SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Amendment No. 2)
Under the Securities Exchange Act of 1934
RIVIERA HOLDINGS CORPORATION
----------------------------
(Name of Issuer)
Common Stock, par value $.001 per share
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(Title of Class of Securities)
769627100
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(CUSIP Number)
Mr. Allen E. Paulson
Del Mar Country Club
6001 Clubhouse Drive
Rancho Santa Fe, California 92067
(619) 759-5990
--------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
with a copy to:
Brian J. McCarthy, Esq.
Skadden, Arps, Slate, Meagher & Flom
300 S. Grand Avenue
Los Angeles, California 90071
(213) 687-5070
September 22, 1997
-----------------------------
(Date of Event which Requires
Filing of this Statement)
If the filing person has previously filed a statement on Schedule
13G to report the acquisition which is the subject of this
Schedule 13D, and is filing this schedule because of Rule 13d-
1(b)(3) or (4), check the following:
( )
Check the following box if a fee is being paid with this
Statement:
( )
CUSIP No. 769627100 13D
(1) NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS:
Allen E. Paulson
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(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP:
(a) ( )
Not applicable (a) ( )
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(3) SEC USE ONLY
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(4) SOURCE OF FUNDS
Not Applicable
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(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e)
Not applicable. ( )
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(6) CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
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: (7) SOLE VOTING POWER
:
: 463,655
:------------------------------
NUMBER OF SHARES BENEFICIALLY : (8) SHARED VOTING
OWNED BY EACH REPORTING :
PERSON WITH : 0
:------------------------------
:
: (9) SOLE DISPOSITIVE
:
: 463,655
:------------------------------
:(10) SHARED DISPOSITIVE
:
: 0
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(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING
PERSON:
463,655
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(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11
EXCLUDES CERTAIN SHARES ( )
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(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
9.4%
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(14) TYPE OF REPORTING PERSON
IN
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RIVIERA HOLDINGS CORPORATION
SCHEDULE 13D
This Amendment No. 2 amends and supplements the
Statement on Schedule 13D (the "Schedule 13D") dated May 7, 1997,
relating to the shares of common stock (the "Common Stock"), par
value $.001 per share, of Riviera Holdings Corporation, a Nevada
corporation (the "Company"), and is being filed pursuant to Rule
13d-2 under the Securities Exchange Act of 1934, as amended.
Unless otherwise indicated, each capitalized term used
but not otherwise defined herein shall have the meaning assigned
to such term in the Schedule 13D. The information set forth in
the Exhibits hereto is hereby expressly incorporated herein by
reference and the responses to each item of this Schedule 13D are
qualified in their entirety by the provisions of such exhibits.
ITEM 4. PURPOSE OF TRANSACTION
Item 4 is amended and supplemented as follows:
R&E Gaming Corp., a Delaware corporation wholly owned
by the Reporting Person ("Gaming"), Riviera Acquisition Sub,
Inc., a Nevada corporation and a wholly owned subsidiary of
Gaming ("RAS"), and the Company, entered into an Agreement and
Plan of Merger, dated as of September 15, 1997 (the "Merger
Agreement"), pursuant to which RAS would be merged with and into
the Company (the "Merger"). The Merger is subject to a number of
conditions, including but not limited to, shareholder approval
and the receipt of regulatory approvals including, all necessary
gaming approvals. Upon consummation of the Merger, each share of
Common Stock issued and outstanding would be converted into the
right to receive $15.00 in cash per share, plus an amount equal
to the daily portion of the accrual on $15.00 at 7% compounded
annually from June 1, 1997 to the effective date of the Merger,
and the Company would be wholly owned by Gaming. The Merger
Agreement is incorporated herein by reference and attached hereto
as Exhibit A.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATION-
SHIPS WITH RESPECT TO SECURITIES OF THE ISSUER
Item 6 is amended and supplemented as follows:
On September 15, 1997 Gaming, RAS and the Company
entered into the Merger Agreement. See Item 4 herein and Exhibit
A hereto.
In connection with the execution of the Merger
Agreement, Gaming entered into an Option and Voting Agreement,
dated as of September 15, 1997 (the "Option Agreement"), by and
among Morgens, Waterfall, Vintiadis & Company, Inc. ("Morgens,
Waterfall"), Keyport Life Insurance ("Keyport") and SunAmerica
Life Insurance Company ("SunAmerica" and, together with Morgens,
Waterfall and Keyport, the "Option Sellers"), pursuant to which
Gaming was granted an option to purchase all of the shares of
Common Stock held by each of the Option Sellers (the "Option"),
totalling approximately 56% of the Common Stock issued and
outstanding, at a price of $15.00 in cash per share plus an
amount equal to the daily portion of the accrual on $15.00 at 7%
compounded annually from June 1, 1997 to the effective date of
the Merger. Exercise of the Option is subject to the
satisfaction of certain conditions, including the receipt of all
necessary gaming approvals.
On September 22, 1997, the Reporting Person delivered
shares of Common Stock pursuant to a Pledge Agreement, dated as
of September 18, 1997 (the "Pledge Agreement"), made by the
Reporting Person in favor of Madeleine L.L.C., a New York limited
liability company ("Madeleine"), which provides for, among other
things, the pledge to Madeleine of, and the grant to Madeleine of
a security interest in, 463,655 shares of Common Stock (the
"Pledge") as security for a term loan made by Madeleine to the
Reporting Person.
The Merger Agreement, the Option Agreement and the
Pledge Agreement are incorporated herein by reference and a copy
of each is attached hereto as Exhibit A, B and C, respectively.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Item 7 is amended and supplemented as follows:
Exhibit A. Agreement and Plan of Merger, dated as
of September 15, 1997, by and among R&E
Gaming Corp., Riviera Acquisition Sub,
Inc. and Riviera Holdings Corporation.
Exhibit B. Option and Voting Agreement, dated as of
September 15, 1997, by and among R&E
Gaming Corp., Morgens, Waterfall,
Vintiadis & Company, Inc., Keyport Life
Insurance Company and SunAmerica Life
Insurance Company
Exhibit C. Pledge Agreement, dated as of September
18, 1997, by the Reporting Person in
favor of the Lender.
SIGNATURE
After reasonable inquiry and to the best of my
knowledge and belief, I certify that the information set forth in
this statement is true, complete and correct.
September 24, 1997
----------------------
Date
/s/ Allen E. Paulson
----------------------
Signature
Allen E. Paulson
EXHIBIT A
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
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
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 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.
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.
(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 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.
(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.
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.
(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 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 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.
(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 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 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 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, 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" 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;
(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.
(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, continuations, 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 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 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.
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 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 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.
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;
(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 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 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.
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 "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 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 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 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, 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 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 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.
(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.
(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;
(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.
(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.
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 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 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 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.
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:
EXHIBIT B
OPTION AND VOTING AGREEMENT
BY
AND
AMONG
R&E GAMING CORP.,
AS PURCHASER,
AND
MORGENS, WATERFALL, VINTIADIS & COMPANY, INC.,
KEYPORT LIFE INSURANCE COMPANY
SUNAMERICA LIFE INSURANCE COMPANY,
ON BEHALF OF CERTAIN INVESTMENT ACCOUNTS,
AS SELLERS
DATED AS OF SEPTEMBER 15, 1997
OPTION AND VOTING AGREEMENT
OPTION AND VOTING AGREEMENT (this
"Agreement"), dated as of September 15, 1997, by and among
R&E Gaming Corp., a Delaware corporation (together with its
assignees or designees, the "Purchaser"), Morgens,
Waterfall, Vintiadis & Company, Inc., on behalf of certain
investment accounts identified on the signature pages hereto
("Morgens, Waterfall"), Keyport Life Insurance Company,
("Keyport"), and SunAmerica Life Insurance Company, an
Arizona corporation ("SunAmerica," and together with
Morgens, Waterfall and Keyport, the "Sellers").
WHEREAS, concurrently with the execution and
delivery of this Agreement, the Purchaser is entering into
an Agreement and Plan of Merger (the "Riviera Merger
Agreement") with Riviera Acquisition Sub, Inc., a Nevada
corporation and a wholly owned subsidiary of the Purchaser
("Acquisition Sub"), and Riviera Holdings Corporation, a
Nevada corporation ("RHC"), pursuant to which the
Acquisition Sub shall merge with and into RHC (the "Riviera
Merger"), upon the terms and conditions set forth therein;
WHEREAS, each Seller desires that the
Purchaser, Acquisition Sub and RHC enter into the Riviera
Merger Agreement;
WHEREAS, as partial consideration for the
grant by the Sellers of the option hereunder, the Purchaser
agrees to pay to each Seller an amount equal to 20% of the
Purchase Price (as defined in Section 1.2(a) hereof) for the
shares of common stock, par value $.001 per share, of RHC
(the "Common Stock") owned by such Seller, if the
transactions contemplated by the Riviera Merger Agreement
are not consummated, other than as a result of certain
circumstances specified herein;
WHEREAS, in order to ensure payment of the
obligation described in the immediately preceding paragraph,
concurrently with the execution and delivery of this
Agreement and the Riviera Merger Agreement, the Purchaser
has delivered a letter of credit in the face amount of
$3,817,680 to Morgens, Waterfall, a letter of credit in the
face amount of $2,571,480 to Keyport, and a letter of credit
in the face amount of $2,285,760 to SunAmerica, each of
which is substantially in the form of Exhibit A hereto
(collectively, the "Letters of Credit"), each of which shall
provide that it may be drawn on in the event the
transactions contemplated by the Riviera Merger Agreement
are not consummated, other than as a result of certain
circumstances as specified herein;
WHEREAS, Morgens, Waterfall beneficially owns
1,272,560 shares of Common Stock, which shares represent
approximately 25.9% of the issued and outstanding shares of
Common Stock, Keyport beneficially owns 857,160 shares of
Common Stock, which Shares represent approximately 17.5% of
the issued and outstanding shares of Common Stock and
SunAmerica beneficially owns 761,920 shares of Common Stock,
which shares represent approximately 15.5% of the issued and
outstanding shares of Common Stock (such shares of Common
Stock owned by the Sellers being the "Shares"); and
WHEREAS, in consideration for entering into
the Riviera Merger Agreement, the Sellers desire to (i)
grant to the Purchaser options to purchase, from the
Sellers, all (but not less than all) of the Shares held by
them as set forth above upon the terms and subject to the
conditions set forth herein and (ii) vote the Shares in the
manner set forth herein;
NOW, THEREFORE, in consideration of the
foregoing premises and the agreements 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
GRANT OF OPTION
SECTION 1.1 Grant of Option. Upon the terms
and subject to the conditions set forth herein, each Seller
hereby grants to the Purchaser an irrevocable option
(individually, a "Purchase Option" and, together with each
Purchase Option granted by each of the other Sellers, the
"Purchase Options") to purchase the Shares owned by such
Seller.
The Purchase Options shall be exercisable, in
whole and not in part, by written notice (the "Exercise
Notice") by the Purchaser delivered to each Seller, at any
time after the date hereof, but not later than the date on
which the Riviera Merger Agreement is terminated pursuant to
Section 6.1(c) thereof or, if the Riviera Merger Agreement
has otherwise been terminated, then June 1, 1998 (such
period being hereinafter referred to as the "Exercise
Period"). No one Purchase Option shall be exercised
individually unless all Purchase Options are exercised. In
addition, in the event the Riviera Merger is consummated,
the Purchase Options shall terminate automatically, the
Shares shall be converted into the right to receive the
Merger Consideration set forth in the Riviera Merger
Agreement; it being understood that the Riviera Merger
Agreement provides for a reduction of the consideration
payable, upon consummation of the Riviera Merger, to each of
the Sellers on account of any interest previously paid to
the Sellers pursuant to Section 1.2(b) hereof. Each of the
Sellers hereby consents to the reduction of the
consideration payable to them under the terms of the Riviera
Merger Agreement by the amount of the interest paid to them
pursuant to Section 1.2(b) hereof.
Upon exercise of the Purchase Options, subject
to the conditions contained in Article V hereof, each of the
Sellers shall sell, assign, transfer, convey and deliver to
the Purchaser, and the Purchaser shall purchase and accept
from each such Seller at the closing (the "Closing") to be
held as soon as possible after 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"), such Seller's rights, title and interest in
and to the Shares in exchange for the Purchase Price (as
defined below).
SECTION 1.2 Purchase Price.
(a) Upon exercise of the Purchase Options,
the Purchaser agrees to pay to each of the Sellers, on the
Closing Date, in consideration for the purchase of the
Shares, an aggregate amount equal to $15 per Share, (the
"Initial Purchase Price" and, when adjusted as provided in
this Section 1.2, the "Purchase Price"), for an aggregate
amount of $43,374,600 payable as follows: (i) $19,088,400
shall be paid to Morgens, Waterfall, (ii) $12,857,400 shall
be paid to Keyport and (iii) $11,428,800 shall be paid to
SunAmerica, in addition to any accrued but unpaid interest
payments required by Section 1.2(b).
(b) During the period commencing on June 1,
1997 and ending on the date immediately preceding the
earlier of the Closing Date or the date this Agreement is
terminated in accordance with its terms, the Purchaser
agrees to pay to each of the Sellers their pro rata portion,
based on the number of Shares owned, of the daily interest
of $8,318.42 per day, which represents interest calculated
at 7% per annum on the Initial Purchase Price for all
Shares, payable monthly in arrears no later than 5 days
after the date of each monthly anniversary of such
execution, unless otherwise provided in this Section 1.2(b).
The first payment to be made by the Purchaser shall be made
on the date of execution and shall consist of all amounts
due and payable until such date under this Section 1.2(b).
All payments required to be made in accordance with this
Section 1.2(b) shall be made by wire transfer of immediately
available funds to such account as each Seller shall have
designated on Exhibit B hereto.
(c) If, between the date of this Agreement
and the Closing Date, the number of issued and outstanding
shares of Common Stock shall have been changed (or RHC shall
have declared a record date with respect to a prospective
change of the Common Stock) into a different number of
shares or a different class of shares by reason of any stock
dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares, this Agreement
(including the terms "Share" and "Common Stock") will be
deemed to relate to all securities issued with respect to
the Common Stock, and the Purchase Price shall be
correspondingly adjusted to reflect such stock dividend,
subdivision, reclassification, recapitalization, split,
combination or exchange of shares.
(d) If, between the date of this Agreement
and the Closing Date, any dividend or other distribution
(other than a stock dividend, which shall require the
adjustment set forth in clause (c) above) is declared or
paid upon the Common Stock (whether in cash, property or
securities), the Purchase Price shall be reduced by the per
share amount of such dividend or distribution (in the case
of non-cash dividends or distributions, by an amount equal
to the fair market value thereof).
(e) If, between the date of this Agreement
and the Closing Date, RHC or any of its subsidiaries shall
repurchase or otherwise acquire any shares of Common Stock
(other than shares issued pursuant to warrants, options,
convertible securities and other rights to acquire shares of
Common Stock referred to in Section 2.2 of the Riviera
Merger Agreement or issued in accordance with Section 4.1
thereof), and the per share consideration paid by RHC or its
subsidiaries (in the case of non-cash consideration, valued
of the fair market value thereof) exceeds the Purchase
Price, the total Purchase Price for all Shares shall be
reduced to the price determined by dividing (i) the
difference between (A) the number of shares of Common Stock
outstanding immediately prior to such repurchase or
redemption multiplied by the Purchase Price in effect
immediately prior to such purchase or redemption minus (B)
the consideration, if any, paid by RHC for such repurchase
or redemption, by (ii) the total number of shares of Common
Stock outstanding immediately after such repurchase or
redemption.
SECTION 1.3 Termination of Riviera Merger
Agreement.
(a) The Sellers shall be entitled to receive,
as partial consideration for the grant by the Sellers of the
Purchase Options to the Purchaser hereunder, an amount equal
to $3,817,680 (in the case of Morgens, Waterfall),
$2,571,480 (in the case of Keyport) and $2,285,760 (in the
case of SunAmerica), if (A) the Riviera Merger Agreement is
terminated (except pursuant to a Non-Payment Termination
Event (as defined herein) or (B) the Riviera Merger does not
occur in accordance with the terms thereof on or before
April 2, 1998 (or, if the termination date of the Riviera
Merger Agreement is extended in accordance with
Section 6.1(c) thereof, June 2, 1998) for any reason other
than the occurrence of a Non-Payment Termination Event,
provided that the Sellers shall be entitled to the
consideration described above if the Riviera Merger is not
consummated as a result of the breach of the Riviera Merger
Agreement by Purchaser, Acquisition Sub, or Allen E. Paulson
of any covenants or warranties made by or about them in the
Riviera Merger Agreement; and provided further, in any
event, that no Seller shall be entitled to such compensation
if the Riviera Merger Agreement is not consummated as a
result of the breach of this Agreement by such Seller. 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 Section 6.1(c) because of the failure of
Purchaser, Acquisition Sub 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.
(b) In order to ensure payment of the
obligation described in Section 1.3(a) hereof, concurrently
with the execution and delivery of this Agreement, the
Purchaser shall deliver a Letter of Credit in the face
amount of $3,817,680 to Morgens, Waterfall, a Letter of
Credit in the face amount of $2,571,480 to Keyport and a
Letter of Credit in the face amount of $2,285,760 to
SunAmerica. In the event that any Seller shall be entitled
to receive compensation pursuant to Section 1.3(a) hereof,
such Seller shall be entitled to receive demand payment
under the Letter of Credit issued to such Seller.
(c) In the event that the Riviera Merger
Agreement is terminated pursuant to a Non-Payment
Termination Event other than Sections 6.1(a) or 6.1(c)
thereof, each Seller shall immediately pay to the Purchaser
an amount equal to all payments received by such Seller
pursuant to this Agreement (each such payment, an "Option
Payment"); provided, that the Sellers shall be entitled to
retain such payments if either (i) all Shares shall be
purchased pursuant to this Agreement or (ii) the Riviera
Merger is not consummated as a result of the breach by the
Purchaser, Acquisition Sub, or Allen E. Paulson of any
covenants or warranties made by or about them in the Riviera
Merger Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.1 Representations and Warranties
of the Sellers. Each of the Sellers severally and not
jointly represents and warrants to the Purchaser as follows:
(a) Organization and Standing. Such Seller
is duly organized, validly existing and in good standing
under the laws of its state of organization, and has all
requisite power and authority to enter into and perform its
obligations under this Agreement.
(b) Authority. The execution and delivery of
this Agreement, and the performance by such Seller of its
obligations hereunder, have been duly authorized by all
necessary action on the part of such Seller and the owners
of the investment accounts, if any, as to which it is
acting. This Agreement has been duly executed and delivered
by such Seller and, assuming the due execution and delivery
hereof by the Purchaser and assuming that approval of this
Agreement by RHC remains effective, this Agreement
constitutes a valid and binding obligation of such Seller,
enforceable against such Seller in accordance with its
terms; provided, however, that Section 4.7 hereof shall be
enforceable in any event.
(c) The Stock. Such Seller is the record and
beneficial owner of, and has good and valid title to, the
number of Shares recited to be owned by it in the recitals
hereof, free and clear of all liens, encumbrances, claims,
charges, security interests, pledges, restrictions,
assessments and limitations (including voting limitations)
of every kind whatsoever (collectively, "Liens"). Assuming
that approval of this Agreement by RHC remains effective,
such Seller shall deliver to the Purchaser, and the
Purchaser will acquire, good and valid title in such Shares,
with full voting rights, free and clear of any Liens.
Except for this Agreement, there are no outstanding
warrants, subscriptions, rights (including preemptive
rights), options, calls, commitments or other agreements or
Liens to encumber, purchase or acquire any of the Shares of
such Seller or securities convertible into the Shares of
such Seller. Neither such Seller nor any of its affiliates
or associates (as such terms are defined in Rule 12b-2
promulgated under the Securities Exchange Act of 1934, as
amended, or the rules and regulations thereunder) holds
either of record or beneficially any securities or capital
stock of RHC or any of RHC's direct or indirect subsidiaries
other than such Seller's Shares.
(d) No Conflict. Assuming that approval of
this Agreement by RHC remains effective, the execution of
this Agreement and the consummation of the transactions
contemplated hereby will not require notice to, or the
consent of, any party to any contract, lease, agreement,
mortgage or indenture (each a "Contract") to which such
Seller is a party or by which it is bound, or the consent,
approval, order or authorization of, or the registration,
declaration or filing with, any governmental authority,
except for those (i) required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), if any, (ii) required by the Nevada Gaming Commission
(the "Gaming Commission"), the Nevada State Gaming Control
Board (the "Control Board"), the City of Las Vegas ("Las
Vegas") and the Clark County Liquor and Gaming Licensing
Board (the "CCB") (the Gaming Commission, the Control Board,
Las Vegas and the CCB are collectively referred to as the
"Gaming Authorities"), including, without limitation,
approvals under the Nevada Gaming Control Act, as amended,
and the rules and regulations promulgated thereunder (the
"Nevada Act") or (iii) set forth on Schedule 2.1(d) hereto.
Assuming that the notices, consents and approvals referred
to in the preceding sentence have been given, made or
obtained and remain effective, the execution, delivery and
performance by such Seller of this Agreement and the
consummation of the transactions contemplated hereby will
not (i) violate any law, statute, ordinance, regulation,
rule or order of any Federal or Nevada authority
(collectively, "Laws"), (ii) result in a breach or violation
of any provision of, constitute a default under, or result
in the termination of, or an acceleration of indebtedness or
creation of any Lien under, any material contract to which
such Seller is a party or by which it is bound or (iii)
conflict with or violate any provision of the organizational
documents of such Seller.
(e) Brokers, Finders, etc. Such Seller is
not a party to any agreement or understanding that would
make it subject to any valid claim of any broker, investment
banker, finder or other intermediary in connection with the
transactions contemplated by this Agreement.
SECTION 2.2 Representations and Warranties
of the Purchaser. The Purchaser hereby represents and
warrants to each of the Sellers as follows:
(a) Organization and Standing. The Purchaser
is duly organized, validly existing and in good standing
under the laws of its state of incorporation, and has all
requisite power and authority to enter into and perform its
obligations under this Agreement.
(b) Authority. The execution and delivery of
this Agreement, and the performance by the Purchaser of its
obligations hereunder, have been duly authorized by all
necessary action on the part of the Purchaser. This
Agreement has been duly executed and delivered on behalf of
the Purchaser and, assuming the due execution and delivery
hereof by the Sellers and assuming that approval of this
Agreement by RHC remains effective, this Agreement
constitutes a valid and binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its
terms.
(c) No Conflict. The execution of this
Agreement and the consummation of the transactions
contemplated hereby will not require notice to, or the
consent of, any party to any Contract to which the Purchaser
or any of its affiliates is a party or by which any of them
is bound, or the consent, approval, order or authorization
of, or the registration, declaration or filing with, any
governmental authority, except for (i) those required under
the HSR Act, if any, (ii) approvals, as necessary, by the
Gaming Authorities, including, without limitation, approvals
under the Nevada Act, (iii) approval by the RHC Board of
Directors (which the Sellers represent has been granted);
and (iv) set forth on Schedule 2.2(c) hereto. Assuming that
the notices, consents and approvals referred to in the
preceding sentence have been given, made or obtained and
remain effective, the execution, delivery and performance by
the Purchaser of this Agreement and the consummation of the
transactions contemplated hereby will not (i) violate any
Laws, (ii) result in a breach or violation of any provision
of, or constitute a default under, any contract to which the
Purchaser is a party or by which it is bound or (iii)
conflict with any provision of the certificate of
incorporation or bylaws of the Purchaser.
(d) Purchase For Investment. Upon exercising
the Purchase Options, the Purchaser represents and warrants
that it intends to acquire the Shares for its own account,
not as a nominee or agent, and not with a view to, or for
offer or resale in connection with, any distribution thereof
in violation of the Securities Act of 1933, as amended, and
the rules and regulations thereunder (the "Securities Act"),
without prejudice, however, to the Purchaser's right at all
times to sell or otherwise dispose of all or any part of
said Shares pursuant to an effective registration statement
under the Securities Act and any applicable state securities
laws, or under an exemption from registration available
under the Securities Act and such other applicable state
securities laws. The Purchaser represents and warrants that
it (i) is knowledgeable, sophisticated and experienced in
business and financial matters, and fully understands the
limitations on transfer described above, and (ii) is an
"accredited investor" as such term is defined in Rule 501(a)
of Regulation D under the Securities Act.
(e) No Brokers. Except for Jefferies & Co.,
Inc. whose fee will be paid by the Purchaser, neither the
Purchaser nor Acquisition Sub 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 or the Riviera
Merger Agreement.
ARTICLE III
VOTING AGREEMENTS
SECTION 3.1 Merger. Each Seller severally
agrees and covenants to each party hereto that at any
meeting of stockholders of RHC called to vote upon the
Riviera Merger and the Riviera Merger Agreement or at any
adjournment thereof or in any other circumstances upon which
a vote, consent or other approval with respect to the
Riviera Merger and the Riviera Merger Agreement is sought,
such Seller shall cause its Shares to be present for quorum
purposes and to vote (or caused to be voted) its Shares in
favor of the terms thereof and each of the other
transactions contemplated by the Riviera Merger Agreement.
SECTION 3.2 Competing Transaction. Each
Seller severally agrees and covenants to each party hereto
that at any meeting of stockholders of RHC or at any
adjournment thereof or in any other circumstances upon which
their vote, consent or other approval is sought, such Seller
shall vote (or cause to be voted) its Shares against (i) any
merger agreement or merger (other than the Riviera Merger
Agreement and the Riviera Merger), consolidation,
combination, sale of substantial assets, sale or issuance of
securities of RHC or its subsidiaries, reorganization, joint
venture, recapitalization, dissolution, liquidation or
winding up of or by RHC or its subsidiaries and (ii) any
amendment of RHC's Second Amended and Restated Articles of
Incorporation (the "Articles of Incorporation") or Bylaws or
other proposal or transaction involving RHC or any of its
subsidiaries which amendment or other proposal or
transaction would in any manner impede, frustrate, prevent
or nullify or result in a breach of any covenant,
representation or warranty or any other obligation or
agreement of RHC under or with respect to, the Riviera
Merger, the Riviera Merger Agreement or any of the other
transactions contemplated by the Riviera Merger Agreement or
by this Agreement (each of the foregoing in clause (i) or
(ii) above, a "Competing Transaction").
ARTICLE IV
COVENANTS
SECTION 4.1 Exclusive Dealing. Each Seller
agrees that it will not, directly or indirectly, through any
director, officer, agent, partner, shareholder, affiliate,
representative or otherwise:
(a) solicit, initiate, encourage submission
of offers or proposals from, or participate in any
discussions, negotiations, agreements, arrangements or
understandings with, any person in respect of a Competing
Transaction; or
(b) participate in any discussions or
negotiations with, or furnish or afford access to any
information to, any other person regarding a Competing
Transaction, or otherwise cooperate in any manner with, or
assist or participate in, facilitate or encourage, any
effort or attempt by any other person to engage in any
Competing Transaction.
SECTION 4.2 No Sale. Without limiting the
foregoing, each Seller agrees that it will not, directly or
indirectly, (i) sell, transfer, assign, pledge, hypothecate
or otherwise encumber or dispose of, (ii) give a proxy with
respect to, or (iii) limit the right to vote in any manner,
any of the Shares owned by it, except pursuant to the
express terms of this Agreement.
SECTION 4.3 Further Assurances. From time
to time, whether before, at, or after the Closing, each
party hereto agrees to execute and deliver, or cause to be
executed and delivered, such additional instruments,
certificates and other documents, and to take such other
action, as any other party hereto may reasonably require in
order to carry out the terms and provisions of this
Agreement and the transactions contemplated hereby
(including, without limitation, voting the Shares in favor
of any such transaction).
SECTION 4.4 Expenses. All reasonable actual
out of pocket costs and expenses, including reasonable legal
fees incurred solely and directly in connection with the
negotiation, execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby
shall be paid by the Purchaser upon receipt of reasonably
detailed statements or invoices therefor.
SECTION 4.5 Publicity. Each Seller and the
Purchaser agree that, prior to the Closing, no public
release or announcement concerning this Agreement shall be
issued by any such party without the prior written consent
(which consent shall not be unreasonably withheld) of the
other parties hereto, except as such release or announcement
may be required by law (in which event the other parties
hereto shall have reasonable opportunity to comment on the
form and content of the disclosure).
SECTION 4.6 Notice of Certain Events. Each
Seller and the Purchaser each agrees to notify each other
party hereto promptly of (a) any event or condition that,
with or without notice or lapse of time, would cause any of
the representations and warranties made by such party herein
to be no longer complete and accurate as of any date on or
before the Closing Date, (b) any failure, with or without
notice or lapse of time, on the part of such party to comply
with any of the covenants or agreements on its part
contained herein at any time on or before the Closing Date
or (c) the occurrence of any event, with or without notice
or lapse of time, that may make the satisfaction of any of
the conditions set forth in Section 5.1 hereof impossible or
unlikely.
SECTION 4.7 Excess Proceeds. Morgens,
Waterfall hereby acknowledges its satisfaction with the
price per Share provided herein and in the Riviera Merger
Agreement and, in recognition thereof, hereby agrees to pay
to the Purchaser an amount equal to 100% of the fair market
value of the net after tax proceeds per Share from any sale,
transfer or other disposition of its Shares (other than
pursuant to the Purchase Option, the Riviera Merger or the
transactions contemplated thereby) in excess of the Purchase
Price, if all of the following conditions are satisfied:
(i) such sale, transfer or other disposition
(x) occurs prior to the date which is 12
months subsequent to the date of the
termination of the Riviera Merger Agreement
pursuant to Sections 6.1(d)(iii), 6.1(d)(iv),
6.1(e)(iii), or 6.1(e) (iv) of the Riviera
Merger Agreement or (y) is effected pursuant
to an agreement or understanding, oral or
written, which is entered into prior to such
date;
(ii) Morgens, Waterfall shall have also sold,
transferred or disposed (including by way of
merger) of its shares of common stock in
Elsinore Corporation, a Nevada Corporation
("Elsinore"), for consideration equal to or
greater than $3.16 per share, which sale,
transfer or other disposition of shares in
Elsinore (x) occurs prior to the date which is
12 months subsequent to the date of the
termination of the Riviera Merger Agreement
pursuant to Sections 6.1(d)(iii), 6.1(d)(iv),
6.1(e)(iii) or 6.1(e)(iv) of the Riviera
Merger Agreement or (y) is effected pursuant
to an agreement or understanding, oral or
written, which is entered into prior to such
date; and
(iii) the Purchaser was not able to exercise
the Purchase Options because of the failure to
satisfy (but not by waiver) the conditions set
forth in Sections 5.2(a), 5.2(b), 5.2(c), or
5.2(d) hereof.
Morgens, Waterfall shall make the payment referenced herein
within two business days of receipt of such proceeds.
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.1 Conditions Precedent to Exercise
of Purchase Options. The Purchaser shall have no obligation
to exercise the Purchase Options. Upon exercise of the
Purchase Options, the obligation of the Purchaser to
purchase the Shares shall be subject to the satisfaction or
(except in the case of Section 5.1(c)(i), which may not be
waived) waiver by the Purchaser on the Closing Date of each
of the following conditions precedent:
(a) HSR Act. The waiting period under the
HSR Act, if applicable, shall have expired or been
terminated.
(b) No Injunctions or Restraints. No
temporary restraining order or preliminary or permanent
injunction of any court or administrative agency of
competent jurisdiction prohibiting the transactions
contemplated by this Agreement, the Riviera Merger
Agreement, the Agreement and Plan of Merger, by and among
the Purchaser, Elsinore Acquisition Sub, Inc., a Nevada
corporation, and Elsinore, or the Option and Voting
Agreement by and between the Purchaser and Morgens,
Waterfall with respect to Elsinore, shall be in effect or
shall be threatened.
(c) Consents. All consents, approvals,
authorizations and waivers from third parties and
governmental and regulatory authorities required or
advisable to consummate the transactions contemplated hereby
(the "Approvals") shall have been obtained before the
Closing Date and, in the case of clauses (ii) and (iii)
below, before the execution of this Agreement and shall not
have expired or been rescinded, including the following:
(i) All necessary gaming approvals,
including, without limitation, licensing or
finding of suitability of the Purchaser and
approval of a change of control of RHC by the
Gaming Authorities;
(ii) Waiver by the Board of Directors of RHC
of any voting restrictions under the Articles
of Incorporation that are applicable to a
purchaser of greater than ten percent of the
issued and outstanding shares of Common Stock;
and
(iii) All approvals and waivers necessary to
exempt the Purchaser for purposes of the
transactions contemplated hereby from
applicable merger moratorium statutes and
control share acquisition statutes, including,
without limitation, Nevada Revised Statutes
Sections 78.411-.444 and 78.378-.3793;
(d) Representations and Warranties. The
representations and warranties of each Seller set forth in
this Agreement shall be true and correct in all material
respects on and as of the Closing Date, as though made on
and as of the Closing Date (and by delivery of the Shares
each Seller shall be deemed to affirm the satisfaction of
this condition).
(e) Performance of Obligations of Sellers.
Each Seller shall have performed all obligations required to
be performed by it under this Agreement on or prior to the
Closing Date (and by delivery of the Shares each Seller
shall be deemed to affirm the satisfaction of this
condition).
(f) Death and Disability. There shall not
have occurred the death or the Disability of Mr. Allen E.
Paulson. As used herein, "Disability" 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 the Purchaser 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
the Purchaser and the Sellers cannot agree, such question
shall be determined by a qualified, independent physician
selected by RHC and approved by the Purchaser and the
disputing 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.
(g) No Violation of Law. The consummation of
the Purchase Options shall not constitute a violation of any
Laws.
SECTION 5.2 Conditions Precedent to the
Sellers' Obligation. The obligation of each of the Sellers
to sell, assign, transfer, convey and deliver the Shares
owned by it or the investment accounts it manages, as
applicable, upon exercise of the Purchase Options by the
Purchaser shall be subject to the satisfaction or (except in
the case of Sections 5.2(a) and 5.2(c), which may not be
waived), waiver on the Closing Date of each of the following
conditions precedent:
(a) HSR Act. The waiting period under the
HSR Act, if applicable to the Purchaser, shall have expired
or been terminated.
(b) No Injunctions or Restraints. No
temporary restraining order or preliminary or permanent
injunction of any court or administrative agency of
competent jurisdiction prohibiting the transactions
contemplated by this Agreement shall be in effect.
(c) Consents. All Approvals shall have been
obtained and shall not have expired or been rescinded,
including those set forth in Section 5.1(c).
(d) No Violation of Law. The consummation of
the Purchase Options shall not constitute a violation of any
Laws.
(e) Representations and Warranties. The
representations and warranties of the Purchaser set forth in
this Agreement shall be true and correct in all material
respects on and as of the Closing Date, as though made on
and as of the Closing Date, except as otherwise contemplated
by this Agreement (and by its acceptance of the Shares, the
Purchaser shall be deemed to reaffirm the accuracy of such
representations and warranties).
(f) Performance of Obligations of the
Purchaser. The Purchaser shall have performed all
obligations required to be performed by it under this
Agreement on or prior to the Closing Date (and by its
acceptance of the Shares, the Purchaser shall be deemed to
affirm the satisfaction of this condition), including the
payment of the Purchase Price and all unpaid amounts, if any
payable under Section 1.2(b).
ARTICLE VI
TERMINATION AND AMENDMENT
SECTION 6.1 Termination. This Agreement
shall terminate without any further action on the part of
the Purchaser or any of the Sellers if (i) the Purchase
Options have been exercised and the Closing has occurred,
(ii) the Purchase Options have not been exercised and either
(x) the Riviera Merger has been consummated or (y) the
Riviera Merger Agreement has been terminated pursuant to
Sections 6.1(a), (b), (c), (d), (e)(i) or (e)(ii) thereof or
(iii) June 1, 1998 shall have occurred.
SECTION 6.2 Effect of Termination. In the
event this Agreement shall have been terminated in
accordance with Section 6.1 of this Agreement, this
Agreement shall forthwith become void and have no effect,
except (i) to the extent such termination results from a
breach by any of the parties hereto of any of its
obligations hereunder (in which case such breaching party
shall be liable for all damages allowable at law and any
relief available in equity), (ii) as otherwise set forth in
any written termination agreement, if any, (iii) that
Sections 1.3 and 4.7 shall survive the termination of this
Agreement, and (iv) that the provisions of Sections 3.1 and
3.2 hereof shall survive the termination of the Riviera
Merger Agreement until the earlier of (A) the consent of the
Sellers to the termination of the provisions of Sections 3.1
and 3.2 hereof and (B) June 1, 1998.
SECTION 6.3 Amendment. This Agreement and
the Schedules and Exhibits hereto may not be amended except
by an instrument or instruments in writing signed and
delivered on behalf of each of the parties hereto. At any
time prior to the Closing Date, any party hereto which is
entitled to the benefits hereof may (a) extend the time for
the performance of any of the obligations or other acts of
any other party, (b) waive any inaccuracy in the
representations and warranties of any other party contained
herein, in any Schedule and Exhibit hereto, or in any
document delivered pursuant hereto, and (c), subject to
applicable law, waive compliance with any of the agreements
of any other party hereto or any conditions contained
herein. Any agreement on the part of any of the parties
hereto to any such extension or waiver (i) shall be valid
only if set forth in an instrument in writing signed and
delivered on behalf of each such party, and (ii) shall not
be construed as a waiver or extension of any subsequent
breach or time for performance hereunder.
ARTICLE VII
MISCELLANEOUS
SECTION 7.1 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 the Purchaser, to:
P.O. Box 9660
Rancho Santa Fe, CA 92067
Attention: Mr. Allen E. Paulson
Telephone: (619) 759-5990
Telecopy: (619) 756-3194
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
LLP
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
Attention: Brian J. McCarthy, Esq.
Telephone: (213) 687-5070
Telecopy: (213) 687-5600
(b) if to Morgens, Waterfall, to:
Swiss Bank Tower
10 East 50th Street
New York, New York 10022
Attention: Mr. Bruce Waterfall
Telephone:(212) 705-0500
Telecopy:(212) 838-5540
with a copy to:
O'Melveny & Myers, LLP
400 South Hope Street
Los Angeles, CA 90071-2899
Attention: C. James Levin, Esq.
Telephone:(213) 669-6578
Telecopy:(213) 669-6407
(c) if to Keyport, to:
Mr. Steve Lockman
Stein Roe & Farnham Incorporated
One South Wacker Drive
33rd Floor
Chicago, Illinois 60606-4685
Telephone:(312) 368-7788
Telecopy:(312) 368-8144
with a copy to:
Stacy Winick
Stein Roe & Farnham Incorporated
One South Wacker Drive
33rd Floor
Chicago, Illinois 60606-4885
(d) if to SunAmerica, to:
Mr. Peter McMillan
SunAmerica, Inc.
One SunAmerica Center
Century City, California 90067
Telephone:(310) 772-6101
Telecopy:(310) 772-6150
with a copy to:
Mr. Alan Nussenblatt
SunAmerica, Inc.
One SunAmerica Center
Century City, California 90067
Telephone: (310) 772-6110
Telecopy: (310) 772-6030
SECTION 7.2 Release. Upon the exercise of the
option by the Purchaser to acquire the Shares, the Purchaser
shall hereby release on behalf of itself and RHC all claims,
causes of actions, rights and liabilities held by the Purchaser
or RHC against each Seller based on or arising from such Seller's
ownership of the Shares or actions as a Stockholder of RHC at all
times to and including the Closing Date, and the sale of the
Shares to the Purchaser, except for the representations and
warranties of each Seller set forth in Sections 2.1(b) and 2.1(c)
hereof which shall survive indefinitely.
SECTION 7.3 Interpretation. When a reference is
made in this Agreement to a Section, Schedule or Exhibit, such
reference shall be to the applicable Section, Schedule or Exhibit
of this Agreement unless otherwise indicated. The headings
contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this
Agreement. When the words "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words
"without limitation." All accounting terms not defined in this
Agreement shall have the meanings determined by generally
accepted accounting principles as of the date hereof. All
capitalized terms defined herein are equally applicable to both
the singular and plural forms of such terms.
SECTION 7.4 Severability. If any provision of
this Agreement or the application of any such provision shall be
held invalid, illegal or unenforceable in any respect by a court
of competent jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision hereof. In
lieu of any such invalid, illegal or unenforceable provision, the
parties hereto intend that there shall be added as part of this
Agreement a valid, legal and enforceable provision as similar in
terms to such invalid, illegal or unenforceable provision as may
be possible or practicable under the circumstances.
SECTION 7.5 Counterparts. This Agreement may be
executed in one 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 instrument.
SECTION 7.6 Entire Agreement. This Agreement and
the Schedules and Exhibits hereto constitute the entire
agreement, and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the
subject matter hereof.
SECTION 7.7 Governing Law. This Agreement shall
be governed by and construed in accordance with the laws of the
State of Nevada, regardless of the laws that otherwise might
govern under any applicable principles of conflicts of law,
except that gaming approval requirements shall be governed by and
construed in accordance with the laws of the State of Nevada.
SECTION 7.8 Assignment. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto
and their respective successors and assigns. Neither this
Agreement nor any of the rights, interests or obligations
hereunder shall be assigned or delegated by any of the parties
hereto without the prior written consent of the other parties;
provided, that the Purchaser may assign the Purchase Options and
the obligations under this Agreement to any other person who is
designated by the Purchaser and; further provided, that the
Purchaser shall remain responsible for the performance of such
designee's obligations.
SECTION 7.9 No Third-Party Beneficiaries.
Nothing herein expressed or implied shall be construed to give
any person other than the parties hereto (and their respective
successors and assigns) any legal or equitable rights hereunder.
SECTION 7.10 OBLIGATIONS SEVERAL AND NOT JOINT.
The obligations of the Sellers hereunder are several and not
joint, and no Seller shall be liable for the breach or default
hereunder by any other Seller.
IN WITNESS WHEREOF, each of the parties hereto has
caused its duly authorized officers to execute this Agreement as
of the date first above written.
R&E GAMING CORP.
By:_____________________________
Name:
Title:
MORGENS, WATERFALL,
VINTIADIS & COMPANY, INC.
By:_____________________________
Name:
Title:
on behalf of the investment
accounts for the entities listed
below
BETJE PARTNERS
THE COMMON FUND
MORGENS WATERFALL INCOME PARTNERS
PHOENIX PARTNERS, L.P.
MWV EMPLOYEE RETIREMENT PLAN
GROUP TRUST
RESTART PARTNERS, L.P.
RESTART PARTNERS II, L.P.
RESTART PARTNERS III, L.P.
KEYPORT LIFE INSURANCE COMPANY
By:________________________________
Name:
Title:
SUNAMERICA LIFE INSURANCE
COMPANY
By:________________________________
Name:
Title:
EXHIBIT C
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated September 18, 1997, made by
Allen E. Paulson, an individual residing at Del Mar Country Club,
6001 Clubhouse Drive, Rancho Santa Fe, California 92067 (the
"Pledgor"), in favor of Madeleine L.L.C., a New York limited
liability company (the "Lender").
W I T N E S S E T H:
WHEREAS, the Pledgor and the Lender are parties to a
Term Loan Agreement dated as of the date hereof (such agreement,
as amended, restated, supplemented or otherwise modified from
time to time, being hereafter referred to as the "Term Loan
Agreement");
WHEREAS, pursuant to the Term Loan Agreement, the
Lender has agreed to extend credit to the Pledgor consisting of
the Term Loan (as defined in the Term Loan Agreement) to the
Pledgor in the principal amount of $20,000,000;
WHEREAS, it is a condition precedent to the making of
the Term Loan by the Lender pursuant to the Term Loan Agreement
that the Pledgor shall have executed and delivered to the Lender
this Agreement providing for the pledge to the Lender of, and the
grant to the Lender of a security interest in, among other
things, 463,655 shares of common stock issued by Riviera Holdings
Corporation, 13,710,734 shares of common stock of CardioDynamics
International Corporation and all of the issued and outstanding
shares of stock of Carlo Corporation, together with other
collateral hereinafter described and all proceeds of the
foregoing;
NOW, THEREFORE, in consideration of the premises and
the agreements herein and in order to induce the Lender to make
and maintain the Term Loan, the Pledgor hereby agrees with the
Lender as follows:
SECTION 1. Definitions. Terms that are not
otherwise defined herein shall have the same meanings herein as
set forth in the Term Loan Agreement or in Article 8 or 9 of the
Uniform Commercial Code (the "Code") as in effect from time to
time in the State of New York. In addition, the following terms
shall have the respective meanings indicated below (such meanings
to be applicable equally to both the singular and plural forms of
the terms defined):
"Entitlement Orders", "Financial Assets", "Investment
Property", "Securities Account" and "Securities Entitlement" have
the meanings specified therefor in Uniform Commercial Code -
Investment Securities, 1997 N.Y. Laws Ch. 566.
"Jefferies Account" means account number 29102113
maintained by the Pledgor with Jefferies & Company, Inc.,
including, without limitation, all investments, securities and
cash now or hereafter held in such account, together with any
successor or replacement accounts.
SECTION 2. Pledge and Grant of Security Interest.
As collateral security for all of the Obligations (as defined in
Section 3 hereof), the Pledgor hereby pledges and assigns, and
grants a continuing security interest in, the following (the
"Collateral") to the Lender:
(a) the Jefferies Account;
(b) all Investment Property now or hereafter
delivered, transferred or assigned to, or deposited or credited
to the Jefferies Account;
(c) the indebtedness described in Schedule I hereto
(the "Pledged Debt") issued by the corporation described on
Schedule I (such corporation, together with any successor
corporation, being hereinafter referred to as the "Debt Issuer"),
the promissory notes, bonds, certificates and other instruments
evidencing the Pledged Debt and all interest, cash, instruments
and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all
of the Pledged Debt (including, without limitation, any shares of
capital stock received in respect of or in exchange for or upon
conversion of any part of the Pledged Debt);
(d) the shares of capital stock listed in Schedule
II hereto (the "Pledged Shares") issued by the corporations
described in such Schedule II (such corporations, together with
any successor corporations, being hereinafter referred to
collectively as the "Stock Issuers", and, together with the Debt
Issuer, the "Issuers" and individually as an "Issuer"), the
certificates representing the Pledged Shares, all options and
other rights, contractual or otherwise, in respect thereof
(including, without limitation, any registration rights) and all
dividends, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged Shares, together with all
certificates hereafter delivered to the Lender, the shares of
stock from time to time represented by such certificates, all
options and other rights, contractual or otherwise, in respect
thereof and all dividends, cash, instruments and other property
from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of such additional
shares;
(e) all cash and cash equivalents, Investment
Property, Financial Assets, capital stock or other equity
interests, notes, debentures, bonds, promissory notes or other
evidences of indebtedness and all other securities deposited from
time to time in the Jefferies Account or delivered to the Lender;
(f) all books and records pertaining to the
Collateral;
(g) all General Intangibles arising from or
relating to the Collateral;
(h) all investment earnings and proceeds of any and
all of the foregoing; and
(i) all Securities Entitlements of the Pledgor in
any and all of the foregoing;
in each case, whether now owned or hereafter acquired by the
Pledgor and howsoever such interest therein may arise or appear
(whether by ownership, security interest, claim or otherwise).
SECTION 3. Security for Obligations. The security
interest created hereby in the Collateral constitutes continuing
collateral security for all of the following obligations, whether
now existing or hereafter incurred (the "Obligations"):
(a) the prompt payment by the Pledgor, as and when
due and payable, of all amounts from time to time owing by the
Pledgor to the Lender in respect of the Term Loan Agreement, the
Note and all other Loan Documents, including, without limitation,
principal of and interest on the Term Loan (including, without
limitation, all interest that accrues after the commencement of
any case, proceeding or other action relating to bankruptcy,
insolvency or reorganization of the Pledgor whether or not a
claim for post filing interest is allowed in such proceedings)
and all fees, commissions, expense reimbursements,
indemnifications and all other amounts due or to become due under
the Term Loan Agreement and any other Loan Document; and
(b) the due performance and observance by the
Pledgor of all of his other obligations from time to time
existing in respect of this Agreement, the Term Loan Agreement
and the other Loan Documents to which he is a party.
SECTION 4. Establishment of Collateral Accounts;
Delivery of the Collateral.
(a) Establishment of Collateral Accounts. The
Pledgor has established and will maintain with Jefferies &
Company, Inc. the Jefferies Account. Subject to the rights of
the Pledgor under Section 7(a) hereof and the other terms and
conditions of this Agreement, (A) the Jefferies Account shall be
under the sole dominion and control of the Lender, (B) the Lender
shall have the sole right to make withdrawals from the Jefferies
Account and to exercise rights with respect to the cash and
investments from time to time on deposit or held therein and (C)
the Lender shall have the sole right to provide Entitlement
Orders to Jefferies & Company, Inc. with respect to the Jefferies
Account. The Collateral shall be held by Jefferies & Company,
Inc. in the Jefferies Account pursuant to the terms hereof and
the letter regarding Acknowledgment of Bailment for Pledged
Securities (the "Jefferies Consent"), dated September 18, 1997
from the Lender and consented and agreed to by Jefferies &
Company, Inc. and the Pledgor. All promissory notes, bonds,
certificates and instruments in the Jefferies Account shall be
held by Jefferies on behalf of the Lender pursuant hereto and the
Jefferies Consent and shall be in suitable form for transfer by
delivery or shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance
satisfactory to the Lender.
(b) Delivery of Collateral. (i) On or prior to the
execution and delivery of this Agreement, all promissory notes,
bonds and other instruments currently evidencing the Pledged Debt
and all certificates representing the Pledged Shares shall be
registered in the name of the Lender or delivered to the Lender
and the Pledgor will take all action required to perfect the
security interest of the Lender in all uncertificated or book-
entry securities constituting Collateral. All other promissory
notes, bonds, certificates and instruments constituting
Collateral from time to time or required to be pledged to the
Lender pursuant to the terms of this Agreement or the Term Loan
Agreement, and all uncertificated or book-entry securities
constituting collateral from time to time (the "Additional
Collateral") shall, in the case of certificates and instruments,
be registered in the name of the Lender or delivered to the
Lender promptly upon the receipt thereof by or on behalf of the
Pledgor and, in the case of uncertificated or book-entry
securities, the Pledgor shall take such action as may be required
to perfect the security interest of the Lender. All such
promissory notes, bonds, certificates and instruments shall be
held by or on behalf of the Lender pursuant hereto and shall be
delivered in suitable form for transfer by delivery or shall be
accompanied by duly executed instruments of transfer or
assignment or undated stock powers executed in blank, all in form
and substance satisfactory to the Lender. Upon receipt by
Pledgor of the Additional Collateral, a Pledge Amendment, duly
executed by the Pledgor, in substantially the form of Schedule
III hereto (a "Pledge Amendment") shall be delivered to the
Lender, in respect of the Additional Collateral which are to be
pledged pursuant to this Agreement, which Pledge Amendment shall
from and after delivery thereof constitute part of Schedules I
and II. The Pledgor hereby authorizes the Lender to attach each
Pledge Amendment to this Agreement and agrees that all promissory
notes, bonds, certificates or instruments listed on any Pledge
Amendment delivered to the Lender shall for all purposes
hereunder constitute Collateral and the Pledgor shall be deemed
upon delivery thereof to have made the representations and
warranties set forth in Section 5 with respect to such Additional
Collateral.
(ii) If the Pledgor shall receive, by virtue of
the Pledgor's being or having been an owner of any Collateral,
any (A) certificated security (including, without limitation, any
certificate representing a stock dividend or distribution in
connection with any increase or reduction of capital,
reclassification, merger, consolidation, sale of assets,
combination of shares, stock split, spinoff or split-off),
promissory note, chattel paper or other instrument, (B) option or
right, whether as an addition to, substitution for, or in
exchange for, any Collateral, or otherwise, (C) dividends payable
in cash (except such dividends permitted to be retained by the
Pledgor pursuant to Section 7(a) hereof) or in securities or
other property or (D) dividends or other distributions in
connection with a partial or total liquidation or dissolution or
in connection with a reduction of capital, capital surplus or
paid-in surplus, the Pledgor shall receive such certificated
security, promissory note, chattel paper, instrument, option,
right, payment or distribution in trust for the benefit of the
Lender, shall segregate it from the Pledgor's other property and
shall deliver it forthwith to the Lender in the exact form
received, with any necessary indorsement and/or appropriate stock
powers duly executed in blank, to be held by the Lender as
Collateral and as further collateral security for the
Obligations.
SECTION 5. Representations and Warranties. The Pledgor
represents and warrants as follows:
(a) The Pledgor has the legal capacity and right to
execute, deliver and perform this Agreement.
(b) The execution, delivery and performance by the
Pledgor of this Agreement (i) do not and will not contravene any
law or any contractual restriction binding on or affecting the
Pledgor or any of his properties; and (ii) do not and will not
result in or require the creation of any Lien upon or with
respect to any of his properties.
(c) This Agreement has been duly executed and
delivered by the Pledgor and constitutes the legal, valid and
binding obligation of the Pledgor, enforceable against the
Pledgor in accordance with its terms, except to the extent that
enforcement thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter
in effect relating to creditors' rights generally and (ii)
general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in
equity).
(d) The promissory notes and bonds currently
evidencing the Pledged Debt have been, and all other promissory
notes, bonds or other instruments from time to time evidencing
Pledged Debt, when executed and delivered, will have been, duly
authorized, executed and delivered by the respective makers
thereof, and all such promissory notes, bonds or other
instruments are or will be, as the case may be, legal, valid and
binding obligations of such makers, enforceable against such
makers in accordance with their respective terms. The
information set forth in Schedule I hereto is accurate and
complete.
(e) The Pledged Shares are fully paid and
nonassessable and, to the best of the Pledgor's knowledge, have
been duly authorized and validly issued. All other shares of
stock constituting Collateral will be duly authorized and validly
issued, fully paid and nonassessable. The information set forth
in Schedule II hereto is accurate and complete.
(f) There is no action, suit or proceeding pending
or, to the Pledgor's knowledge, threatened or otherwise affecting
this Agreement or any other Loan Document or the Pledgor or the
Jefferies Account before any court or other Governmental
Authority or regulatory body or arbitrator that is reasonably
likely to materially adversely affect the financial condition of
the Pledgor or the Pledgor's ability to perform his obligations
hereunder, under the Term Loan Agreement or under any other Loan
Documents to which the Pledgor is a party.
(g) No authorization or approval or other action
by, and no notice to or filing with, any Governmental Authority
or other regulatory body or any other Person is required for
(i) the due execution, delivery and performance by the Pledgor of
this Agreement, the Term Loan Agreement or any other Loan
Document to which the Pledgor is a party, (ii) the grant by the
Pledgor, or the perfection, of the Lien purported to be created
hereby in the Collateral or (iii) the exercise by the Lender of
any of its rights and remedies hereunder, except as may be
required in connection with any sale of any Collateral by laws
affecting the offering and sale of securities generally.
(h) The Pledgor is and will be at all times the
legal and beneficial owner of the Collateral, free and clear of
any lien, option or other charge or encumbrance except for the
Lien created by this Agreement. There is no financing statement
naming the Pledgor as debtor (or similar documents or instrument
of registration under the law of any jurisdiction) now on file or
registered in any public office covering any interest of the
Pledgor in the Collateral except such as may have been filed in
favor of the Lender relating to this Agreement.
(i) This Agreement creates a valid security
interest in favor of the Lender in the Collateral, as security
for the Obligations. Jefferies & Company, Inc. having credited
to the Jefferies Account all certificates, instruments and cash
constituting Collateral from time to time, the execution and
delivery of the Jefferies Consent, the Lender's having possession
of the Pledged Shares and all other certificates, instruments and
cash constituting Collateral and the Lender having control over
all other Collateral from time to time collectively result in the
perfection of such security interest. Such security interest is,
or in the case of Collateral in which the Pledgor obtains rights
after the date hereof, will be, a perfected, first priority
security interest. All action necessary or desirable to perfect
and protect such security interest has been duly taken, except
for the Lender's and/or Jefferies & Company, Inc.'s having
possession of certificates, instruments and cash constituting
Collateral after the date hereof or the Lender's and/or Jefferies
& Company, Inc.'s having control over all other Collateral
arising after the date hereof.
SECTION 6. Covenants as to the Collateral. So long
as any of the Obligations shall remain outstanding, unless the
Lender shall otherwise consent in writing:
(a) Records. The Pledgor will keep adequate
records concerning the Collateral and permit the Lender or any
agents or representatives of the Lender at any reasonable time
and from time to time to examine and make copies of and abstracts
from such records.
(b) Notices. The Pledgor will, at the expense of
the Pledgor, promptly deliver to the Lender a copy of each
material notice or other material communication received by it in
respect of any of the Collateral, together with a copy of any
reply by the Pledgor thereto.
(c) Defend Title. The Pledgor will, at the
reasonable request of the Lender and at the expense of the
Pledgor, defend his right, title and interest in and to the
Collateral against the claims of any Person.
(d) Further Assurances. The Pledgor will, at the
expense of the Pledgor, at any time and from time to time,
promptly execute and deliver all further instruments and
documents and take all further action that may be necessary or
desirable or that the Lender may reasonably request in order (i)
to perfect and protect the security interest created or purported
to be created hereby (whether pursuant to laws, rules,
regulations or general practices currently in effect or adopted
subsequent to the date hereof); (ii) to enable the Lender to
exercise and enforce its rights and remedies hereunder in respect
of the Collateral; or (iii) to otherwise effect the purposes of
this Agreement, including, without limitation: (A) at the
request of the Lender, marking conspicuously each of the records
of the Pledgor pertaining to the Collateral with a legend, in
form and substance satisfactory to the Lender, indicating that
such Collateral is subject to the security interest created
hereby; (B) if any Collateral shall be evidenced by a
certificated security, promissory note or other instrument or
chattel paper, delivering and pledging to the Lender hereunder
such certificated security, note, instrument or chattel paper
duly indorsed and accompanied by executed instruments of transfer
or assignment, all in form and substance satisfactory to the
Lender; (C) delivering to the Lender irrevocable proxies in
respect of the Collateral and executing and filing such financing
or continuation statements, or amendments thereto, as may be
necessary or desirable or that the Lender may request in order to
perfect and preserve the security interest created or purported
to be created hereby; and (D) furnishing to the Lender from time
to time statements and schedules further identifying and
describing the Collateral and such other reports in connection
with the Collateral as the Lender may reasonably request, all in
reasonable detail.
(e) Transfers and Other Restrictions. The Pledgor
will not (i) sell, assign (by operation of law or otherwise),
exchange or otherwise dispose of any of the Collateral (except as
permitted by Section 7(a) hereof); or (ii) create or suffer to
exist any (A) Lien upon or with respect to any of the Collateral
except the Lien created by this Agreement or (B) contractual
restriction on the transferability of any of the Collateral.
(f) Issuance of Additional Securities. In the case
of Collateral issued by Carlo, the Pledgor will not permit the
issuance of (i) any additional shares of any class of capital
stock of any such Person, (ii) any securities convertible
voluntarily by the holder thereof or automatically upon the
occurrence or non-occurrence of any event or condition into, or
exchangeable for, any such shares of capital stock or (iii) any
warrants, options, contracts or other commitments entitling any
Person to purchase or otherwise acquire any such shares of
capital stock.
(g) Other Actions. The Pledgor will not take or
fail to take any action that would in any manner impair the value
or enforceability of the Lender's security interest in the
Collateral.
SECTION 7. Voting Rights, Dividends, Etc. in Respect
of the Collateral; Withdrawal and Sale of Collateral.
(a) So long as no Event of Default shall have
occurred and be continuing:
(i) the Pledgor may exercise any and all
voting and other consensual rights pertaining to the Collateral
in a manner not inconsistent with the terms of this Agreement or
the other Loan Documents; provided, however, that (A) the Pledgor
will not exercise or refrain from exercising any such right, as
the case may be, if the Lender gives the Pledgor notice that, in
the Lender's judgment, such action would have an adverse effect
on the value of any Collateral and (B) the Pledgor will give the
Lender at least five days' notice of the manner in which the
Pledgor intends to exercise, or the reasons for refraining from
exercising, any such right;
(ii) Any and all dividends or interest paid or
payable in cash in respect of the Collateral shall forthwith be
paid to the Lender pursuant to Section 2.05(a) of the Term Loan
Agreement and shall, if received by the Pledgor, be received in
trust for the benefit of the Lender, shall be segregated from the
other property or funds of the Pledgor, and shall forthwith be
paid to the Lender. Any and all dividends or interest paid or
payable other than in cash in respect of the Collateral shall
forthwith be delivered to the Lender or Jefferies & Company,
Inc., as applicable, to hold as Collateral and shall, if received
by the Pledgor , be received in trust for the benefit of the
Lender, shall be segregated from the other property or funds of
the Pledgor, and shall forthwith be delivered to the Lender or
Jefferies & Company, Inc., as applicable, in the exact form
received with any necessary indorsement and/or appropriate stock
powers duly executed in blank, to be held, by the Lender or by
Jefferies & Company, Inc. in the Jefferies Account, as the case
may be, as Collateral hereunder;
(iii) the Lender will execute and deliver (or
cause to be executed and delivered) to the Pledgor all such
proxies and other instruments as the Pledgor may reasonably
request for the purpose of enabling the Pledgor to exercise the
voting and other rights that the Pledgor is entitled to exercise
pursuant to paragraph (i) of this Section 7(a) and to receive the
dividends, if any, that it is authorized to receive and retain
pursuant to paragraph (ii) of this Section 7(a); and
(iv) all investments from time to time in the
Jefferies Account and the non-cash proceeds thereof shall remain
in the Jefferies Account (except for withdrawals by the Lender
after an Event of Default) and the Pledgor may not withdraw any
part of the Collateral from the Jefferies Account.
(b) Upon the occurrence and during the continuance
of an Event of Default:
(i) all rights of the Pledgor to exercise the
voting and other consensual rights that the Pledgor would
otherwise be entitled to exercise pursuant to paragraph (i) of
this Section 7(a), and to receive the dividends and interest
payments and other distributions that the Pledgor would otherwise
be authorized to receive and retain pursuant to paragraph (ii) of
this Section 7(a), shall cease, and (A) all such rights shall
thereupon become vested in the Lender, which shall thereupon have
the sole right to exercise such voting and other consensual
rights and to receive and hold as Collateral such dividends and
interest payments, and (B) the Pledgor shall execute and deliver
all such proxies and other instruments as the Lender may
reasonably request for the purpose of enabling the Lender to
exercise the voting and other rights that it is entitled to
exercise pursuant to this Section 7(b)(i);
(ii) the Lender is authorized to notify each
debtor with respect to the Pledged Debt to make payment directly
to the Lender and may collect any and all moneys due or to become
due to the Pledgor in respect of the Pledged Debt and the Pledgor
hereby authorizes each such debtor to make such payment directly
to the Lender without any duty of inquiry;
(iii) without limiting the generality of the
foregoing, the Lender may at its option exercise any and all
rights of conversion, exchange, subscription or any other rights,
privileges or options pertaining to any of the Collateral as if
it were the absolute owner thereof, including, without
limitation, the right to exchange, in its discretion, any and all
of the Collateral upon the merger, consolidation, reorganization,
recapitalization or other adjustment of any Issuer of Collateral,
or upon the exercise by any Issuer of Collateral of any right,
privilege or option pertaining to any Collateral, and, in
connection therewith, to deposit and deliver any and all of the
Collateral with any committee, depository, transfer agent,
registrar or other designated agent upon such terms and
conditions as it may determine; and
(iv) all dividends and interest payments and
other distributions that are received by the Pledgor contrary to
the provisions of paragraph (i) of this Section 7(b) shall be
received in trust for the benefit of the Lender, shall be
segregated from the other funds of the Pledgor, and shall be
forthwith paid over to the Lender and/or Jefferies & Company,
Inc. as Collateral in the exact form received with any necessary
indorsement and/or appropriate stock powers duly executed in
blank, to be held by the Lender and/or Jefferies & Company, Inc.
as Collateral hereunder.
SECTION 8. Additional Provisions Concerning the
Collateral.
(a) The Pledgor hereby authorizes the Lender to
file, without the signature of the Pledgor where permitted by
law, one or more financing or continuation statements, and
amendments thereto, relating to the Collateral.
(b) The Pledgor hereby irrevocably appoints the
Lender the Pledgor's attorney-in-fact and proxy, with full
authority in the place and stead of the Pledgor and in the name
of the Pledgor or otherwise, from time to time in the Lender's
discretion, to take any action and to execute any instrument (at
the expense of the Pledgor) that the Lender may reasonably deem
necessary or advisable to accomplish the purposes of this
Agreement including, without limitation, (i) at any time and from
time to time, to receive, indorse and collect all instruments
made payable to the Pledgor representing any distribution in
respect of any Collateral and to give full discharge for the
same, and (ii) to receive, indorse and collect any drafts or
other instruments, documents and chattel paper representing any
dividend or other distribution in respect of the Collateral and,
in addition to the foregoing and without limitation: (A) to ask,
demand, collect, sue for, recover, compound, receive and give
acquittance and receipts for moneys due and to become due under
or in respect of any of the Collateral and to receive, indorse,
and collect any drafts or other instruments, documents and
chattel paper in connection therewith; and (B) for the collection
of any of the Collateral or otherwise to enforce the rights of
the Lender with respect to any of the Collateral; provided,
however, that the Lender shall exercise such powers only during
the occurrence and continuance of an Event of Default.
(c) If the Pledgor fails to perform any agreement
contained herein, the Lender (immediately after giving notice to
the Pledgor) may itself perform, or cause performance of, such
agreement or obligation, and the expenses of the Lender incurred
in connection therewith shall be payable by the Pledgor pursuant
to Section 10 hereof, together with interest from the date such
expenses are paid by the Lender until repaid in full, at the rate
for overdue principal under the Term Loan Agreement, all payable
on demand.
(d) The Lender may at any time in its discretion
(i) without prior notice to the Pledgor, transfer or register in
the name of the Lender or any of its nominees any or all of the
Collateral (it being understood that the Lender will give prompt
notice to the Pledgor immediately after any such transfer or
register), and (ii) exchange certificates or instruments
constituting Collateral for certificates or instruments of
smaller or larger denominations.
(e) Other than the exercise of reasonable care to
assure the safe custody of the Collateral while held by the
Lender hereunder, the Lender shall have no duty or liability to
preserve rights pertaining thereto and shall be relieved of all
responsibility for the Collateral upon surrendering it or
tendering surrender of it to the Pledgor. The Lender shall be
deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the
Collateral is accorded treatment substantially equal to that
which the Lender accords its own property, it being understood
that the Lender shall not have responsibility for
(i) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters
relating to any Collateral, whether or not the Lender has or is
deemed to have knowledge of such matters, or (ii) taking any
necessary steps to preserve rights against any parties with
respect to any Collateral.
SECTION 9. Remedies Upon Event of Default. If any
Event of Default shall have occurred and be continuing:
(a) The Lender may exercise in respect of the
Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all of the rights and
remedies of a secured party on default under the Code then in
effect in the State of New York (whether or not the Code applies
to the affected Collateral); and without limiting the generality
of the foregoing, also may (i) without notice except as specified
below, sell the Collateral or any part thereof in one or more
parcels at public or private sale, at any exchange or broker's
board or elsewhere, at such price or prices and on such other
terms as the Lender may deem commercially reasonable. In
addition, the Lender may, at any time and from time to time, upon
the occurrence and during the continuance of an Event of Default,
direct that Jefferies & Company, Inc. immediately deliver to the
Lender all or part of the Collateral. The Lender may apply all
or part of the cash and/or other investments constituting
Collateral to the payment of all or any part of the Obligations
in such manner as the Lender may elect. The Pledgor agrees that,
to the extent notice of sale shall be required by law, at least
10 days' notice to the Pledgor of the time and place of any
public sale or the time after which any private sale is to be
made shall constitute reasonable notification. The Lender shall
not be obligated to make any sale of Collateral regardless of
notice of sale having been given. The Lender may adjourn any
public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so
adjourned.
(b) The Pledgor agrees that in any sale of any
Collateral hereunder the Lender is hereby authorized to comply
with any limitation or restriction in connection with such sale
as it may be advised by counsel is necessary in order to avoid
any violation of applicable law, rule or regulation (including,
without limitation, compliance with such procedures as may
restrict the number of prospective bidders and purchasers,
require that such prospective bidders and purchasers have certain
qualifications, and restrict such prospective bidders and
purchases to Persons who will represent and agree that they are
purchasing for their own account for investment and not with a
view to the distribution or resale of such Collateral), or in
order to obtain any required approval of the sale or of the
purchasers by any Governmental Authority or official, and the
Pledgor further agrees that such compliance shall not result in
such sale being considered or deemed not to have been made in a
commercially reasonable manner, nor shall the Lender be liable or
accountable to the Pledgor for any discount allowed by reason of
the fact that such Collateral is sold in compliance with any such
limitation or restriction.
(c) Notwithstanding the provisions of subsection
(b) of this Section 9, the Pledgor recognizes that the Lender may
deem it impracticable to effect a public sale of all or any part
of the Collateral and that the Lender may, therefore, determine
to make one or more private sales of any such Collateral to a
restricted group of purchasers who will be obligated to agree,
among other things, to acquire such Collateral for their own
account, for investment and not with a view to the distribution
or resale thereof. The Pledgor acknowledges that any such
private sale may be at prices and on terms less favorable to the
seller than the prices and other terms that might have been
obtained at a public sale and, notwithstanding the foregoing,
agrees that such private sales shall be deemed to have been made
in a commercially reasonable manner and that the Lender shall
have no obligation to delay sale of any such securities for the
period of time necessary to permit the Issuer of any securities
constituting Collateral to register such securities for public
sale under the Securities Act of 1933, as amended. The Pledgor
further acknowledges and agrees that any offer to sell such
securities that has been (i) publicly advertised on a bona fide
basis in a newspaper or other publication of general circulation
in the financial community of New York, New York (to the extent
that such an offer may be so advertised without prior
registration under the Securities Act of 1933, as amended) or
(ii) made privately in the manner described above to not less
than fifteen bona fide offerees shall be deemed to involve a
"public sale" for the purposes of Section 9-504(3) of the Code
(or any successor or similar, applicable statutory provision) as
then in effect in the State of New York, notwithstanding that
such sale may not constitute a "public offering" under the
Securities Act of 1933, as amended, and that the Lender may, in
such event, bid for and purchase such securities.
(d) Any cash held by the Lender as Collateral and
all cash or other proceeds received by the Lender in respect of
any sale of, collection from, or other realization upon, all or
any part of the Collateral may, in the discretion of the Lender,
be held by the Lender as collateral for, and/or then or at any
time thereafter applied (after payment of any amounts payable to
the Lender pursuant to Section 10 hereof) in whole or in part by
the Lender against, all or any part of the Obligations in such
order as the Lender shall elect. Any surplus of such cash or
other proceeds held by the Lender and remaining after payment in
full of all of the Obligations shall be paid over to the Pledgor
or to such Person as may be lawfully entitled to receive such
surplus.
(e) The Pledgor shall (i) subject to clause (ii)
below, hold any dividends, interest or other distributions which
it receives with respect to the Collateral in trust for the
Lender, separate from all other moneys of the Pledgor, and (ii)
forthwith transfer such dividends, interest or other
distributions to the Lender. Notwithstanding the foregoing, the
Pledgor may not take any action under this Section with respect
to the Collateral that, in the Lender's judgment, (i) would in
any way affect the lien of this Agreement with respect to any
Collateral, or impair the interest or rights of the Lender
therein or (ii) would otherwise be inconsistent with the
provisions of this Agreement or the Term Loan Agreement or result
in a violation hereof or thereof.
(d) In the event that the proceeds of any such
sale, collection or realization are insufficient to pay all
amounts to which the Lender is legally entitled, the Pledgor
shall be liable for the deficiency, together with interest
thereon at the highest rate specified in the Term Loan Agreement
for interest on overdue principal thereof or such other rate as
shall be fixed by applicable law, together with the costs of
collection and the reasonable fees of any attorneys employed by
the Lender to collect such deficiency.
SECTION 10. Indemnity and Expenses.
(a) The Pledgor agrees to indemnify the Lender from
and against any and all claims, losses and liabilities
(including, without limitation, the reasonable fees, client
charges and other expenses of the Lender's counsel) growing out
of or resulting from this Agreement or the enforcement of any of
the terms hereof (including, without limitation, the sale of
Collateral pursuant to a public or private offering and each and
every document produced in furtherance thereof), except claims,
losses or liabilities resulting from the Lender's gross
negligence or willful misconduct.
(b) The Pledgor agrees to pay to the Lender on
demand the amount of any and all costs and expenses, including
the reasonable fees and other client charges of the Lender's
counsel and of any experts and agents, that the Lender may incur
in connection with (i) the administration and termination of this
Agreement, (ii) the custody, preservation, use or operation of,
or the sale of, collection from, or other realization upon, any
of the Collateral (including, without limitation, fees or
commissions of any broker), (iii) the exercise or enforcement of
any of the rights of the Lender hereunder, (iv) the failure by
the Pledgor to perform or observe any of the provisions hereof,
or (v) obtaining any public information regarding any Issuer of
Collateral which the Lender, in its sole discretion, deems
prudent to obtain.
SECTION 11. Notices, Etc. All notices and other
communications provided for hereunder shall be in writing and
shall be mailed, telecopied, telexed or delivered, if to the
Pledgor, to him at the address set forth in the Term Loan
Agreement, if to the Lender, to it at its address set forth in
the Term Loan Agreement; or as to any such Person at such other
address as shall be designated by such Person in a written notice
to such other Persons complying as to delivery with the terms of
this Section 11. All such notices and other communications shall
be effective (i) if mailed, when received or three Business Days
after mailing, whichever occurs first; (ii) if telecopied, when
transmitted and the appropriate confirmation is received, (iii)
if telexed, when the appropriate answerback is received; or (iv)
if delivered, upon delivery.
SECTION 12. Miscellaneous.
(a) No amendment of any provision of this Agreement
shall be effective unless it is in writing and signed by the
Pledgor and the Lender, and no waiver of any provision of this
Agreement, and no consent to any departure by the Pledgor
therefrom, shall be effective unless it is in writing and signed
by the Lender, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for
which given.
(b) No failure on the part of the Lender to
exercise, and no delay in exercising, any right hereunder or
under any other Loan Document shall operate as a waiver thereof;
nor shall any single or partial exercise of any such right
preclude any other or further exercise thereof or the exercise of
any other right. The rights and remedies of the Lender provided
herein and in the other Loan Documents are cumulative and are in
addition to, and not exclusive of, any rights or remedies
provided by law. The rights of the Lender against the Pledgor
under any Loan Document are not conditional or contingent on any
attempt by the Lender to exercise any of its rights under any
other Loan Document against the Pledgor or against any other
Person.
(c) Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining portions
hereof or thereof or affecting the validity or enforceability of
such provision in any other jurisdiction.
(d) This Agreement shall create a continuing
security interest in the Collateral and shall (i) remain in full
force and effect until the Obligations have been satisfied in
full; and (ii) be binding on the Pledgor and his heirs,
executors, administrators, successors and assigns and shall
inure, together with all rights and remedies of the Lender
hereunder, to the benefit of the Lender and its successors,
transferees and assigns. The Lender may assign or transfer, as
collateral or otherwise, any or all of its interest hereunder and
under the other Loan Documents. None of the rights or
obligations of the Pledgor hereunder may be assigned or otherwise
transferred without the prior written consent of the Lender.
(e) Upon the satisfaction in full of the
Obligations after the termination of the Term Loan Agreement (i)
this Agreement and the security interest created hereby shall
terminate and all rights to the Collateral shall revert to the
Pledgor, and (ii) the Lender will, upon the Pledgor's request and
at the Pledgor's expense, (A) return to the Pledgor such of the
Collateral held by the Lender, and instruct Jefferies & Company,
Inc. to return to the Pledgor such of the Collateral held in the
Jefferies Account as shall not have been sold or otherwise
disposed of or applied pursuant to the terms hereof and (B)
execute and deliver to the Pledgor such documents as the Pledgor
shall reasonably request to evidence such termination.
(f) This Agreement shall be governed by and
construed in accordance with the law of the State of New York,
except as required by mandatory provisions of law and except to
the extent that the perfection and the effect of perfection or
non-perfection of the security interest created hereby, or
remedies hereunder, in respect of any particular Collateral are
governed by the law of a jurisdiction other than the State of New
York.
(g) Section headings in this Agreement are included
herein for the convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
(h) This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate
counterparts each of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute but one and
the same instrument.
SECTION 13. Security Interest Absolute. All rights of
the Lender, all security interests and all obligations of the
Pledgor hereunder shall be absolute and unconditional
irrespective of (i) any lack of validity or enforceability of the
Term Loan Agreement or of any Loan Document or any other
agreement, instrument or document relating thereto, (ii) any
change in the time, manner or place of payment of, or in any
other term in respect of, all or any of the Obligations, or any
other amendment or waiver of or consent to any departure from the
Term Loan Agreement or any Loan Document or any other agreement,
instrument or document relating thereto, (iii) any exchange or
release of, or non-perfection of any lien on, any collateral for
any of the Obligations, or any release or amendment or waiver of
or consent to departure from any guaranty, for all or any of the
Obligations or (iv) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, the Pledgor
in respect of any of his obligations under the Term Loan
Agreement or the other Loan Documents, or the Pledgor in respect
of any of the Obligations.
SECTION 14. OTHER AGREEMENTS. THIS WRITTEN AGREEMENT
AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
SECTION 15. CONSENT TO JURISDICTION. ANY LEGAL ACTION
OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR
OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND,
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE PLEDGOR HEREBY
IRREVOCABLY ACCEPTS FOR HIMSELF IN RESPECT OF HIS PROPERTY,
GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. THE PLEDGOR FURTHER IRREVOCABLY CONSENTS TO THE SERVICE
OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS AND IN ANY
SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO THE PLEDGOR AT
HIS ADDRESS FOR NOTICES CONTAINED IN SECTION 7.01 OF THE TERM
LOAN AGREEMENT, SUCH SERVICE TO BECOME EFFECTIVE THIRTY (30) DAYS
AFTER SUCH MAILING. THE PLEDGOR HEREBY IRREVOCABLY APPOINTS THE
SECRETARY OF STATE OF THE STATE OF NEW YORK AS ITS AGENT FOR
SERVICE OF PROCESS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE LENDER TO SERVICE OF
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE PLEDGOR IN ANY OTHER
JURISDICTION.
SECTION 16. WAIVER OF JURY TRIAL, ETC. THE PLEDGOR
AND THE LENDER EACH HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS
UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR UNDER ANY
AMENDMENT, WAIVER, CONSENT, INSTRUMENT, DOCUMENT OR OTHER
AGREEMENT DELIVERED OR WHICH IN THE FUTURE MAY BE DELIVERED IN
CONNECTION HEREWITH OR THEREWITH, AND AGREES THAT ANY SUCH
ACTION, PROCEEDINGS OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT
AND NOT BEFORE A JURY. THE PLEDGOR HEREBY WAIVES ANY RIGHT HE
MAY HAVE TO CLAIM OR RECOVER IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL
DAMAGES. THE PLEDGOR CERTIFIES THAT NO OFFICER, REPRESENTATIVE,
AGENT OR ATTORNEY OF THE LENDER HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT THE LENDER WOULD NOT, IN THE EVENT OF ANY ACTION,
PROCEEDING OR COUNTERCLAIM, SEEK TO ENFORCE THE FOREGOING
WAIVERS. THE PLEDGOR HEREBY ACKNOWLEDGES THAT THIS PROVISION IS
A MATERIAL INDUCEMENT FOR THE LENDER ENTERING INTO THIS
AGREEMENT.
IN WITNESS WHEREOF, the Pledgor has executed and delivered this
Agreement as of the date first above written.
ALLEN E. PAULSON
Acknowledged and Consented to:
MADELEINE L.L.C.
By:______________________________
Name:
Title:
SCHEDULE I
TO
PLEDGE AGREEMENT
Pledged Debt
Description and Original
Name of Payee Date of Instrument Principal Amount
------------- ------------------ ----------------
Borrower Promissory Note dated $21,371,194.35
December 31, 1996 made
by Carlo Corporation
to the Borrower
SCHEDULE II
TO
PLEDGE AGREEMENT
Pledged Shares
Name of Number of Certificate
Issuer/Payee Shares/Amount Class/Description Numbers
------------ ------------- ----------------- -----------
Riviera Holdings 463,655 Common *
Corporation
Carlo Corporation 1,000 Common 1
CardioDynamics 13,699,734 Common C0898
International C0661
Corporation C0409
C0507
CardioDynamics 11,000 Common *
International
Corporation
--------------------
* Held through Jefferies & Company, Inc.
*
