SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): May 15, 1997
RIVIERA HOLDINGS CORPORATION
(exact name of registrant as specified in its charter)
Nevada 000-21430 88-0296885
(State of (Commission (IRS Employer
Incorporation) File Number) Identification No.)
2901 Las Vegas Boulevard
Las Vegas, Nevada 89109
(Address of principal office) (Zip code)
Registrant's Telephone number, (702) 794-9527
including area code
Item 5 - Other Events
See attached Press Release and non-binding Letter of Intent, dated
May 15, 1997, between the registrant and Allen E. Paulson.
Item 7 - Financial Statements and Exhibits
A. Press Release, dated May 15, 1997.
B. Letter of Intent, dated May 15, 1997, between the
registrant and Allen E. Paulson
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SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: May 23, 1997 RIVIERA HOLDINGS CORPORATION
By: /s/ Duane Krohn
Duane Krohn
Treasurer and CFO
Riviera Holdings Corporation
2901 Las Vegas Boulevard South
Las Vegas, NV 89109
Investor Relations: (800)362 1468
Fax: (702) 794-9442
Hotel: (702) 734-5110
TRADED: AMEX-RIV
AT THE COMPANY: AT FRB SAN FRANCISCO: FOR MR. PAULSON:
Duane Krohn, Treasurer Bonnie McBride (analysts) Brian McCarthy, Esq.
and CFO Dick Strasbaugh (general info) Skadden, Arps, Slate
(702) 794-9527 Frank Thorsberg (media) Meagher & Flom
John Wishon, Secretary (415) 986-1591 (213) 687-5070
and General Counsel
(702) 794-9504
FOR IMMEDIATE RELEASE
THURSDAY, MAY 15, 1997
RIVIERA SIGNS NON-BINDING LETTER OF INTENT TO MERGE
LAS VEGAS, NV - May 15, 1997 - Riviera Holdings Corporation (RHC) and Allen E.
Paulson announced today that they had signed a non-binding letter of intent
which contemplates the merger of a new corporation owned by Mr. Paulson into
RHC. At the closing of the merger, (1) each RHC stockholder would receive $15
per share, plus an amount equal to 7 percent per annum thereon from June 1, 1997
to the closing and (2) RHC would become wholly owned by Mr. Paulson.
Any transaction is subject to, among other things, completion of satisfactory
due diligence, negotiation and execution of a definitive agreement between
RHC and Mr. Paulson, and negotiation and execution of definitive option and
voting agreements between Mr. Paulson and certain institutional shareholders
which own approximately 58 percent of the shares of RHC common stock. Among the
other conditions to closing the merger are RHC shareholder, Nevada Gaming and
other licensing approvals.
No assurance can be given that the merger agreement will be executed or the
merger will be consummated.
"The management team is looking forward to the prospect of working with Mr.
Paulson to grow the Riviera and other gaming prospects," said Riviera Chairman
and Chief Executive Officer William L. Westerman.
Riviera Holdings Corp. operates the Riviera Hotel and Casino, and through its
wholly-owned subsidiary Riviera Gaming Management (RGM), operates the Four
Queens Hotel and Casino. Riviera Holdings Corporation is traded on the
American Stock Exchange under the symbol RIV.
For more information on Riviera Holdings Corporation, dial 1-800-PRO-INFO,
code RIV
May 15, 1997
Mr. Allen E. Paulson
Del Mar Country Club
6001 Clubhouse Drive
Rancho Santa Fe, CA 92067
Dear Mr. Paulson:
This letter of intent will set forth the principal business
terms (the "Terms") upon which a subsidiary of your newly-formed Nevada
corporation ("Newco") proposes to merge (the "Merger") into Riviera Holdings
Corporation ("RHC"), whereby on the "Closing Date" (hereinafter defined) all
holders of shares of RHC common stock (the "Shares") would receive in cash the
"Per Share Purchase Price" (hereinafter defined).
1. "Per Share Purchase Price" means an amount per Share equal
to $15.00 plus an amount equal to 7% per annum of such $15.00 amount from June
1, 1997 to the Closing Date.
2. "Closing Date" means 10:00 A.M. Pacific Time on the fifth
business day following satisfaction of all conditions specified in the "Merger
Agreement" (hereinafter defined), including receipt of all Nevada gaming, liquor
and other regulatory approvals necessary to consummate the Merger (the
"Approvals"), provided RHC may terminate the Merger Agreement (unless otherwise
provided for in the Merger Agreement) if the Closing Date shall not have
occurred by April 1, 1998 for any reason (other than a material breach by RHC of
its obligations under the Merger Agreement).
3. "Merger Agreement" means an agreement containing
customary representations, agreements and conditions and embodying the Terms.
4. Stock Options and Employee Stock Purchase Plan Shares.
(a) RHC has furnished Newco with a list of (i) the Shares
("Option Shares") issuable upon exercise of all outstanding options (the
"Options") and (ii) the Shares issued or issuable under RHC's Employee Stock
Purchase Plan Shares ("Purchase Plan Shares").
(b) Under RHC's Non-Qualified Stock Option Plan For
Non-Employee Directors ("Directors Plan"), on May 12, 1997, options (the
"Directors Options") to purchase 2,000 Shares will be issued to the persons
previously identified to you with an exercise price equal to the closing price
of RHC's common stock on May 12, 1997.
(c) On the Closing Date, RHC will cancel the Options by paying
in cash an amount equal to the difference between the exercise price of the
Options and the Merger Per Share Purchase Price multiplied by the number of
Option Shares on the basis of 100% vesting. Under the terms of the Employee
Stock Purchase Plan, RHC is required to refund the original purchase price
($11.25 per Share in the case of Purchase Plan Shares issued in 1996) to an
employee who so requests. RHC intends to offer a small number of Purchase Plan
Shares at 85% of fair market value to Riviera employees who were not eligible in
1996. Purchase Plan Shares will be treated similarly to all other outstanding
shares except, for administrative convenience, Purchase Plan Shares will be
cashed out on the Closing Date by RHC netting the spread between the Purchase
Plan Share Purchase Price against the Merger Per Share Purchase Price after
deduction of any loan balance of an employee.
(d) If there is a closing under a Development and Operating
Agreement between Eagle Gaming, L.P. ("Eagle") and RHC's indirectly held
subsidiary, Riviera Gaming Management of Colorado, Inc. ("RGMC"), whereby
Riviera Blackhawk, LLC ("RBL") is established, (i) RHC will be obligated to
issue to Ladenburg, Thalmann & Co. five-year warrants to purchase 100,000 shares
of RHC's common stock at a price equal to 120% of the closing market price of
RHC's common stock on the American Stock Exchange on the date of such closing
and (ii) RHC may be required to issue Shares to Eagle upon exercise by Eagle of
a "Put" if RHC indirectly owns 100% of RBL or after giving effect to such Put,
RHC and Newco will seek to mutually agree upon cash payments in lieu of such
warrants and RHC Shares issuable upon exercise of such Put.
5. Issuance of Additional Common Stock or Stock Options; No
Distributions. Except as specified in Paragraph 4 above, prior to the Closing
Date or earlier termination of the Merger Agreement, RHC will not issue or
repurchase (or enter into any commitment to do so) any additional Shares,
options or warrants or other instruments representing an equity interest in RHC,
and RHC will not make any distributions of any kind to its shareholders.
6. Escrow; Liquidated Damages; Funds at Closing.
(a) Upon the execution of the Merger Agreement, Newco will
deposit in cash or letters of credit containing terms acceptable to RHC in
escrow (the "Escrow") $14,745,000 ($3 per share x 4,915,000 shares outstanding)
plus (i) an amount equal to 7% per annum on $73,725,000 from June 1, 1997 to
such execution date, and (ii) $426,605 (.0058 x $73,725,000) on each monthly
anniversary of such execution date until the Closing Date or the date the Merger
Agreement is terminated; provided there shall be deducted from the foregoing (i)
any amount set aside by Newco or Mr. Allen E. Paulson pursuant to any separate
agreement (the "Separate Agreements") with Morgens, Waterfall, Sun Life or
Keyport Life (the "Major RHC Shareholders") with respect to their share
interests in RHC and (ii) amounts required to be deposited with respect to the
Shares beneficially owned by Newco or Mr. Paulson (collectively "Paulson
Ownership").
(b) The shareholders of RHC (excluding the Paulson Ownership)
shall be entitled to receive the Escrow pro-rata, if Newco shall fail to close
and pay by April 1, 1998 for any reason other than:
(i) a breach by RHC of its representations and
warranties or obligations under the Merger
Agreement,
(ii) the transaction is enjoined pursuant to a
final non-appealable order, (provided RHC,
Newco and their affiliates shall have used
their best efforts to have such injunction
lifted),
(iii) assuming the accuracy of the following
representation and performance by Mr.
Paulson of the following agreement,
Newco/Mr. Paulson have not obtained all
necessary Approvals by April 1, 1998: (A)
Mr. Paulson represents that he has discussed
in detail with his Nevada gaming counsel his
background and knows of no reason why he
should not be able to obtain all necessary
Approvals prior to April 1, 1998; and (B)
Mr. Paulson agrees that he will pursue
licensure vigorously and will give complete
and prompt attention to requests of Nevada
regulatory authorities for information and
will do nothing which might delay receipt of
all necessary Approvals,
(iv) In addition, the parties will seek to mut-
ually agree as to the effect on the Escrow
of the death or disability of Mr. Paulson
prior to the Closing Date.
(c) At the Closing Date the Escrow will be released to Newco,
and Newco must have, in cash, an amount equal to the aggregate Per Share
Purchase Price, multiplied by the number of outstanding RHC Shares, minus (i)
the Escrow and (ii) the amounts held pursuant to the Separate Agreements and the
Paulson Ownership. In addition on the Closing Date RHC will pay approximately
$12 million in cash as previously identified to you and Newco shall have
irrevocable commitments sufficient to cover Puts by the holders of all $100
million of RHC's 11% Mortgage Notes by reason of the change in control
contemplated by the Merger or have made other arrangements satisfactory to RHC.
7. RHC Operations. RHC has furnished Newco with its
confidential monthly projections of RHC's consolidated results of operations for
the twelve months ended March 31, 1998. Newco will have the right to terminate
the Merger Agreement if RHC's actual consolidated results of operations through
the Closing Date constitute a "Material" adverse change compared to the
Projected Results for the same period. For purposes of the foregoing, "Material"
shall mean a decline in EBITDA of 7.5% or more.
8. Indemnification. Newco will be given an opportunity to
conduct such due diligence with respect to RHC as Newco reasonably deems
appropriate and may condition its obligation to close under the Merger Agreement
upon any material breach by RHC of its representations or agreements under the
Merger Agreement, provided, however, that upon consummation of the Merger, (i)
none of the directors, officers, employees or shareholders of RHC
("Indemnitees") will be liable to Newco (or anyone claiming rights through
Newco) for breach of such representations and agreements and (ii) Newco will
hold the Indemnitees harmless against any loss, liability, cost or expense
including counsel fees which arises out of the operation of RHC or any of its
subsidiaries through the Closing or by reason of the Merger.
9. Cooperation. RHC and Newco will cooperate on the
following matters:
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(a) The calling of a Special Meeting of RHC shareholders to
approve the Merger, together with the preparation of a proxy statement with
respect thereto to be furnished to the shareholders of RHC; provided, however,
that it shall be a condition to the Merger that the holders of at least 70% of
the RHC Shares entitled to vote on the Merger shall have approved the Merger.
(b) Engagement by RHC of an investment banker to give a
fairness opinion as to the Merger;
(c) The preparation and filing of a notification and
report form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976;
(d) The obtaining of all necessary Approvals;
(e) The continued employment of key management personnel
of RHC; and
(f) All other matters contemplated by the transaction,
including the refinancing of the 11% Mortgage Notes.
10. No Shop; RHC board Fiduciary Duty; First Refusal;
Break-Up Fee.
(a) Upon the execution of the Merger Agreement following
approval by RHC's Board, RHC will not actively seek to enter into a merger or
similar transaction ("Alternative Transaction") with a third party, subject,
however, to the fiduciary duty of RHC's board to entertain an Alternative
Transaction, if the same will provide RHC's shareholders with a per share
purchase price which is higher (the amount of such excess in the per share
purchase price being referred to as the "Spread") than the Per Share Purchase
Price.
(b) Newco shall have the right (the "First Refusal Right") for
30 days after receipt of notice of an Alternative Transaction and by written
notice to RHC's Board to increase the Per Share Purchase Price in the amount of
the Spread. The First Refusal Right shall expire on the earliest to occur of (i)
termination of the Merger Agreement or (ii) April 1, 1998 (unless otherwise
extended under the terms of the Merger Agreement).
<PAGE>
(c) If Newco shall fail to exercise its First Refusal Right
(i) at the Closing of an Alternative Transaction, RHC will pay Newco and/or Mr.
Paulson an aggregate amount equal to 3% of the purchase price for the equity of
RHC which is paid in the Alternative Transaction and (ii) upon the execution by
RHC of definitive agreements with respect to an Alternative Transaction or the
approval or recommendation of an Alternative Transaction by RHC's Board of
Directors, directly or indirectly, RHC will reimburse Newco and Mr. Paulson for
the documented out-of-pocket expenses in connection with the transaction
contemplated by this letter of intent and the Merger, which shall have been
incurred from April 15, 1997.
11. Publicity. Neither RHC nor Newco will make any public
announcement about the Merger or related matters without the prior approval of
the other party, subject, however, to RHC's obligation as a public company to
make public disclosure of certain matters. In such event, Newco's counsel will
be given prior notice and the ability to comment on RHC's announcement, to the
extent practicable.
12. Confidentiality. Newco and its authorized representatives
shall keep all information supplied or made available to Newco in confidence and
shall not disclose the same to any party other than its employees and advisors
on a need to know basis and only for purposes of evaluating the transaction
described in this letter. Newco will not use such information except for
evaluating such transaction. If the Merger is not consummated, Newco shall
return to RHC any information provided to Newco.
13. Expenses. Each of the parties will bear its own e
xpenses except as otherwise provided in Paragraph 10(c) above.
14. No Obligation. Except as specified in Paragraphs 11, 12
and 13 above, this letter of intent is not meant to be binding upon the parties
hereto. Neither RHC nor Newco will be under any obligation to the other for
whatever reason, including any fact or circumstance which may have been or may
be made or become available to Newco or Paulson with respect to RHC or any other
fact or circumstance, unless and until the Merger Agreement is executed and
delivered by the parties thereto. Any transaction would be subject to, among
other things, completion of due diligence satisfactory to Newco, negotiation and
execution of the Merger Agreement, shareholder approval and receipt of all other
material consents, including an option and voting agreement from the Major RHC
Shareholders.
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If the foregoing is in accordance with your understanding,
please sign and return the enclosed copy prior to the close of business on May
15, 1997.
Very truly yours,
NEWCO RIVIERA HOLDINGS CORPORATION
By:__________________________ ____________________________
Allen E. Paulson William L. Westerman,
Chairman and Chief
Executive Officer
