), the Escrow
Agent shall immediately deliver the Escrow Consideration, together with the Cash
Interest, if any, to Gaming, and the Escrow shall promptly terminate; provided,
that the Escrow Agent shall not deliver the Escrow Consideration and the Cash
Interest to Gaming if the Escrow Agent has received from the Company, within ten
business days following receipt by the Company of the Gaming Certificate, a
certificate contesting the action to be taken by the Escrow Agent (a "Company
Contesting Certificate").
Section 5. Disputes. In the event a Gaming Contesting Certificate or a
Company Contesting Certificate has been delivered to the Escrow Agent, the
Escrow Agent shall not make the request for payment for the LC Issuer under
Section 3 hereof or the payment under Section 4 hereof and the dispute shall be
resolved by arbitration in Las Vegas, Nevada, by the American Arbitration
Association. Each of the Company and Gaming shall be entitled to select one
arbitrator and such arbitrators shall select a third arbitrator who shall act as
the chairman of the arbitration panel. If either Gaming or the Company shall
fail to appoint an arbitrator within 10 days after notice of commencement of the
arbitration, or the chairman of the arbitration panel shall not have been
selected within 10 days after the selection by the parties of the two
arbitrators, then the arbitrator or arbitrators in question shall be selected by
the American Arbitration Association. The decision of the arbitration panel
shall be final and binding and the fees of the arbitrators shall be borne by the
party which loses the arbitration. If the prevailing party is the Company, the
Escrow Agent shall continue to include the Additional Amounts referred to in
clause (ii) of Section 1 hereof.
Section 6. Escrow Agent Expenses. All fees of the Escrow Agent for
establishing and holding Escrow and paying out the Escrow Consideration shall
4
<PAGE>
be borne equally by the Company and by Gaming. The Escrow Agent shall receive
the fees provided in Exhibit B annexed hereto.
Section 7. Limitations on Escrow Agent's Liability and Duties. (a) The
Escrow Agent shall neither be responsible for or under, nor chargeable with
knowledge of, the terms and conditions of any other agreement, instrument or
document executed between/among the parties hereto. This Agreement sets forth
all of the obligations of the Escrow Agent, and no additional obligations shall
be implied from the terms of this Agreement or any other agreement, instrument
or document.
(b) The Escrow Agent may act in reliance upon any instruction, notice,
certification, demand, consent, authorization, receipt, power of attorney or
other writing, delivered to it by any other party in accordance with the
provisions of Section 10 hereof, without being required to determine the
authenticity or validity thereof or the correctness of any fact stated therein,
the propriety or validity of the service thereof, or the jurisdiction of the
court issuing any judgment or order. The Escrow Agent may act in reliance upon
any signature believed by it to be genuine, and may assume that such person has
been properly authorized to do so.
(c) The Company agrees to reimburse the Escrow Agent on demand for, and
to indemnify and hold the Escrow Agent harmless against and with respect to, any
and all loss, liability, damage or expense (including, but without limitation,
reasonable attorneys' fees, costs and disbursements) that the Escrow Agent may
suffer or incur in connection with this Agreement and its performance hereunder
or in connection herewith, except to the extent such loss, liability, damage or
expenses arise from its willful misconduct or gross negligence as adjudicated by
a court of competent jurisdiction.
(d) The Escrow Agent may consult with legal counsel of its selection in
the event of any dispute or question as to the meaning or construction of any of
the provisions hereof or its duties hereunder, and it shall incur no liability
and shall be fully protected in acting in accordance with the opinion and
instructions of such counsel. The Company agrees to reimburse the Escrow Agent
on demand for reasonable legal fees, disbursements and expenses.
(e) The Escrow Agent shall be under no duty to give the property held
in Escrow by it hereunder any greater degree of care than it gives its own
similar property.
5
<PAGE>
(f) In the event of any disagreement between/among any of the parties
to this Agreement, or between/among them or either or any of them and any other
person, resulting in adverse claims or demands being made in connection with the
subject matter of the Escrow, or in the event that the Escrow Agent, in good
faith, be in doubt as to what action it should take hereunder, the Escrow Agent
may, at its option, refuse to comply with any claims or demands on it, or refuse
to take any other action hereunder, so long as such disagreement continues or
such doubt exists, and in any such event, the Escrow Agent shall not become
liable in any way or to any person for its failure or refusal to act, and the
Escrow Agent shall be entitled to continue so to refrain from acting until (i)
the rights of all parties shall have been fully and finally adjudicated by a
court of competent jurisdiction or (ii) all differences shall have been adjusted
and all doubt resolved by agreement among all of the interested persons, and the
Escrow Agent shall have been notified thereof in writing signed by all such
persons. The rights of the Escrow Agent under this paragraph are cumulative of
all other rights which it may have by law or otherwise.
(g) Before the Escrow Agent makes any distribution of Escrow
Consideration, Cash Interest or any other amount distributable by it pursuant to
this Agreement, it may require the recipient to first deliver to the Escrow
Agent an IRS Form W-9 or such other documentation as may be required by the
Escrow Agent to permit it to report the distribution to the appropriate tax
authorities.
Section 8. Successor Escrow Agent. (a) Any corporation into which the
Escrow Agent in its individual capacity may be merged or converted or with which
it may be consolidated, or any corporation resulting from any merger, conversion
or consolidation to which the Escrow Agent in its individual capacity shall be a
party, or any corporation to which substantially all of the corporate trust
business of the Escrow Agent in its individual capacity (including the trust
established by this Agreement) may be transferred, shall be the Escrow Agent
under this Agreement without further act.
(b) The Escrow Agent may, in its sole discretion, resign and terminate
its position hereunder at any time following thirty days written notice to the
other parties hereto. Any such resignation shall terminate all obligations and
duties of the Escrow Agent hereunder. On the effective date of such resignation,
the Escrow Agent shall deliver this Agreement together with any and all related
instruments or documents to any successor Escrow Agent agreeable to the parties
hereto. If a successor Escrow Agent has not been appointed prior to the
expiration of thirty days following the date of the notice of such resignation,
the then acting Escrow Agent may petition any court of competent jurisdiction
for the appointment
6
<PAGE>
of a successor Escrow Agent, or other appropriate relief. Any such resulting
appointment shall be binding upon all of the parties to this Agreement.
Section 9. Termination; Survival. This Agreement may be terminated upon
the joint written instructions of the Company, Gaming and the Escrow Agent, or
upon the release of the Escrow Consideration as otherwise specified herein.
Notwithstanding any such termination, the provisions of Section 7 hereof shall
survive for a period a one year following termination.
Section 10. Compliance. Strict compliance shall be required with each
and every provision of this Agreement, it being understood and agreed that no
party shall have any right to receive the items held in escrow by the Escrow
Agent, except as specifically contemplated herein. The parties hereto agree that
failure to perform the obligations hereunder and abide by the conditions set
forth in this Agreement shall result in irreparable damage and that monetary
damages shall be inadequate to compensate therefor. Accordingly, the parties
hereby agree that, in addition to any other rights, remedies or damages
available hereunder, at law or in equity, any party hereto shall be entitled to
a temporary restraining order, preliminary injunction and permanent injunction
in order to prevent or to restrain any such failure or threatened failure or to
specific performance to enforce these obligations and conditions as may be
obtained by suit in equity.
Section 11. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by overnight
courier with receipt requested, by facsimile transmission (with receipt
confirmed by automatic transmission report), or two business days after being
sent by registered or certified mail (postage prepaid, return receipt
requested), to the other party as follows:
(a) if to Gaming, to:
P.O. Box 9660
Rancho Santa Fe, CA 92067
Fax: (619) 756-3194
Attention: Mr. Allen E. Paulson
7
<PAGE>
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
Fax (213) 687-5600
Attention: Brian J. McCarthy, Esq.
(b) if to the Company, to:
2901 Las Vegas Boulevard South
Las Vegas, Nevada 89109
Fax: (702) 794-9277
Attention: Mr. William L. Westerman
with a copy to:
Dechert Price & Rhoads
30 Rockefeller Plaza
New York, NY 10112
Fax: (212) 698-3599
Attention: Fredric Klink, Esq.
(c) if to the Escrow Agent, to:
State Street Bank and Trust Company
of California, N.A.
725 South Figueroa Street
Suite 3100
Los Angeles, CA 90017
Fax: (213) 362-7357
Attention: Corporate Trust Department
(R&E Gaming Corp. 1997 Escrow)
Notwithstanding the foregoing, notices to the Escrow Agent
shall be effective only upon receipt.
8
<PAGE>
Section 12. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Nevada, without regard to
the principles of conflicts of law thereof. Each of the parties hereto hereby
irrevocably and unconditionally consents to submit to jurisdiction of the courts
of the State of Nevada and of the United States of America located in the State
of Nevada for any litigation arising out of or relating to this Agreement (and
the transactions contemplated hereby).
Section 13. Assignment. Except as set forth in Section 8 hereof, this
Agreement may not be assigned by either party hereto without the prior written
consent of each of the other parties hereto, except that Gaming may assign this
Agreement to any of its affiliates without the prior written consent of the
other parties hereto; provided, that, no such assignment shall relieve Gaming of
its obligations hereunder if such assignee does not perform such obligations.
Section 14. Miscellaneous.
(a) Subject to Section 6 hereof, the Escrow Agent hereby waives any and
all rights to offset it may have against Gaming, the Company, or any other
person or entity with respect to any amounts held in Escrow.
(b) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, and all of which, when taken together, shall
be deemed to constitute but one and the same Agreement.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date and year first above
written.
R&E GAMING CORP.
By:
------------------------------------
Name:
Title:
RIVIERA HOLDINGS CORPORATION
By:
------------------------------------
Name:
Title:
STATE STREET BANK AND TRUST COMPANY
OF CALIFORNIA, N.A., as Escrow Agent
By:
------------------------------------
Name:
Title:
10
<PAGE>
EXHIBIT A
[To be provided by LC Issuer]
A-1
<PAGE>
EXHIBIT B
[To be provided by the Escrow Agent]
$----------
B-1
<PAGE>
Exhibit A
ESCROW AGENT NOTICE
The undersigned, a duly authorized officer of State Street Bank and
Trust Company of California, N.A. (the "Escrow Agent"), hereby certifies to City
National Bank (the "Bank") with reference to irrevocable letter of credit No.
_____ (the "Letter of Credit") issued by the Bank that the Escrow Agent is
delivering Notice (as such term is defined in the Escrow Agreement, dated as of
September ___, 1997 by and among R & E Gaming Corp., a Delaware corporation,
Riviera Holdings Corporation and the Escrow Agent (the "Escrow Agreement")) in
full compliance with the terms and provisions of Section 3 of the Escrow
Agreement.
Demand is hereby made under the Letter of Credit for $_______. Please
remit payment to State Street Bank and Trust Company of California, N.A.,
account number ________, at ______, ABA No. _________, REF: __________.
By:____________________
Name:
Title:
<PAGE>
EXHIBIT B
[To be provided by the Escrow Agent]
$---------
B-1
<PAGE>
Exhibit A
ATTACHMENT to Standby L/C Application
-------------------------------------
ISSUING BANK LETTERHEAD DATE: (date of l/c)
IRREVOCABLE STANDBY LETTER OF
CREDIT NUMBER: (l/c Number)
BENEFICIARY:
(beneficiary name & address) APPLICANT:
(applicant name & address)
DATE AND PLACE OF EXPIRY:
date/month/year
AT OUR COUNTERS
AMOUNT: (currency amount of l/c)
GENTLEMEN:
WE HEREBY ESTABLISH OUR IRREVOCABLE STANDBY LETTER OF CREDIT IN YOUR FAVOR
AVAILABLE BY PAYMENT OF YOUR DRAFTS AT SIGHT DRAWN ON CITY NATIONAL BANK
INTERNATIONAL DEPARTMENT, LOS ANGELES, CALIFORNIA AND ACCOMPANIED BY THE
DOCUMENTS AS SPECIFIED BELOW:
1. THIS ORIGINAL STANDBY LETTER OF CREDIT, AND AMENDMENT(S) IF
ANY.
2. BENEFICIARY'S SIGNED AND DATED STATEMENT WORDED AS PER ATTACHED
EXHIBIT.
EACH DRAFT DRAWN HEREUNDER MUST STATE "DRAWN UNDER CREDIT NUMBER (___ NUMBER) OF
CITY NATIONAL BANK, LOS ANGELES, CALIFORNIA.
WE HEREBY ENGAGE WITH YOU THAT ALL DRAFTS DRAWN UNDER AND IN COMPLIANCE WITH THE
TERMS AND CONDITIONS OF THIS CREDIT SHALL BE DULY HONORED IF PRESENTED FOR
PAYMENT AT THE OFFICE OF CITY NATIONAL BANK INTERNATIONAL DEPARTMENT, 606 SOUTH
OLIVE STREET SUITE 300, LOS ANGELES, CALIFORNIA 90014 ON OR BEFORE THE
EXPIRATION DATE OF THIS CREDIT.
<PAGE>
EXCEPT SO FAR AS OTHERWISE EXPRESSLY STATED, THIS CREDIT IS SUBJECT TO THE
UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION),
INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION NO. 500.
SINCERELY,
- ---------------------------
(authorized bank signature)
*******
Standby Wording Approval
Print Name:
- ---------------------------
Authorized Signature - Date
<PAGE>
Exhibit B
STATE STREET Jenni Minardi
Vice President
September 10, 1997 State Street Bank and Trust
Company of California, N.A.
Corporate Trust
725 South Figueroa Street, Suite 3100
Los Angeles, CA 90017
Telephone: (213) 362-7313
Facsimile: (213) 362-7301
Ms. Sue Winchester
Skadden, Arps, Slate, Meagher &
Flom LLP
300 South Grand Avenue
Los Angeles, CA 90071-3144
RE: ESCROW SERVICES
R&E GAMING CORPORATION AND
RIVIERA HOLDING CORPORATION
Dear Ms. Winchester:
On behalf of State Street Bank and Trust Company of California, N.A., I am
pleased to submit the following proposal to serve as Escrow Agent on the
above-referenced financing:
Acceptance Fee: $1,000.00
This is one-time charge, payable upon funding, includes acceptance of
responsibilities and duties as Escrow Agent, review of the Escrow
Agreement and supporting documents, liaison with Corporate Officials
and Counsel.
Annual Administration Fee: $2,000.00
Payable at funding and annually thereafter, if applicable. Compensates
State Street for administrative services in accordance with the Escrow
Agreement.
Outside Counsel: $ 754.00 Capped
- ---------------
<PAGE>
Letter of Credit Draws: $ 250.00 each draw
- ----------------------
Claims (if applicable): $ 250.00 each claim
- ----------------------
Preparation of 1099's $ 5.00 each 1099
- ---------------------
Other Fees:
See attached schedule of "Ancillary Fees"
Extraordinary Services (as requested):
Such as manually created spreadsheets, reports or certificates required under
the governing documents and any other extraordinary request not covered by the
Annual Administration Fee.
Out-of-Pocket Expense: Billed at cost
These expenses are those incurred by us on your behalf to effectively
service your account on a day-to-day basis. We will only charge for
expenses that can be directly identified to costs associated with your
specific trust account, e.g. wires at $20.00 each, excessive faxes,
postage and travel costs to attend closing and/or meetings.
This proposal is subject to State Street's review of all documents and
acceptance of a definitive agreement. Should the characteristics of the Escrow
Agent Services differ materially from the assumptions stated in the request for
proposal letter dated September 4, 1997, State Street reserves the right to
adjust its fee proposal. This proposal is a confidential document and should not
be duplicated and/or distributed.
In closing, State Street recognizes our role in providing our customers with
value-added trust services. We accept the serious responsibility we have to
support the Corporations so that the Corporations, in turn, can meet its goals
under the Escrow Agreement. Should you have any questions regarding our services
or the fees quoted herein, please do not hesitate to contact me.
Very truly yours,
Jenni Minardi
Vice President
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
INVESTMENT FEES:
Securities delivered book-entry $ 65.00 per Purchase
Securities delivered physical $ 100.00 per Purchase
Securities sold $ 65.00 per Sale (Prior to maturity)
Securities sold physical $ 100.00 per Sale (Prior to maturity)
Competitive Bid - 3 brokers $ 25.00 per Bid Process
Money Market Funds $ 40.00 per Purchase and per Sale
Reinvestment of income $ 20.00 per receipt
Reconcilement of Confirmation Statements $ 25.00 per Statement
Money Market Funds with compensating fees to SSB No Charge
Investment Contracts/Flexible Repurchase Agreements:
Document review - No Collateral $ 750.00 (includes counsel review)
Document review - Collateral $ 1,000.00 (includes counsel review)
Income verification, collection and reporting $ 25.00 per Posting
Maintenance of Collateral $ 25.00 per Delivery or Receipt
Mark to Market $ 500.00 Annually per account
Forward Float Contract $ 750.00 (includes counsel review)
Legal Opinion, if required $ 1,000.00
WIRE FEE: (Investment-related wires at no charge) $ 20.00 each
- --------
UCC FEES:
Copying $ 5.00
CSC Networks/Prentice hall $ 100.00
MICROFICHE COPYING FEE: $ 2.00 per Page ($25 Minimum)
- ----------------------
ACCOUNTING STATEMENTS: (Two recipients at no charge) $ 5.00 per Recipient (in excess of
- --------------------- two)
FAX: (Five pages at no charge) $ 2.00 per Page (in excess of five)
- ---
T-1 PREPARATION: $ 500.00
- ---------------
AGREEMENT COPYING: $ .20 per Page ($25 Minimum)
- -----------------
AUDIT CONFIRMATION: $ 25.00
- ------------------
POSTAGE:
Bondholder Notices At cost
Monthly Statements: General Obligation Bond Issues $ 15.00 annually per recipient
All Others $ 30.00 annually per recipient
FUND DISBURSEMENT FEE: $ 15.00 per Requisition, plus
- ---------------------
$ 3.75 per Payee
DIC BOOK-ENTRY TENDERED BONDS: $ 50.00 per Bond tendered
- -----------------------------
NON-BOOK ENTRY REGISTRATION FEE:
Issuance and Transfer $ $ 2.00 each
Maintenance of Registered Holder Accounts $ 6.00 per Account
Interest Payment $ .50 per Check issued
Principal Payment: At maturity $ 2.50 per Certificate
Call prior to maturity $ 3.50 per Certificate
PREPARATION OF NOTICE AND LOTTERY CALLS:
Book-Entry issue No Charge
Non-Book-Entry issue $ 500.00 per Notice
BONDHOLDERS LIST $ 60.00 per List
- ----------------
EXTRAORDINARY SERVICES: Billed at Cost
OUT-OF-POCKET EXPENSE: Billed at Cost Dated 08/07/97
</TABLE>
<PAGE>
Riviera Holdings Corporation
2901 Las Vegas Boulevard South
Las Vegas, NV 89109
Investor Relations: (800) 362-1460
(702) 794-9442
(702) 734-5110
TRADED: AMEX - RIV
AT THE COMPANY: AT FRB SAN FRANCISCO:
Duane Krohn, Treasurer and CFO Lynn Chaffier (analysts)
(702) 794-9527 Frank Thorsberg (media)
John Wishon, Secretary and (415) 986-1591
General Counsel Betsy Truax (general information)
(702) 794-9504 (208) 233-8323
FOR IMMEDIATE RELEASE:
TUESDAY, SEPTEMBER 16, 1997
RIVIERA HOLDINGS CORPORATION ANNOUNCES AGREEMENT TO BE ACQUIRED
LAS VEGAS, NV -- September 16, 1997 -- Riviera Holdings Corporation (AMEX:RIV)
announced today that it has entered into an Agreement and Plan of Merger with
R&E Gaming Corp., an entity controlled by Allen E. Paulson, pursuant to which
Riviera would be acquired by R&E Gaming and Riviera shareholders would receive
$15 per share in cash for each share of Riviera common stock owned by them, plus
an amount equal to 7% per annum from June 1. 1997 to the date of the closing.
The transaction would value the Riviera, including its $175 million of
indebtedness, at approximately $250 million. Following completion of the
transaction, Riviera will be wholly owned by R&E Gaming.
As part of its review of the transaction, Riviera's Board of Directors
received an opinion from its financial advisor, Ladenburg, Thalmann & Co., Inc.,
as to the fairness, from a financial point of view, of the consideration to be
received in the merger by Riviera's shareholders.
In connection with the execution of the merger agreement, shareholders
owning approximately 56% of the outstanding, fully diluted Riviera shares have
granted R&E Gaming an option to purchase their shares at the same price that all
shareholders would receive in the merger and have agreed to vote in favor of the
transaction.
-more-
<PAGE>
Riviera Holdings Corporation
Page 2
Closing of the merger is subject to a number of conditions, including
(i) approval by the holders of at least 60% of the Riviera shares (excluding the
shares owned by Mr. Paulson or his affiliates) at a meeting of shareholders
scheduled for November 19, 1997, and (ii) the receipt of all necessary approvals
by the Nevada Gaming Authorities. There can be no assurance that the conditions
to the merger will be met or that the merger will be consummated.
William L. Westerman, Chief Executive Officer of Riviera, said, "The
Riviera Board of Directors believes that the R&E Gaming transaction provides
shareholders with significant value and is in the best interests of our
shareholders. We are pleased to have reached this definitive agreement with Mr.
Paulson."
R&E Gaming also announced today that it has entered into agreements to
acquire Elsinore Corporation, the owner of the Four Queens Hotel and Casino in
Las Vegas and which is managed by Riviera.
Allen E. Paulson, Chairman of R&E Gaming, stated, "We are delighted to
have entered into today's agreements to acquire Riviera and Elsinore
Corporation. We believe that these transactions will serve as the cornerstones
to the creation of a multi-jurisdictional gaming enterprise encompassing a large
market. Over the past several months, we have been impressed by the Riviera
management team and the hard work and enthusiasm of Riviera's employees. We look
forward to working together and providing them the necessary support to continue
their success."
Jefferies & Company, Inc. has acted as financial advisor to R&E Gaming.
Riviera Holdings Corporation operates the Riviera Hotel and Casino on
"The Strip" in Las Vegas, Nevada, and through its wholly-owned subsidiary,
Riviera Gaming Management, operates the Four Queens Hotel and Casino in downtown
Las Vegas. Riviera is also constructing a casino in Black Hawk, Colorado.
For more information on Riviera, dial 1-800-PRO-INFO, code RIV.
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