As filed with the Securities and Exchange Commission on September 10, 1997.
Registration Statement No. 333-
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------
Form S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------------
RIVIERA HOLDINGS CORPORATION
(Exact Name of Registrant as specified in its charter)
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<CAPTION>
Nevada 6719 88-0296885
<S> <C> <C>
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
---------------------------
2901 Las Vegas Boulevard South
Las Vegas, Nevada 89109
(702) 734-5110
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
--------------------------
See Table of Additional Registrants below
--------------------------
WILLIAM L. WESTERMAN
2901 Las Vegas Boulevard South
Las Vegas, Nevada 89109
(702) 734-5110
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
--------------------------
With a copy to:
Fredric J. Klink
Dechert Price & Rhoads
30 Rockefeller Plaza
New York, NY 10112
(212) 698-3500
--------------------------
Approximate date of commencement of proposed
sale to the public: As soon as practicable after the
effective date of this Registration Statement.
--------------------------
If the securities being registered on this form are to be offered in
connection with the formation of a holding company and there is
compliance with General Instruction G, check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------------------------
Title of Each Class of Amount to be Proposed Maximum Offering Proposed Maximum Aggregate Amount of
Securities to be Registered Registered Price Per Unit Offering Price Registration Fee(1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10% First Mortgage Notes
due 2004 $175,000,000 100% $175,000,000(2) $53,031
- -----------------------------------------------------------------------------------------------------------------------------------
Subsidiary Guarantees $175,000,000 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
(1) Calculated in accordance with Rule 457(o) of the Securities Act of 1933,
as amended.
(2) Estimated solely for purposes of calculating the registration fee.
</TABLE>
--------------------------
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
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RIVIERA HOLDINGS CORPORATION
Table of Additional Registrants
State or IRS
Other Primary Standard Employer
Jurisdiction of Industrial Classification Identification
Name Incorporation Code Number No.
---- --------------- ------------------------- --------------
<S> <C> <C> <C>
Riviera Operating Corporation Nevada 7011, 7993, 7999 88-0296874
Riviera Gaming Management, Inc. Nevada 8741 88-0357130
Riviera Gaming Management-Elsinore, Inc. Nevada 8741 88-0357131
Riviera Gaming Management of Colorado Inc. Colorado 7993, 7999 86-0874635
</TABLE>
The address, including zip code, and telephone number, including area
code, of the principal offices of the additional registrants listed above (the
"Additional Registrants") is: 2901 Las Vegas Boulevard South, Las Vegas, Nevada
89109; the telephone number at that address is (702) 734-5110.
<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 10, 1997
PROSPECTUS
OFFER TO EXCHANGE
10% First Mortgage Notes due 2004
for all outstanding
10% First Mortgage Notes due 2004
of
RIVIERA HOLDINGS CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT ___ P.M.,
______ TIME, ON _____________, 1997, UNLESS EXTENDED
---------------
Information contained herein is subject to completion or
amendment. A registration statement relating to these
securities has been filed with the securities and exchange
commission. These securities may not be sold nor may offers to
buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an
offer to sell or the solicitation of an offer to buy nor shall
there be any sale of these securities in any state in which
such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any
such state.
Riviera Holdings Corporation, a Nevada corporation (the "Company"), hereby
offers to exchange an aggregate principal amount of up to $175,000,000 of its
10% First Mortgage Notes due 2004 (the "New Notes") for a like principal amount
of its 10% First Mortgage Notes due 2004 (the "Existing Notes") outstanding on
the date hereof upon the terms and subject to the conditions set forth in this
Prospectus and in the accompanying letter of transmittal (the "Letter of
Transmittal" and, together with this Prospectus, the "Exchange Offer"). The New
Notes and the Existing Notes are hereinafter collectively referred to as the
"Notes." The terms of the New Notes are identical in all material respects to
those of the Existing Notes, except that (i) the exchange will have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
and hence the New Notes will not bear legends restricting the transfer thereof,
and (ii) holders of the New Notes will not be entitled to certain rights of
holders of the Existing Notes under the Registration Rights Agreement (as
defined), which rights will terminate upon the consummation of the Exchange
Offer. The New Notes will be issued pursuant to, and will be entitled to the
benefits of, the Indenture (as defined) governing the Existing Notes.
The New Notes will bear interest from and including the date of
consummation of the Exchange Offer. Interest on the New Notes will be payable
semi-annually on February 15 and August 15 of each year, commencing February 15,
1998. Additionally, interest on the New Notes will accrue from the last interest
payment date on which interest was paid on the Existing Notes surrendered in
exchange therefor or, if no interest has been paid on the Existing Notes, from
the date of original issue of the Existing Notes. Holders whose Existing Notes
are accepted for exchange will be deemed to have waived the right to receive any
interest accrued on the Existing Notes.
The New Notes will mature on August 15, 2004. The New Notes will be
redeemable at the option of the Company, in whole or in part, on or after August
15, 2001, at the redemption prices set forth herein, plus accrued and unpaid
interest, if any, to the date of redemption. Upon a Change of Control (as
defined), subject to certain exceptions relating to the Merger (as defined), the
Company will be required to offer to repurchase all of the outstanding New Notes
at 101% of the principal amount thereof, plus accrued and unpaid interest, if
any, to the date of repurchase.
The New Notes will be senior secured obligations of the Company and will
rank pari passu in right of payment with all senior indebtedness of the Company
and senior in right of payment to all subordinated indebtedness of the Company.
The New Notes will be unconditionally guaranteed by existing and future
Restricted Subsidiaries (as defined) of the Company (the "Subsidiary
Guarantees"). The Subsidiary Guarantees will be senior secured obligations of
each Restricted Subsidiary and will rank pari passu in right of payment with all
senior indebtedness of such Restricted Subsidiary. The obligations under the New
Notes and the Subsidiary Guarantees will be secured by a first priority security
interest, subject to Permitted Liens (as defined) and certain exclusions, in the
land and improvements comprising the Riviera Hotel & Casino, furnitures,
fixtures and equipment (excluding Gaming Equipment (as defined)), contract
rights, trademarks and certain other personal property (excluding inventory and
accounts receivable) and a pledge of all of the capital stock of the Restricted
Subsidiaries. See "Capitalization."
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company and the Guarantors (as defined) contained in the
Registration Rights Agreement, dated as of August 13, 1997 (the "Registration
Rights Agreement") by and between the Company, the Guarantors, and Jefferies &
Company, Inc. and Ladenberg Thalmann & Co. Inc. (the "Initial Purchasers") with
respect to the initial sale of the Existing Notes.
The Company will not receive any proceeds from the Exchange Offer. The
Company will pay all the expenses incident to the Exchange Offer. Tenders of
Existing Notes pursuant to the Exchange Offer may be withdrawn at any time prior
to the Expiration Date (as defined) for the Exchange Offer. In the event the
Company terminates the Exchange Offer and does not accept for exchange any
Existing Notes with respect to the Exchange Offer, the Company will promptly
return such Existing Notes to the holders thereof. See "The Exchange Offer."
(Continued on following page)
---------------
See "Risk Factors" commencing on page 10 for a discussion of certain
matters that should be considered by prospective investors in the Notes.
---------------
NONE OF THE NEVADA GAMING COMMISSION, THE NEVADA STATE GAMING CONTROL BOARD OR
ANY OTHER GAMING AUTHORITY HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
OFFERING CIRCULAR OR THE INVESTMENT MERITS OF THE NOTES OFFERED
HEREBY. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------
The date of this Prospectus is , 1997
<PAGE>
The Company is offering the New Notes in reliance on certain interpretive
letters issued by the staff of the Securities and Exchange Commission (the
"Commission") to third parties in unrelated transactions. Based on such
interpretive letters, the Company is of the view that the New Notes issued
pursuant to this Exchange Offer in exchange for Existing Notes may be offered
for resale, resold and otherwise transferred by a holder thereof (other than (i)
a broker-dealer who purchases such New Notes directly from the Company to resell
pursuant to Rule 144A or any other available exemption under the Securities Act
or (ii) a person that is an affiliate of the Company within the meaning of Rule
405 under the Securities Act), without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that the holder
is acquiring the New Notes in the ordinary course of its business and is not
participating, and had no arrangement or understanding with any person to
participate, in the distribution of the New Notes. Holders of Existing Notes
wishing to accept the Exchange Offer must represent to the Company, as required
by the Registration Rights Agreement, that such conditions have been met. Each
broker-dealer that receives the New Notes for its own account in exchange for
the Existing Notes, where such Existing Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. The Company believes that none of the
registered holders of the Existing Notes is an affiliate (as such term is
defined in Rule 405 under the Securities Act) of the Company.
Prior to the Exchange Offer, there has been no public market for the
Existing Notes. If a market for the New Notes should develop, such New Notes
could trade at a discount from their principal amount. The Company currently
does not intend to list the New Notes on any securities exchange or to seek
approval for quotation through any automated quotation system, and no active
public market for the New Notes is currently anticipated. There can be no
assurance that an active public market for the New Notes will develop. See "Risk
Factors--Absence of Public Market for the Notes."
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of New Notes
received in exchange for Existing Notes where such Existing Notes were acquired
by such broker-dealer as a result of market-making activities or other trading
activities. The Company has indicated its intention to make this Prospectus (as
it may be amended or supplemented) available to any broker-dealer for use in
connection with any such resale for a period of one year following the Effective
Date (as defined). See "Plan of Distribution."
The Exchange Offer is not conditioned upon any minimum principal amount of
Existing Notes being tendered for exchange pursuant to the Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF EXISTING NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on
Form S-4 under the Securities Act with respect to the New Notes offered hereby
(the "Registration Statement"). As permitted by the rules and regulations of the
Commission, this Prospectus omits certain information, exhibits and undertakings
contained in the Registration Statement. For further information with respect to
the Company and the New Notes offered hereby, reference is made to the
Registration Statement, including the exhibits thereto and the financial
statements, notes and schedules filed as a part thereof. The Company is subject
to the information requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and in accordance therewith files periodic
reports, proxy statements and other information with the Commission. Such
reports, proxy statements and other information filed by the Company with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, NW, Washington, D.C. 20549,
and at the Commission's Regional Offices at 7 World Trade Center, New York, New
York 10048 and Citicorp Center, 500 Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can be obtained upon written request
addressed to the Commission, Public Reference Section, 450 Fifth Street, NW,
Washington, D.C. 20549, at prescribed rates. The Commission also maintains a Web
site at http://www.sec.gov that contains reports and other information regarding
registrants that file electronically with the Commission. In addition, material
filed by the Company may be inspected at the offices of the American Stock
Exchange at 86 Trinity Place, New York, New York 10006. Statements contained in
this Prospectus as to the contents of any contract or other document are not
necessarily complete, and in each instance reference is made to the copy of such
contract or document filed as an exhibit to the Registration Statement, each
such statement being qualified in all respects by such reference.
In the event that the Company ceases to be subject to the informational
requirements of the Exchange Act, the Company has agreed that, so long as any
Notes remain outstanding, it will file with the Commission (but only if the
Commission at such time is accepting such voluntary filings) and distribute to
holders of the Notes, copies of the financial information that would have been
contained in such annual reports and quarterly reports, including management's
discussion and analysis of financial condition and results of operations, that
would have been required to be filed with the Commission pursuant to the
Exchange Act. The Company will also furnish such other reports as it may
determine or as may be required by law.
---------------
This Prospectus includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. All statements other than statements of historical facts included in this
Prospectus, including, without limitation, the statements under "Summary,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business" and located elsewhere herein regarding industry
prospects and the Company's financial position are forward-looking statements.
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to have been correct. Important factors that could cause
actual results to differ materially from the Company's expectations ("Cautionary
Statements") are disclosed in the Prospectus, including, without limitation, in
conjunction with the forward-looking statements in this Prospectus under "Risk
Factors."
All subsequent written and oral forward-looking statements attributable
to the Company or persons acting on its behalf are expressly qualified in their
entirety by the Cautionary Statements.
<PAGE>
SUMMARY
The following summary is qualified in its entirety by, and should be
read in conjunction with, the more detailed information and financial statements
(including notes thereto) included elsewhere in this Prospectus. Unless
otherwise indicated or the context otherwise requires, references to the
"Company" are to Riviera Holdings Corporation and its subsidiaries including
Riviera Operating Corporation, a Nevada corporation ("ROC"). This Prospectus
contains forward-looking information that involves risks and uncertainties, and
such information is subject to the assumptions set forth in connection therewith
and the information contained or incorporated by reference herein. Holders of
Existing Notes should carefully consider the information set forth under the
heading "Risk Factors."
The Company
The Company owns and operates the Riviera Hotel & Casino (the
"Riviera") located on Las Vegas Boulevard (the "Strip") in Las Vegas, Nevada.
Opened in 1955, the Riviera has developed a long-standing reputation for
delivering high quality, traditional Las Vegas-style gaming and entertainment.
The Riviera is situated on a 26-acre site, located across the Strip from Circus
Circus and across Paradise Road from the Las Vegas Hilton and the Las Vegas
Convention Center. The property features approximately 2,100 hotel rooms,
including 169 suites, 105,000 square feet of casino space, one of the largest
convention, meeting and banquet facilities in Las Vegas, four full-service
restaurants, a large buffet, four showrooms, an entertainment lounge, 43 food
and retail concessions and approximately 2,900 parking spaces. The casino
contains approximately 1,300 slot machines, 50 gaming tables, a keno lounge and
a 200-seat race and sports book. The Riviera offers one of the most extensive
entertainment programs in Las Vegas, including the award winning show,
Splash(R). The Company, through its gaming management subsidiary, also manages
the Four Queens Hotel and Casino ("Four Queens") on Fremont Street in downtown
Las Vegas.
Since 1992, the Riviera's management team has achieved consistent
growth in EBITDA (as defined) and profit margins. EBITDA has increased over 44%
from $21.8 million in 1992 to $31.5 million in 1996 and EBITDA margins have
improved from 15.1% to 19.2% over the same period. The Company achieved this
growth through the implementation of a number of strategic initiatives that
included (i) refocusing its marketing strategy from "high-rollers" to adult
mid-level gaming customers, a niche that management believes has been
underserved, (ii) focusing on conventioneers who pay higher room rates, causing
Riviera's average daily room rate ("ADR") to increase from $47 in 1992 to $57 in
1996, (iii) aggressively marketing its hotel facilities resulting in occupancy
rates growing from 90.6% in 1992 to 98.2% in 1996, (iv) emphasizing higher
margin slot play which increased slot revenue by 33.0% from 1992 to 1996 and (v)
investing approximately $47 million in capital improvements since 1992.
Management believes that it has also improved the stability of EBITDA by
providing a broad entertainment experience (1996 non-gaming revenues: 55% vs.
47% for other casinos on the Strip), focusing on conventioneers (approximately
30% of mid-week room nights pre-sold through June 1999) and developing a repeat
and loyal customer base through proprietary database marketing.
Growth Opportunities
The Company seeks to continue its growth in EBITDA and profits by
maximizing the potential of the Riviera's prime Strip frontage and capitalizing
on the proven strength of its management team by leveraging its talents across
multiple properties. To achieve this goal, the Company is pursuing the following
opportunities:
<PAGE>
Riviera Expansion. By the end of 1997, management expects to have
completed the upgrade of the slot machines and refurbished all of the hotel
rooms at the Riviera. To continue capitalizing on the Riviera's prime Strip
frontage, the Company is developing the Nickel Plaza, a new 10,000 square-foot
gaming area fronting the Strip complete with 350 slot machines, a bar, snack bar
and souvenir shop, which is expected to be completed by December 1997. Nickel
Plaza will be ideally positioned to attract the additional walk-in traffic from
the 1,000 newly built rooms directly across the Strip at Circus Circus and the
expansions of the Las Vegas Hilton and the Las Vegas Convention Center.
Management expects Nickel Plaza will be developed for an estimated cost of $5
million. To maintain and enhance its core conventioneer customer base, the
Company also plans to expand its convention center from 100,000 square feet to
158,000 square feet by constructing new state-of-the-art, multi-level,
convention, meeting and banquet facilities. Construction is expected to commence
in the fourth quarter of 1997 and be completed by the end of the third quarter
of 1998. Management believes this expansion, which is estimated to cost
approximately $15 million, will further solidify the Riviera as one of the
premier convention sites in Las Vegas. In addition, the Company owns
approximately six acres of contiguous property which is available for future
expansion.
The Black Hawk Project. As part of the Company's strategy to diversify
its revenue base and leverage both the Riviera name and its management team, the
Company pursues development opportunities in both established and emerging
gaming markets. The Company has acquired for $15 million what management
believes to be the premier gaming site in Colorado. The Company intends to use
this site to construct one of the largest gaming facilities in the adjacent
gaming cities of Black Hawk and Central City, Colorado (the "Black Hawk
Project"). The Black Hawk Project is expected to feature 1,000 slot machines, 14
table games, a 500 space covered parking garage and entertainment and food
service amenities. Management believes this market has attractive fundamentals,
including (i) gaming currently limited to Black Hawk/Central City and Cripple
Creek in Colorado, (ii) consistent gaming revenue growth since 1992 to over $300
million in 1996, (iii) slot machine dominated market due to statutory limited
stakes, (iv) one hour drive from central Denver and (v) approximately 2.3
million adults residing within 100 miles of Black Hawk. Management believes that
the proposed Riviera facility will be highly successful due to the following
attributes: (i) premier location: it will be the first gaming site encountered
when arriving from Denver, (ii) size and quality: it will be one of the largest
casinos in the market complete with restaurant and entertainment options and
(iii) superior parking: it will have onsite, covered self-parking, which is
critical in this market where parking is currently extremely limited. The Black
Hawk Project is an attractive investment opportunity that allows the Company to
create a multi-jurisdictional gaming company. The Company currently estimates
that total costs for completion of the Black Hawk Project will be approximately
$55 million, $15 million of which was provided by the net proceeds of the sale
of the Existing Notes to purchase the Black Hawk Land (as defined), and the
remainder of which will be derived from a combination of third party financing
and additional investment by the Company, including up to an additional $10
million of the net proceeds from the sale of the Existing Notes. Site clearance
work will begin in the fall of 1997, with the opening of the casino scheduled
for the spring of 1999.
Casino/Hotel Management Contracts. The Company believes that there is
increasing demand for the services of skilled gaming and hospitality
professionals. In order to capitalize on management's reputation and experience
as successful casino operators, the Company formed Riviera Gaming Management,
Inc. ("RGM") for the primary purpose of obtaining casino management contracts
with casinos/hotels in Nevada and other jurisdictions. Since August 1996, RGM
has managed the Four Queens located adjacent to the Golden Nugget on Fremont
Street in downtown Las Vegas. Under the Four Queens management contract, RGM
receives a guaranteed minimum management fee plus additional compensation based
on EBITDA improvement of the Four Queens, and warrants to purchase 20% (on a
fully diluted basis) of the common stock of the Four Queens' parent, Elsinore
Corporation ("Elsinore"). Such management contract provides significant revenues
and upside equity potential with minimal additional
2
<PAGE>
overhead and capital expenditure. Under RGM, Four Queens' EBITDA improved by
more than 40% in the twelve months ended June 30, 1997, compared to the same
period in 1996 and generated approximately $0.9 million in management fees for
the Company. Management is continually evaluating opportunities to manage other
casinos/hotels.
The Company's principal executive offices are located at 2901 Las Vegas
Boulevard South, Las Vegas, Nevada 89109, and its telephone number is (702)
734-5110.
The Proposed Merger
The Company intends to execute in the near future an Agreement and Plan
of Merger (the "Merger Agreement") among the Company and certain entities
controlled by Allen E. Paulson, a California businessman, pursuant to which one
of such entities would be merged with and into the Company (the "Merger"). The
closing of the Merger would be subject to a number of conditions, including (i)
approval by the affirmative vote of the holders of at least 60% of all issued
and outstanding shares of Common Stock, par value $.001 per share (the "Common
Stock"), of the Company (excluding the shares of Common Stock owned by Mr.
Paulson or his affiliates) at a meeting scheduled to be held this fall, (ii) Mr.
Paulson's licensure by the Nevada Gaming Authorities (as defined), (iii) the
absence of any regulation, judgment or other law that prohibits the consummation
of the Merger or would prohibit or limit the Company's ownership or control of a
material portion of the Company's business or assets following the Merger, and
(iv) the absence of any material adverse change in the Company's cumulative
EBITDA for the period commencing on April 1, 1997 through and including the most
recent month prior to such closing for which the Company's financial statements
are available. The Company expects that the holders of approximately 56% of the
Company's Common Stock will enter into an option and voting agreement
simultaneously with the execution of the Merger Agreement and agree to vote for
the Merger. The terms of the Merger Agreement are currently being negotiated.
Accordingly, there can be no assurance that the Merger Agreement or such option
and voting agreement will be executed or that the Merger will be consummated.
The Transactions
The Existing Notes were issued on August 13, 1997. The net proceeds
from the sale of the Existing Notes were approximately $165.8 million, a portion
of which were used as follows: (i) $109.8 million was used to defease the
Company's 11% First Mortgage Notes due 2002 (the "11% First Mortgage Notes"),
(ii) $4.5 million was used to retire the Company's Class 13/14 Unsecured
Promissory Note (the "Unsecured Note") and (iii) $7.0 million was used to pay
fees and expenses relating to the foregoing as well as the sale of the Existing
Notes. In addition, the Company has used $15 million of the net proceeds to
acquire the Black Hawk Land. The Company also intends to use the remaining net
proceeds from the sale of the Existing Notes to fund the development of Nickel
Plaza and the expansion of the convention center, and, if necessary, to provide
additional financing for the Black Hawk Project. To the extent that the
additional proceeds are not used for the development of the Black Hawk Project,
the unused proceeds will be used for the Company's general business purposes.
The issuance and sale of the Existing Notes and the application of the net
proceeds therefrom, including the payment of related transaction fees and
expenses and the defeasance of the 11% First Mortgage Notes are collectively
referred to herein as the "Transactions."
3
<PAGE>
The Exchange Offer
<TABLE>
<CAPTION>
<S> <C>
Securities Offered............................ Up to $175.0 million aggregate principal amount of 10% First
Mortgage Notes due 2004. The terms of the New Notes and Existing
Notes are identical in all material respects, except for certain
transfer restrictions and registration rights relating to the
Existing Notes.
The Exchange Offer............................ The New Notes are being offered in exchange for a like principal
amount of Existing Notes. Existing Notes may be exchanged only in
integral multiples of $1,000. The issuance of the New Notes is
intended to satisfy obligations of the Company contained in the
Registration Rights Agreement.
Expiration Date; Withdrawal Tender............ The Exchange Offer will expire at _____p.m. _________ time, on
________, 1997, or such later date and time to which it may be
extended by the Company. The tender of Existing Notes pursuant to
the Exchange Offer may be withdrawn at any time prior to the
Expiration Date. Any Existing Notes not accepted for exchange for
any reason will be returned without expense to the tendering
holder thereof as promptly as practicable after the expiration or
termination of the Exchange Offer.
Accrued Interest on the New Notes
and the Existing Notes...................... The New Notes will bear interest from and including the date of
consummation of the Exchange Offer. Additionally, interest on the
New Notes will accrue from the last interest payment date on which
interest was paid on the Existing Notes surrendered in exchange
therefor or, if no interest has been paid on the Existing Notes,
from the date of original issue of the Existing Notes. Holders
whose Existing Notes are accepted for exchange will be deemed to
have waived the right to receive any interest accrued on the
Existing Notes.
Certain Conditions to the
Exchange Offer................................ The Company's obligation to accept for exchange, or to issue New
Notes in exchange for, any Existing Notes is subject to certain
customary conditions relating to compliance with any applicable
law or any applicable interpretation by the staff of the
Commission, the receipt of any applicable governmental approvals
and the absence of any actions or proceedings of any governmental
agency or court which could materially impair the Company's
ability to consummate the Exchange Offer. The Company currently
expects that each of the conditions will be satisfied and that no
waivers will be necessary. See "The Exchange Offer--Certain
Conditions to the Exchange Offer."
4
<PAGE>
Procedures for Tendering
Existing Notes................................ Each holder of Existing Notes wishing to accept the Exchange Offer
must complete, sign and date the Letter of Transmittal, or a
facsimile thereof, in accordance with the instructions contained
herein and therein, and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with such Existing Notes
and any other required documentation, to the Exchange Agent (as
defined) at the address set forth herein. Subject to the
satisfaction or waiver of the conditions to the Exchange Offer,
the Company will accept for exchange any and all Existing Notes
which are properly tendered in the Exchange Offer prior to the
Expiration Date. See "The Exchange Offer--Procedures for
Tendering Existing Notes."
Special Procedures for
Beneficial Owners............................. Any beneficial owner whose Existing Notes are registered in the
name of a broker, dealer, commercial bank, trust company or other
nominee and who wishes to tender such Existing Notes in the
Exchange Offer should contact such registered holder promptly and
instruct such registered holder to tender on such beneficial
owner's behalf. See "The Exchange Offer --Procedures for Tendering
Existing Notes." If such bene-ficial owner wishes to tender on
such owner's own behalf, such owner must, prior to completing and
executing the Letter of Transmittal and delivering such owner's
Existing Notes, either make appropriate arrangements to register
ownership of the Existing Notes in such owner's name or obtain a
properly completed bond power from the registered holder. The
transfer of registered ownership may take considerable time and
may not be able to be completed prior to the Expiration Date.
Guaranteed Delivery Procedures................ Holders of Existing Notes who wish to tender their Existing Notes
and whose Existing Notes are not immediately available or who
cannot deliver their Existing Notes, the Letter of Transmittal or
any other document required by the Letter of Transmittal to the
Exchange Agent prior to the Expiration Date, must tender their
Existing Notes according to the guaranteed delivery procedures set
forth in "The Exchange Offer--Guaranteed Delivery Procedures."
Withdrawal Rights............................. Tenders of Existing Notes may be withdrawn at any time prior to
the Expiration Date. See "The Exchange Offer--Withdrawal of
Tenders."
Certain Federal Income Tax
Considerations................................ For a discussion of certain federal income tax considerations
relating to the exchange of the Notes, see "Certain Federal Income
Tax Considerations."
5
<PAGE>
Use of Proceeds............................... The Company will not receive any proceeds from the Exchange Offer.
Exchange Agent................................ Norwest Bank Minnesota, N.A. (the "Exchange Agent") is serving as
the Exchange Agent in connection with Exchange Offer.
</TABLE>
Consequences of Exchanging Existing Notes Pursuant to the Exchange Offer
Based on certain interpretive letters issued by the staff of the
Commission to third parties in unrelated transactions, the Company is of the
view that the New Notes issued pursuant to this Exchange Offer in exchange for
Existing Notes may be offered for resale, resold and otherwise transferred by a
holder thereof (other than (i) a broker-dealer who purchases such New Notes
directly from the Company to resell pursuant to Rule 144A or any other available
exemption under the Securities Act or (ii) a person that is an affiliate of the
Company within the meaning of Rule 405 under the Securities Act), without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that the holder is acquiring the New Notes in the
ordinary course of its business and is not participating, and had no arrangement
or understanding with any person to participate, in the distribution of the New
Notes. Holders of Existing Notes wishing to accept the Exchange Offer must
represent to the Company, as required by the Registration Rights Agreement, that
such conditions have been met. Each broker-dealer that receives the New Notes
for its own account in exchange for the Existing Notes, where such Existing
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Existing Notes where such
Existing Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has indicated its intention
to make this Prospectus (as it may be amended or supplemented) available to any
broker-dealer for use in connection with any such resale for a period of one
year following the date the Registration Statement is declared effective by the
Commission (the "Effective Date"). See "Plan of Distribution."
In addition, to comply with the securities laws of certain
jurisdictions, if applicable, the New Notes may not be offered or sold unless
they have been registered or qualified for sale in such jurisdictions or in
compliance with an available exemption from registration or qualification. The
Company has agreed, pursuant to the Registration Rights Agreement and subject to
certain specified limitations therein, to register or qualify the New Notes for
offer or sale under the securities or blue sky laws of such jurisdictions as are
necessary to permit consummation of the Exhcange Offer. If a holder of Existing
Notes does not exchange such Existing Notes for New Notes pursuant to the
Exchange Offer, such Existing Notes will continue to be subject to the
restrictions on transfer contained in the legend thereon. In general, the
Existing Notes may not be offered or sold, unless registered under the
Securities Act, except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. Holders of
Existing Notes do not have any appraisal or dissenters' rights under Nevada
Corporation Law in connection with the Exchange Offer. See "The Exchange
Offer--Consequences of Failure to Exchange; Resales of New Notes."
The Existing Notes are currently eligible for trading in the Private
Offerings, Resales and Trading through Automated Linkages ("PORTAL") market.
Following commencement of the Exchange Offer but
6
<PAGE>
prior to its consummation, the Existing Notes may continue to be traded in the
PORTAL market. Following consummation of the Exchange Offer, the New Notes will
not be eligible for PORTAL trading.
The New Notes
The terms of the New Notes are identical in all material respects to
the Existing Notes, except for certain transfer restrictions and registration
rights relating to the Existing Notes.
<TABLE>
<CAPTION>
<S> <C>
Securities Offered............................ Up to $175.0 million in aggregate principal amount of 10% First
Mortgage Notes due 2004.
Maturity Date................................. August 15, 2004.
Interest...................................... The New Notes will bear interest at a rate of 10% per annum,
payable semi-annually on February 15 and August 15 of each year,
commencing February 15, 1998.
Ranking....................................... The New Notes will be senior secured obligations of the Company
and will rank pari passu in right of payment with any existing and
future senior indebtedness of the Company and senior in right of
payment to any existing and future subordinated indebtedness of the
Company. At June 30, 1997, after giving effect to the Transactions
and the redemption of the 11% First Mortgage Notes, the Company and
its subsidiaries would have had outstanding senior indebtedness
(including the Notes) of approximately $173.9 million.
Guarantees.................................... The New Notes will be unconditionally guaranteed by all existing
and future Restricted Subsidiaries (as defined) of the Company,
which will not initially include Riviera Black Hawk, Inc., a
Colorado corporation that owns the Black Hawk Land and is expected
to hold any required Colorado gaming licenses ("Black Hawk
Operating Company"). See "Description of Notes-- Security." The
Subsidiary Guarantees will be senior secured obligations of the
respective Restricted Subsidiaries and will rank pari passu in
right of payment to all senior indebtedness of the Restricted
Subsidiaries. At June 30, 1997, Black Hawk Operating Company had no
assets, liabilities or operations and separate financial statements
of the Guarantors have therefore not been included in this
Prospectus.
Security...................................... The New Notes and the Subsidiary Guarantees will be secured by a
first priority security interest, subject to Permitted Liens, in
the land and improvements comprising the Riviera (provided that up
to six undeveloped acres of the land may be released from the
mortgage for purpose of future developments), furnitures, fixtures
and equipment (excluding Gaming Equipment), contract rights,
trademarks, and certain other personal property (excluding
inventory and accounts receivable) and, subject to required
approvals, a pledge of all of the capital stock of the Restricted
Subsidiaries. See "Description of Notes-- Security."
7
<PAGE>
Optional Redemption........................... The New Notes will be redeemable at the option of the Company, in
whole or in part, on or after August 15, 2001, at the redemption
prices set forth herein, plus accrued and unpaid interest, if any,
to the date of redemption. The Company will have the option to
redeem the New Notes at any time to maintain or obtain any Gaming
License (as defined) under any applicable Gaming Law (as defined).
Notwithstanding the foregoing, at any time or from time to time
prior to August 15, 2000, the Company may redeem up to one-third
of the aggregate principal amount of the New Notes originally
issued at a redemption price equal to 110% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of
redemption with the net proceeds of an offering of common stock of
the Company, provided that at least $116.7 million of the
aggregate principal amount of the New Notes remain outstanding
immediately thereafter. See "Description of Notes -- Optional
Redemption."
Mandatory Redemption.......................... None.
Change of Control............................. Upon the occurrence of a Change of Control (except as a result of
the Merger), the Company will be required to offer to repurchase
all of the outstanding New Notes at 101% of the principal amount
thereof, together with accrued and unpaid interest, if any, to the
date of repurchase. See "Description of Notes-- Repurchase at the
Option of Holders."
Certain Covenants............................. The Indenture relating to the Notes contains certain covenants,
including covenants which limit the ability of the Company and its
Restricted Subsidiaries, subject to certain exceptions, to: (i)
incur additional indebtedness and issue preferred stock; (ii) pay
dividends or other distributions, repurchase capital stock or
other equity interests or subordinated indebtedness; (iii) enter
into certain transactions with affiliates; (iv) create certain
liens; (v) sell certain assets; and (vi) enter into certain
mergers and consolidations. See "Description of Notes--Certain
Covenants."
</TABLE>
For a more detailed discussion of the terms of the New Notes, see
"Description of Notes."
Risk Factors
Holders of Existing Notes should carefully consider all of the
information set forth in this Prospectus and, in particular, should evaluate the
specific factors under "Risk Factors" beginning on page 10 in connection with
the Exchange Offer.
8
<PAGE>
Summary Financial and Operating Data
The summary historical financial data set forth below have been derived
from the audited financial statements of the Company and, prior to the Company's
emergence from bankruptcy in June 1993, the Hotel and Casino Division of
Riviera, Inc., the Company's predecessor, for the fiscal year ended December 31,
1992, each of the three fiscal years in the period ended December 31, 1996 and
the fiscal years ended June 30, 1993 and December 31, 1993. The results for the
three months and six months ended June 30, 1996 and 1997 and as of June 30, 1997
are derived from the unaudited financial statements and notes thereto of the
Company and, in the opinion of management, reflect all adjustments, consisting
of only normal recurring adjustments, necessary to present fairly information
set forth therein. The results for the three months and six months ended June
30, 1996 and 1997 are not necessarily indicative of the results expected for any
other interim period or for the full year. The pro forma data set forth below
gives effect to the Transactions had they occurred at the beginning of the
relevant period. The following information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and notes thereto included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
Year Six Months Ended Year Ended Six Months Three Months
Ended ----------------- Dec. 31, Years Ended December 31, Ended June 30, Ended June 30,
Dec. 31, June 30, Dec. 31, 1993 ---------------------------- ---------------- ----------------
1992 1993 1993 Combined 1994 1995 1996 1996 1997 1996 1997
-------- -------- ------- -------- -------- -------- -------- ------- ------- ------- -------
(Pre- (Pre- (Suc-
decessor) decessor) cessor)
(Dollars in Thousands except Operating Data
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Net revenues............ $144,502 $72,702 $76,221 $148,923 $153,921 $151,145 $164,409 $83,273 $80,103 $41,552 $40,622
Income (loss) from
operations.............. (76,608)(1) 8,260 8,767 17,027 19,919 20,980 23,281 12,525 10,855 5,984 5,774
Net income.............. (80,905)(1) 5,628 2,607 8,235 4,790 6,344 8,440 4,616 3,003 2,145 2,019
Other Data:
EBITDA(2)............... $21,843 $10,882 $11,166 $22,048 $25,593 $27,791 $31,493 $16,387 $15,865 $7,958 $8,352
EBITDA margin........... 15.1% 15.0% 14.6% 14.8% 16.6% 18.4% 19.2% 19.7% 19.8% 19.2% 20.6%
Cash flows from
operating activities.. $13,130 $8,517 $ 766 $ 9,283 $16,372 $16,740 $18,290 $8,033 $8,434 $ 978 $ 397
Cash flows used in
investing activities.. (2,073) (1,478) (4,307) (5,785) (10,439) (8,218) (13,017) (2,560) (7,984) (1,973) (3,171)
Cash flows used in
financing activities.. (729) (2,311) (4,658) (6,969) (2,696) (2,983) (1,488) (1,352) (572) (809) (634)
Depreciation &
amortization.......... 13,230 2,622 2,399 5,021 5,674 6,811 8,212 3,862 5,010 1,974 2,578
Ratio of earnings to
fixed charges......... --(3) 2.99x(3) 1.41x 1.89x 1.60x 1.78x 2.06x 2.15x 1.76x 2.07x 2.01x
Capital expenditures.... $2,477 $1,478 $4,307 $ 5,785 $ 8,933 $ 7,836 $14,923 $5,259 $6,885 $3,025 $2,644
Pro Forma Data:
EBITDA/net interest
expense(4).............. --(4) --(4) --(4) --(4) 1.4x 1.6x 1.9x 2.0x 1.9x 1.9x 2.0x
Net debt/EBITDA(5)...... --(5) --(5) --(5) --(5) 5.7 5.0 4.2 4.0 4.2 4.1 3.9
Operating Data:
Average occupancy
rate(6)............... 90.6% 92.4% 95.0% 93.7% 97.5% 97.0% 98.2% 99.0% 98.2% 99.2% 99.2%
Average daily room
rate (ADR)............ $47.00 $51.63 $49.33 $50.42 $47.51 $54.69 $57.09 $59.03 $59.37 $56.83 $59.65
Number of slot
machines(7)........... 1,218 1,218 1,207 1,207 1,203 1,226 1,312 1,312 1,308 1,312 1,308
Number of gaming
tables(7)............. 74 70 70 70 56 56 55 55 52 55 52
</TABLE>
<TABLE>
<CAPTION>
As of December 31, As of June 30, 1997
---------------------------------------------------- -----------------------
1992 1993 1994 1995 1996 Historical As Adjusted(8)
--- ----- ----------- -------- --------- -------- ----------- --------------
(Predecessor)(Successor)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents... $16,659 $21,387 $16,423 $21,962 $25,747 $ 25,625 $ 77,308(9)
Total assets................ 145,631 143,704 151,925 157,931 167,665 168,074 226,757
Long term debt, including
current portion............. 133,255 112,677 110,489 107,822 105,878 105,305 173,855
Stockholders' equity........ (114,358) 5,148 19,938 26,282 35,251 38,508 35,574
<FN>
(1) Includes a recognized loss on the permanent impairment of assets during the bankruptcy in the amount of $85,000,000 to
record the fair market value of the property and equipment.
(2) EBITDA consists of earnings before interest, income taxes, depreciation and amortization. While EBITDA should not be construed
as a substitute for operating income or a better indicator of liquidity than cash flow from operating activities, which are
determined in accordance with generally accepted accounting principles ("GAAP"), it is included herein to provide additional
information with respect to the ability of the Company to meet its future debt service, capital expenditure and working
capital requirements. Although EBITDA is not necessarily a measure of the Company's ability to fund its cash needs, management
believes that certain investors find EBITDA to be a useful tool for measuring the ability of the Company to service its debt.
(3) The ratio for fiscal 1992 has been omitted because earnings were not sufficient to cover fixed charges. The coverage
deficiency was $80,905 ($101,882 if interest was not stayed). If interest would have been accrued on the pre-bankruptcy or
other unsecured debt for the six months ended June 30, 1993 earnings would have been inadequate to cover fixed charges by
$1,937. For the purpose of computing the ratio of earnings to fixed charges, "earnings" consist of income before fixed
charges and income taxes, adjusted to exclude interest capitalized, and "fixed charges" consist of interest cost,
amortizations of debt expense, amortization of bond discount and capitalized interest.
(4) Net interest expense represents pro forma total interest expense (excluding amortization of debt issue costs in connection
with the Transactions) less interest income as if the Transactions had occurred at the beginning of each period presented. Pro
forma numbers for those fiscal years prior to and including the bankruptcy of the Company's predecessor have not been
presented.
(5) Net debt represents total debt, as adjusted to reflect the proceeds from the Transactions, less historical cash and cash
equivalents for the dates presented and excess cash from the proceeds of the Transactions. Uses an annualized EBITDA for the
three months and six months ended June 30, 1996 and 1997. Pro forma numbers for those fiscal years prior to and including
the bankruptcy of the Company's predecessor have not been presented.
(6) Based on available rooms.
(7) Number of licensed slot machines and gaming tables at period end.
(8) As adjusted for the Transactions. See "--Transactions," "Capitalization" and "Use of Proceeds."
(9) Includes $15,000 designated for purchase of the Black Hawk Land and $20,000 designated for the development of Nickel Plaza and
the expansion of the convention center. See "Use of Proceeds."
</FN>
</TABLE>
9
<PAGE>
RISK FACTORS
Holders of Existing Notes should give careful consideration to the
specific factors set forth below and the other information set forth herein in
connection with the Exchange Offer. The Risk Factors set forth below are
generally applicable to the New Notes as well as the Existing Notes.
Significant Leverage; Ability to Service Debt
The Company is highly leveraged. At June 30, 1997, after giving effect
to the Transactions and the redemption of the 11% First Mortgage Notes, the
Company's debt would have been $173.9 million. See "Description of Certain
Indebtedness."
The Company's high degree of leverage could have important consequences
to the Holders, including, without limitation: (i) a substantial portion of the
Company's cash flow from operations will be dedicated to servicing its debt;
(ii) the covenants contained in the Company's debt documents impose certain
restrictions on the Company which, among other things, will limit its ability to
borrow additional funds; (iii) the Company's ability to obtain additional
financing in the future for working capital, capital expenditures, acquisitions,
general corporate purposes or other purposes may be impaired; and (iv) the
Company's level of debt may limit the Company's flexibility in reacting to
changes in its business environment.
The Company is a holding company and its ability to make interest and
principal payments on its obligations, including the Notes, will depend on the
future operating performance of its subsidiaries, which will be affected by
general economic conditions and financial, business and other factors, many of
which are beyond their control. The ability of the Company's subsidiaries to
make distributions to the Company is also subject to the gaming laws of Nevada
(which place limits on the amount of funds that may be transferred to the
Company and may require prior or subsequent approval for any such payments) and
other restrictions that may be imposed by gaming authorities on licensed
enterprises. Furthermore, it is expected that third party financing for the
Black Hawk Project will restrict the ability of such project to make
distributions to the Company. See "-- The Black Hawk Project." There can be no
assurance that the subsidiaries will be able to, or will be permitted to, pay to
the Company amounts necessary to enable the Company to make required principal
and interest payments on the Notes. If the Company cannot generate sufficient
cash flow from operations in the future to service its debt, it may be required
to refinance all or a portion of such debt (including the Notes), sell assets or
obtain additional financing. There can be no assurance that any of these
financing strategies could be effected on terms satisfactory to the Company.
Failure to Exchange Existing Notes
The New Notes will be issued in exchange for Existing Notes only after
timely receipt by the Exchange Agent of such Existing Notes, a properly
completed and duly executed Letter of Transmittal and all other required
documents. Therefore, holders of Existing Notes desiring to tender such Existing
Notes in exchange for New Notes should allow sufficient time to ensure timely
delivery. Neither the Exchange Agent nor the Company is under any duty to give
notification of defects or irregularities with respect to tenders of Existing
Notes for exchange. Existing Notes that are not tendered or are tendered but not
accepted will, following consummation of the Exchange Offer, continue to be
subject to the existing restrictions upon transfer thereof. In addition, any
holder of Existing Notes who tenders in the Exchange Offer for the purpose of
participating in a distribution of the New Notes will be required to comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives New
Notes for its own account in exchange for Existing Notes, where such Existing
Notes were acquired by such broker-dealer as a result of market-making
activities or any other trading activities, must acknowledge that it will
deliver a prospectus in connection
10
<PAGE>
with any resale of such New Notes. See "Plan of Distribution." To the extent
that Existing Notes are tendered and accepted in the Exchange Offer, the trading
market for untendered and tendered but unaccepted Existing Notes could be
adversely affected. See "The Exchange Offer."
Competition
Intense competition exists among companies in the gaming industry, many
of which have significantly greater resources than the Company. The Riviera
faces competition from all other casinos and hotels in the Las Vegas area.
Management believes that the Riviera's most direct competition comes from
certain large casino/hotels located on or near the Strip which offer amenities
and marketing programs similar to those offered by the Riviera.
Las Vegas gaming square footage and room capacity are continuing to
grow and are expected to continue to increase significantly during the next
several years. Since January 1, 1996 approximately 4,700 new hotel rooms opened.
As of December 31, 1996 there were over 9,200 hotel rooms under construction
(which combined constitutes a 14.7% increase in the number of hotel and motel
rooms in Las Vegas) and the Las Vegas Convention and Visitors Authority
estimates that approximately 60,000 additional hotel rooms are proposed for
construction. Existing and future expansions, additions and enhancements to
existing properties and construction of new properties by the Company's
competitors could divert additional business from the Company's facilities.
There can be no assurance that the Company will compete successfully in the Las
Vegas market in the future.
Compared to the first five months ended May 31, 1996, during the first
five months of 1997, available rooms in the Las Vegas market increased by 11.8%,
while total room nights occupied increased by only 8.2%. This has had the effect
of intensifying competition, resulting in declining occupancy and average room
rates throughout the Las Vegas market. Although the Company was able to increase
its room rates nominally which offset a less than 1% decline in occupancy, there
is no certainty that the Company can continue to maintain its present level of
room revenue considering the competitive situation.
Intense competition also characterizes the Black Hawk/Central City,
Colorado market. There are approximately 31 casinos currently operating in this
market in addition to casinos located in Cripple Creek. Several new development
projects and expansion plans have been announced, including construction of a
casino by a joint venture between Jacobs Entertainment, Ltd. and the
owner/operator of Gilpin Hotel Casino and a casino on property adjacent to the
Black Hawk Land (as defined) by a joint venture between Casino America and
Nevada Gold. Colorado does not limit the total number of gaming licenses
available for issuance in Colorado and there are no minimum facility size
requirements. The Company believes that many Colorado casinos may not be
operating profitably. A number of Colorado casinos have ceased operations, and
others have either filed for bankruptcy protection, closed temporarily or
reduced the number of their employees.
In May 1997, the Colorado Legislature passed a bill mandating the
installation of a minimum of 500 video lottery terminals at each licensed horse
and greyhound racetrack then located in Colorado Springs, Pueblo, Byers,
Loveland, Commerce City and Arapahoe County. The Governor of Colorado vetoed the
bill on June 4, 1997 labeling it as a "back-door expansion of gambling." There
is no reason, however, to believe that there will not be renewed efforts to pass
similar legislation during the 1998 or subsequent legislative sessions.
The Company also competes, to some extent, with casinos in other
states, riverboat and Native American gaming ventures, state-sponsored
lotteries, on- and off-track wagering, card parlors and other forms of legalized
gaming in the United States, as well as with gaming on cruise ships and
international
11
<PAGE>
gaming operations. In addition, certain states have recently legalized or are
considering legalizing casino gaming in specific geographical areas within those
states. Any future development of casinos, lotteries or other forms of gaming in
other states, particularly areas close to Nevada, such as California, could have
a material adverse effect on the Company's results of operations. For a more
comprehensive discussion of competitive factors affecting the Company's
operations, see "Business -- Competition."
The current business of the Company is entirely dependent on gaming in
Las Vegas. The Riviera derives a substantial percentage of its business from
tourists, principally from Southern California and the southwestern United
States. Weakness in the economy of Southern California has in the past and could
in the future adversely affect the financial results of the Company. Until the
Black Hawk Casino opens, the Company's operations will be primarily dependent
upon the results of operations achieved by the Riviera on the Las Vegas Strip.
Any significant disruption in operations at the Riviera would have a material
adverse effect on the Company.
Uncertainties of Future Developments
While the Company intends to expand its business by managing additional
gaming properties and acquiring and developing new gaming properties, there is
no assurance that it will be able to do so or that such projects will become
operational within the time frames and budgets contemplated by management.
Construction projects, such as the proposed Nickel Plaza project and convention
center expansion at the Riviera and the Black Hawk Project, entail significant
development and construction risks, including, but not limited to, cost
overruns, delay in receipt of governmental approvals, shortages of materials or
skilled labor, unforeseen engineering or environmental problems, work stoppages,
weather interference, unanticipated cost increases and regulatory problems, any
of which, if they occurred, could delay construction or result in substantial
cost increases to the Company. Budget overruns and delays with respect to
expansion and development projects could have a material adverse impact on the
Company's results of operations. In addition, with respect to the Nickel Plaza
and the convention center projects, the Company does not have final construction
contracts. Further, to the extent that the Company is successful in its
expansion strategy, it will face the inherent risks associated with managing an
increased number of properties. The necessity of key employees to focus their
attention on various planned expansion projects may reduce the amount of time
they can devote to core operations of the Company.
The Black Hawk Project
Limitation on Distribution. The Company currently estimates that total
costs for completion of the Black Hawk Project will be approximately $55
million, $15 million of which was provided by the net proceeds of the sale of
the Existing Notes to purchase a certain parcel of real property in Black Hawk,
Colorado (the "Black Hawk Land"), and the remainder of which will be derived
from a combination of third party financing and additional investment by the
Company, including up to an additional $10 million of the net proceeds from the
sale of the Existing Notes. There is no assurance that such third party
financing will be obtained on terms satisfactory to the Company. In addition,
such financing, if and when obtained, will likely be subject to various
conditions, including restrictions on Black Hawk Operating Company's ability to
make distributions to the Company out of cash flow from the operations at Black
Hawk (which are expected to commence in 1999), other covenant restrictions, and
approval by relevant gaming authorities. The Company expects that the amount of
cash flow available for distributions to it from its operations in Black Hawk,
which are expected to commence in 1999, will be limited until any project
financing is repaid in its entirety.
Completion of the Black Hawk Project. Completion of the Black Hawk
Project is subject to obtaining bonded fixed price construction and completion
contracts, obtaining regulatory approvals for the
12
<PAGE>
Black Hawk Project and obtaining adequate third party financing for the Black
Hawk Project. There can be no assurance that these conditions to the Black Hawk
Project can be satisfied on terms satisfactory to the Company.
Licensing Requirements. The Black Hawk Project will be contingent upon,
among other things, the Company's Colorado subsidiary's receipt of all required
licenses, permits and authorizations under Colorado law. The scope of the
approvals required for a project of this nature is extensive, including, without
limitation, state and local land-use permits, building and zoning permits,
health and safety permits and gaming and liquor licenses. There can be no
assurance that the Company's Colorado subsidiary will receive the necessary
permits, licenses and approvals for the Black Hawk Project, or that such
permits, licenses and approvals will be obtained within the anticipated time
frame. Unexpected changes or concessions required by local, state or federal
regulatory authorities could involve significant additional costs and delay or
prevent the scheduled openings of the facilities.
Access to Black Hawk/Central City. The cities of Black Hawk and Central
City (adjacent to each other) are located in the Colorado Rocky Mountains and
are serviced by winding mountain roads that require extremely cautious driving,
particularly in bad weather. These roads have tunnels that are subject to
closure. Congestion on the roads leading to Black Hawk and Central City is not
uncommon during the peak summer season, holidays and other times of year and may
discourage potential customers from traveling to the casinos. In addition,
concerns about the overall availability of convenient parking in Black Hawk and
Central City may discourage some potential customers. Further, Black Hawk and
Central City have experienced unanticipated demands for their municipal systems,
including water and sewage treatment facilities. Increased levels of activity in
the area may exacerbate old or pose new municipal and environmental problems,
the costs of which could be borne by the gaming industry generally and in part
by the Company specifically.
Environmental Considerations. The Black Hawk Project site is located in
a 400-square mile area that was designated in 1983 by the United States
Environmental Protection Agency (the "EPA") as a National Priorities List area
under the Comprehensive Environmental Response, Compensation and Liability Act,
as a result of hazardous substance contamination in the soil, groundwater and
surface water caused by historical mining activity in the area. Within this
broad area, EPA has identified several areas of contamination from historical
mining activity, including draining mines and mine dumps, as the Clear
Creek/Central City Superfund Site. The EPA can require owners or operators of
property to remediate hazardous substance contamination or to reimburse costs
incurred by the government in connection with such remediation. Although several
remedial actions have occurred on property in the vicinity of the parcels on
which the Black Hawk Project will be built, EPA has not identified contamination
on or from the Black Hawk Project site which requires remediation, and does not
consider the Black Hawk Project to be part of the Clear Creek/Central City
Superfund Site. Nevertheless, there can be no assurance that EPA or the State of
Colorado might not require remediation for contaminated soil uncovered during
excavation or construction, or for contaminated in the groundwater on the
property or elsewhere in the area, which sampling has disclosed. In addition,
the handling of contaminated soil and groundwater can increase construction
costs significantly.
Dependence on Key Personnel
The ability of the Company to operate successfully is dependent, in
part, upon the continued services of certain of its executive personnel. The
loss of one or more of such executive officers, the inability to attract or
retain key employees in the future could have a material adverse effect on the
Company. In addition, the necessity of key employees to focus their attention on
various planned expansion projects may reduce the amount of time they can devote
to core operations of the Company. The Company
13
<PAGE>
has an employment agreement only with Mr. William L. Westerman, the Chairman of
the Board, President, and Chief Executive Officer of the Company. The term of
Mr. Westerman's employment agreement with the Company is scheduled to expire on
December 31, 1998. However, it will automatically be extended unless the Company
gives three months notice or Mr. Westerman gives six months notice to terminate.
Mr. Westerman's contract is also subject to earlier termination upon occurrence
of certain events. See "Management -- Employment Agreements." There can be no
assurance that a suitable replacement for Mr. Westerman could be found in the
event of a termination of his employment. A shortage of skilled management-level
employees currently exists in the gaming industry which may make it difficult
and expensive to attract and retain qualified employees. Regulation
The Company's business is subject to comprehensive and stringent
government regulation. In addition, there have been in the past and are
currently a number of regulatory and tax proposals which could adversely affect
the gaming industry and the Company. See "Business -- Regulation and Licensing."
The Company's gaming operations, and the ownership of securities in the
Company, are subject to extensive regulation by the Nevada Gaming Authorities
(as defined). The Nevada Gaming Authorities have broad authority with respect to
licensing and registration of entities and individuals involved in gaming
operations, including certain holders of the Company's outstanding voting
securities. The Nevada Gaming Authorities may, among other things, revoke the
license of any entity licensed as a gaming corporation or the registration of
any entity registered as a holding company of a gaming corporation, and they may
also revoke the license of any individual licensed as an officer, director,
control person or stockholder of a licensed or registered entity. If the gaming
licenses of the Company were revoked for any reason, the Nevada Gaming
Authorities could require the closing of the Riviera which would result in a
material adverse effect on the business of the Company.
In addition, any future public offering of debt or equity securities by
the Company, including the Exchange Offer and any offering the securities or
proceeds of which are intended to be used to pay for construction of, or to
acquire an interest in, any gaming facilities in Nevada, to finance the gaming
operations of an affiliated company or to retire or extend obligations incurred
for any such purposes, requires the prior approval of the Nevada Gaming
Commission (the "Nevada Commission") upon the recommendation of the Nevada State
Gaming Control Board (the "Nevada Board").
Each holder of the Notes shall be deemed to have agreed (to the extent
permitted by law) that if a relevant gaming authority determines that a holder
or beneficial owner of Notes must be found suitable under applicable law
(whether as a result of a foreclosure of the Company's casino or for any other
reason), and if such holder or beneficial owner is not found suitable, such
holder shall, upon the request of the Company, dispose of such holder's Notes
within 30 days after receipt of such request or such earlier date as may be
ordered by the relevant gaming authority. The Company also will have the right
to call for the redemption of Notes held by any holder who is not found suitable
at a price equal to 100% of the principal amount thereof, plus accrued and
unpaid interest and liquidated damages, if any, thereon to the date of
redemption or such earlier date as may be required by the relevant gaming
authority or applicable law. Although the Existing Notes are currently listed
for trading on the PORTAL markets, the New Notes will be new securities for
which there will be no established market and the price at which a holder of New
Notes may be required to dispose of such holder's New Notes cannot be predicted.
See "-- Absence of Public Trading Market," "Business -- Regulation and
Licensing" and "Description of Notes -- Optional Redemption."
14
<PAGE>
On August 3, 1996, President Clinton signed a bill creating a
nine-member National Gambling Impact Study Commission to study the economic and
social impact of gaming and report its findings to Congress and the President
within two years after the first meeting of the commission. The commission could
recommend changes in state or federal gaming policies. The President, House
Speaker and Senate Majority Leader have each selected three of the commission's
members and the commission held its first meeting in June 1997. Additional
federal regulation of the gaming industry could occur as a result of
investigations or hearings by the committee, which could have a material adverse
effect on the Company.
The Company's plan to manage additional gaming properties and to
acquire and develop new gaming properties, including the Black Hawk Project,
will require many permits, licenses and approvals. These could include, without
limitation, gaming approvals, liquor licenses, state and local land-use permits,
governmental easement and flood plain requirements, building and zoning permits,
set back, access and building height waivers or approvals, and architectural
(historic district) restrictions. Unexpected changes or concessions required by
local, state or federal regulatory authorities could involve significant
additional costs and delay or prevent the scheduled openings of the facilities.
Ability to Realize on Collateral
The New Notes are secured by a first priority security interest,
subject to Permitted Liens and certain exclusions, in the land and improvements
comprising the Riviera, furniture, fixtures and equipment (excluding Gaming
Equipment), contract rights, trademarks and certain other personal property
(excluding inventory and accounts receivable) and, subject to approval by the
Nevada Commission, a pledge of all of the capital stock of the Restricted
Subsidiaries. There can be no assurance that, if an Event of Default (as
defined) occurs with respect to the Notes and the indebtedness evidenced by the
Notes is accelerated and the Company fails to make the required payments, the
liquidation of the collateral will produce proceeds in an amount sufficient to
pay the principal of or accrued and unpaid interest, if any, or any other sums
due and payable, on the New Notes.
The pledge of the stock of a corporation which holds a gaming license
issued by the Nevada Commission (a "Corporate Licensee"), such as ROC or Riviera
Gaming Management-Elsinore, Inc. ("RGME"), or of a corporation which is
registered as an intermediary company (an "Intermediary Company"), such as ROC
or RGM, is void without the prior approval of the Nevada Commission. Approval by
the Nevada Commission of the pledge of stock of ROC, RGM and RGME has not yet
been obtained, and there can be no assurance as to when such approval may be
obtained. An approval to pledge the stock of a Corporate Licensee or
Intermediary Company does not constitute approval to foreclose on such pledge.
Separate approval is required to foreclose on a pledge of stock of a Corporate
Licensee or Intermediary Company and such approval requires the licensing of the
indenture trustee unless such requirement is waived upon the application of the
indenture trustee. In addition, restrictions on the transfer of equity
securities issued by a Corporate Licensee or Intermediary Company, and
agreements not to encumber such securities, are ineffective unless approved in
advance by the Nevada Commission upon the recommendation of the Nevada Board.
In the event of a foreclosure of the mortgage on the land located at
the Riviera, the purchaser or operator of the facility would be required to be
licensed to operate the facility under Nevada gaming laws and regulations
promulgated thereunder, and if the Trustee purchases the Riviera at a
foreclosure sale and thereafter is unable or chooses not to sell that part of
Riviera constituting the casino, the Trustee would be required to retain an
entity licensed under the Nevada gaming laws in order to conduct gaming
operations in the facility and the holders of the Notes may be required to be
investigated and licensed or found suitable. Because potential bidders who wish
to operate the facility as a casino must satisfy such requirements, the number
of potential bidders in a foreclosure sale could be less than in foreclosure of
other types of
15
<PAGE>
facilities, and such requirements may delay the sale of, and may adversely
affect the sales price obtained for, the casinos. The ability to take possession
and dispose of the collateral securing the Notes upon acceleration is likely to
be significantly impaired or delayed by applicable bankruptcy law if a
bankruptcy were to be commenced by or against the entity which owns such
collateral prior to the Trustee's taking of possession or disposition of the
collateral securing the Notes. See "Regulation."
Subsidiary Guarantees
The New Notes are guaranteed on a senior secured basis by the
Guarantors (as defined). Enforcement of the Subsidiary Guarantees against any
existing or future Guarantors would be subject to certain defenses available to
guarantors generally, and would also be subject to certain defenses available to
the Company regarding enforcement of the Notes, including, without limitation,
the right to force the Trustee to exercise its remedies under the Collateral
Documents prior to commencement of any action on the Subsidiary Guarantees. The
Guarantors have waived all such defenses to the extent they may legally do so.
Black Hawk Operating Company will not initially be a Guarantor of the Notes. See
"Description of Notes - Security." At June 30, 1997 of the Guarantors, Black
Hawk Operating Company had no assets, liabilities or operations and therefore
separate financial statements of the Guarantors have not been included in this
Prospectus.
Fraudulent Transfer Considerations
The ability of the holders of the New Notes or the Trustee to enforce
the Subsidiary Guarantees or realize on the collateral may be limited by certain
fraudulent conveyance laws. Various fraudulent conveyance and avoidance laws
have been enacted for the protection of creditors and may be utilized by a court
of competent jurisdiction to avoid the security interest in the collateral
granted to the Trustee by the Company or any Guarantor (as defined herein), or
to subordinate the obligations of the Company under the Notes or the Subsidiary
Guarantees of any Guarantor. The requirements for establishing a fraudulent
conveyance or avoidance transfer vary depending on the law of the jurisdiction
which is being applied. Generally, if under federal and certain state statutes
in a bankruptcy, reorganization, rehabilitation or similar proceeding in respect
of the Company or a Guarantor, or in a lawsuit by or on behalf of creditors
against the Company or a Guarantor, a court were to find that (i) the Company or
a Guarantor, as the case may be, incurred indebtedness in connection with the
Notes (including the Subsidiary Guarantees) or granted security interests in the
collateral with the intent of hindering, delaying or defrauding current or
future creditors of the Company or the Guarantor, as the case may be, or (ii)
the Company or a Guarantor, as the case may be, received less than reasonably
equivalent value or fair consideration for incurring the indebtedness in
connection with the Notes (including the Subsidiary Guarantees) or for granting
security interests in the collateral and the Company or such Guarantor, as the
case may be, (a) was insolvent at the time of the incurrence of the indebtedness
in connection with the Notes (including the Subsidiary Guarantees) or the
granting of security interests in the collateral, (b) was rendered insolvent by
reason of incurring the indebtedness in connection with the Notes (including the
Subsidiary Guarantees) or the granting of security interests in the collateral,
(c) was engaged or about to engage in a business or transaction for which its
assets constituted unreasonably small capital or (d) intended to incur, or
believed that it would incur, debts beyond its ability to pay such debts as they
matured (as all of the foregoing terms are defined in or interpreted under the
applicable fraudulent conveyance or revocatory statutes), such court could,
subject to applicable statutes of limitation, with respect to the Company, or
the Guarantor, as the case may be, avoid in whole or in part the obligations of
the Company or such Guarantor in connection with the Notes (including the
Subsidiary Guarantees) or the security interests granted in the collateral
and/or subordinate claims with respect to the Notes (including Subsidiary
Guarantees) to some or all other debts of the
16
<PAGE>
Company or the Guarantors, as applicable. There can be no assurance that there
would be sufficient amounts to pay the New Notes and the Subsidiary Guarantees
together with all other debts of the Company or such Guarantors, as applicable,
if such security interests in the collateral were avoided. Similarly, if the
obligations of the Company or the Guarantors or the security interests securing
them were subordinated, there can be no assurance that after payment of the
other debts of the Company or the Guarantors, there would be sufficient assets
to pay such subordinated claims with respect to the Notes and the Subsidiary
Guarantees.
The measures of insolvency for purposes of the foregoing will vary
depending upon the law of the jurisdiction which is being applied in any such
proceeding. Generally, however, an entity will be considered insolvent if the
sum of its respective debts was greater than the fair saleable value of all of
its property at a fair valuation or if the present fair saleable value of its
assets is less than the amount that will be required to pay its probable
liability on its existing debts, as they become absolute and matured.
If certain bankruptcy or insolvency proceedings were initiated by or
against the Company or any Guarantor within 90 days (or, possibly, one year)
after any payment by the Company or such Guarantor with respect to the Notes or
a Subsidiary Guarantee, respectively, or if the Company or such Guarantor
anticipated becoming insolvent, all or a portion of such payment could be
avoided as a preferential transfer under federal bankruptcy or applicable state
insolvency law, and the recipient of such payment could be required to return
such payment. In addition, the timing of any pledges of the capital stock of
certain of the Company's future subsidiaries may result in treatment of such
pledges as preferential transfers under applicable bankruptcy or state
insolvency law and, if so treated, could be set aside by a court.
Absence of Public Trading Market
The Existing Notes are currently eligible for trading in the PORTAL
market. The New Notes are a new issue of securities for which there is currently
no established trading market. The Company does not intend to list the New Notes
on any national securities exchange or to seek the admission thereof to trading
in the National Association of Securities Dealer Automated Quotation System. The
Initial Purchasers have advised the Company that they currently intend to make a
market in the New Notes. However, the Initial Purchasers are not obligated to do
so and any market making may be discontinued at any time without notice. There
can be no assurance as to the development of any market or the liquidity of any
market that may develop for the New Notes.
Control by a Single Stockholder
If the Merger occurs, Mr. Allen E. Paulson will indirectly own all of
the outstanding capital stock of the Company. As the beneficial owner of 100% of
the outstanding shares of Common Stock, Mr. Paulson would control all of the
voting power of the Company and would be able to exercise significant influence
over the affairs of the Company. There can be no assurance that the Merger will
be consummated. See "The Proposed Merger."
17
<PAGE>
USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer. The
proceeds to the Company from the sale of the Existing Notes, after deducting
selling commissions and net related fees and expenses, were approximately $172.8
million, of which the Company has used approximately $109.8 million to defease
the 11% First Mortgage Notes, approximately $4.5 million to repay the Unsecured
Note and approximately $7.0 million to pay fees and expenses relating to the
foregoing and the sale of the Existing Notes. In addition, the Company has used
$15 million of the net proceeds to acquire the Black Hawk Land. The Company
intends to use the remaining net proceeds to fund the development of the Nickel
Plaza and the expansion of the convention center, and, if necessary, to provide
additional financing for the Black Hawk Project. To the extent that the
additional proceeds are not used for the development of the Black Hawk Project,
the unused proceeds will be used for the Company's general business purposes.
Pending use in the Company's business, the net proceeds from the sale of the
Existing Notes have been invested in investment grade, short-term interest
bearing securities or money market funds, and the New Notes will have a security
interest in such proceeds.
The following table sets forth the estimated sources and uses of funds
assuming the sale of the Existing Notes had been consummated on June 30, 1997.
<TABLE>
<CAPTION>
Sources of Funds Uses of Funds
---------------- -------------
(Dollars in millions)
<S> <C> <C> <C>
10% First Mortgage Notes due 2004........ $ 172.8 Defease 11%
First Mortgage Notes(1).................... $ 109.8
Purchase Black Hawk Land(2)................ 15.0
Expansion of convention center(3).......... 15.0
Development of Nickel Plaza(3)............. 5.0
Excess Cash................................ 16.5
Repay Unsecured Note(4).................... 4.5
Fees and expenses.......................... 7.0
------- ----------
Total Sources................. $ 172.8 Total Uses........................... $ 172.8
======= =========
<FN>
- ----------
(1) The 11% First Mortgage Notes mature on December 31, 2002 and bear interest
at a fixed rate of 11% per annum. The funds required to defease of the 11%
First Mortgage Notes were deposited into an account with the trustee of the
11% First Mortgage Notes and will be held until June 1, 1998 upon which date
the 11% First Mortgage Notes will be redeemed by the trustee at 104.3125% of
the outstanding principal amount.
(2) Site clearance work in connection with the construction of a casino in Black
Hawk, Colorado will begin in the fall of 1997, with the opening of the
casino scheduled for the spring of 1999. The Company's initial investment
includes the purchase of the Black Hawk Land for $15 million. The Company
estimates that total costs for completion of the Black Hawk Project will be
approximately $55 million, $15 million of which was provided by the net
proceeds of the sale of the Existing Notes to purchase the Black Hawk Land,
and the remainder of which will be derived from a combination of third party
financing and additional investment by the Company, including up to an
additional $10 million of the net proceeds from the sale of the Existing
Notes. To the extent that the additional proceeds are not used for the
development of the Black Hawk Project, the unused proceeds will be used for
the Company's general business purposes. See "Business -- Growth
Opportunities -- The Black Hawk Project."
(3) See "Business -- Growth Opportunities." The amounts shown for the
development of Nickel Plaza and the expansion of the convention center are
estimates, and the actual use of funds for such projects may be higher or
lower. In addition, a portion of the amount shown may be reallocated to the
Black Hawk Project if capital needs so require.
(4) The Company used a portion of the net proceeds to repay the Unsecured Note,
which was payable in semi-annual installments of $500,000 to $750,000, and
was discounted on the Company's books at 12% to a carrying value of $4.3
million as of June 30, 1997. See "Description of Certain Indebtedness."
</FN>
</TABLE>
18
<PAGE>
CAPITALIZATION
The following table sets forth at June 30, 1997 (i) the capitalization
of the Company and (ii) the capitalization of the Company as adjusted to give
effect to the Transactions (including the redemption of the 11% First Mortgage
Notes). This table should be read in conjunction with the consolidated financial
statements of the Company and the related notes thereto, which are included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
June 30, 1997
---------------------------
Historical As Adjusted
---------- -----------
(Dollars in thousands)
<S> <C> <C>
Cash and cash equivalents....................................................... $ 25,625 $ 77,308(1)
=========== =========
Short term debt, including current portion of long term debt(4)................. $ 1,119 $ 288
=========== =========
Long term debt, less current portion:
Revolving Credit Facility(2).................................................. $ -- $ --
11% First Mortgage Notes(3)................................................... 100,000 --
10% First Mortgage Notes due 2004............................................. -- 172,848
Unsecured Note(4)............................................................. 3,467 --
Capitalized lease obligations and other indebtedness.......................... 719 719
----------- ---------
Total long term debt, less current portion............................ 104,186 173,567
Stockholders' equity(5)......................................................... 38,508 35,574
----------- ---------
Total capitalization.................................................. $ 142,694 $ 209,141
=========== =========
<FN>
- ----------
(1) Includes $15.0 million used to purchase the Black Hawk Land and $20.0
million designated for the development of Nickel Plaza and expansion of the
convention center. See "Business -- Growth Opportunities."
(2) The Company maintains a $15.0 million unsecured Revolving Credit Facility.
See "Description of Certain Indebtedness." The Revolving Credit Facility
bears interest at prime plus 0.5% or LIBOR plus 2.9%. No amounts were
outstanding under the Revolving Credit Facility at June 30, 1997. As a
result of the sale of the Existing Notes, the Company does not meet the
conditions for borrowing availability and will not be able to borrow under
the facility unless its terms are renegotiated.
(3) On August 13, 1997, the Company defeased the 11% First Mortgage Notes. The
funds required to defease the 11% First Mortgage Notes were deposited into
an account with the trustee for the 11% First Mortgage Notes and will be
held until June 1, 1998 upon which date the 11% First Mortgage Notes will be
redeemed by the trustee at 104.3125% of the outstanding principal amount.
(4) The current portion of the Unsecured Note as of June 30, 1997 was $0.8
million and reflected in short term debt. The Company used $4.5 million of
the net proceeds from the sale of the Existing Notes to retire the Unsecured
Note. See "Use of Proceeds" and "Description of Certain Indebtedness."
(5) Stockholders' equity is adjusted to reflect the extraordinary charges that
will be recorded by the Company upon the redemption of the 11% First
Mortgage Notes and the repayment of the Unsecured Note.
</FN>
</TABLE>
19
<PAGE>
SELECTED HISTORICAL FINANCIAL AND OPERATING DATA
The selected financial data as of December 31, 1992, 1993, 1994, 1995
and 1996 and for the year ended December 31, 1992, the six months ended June 30,
1993 and December 31, 1993 and the years ended December 31, 1994, 1995 and 1996
have been derived from the audited financial statements of the Company and,
prior to the Company's emergence from bankruptcy in June 1993, the Hotel and
Casino Division of Riviera, Inc., the Company's predecessor. The results for and
as of the three months and six months ended June 30, 1996 and 1997 are derived
from the unaudited financial statements and notes thereto of the Company and, in
the opinion of management, reflect all adjustments, consisting of normal
recurring adjustments, necessary to present fairly information set forth
therein. The results for the three months and six months ended June 30, 1996 and
1997 are not necessarily indicative of the results expected for any other
interim period or for the full year. The following information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the financial statements and notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Year Ended Six Months Ended
Year Ended ------------------------- Years Ended December 31,
Dec. 31 June 30, Dec. 31, Combined ------------------------------
1992 1993 1993 1993 (1) 1994 1995 1996
------------- ------------- ----------- ------------ -------- --------- --------
(Predecessor) (Predecessor) (Successor)
(Dollars in thousands, except Operating Data)
Income Statement Data:
Revenues:
<S> <C> <C> <C> <C> <C> <C> <C>
Casino.................... $ 75,975 $ 38,073 $ 41,158 $ 79,231 $ 82,060 $ 77,337 $ 80,384
Rooms..................... 33,474 17,614 17,808 35,422 35,422 39,848 41,835
Food and beverage......... 22,557 11,656 11,760 23,416 22,961 21,895 22,641
Entertainment............. 19,046 8,059 8,422 16,481 16,945 14,423 20,883
Other..................... 8,369 4,116 4,230 8,346 9,390 9,515 11,293
-------- --------- --------- --------- --------- --------- ---------
159,421 79,518 83,378 162,896 166,778 163,018 177,036
Less promotional
allowances.............. 14,919 6,816 7,157 13,973 12,857 11,873 12,627
-------- --------- --------- --------- --------- --------- ---------
Net revenues.............. 144,502 72,702 76,221 148,923 153,921 151,145 164,409
-------- --------- --------- --------- --------- --------- ---------
Costs and expenses:
Casino.................... 46,892 24,559 25,533 50,092 48,826 45,325 47,509
Rooms..................... 16,233 8,339 8,456 16,795 17,594 18,787 18,834
Food and beverage......... 15,592 7,427 7,796 15,223 15,588 15,768 15,916
Entertainment............. 15,152 7,051 7,897 14,948 13,982 10,329 15,290
Other..................... 3,256 1,737 1,839 3,576 3,516 3,527 3,913
Selling, general and
administrative.......... 25,534 12,707 13,534 26,241 28,822 29,618 31,454
Decpreciation and
amortization 13,230 2,622 2,399 5,021 5,674 6,811 8,212
Loss on permanent
impairment of assets(2). 85,221 -- -- -- -- -- --
-------- --------- --------- --------- --------- --------- ---------
Total costs and expenses.. 221,110 64,442 67,454 131,896 134,002 130,165 141,128
-------- --------- --------- --------- --------- --------- ---------
Income (loss) from
operations................ (76,608) 8,260 8,767 17,027 19,919 20,980 23,281
Interest expense, net(3).... 434 2,632 6,160 8,792 12,254 11,304 10,918
Other (income) expense, net. -- -- -- -- -- -- (505)
Reorganization items(4).... (3,863)(4) -- -- -- -- -- --
Provision for income taxes.. -- -- -- -- 2,875 3,332 4,428
-------- --------- --------- --------- --------- --------- ---------
Net income (loss)........... (80,905) 5,628 2,607 $ 8,235 $ 4,790 $ 6,344 $ 8,440
======== ========= ========= ========= ========= ========= =========
Other Data:
EBITDA(5)................... 21,843 $ 10,882 $ 11,166 $ 22,048 $ 25,593 $ 27,791 $ 31,493
EBITDA margin............... 15.1% 15.0% 14.6% 14.8% 16.6% 18.4% 19.2%
Cash flows from operating
activities................ 13,130 8,517 766 9,283 16,372 16,740 18,290
Cash flows used in
investing activities...... (2,073) (1,478) (4,307) (5,785) (10,439) (8,218) (13,017)
Cash flows used in
financing activities (729) (2,311) (4,658) (6,969) (2,696) (2,983) (1,488)
Ratio of earnings to fixed
charges(6)................ --(6) 2.99x(6) 1.41x 1.89x 1.60x 1.78x 2.06x
Capital expenditures........ $ 2,477 $ 1,478 $ 4,307 $ 5,785 $ 8,933 $ 7,836 $ 14,923
Operating Data:
Average occupancy rate(7)... 90.6% 92.4% 95.0% 93.7% 97.5% 97.0% 98.2%
Average daily room rate
(ADR)...................... $ 47.00 $ 51.63 $ 49.33 $ 50.42 $ 47.51 $ 54.69 $ 57.09
Number of slot machines(8).. 1,218 1,218 1,207 1,207 1,203 1,226 1,312
Number of gaming tables(8).. 74 70 70 70 56 56 55
As of December 31,
--------------------------------------------------------
1992 1993 1994 1995 1996
-------- --------- --------- -------- -------
(Predecessor)(Successor)
Balance Sheet Data:
Cash and cash equivalents..... $16,659 $21,387 $ 16,423 $ 21,962 $ 25,747
Total assets.................. 145,631 143,704 151,925 157,931 167,665
Long term debt, including
current portion............... 133,255 112,677 110,489 107,822 105,878
Stockholders' equity.......... (114,358) 15,148 19,938 26,282 35,251
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Six Months Three Months
Ended June 30, Ended June 30,
--------------------- ----------------------
1996 1997 1996 1997
---- ---- ---- ----
(Dollars in thousands, except Operating Data)
Income Statement Data:
Revenues:
<S> <C> <C> <C> <C>
Casino............................ $40,382 $38,134 $ 20,217 $19,332
Rooms............................. 21,771 21,424 10,514 10,930
Food and beverage................. 12,043 11,248 6,215 5,787
Entertainment..................... 11,247 10,759 5,493 5,327
Other............................. 4,752 5,241 2,398 2,670
------- ------- -------- -------
90,195 86,806 44,837 44,046
Less promotional allowances....... 6,922 6,703 3,285 3,424
------- ------- -------- -------
Net revenues...................... 83,273 80,103 41,552 40,622
------- ------- -------- -------
Costs and expenses:
Casino............................ 24,472 22,187 12,066 10,930
Rooms............................. 9,365 9,166 4,701 4,574
Food and beverage................. 8,089 8,002 4,163 4,015
Entertainment..................... 7,907 7,571 3,927 3,790
Other............................. 1,451 1,473 738 797
Selling, general and
administrative.................. 15,602 15,839 7,999 8,164
Depreciation and amortization..... 3,862 5,010 1,974 2,578
------- ------- -------- -------
Total costs and expenses.......... 70,748 69,248 35,568 34,848
------- ------- -------- -------
Income from operations.............. 12,525 10,855 5,984 5,774
Interest expense, net(3)............ 5,507 5,420 2,723 2,702
Other (income) expense, net......... -- 850 -- --
Provision for income taxes.......... 2,402 1,582 1,116 1,053
------- ------- -------- -------
Net income.......................... $ 4,616 $ 3,003 $ 2,145 $ 2,019
======= ======= ======== =======
Other Data:
EBITDA(5)........................... $16,387 $15,865 $ 7,958 $ 8,352
EBITDA margin....................... 19.7% 19.8% 19.2% 20.6%
Cash flow from operating activities. $ 8,033 $ 8,434 $ 978 $ 397
Cash flows used in investing (2,560) (7,984) (1,973) (3,171)
activities............................
Cash flows used in financing (1,352) (572) (809) (634)
activities............................
Ratio of earnings to fixed charges(6) 2.15x 1.76x 2.07x 2.01x
Capital expenditures................ $ 5,259 $ 6,885 $ 3,025 $ 2,644
Operating Data:
Average occupancy rate(7)........... 99.0% 98.2% 99.2% 99.2%
Average daily room rate (ADR)....... $ 59.03 $ 59.37 $ 56.83 $ 59.65
Number of slot machines(8).......... 1,312 1,308 1,312 1,308
Number of gaming tables(8).......... 55 52 55 52
As of June 30,
--------------------
1996 1997
---- ----
Balance Sheet Data:
Cash and cash equivalents.................. $ 26,083 $ 25,625
Total assets............................... 161,482 168,074
Long term debt, including current portion.. 105,541 105,305
Stockholders' equity....................... 31,070 38,508
<FN>
- ----------
(1) As the Company emerged from bankruptcy in June 1993, operating results presented for 1993
reflect the combined operating results of the Company and its predecessor.
(2) Includes a recognized loss on the permanent impairment of assets during the bankruptcy of
the Company's predecessor to record the fair market value of the property and equipment.
(3) Interest expense is presented net of interest income. 1993 results reflect no accrual of
interest on debt through June 1993. If accrued, interest expense on these obligations would
have totaled $21,400 and $10,400 for the year ended December 31, 1992 and the six months
ended June 30, 1993, respectively.
(4) Represents costs incurred in connection with the bankruptcy of the Company's predecessor.
(5) EBITDA consists of earnings before interest, income taxes, depreciation and amortization.
While EBITDA should not be construed as a substitute for operating income or a better
indicator of liquidity than cash flow from operating activities, which are determined in
accordance with GAAP, it is included herein to provide additional information with respect
to the ability of the Company to meet its future debt service, capital expenditure and
working capital requirements. Although EBITDA is not necessarily a measure of the Company's
ability to fund its cash needs, management believes that certain investors find EBITDA to
be a useful tool for measuring the ability of the Company to service its debt.
(6) The ratio for fiscal 1992 has been omitted because earnings were not sufficient to cover
fixed charges. The coverage deficiency was $80,905 ($101,882 if interest was not stayed).
If interest would have been accrued on the pre-bankruptcy or other unsecured debt for the
six months ended June 30, 1993 earnings would have been inadequate to cover fixed charges
by $1,937. For the purpose of computing the ratio of earnings to fixed charges, "earnings"
consist of income before fixed charges and income taxes, adjusted to exclude interest
capitalized, and "fixed charges" consist of interest cost, amortizations of debt expense,
amortization of bond discount and capitalized interest.
(7) Based on available rooms.
(8) Number of licensed slot machines and gaming tables at period end.
</FN>
</TABLE>
21
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in Thousands)
<TABLE>
<CAPTION>
Years Ended Six Months Ended Three Months
Six Months Ended December 31, June 30, Ended June 30,
Year Ended ----------------- ------------------------- ------------------ -----------------
Dec. 31 June 30, Dec. 31, Combined
1993(2) 1993 1993 1993 1994 1995 1996 1996 1997 1996 1997
-------- ------- ------ ------ ------ ------ ------- ------ ------ ------ ------
(Pre- (Pre
decessor) decessor)
Earnings:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pre-tax income (loss)...... $(80,905) $ 5,628 $2,607 $8,235 $7,665 $9,676 $12,868 $7,018 $4,585 $3,261 $3,072
Fixed charges(1)........... 434 2,832 6,382 9,214 12,764 12,453 12,085 6,100 6,043 3,039 3,030
Less: capitalized
interest.......... 0 0 0 0 0 0 0 0 0 0 0
-------- ------- ------ ------ ------ ------ ------- ------ ------ ------ ------
Earnings available for
fixed charges............ (80,471) 8,460 8,989 17,449 20,429 22,129 24,953 13,118 10,628 6,300 6,102
-------- ------- ------ ------ ------ ------ ------- ------ ------ ------ ------
Ratio of earnings to
fixed charges............ --(2) 2.99x(3) 1.41x 1.89x 1.60x 1.78x 2.06x 2.15x 1.76x 2.07x 2.01x
<FN>
(1) Includes interest expense, amortization of debt expense, amortization of bond discount and
capitalized interest.
(2) Earnings are inadequate to cover fixed charges by $80,905 ($101,882 if interest was not
stayed) for the year ended December 31, 1992.
(3) If interest would have been accrued on the pre-bankruptcy or other unsecured debt for the
six months ended June 30, 1993, earnings would have been inadequate to cover fixed charges
by $1,937.
</FN>
</TABLE>
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The current management team successfully guided the Company through its
emergence from bankruptcy in June 1993. Since 1992, the Riviera's management
team has achieved consistent growth in EBITDA and profit margins. EBITDA
increased over 44% from $21.8 million in 1992 to $31.5 million in 1996 and
EBITDA margins improved from 15.1% to 19.2% over the same period. The Company
achieved this growth through the implementation of a number of strategic
initiatives that included (i) refocusing its marketing strategy from
"high-rollers" to adult mid-level gaming customers, a niche that management
believes has been underserved, (ii) focusing on conventioneers who pay higher
room rates, causing Riviera's ADR to increase from $47 in 1992 to $57 in 1996,
(iii) aggressively marketing its hotel facilities resulting in occupancy rates
growing from 90.6% in 1992 to 98.2% in 1996, (iv) emphasizing higher margin slot
play which increased slot revenue by 33.0% from 1992 to 1996 and (v) investing
approximately $47 million in capital improvements since 1992. Management
believes that it has also improved the stability of EBITDA by providing a broad
entertainment experience (1996 non-gaming revenues: 55% vs. 47% for other
casinos on the Strip), focusing on conventioneers (approximately 30% of mid-week
room nights pre-sold through June 1999) and developing a repeat and loyal
customer base through proprietary database marketing.
Results of Operations
The following table sets forth certain of the Company's operating
information for the years ended December 31, 1994, 1995, and 1996 and for the
three months and six months ended June 30, 1996 and 1997. Revenues and
promotional allowances are shown as a percentage of net revenues. Departmental
costs are shown as a percentage of departmental revenues. All other percentages
are based on net revenues.
<TABLE>
<CAPTION>
Years Ended Six Months Three Months
December 31, Ended June 30, Ended June 30,
------------------------------------ ---------------------- -------------------
1994 1995 1996 1996 1997 1996 1997
------------ ----------- ---------- ---------- ---------- ----------- --------
Revenues:
<S> <C> <C> <C> <C> <C> <C> <C>
Casino................................. 53.3% 51.2% 48.9% 48.5% 47.6% 48.7% 47.6%
Rooms.................................. 23.0 26.4 25.4 26.1 26.8 25.3 26.9
Food and beverage...................... 14.9 14.5 13.8 14.5 14.0 15.0 14.2
Entertainment.......................... 11.0 9.5 12.7 13.5 13.4 13.2 13.1
Other.................................. 6.1 6.3 6.9 5.7 6.6 5.8 6.6
Less promotional allowances............ (8.3) (7.9) (7.7) (8.3) (8.4) (8.0) (8.4)
------ --------- -------- ------- ------- ------- -------
Net revenues........................ 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Costs and Expenses:
Casino (1)............................. 59.5 58.6 59.1 60.6 58.2 59.7 56.5
Rooms (1).............................. 49.7 47.1 45.0 43.0 42.8 44.7 41.8
Food and beverage (1).................. 67.9 72.0 70.3 67.2 71.1 67.0 69.4
Entertainment (1)...................... 82.5 71.6 73.2 70.3 70.4 71.5 71.1
Other (1).............................. 37.4 37.1 34.6 30.5 28.1 30.8 29.9
Selling, general and 18.7 19.6 19.1 18.7 19.8 19.3 20.1
administrative...........................
Depreciation and amortization.......... 3.7 4.5 5.0 4.6 6.3 4.8 6.3
------ --------- ------- ------- ------- ------- -------
Total costs and expenses................. 87.1 86.1 85.8 85.0 86.4 85.6 85.8
------ --------- ------- ------- ------- ------- -------
Income from operations................... 12.9 13.9 14.2 15.0 13.6 14.4 14.2
Interest expense, net.................... 8.0 7.5 6.7 6.6 6.8 6.6 6.7
Other (income) expense, net.............. 0.0 0.0 (0.3) 0.0 1.1 0.0 0.0
------ --------- ------- ------- ------- ------- -------
Income before provision for income
taxes.................................. 4.9 6.4 7.8 8.4 5.7 7.8 7.5
Provision for income taxes............... 1.9 2.2 2.7 2.9 2.0 2.7 2.6
------ --------- ------- ------- ------- ------- -------
Net income............................... 3.0 4.2 5.1 5.5 3.7 5.1 4.9
------ --------- ------- ------- ------- ------- -------
EBITDA margin............................ 16.6% 18.4% 19.2% 19.7% 19.8% 19.2% 20.6%
<FN>
- ----------
(1) Shown as a percentage of corresponding departmental revenue.
</FN>
</TABLE>
23
<PAGE>
The following discussion and analysis should be read in conjunction
with the consolidated financial statements and the related notes thereto
appearing elsewhere in this Prospectus.
Three Months Ended June 30, 1997 Compared to Three Months Ended June 30, 1996
Revenues. Net revenues decreased by approximately $900,000, or 2.2%,
from $41.5 million for the three months ended June 30, 1996 to $40.6 million for
the three months ended June 30, 1997.
Casino revenues decreased by approximately $900,000, or 4.5%, from
$20.2 million during 1996 to $19.3 million during 1997 due to a general softness
in the gaming market in Las Vegas. Slot revenues decreased approximately
$800,000 due to a decrease in the hold percent from 6.5% to 6.1% on comparable
coin-in volumes due to competitive pressures. Although the table games drop was
down approximately $3.2 million, or 11.0%, the table games win percentage
increased 4.1%, which resulted in an increase in table games revenues of
$658,000. The increase was primarily attributable to implementation of a more
conservative games management policy which eliminated three times odds on Craps
and single-deck Black Jack. Race book revenues decreased $520,000 due to the
elimination of rebates (to selected high volume customers) under revised
agreements between the casinos and the Nevada Pari Mutuel Association.
Room revenues increased by approximately $400,000, or 4.0%, from $10.5
million during 1996 to $10.9 million during 1997 as a result of an increase of
$2.82 in average room rate from $56.83 in 1996 to $59.65 in 1997. Hotel
occupancy remained at 99.2% for both years.
Food and beverage revenues decreased approximately $400,000, or 6.5%,
from $6.2 million during 1996 to $5.8 million during 1997 due to reduced
complimentary beverage in the casino and lower food covers in the restaurants.
Entertainment revenues decreased by approximately $200,000, or 3.6%,
from $5.5 million during 1996 to $5.3 million during 1997 due to a decrease in
covers in the Splash(R) production show and a decrease in the average ticket
price resulting from discounts to maintain volume.
Other revenues increased by approximately $300,000, or 12.5%, from $2.4
million during 1996 to $2.7 million during 1997 due primarily to the management
fees for operating the Four Queens in downtown Las Vegas beginning in August
1996.
Promotional allowances increased by approximately $100,000, or 3.0%,
from $3.3 million during 1996 to $3.4 million during 1997 due to increased room
complimentaries of $200,000 offered in connection with the June gaming
tournaments which were partially offset by lower food and beverage
complimentaries of $100,000.
Direct Costs and Expenses of Operating Departments. Total direct costs
and expenses of operating departments decreased by approximately $1.5 million,
or 5.9%, from $25.6 million for the three months ended June 30, 1996 to $24.1
million for the three months ended June 30, 1997.
Casino expenses decreased by approximately $1.2 million, or 9.9%, from
$12.1 million during 1996 to $10.9 million during 1997 due to a corresponding
decrease in casino revenues. Casino expenses as a percent of casino revenue
decreased from 59.7% to 56.5%, primarily due to a 13.4% decrease in marketing
expenses in 1997. Management is reviewing the competition and may increase
marketing expenditures somewhat to drive additional revenues. However, the
Company does not intend to significantly discount its gaming product or
substantially increase its promotional allowances.
24
<PAGE>
Room costs decreased by approximately $100,000, or 2.1%, from $4.7
million during the 1996 period to $4.6 million during the 1997 period and room
costs as a percentage of room revenue decreased from 44.7% in 1996 to 41.8% in
1997 because costs charged to the casino department for promotional allowances
increased.
Food and beverage costs decreased by approximately $200,000, or 4.8%,
from $4.2 million in 1996 to $4.0 million in 1997. However, food and beverage
costs as a percentage of revenues increased from 67.0% in 1996 to 69.4% in 1997
due to a decrease in cost allocations to casino expenses for promotional
allowances.
Entertainment costs decreased by approximately $100,000, or 2.6%, from
$3.9 million in 1996 to $3.8 million in 1997 as a direct result of the lower
revenues in all shows. Entertainment expense as a percentage of entertainment
revenues fell slightly from 71.5% in 1996 to 71.1% in 1997.
Other expenses as a percentage of revenues decreased from 30.8% in 1996
to 29.9% in 1997 because of the limited costs associated with management fee
revenues from the RGM (Four Queens) contract.
Other Operating Expenses. Selling, general and administrative expenses
increased by approximately $200,000, or 2.5%, from $8.0 million for the three
months ended June 30, 1996 to $8.2 million for the three months ended June 30,
1997. As a percentage of total net revenues, selling, general and administrative
expenses increased from 19.3% during the 1996 period to 20.1% during the 1997
period as fixed costs represented a higher percentage of a lower revenue base in
the 1997 period.
Depreciation and amortization increased by approximately $600,000, or
30.0%, from $2.0 million in 1996 to $2.6 million in 1997 and from 4.8% to 6.3%
of net revenues due to capital expenditures amounting to $16.5 million in the
twelve months ended June 30, 1997.
Other Income (Expense). Interest expense and interest income remained
relatively constant in both years at $2.7 million and 6.6% and 6.7% of net
revenues.
Net Income. As a result of the factors discussed above, net income
decreased by approximately $100,000, or 4.8%, from $2.1 million during the three
months ended June 30, 1996 to $2.0 million during the three months ended June
30, 1997.
EBITDA. EBITDA increased by approximately $400,000, or 5.0%, from $8.0
million during the three months ended June 30, 1996 to $8.4 million during the
three months ended June 30, 1997. During the same periods, EBITDA margin
increased from 19.2% to 20.6% of net revenues. It is significant that the
improvement of EBITDA was accomplished despite the decrease in net revenues.
Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996
Revenues. Net revenues decreased by approximately $3.2 million, or
3.8%, from $83.3 million for the six months ended June 30, 1996 to $80.1 million
for the six months ended June 30, 1997.
Casino revenues decreased by approximately $2.3 million, or 5.7%, from
$40.4 million during 1996 to $38.1 million during 1997 due to a general softness
in the gaming market in Las Vegas. Slot revenues decreased approximately $1.4
million due to a decrease in hold percent on comparable casino volumes in
response to competitive pressures. Although the table games drop was down
approximately $9.4 million, or 15.1%, the win percentage increased 3.4%, which
resulted in an increase in table games
25
<PAGE>
revenues of approximately $500,000. The increase was primarily attributable to
implementation of a more conservative games management policy which eliminated
three times odds on Craps and single-deck Black Jack. Race book revenues
decreased approximately $850,000 due to the elimination of rebates (to selected
high volume customers) under revised agreements between the casinos and the
Nevada Pari Mutuel Association.
Room revenues decreased by approximately $400,000, or 1.8%, from $21.8
million during 1996 to $21.4 million during 1997 due primarily to a decrease in
room nights available for sale of 5,000 in 1997 as a result of remodeling
projects. Hotel occupancy remained relatively constant at 99.0% in 1997 as
compared to 98.2% in 1996 (based on available rooms). The average room rate
increased $0.34, or 0.5%, from $59.03 to $59.37, recovering from first quarter
1997 when the average room rate had fallen $2.15 because of the shift of a major
convention from the first quarter of 1997 to the second quarter.
Food and beverage revenues decreased approximately $800,000, or 6.6%,
from $12.0 million during 1996 to $11.2 million during 1997 primarily due to
reduced complimentary beverage in the casino as well as lower food covers in the
restaurants.
Entertainment revenues decreased by approximately $400,000, or 3.6%,
from $11.2 million during 1996 to $10.8 million during 1997 due to a 5.9%
decrease in covers in the Splash(R) production show and a decrease in the
average ticket price resulting from discounts to maintain volume.
Other revenues increased by approximately $500,000, or 10.6%, from $4.7
million during 1996 to $5.2 million during 1997 primarily due to the management
fees for operating the Four Queens in downtown Las Vegas beginning in August
1996.
Promotional allowances decreased by approximately $200,000, or 2.9%,
from $6.9 million during 1996 to $6.7 million during 1997 due to lower food and
beverage complimentaries of $450,000 which were partially offset by increased
room complimentaries of $250,000.
Direct Costs and Expenses of Operating Departments. Total direct costs
and expenses of operating departments decreased by approximately $2.9 million,
or 5.7%, from $51.3 million for the six months ended June 30, 1996 to $48.4
million for the six months ended June 30, 1997.
Casino expenses decreased by approximately $2.3 million, or 9.4%, from
$24.5 million during 1996 to $22.2 million during 1997 due to a corresponding
decrease in casino revenues. Casino expenses as a percent of casino revenue
decreased from 60.6% to 58.2%, primarily due to a 14.4% decrease in marketing
expenses in 1997.
Room costs decreased by approximately $200,000, or 2.1%, from $9.4
million during the 1996 period to $9.2 million during the 1997 period and room
costs as a percentage of room revenue decreased from 43.0% in 1996 to 42.8% in
1997 because of increased costs charged to the casino department for promotional
allowances.
Food and beverage costs were relatively flat for 1997 compared to 1996,
however, food and beverage costs as a percentage of revenues increased from
67.2% in 1996 to 71.1% in 1997 because the costs charged to the casino
department for promotional allowances decreased substantially.
Entertainment costs decreased by approximately $300,000, or 3.8%, from
$7.9 million in 1996 to $7.6 million in 1997 due to fewer concerts and special
events in 1997 and the lower payments to the
26
<PAGE>
Splash(R) producer. Entertainment expense as a percentage of entertainment
revenues remained flat at 70.3% for 1996 and 1997.
Other expenses as a percentage of revenues decreased from 30.5% in 1996
to 28.1% in 1997 because of the limited costs associated with management fee
revenues from the RGM (Four Queens) contract.
Other Operating Expenses. Selling, general and administrative expenses
increased by approximately $200,000, or 1.5%, from $15.6 million for the six
months ended June 30, 1996 to $15.8 million for the six months ended June 30,
1997. As a percentage of total net revenues, selling, general and administrative
expenses increased from 18.7% during the 1996 period to 19.8% during the 1997
period as a result of the spreading of fixed costs over a lower revenue base in
the 1997 period.
Depreciation and amortization increased by approximately $1.1 million,
or 28.2%, from $3.9 million in 1996 to $5.0 million in 1997 and from 4.6% to
6.3% of net revenues due to the significant capital expenditures in the twelve
months ended June 30, 1997.
Other Income (Expense). Interest expense and interest income remained
relatively constant in both years. During the first quarter of 1997 the Company
filed an updated registration statement with the Securities and Exchange
Commission for a secondary offering of 1.75 million shares by the Company and
1.25 million shares by existing stockholders. The Company withdrew its offering
due to market conditions and, as a result, wrote off costs totaling $850,000 in
1997.
Net Income. As a result of the factors discussed above, net income
decreased by approximately $1.6 million, or 34.9%, from $4.6 million during the
six months ended June 30, 1996 to $3.0 million during the six months ended June
30, 1997.
EBITDA. EBITDA decreased by approximately $500,000, or 3.0%, from $16.4
million during the six months ended June 30, 1996 to $15.9 million during the
six months ended June 30, 1997. However, during the same periods, EBITDA margin
increased from 19.7% to 19.8% of net revenues. This increase was accomplished in
spite of the 3.8% decrease in net revenues.
Fiscal 1996 Compared to Fiscal 1995
Revenues. Net revenues increased by approximately $13.3 million, or
8.8%, from $151.1 million in 1995 to $164.4 million in 1996. Casino revenues
increased by approximately $3.0 million, or 3.9%, from $77.3 million in 1995 to
$80.4 million in 1996 due primarily to a $2.9 million, or 5.4%, increase in slot
revenues as a result of an increase in promotional activities directed at slot
players. Room revenues increased by approximately $2.0 million, or 5.0%, from
$39.8 million in 1995 to $41.8 million in 1996 as a result of an increase in
hotel occupancy from 97.0% to 98.2% (based on available rooms) and an increase
in average room rate of $2.40, or 4.4%. Food and beverage revenues increased
approximately $700,000, or 3.4%, from $21.9 million in 1995 to $22.6 million in
1996 due to additional covers in the bars and restaurants. Entertainment
revenues increased by approximately $6.5 million, or 44.8%, from $14.4 million
in 1995 to $20.9 million in 1996. This was principally due to the reopening of
Splash(R), a variety show which had been closed during the first half of 1995
for show revisions and theater remodeling. Other revenues increased by
approximately $1.8 million, or 18.7%, from $9.5 million in 1995 to $11.3 million
in 1996 due primarily to a refund of $576,000 from a union health and welfare
trust fund for reduced premiums and general increases in other revenues such as
telephone, gift shops and box office commissions. In addition, the Company
received management fees of approximately $400,000 for operating the Four Queens
in downtown Las Vegas beginning in August 1996. Promotional allowances
27
<PAGE>
increased by approximately $700,000, or 6.4%, from $11.9 million in 1995 to
$12.6 million in 1996 due to additional complimentary show tickets for Splash(R)
and an increase in complimentaries associated with casino and slot marketing
programs.
Direct Costs and Expenses of Operating Departments. Total direct costs
and expenses of operating departments increased by approximately $7.7 million,
or 8.2%, from $93.7 million in 1995 to $101.5 million in 1996. Casino expenses
increased by approximately $2.2 million, or 4.8%, from $45.3 million in 1995 to
$47.5 million in 1996 due to a corresponding increase in casino revenues and
casino expenses as a percent of casino revenues increased from 58.6% to 59.1%,
primarily due to increased entertainment promotional allowances upon the
reopening of Splash(R) on June 23, 1995. Room costs were mostly flat for 1996
compared to 1995, however, room costs as a percentage of room revenues decreased
from 47.1% in 1995 to 45.0% in 1996 as room revenues increased while room costs
remained relatively constant. Food and beverage costs increased by approximately
$150,000, or 0.9%, from $15.8 million in 1995 to $15.9 million in 1996 resulting
from a corresponding increase in revenues. Food and beverage costs as a
percentage of food and beverage revenues decreased from 72.0% in 1995 to 70.3%
in 1996 because food and beverage revenue increased while payroll and other
costs remained relatively constant. Entertainment costs increased by
approximately $5.0 million, or 48.0%, from $10.3 million in 1995 to $15.3
million in 1996, due to the additional expenses associated with operating
Splash(R) for a full year in 1996. Entertainment expenses as a percentage of
entertainment revenues increased from 71.6% in 1995 to 73.2% in 1996 due to a
revision in the Splash(R) producer's agreement. Other expenses increased by
approximately $400,000, or 10.9%, from $3.5 million to $3.9 million due to a
corresponding increase in other revenues.
Other Operating Expenses. Selling, general and administrative expenses
increased by approximately $1.8 million, or 6.2%, from $29.6 million in 1995 to
$31.5 million in 1996 due to increased incentive plan costs required to retain
personnel in the competitive gaming environment. As a percentage of total net
revenues, selling, general and administrative expenses decreased from 19.6% in
1995 to 19.1% in 1996 as a result of lower general marketing expenses and the
spreading of fixed costs over a larger revenue base in 1996. Depreciation and
amortization increased by approximately $1.4 million, or 20.6%, from $6.8
million in 1995 to $8.2 million in 1996.
Other Income (Expense). Interest expense decreased by approximately
$400,000, or 3.0%, from $12.5 million in 1995 to $12.1 million in 1996 while
interest income remained constant at $1.1 million in 1995 and 1996. This was due
to a reduction in average debt outstanding, an increase in average cash balances
and a decrease in the investment yield in 1996. Other income increased by
$505,000 due to a gain on the final payment of certain unsecured notes in the
fourth quarter of 1996 offset by a loss due to the change in terms of one of the
Company's notes.
Net Income. As a result of the factors discussed above, net income
increased by approximately $2.1 million, or 33.0%, from $6.3 million in 1995 to
$8.4 million in 1996. The effective income tax rate was 34.4% for 1995 and 1996.
EBITDA. EBITDA increased by approximately $3.7 million, or 13.3%, from
$27.8 million in 1995 to $31.5 million in 1996. During the same periods, EBITDA
margin increased from 18.4% to 19.2% of net revenues.
Fiscal 1995 Compared to Fiscal 1994
Revenues. Net revenues decreased by approximately $2.8 million, or
1.8%, from $153.9 million in 1994 to $151.1 million in 1995. Casino revenues
decreased by approximately $4.7 million, or 5.8%, from
28
<PAGE>
$82.1 million in 1994 to $77.3 million in 1995 which was largely due to an
approximately $5.9 million, or 22.9%, decrease in table game revenues as a
result of reduced "high-roller" play and the elimination of unprofitable
marketing programs offset by an approximately $1.3 million, or 2.8%, increase in
slot machine revenues. Room revenues increased by approximately $4.4 million, or
12.5%, from $35.4 million in 1994 to $39.8 million in 1995 due to a slight
decrease in occupancy offset by an increase of $7.18 in the average room rate.
Food and beverage revenues decreased approximately $1.1 million, or 4.6%, from
$23.0 million in 1994 to $21.9 million in 1995, principally due to reduced
covers resulting from the decline in customer traffic as a result of Splash(R)
being closed for six months in 1995 compared to one month in 1994. Entertainment
revenues decreased by approximately $2.5 million, or 14.9%, from $16.9 million
in 1994 to $14.4 million in 1995 due primarily to the closure of Splash(R) from
November 1994 to June 1995. Other revenues increased by approximately $125,000,
or 1.3%, from $9.4 million in 1994 to $9.5 million in 1995. Promotional
allowances decreased by approximately $1.0 million, or 7.7%, from $12.9 million
in 1994 to $11.9 million in 1995, primarily due to the elimination of certain
marketing programs.
Direct Costs and Expenses of Operating Departments. Total direct costs
and expenses of operating departments decreased by approximately $5.8 million,
or 5.8%, from $99.5 million in 1994 to $93.7 million in 1995. Casino expenses
decreased by approximately $3.5 million, or 7.2%, from $48.8 million in 1994 to
$45.3 million in 1995 due to a corresponding decrease in casino revenues. Casino
expenses as a percentage of casino revenues decreased from 59.5% in 1994 to
58.6% in 1995 due to reduced complimentaries. Room costs increased by
approximately $1.2 million, or 6.8%, from $17.6 million in 1994 to $18.8 million
in 1995, principally due to the payment of higher credit card and travel agent
commissions associated with the increase in room revenues. Room costs as a
percentage of room revenues decreased from 49.7% in 1994 to 47.1% in 1995 as a
result of certain fixed costs being allocated over a larger revenue base. Food
and beverage costs increased by approximately $180,000, or 1.2%, from $15.6
million in 1994 to $15.8 million in 1995. As a percentage of food and beverage
revenues, costs increased from 67.9% in 1994 to 72.0% in 1995 because certain
fixed costs could not be reduced commensurate with the reduction of revenue.
Entertainment costs decreased by approximately $3.7 million, or 26.1%, from
$14.0 million in 1994 to $10.3 million in 1995 due to Splash(R) being closed
during the first half of 1995. Entertainment costs as a percentage of
entertainment revenues decreased from 82.5% in 1994 to 71.6% in 1995 due to
better contract terms with the producer of Splash(R). Other expenses remained
constant at $3.5 million in 1995.
Other Operating Expenses. Selling, general and administrative expenses
increased by approximately $800,000, or 2.8%, from $28.8 million in 1994 to
$29.6 million in 1995. As a percentage of total net revenues, selling, general
and administrative expenses increased from 18.7% in 1994 to 19.6% in 1995 due to
increases in payroll and maintenance offset by a decrease in workers'
compensation insurance expense resulting from the Company becoming self-insured
and a decrease in the provision for bad debts as a result of stricter credit
policies during 1995. Depreciation and amortization increased by approximately
$1.1 million, or 20.0%, from $5.7 million in 1994 to $6.8 million in 1995.
Other Income (Expense). Interest expense decreased by approximately
$311,000, or 2.4%, from $12.8 million in 1994 to $12.5 million in 1995, while
interest income more than doubled from approximately $510,000 to $1.1 million.
This was due to a reduction in average debt outstanding and an increase in
average cash balances, respectively, during 1995 compared to 1994.
Net Income. As a result of the factors discussed above, net income
increased by approximately $1.6 million, or 32.4%, from $4.8 million in 1994 to
$6.3 million in 1995. The effective income tax rate for 1995 was 34.4% compared
to 37.5% for 1994.
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<PAGE>
EBITDA. EBITDA increased by approximately $2.2 million, or 8.6%, from
$25.6 million in 1994 to $27.8 million in 1995. During the same periods, EBITDA
margin increased from 16.6% to 18.4% of net revenues.
Liquidity and Capital Resources
The Company had cash and cash equivalents of $25.6 million at June 30,
1997, which was consistent with balances at December 31, 1996. For the six
months ended June 30, 1997, the Company's net cash provided by operating
activities was $8.4 million compared to $8.0 million for the six months ended
June 30, 1996. EBITDA for the six months ended June 30, 1997 and the year ended
December 31, 1996 was $15.9 million and $31.5 million, respectively, which was
adequate to cover the Company's debt service and capital expenditures.
Management believes that sufficient EBITDA will be available to cover the
Company's debt service and enable investment in budgeted capital expenditures
for the next 12 months.
In February 1997, the Company entered into a $15.0 million, five-year
reducing revolving line of credit collateralized by certain furniture, fixtures
and equipment (the "Revolving Credit Facility"). The revolving line of credit
bears interest at prime plus 0.5% or LIBOR plus 2.9%. The Company has not
utilized this line of credit. As a result of the sale of the Existing Notes, the
Company has ceased to meet such conditions for borrowing availability. The
Company intends to renegotiate the conditions to borrowing under the Revolving
Credit Facility or secure a replacement facility. There can be no assurance
however, that such renegotiation or replacement will be successful.
The Company has made significant capital expenditures to upgrade its
facilities, investing approximately $47 million in capital improvements since
1992. By the end of 1997, management expects to have completed the upgrade of
the slot machines and refurbished all of the hotel rooms at the Riviera. Capital
expenditures totaled approximately $8.9 million in 1994, $7.8 million in 1995,
$14.9 million in 1996 and $6.9 million for the six months ended June 30, 1997.
Management has budgeted approximately $14.1 million for the remaining six months
of 1997, including $5.0 million for Nickel Plaza and $1.4 million expansion of
the convention center and $4.0 million to complete the upgrade of its slot
machines and refurbish its rooms. Management has budgeted approximately $23.5
million for 1998, including $13.5 million for the expansion of the convention
center. The Company expects to finance the development of the Nickel Plaza and
expansion of the convention center in part from the net proceeds of the sale of
the Existing Notes. Management also has budgeted $55 million for the Black Hawk
Project. The Company currently estimates that total costs for completion of the
Black Hawk Project will be approximately $55 million, $15 million of which was
provided by the net proceeds of the sale of the Existing Notes to purchase the
Black Hawk Land, and the remainder of which will be derived from a combination
of third party financing and additional investment by the Company, including up
to an additional $10 million of the net proceeds from the sale of the Existing
Notes. Site clearance work will begin in the fall of 1997, with the opening of
the casino scheduled for the spring of 1999. See "Use of Proceeds" and "Business
- -- Growth Opportunities."
Forward Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements. Certain matters discussed in
this filing could be characterized as forward-looking statements such as
statements relating to plans for future expansion, as well as other capital
spending, financing sources and effects of regulation and competition. Such
forward-looking statements involve important risks and uncertainties that could
cause actual results to differ materially from those expressed in such
forward-looking statements.
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<PAGE>
Recently Adopted Accounting Standards
During 1996 the Company adopted the provisions of Statement of
Financial Accounting Standards No. 121 ("SFAS 121") Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
SFAS 121 requires that long-lived assets and certain identifiable intangibles be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. The adoption of
SFAS 121 had no impact on the financial statements of the Company.
In October 1995, the Financial Accounting Standards Board ("FASB")
issued the Statement of Financial Accounting Standards No. 123 ("SFAS 123")
Accounting for Stock-Based Compensation which establishes financial accounting
and reporting standards for stock-based employee compensation plans and for
transactions in which an entity issues its equity instruments to acquire goods
or services from non-employees. The Company continues to account for stock-based
compensation arrangements in accordance with Accounting Principles Board No. 25,
"Accounting for Stock Issued to Employees" and therefore the adoption of SFAS
123 had no effect on the financial position or results of operations of the
Company. The Company has provided the pro forma and other additional disclosures
about stock-based employee compensation plans in its 1996 consolidated financial
statements as required by SFAS 123.
Recently Issued Accounting Standards
The FASB recently issued Statement of Accounting Standards No. 128,
Earnings Per Share. This statement establishes standards for computing and
presenting earnings per share and is effective for financial statements issued
for periods ending after December 15, 1997. Earlier application of this
statement is not permitted and upon adoption requires restatement (as
applicable) of all prior-period earnings per share data presented. Management
believes that the implementation of this standard will not have a material
impact on earnings per share.
In addition, the FASB issued Statement of Financial Accounting
Standards No. 129, Disclosure of Information about Capital Structure in February
1997. This statement establishes standards for disclosing information about an
entity's capital structure. Management intends to comply with the disclosure
requirements of this statement which are effective for periods ending after
December 15, 1997.
On June 30, 1997, the FASB issued Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income. This statement requires
companies to classify items of other comprehensive income by their nature in a
financial statement and display the accumulated balance of other comprehensive
income separately from retained earnings and additional paid-in capital in the
equity section of a statement of financial position, and is effective for
financial statements issued for fiscal years beginning after December 15, 1997.
Management does not believe this new FASB will have a material impact on their
financial statements.
On June 30, 1997, the FASB issued Statement of Financial Accounting
Standards No. 131, Disclosure About Segments of an Enterprise and Related
Information. This Statement establishes additional standards for segment
reporting in the financial statements and is effective for fiscal years
beginning after December 15, 1997. Management has not determined the effect of
this statement on its financial statement disclosure.
31
<PAGE>
THE EXCHANGE OFFER
Purpose of the Exchange Offer
The Existing Notes were sold by the Company on August 13, 1997 (the
"Closing Date") to the Initial Purchasers pursuant to the Purchase Agreement.
The Initial Purchasers subsequently resold the Existing Notes to qualified
institutional buyers in reliance on Rule 144A under the Securities Act and a
limited number of institutional accredited investors within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act. As a condition to the sale
of the Existing Notes, the Company and the Restricted Subsidiaries were required
to enter into the Registration Rights Agreement. Pursuant to the Registration
Rights Agreement, the Company agreed that, unless the Exchange Offer is not
permitted by applicable law or Commission policy, it would (i) file with the
Commission a Registration Statement under the Securities Act with respect to the
New Notes within 60 days after the Closing Date, (ii) use its best efforts to
cause such Registration Statement to become effective under the Securities Act
within 120 days after the Closing Date and (iii) upon effectiveness of the
Registration Statement, to commence the Exchange Offer, maintain the
effectiveness of the Registration Statement for at least 20 business days (or a
longer period if required by law) and deliver to the Exchange Agent New Notes in
the same aggregate principal amount as the Existing Notes that were tendered by
holders thereof pursuant to the Exchange Offer. A copy of the Registration
Rights Agreement has been filed as an exhibit to the Registration Statement of
which this Prospectus is a part. The Exchange Offer is intended to satisfy
certain of the Company's and the Restricted Subsidiaries' obligations under the
Registration Rights Agreement and the Purchase Agreement.
The terms of the New Notes are identical in all material respects to
those of the Existing Notes, except that (i) the exchange will have been
registered under the Securities Act and hence the New Notes will not bear
legends restricting the transfer thereof, and (ii) holders of the New Notes will
not be entitled to certain rights of holders of the Existing Notes under the
Registration Rights Agreement, which rights will terminate upon the consummation
of the Exchange Offer. The New Notes will be issued pursuant to, and will be
entitled to the benefits of, the Indenture governing the Existing Notes.
Terms Of The Exchange Offer; Period For Tendering Existing Notes
Upon the terms and subject to the conditions set forth in this
Prospectus and in the accompanying Letter of Transmittal (which together
constitute the Exchange Offer), the Company will accept for exchange Existing
Notes which are properly tendered on or prior to the Expiration Date and not
withdrawn as permitted below. As used herein, the term "Expiration Date" means
_____ p.m., _______time, on ______, 1997; provided, however, that if the Company
has extended the period of time for which the Exchange Offer is open, term
"Expiration Date" means the latest time and date to which the Exchange Offer is
extended.
As of the date of this Prospectus, $169.7 million aggregate principal
amount of the Existing Notes are outstanding and registered in the name of Cede
& Co., as nominee for the Depository Trust Company (the "Depositary") and $5.3
million aggregate principal amount of the Existing Notes are registered in the
names of certain accredited institutional investors who hold such notes in
certificated form. Only a registered holder of the Existing Notes (or such
holder's legal representative or attorney-in-fact) as reflected on the records
of the Trustee under the Indenture may participate in the Exchange Offer. There
will be no fixed record date for determining registered holders of the Existing
Notes entitled to participate in the Exchange Offer. The Existing Notes may be
tendered only in integral multiples of $1,000. This Prospectus, together with
the Letter of Transmittal, is first being sent on or about _______, 1997 to all
holders of Existing Notes known to the Company. The Company's obligation to
accept Existing Notes for
32
<PAGE>
exchange pursuant to the Exchange Offer is subject to certain conditions as set
forth under "-- Certain Conditions to the Exchange Offer" below.
The Company shall be deemed to have accepted validly tendered Existing
Notes when, as and if the Company has given oral or written notice thereof to
the Exchange Agent. The Exchange Agent will act as agent for the tendering
holders of Existing Notes for the purposes of receiving the New Notes from the
Company.
The Company expressly reserves the right, at any time or from time to
time, to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for any exchange of any Existing Notes, by giving
notice of such extension to the Exchange Agent and the holders thereof. During
any such extension, all Existing Notes previously tendered will remain subject
to the Exchange Offer and may be accepted for exchange by the Company. Any
Existing Notes not accepted for exchange for any reason will be returned without
expense to the tendering holder thereof as promptly as practicable after the
expiration or termination of the Exchange Offer.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Existing Notes, (ii) to extend the Exchange Offer, or (iii) if any
conditions set forth below under "The Exchange Offer-- Certain Conditions to the
Exchange Offer" shall not have been satisfied, to terminate the Exchange Offer
by giving oral or written notice of such delay, extension or termination to the
Exchange Agent. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by oral or written notice
thereof to the registered holders. If the Exchange Offer is amended in a manner
determined by the Company to constitute a material change, the Company will
promptly disclose such amendment by means of a prospectus supplement that will
be distributed to the registered holders, and the Company will extend the
Exchange Offer for a period of five to 10 business days, depending upon the
significance of the amendment and the manner of disclosure to the registered
holders, if the Exchange Offer would otherwise expire during such five to 10
business day period.
Holders of Existing Notes do not have any appraisal or dissenters'
rights under the Nevada Corporation Law in connection with the Exchange Offer.
The Company intends to conduct the Exchange Offer in accordance with the
provisions of the Registration Rights Agreement and the applicable requirements
of the Securities Act, the Exchange Act and the rules and regulations of the
Commission thereunder.
Procedures For Tendering Existing Notes
Only a registered holder of Existing Notes may tender such Existing
Notes in the Exchange Offer. To tender in the Exchange Offer, a holder must
complete, sign and date the Letter of Transmittal, or facsimile thereof, have
the signatures thereon guaranteed if required by the Letter of Transmittal, and
mail or otherwise deliver such Letter of Transmittal or such facsimile to the
Exchange Agent at the address set forth below under "The Exchange
Offer--Exchange Agent" for receipt prior to the Expiration Date. In addition,
either (i) certificates for such Existing Notes must be received by the Exchange
Agent along with the Letter of Transmittal, or (ii) a timely confirmation of a
book-entry transfer (a "Book-Entry Confirmation") of such Existing Notes, if
such procedure is available, into the Exchange Agent's account at the Depositary
pursuant to the procedure for book-entry transfer described below, must be
received by the Exchange Agent prior to the Expiration Date, or (iii) the holder
must comply with the guaranteed delivery procedures described below.
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<PAGE>
The tender by a holder which is not withdrawn prior to the Expiration
Date will constitute an agreement between such holder and the Company in
accordance with the terms and subject to the conditions set forth in herein and
in the Letter of Transmittal.
THE METHOD OF DELIVERY OF EXISTING NOTES AND THE LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND
RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS
USE AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR EXISTING NOTES SHOULD BE
SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
Any beneficial owner(s) of the Existing Notes whose Existing Notes are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee and who wishes to tender should contact the registered holder
promptly and instruct such registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to tender on such owner's own
behalf, such owner must, prior to completing and executing the Letter of
Transmittal and delivering such owner's Existing Notes, either make appropriate
arrangements to register ownership of the Existing Notes in such owner's name or
obtain a properly completed bond power from the registered holder. The transfer
of registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal
described below (see "The Exchange Offer--Withdrawal of Tenders"), as the case
may be, must be guaranteed by an Eligible Institution (as defined below) unless
the Existing Notes tendered pursuant thereto are tendered (i) by a registered
holder who has not completed the box entitled "Special Delivery Instructions" on
the Letter of Transmittal or (ii) for the account of an Eligible Institution. In
the event that signatures on a Letter of Transmittal or a notice of withdrawal,
as the case may be, are required to be guaranteed, such guarantee must be made
by a member firm of a registered national securities exchange or of the National
Association of Securities Dealers, Inc. a commercial bank or trust company
having an office or correspondent in the United States or an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Exchange Act which is
a member of one of the recognized signature guarantee programs identified in the
Letter of Transmittal (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Existing Notes listed therein, such Existing Notes must
be endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Existing
Notes.
If the Letter of Transmittal or any Existing Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with the Letter of Transmittal.
The Exchange Agent and the Depositary have confirmed that any financial
institution that is a participant in the Depositary's system may utilize the
Depositary's Automated Tender Offer Program to tender Existing Notes.
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<PAGE>
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Existing Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and all
Existing Notes not properly tendered or any Existing Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Existing Notes. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Existing Notes must be cured within such time as the
Company shall determine. Although the Company intends to notify holders of
defects or irregularities with respect to tenders of Existing Notes, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Existing Notes will not be deemed
to have been made until such defects or irregularities have been cured or
waived.
While the Company has no present plan to acquire any Existing Notes
which are not tendered in the Exchange Offer or to file a registration statement
to permit resales of any Existing Notes which are not tendered pursuant to the
Exchange Offer, the Company reserves the right in its sole discretion to
purchase or make offers for any Existing Notes that remain outstanding
subsequent to the Expiration Date or, as set forth below under "--Certain
Conditions to the Exchange Offer," to terminate the Exchange Offer and, to the
extent permitted by applicable law, purchase Existing Notes in the open market,
in privately negotiated transactions or otherwise. The terms of any such
purchases or offers could differ from the terms of the Exchange Offer.
By tendering, each holder will represent to the Company that, among
other things, (i) the New Notes to be acquired by the holder of the Existing
Notes in connection with the Exchange Offer are being acquired by the holder in
the ordinary course of business of the holder, (ii) the holder has no
arrangement or understanding with any person to participate in the distribution
of New Notes, (iii) the holder acknowledges and agrees that any person who is a
broker-dealer registered under the Exchange Act or is participating in the
Exchange Offer for the purposes of distributing the New Notes must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction of the New Notes acquired by such
person and cannot rely on the position of the staff of the Commission set forth
in certain no-action letters, (iv) the holder understands that a secondary
resale transaction described in clause (iii) above and any resales of New Notes
obtained by such holder in exchange for Existing Notes acquired by such holder
directly from the Company should be covered by an effective registration
statement containing the selling securityholder information required by Item 507
or Item 508, as applicable, of Regulation S-K of the Commission, and (v) the
holder is not an "affiliate," as defined in Rule 405 of the Securities Act, of
the Company. If the holder is a broker-dealer that will receive New Notes for
its own account in exchange for Existing Notes that were acquired as a result of
market-making activities or other trading activities, the holder is required to
acknowledge in the Letter of Transmittal that it will deliver a prospectus in
connection with any resale of such New Notes; however, by so acknowledging and
by delivering a prospectus, the holder will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
Return of Existing Notes
If any tendered Existing Notes are not accepted for any reason set
forth in the terms and conditions of the Exchange Offer or if Existing Notes are
withdrawn or are submitted for a greater principal amount than the holders
desire to exchange, such unaccepted, withdrawn or non-exchanged Existing Notes
will be returned without expense to the tendering holder thereof (or, in the
case of Existing Notes tendered by book-entry transfer
35
<PAGE>
into the Exchange Agent's account at the Depositary pursuant to the book-entry
transfer procedures described below, such Existing Notes will be credited to an
account maintained with the Depositary) as promptly as practicable.
Book-Entry Transfer
The Exchange Agent will make a request to establish an account with
respect to the Existing Notes at the Depositary for purposes of the Exchange
Offer within two business days after the date of this Prospectus, and any
financial institution that is a participant in the Depositary's systems may make
book-entry delivery of Existing Notes by causing the Depositary to transfer such
Existing Notes into the Exchange Agent's account at the Depositary in accordance
with the Depositary's procedures for transfer. However, although delivery of
Existing Notes may be effected through book-entry transfer at the Depositary,
the Letter of Transmittal or facsimile thereof, with any required signature
guarantees and any other required documents, must, in any case, be transmitted
to and received by the Exchange Agent at the address set forth below under "The
Exchange Offer--Exchange Agent" on or prior to the Expiration Date or pursuant
to the guaranteed delivery procedures described below.
Guaranteed Delivery Procedures
Holders who wish to tender their Existing Notes and (i) whose Existing
Notes are not immediately available or (ii) who cannot deliver their Existing
Notes, the Letter of Transmittal or any other required documents to the Exchange
Agent prior to the Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives
from such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the Company (by
facsimile transmission, mail or hand delivery) setting forth the name and
address of the holder, the certificate number(s) of such Existing Notes and the
principal amount of Existing Notes tendered, stating that the tender is being
made thereby and guaranteeing that, within five New York Stock Exchange trading
days after the Expiration Date, the Letter of Transmittal (or a facsimile
thereof) together with the certificate(s) representing the Existing Notes in
proper form for transfer or a Book-Entry Confirmation, as the case may be, and
any other documents required by the Letter of Transmittal will be deposited by
the Eligible Institution with the Exchange Agent; and
(c) Such properly executed Letter of Transmittal (or facsimile
thereof), as well as the certificate(s) representing all tendered Existing Notes
in proper form for transfer and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within five New York Stock
Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery
will be sent to holders who wish to tender their Existing Notes according to the
guaranteed delivery procedures set forth above.
Withdrawal of Tenders
Except as otherwise provided herein, tenders of Existing Notes may be
withdrawn at any time prior to the Expiration Date.
To withdraw a tender of Existing Notes in the Exchange Offer, a written
or facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to the Expiration Date. Any such
notice of withdrawal must (i) specify the name of the person having deposited
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<PAGE>
the Existing Notes to be withdrawn (the "Depositor"), (ii) identify the Existing
Notes to be withdrawn (including the certificate number or numbers and aggregate
principal amount of such Existing Notes), and (iii) be signed by the holder in
the same manner as the original signature on the Letter of Transmittal by which
such Existing Notes were tendered (including any required signature guarantees).
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Company in its sole
discretion, whose determination shall be final and binding on all parties. Any
Existing Notes so withdrawn will be deemed not to have been validly tendered for
purposes of the Exchange Offer and no New Notes will be issued with respect
thereto unless the Existing Notes so withdrawn are validly retendered. Properly
withdrawn Existing Notes may be retendered by following one of the procedures
described above under "The Exchange Offer--Procedures for Tendering" at any time
prior to the Expiration Date.
Certain Conditions To The Exchange Offer
Notwithstanding any other provision of the Exchange Offer, the Company
shall not be required to accept for exchange, or to issue New Notes in exchange
for, any Existing Notes and may terminate or amend the Exchange Offer if at any
time before the acceptance of such Existing Notes for exchange or the exchange
of New Notes for such Existing Notes, the Company determines that the Exchange
Offer violates applicable law, rule or regulation, any applicable interpretation
of the staff of the Commission or any order of any governmental agency or court
of competent jurisdiction.
The foregoing conditions are for the sole benefit of the Company and
may be asserted by the Company regardless of the circumstances giving rise to
any such condition or may be waived by the Company in whole or in part at any
time and from time to time in its reasonable discretion. The failure by the
Company at any time to exercise any of the foregoing rights shall not be deemed
a waiver of such right and each such right shall be deemed an ongoing right
which may be asserted at any time and from time to time.
In addition, the Company will not accept for exchange any Existing
Notes tendered, and no New Notes will be issued in exchange for any such
Existing Notes, if at such time any stop order shall be threatened or in effect
with respect to the Registration Statement of which this Prospectus constitutes
a part or the qualification of the Indenture under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). In any such event the Company is
required to use every reasonable effort to obtain the withdrawal of any stop
order at the earliest possible time.
Exchange Agent
Norwest Bank Minnesota, N.A. has been appointed as the Exchange Agent
for the Exchange Offer. All executed Letters of Transmittal should be directed
to the Exchange Agent at one of the addresses set forth below. Questions and
requests for assistance, requests for additional copies of this Prospectus or of
the Letter of Transmittal and requests for Notices of Guaranteed Delivery should
be directed to the Exchange Agent addressed as follows:
37
<PAGE>
<TABLE>
<CAPTION>
By Hand: By Registered or Certified Mail: By Overnight Courier:
<S> <C> <C>
Northwest Bank Minnesota, N.A. Norwest Bank Minnesota, N.A. Norwest Bank Minnesota, N.A.
Northstar East Building Corporate Trust Operations Corporate Trust Services
608 Second Avenue South P.O. Box 1517 Sixth and Marquette Avenue
12th Floor Minneapolis, MN 55480-1517 Minneapolis, MN 55479-0113
Corporate Trust Services
Minneapolis, MN
By Facsimile:
(612) 667-4927
Confirm by Telephone:
(612) 667-9764
</TABLE>
Delivery other than as set forth above will not constitute a valid
delivery.
Fees and Expenses
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by facsimile, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offer
will be paid by the Company and are estimated in the aggregate to be
approximately $150,000. Such expenses include registration fees, fees and
expenses of the Exchange Agent and Trustee, accounting and legal fees and
printing costs, among others.
The Company will pay all transfer taxes, if any, applicable to the
exchange of Existing Notes pursuant to the Exchange Offer. If, however, a
transfer tax is imposed for any reason other than the exchange of the Existing
Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exemption therefrom is not submitted with the Letter of Transmittal, the amount
of such transfer taxes will be billed directly to such tendering holder.
Accounting Treatment
The New Notes will be recorded at the same carrying value as the
Existing Notes, which is the principal amount as reflected in the Company's
accounting records on the date of the exchange.
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<PAGE>
Accordingly, no gain or loss for accounting purposes will be recognized. The
debt issuance costs will be capitalized for accounting purposes and will be
amortized over the term of the debt.
Consequences Of Failure To Exchange; Resales Of New Notes
Participation in the Exchange Offer is voluntary. Holders of the
Existing Notes are urged to consult their financial and tax advisors in making
their own decisions on what action to take.
The Existing Notes which are not exchanged for the New Notes pursuant
to the Exchange Offer will remain restricted securities. Accordingly, such
Existing Notes may be resold only (i) to a person whom the seller reasonably
believes is a qualified institutional buyer (as defined in Rule 144A under the
Securities Act) in a transaction meeting the requirements of Rule 144A, (ii) in
a transaction meeting the requirements of Rule 144 under the Securities Act,
(iii) outside the United States to a foreign person in a transaction meeting the
requirements of Rule 904 under the Securities Act or (iv) in accordance with
another exemption from the registration requirements of the Securities Act (and
based upon an opinion of counsel if the Company so requests), (v) to the Company
or (vi) pursuant to an effective registration statement and, in each case, in
accordance with any applicable securities laws of any state of the United States
or any other applicable jurisdiction
With respect to the New Notes, based upon an interpretation by the
staff of the Commission set forth in certain no-action letters issued to third
parties, the Company believes that a holder (other than (i) a broker-dealer who
purchases such New Notes directly from the Company to resell pursuant to Rule
144A or any other available exemption under the Securities Act or (ii) any such
holder which is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) who exchanges the Existing Notes for the New Notes in
the ordinary course of business and who is not participating, does not intend to
participate, and has no arrangement with any person to participate, in the
distribution of the New Notes, will be allowed to resell the New Notes to the
public without further registration under the Securities Act and without
delivering to the purchasers of the New Notes a prospectus that satisfies the
requirements of Section 10 of the Securities Act. However, if any holder
acquires the New Notes in the Exchange Offer for the purpose of distributing or
participating in the distribution of the New Notes or is a broker-dealer, such
holder cannot rely on the position of the staff of the Commission enumerated in
certain no-action letters issued to third parties and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction, unless an exemption from registration is
otherwise available. Each broker-dealer that receives New Notes for its own
account in exchange for Existing Notes, where such Existing Notes were acquired
by such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of New Notes received in
exchange for Existing Notes where such Existing Notes were acquired by such
broker-dealer as a result of market-making or other trading activities. Pursuant
to the Registration Rights Agreement, the Company has agreed to make this
Prospectus, as it may be amended or supplemented from time to time, available to
broker-dealers for use in connection with any resale for a period of one year
following the Effective Date. See "Plan of Distribution."
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the material United States federal
income tax consequences of the Exchange Offer to a holder of Existing Notes that
is an individual citizen or resident of the United States or a United
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States corporation that purchased the Existing Notes pursuant to their original
issue (a "U.S. Holder"). It is based on the Internal Revenue Code of 1986, as
amended to the date hereof (the "Code"), existing and proposed Treasury
regulations, and judicial and administrative determinations, all of which are
subject to change at any time, possibly on a retroactive basis. The following
relates only to the Existing Notes, and the New Notes received therefor, that
are held as "capital assets" within the meaning of Section 1221 of the Code by
U.S. Holders. It does not discuss state, local, or foreign tax consequences, nor
does it discuss tax consequences to subsequent purchasers (persons who did not
purchase the Existing Notes pursuant to their original issue ), or to categories
of holders that are subject to special rules, such as foreign persons,
tax-exempt organizations, insurance companies, banks, and dealers in stocks and
securities. Tax consequences may vary depending on the particular status of an
investor. No rulings will be sought from the Internal Revenue Service with
respect to the federal income tax consequences of the Exchange Offer.
In the opinion of Dechert Price & Rhoads, counsel to the Company, (a)
the exchange of Notes pursuant to the Exchange Offer should not be a taxable
event for a U.S. Holder as set forth below under the caption "-- The Exchange
Offer", and (b) the summary of the United States federal income tax consequences
to a U.S. Holder that appears below under the captions "--Stated Interest",
"--Sale, Exchange or Retirement of the Notes" and "--Backup Withholding" is
accurate in all material respects.
THIS SECTION DOES NOT PURPORT TO DEAL WITH ALL ASPECTS OF FEDERAL
INCOME TAXATION THAT MAY BE RELEVANT TO AN INVESTOR'S DECISION TO EXCHANGE
EXISTING NOTES FOR NEW NOTES. EACH INVESTOR SHOULD CONSULT WITH ITS OWN TAX
ADVISOR CONCERNING THE APPLICATION OF THE FEDERAL INCOME TAX LAWS AND OTHER TAX
LAWS TO ITS PARTICULAR SITUATION BEFORE DETERMINING WHETHER TO EXCHANGE EXISTING
NOTES FOR NEW NOTES.
The Exchange Offer
In the opinion of Dechert Price & Rhoads, counsel to the Company, the
exchange of Existing Notes pursuant to the Exchange Offer should be treated as a
continuation of the corresponding Existing Notes because the terms of the New
Notes are not materially different from the terms of the Existing Notes, and
accordingly (i) such exchange should not constitute a taxable event to a U.S.
Holder, (ii) no gain or loss should be realized by a U.S. Holder upon receipt of
a New Note, (iii) the holding period of the New Note should include the holding
period of the Existing Note exchanged therefor and (iv) the adjusted tax basis
of the New Note should be the same as the adjusted tax basis of the Existing
Note exchanged therefor immediately before the exchange.
Stated Interest
Stated interest on a Note will be taxable to a U.S. Holder as ordinary
interest income at the time that such interest accrues or is received, in
accordance with the U.S. Holder's regular method of accounting for federal
income tax purposes. The Notes are not considered to have been issued with
original issue discount for federal income tax purposes.
Sale, Exchange or Retirement of the Notes
A U.S. Holder's tax basis in a Note generally will be its cost. A U.S.
Holder generally will recognize gain or loss on the sale, exchange or retirement
of a Note in an amount equal to the difference between the amount realized on
the sale, exchange or retirement and the tax basis of the Note. Gain or loss
recognized on the sale, exchange or retirement of a Note (excluding amounts
received in respect of accrued
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interest, which will be taxable as ordinary interest income) generally will be
capital gain or loss. A U.S. Holder who is an individual or other person not
taxable as a corporation for federal income tax purposes who has held a Note for
more than 18 months is subject to a maximum rate of tax 28% on any capital gain
recognized upon its disposition. Gain recognized by a noncorporate U.S. Holder
who has held a Note for 12 months or less may be taxed at ordinary income rates.
Capital losses of noncorporate U.S. Holders in excess of capital gains may be
offset against ordinary income up to $3000; excess capital losses may be carried
forward to subsequent years. Capital gains of a U.S. Holder taxable as a
corporation for federal income tax purposes is classified as long or short term
depending upon whether the Note has been held for more than 12 months.
Backup Withholding
Under certain circumstances, a U.S. Holder of a Note may be subject to
"backup withholding" at a 31% rate with respect to payments of interest thereon
or the gross proceeds from the disposition thereof. This withholding generally
applies if the U.S. Holder fails to furnish his or her social security number or
other taxpayer identification number in the specified manner and in certain,
other circumstances. Any amount withheld from a payment to a U.S. Holder under
the backup withholding rules is allowable as a credit against such U.S. Holder's
federal income tax liability provided that the required information is furnished
to the IRS. Corporations and certain Other entities described in the Code and
Treasury regulations are exempt from backup withholding if their exempt status
is properly established.
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BUSINESS
General
The Company owns and operates the Riviera located on the Strip in Las
Vegas, Nevada. Opened in 1955, the Riviera has developed a long-standing
reputation for delivering high quality, traditional Las Vegas-style gaming and
entertainment. The Riviera is situated on a 26-acre site, located across the
Strip from Circus Circus and across Paradise Road from the Las Vegas Hilton and
the Las Vegas Convention Center. The property features approximately 2,100 hotel
rooms, including 169 suites, 105,000 square feet of casino space, one of the
largest convention, meeting and banquet facilities in Las Vegas, four
full-service restaurants, a large buffet, four showrooms, an entertainment
lounge, 43 food and retail concessions and approximately 2,900 parking spaces.
The casino contains approximately 1,300 slot machines, 50 gaming tables, a keno
lounge and a 200-seat race and sports book. The Riviera offers one of the most
extensive entertainment programs in Las Vegas, including the award winning show,
Splash(R). The Company, through its gaming management subsidiary, also manages
the Four Queens on Fremont Street in downtown Las Vegas.
Since 1992, the Riviera's management team has achieved consistent
growth in EBITDA and profit margins. EBITDA has increased over 44% from $21.8
million in 1992 to $31.5 million in 1996 and EBITDA margins have improved from
15.1% to 19.2% over the same period. The Company achieved this growth through
the implementation of a number of strategic initiatives that included (i)
refocusing its marketing strategy from "high-rollers" to adult mid-level gaming
customers, a niche that management believes has been underserved, (ii) focusing
on conventioneers who pay higher room rates, causing Riviera's ADR to increase
from $47 in 1992 to $57 in 1996, (iii) aggressively marketing its hotel
facilities resulting in occupancy rates growing from 90.6% in 1992 to 98.2% in
1996, (iv) emphasizing higher margin slot play which increased slot revenue by
33.0% from 1992 to 1996 and (v) investing approximately $47 million in capital
improvements since 1992. Management believes that it has also improved the
stability of EBITDA by providing a broad entertainment experience (1996
non-gaming revenues: 55% vs. 47% for other casinos on the Strip), focusing on
conventioneers (approximately 30% of mid-week room nights pre-sold through June
1999) and developing a repeat and loyal customer base through proprietary
database marketing.
Growth Opportunities
The Company seeks to continue its growth in EBITDA and profits by
maximizing the potential of the Riviera's prime Strip frontage and capitalizing
on the proven strength of its management team by leveraging its talents across
multiple properties. To achieve this goal, the Company is pursuing the following
opportunities:
Riviera Expansion. By the end of 1997, management expects to have
completed the upgrade of the slot machines and refurbished all of the hotel
rooms at the Riviera. To continue capitalizing on the Riviera's prime Strip
frontage, the Company is developing the Nickel Plaza, a new 10,000 square-foot
gaming area fronting the Strip complete with 350 slot machines, a bar, snack bar
and souvenir shop, which is expected to be completed by December 1997. Nickel
Plaza will be ideally positioned to attract the additional walk-in traffic from
the newly built 1,000 rooms directly across the Strip at Circus Circus and the
expansions of the Las Vegas Hilton and the Las Vegas Convention Center.
Management expects Nickel Plaza will be developed for an estimated cost of $5
million. To maintain and enhance its core conventioneer customer base, the
Company also plans to expand its convention center from 100,000 square feet to
158,000 square feet by constructing new state-of-the-art, multi-level,
convention, meeting and banquet facilities. Construction is expected to commence
in the fourth quarter of 1997 and be completed by the end
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of the third quarter of 1998. Management believes this expansion, which is
estimated to cost approximately $15 million, will further solidify the Riviera
as one of the premier convention sites in Las Vegas. In addition, the Company
owns approximately six acres of contiguous property which is available for
future expansion.
The Black Hawk Project. As part of the Company's strategy to diversify
its revenue base and leverage both the Riviera name and its management team, the
Company pursues development opportunities in both established and emerging
gaming markets. The Company has acquired for $15 million what management
believes to be the premier gaming site in Colorado. The Company intends to use
this site to construct one of the largest gaming facilities in the adjacent
gaming cities of Black Hawk and Central City, Colorado. The Black Hawk Project
is expected to feature 1,000 slot machines, 14 table games, a 500 space covered
parking garage and entertainment and food service amenities. Management believes
this market has attractive fundamentals, including (i) gaming limited to Black
Hawk/Central City and Cripple Creek in Colorado, (ii) consistent gaming revenue
growth since 1992 to over $300 million in 1996, (iii) slot machine dominated
market due to statutory limited stakes, (iv) one hour drive from central Denver
and (v) approximately 2.3 million adults residing within 100 miles of Black
Hawk. Management believes that the proposed Riviera facility will be highly
successful due to the following attributes: (i) premier location: it will be the
first gaming site encountered when arriving from Denver, (ii) size and quality:
it will be one of the largest casinos in the market complete with restaurant and
entertainment options and (iii) superior parking: it will have on-site, covered
self-parking, which is critical in this market where parking is currently
extremely limited. The Black Hawk Project is an attractive investment
opportunity that allows the Company to create a multi-jurisdictional gaming
company. The Company currently estimates that total costs for completion of the
Black Hawk Project will be approximately $55 million, $15 million of which was
provided by the net proceeds of the sale of the Existing Notes to purchase the
Black Hawk Land, and the remainder of which will be derived from a combination
of third party financing and additional investment by the Company, including up
to an additional $10 million of the net proceeds from the sale of the Existing
Notes. Site clearance work in connection with the construction of the casino
will begin in the fall of 1997, with the opening of the casino scheduled for the
spring of 1999.
Casino/Hotel Management Contracts. The Company believes that there is
increasing demand for the services of skilled gaming and hospitality
professionals. In order to capitalize on management's reputation and experience
as successful casino operators, the Company formed RGM for the primary purpose
of obtaining casino management contracts with casinos/hotels in Nevada and other
jurisdictions. Since August 1996, RGM has managed the Four Queens located
adjacent to the Golden Nugget on Fremont Street in downtown Las Vegas. Under the
Four Queens management contract, RGM receives a guaranteed minimum management
fee plus additional compensation based on EBITDA improvement of the Four Queens,
and warrants to purchase 20% (on a fully diluted basis) of the common stock of
the Four Queens' parent, Elsinore. Such management contract provides significant
revenues and upside equity potential with minimal additional overhead and
capital expenditure. Under RGM, Four Queens' EBITDA improved by more than 40% in
the twelve months ended June 30, 1997, compared to the same period in 1996 and
generated approximately $0.9 million in management fees for the Company.
Management is continually evaluating opportunities to manage other
casinos/hotels.
The Riviera
The Riviera is located on the corner of the Strip and Riviera Drive,
across from Circus Circus. The back of the 26-acre property fronts Paradise Road
across from the Las Vegas Hilton and the Las Vegas Convention Center. The
Riviera is strategically located to take advantage of the high tourist traffic
along the Strip as well as the increasing number of convention customers that
use the Las Vegas Convention Center.
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The Company is continuing an extensive capital investment program,
including completion of the upgrade of its slot machines and refurbishment of
all of its hotel rooms by the end of 1997. When the Company acquired the Riviera
on June 30, 1993, it embarked on a refurbishing and upgrading program and will
have invested approximately $50 million in such efforts by the end of 1997.
Between July 1, 1993 and December 31, 1997, the Company will have spent $21.6
million refurbishing its 2,100 rooms, including installation of a card key entry
system and new telephone computer switch equipment and other similar upgrades;
$8.7 million upgrading its slot machines so that they can be competitive with
slot machines of other Las Vegas Strip casinos and reducing the average age of
the equipment to less than three years; $2.6 million remodeling bars,
restaurants and convention banquet areas; $1.3 million remodeling the show rooms
and upgrading light and sound equipment; $10.7 million upgrading the life
safety, heating and cooling and other back of the house support systems; and
$4.6 million upgrading its computer systems, including casino rating software,
slot tracking systems and payroll management systems, all with the objective of
controlling costs and enhancing customer service.
Gaming. The Riviera has 105,000 square feet of casino space. The casino
currently has approximately 1,300 slot machines and 50 gaming tables, including
blackjack, craps, roulette, pai gow poker, Caribbean Stud(R) poker, baccarat,
Let It Ride(R) and poker. The casino also includes a keno lounge and a 200-seat
race and sportS book.
Gaming operations at the Riviera are continually updated to respond to
both changing market conditions and customer demand in an effort to attract new
customers and encourage repeat customer business through player tracking and
database management. The Company maintains a slot players club, through which
members receive special promotions and targeted mailings. New and innovative
slot and table games have been introduced based on customer feedback. Management
devotes substantial time and attention to the type, location and player activity
of all its slot machines. The Company is continuing an extensive capital
investment program for the upgrade of its slot machines which is expected to be
completed by the end of 1997.
The current management team has made an effort to redirect its business
away from high-stakes wagerers in favor of focusing on highly profitable, less
volatile mid-level gaming customers consistent with its focused marketing
efforts. In order to effectively pursue this strategy, management has made
several strategic changes including reconfiguring the casino space to improve
the flow of customer traffic, installing new slot machines and bill acceptors,
reducing the number of gaming tables and de-emphasizing baccarat. In addition,
management implemented stricter credit policies and reduced baccarat table
limits. As a result, the percentage of table game dollar volume represented by
credit play declined from approximately 24% in 1993 to 15% in 1996. Also, in
1996, revenues from slots and tables were approximately 70% and 30%,
respectively, as compared to 55% and 45%, respectively, in 1992. Because the
extension of credit is not necessary for success with mid-level gaming
customers, losses on uncollectible and discounted receivables have declined
significantly. Receivables from casino operations declined from approximately
$2.9 million at December 31, 1993 to approximately $2.3 million at December 31,
1996 and the allowance for bad debts and discounts from casino operations
declined from approximately $800,000 to $400,000 during the same period. These
reductions have resulted primarily from the imposition of stricter credit
standards.
The Company currently has detailed plans to further capitalize on the
Riviera's prime Strip frontage and proximity to the Las Vegas Convention Center
through additional development and expansion on the existing 26-acre site. To
attract walk-in traffic from the nearby hotel casinos and motels (Circus Circus,
Westward Ho, Stardust, Sahara, El Rancho) which have more than 10,000 rooms, the
Company is in the process of developing a 10,000 square-foot "Nickel Plaza" on
the corner of Las Vegas Boulevard and Riviera Boulevard at the crosswalk from
Circus Circus and the local Strip bus stop at an estimated
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cost of about $5 million. The facility will contain 350 slot machines, a bar,
snack bar and souvenir shop. Food and beverage items will be priced very
attractively and promoted extensively. Dramatic signage and lighting effects
compatible with the property's existing facade facing Las Vegas Boulevard will
create a "must see" effect for passersby on both sides of Las Vegas Boulevard.
The Company believes that the nickel player represents the most rapidly growing
segment of the Las Vegas gaming market and is frequently neglected by the
Company's major competitors who focus their slot products on higher
denominations. Two-thirds of the devices in Nickel Plaza will be nickel
machines. The Company has received Clark County Planning Commission approval, is
finalizing detailed drawings for bids and expects to start construction in
September 1997 with a completion date of December 31, 1997.
Hotel. The Riviera's hotel is comprised of five hotel towers with
approximately 2,100 rooms, including 169 suites. Built in 1955 as part of the
original casino/hotel, the nine-story North Tower features 391 rooms and 11
suites. In 1967, the 12-story South Tower was built with 147 rooms and 31
suites. Another 220 rooms and 72 suites, including penthouse suites, were added
to the property through the construction of the 17-story Monte Carlo Tower in
1974. In 1977, the six-story San Remo Tower added 243 rooms and six suites to
the south side of the resort. The most recent phase of hotel expansion was
completed in 1988 upon the opening of the 930 room, 49 suite, 24-story Monaco
Tower. The Company is currently refurbishing all of its rooms, with
approximately 1,800 completed through June 1997 and the balance expected to be
completed by the end of 1997 for an additional $2.5 million. Despite the
significant increase in rooms on the Strip in the last three years, management
believes that the Riviera has attained room occupancy rates that are among the
highest on the Strip with 97.5% for 1994, 97.0% for 1995, and 98.2% for 1996
(based on available rooms). The average occupancy rate for the Strip was 91.4%
in 1996. Room revenue has increased from $35.4 million in 1993 to $41.8 million
in 1996, an increase of 18.1%. Management believes that this performance can be
attributed to its targeted and coordinated marketing strategy, particularly its
focus on conventioneers.
Restaurants. The quality, value and variety of food services are
critical to attracting Las Vegas visitors. The Riviera offers four bars and five
restaurants and serves an average of approximately 5,000 meals per day,
including banquets and room service. The following table outlines, for each
restaurant, the type of service provided and total seating capacity:
Seating
Name Type Capacity
- ---- ---- --------
Kady's............................ Coffee Shop 290
Kristofer's....................... Steak and Seafood 162
Rik' Shaw......................... Chinese 124
Ristorante Italian................ Italian 126
World's Fare Buffet............... All-you-can-eat 432
----------
Total............................................. 1,134
==========
In addition, the Riviera has a food court operated by a third party
under a long-term lease with 200 seats and several branded, popular fast-food
restaurants, including Burger King(R), Panda Express(R), Pizza Hut(R) and
"TCBY"(R).
Convention Center. The Riviera features 100,000 square feet of
convention, meeting and banquet space. The convention center is one of the
largest in Las Vegas and is an important feature that attracts customers. The
facility can be reconfigured for multiple meetings of small groups or large
gatherings of up to 5,000 people. The Riviera hosts approximately 150
conventions per year. As of June 30, 1997, convention related advance bookings
of rooms totaled approximately 446,000 for 1998 and 1999, which
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includes 331,000 definite bookings and 115,000 tentative bookings. On average,
approximately 25% of the rooms are occupied for conventions.
The Company intends to increase its emphasis on the convention segment
of its business and the Clark County Planning Commission has recently approved
the expansion of the Company's convention facility. In 1998, the Company plans
to expand its convention center from 100,000 to 158,000 square feet by
constructing new state-of-the-art, multi-level, convention, meeting and banquet
facilities. The new facility will feature 46,000 square feet of exhibit space,
10 breakout meeting rooms totaling 7,200 square feet and 20 sky box/hospitality
suites totaling 17,200 square feet. Overlooking the exhibit floor, the sky
box/hospitality suites will range from 540 to 1,300 square feet and can be
interconnected to accommodate larger groups. All units will have two tiers of 12
theater seats and the 1,300 square-foot boxes will be equipped with wet bars and
private restrooms. The new convention/entertainment facility will have a total
concert seating capacity of 5,700 and will be able to accommodate up to 2,500
for sit-down banquets. Other features will include a portable stage, ceiling
tech booth, entertainer dressing rooms with full baths and an approximately 200
space underground parking facility with elevator access to all floors. The new
addition will connect to the existing convention facility and the main hotel
buildings by a covered walkway.
Combined with the existing convention facility, the Riviera will offer
convention and meeting planners 90,640 square feet of exhibit space, 19 breakout
rooms with a total of 21,000 square feet, an additional 17,200 square feet in
the 20 interconnecting sky box/hospitality suites and a 15,000 square-foot foyer
with two registration desks, a business center and connecting offices, and a
full-service banquet kitchen. In addition to the new 192 space underground
parking facility, the convention facility will have direct access to a 1,600
space covered parking garage. The Company expects the expanded convention center
to be one of the premier convention facilities in Las Vegas, ideally positioned
to take advantage of the growing convention business.
The new facility will generate increased banquet, rental and
entertainment revenue. In addition, the Company believes that with the expanded
state-of-the-art facilities, hotel room nights occupied by conventioneers will
increase as a percentage of total room nights. This will increase ADR since
convention rates are considerably more than those for all other occupancy
segments. The Company's architect is currently finalizing drawings for
permitting and bidding. Construction will commence in the fourth quarter of 1997
and will be completed in the third quarter of 1998.
Entertainment and Other. The Riviera has one of the most extensive
entertainment programs in Las Vegas, offering four different regularly scheduled
shows and special appearances by headline entertainers in concert. The four
in-house productions are regularly updated. In November 1994, the award winning
Splash(R) production was closed in order to revise the show and remodel the
showroom for the new Splash(R), which opened on June 23, 1995. The readers of
the Las Vegas Review Journal recently voted The Riviera Comedy Club(SM) the
number one comedy club in Las Vegas and Crazy Girls cast the most beautiful
showgirls in Las Vegas. A summary of the shows and times is outlined below:
<TABLE>
<CAPTION>
Seating
Show Type Performance Times Capacity
- ---- ---- ----------------- --------
<S> <C>
Splash(R) Variety show Twice a night, seven nights per week 950
An Evening at Female impersonation Twice a night, five nights per week; three 575
La Cage(R) times on Wednesday
Crazy Girls Adult-oriented production Twice a night, five nights per week; 410
three times a night on Saturday
The Riviera Stand-up comedy Twice a night, five nights per week; three 350
Comedy ClubSM times a night on Friday & Saturday
</TABLE>
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Other entertainment includes the 200-seat Le Bistro entertainment
lounge located in the casino which offers live performances six times per night.
In addition, the Riviera sponsors special events, such as the Las Vegas Bowl
football game, and presents major concerts such as the Beach Boys, the Pointer
Sisters, Drew Carey and the Doobie Brothers.
Entertainment revenues have increased from $16.5 million in 1993 to
$20.9 million in 1996, a 26.7% increase. Management believes that this increase
is attributable to the increasing popularity of the in-house productions.
Future Expansions
Future plans for the development of the Riviera include development of
an approximately 60,000 square-foot domed shopping center and entertainment
complex to be constructed directly over the casino and containing stores and
entertainment that will appeal to the Riviera's main target audience, adults
aged 45 to 65. The exit from the complex will be by an escalator which will
deliver patrons to the casino. The Company expects to find partners to finance,
develop and operate the entertainment attraction and retail stores.
The Company also has approximately six acres of its existing 26-acre
site available for additional development. The Company is exploring a number of
options in order to make the best use of this valuable land, including a joint
venture for the development of a time-share condominium tower. The Company
expects it would contribute up to 6 acres of land to such a joint venture and a
third party would construct and sell time-share units and arrange financing.
Management believes that additional rooms adjacent to the Las Vegas Convention
Center would be particularly attractive to business customers and would provide
a base for additional casinos customers. The development of a time-share tower
or parking facility would require additional financing and, in the case of the
time-share tower, a joint venture partner, none of which the Company has in
place at the time.
Marketing Strategy
Since 1992, the Riviera's management team implemented numerous
programs, aimed at repositioning the Riviera and refocusing its marketing
efforts. Such initiatives included targeting California and the southwestern
United States and emphasizing mid-level gaming customers, particularly slot
players, as opposed to "high rollers." Management believes that adult mid-level
gaming customers are underserved. Management reconfigured the casino space to
improve the flow of customer traffic, installed new slot machines and bill
acceptors, reduced the number of gaming tables and de-emphasized baccarat. In
addition, management reduced credit limits, outsourced the Company's sports book
and shifted to parimutuel horse wagering, thereby decreasing the volatility of
gaming revenues. Also, improved hotel marketing efforts resulted in one of the
highest room occupancy rates on the Strip.
The Riviera will continue to emphasize marketing programs that appeal
to slot and mid-level table game customers with a focus on creating repeat
customers and increasing walk-in traffic. In addition, a key marketing focus is
maintaining and expanding Riviera's core conventioneer customer base. In
developing its overall marketing programs, the Company conducts extensive,
ongoing research of its target customers' preferences through written surveys,
one-on-one interviews and focus groups.
Emphasize Slot Play. Management instituted a number of initiatives at
the Riviera to increase slot play, including the replacement of old slot
machines, the installation of bill acceptors and the addition of slot hosts. The
Company's strategy is to continue to increase slot play through marketing
programs and other improvements, including (i) completion of the Company's slot
upgrade program in the third quarter of
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1997, (ii) addition of new signage, (iii) promotion of the Riviera Player's
Club, (iv) sponsorship of slot tournaments, (v) creation of promotional programs
and (vi) marketing of the "World's Loosest Corner of Slots" and "$40 for $20"
slot promotions.
One of the Company's most successful permanent promotions is its "$40
for $20" slot promotion which attracts slot players to the casino. The promotion
offers $40 of slot play on certain promotional machines for $20 cash. If the
customer does not win a jackpot of at least $40, a prize with a retail value of
at least $20 is awarded. While the Riviera's competitors' promotions normally
result in a cost (loss) to the casino department, this innovative program has a
positive EBITDA (exclusive of ancillary slot play) which is used to offset other
marketing costs, including "free pulls," drawings, advertising and general
marketing. The sign-up counter and the promotion machines are located near an
entrance to the casino and often draw long lines of patrons. The Company has
introduced this promotion at the Four Queens and has been approached to license
this promotion to other casinos as well, which it may do in the future. Another
successful promotion is the "World's Loosest Corner of Slots" which is an area
of the casino that contains banks of slot machines with the guaranteed highest
payback percentages of any similar machines in Las Vegas. Like the "$40 for $20"
slot promotion, the "World's Loosest Corner of Slots" is located near an
entrance to the casino to attract walk-in traffic. These promotions have
produced significant income from both repeat and walk-in customers within the
Riviera's targeted market segments.
Create Repeat Customers. Generating customer loyalty is a critical
component of management's business strategy as retaining customers is less
expensive than attracting new ones. The Company has developed a focused and
coordinated marketing program intended to develop a loyal customer base which
emphasizes (i) providing a high level of service to its customers to ensure an
enjoyable experience while at the Riviera, (ii) responding to customer surveys
and (iii) focusing marketing efforts and promotional programs on customers with
positive gaming profiles. The Company uses its research data to tailor
promotional offers to the specific tastes of targeted customers. All slot and
table players are encouraged to join the Riviera Player's Club and to fill out
surveys that provide the Riviera with personal information and preferences and
tracks their level of play. Members of the Riviera Player's Club earn bonus
points based upon their level of play, redeemable for free gifts, complimentary
services or cash rebates. Promotional offers are made to qualifying customers
through direct mail and telemarketing. The Company designs promotional offers
targeted at certain mid-level gaming patrons that are expected to provide
significant revenues based upon their historical gaming patterns. The Company
contacts these customers through a combination of direct mail and telemarketing
by an in-house marketing staff and independent representatives located in major
cities. The Riviera uses a proprietary database which is linked to its player
tracking system to help identify customers' requirements and preferences;
thereby allowing the Riviera to customize promotions to attract repeat visitors.
The Company offers customers personalized service, credit availability and
access to a variety of complimentary or reduced-rate room, dinner and
entertainment reservations. Management uses a specialized multi-tiered marketing
approach to attract customers in each of its major market segments. Slot and
table game tournaments and special events are designed for specific levels of
play. Utilizing its proprietary database the Company's marketing department then
targets and invites the customers most appropriate for the customized events. In
addition, the Company hosts an array of special events, including slot and table
tournaments, designed to attract customers for an extended stay. Management has
found that this individualized marketing approach has provided significant
revenues and profitable repeat business.
Provide Extensive Entertainment Options. The Company focuses on
attracting its guests through a range of entertainment opportunities. The
Riviera has one of the most extensive entertainment programs in Las Vegas with
four different regularly scheduled shows and special appearances by headline
entertainers. In addition to providing a positive impact on the Company's
profitability, the shows attract
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additional gaming revenue. Surveys indicate that approximately 80% of the show
patrons come from outside the hotel and approximately 66% of these individuals
gamble at the Riviera before or after the shows. In addition, the Riviera offers
a variety of quality dining options, a range of accommodations from deluxe rooms
to penthouse suites, a 75,000 square-foot pool area with an olympic-size
swimming pool, tennis courts, fitness center, spa and 43 retail outlets located
throughout the property. The Company believes that it offers a value-oriented
experience by providing a variety of hotel rooms, restaurants and entertainment,
with some of Las Vegas' most popular shows, all at reasonable prices.
Attract Walk-In Traffic. The Company seeks to maximize the number of
people who patronize the Riviera that are not guests in the hotel by
capitalizing on Riviera's prime Strip location, convention center proximity and
the Riviera's several popular in-house productions. The Riviera is well situated
on the Las Vegas Strip near Circus Circus, The Stardust Hotel & Casino, the
Westward Ho Casino & Hotel, the Las Vegas Hilton and the Las Vegas Convention
Center. Management strives to attract customers from those facilities, as well
as capitalize on the growth in Las Vegas visitors in general, with the goal of
increasing walk-in traffic by (i) providing a variety of quality, value-priced
entertainment and dining options, (ii) promoting the "World's Loosest Corner of
Slots" and "$40 for $20" slot promotions, and placing them near the entrances to
the casino, (iii) upgrading the exterior of the Riviera including painting,
lighting and landscaping and (iv) developing the Nickel Plaza.
Focus on Convention Customers. This market segment consists of two
groups: (i) those trade organizations and groups that hold their events in the
banquet and meeting space provided by a single hotel and (ii) those attending
city-wide events, usually held at the Las Vegas Convention Center. The Riviera
targets convention business because it typically provides patrons willing to pay
higher room rates and provides certain advance planning benefits, since
conventions are usually booked two years in advance of the event date. The
Riviera has 100,000 square feet of exhibit, meeting and banquet space (one of
the largest convention facilities provided by a casino/hotel in Las Vegas),
making it attractive to large groups. Management focuses its marketing efforts
on conventions whose participants have the most active gaming profile and higher
room rate, banquet and function spending habits. The Riviera also benefits from
its proximity to the Las Vegas Convention Center which makes it attractive to
city-wide conventioneers looking to avoid the congestion that occurs during a
major convention, particularly at the south end of the Strip. The Riviera
currently has 251 conventions scheduled through June 1999 to use the Riviera's
convention facilities. Management believes that its plans to further develop the
Riviera's convention center will attract significant additional convention
business. After completion of its expanded convention center to 158,000 square
feet at the end of the third quarter of 1998, the Company believes its
competitive position in the market for convention space and the corresponding
hotel room occupancy by convention attendees will be significantly increased.
The Company focuses its marketing efforts in the southwestern United
States during the spring and summer months and in the midwestern United States
during the fall and winter months to effectively capitalize on the vacation
patterns of the Riviera's target customers in those markets. Marketing efforts
in California are consistent throughout the year reflecting the constant flow of
California residents to Las Vegas. Management has found that many of its
customers use tour and travel "package" options to reduce the cost of travel,
lodging and entertainment. These packages are produced by wholesale operators
and travel agents and emphasize mid-week stays. Tour and travel patrons often
book at off-peak periods enabling the Company to maintain occupancy rates at the
highest levels throughout the year. Management has developed specialized
marketing programs and cultivated relationships with wholesale operators, travel
agents and major domestic air carriers to expand this market. The Company's four
largest tour and travel operators, including America West Vacations, currently
account for approximately 524 room bookings per
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night. The Company has successfully converted many tour and travel customers who
meet the Company's target customer profile into repeat customers.
Riviera Gaming Management
In order to capitalize on management's expertise and reputation as
successful operators of casino properties, the Company formed RGM, a wholly
owned subsidiary of the Company, for the primary purpose of obtaining casino
management contracts in Nevada and other jurisdictions. RGM provides services
such as assisting new venue licensee applicants in designing and planning their
gaming operations and managing the start-up of new gaming operations. These
services include casino design, equipment selection, employee recruitment and
training, control and accounting systems and marketing programs. Management
believes that management contracts provide high margin income with limited
additional overhead and little or no capital expenditure requirements.
Management is continually evaluating opportunities to manage other
casinos/hotels. The Company's objective is to obtain the right to a substantial
equity position in projects it would manage as part of the compensation for its
services.
Four Queens Management Agreement. Since August 1996, RGM has been
operating the Four Queens located adjacent to the Golden Nugget on Fremont
Street in downtown Las Vegas under an interim management agreement for a fee of
$83,333 per month. A long-term management agreement with Elsinore, the owner of
the Four Queens, went into effect on February 28, 1997, the effective date of
the Chapter 11 plan of reorganization of Elsinore.
The term of the management agreement is approximately 40 months,
subject to earlier termination or extension. Either party may terminate if
cumulative EBITDA for the first two fiscal years is less than $12.8 million. The
term can be extended by an additional 24 months at RGM's option, if cumulative
EBITDA for the three fiscal years of the term is at least $19.2 million. RGM
will be paid a fee of 25% of any increase in annual EBITDA over $4.0 million,
subject to a $1.0 million minimum fee, payable in equal monthly installments.
RGM has received warrants to purchase 1,125,000 shares of common stock of
Elsinore, exercisable during the term or extended term of the management
agreement at an exercise price of $1.00 per share. If the proposed acquisition
of Elsinore by an affiliate of Mr. Allen E. Paulson is consummated (see "The
Proposed Merger -- The Elsinore Transaction"), the Company would receive
$2,430,000 (i.e., the spread between the per share warrant price and the per
share merger price multiplied by 1,125,000).
Either party can terminate the management agreement if (i)
substantially all the Four Queens' assets are sold, (ii) the Four Queens is
merged or (iii) a majority of the Four Queens' or Elsinore's shares are sold.
Upon such termination, RGM will receive a $2.0 million termination bonus minus
any amount realized or realizable upon exercise of the warrants.
Las Vegas Market
Las Vegas is one of the largest and fastest growing entertainment
markets in the country. According to the Las Vegas Convention and Visitors
Authority (the "LVCVA"), the number of visitors traveling to Las Vegas has
increased at a steady and significant rate for the last eleven years from 15.2
million in 1986 to 29.6 million in 1996, a compound annual growth rate of 6.9%.
Clark County gaming has continued to be a strong and growing business with Clark
County gaming revenues increasing at a compound annual growth rate of 9.2% from
$2.4 billion in 1986 to $5.8 billion in 1996.
The Riviera targets the large and expanding Las Vegas tourist and
gaming market. Las Vegas is the largest city in Nevada, with a local population
in excess of one million, and is Nevada's principal
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tourist center. Gaming and tourism are the major attractions, complemented by
warm weather and the availability of many year-round recreational activities.
Although Las Vegas' principal markets are the western region of the United
States, most significantly Southern California and Arizona, Las Vegas also
serves as a destination resort for visitors from all over the world. A
significant percentage of visitors originate from Latin America and Pacific Rim
countries such as Japan, Taiwan, Hong Kong and Singapore.
Historically, Las Vegas has had one of the strongest hotel markets in
the country. The number of hotel and motel rooms in Las Vegas has increased by
over 40% from approximately 67,000 at the end of 1989 to 95,000 at the end of
1996, giving Las Vegas the most hotel and motel rooms of any metropolitan area
in the country. Despite this significant increase in the supply of rooms, the
Las Vegas hotel occupancy rate exceeded 91% for each of 1993, 1994, 1995 and
1996. Since January 1, 1996, approximately 4,700 new hotel rooms opened and as
of December 31, 1996, there were over 9,200 hotel rooms under construction
(which combined constitutes a 14.7% increase in the number of hotel and motel
rooms in Las Vegas) and the LVCVA estimated that approximately 60,000 additional
hotel rooms were proposed for construction. However, the Company believes that
many of these projects will not materialize. The new rooms under construction
are primarily being designed to attract the high end gaming and convention
customers, and based on construction costs will be priced at rates well above
those which have been or can be charged by the Riviera based on the investment
in its facility.
The Company believes that the growth in the Las Vegas market has been
enhanced as a result of (i) a dedicated program by the LVCVA and major Las Vegas
casino/hotels to promote Las Vegas as a major convention site, (ii) the
increased capacity of McCarran Airport and (iii) the introduction of large
themed "must see" destination resorts in Las Vegas. In 1987, approximately 1.7
million people attended conventions in Las Vegas and generated approximately
$1.2 billion of non-gaming economic impact. In 1996, the number of convention
delegates had increased to 3.3 million with approximately $3.9 billion of
non-gaming economic impact. According to the LVCVA, Las Vegas was the largest
convention market in the country in 1996.
During the past five years, McCarran Airport has expanded its
facilities to accommodate the increased number of airlines and passengers which
it services. The number of passengers traveling through McCarran Airport has
increased from approximately 15.6 million in 1987 to 30.5 million in 1996.
Construction is currently underway on numerous roadway enhancements to improve
access to the airport. The airport has additional long-term expansion plans
underway which will provide additional runways, three new satellite concourses,
60 additional gates and other facilities.
See "Risk Factors -- Competition" for a discussion of competition in
the Las Vegas gaming market.
The Black Hawk Project
The Company has acquired for $15 million what management believes to be
the premier gaming site in Black Hawk, Colorado. See "Risk Factors -- The Black
Hawk Project." The property is currently the closest gaming site to Denver and
is the first site encountered when traveling from Denver to Black Hawk/Central
City. The Black Hawk/Central City market primarily serves the metropolitan
Denver area and is approximately an hour drive and 40 miles west of central
Denver.
Located on South Main Street, the property is located directly in front
of the Colorado Central Station, owned by Anchor Gaming, which management
believes is the most successful casino in Colorado due to its location, size and
availability of parking. Unlike many other sites, the Riviera development site
is
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level and has a relatively broad footprint, which is expected to provide
significant cost and time savings in construction relative to other projects in
the market and can accommodate a large Las Vegas-style casino on one floor.
The development site comprises 71,000 square feet, zoned for gaming.
The casino building is expected to be approximately 62,000 square feet and
include approximately 1,000 slot machines and 14 table games. In addition, the
facility will provide entertainment, food and beverage service and will
incorporate an attached covered parking facility for 500 vehicles. The Company
believes that the Black Hawk Project could be expanded beyond its currently
permitted scope based on zoning waivers granted to other casino developers.
The Company currently estimates that total costs for completion of the
Black Hawk Project will be approximately $55 million, $15 million of which was
provided by the net proceeds of the sale of the Existing Notes to purchase the
Black Hawk Land, and the remainder of which will be derived from a combination
of third party financing and additional investment by the Company, including up
to an additional $10 million of the net proceeds from the sale of the Existing
Notes. Site clearance work in connection with the construction of the casino is
scheduled to begin in the fall of 1997, with the opening of the casino scheduled
for the spring of 1999. See "Risk Factors -- Competition" and "Risk Factors --
The Black Hawk Project" for a discussion of the risk factors involved in
investing in the Black Hawk Project.
Black Hawk Operating Company will not initially be a Guarantor of the
Notes. See "Description of Notes - Security." At June 30, 1997, Black Hawk
Operating Company had no assets or liabilities and therefore separate financial
statements have not been included in this Prospectus.
Colorado Market
In November 1990, the state of Colorado approved limited stakes gaming
($5.00 or less per wager) in two historic gold mining areas, Black Hawk/Central
City and Cripple Creek. Because of the $5.00 maximum bet, the casinos in
Colorado emphasize gaming machine play. Black Hawk and Central City are
contiguous, with Black Hawk being closer to Denver, and are located
approximately 40 miles west of Denver and 10 miles north of Interstate 70, the
main highway connecting Denver to many of Colorado's major ski resorts. Cripple
Creek is located approximately 45 miles from Colorado Springs and 75 miles from
Pueblo. Casinos located in the Black Hawk/Central City area serve primarily the
residents of Denver and Boulder, Colorado and surrounding communities.
Approximately three million people live within a 100-mile radius of the Black
Hawk/Central City area.
The following table sets forth statistical information relating to the
growth of the Black Hawk/Central City market compiled from data published by the
Colorado Department of Revenue:
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------
1993 1994 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Aggregate Gaming Revenues (Dollars in
millions)....................................................... $ 182 $ 243 $ 291 $ 309
Revenue Per Slot Machine Per Day.................................. 70 80 85 93
Average Number of Slot Machines................................... 6,922 7,705 8,636 8,446
Average Number of Casinos in Operation............................ 36 34 32 33
</TABLE>
See "Risk Factors -- Competition" for a discussion of competition in
the Colorado gaming market.
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Employees and Labor Relations
As of June 30, 1997, the Riviera employed approximately 2,100 persons
and had collective bargaining contracts with eight unions covering approximately
1,300 of such employees including food and beverage employees, rooms department
employees, carpenters, engineers, stage hands, musicians, electricians, painters
and teamsters. The Company's agreements with the Southern Nevada Culinary and
Bartenders Union and Stage Hands Union, which cover the majority of the
Company's unionized employees, were renegotiated in 1994 and expired on May 31,
1997 and June 1, 1997, respectively. The Riviera, along with the other Las Vegas
hotels are currently negotiating with these unions and anticipate that new
contracts will be agreed upon by September 1997. The Culinary and Bartenders
Union is currently concentrating on its negotiations with the larger gaming
companies and is expected to intensify its negotiations with the Riviera after
preliminary agreements have been reached with the larger gaming companies. The
Stage Hands Union's negotiations are proceeding at a steady pace and agreement
on details of the contract is anticipated during the summer of 1997. The
Teamsters, Operating Engineers, Carpenters, Painters and Electricians Unions'
collective bargaining agreements were renewed in 1995 and generally expire in or
after 1998. The Musicians Union's collective bargaining agreement expires on
September 21, 1999. Although unions have been active in Las Vegas, management
considers its employee relations to be satisfactory. There can be no assurance,
however, that new agreements will be reached without union action or will be on
terms satisfactory to the Company.
Regulation and Licensing
Nevada Gaming Regulations. The ownership and operation of casino gaming
facilities in Nevada are subject to: (i) The Nevada Gaming Control Act and the
regulations promulgated thereunder (collectively the "Nevada Act") and (ii)
various local ordinances and regulations. The Company's gaming operations are
subject to the licensing and regulatory control of the Nevada Commission, the
Nevada Board, the Clark County Liquor and Gaming Licensing Board (the "Clark
County Board") and the City of Las Vegas. The Nevada Commission, the Nevada
Board, the Clark County Board and the City of Las Vegas are collectively
referred to as the "Nevada Gaming Authorities."
The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy which are concerned
with, among other things: (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time and in any
capacity; (ii) the establishment and maintenance of responsible accounting
practices and procedures; (iii) the maintenance of effective controls over the
financial practices of licensees, including the establishment of minimum
procedures for internal fiscal affairs and the safeguarding of assets and
revenues, providing reliable record keeping and requiring the filing of periodic
reports with the Nevada Gaming Authorities; (iv) the prevention of cheating and
fraudulent practices; and (v) providing a source of state and local revenues
through taxation and licensing fees. Change in such laws, regulations and
procedures could have an adverse effect on the Company's gaming operations.
ROC is required to be licensed by the Nevada Gaming Authorities. The
gaming license held by ROC requires the periodic payment of fees and taxes and
is not transferable. ROC is also licensed as a manufacturer and distributor of
gaming devices. Such licenses also require the periodic payment of fees and are
not transferable. The Company is registered by the Nevada Commission as a
publicly traded corporation (a "Registered Corporation") and has been found
suitable to own the stock of ROC. ROC is also registered by the Nevada
commission as an Intermediary Company and has been found suitable to own the
stock of RGM which has been registered by the Nevada Commission as an
Intermediary Company and has been found suitable to own the stock of RGME. RGME
has been licensed as the manager of the Four Queens and such license is not
transferable. ROC and RGME are each a Corporate Licensee (collectively,
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the "Corporate Licensees") under the terms of the Nevada Act. As a Registered
Corporation, the Company is required periodically to submit detailed financial
and operating reports to the Nevada Commission and to furnish any other
information which the Nevada Commission may require. No person may become a
stockholder of, or receive any percentage of profits from, the Corporate
Licensees without first obtaining licenses and approvals from the Nevada Gaming
Authorities. The Company, ROC, RGM and RGME have obtained from the Nevada Gaming
Authorities the various registrations, approvals, permits, findings of
suitability and licenses required in order to engage in gaming activities and
manufacturing and distribution activities in Nevada.
All gaming devices that are manufactured, sold or distributed for use
or play in Nevada, or for distribution outside of Nevada, must be manufactured
by licensed manufacturers, distributed or sold by licensed distributors and
approved by the Nevada Commission. The approval process includes rigorous
testing by the Nevada Board, a field trial and a determination as to whether the
gaming device meets strict technical standards that are set forth in the
regulations of the Nevada Gaming Authorities. Associated equipment must be
administratively approved by the Chairman of the Nevada Board before it is
distributed for use in Nevada.
The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, the Company, ROC, RGM or
RGME in order to determine whether such individual is suitable or should be
licensed as a business associate of a gaming licensee. Officers, directors and
certain key employees of ROC and RGME must file applications with the Nevada
Gaming Authorities and may be required to be licensed or found suitable by the
Nevada Gaming Authorities. Officers, directors and key employees of the Company
and RGM who are actively and directly involved in the gaming activities of ROC
or RGME may be required to be licensed or found suitable by the Nevada Gaming
Authorities. The Nevada Gaming Authorities may deny an application for licensing
for any cause which they deem reasonable. A finding of suitability is comparable
to licensing, and both require submission of detailed personal and financial
information followed by a thorough investigation. The applicant for licensing or
a finding of suitability must pay all the costs of the investigation. Any change
in a corporate position by a licensed person must be reported to the Nevada
Gaming Authorities and, in addition to their authority to deny an application
for a finding of suitability or licensure, the Nevada Gaming Authorities have
jurisdiction to disapprove a change in a corporate position.
If the Nevada Gaming Authorities were to find an officer, director or
key employee unsuitable for licensing or unsuitable to continue having a
relationship with the Company, ROC, RGM or RGME the companies involved would
have to sever all relationships with such person. In addition, the Nevada
Commission may require the Company, ROC, RGM or RGME to terminate the employment
of any person who refuses to file appropriate applications. Determinations of
suitability or of questions pertaining to licensing are not subject to judicial
review in Nevada.
The Company, ROC and RGME are required to submit detailed financial and
operating reports to the Nevada Commission. Substantially all material loans,
leases, sales of securities and similar financing transactions by ROC must be
reported to or approved by the Nevada Commission.
If it were determined that the Nevada Act was violated by ROC or RGME,
the gaming licenses they hold could be limited, conditioned, suspended or
revoked, subject to compliance with certain statutory and regulatory procedures.
In addition, the Company, ROC, RGM and RGME and the persons involved could be
subject to substantial fines for each separate violation of the Nevada Act at
the discretion of the Nevada Commission. Further, a supervisor could be
appointed by the Nevada Commission to operate the casino and, under certain
circumstances, earnings generated during the supervisor's appointment (except
for reasonable rental value of the casino) could be forfeited to the State of
Nevada. Limitation, conditioning
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or suspension of the gaming licenses of ROC or RGME or the appointment of a
supervisor could (and revocation of any gaming license would) materially
adversely affect the Company's gaming operations.
Any beneficial holder of the Company's voting securities, regardless of
the number of shares owned, may be required to file an application, be
investigated, and have his suitability as a beneficial holder of the Company's
voting securities determined if the Nevada Commission has reason to believe that
such ownership would otherwise be inconsistent with the declared policies of the
State of Nevada. The applicant must pay all costs of investigation incurred by
the Nevada Gaming Authorities in conducting any such investigation.
The Nevada Act requires any person who acquires more than 5% of a
Registered Corporation's voting securities to report the acquisition to the
Nevada Commission. The Nevada Act requires that beneficial owners of more than
10% of a Registered Corporation's voting securities apply to the Nevada
Commission for a finding of suitability within thirty days after the Chairman of
the Nevada Board mails the written notice requiring such filing. Under certain
circumstances, an "institutional investor," as defined in the Nevada Act, which
acquires more than 10%, but not more than 15%, of a Registered Corporation's
voting securities may apply to the Nevada Commission for a waiver of such
finding of suitability if such institutional investor holds the voting
securities for investment purposes only. An institutional investor shall not be
deemed to hold voting securities for investment purposes unless the voting
securities were acquired and are held in the ordinary course of business as an
institutional investor and not for the purpose of causing, directly or
indirectly, the election of a majority of the members of the board of directors
of the Registered Corporation, any change in the corporate charter, bylaws,
management, policies or operations of the Registered Corporation, or any of its
gaming affiliates, or any other action which the Nevada Commission finds to be
inconsistent with holding the Registered Corporation's voting securities for
investment purposes only. Activities which are deemed to be consistent with
holding voting securities for investment purposes only include: (i) voting on
all matters voted on by stockholders; (ii) making financial and other inquiries
of management of the type normally made by securities analysts for informational
purposes and not to cause a change in its management, policies or operations;
and (iii) such other activities as the Nevada Commission may determine to be
consistent with such investment intent. If the beneficial holder of voting
securities who must be found suitable is a corporation, partnership or trust, it
must submit detailed business and financial information including a list of
beneficial owners. The applicant is required to pay all costs of investigation.
Any person who fails or refuses to apply for a finding of suitability
or a license within thirty days after being ordered to do so by the Nevada
Commission or the Chairman of the Nevada Board, may be found unsuitable. The
same restrictions apply to a record owner if the record owner, after request,
fails to identify the beneficial owner. Any stockholder found unsuitable and who
holds, directly or indirectly, any beneficial ownership of the common stock
beyond such period of time as may be prescribed by the Nevada Commission may be
guilty of a criminal offense. The Company is subject to disciplinary action if,
after it receives notice that a person is unsuitable to be a stockholder or to
have any other relationship with the Company, ROC, RGM or RGME, the Company (i)
pays that person any dividend or interest upon voting securities of the Company,
(ii) allows that person to exercise, directly or indirectly, any voting right
conferred through securities held by that person, (iii) pays remuneration in any
form to that person for services rendered or otherwise, or (iv) fails to pursue
all lawful efforts to require such unsuitable person to relinquish his voting
securities including, if necessary, the immediate purchase of said voting
securities for cash at fair market value. Additionally, the Clark County Board
has the authority to approve all persons owning or controlling the stock of any
corporation controlling a gaming licensee.
The Nevada Commission may, in its discretion, require the holder of any
debt security of a Registered Corporation such as the 11% First Mortgage Notes,
the Existing Notes or the New Notes to file
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<PAGE>
applications, be investigated and be found suitable to own the debt security of
a Registered Corporation, if it has reason to believe that such ownership would
be inconsistent with the declared policies of the State of Nevada. If the Nevada
Commission determines that a person is unsuitable to own such security, then
pursuant to the Nevada Act, the Registered Corporation can be sanctioned,
including the loss of its approvals, if without the prior approval of the Nevada
Commission, it: (i) pays to the unsuitable person any dividend, interest, or any
distribution whatsoever; (ii) recognizes any voting right by such unsuitable
person in connection with such securities; (iii) pays the unsuitable person
remuneration in any form; or (iv) makes any payment to the unsuitable person by
way of principal, redemption, conversion, exchange, liquidation, or similar
transaction.
The Company is required to maintain a current stock ledger in Nevada
which may be examined by the Nevada Gaming Authorities at any time. If any
securities are held in trust by an agent or by a nominee, the record holder may
be required to disclose the identity of the beneficial owner to the Nevada
Gaming Authorities. A failure to make such disclosure may be grounds for finding
the record holder unsuitable. The Company is also required to render maximum
assistance in determining the identity of the beneficial owner. The Nevada
Commission has the power to require the Company's stock certificates to bear a
legend indicating that the securities are subject to the Nevada Act. However, to
date, the Nevada Commission has not imposed such a requirement on the Company.
The Company may not make a public offering of its securities without
the prior approval of the Nevada Commission if the securities or proceeds
therefrom are intended to be used to construct, acquire or finance gaming
facilities in Nevada, or to retire or extend obligations incurred for such
purposes. The Exchange Offer will constitute a public offering (as defined in
the Nevada Act) and will require the prior approval of the Nevada Commission
upon the recommendation of the Nevada Board. In addition, (i) a Corporate
Licensee may not guarantee a security issued by a Registered Corporation
pursuant to a public offering, or hypothecate its assets to secure the payment
or performance of the obligations evidenced by such a security, without the
prior approval of the Nevada Commission, (ii) the pledge of the stock of a
Corporate Licensee or Intermediary Company ("Stock Pledge"), such as ROC, RGM
and RGME, is void without the prior approval of the Nevada Commission, and (iii)
restrictions upon the transfer of an equity security issued by a Corporate
Licensee, or Intermediary Company and agreements not to encumber such securities
(collectively, "Stock Restrictions") are ineffective without the prior approval
of the Nevada Commission. The Stock Pledge and the Stock Restrictions in respect
of the Notes require the prior approval of the Nevada Commission to be
effective. In connection with the approval of the Exchange Offer, the Subsidiary
Guaranty of ROC, RGM & RGME, the hypothecation of the assets of ROC and RGME,
the Stock Pledge and the Stock Restrictions will also require the prior approval
of the Nevada Commission. An approval of the Stock Pledge, if granted, will not
constitute approval to foreclose on the Stock Pledge. Separate approval will be
required to foreclose on the Stock Pledge and such approval will require the
licensing of the Trustee unless such requirement is waived upon the application
of the Trustee. Approval of a public offering does not constitute a finding,
recommendation or approval by the Nevada Commission or the Nevada Board as to
the accuracy or adequacy of the prospectus or the investment merits of the
securities offered. Any representation to the contrary is unlawful.
Changes in control of the Company through merger, consolidation, stock
or asset acquisitions, management or consulting agreements, or any act or
conduct by a person whereby he obtains control, may not occur without the prior
approval of the Nevada Commission. Entities seeking to acquire control of a
Registered Corporation must satisfy the Nevada Board and Nevada Commission in a
variety of stringent standards prior to assuming control of such Registered
Corporation. The Nevada Commission may also require controlling stockholders,
officers, directors and other persons having a material relationship or
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involvement with the entity proposing to acquire control, to be investigated and
licensed as part of the approval process relating to the transaction.
The Nevada legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and corporate defense
tactics affecting Nevada corporate gaming Licensees, and Registered Corporations
that are affiliated with those operations, may be injurious to stable and
productive corporate gaming. The Nevada Commission has established regulations
to ameliorate the potentially adverse effects of these business practices upon
Nevada's gaming industry and to further Nevada's policy to: (i) assure the
financial stability of corporate gaming Licensees and their affiliates; (ii)
preserve the beneficial aspects of conducting business in the corporate form;
and (iii) promote a neutral environment for the orderly governance of corporate
affairs. Approvals are, in certain circumstances, required from the Nevada
Commission before the Registered Corporation can make exceptional repurchases of
voting securities above the current market price thereof and before a corporate
acquisition opposed by management can be consummated. The Nevada Act also
requires prior approval of a plan of recapitalization proposed by the Registered
Corporation's Board of Directors in response to a tender offer made directly to
the Registered Corporation's stockholders for the purposes of acquiring control
of the Registered Corporation.
License fees and taxes, computed in various ways depending on the type
of gaming or activity involved, are payable to the State of Nevada and to the
County in which the ROC's and RGME's operations are conducted. Depending upon
the particular fee or tax involved, these fees and taxes are payable either
monthly, quarterly or annually and are based upon either: (i) a percentage of
the gross revenues received; (ii) the number of gaming devices operated; or
(iii) the number of table games operated. A casino entertainment tax is also
paid by casino operations where entertainment is furnished in connection with
the selling of food, refreshments or merchandise. Nevada Licensees that hold a
license to manufacture and distribute slot machines and gaming devices, such as
ROC, also pay certain fees and taxes to the State of Nevada.
Any person who is licensed, required to be licensed, registered,
required to be registered, or is under common control with such persons
(collectively, "Licensees"), and who proposes to become involved in a gaming
venture outside of Nevada, is required to deposit with the Nevada Board, and
thereafter maintain, a revolving fund in the amount of $10,000 to pay the
expenses of investigation by the Nevada Board of their participation in such
foreign gaming. The revolving fund is subject to increase or decrease in the
discretion of the Nevada Commission. Thereafter, Licensees are required to
comply with certain reporting requirements imposed by the Nevada Act. Licensees
are also subject to disciplinary action by the Nevada Commission if they
knowingly violate any laws of the foreign jurisdiction pertaining to the foreign
gaming operation, fail to conduct the foreign gaming operation in accordance
with the standards of honesty and integrity required of Nevada gaming
operations, engage in activities that are harmful to the State of Nevada or its
ability to collect gaming taxes and fees, or employ a person in the foreign
operation who has been denied a license or finding of suitability in Nevada on
the ground of personal unsuitability.
Other Nevada Regulation. The sale of alcoholic beverages at the Riviera
is subject to licensing, control and regulation by the Clark County Board. All
licenses are revocable and are not transferable. The Clark County Board has full
power to limit, condition, suspend or revoke any such license, and any such
disciplinary action could (and revocation would) have a material adverse affect
upon the operations of ROC.
Colorado Gaming Regulation. Pursuant to an amendment to the Colorado
Constitution (the "Colorado Amendment"), limited stakes gaming became lawful in
the cities of Central City, Black Hawk
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and Cripple Creek on October 1, 1991. The Colorado Amendment defines limited
stakes gaming as the use of slot machines and the card games of blackjack and
poker, with a maximum single bet of five dollars.
Limited stakes gaming is confined to the commercial districts of these
cities as defined by Central City on October 7, 1981, by Black Hawk on May 4,
1978, and by Cripple Creek on December 3, 1973. In addition, the Colorado
Amendment restricts limited stakes gaming to structures that conform to the
architectural styles and designs that were common to the areas prior to World
War I, and which conform to the requirements of applicable city ordinances
regardless of the age of the structures. The Colorado Amendment provides that no
more than 35% of the square footage of any building and no more than 50% of any
one floor of any building may be used for limited stakes gaming. The Colorado
Amendment prohibits limited stakes gaming between the hours of 2:00 a.m. and
8:00 a.m., and allows limited stakes gaming to occur in establishments licensed
to sell alcoholic beverages.
Further, the Colorado Amendment provides that, in addition to any other
applicable license fees, up to a maximum of 40% of the Adjusted Gross Proceeds
("AGP") of limited stakes gaming operations may be payable by a licensee for
conducting limited stakes gaming. Such percentage is to be established by the
Colorado Limited Gaming Control Commission (the "Colorado Commission") per the
Colorado Limited Gaming Act of 1991 (the "Colorado Act").
The Colorado legislature promulgated the Colorado Act to implement the
provisions of the Colorado Amendment. The Colorado Act became effective on June
4, 1991 and has been amended subsequently.
The Colorado Act declares public policy on limited stakes gaming to be
that: (i) the success of limited stakes gaming is dependent upon public
confidence and trust that licensed limited stakes gaming is conducted honestly
and competitively; the rights of the creditors of licensees are protected;
gaming is free from criminal and corruptive elements; (ii) public confidence and
trust can be maintained only by strict regulation of all persons, locations,
practices, associations and activities related to the operation of licensed
gaming establishments and the manufacture or distribution of gaming devices and
equipment; (iii) all establishments where limited stakes gaming is conducted and
where gambling devices are operated and all manufacturers, sellers and
distributors of certain gambling devices and equipment must be licensed,
controlled and assisted to protect the inhabitants of the state to foster the
stability and success of limited stakes gaming and to preserve the economy and
free competition in Colorado; and (iv) no applicant for a license or other
approval has any right to a license or to the granting of the approval sought.
The Colorado Act subjects the ownership and operation of limited stakes
gaming facilities in Colorado to extensive regulation by the Colorado Commission
and prohibits persons under the age of 21 from participating in limited stakes
gaming. No limited stakes gaming may be conducted in Colorado unless all
appropriate gaming licenses are approved by and obtained from the Colorado
Commission. The Colorado Commission has full and exclusive authority to
promulgate, and has promulgated, rules and regulations governing the licensing,
conducting and operating of limited stakes gaming (the "Colorado Regulations").
Such authority does not require any approval by or delegation of authority from
the Colorado Department of Revenue (the "Colorado Revenue Department"). The
Colorado Act also created the Division of Gaming within the Colorado Revenue
Department to license, implement, regulate and supervise the conduct of limited
stakes gaming in Colorado, supervised and administered by the Director of the
Division of Gaming ("Division Director").
The Colorado Commission may issue: (i) slot machine manufacturer or
distributor, (ii) operator, (iii) retail gaming, (iv) support and (v) key
employee gaming licenses. The first three licenses require annual renewal by the
Colorado Commission. Support and key employee licenses are issued for two year
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periods and are renewable by the Division Director. The Colorado Commission has
broad discretion to condition, suspend for up to six months, revoke, limit or
restrict a license at any time and also has the authority to impose fines.
An applicant for a gaming license must complete comprehensive
application forms, pay required fees and provide all information required by the
Colorado Commission and the Division of Gaming. Prior to licensure, applicants
must satisfy the Colorado Commission that they are suitable for licensing.
Applicants have the burden of proving their qualifications and must pay the full
cost of any background investigations. There is no limit on the cost of such
background investigations.
Gaming employees must hold either a support or key employee license.
Every retail gaming licensee must have a key employee licensee in charge of all
limited stakes gaming activities when limited stakes gaming is being conducted.
The Colorado Commission may determine that a gaming employee is a key employee
and, require that such person apply for a key employee license.
A retail gaming license is required for all persons conducting limited
stakes gaming on their premises. In addition, an operator license is required
for all persons who engage in the business of placing and operating slot
machines on the premises of a retailer. However, a retailer is not required to
hold an operator license. No person may have an ownership interest in more than
three retail licenses. A slot machine manufacturer or distributor license is
required for all persons who manufacture, import or distribute slot machines in
Colorado.
The Colorado Act requires that every officer, director, and stockholder
of private corporations or equivalent office or ownership holders for
non-corporate applicants, and every officer, director or stockholder holding
either a 5% or greater interest or controlling interest of a publicly traded
corporation or owners of an applicant or licensee shall be a person of good
moral character and submit to a full background investigation conducted by the
Division of Gaming and the Colorado Commission. The Colorado Commission may
require any person having an interest in a license to undergo a full background
investigation and pay such costs in the same manner as an applicant.
Persons found unsuitable by the Colorado Commission may be required
immediately to terminate any interest, association or agreement with or
relationship to a licensee. A finding of unsuitability with respect to any
officer, director, employee, associate, lender or beneficial owner of a licensee
or applicant also may jeopardize the licensee's license or the applicant's
application. A license approval may be conditioned upon the termination of any
relationship with unsuitable persons.
An applicant or licensee must report to the Division of Gaming or
Colorado Commission all leases not later than 30 days after the effective date
of the lease. Also, an applicant or a licensee, upon the request of the Colorado
Commission or the Division Director, must submit copies of all written gaming
contracts and summaries of all oral gaming contracts to which it is or intends
to become a party. The Division Director or the Colorado Commission may require
changes in the lease or gaming contract before an application is approved or
participation in such agreement is allowed or may require termination of the
lease or gaming contract.
The Colorado Act and the Colorado Regulations require licensees to
maintain detailed records that account for all business transactions. Records
must be furnished upon demand to the Colorado Commission, the Division of Gaming
and other law enforcement authorities. The Colorado Regulations also establish
extensive playing procedures and rules of play for poker, blackjack and slot
machines. Retail gaming licensees must adopt comprehensive internal control
procedures. Such procedures must be approved in advance by the Division of
Gaming and include the areas of accounting, surveillance, security,
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cashier operations, key control and fill and drop procedures, among others. No
gaming devices may be used in limited stakes gaming without the approval of the
Division Director or the Colorado Commission.
Licensees have a continuing duty to immediately report to the Division
of Gaming the name, date of birth and social security number of all persons who
obtain an ownership, financial or equity interest in the licensee of five (5)
percent or greater, or who have the ability to control the licensee, or who have
the ability to exercise significant influence over the licensee, or who loan any
money or other thing of value to the licensee. Licensees must report to the
Division of Gaming all licenses, and all applications for licenses, in foreign
jurisdictions.
With limited exceptions applicable to licensees that are publicly
traded entities, no person may sell, lease, purchase, convey or acquire any
interest in a retail gaming or operator license or business without the prior
approval of the Colorado Commission.
All agreements, contracts, leases, or arrangements in violation of the
Colorado Act or the Colorado Regulations are void and unenforceable.
The Colorado Amendment requires an annual tax of as much as 40% on the
AGP from limited stakes gaming. Effective October 1 of each year, the Colorado
Commission establishes the gaming tax for the following 12 months. Currently,
the gaming tax on AGP is: 2% on the first $2 million of AGP; 4% on AGP from $2
million to $4 million; 14% on AGP from $4 million to $5 million; 18% on AGP from
$5 million to $10 million; and 20% on AGP over $10 million.
The Colorado Commission requires all gaming licensees to pay an annual
device fee for each slot machine, blackjack table and poker table of $75. The
municipality of Black Hawk assesses an annual device fee of $750 per device.
There is no statutory limit on state or city device fees, which may be increased
at the discretion of the Colorado Commission or the city. In addition, a
business improvement fee of as much as $102 per device and a transportation
authority device fee of $77 per device also may apply depending upon the
location of the licensed premises in Black Hawk. The current annual business
improvement fee is $89.04.
Black Hawk also imposes taxes and fees on other aspects of the
businesses of gaming licensees, such as parking, alcoholic beverage licenses and
other municipal taxes and fees. Significant increases in these fees and taxes,
or the imposition of new taxes and fees, may occur.
Violation of the Colorado Act or any of the Colorado Regulations is a
criminal offense. Gaming licensees violating the Colorado Act or the Colorado
Regulations may, in addition to being subject to fines, suspension for as long
as six months or revocation of the gaming license, commit a class 1 misdemeanor
which may result in incarceration or fines or both.
The sale of alcoholic beverages in gaming establishments is subject to
strict licensing, control and regulation by state and local authorities and
requires a liquor license. Alcoholic beverage licenses are revocable and
non-transferable. State and local licensing authorities have full power to
limit, condition, suspend for as long as six months or revoke any such licenses.
Violation of state alcoholic beverage laws may constitute a criminal offense
resulting in incarceration or fines or both.
There are various classes of retail liquor licenses under the Colorado
Liquor Code. A gaming licensee may sell malt, vinous or spirituous liquors only
by the individual drink for consumption on the premises. Even though a retail
gaming licensee may be various any classes of retail liquor licenses such gaming
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licensee may only hold liquor licenses of the same class. An application for an
alcoholic beverage license in Colorado requires notice, posting and a public
hearing before the local liquor licensing authority prior to approval of the
same. The Colorado Department of Revenue's Liquor Enforcement Division must also
approve the application.
The Colorado Commission has enacted Rule 4.5, which imposes
requirements on publicly traded corporations holding gaming licenses in Colorado
and on gaming licensees owned directly or indirectly by a publicly traded
corporation whether through a subsidiary or intermediary company. The term
"publicly traded corporation" includes corporations, firms, limited liability
companies, trusts, partnerships and other forms of business organizations even
if created under the laws of a foreign country. Such requirements shall
automatically apply to any ownership interest held by a publicly traded
corporation, holding company or intermediary company thereof, where such
ownership interest directly or indirectly is, or will be upon approval of the
Colorado Commission, 5% or more of the entire licensee. In any event, if the
Colorado Commission determines that a publicly traded corporation, or a
subsidiary, intermediary company or holding company has the actual ability to
exercise influence over a licensee, regardless of the percentage of ownership
possessed by said entity, the Colorado Commission may require that entity to
comply with the disclosure regulations contained in Rule 4.5.
Under Rule 4.5, gaming licensees, affiliated companies and controlling
persons commencing a public offering of voting securities must notify the
Colorado Commission within 10 days of the initial filing of a registration
statement with the Securities and Exchange Commission. Licensed publicly traded
corporations are also required to send proxy statements to the Division of
Gaming within 5 days after distribution of such statement. Licensees to whom
Rule 4.5 applies must include in their articles of organization or similar
charter documents provisions that: restrict the rights of the licensees to issue
voting interests or securities except in accordance with the Colorado Act and
the Colorado Regulations; limit the rights of persons to transfer voting
interests or securities of licensees except in accordance with the Colorado Act
and the Colorado Regulations; and provide that holders of voting interests or
securities of licensees found unsuitable by the Colorado Commission may, within
60 days of such finding of unsuitability, be required to sell their interests or
securities back to the issuer at the lesser of the cash equivalent of the
holders' investment or the market price as of the date of the finding of
unsuitability. Alternatively, the holders may, within 60 days after the finding
of unsuitability, transfer the voting interests or securities to a suitable
person (as determined by the Colorado Commission). Until the voting interests or
securities are held by suitable persons, the issuer may not pay dividends or
interest, the securities may not be voted, they may not be included in the
voting or securities of the issuer, and the issuer may not pay any remuneration
in any form to the holders of the securities.
Pursuant to Rule 4.5, persons who acquire direct or indirect beneficial
ownership of (i) 5% or more of any class of voting securities of a publicly
traded corporation required to include in its articles of organization the Rule
4.5 charter language provisions, or (ii) 5% or more of the beneficial interest
in a gaming licensee directly or indirectly through any class of voting
securities of any holding company or intermediary company of a licensee (all
such persons hereinafter referred to as "qualifying persons"), shall notify the
Division of Gaming within 10 days of such acquisition, are required to submit
all requested information and are subject to a finding of suitability as
required by the Division of Gaming or the Colorado Commission. Licensees also
must notify any qualifying persons of these requirements. A qualifying person
whose interests equal 10% or more must apply to the Colorado Commission for a
finding of suitability within 45 days after acquiring such securities. Licensees
must also notify any qualifying persons of these requirements. Whether or not
notified, qualifying persons are responsible for complying with these
requirements.
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A qualifying person who is an institutional investor under Rule 4.5 and
who individually or in association with others, acquires, directly or
indirectly, the beneficial ownership of 15% or more of any class of voting
securities must apply to the Colorado Commission for a finding of suitability
within 45 days after acquiring such interests. A qualifying person who is an
institutional investor and whose interests equal 10%, but less than 15%, may not
be required to apply for suitability, provided such person fulfills reporting
requirements required by the Colorado Regulations.
Pursuant to Rule 4.5, persons found unsuitable by the Colorado
Commission must be removed from any position as an officer, director, or
employee of a licensee, or from a holding or intermediary company. Such
unsuitable persons also are prohibited from any beneficial ownership of the
voting securities of any such entities. Licensees, or affiliated entities of
licensees, are subject to sanctions for paying dividends or distributions to
persons found unsuitable by the Colorado Commission, or for recognizing voting
rights of, or paying a salary or any remuneration for services to, unsuitable
persons. Licensees or their affiliated entities also may be sanctioned for
failing to pursue efforts to require unsuitable persons to relinquish their
interests. The Colorado Commission may determine that anyone with a material
relationship to, or material involvement with, a licensee or an affiliated
company must apply for a finding of suitability or must apply for a key employee
license.
Currently, no gaming or liquor licenses in Colorado have been obtained
in connection with the Black Hawk Project. Application has been made for a
gaming license and application for a liquor license is expected to be made in
the near future.
Federal Registration
ROC is required to annually file with the Attorney General of the
United States in connection with the sales, distribution, or operations of slot
machines. All requisite filings for the present year have been made.
Legal Proceedings
The Company is a party to several routine lawsuits both as plaintiff
and as defendant arising from the normal operations of a hotel. Management does
not believe that the outcome of such litigation, in the aggregate, will have a
material adverse effect on the financial position or results of operations of
the Company.
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THE PROPOSED MERGER
Agreement and Plan of Merger
Pursuant to the terms and subject to the conditions of the Merger
Agreement, the Company would become a wholly owned subsidiary of R&E Gaming
Corp., a Delaware corporation controlled by Mr. Paulson ("Gaming"), and ROC
would continue its existence as a wholly owned subsidiary of the Company.
Also, pursuant to the Merger Agreement, each share of Common Stock that
is issued and outstanding immediately prior to the Effective Time (as defined in
the Merger Agreement) (other than shares of Common Stock owned by Gaming or its
subsidiary or which are held in the treasury of the Company or any of its
subsidiaries, which shares shall be canceled without payment) will be converted
into the right to receive the Merger Consideration (as defined below).
The Merger Agreement defines "Merger Consideration" as $15.00 in cash
per share of Common Stock, plus an amount of additional consideration (the
"Additional Consideration") equal to the daily portion on the accrual on $15.00
at 7% compounded annually, accruing from June 1, 1997 to the Effective Time;
provided that the Merger Consideration to be paid to each Option Seller (as
defined in the Merger Agreement) will be reduced by an amount of Additional
Consideration paid to such Option Seller pursuant to the terms and subject to
the conditions of the Option Agreement (as defined below).
The obligations of the Company, Gaming, and its subsidiary to
consummate the Merger are subject to, among other things, satisfaction or waiver
on or prior to the Effective Time of the following conditions: (i) any waiting
period applicable to the consummation of the Merger under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, 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 the Merger, (ii) the Merger Agreement shall have been approved
and adopted by the affirmative vote of the holders of at least sixty percent of
all of the issued and outstanding shares of Common Stock (excluding the shares
of Common Stock owned by Gaming, its subsidiary and Mr. Paulson), (iii) there
shall not have been any statute, rule, regulation, judgment, order or injunction
promulgated, entered, enforced, enacted or issued applicable to the Merger by
any governmental entity which, including without limitation, prohibits the
consummation of the Merger, and (iv) other than the filing of the articles of
merger in accordance with the Nevada Corporation 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, its subsidiary, Mr. Paulson and the Company in order to
consummate the Merger and continue the Company's business as conducted prior to
the Effective Time shall have been obtained or made.
The obligations of Gaming and its subsidiary to consummate the Merger
are subject to, among other things, satisfaction on or prior to the Effective
Time of, the following additional conditions: (i) the Company shall have
performed in all material respects all of its obligations under the Merger
Agreement required to be performed by it and, subject to certain exceptions, the
representations and warranties of the Company contained in the Merger Agreement
shall be true and correct in all material respects as of the date of the Merger
Agreement and at and as of the Effective Time as if made at and as of such time,
(ii) the actual Consolidated EBITDA (as defined in the Merger Agreement) as
reflected in the consolidated statement of operations of the Company for the
period from April 1, 1997 to the month for which the Company's financial
statements are then available shall not have declined by 7.5% or more when
compared to the Projected Results (as defined in the Merger Agreement) for such
period, (iii) the Option Agreement shall have been entered into concurrently
with the execution of the Merger Agreement, and the Option Agreement shall be in
full force and effect and the Option Sellers shall have complied in all
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respects with the terms thereof, (iv) Mr. Paulson shall not have become deceased
or Disabled (as defined in the Merger Agreement), and (v) Gaming shall have
received certain documents as Gaming may reasonably request.
The obligations of the Company to consummate the Merger are subject to,
among other things, the satisfaction on or prior to the Effective Time of the
following additional conditions: (i) each of Gaming and its subsidiary shall
have performed in all material respects all of its obligations under the Merger
Agreement and, subject to certain exceptions, the representations and warranties
of Gaming and its subsidiary contained in the Merger Agreement shall be true and
correct in all respects as of the date of the Merger Agreement and at and as of
the Effective Time, (ii) Gaming shall have in cash, or immediately available
funds, an amount equal to the aggregate Merger Consideration, and (iii) the
Company shall have received certain documents as the Company may reasonably
request.
It is anticipated that the owner of Gaming will offer key employees of
the Company the opportunity to participate in the continued growth of the
corporation which survives the Merger. Although no definitive plan has yet been
formulated, it is possible that certain key employees might receive a type of
equity participation in lieu of receiving the amount contemplated to be paid to
them under the Merger Agreement on their present options in cash at the
Effective Time.
If the Merger does not occur by April 1, 1998, subject to extension
until June 1, 1998, under certain circumstances, the Merger Agreement will
terminate. The terms of the Merger Agreement are currently being negotiated.
Accordingly, there can be no assurance that the Merger Agreement will be
executed or that the Merger will be consummated.
Option and Voting Agreement
Contemporaneously with the execution and delivery of the Merger
Agreement, Gaming, Morgens, Waterfall, Vintiadis & Company, Inc. ("Morgens
Waterfall"), on behalf of certain investment accounts, Stein Roe & Farnham,
Incorporated ("Stein Roe"), on behalf of certain investment accounts, and Sun
Life Insurance Company, a Nevada corporation ("Sun Life," and together with
Morgens Waterfall and Stein Roe, the "Sellers") intend to enter into an option
and voting agreement (the "Option Agreement"). Pursuant to the terms and subject
to the conditions of the Option Agreement, each Seller would grant Gaming an
irrevocable option to purchase (the "Purchase Option") all the shares of Common
Stock owned by such Seller. Upon exercise of the Purchase Option, Gaming would
pay to each of the Sellers an aggregate amount equal to $15 per share, subject
to certain adjustments under the Option Agreement. An aggregate amount of
$43,374,600 would be payable as follows: (i) $19,088,400 to Morgens Waterfall,
(ii) $12,857,400 to Stein Roe and (iii) $11,428,800 to Sun Life, in addition to
any accrued but unpaid interest payments required under the Option Agreement.
In addition, each Seller would agree and covenant with Gaming that at
any meeting of stockholders of the Company called to vote upon the Merger and
the Merger Agreement or in any other circumstances upon which a vote, consent or
other approval with respect to the Merger and the Merger Agreement is sought,
such Seller would cause its shares of Common Stock to be present for quorum
purposes and to vote (or caused to be voted) its shares of Common Stock in favor
of the terms thereof and each of the other transactions contemplated by the
Merger Agreement.
The obligations of each of the Sellers under the Option Agreement would
be subject to, among other things, satisfaction or, in certain cases, waiver, on
the Closing Date (as defined in the Option
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Agreement) of the following conditions: (i) no temporary restraining order or
preliminary or permanent injunction of any court or administrative agency of
competent jurisdiction prohibiting the transactions contemplated by the Option
Agreement shall be in effect, (ii) all approvals shall have been obtained and
shall not have expired or been rescinded, (iii) subject to certain exceptions,
the representations and warranties of Gaming in the Option 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 (iv) Gaming shall have performed
all obligations required to be performed by it under the Option Agreement on or
prior to the Closing Date.
The terms of the Option Agreement are currently being negotiated.
Accordingly, there can be no assurance that the Option Agreement will be
executed.
The Elsinore Transaction
The Company has been advised that substantially concurrently with the
execution of the Merger Agreement, affiliates of Gaming and its subsidiary
intend to execute an agreement to purchase the outstanding common stock of
Elsinore, the primary asset of which is the Four Queens. Based upon reports
filed pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as of April 1, 1997, Morgens Waterfall, one of the majority stockholders,
beneficially owned approximately 94.3% of the common stock of Elsinore.
The terms of such agreement are currently being negotiated.
Accordingly, there can be no assurance that such agreement will be executed.
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MANAGEMENT
Executive Officers & Directors
The executive officers and directors of the Company and ROC are as
follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
William L. Westerman 66 Chairman of the Board and Chief Executive Officer of the Company and
ROC, and President of the Company
Duane R. Krohn 51 Treasurer of the Company and Vice President of
Finance and Treasurer of ROC
John A. Wishon, Esq. 52 Vice President and General Counsel of ROC, Secretary of the Company and
ROC
Michael L. Falba 55 Vice President of Casino Operations of ROC
Jerome P. Grippe 55 Vice President of Operations of ROC
Martin R. Gross 40 Vice President of Hotel Marketing of ROC
Ronald P. Johnson 49 Vice President of Gaming Operations of ROC
Robert E. Nickels, Sr. 67 Vice President of Administration of ROC
Robert A. Vannucci 50 Vice President of Marketing and Entertainment of ROC
Robert R. Barengo 55 Director of the Company and ROC
William Friedman 55 Director of the Company and ROC
Philip P. Hannifin 62 Director of the Company and ROC
</TABLE>
William L. Westerman assumed the positions referred to above in
February, 1993. Mr. Westerman was a consultant to Riviera, Inc. from July 1,
1991 until he was appointed Chairman of the Board and Chief Executive Officer of
Riviera, Inc. on January 1, 1992. From 1973 to June 30, 1991, Mr. Westerman was
President and Chief Executive Officer of Cellu-Craft Inc., a manufacturer of
flexible packaging primarily for food products. Alusuisse, a multi-national
aluminum and chemical company, acquired Cellu-Craft on June 30, 1989. On January
1, 1990, Mr. Westerman was appointed President of Alusuisse Flexible Packaging
(Alusuisse's wholly-owned U.S. subsidiary engaged in the manufacture of flexible
packaging for food and pharmaceutical products). Additionally, Mr. Westerman was
named a member of the team responsible for all of Alusuisse multinational
packaging operations with annual sales volume in excess of $1 billion. Mr.
Westerman resigned from all his positions with Alusuisse on June 30, 1991.
Duane R. Krohn, CPA, assumed the position of Treasurer of the Company
and ROC on June 30, 1993 and was elected Vice President of Finance of ROC on
April 26, 1994. Mr. Krohn was initially employed by Riviera, Inc. in April 1990,
as Director of Corporate Finance and served as Vice President-Finance from March
1992 to June 30, 1993. Mr. Krohn served as Chief Financial Officer of Imperial
Palace, Inc. (a casino/hotel operator in Las Vegas) from February 1987 to March
1990. Prior to 1987, Mr. Krohn was Chief Financial Officer of the Mint and the
Dunes in Las Vegas, Nevada, and Bally's Park Place in Atlantic City, New Jersey.
John A. Wishon, Esq. was elected Secretary of the Company and ROC, and
General Counsel of ROC in September 1994, and was elected Vice President of ROC
in November 1996. Mr. Wishon was initially employed by ROC as a Marketing
Analyst in February 1994. From January 1992 to February 1994, Mr. Wishon was a
legal and management consultant to Gold River Gambling Hall & Resort, the
Bicycle Club Casino, and Tierra del Sol Casino Resort. From October 1990 to
January 1992, Mr. Wishon served as Vice President of Hotel Operations and later
as Vice President of Administration and Legal Affairs at the Sands Hotel Casino
in Las Vegas. Prior to December, 1988, Mr. Wishon served as General Manager of
the Airtel Plaza and Westwood Plaza Hotels in Los Angeles, California. From 1976
until
66
<PAGE>
1988, Mr. Wishon was Senior Vice President of the Hotel del Coronado Corporation
and held the positions of Resident Manager and General Counsel. Mr. Wishon is a
member of the Nevada and California Bars, has practiced law with emphasis on
real estate and contract law and has been employed in law enforcement.
Michael L. Falba was elected Vice President of Casino Operations of ROC
on April 26, 1994. Mr. Falba became Director of Casino Operations of ROC on June
30, 1993. Mr. Falba was employed by the Riviera, Inc. from March 1989 until
November 1991 as Assistant Casino Manager, and from November 1991 to June 30,
1993 as Vice President of Casino Operations.
Jerome P. Grippe was elected Vice President of Operations of ROC on
April 26, 1994. Mr. Grippe became Director of Operations of ROC on June 30,
1993. Mr. Grippe was Assistant to the Chairman of the Board of Riviera, Inc.
from July 1990 until May 1993. Mr. Grippe had served in the United States Army
from 1964 until his retirement as a Colonel in July 1990.
Martin R. Gross was elected Vice President of Hotel Marketing of ROC on
April 26, 1994. Mr. Gross became Director of Hotel Marketing of ROC on June 30,
1993. Mr. Gross was Vice President-Hotel Marketing of Riviera, Inc. from April
1992 until June 30, 1993. Mr. Gross was Vice President-Marketing and Sales for
Alexis Park Resort Hotel (a 500-suite non-gaming resort) in Las Vegas from
August 1988 until April 1992. From 1980 to 1988, Mr. Gross held key marketing
positions with the Mirage and MGM Grand hotels. On August 12, 1996, concurrent
with RGM taking over the management of the Four Queens, Mr. Gross assumed the
responsibilities of Acting General Manager of the Four Queens and in February of
1997, Mr. Gross became General Manager of the Four Queens. Mr. Gross remains an
officer and employee of ROC.
Ronald P. Johnson became Vice President of Gaming Operations of ROC in
September 1994. Mr. Johnson became Director of Slots of ROC on June 30, 1993 and
was elected Vice President of Slot Operations and Marketing on April 26, 1994.
Mr. Johnson was Vice President-Slot Operations and Marketing of Riviera, Inc.
from April 1991 until June 30, 1993. Mr. Johnson was Vice President-Slot
Operations for Sands Hotel and Casino Inc. from September 1989 until he joined
Riviera, Inc. From September 1986 until September 1989, Mr. Johnson was
Assistant Slot Manager at Bally's Grand Las Vegas.
Robert E. Nickels, Sr. was elected Vice President of Administration of
ROC on June 30, 1993. From March 1992 until June 30, 1993 Mr. Nickels was Vice
President-Administration of Riviera, Inc. From November 1991 to February 1992
Mr. Nickels was a self-employed business consultant. From March 1979 to April
1986, Mr. Nickels was Director of Internal Audit for MGM-Reno. From April 1986
to November 1991, Mr. Nickels served as Vice President of Administration at
Bally's Reno and Las Vegas.
Robert A. Vannucci was elected Vice President of Marketing and
Entertainment of ROC on April 26, 1994. Mr. Vannucci had been Director of
Marketing of ROC since July 19, 1993. Mr. Vannucci was Senior Vice President of
Marketing and Operations at the Sands Casino Hotel in Las Vegas from April 1991
to February 1993. Mr. Vannucci was Vice President and General Manager of
Fitzgerald's Las Vegas (a casino/hotel operator) from 1988 to January 1991. In
July 1993, Robert Vannucci filed for personal bankruptcy protection under
Chapter 13 of the Bankruptcy Code. Pursuant to his bankruptcy plan, Mr. Vannucci
has made 100% repayment to all creditors.
Robert R. Barengo has been a Director of the Company and ROC since
February, 1993. Mr. Barengo was a consultant to Riviera, Inc. from January 1993
until June 30, 1993. Since 1972, Mr. Barengo has been engaged in the private
practice of law in Reno, Nevada. From 1978 to 1983, Mr.
67
<PAGE>
Barengo was Speaker Pro Tempore and Speaker of the Nevada Assembly. From October
1992 to May 1996, Mr. Barengo was a director and 10% stockholder of Leroy's
Horse & Sports Place, Inc. ("Leroy's"). In May 1996, Leroy's became a wholly
owned subsidiary of American Wagering, Inc. ("AWI"), a publicly held corporation
listed on NASDAQ. Since May 1996, Mr. Barengo has been a director of AWI and
currently owns 7% of the outstanding stock of AWI. Since 1993, Mr. Barengo has
been the President and the sole stockholder of Silver State Disseminators
Company, a company licensed by Nevada gaming authorities to disseminate racing
information in the State of Nevada and Chairman of the Nevada Dairy Commission.
William Friedman has been a Director of the Company and ROC since
February 1993. Mr. Friedman was a consultant to Riviera, Inc. from January 1993
until June 30, 1993. During 1989 and 1990, Mr. Friedman was President and
General Manager of the Las Vegas Casino Division of United Gaming Inc., the
largest slot route operator in Nevada. In 1988 and 1989, Mr. Friedman was Chief
Executive Officer and Executive Vice President of Rio Suite Hotel & Casino, Inc.
(formerly MarCor Resorts. Inc.) and President and General Manager of Rio Suite
Hotel & Casino in Las Vegas.
Philip P. Hannifin has been a Director of the Company and ROC since
February 1993. Mr. Hannifin was a consultant to Riviera, Inc. from January 1993
until June 30, 1993. Mr. Hannifin was a Director from 1986 to 1995 and an
Executive Vice President of Fitzgerald's Reno, Inc. (a casino/hotel operator)
since 1991. From 1987 to 1990, Mr. Hannifin was a Director and Executive Vice
President of MGM Grand Inc. (a casino/hotel operator). From January 1971 to
September 1977, Mr. Hannifin was Chairman of the Nevada Gaming Control Board.
Officers of each of the Company and ROC serve at the discretion of
their respective Boards of Directors and are also subject to the licensing
requirements of the Gaming Commission.
Director Compensation and Arrangements
Each of Messrs. Barengo, Friedman and Hannifin is paid an annual fee of
$50,000 for services as a director of the Company and ROC. Each director is also
reimbursed for expenses incurred in connection with attendance at meetings of
the Board of Directors. Mr. Hannifin was granted options to purchase 24,000
shares in 1993, 12,000 shares in 1994 and none in 1995 and 1996. On March 5,
1996 the Board of Directors adopted a Nonqualified Stock Option Plan for
Non-Employee Directors (the "Directors' Option Plan"), which was approved by the
stockholders on May 10, 1996. Under the Directors' Option Plan, each individual
elected, re-elected or continuing as a non-employee director will automatically
receive a non-qualified stock option for 2,000 shares of Common Stock, with an
option exercise price equal to the fair market value of the Common Stock on the
date of grant. 50,000 shares have been reserved for issuance under the
Directors' Option Plan. Options to purchase 2,000 shares at an exercise price of
$13.25 were granted to each of Messrs. Barengo and Friedman on May 10, 1996
under the Directors' Option Plan. In addition, options to purchase 2,000 shares
at an exercise price of $13.50 were granted to each of Messrs. Barengo, Friedman
and Hannifin on May 27, 1997 under the Director's Option Plan. Directors who are
also officers or employees of the Company or ROC do not receive any additional
compensation for services as a director. Currently, Mr. Westerman is the only
such director. The Board of Directors has granted the members of the
Compensation Committee the right to elect to receive all or part of their annual
fees in the form of the Company's Common Stock in a number of shares having a
fair market value equal to the cash compensation subject to such election
pursuant to the Company's Compensation Plan for Directors serving on the
Compensation Committee. Of the 50,000 shares reserved for issuance under this
plan, 3,103 shares have been issued to Mr. Barengo for his director's fees in
1996.
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<PAGE>
Compensation of Executive Officers
The following table sets forth a summary of the compensation paid by
the Company in the years ended December 31, 1994, 1995 and 1996, to the Chief
Executive Officer of the Company and ROC, and to the Company's four most highly
compensated executive officers who received over $100,000 in compensation during
1996 from the Company (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
Summary Compensation Table
Name and Other Annual All Other
Principal Position Year Salary Bonus Compensation Compensation(1)
- ------------------ ------- ----------- ----------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
William L. Westerman 1996 $ 400,000 $ 1,213,969(2) $ 441,375(3) $ 1,566
Chairman of the Board and 1995 375,000 855,961 431,315(3) 1,630
Chief Executive Officer of 1994 350,000 592,379 389,040(3) 1,630
the Company and ROC
Ronald P. Johnson 1996 170,961 100,000 6,875 791
Vice President of Gaming 1995 155,840 70,000 8,529 772
Operations of ROC 1994 131,813 50,000 5,446 497
Martin R. Gross 1996 148,653 100,000 6,875 536
Vice President of Hotel 1995 140,049 70,000 8,079 541
Marketing of ROC 1994 125,302 50,000 5,316 442
Robert Vannucci 1996 145,961 100,000 6,875 536
Vice President of 1995 130,569 70,000 6,879 541
Marketing and 1994 110,852 50,000 2,717 365
Entertainment of ROC
Jerome P. Grippe 1996 118,653 100,000 6,873 408
Vice President of 1995 108,950 70,000 7,115 442
Operations of ROC 1994 103,654 50,000 4,646 398
- ------------------
<FN>
(1) Includes premiums paid by the Company for excess life insurance.
(2) Includes $614,000 of Mr. Westerman's 1996 Incentive Bonus which was credited
to his retirement account pursuant to his employment agreement.
(3) Includes contributions to Mr. Westerman's retirement account of $425,000 in
1996, $400,000 in 1995 and $375,000 in 1994 (See "--Employment Agreements").
</FN>
</TABLE>
Option Grants
The number of shares available for purchase under the Company's 1993
Employee Stock Option Plan, as amended (the "Stock Option Plan") is 1,000,000
(as adjusted pursuant to antidilution provisions). Options for an aggregate of
774,000 shares have been granted under the Stock Option Plan. During the
Company's 1996 fiscal year, options covering a total of 410,000 shares of Common
Stock were granted under the Stock Option Plan.
The following table sets forth certain information regarding options
granted during the fiscal year ended December 31, 1996 to the Named Executive
Officers:
69
<PAGE>
Option Grants In Last Fiscal Year
Individual Grants
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
Number of of Stock Price
Securities Percent of Total Appreciation
Underlying Options Granted Exercise for Options Term(1)
Options to Employees Price Per Expiration -----------------------------
Granted in Fiscal Year Share Date 5% 10%
---------- ---------------- ---------- -------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
William L. Westerman....... 320,000 78.05% $ 13.625 11/20/06 $2,741,981 $ 6,948,717
Ronald P. Johnson.......... 7,000 1.71 13.625 11/20/06 59,981 152,003
Martin R. Gross............ 7,000 1.71 13.625 11/20/06 59,981 152,003
Robert Vannucci............ 7,000 1.71 13.625 11/20/06 59,981 152,003
Jerome P. Grippe........... 7,000 1.71 13.625 11/20/06 59,981 152,003
- -------------
<FN>
(1) "Potential Realizable Value" is based on the difference between the
potential market value of shares issuable (based upon assumed 5% and 10%
appreciation rates) upon exercise of such options and the exercise price
of such options. The values disclosed are not intended to be, and should
not be interpreted as, representations or projections of future value of
the Company's stock or of the stock price.
</FN>
</TABLE>
Option Exercises and Year-End Options Values
The following table presents at June 30, 1997 the value of unexercised
in-the-money options held by the Named Executive Officers. No options have ever
been exercised.
<TABLE>
<CAPTION>
Number of Value of Unexercised,
Unexercised Options In-The-Money Options
--------------------------- ----------------------------
Name Vested Not Vested Vested Not Vested
- ---- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
William L. Westerman.................................. 245,000 255,000 $1,679,376 $ 148,125
Ronald P. Johnson..................................... 18,250 6,750 167,938 14,813
Martin R. Gross....................................... 18,250 6,750 167,938 14,813
Robert Vannucci....................................... 18,250 6,750 167,938 14,813
Jerome P. Grippe...................................... . 18,250 6,750 167,938 14,813
</TABLE>
Employment Agreements
William L. Westerman serves as Chairman of the Board, President and
Chief Executive Officer of the Company, and as Chairman of the Board and Chief
Executive Officer of ROC.
Under Mr. Westerman's existing employment agreement with the Company
which was last amended on November 21, 1996 and approved by the stockholders of
the Company on May 8, 1997, the term of Mr. Westerman's employment will expire
on December 31, 1998 and Mr. Westerman's employment will be automatically
renewed for successive one-year terms unless the Company gives Mr. Westerman 90
days written notice or Mr. Westerman gives the Company 180 days notice. Mr.
Westerman's base compensation is $600,000.
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<PAGE>
Under the employment agreement, Mr. Westerman is entitled to
participate in the Company's Senior Management Compensation Plan or such other
executive bonus plan as shall be established by the Company's Board of Directors
(collectively the "Plan"). If at least 80% of targeted net income, as defined by
the Plan, is met, Mr. Westerman shall be entitled to receive a bonus under the
Plan expressed as a percentage of his $600,000 base salary depending on the
percentage of targeted net income realized by the Company in a particular year,
with a maximum bonus of $900,000.
The employment agreement provides that the Company fund a retirement
account for Mr. Westerman. Pursuant to the employment agreement, an aggregate of
$2,924,000 had been credited to the retirement account from its inception
through January 1, 1997. Under the employment agreement, each year that Mr.
Westerman continues to be employed, an amount equal to Mr. Westerman's base
salary for that year will be credited to the account on January 1 of that year
and in the event that Mr. Westerman is no longer employed by the Company (except
for termination for cause, in which case Mr. Westerman would forfeit all rights
to monies in the retirement account), Mr. Westerman will be entitled to receive
the amount in the retirement account as of the date he ceases to be employed by
the Company in 20 quarterly installments. Pursuant to the employment agreement,
the retirement account was credited with $79,027 on April 1, 1997, $85,672 on
July 1, 1997 and shall be credited with additional amounts on the first day of
each succeeding calendar quarter equal to the product of (i) the Company's
average borrowing cost for the immediately preceding fiscal year, as determined
by the Company's chief financial officer and (ii) the average outstanding
balance in the retirement account during the preceding calendar quarter. In the
event of Mr. Westerman's death, an amount equal to the applicable federal estate
tax (now 60%) on the retirement account will be pre-paid prior to the date or
dates such taxes are due.
The Company retains beneficial ownership of all monies in the
retirement account, which monies are earmarked to pay Mr. Westerman's retirement
benefits. However, upon (i) the vote of a majority of the outstanding shares of
Common Stock approving a "Change of Control" (as defined below), (ii) the
occurrence of a Change of Control without Mr. Westerman's consent, (iii) a
breach by the Company of a material term of the employment Agreement or (iv) the
expiration or earlier termination of the term of the employment agreement for
any reason other than cause, Mr. Westerman may require the Company to establish
a "Rabbi Trust" for the benefit of Mr. Westerman and to fund such trust with an
amount of cash equal to the amount then credited to the retirement account,
including any amount to be credited to the retirement account upon a Change of
Control discussed below.
The employment agreement provides that Mr. Westerman will receive the
same life, health and disability benefits offered to other key executives of the
Company and ROC, will be reimbursed for all business expenses and will be
entitled to four weeks vacation per year.
Under the employment agreement, Mr. Westerman will be entitled to
rights exercisable upon a "Change of Control." A "Change of Control" is defined
generally as transactions involving (i) a sale of substantially all of the
assets of the Company, (ii) a merger, sale or other transaction resulting in
holders of Common Stock immediately prior to such transaction holding less than
a majority in voting interest to elect the directors of the Company or any other
surviving entity, (iii) any person that held less than 10% of the Common Stock
acquiring a majority in voting interest to elect the directors of the Company or
(iv) any person acquiring 50% or more of voting power to elect directors of the
Company or any surviving entity or acquiror of substantially all of the assets
of the Company. Under the employment agreement, a Change of Control without Mr.
Westerman's consent is a special event of default entitling Mr. Westerman, upon
at least 90 days prior notice to the Company, to terminate his employment with
the Company and to (i) have an amount equal to one year of base salary credited
to his retirement account and (ii) 100% vesting of stock options held by him.
With respect to the Merger, Mr. Westerman and Mr. Paulson are negotiating Mr.
Westerman's waiver of his rights under the "Change of Control" provisions of the
employment agreement
71
<PAGE>
and amending the agreement with respect to the establishment of a "Rabbi Trust"
for the benefit of Mr. Westerman upon notice by Mr. Westerman at any time and
crediting Mr. Westerman's retirement account with an amount equal to one year's
base salary in the event the Company terminates his employment or does not renew
his employment agreement for any successive one year term.
Termination Fee Agreements
ROC is a party to termination fee agreements with certain significant
employees pursuant to which each such employee is entitled to receive one year's
salary and benefits if his or her employment with ROC is terminated without
cause within one year of a change of control (as defined in the termination fee
agreements) of the Company or ROC. The estimated total amount that would be
payable under all such agreements is approximately $1.4 million in salaries and
$425,000 in benefits as of June 30, 1997.
Stay Bonus Agreements
ROC is a party to stay bonus agreements with certain significant
employees pursuant to which each such employee is entitled to receive one year's
salary (less the amount of any incentive bonus paid in 1997 for 1996) in the
event there is a change of control (as defined in the stay bonus agreements) of
the Company. The agreements expire on December 31, 1997. The estimated total
amount that would be payable under all such agreements is approximately $352,000
if the Merger is consummated prior to December 31, 1997. If the Merger is not
consummated in 1997, the Company intends to renew the stay bonus agreements for
these employees in which case, upon a change of control, each such employee
would be entitled to receive one year's salary less the amount of any incentive
bonus paid in 1998 for 1997.
72
<PAGE>
OWNERSHIP OF THE COMPANY
The Common Stock is traded on the American Stock Exchange. The
following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of June 30, 1997 by (i) each person who, to the
knowledge of the Company, beneficially owns more than 5% of the outstanding
Common Stock, (ii) the directors and certain officers of the Company and (iii)
all directors and officers of the Company and ROC as a group. Except as
indicated, each person listed below has sole voting and investment power with
respect to the shares set forth opposite such person's name.
<TABLE>
<CAPTION>
Shares Beneficially
Owned
----------------------------
Name Number Percentage
---- -------------- ------------
<S> <C> <C>
William L. Westerman(1)(7)......................................... 329,200 6.4%
Ronald P. Johnson(1)(7)............................................ 30,250 *
Martin R. Gross(1)(7).............................................. 19,250 *
Robert Vannucci(1)(7).............................................. 18,850 *
Jerome P. Grippe(1)(7)............................................. 19,250 *
Robert R. Barengo(1)(7)............................................ 4,380 *
William M. Friedman(1)(7).......................................... 400 *
Philip P. Hannifin(1)(7)........................................... 33,000 *
Keyport Life Insurance Co.(2)(8)................................... 857,160 17.4
Sun America Life Insurance Company(3)(8)........................... 761,920 15.5
Morgens Entities:(4)(8)
Betje Partners................................................... 29,360 *
Morgens Waterfall Income Partners................................ 43,920 *
MWV Employee Retirement Plan Group Trust......................... 7,760 *
Phoenix Partners................................................. 79,440 1.6
Restart Partners, L.P............................................ 282,000 5.7
Restart Partners II, L.P......................................... 440,600 9.0
Restart Partners III, L.P........................................ 298,600 6.1
The Common Fund.................................................. 90,880 1.9
------------- ----
Total Morgens Entities................................... 1,272,560 25.9
Restructuring Capital Associates, L.P.(5).......................... 398,240 8.1
Allen E. Paulson(6)................................................ 463,655 9.4
All executive officers and directors as a group
(12 persons)(1)(7)............................................... 521,480 9.8
<FN>
- ------------
* Less than 1%.
(1) The address for each director and officer of the Company or ROC is c/o
Riviera Holdings Corporation, 2901 Las Vegas Boulevard South, Las Vegas,
Nevada 89109.
(2) The address for Keyport Life Insurance Company ("Keyport") is 125 High
Street, Boston, Massachusetts 02110. Stein Roe, an affiliate of Keyport,
is Keyport's investment advisor, and, as such, has the power and authority
to direct the disposition of the securities, and accordingly, could be
deemed to be a "beneficial" owner within the meaning of Rule 13d-3 of the
Exchange Act. Stein Roe, however, disclaims actual beneficial ownership of
such securities.
(3) The address for Sun Life is One Sun America Center, Century City,
California 90067.
(4) The address for Morgens Waterfall is 10 East 50th Street, New York, New
York 10022. Morgens Waterfall or its principals are either investment
advisors to, or trustees or general partners of, the
</FN>
</TABLE>
73
<PAGE>
eight entities listed in the above table ("Morgens Entities") that are the
owners of Common Stock. Morgens Waterfall or its principals have the power
and authority to direct the disposition of these securities and,
accordingly, could be deemed to be "beneficial" owners within the meaning
of Rule 13d-3 of the Exchange Act. Each of Morgens Waterfall, its
principals and the Morgens Entities, however, disclaims beneficial
ownership with respect to any securities not actually beneficially owned
by it.
(5) The address for Restructuring Capital Associates, L.P. is 450 Park Avenue,
New York, New York 10022.
(6) The address for Mr. Paulson is Del Mar Country Club, 6001 Clubhouse Drive,
Rancho Santa Fe, California 92067.
(7) Includes vested portion of options to purchase shares of Common Stock
granted pursuant to the Stock Option Plan and Nonqualified Stock Option
Plan for Non-Employee Directors.
(8) If the Option Agreement is executed, Morgens Waterfall, Sun Life and Stein
Roe, Keyport's investment advisor, would vote their shares in favor of the
Merger Agreement and the Merger under the Option Agreement. See "The
Proposed Merger."
74
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Robert R. Barengo was formerly a director and 10% stockholder of
Leroy's. In May 1996, Leroy's became a wholly owned subsidiary of AWI, a
publicly held corporation listed on NASDAQ. Mr. Barengo is currently a director
of AWI and owns 7% of the outstanding stock of AWI, which leases approximately
12,000 square feet of the Riviera casino floor. AWI is the operator of the
Riviera's sports book operations. This lease was assumed by the Company from
Riviera, Inc. and is still in effect. The lease provides for rental payments
based upon the monthly and annual revenues derived by AWI from the location.
From January 1, 1996 through December 31, 1996, AWI paid aggregate rent to ROC
of $168,705 and $88,600 from January 1, 1997 through June 30, 1997. The Company
believes that the terms of the lease with AWI are at least as favorable to the
Company and ROC as could have been obtained from unaffiliated third parties and
are at least as favorable as terms obtained by other casino/hotels in Las Vegas.
AWI also owns Howard Johnson Hotel & Casino located at the intersection of
Tropicana Avenue and Interstate 15 in Las Vegas, Nevada. The hotel's operations
include an International House of Pancakes restaurant, on-site food and beverage
sales, 150 guest rooms (no suites) and approximately 53 gaming machines. The
Company believes that this casino/hotel's operations are not competitive with
the Riviera.
From August 1996 until February 1997, RGM, a wholly owned subsidiary of
the Company, has been operating the Four Queens located adjacent to the Golden
Nugget on Fremont Street in downtown Las Vegas under an interim management
agreement for a fee of $83,333 per month. The long-term management agreement
with Elsinore, the owner of the Four Queens, went into effect on February 28,
1997, the effective date of the Chapter 11 plan of reorganization of Elsinore.
The Morgens Entities, beneficial owners of approximately 25.9% of the Common
Stock of the Company, own over 90% of the common stock of Elsinore. The Company
believes that the terms of the management agreement are no less favorable to the
Company than if the Company had negotiated with an independent third party.
The term of the management agreement is approximately 40 months,
subject to earlier termination or extension. Either party may terminate if
EBITDA for the first two fiscal years is less than $12.8 million. The term can
be extended by an additional 24 months at RGM's option, if cumulative EBITDA for
the three fiscal years of the term is at least $19.2 million. RGM will be paid a
fee of 25% of any increase in annual EBITDA over $4.0 million, subject to a $1.0
million minimum fee, payable in equal monthly installments. RGM has received
warrants to purchase 1,125,000 shares of common stock of Elsinore, exercisable
during the term or extended term of the management agreement at an exercise
price of $1.00 per share. If the proposed acquisition of Elsinore by an
affiliate of Allen E. Paulson is consummated (see "The Proposed Merger -- The
Elsinore Transaction"), the Company would receive approximately $2,430,000
(i.e., the spread between the per share warrant price and the per share merger
price multiplied by 1,125,000). To facilitate RGM's performance of the
management agreement, Mr. William L. Westerman is the sole Director, President
and Treasurer of the Four Queens. He receives no compensation and has been
licensed by the Nevada Gaming Commission to hold these positions.
Either party can terminate the management agreement if (i)
substantially all the Four Queens' assets are sold, (ii) the Four Queens is
merged or (iii) a majority of the Four Queens' or Elsinore's shares are sold.
Upon such termination, RGM will receive a $2.0 million termination bonus minus
any amount realized or realizable upon exercise of the warrants.
Since June 23, 1997 Mr. Westerman has been a Director of Darling
International, Inc., a publicly held company. Morgens Waterfall entities own
46.13% of the stock of Darling International, Inc. which is primarily in the
business of processing animal and bakery waste by-products.
75
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following is a summary of certain indebtedness of the Company and
ROC which will be outstanding following consummation of the Transactions. To the
extent such summary contains descriptions of the Revolving Credit Facility and
other loan documents, such descriptions do not purport to be complete and are
qualified in their entirety by reference to such documents, which are available
upon request from the Company.
Revolving Credit Facility
The revolving credit facility (the "Revolving Credit Facility") was
established as of February 28, 1997 on behalf of the Company and ROC pursuant to
agreements among the Company, ROC and U.S. Bank of Nevada, as lender ("USBN").
The Revolving Credit Facility provides for borrowings of up to $15,000,000,
which amount is reduced on a quarterly basis, commencing April 1998. The
Revolving Credit Facility matures on January 1, 2002, unless accelerated earlier
by USBN upon an event of default. Interest on outstanding principal under the
Revolving Credit Facility accrues at either the prime rate plus .50% per annum
or LIBOR plus 2.90% per annum, at the Company's option. Funds under the
Revolving Credit Facility could be used by the Company to acquire gaming and
other equipment when and as needed. Availability of loans under the Revolving
Credit Facility is subject to compliance by the Company and ROC with certain
conditions precedent, including the maintenance of certain financial ratios. As
a result of the sale of the Existing Notes, the Company has ceased to meet such
conditions for borrowing availability. The Company intends to renegotiate the
conditions to borrowing under the Revolving Credit Facility or secure a
replacement facility. There can be no assurance however, that such renegotiation
or replacement will be successful.
Unsecured Note
The Company issued a Class 13/14 Unsecured Promissory Note (the
"Unsecured Note") on June 30, 1993. As of June 30, 1997, the outstanding
principal balance of the Unsecured Note was $5.6 million, which was discounted
at 12% to have a $4.3 million balance sheet carrying value. The Company retired
the Unsecured Note by paying $4.5 million out of the proceeds of the sale of the
Existing Notes. See "Use of Proceeds."
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DESCRIPTION OF NOTES
General
The Existing Notes were issued pursuant to an Indenture (the
"Indenture"), dated as of August 13, 1997, between the Company and Norwest Bank
Minnesota, N.A. as trustee (the "Trustee") in a private transaction that is not
subject to the registration requirements of the Securities Act. See "Notice to
Investors." The terms of the indenture apply to the Existing Notes and to the
New Notes to be issued in exchange therefor pursuant to the Exchange Offer (all
such Notes being referred to herein collectively as the "Notes"). The terms of
the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). The Notes are subject to all such terms, and Holders of
the Notes are referred to the Indenture and the Trust Indenture Act for a
statement thereof. The following summary of certain provisions of the Indenture,
the Collateral Documents (as defined) and the Registration Rights Agreement
between the Company and the Initial Purchasers (the "Registration Rights
Agreement") does not purport to be complete and is qualified in its entirety by
reference to the Indenture, the Collateral Documents and the Registration Rights
Agreement, including the definitions therein of certain terms used below. Copies
of the proposed form of Indenture, the Collateral Documents and the Registration
Rights Agreement will be made available as set forth below under "-- Additional
Information." The definitions of certain terms used in the following summary are
set forth below under "-- Certain Definitions." For purposes of this summary,
the term "Company" refers to Riviera Holdings Corporation and not to any of its
Subsidiaries.
The Notes will be senior secured obligations of the Company and will
rank senior in right of payment to all existing and future subordinated
Indebtedness of the Company and pari passu in right of payment with all existing
and future senior Indebtedness of the Company, including borrowings under the
Revolving Credit Facility. As of June 30, 1997, after giving effect to the
Transactions and the redemption of the 11% First Mortgage Notes, the total
senior Indebtedness of the Company (including the Notes) would have been
approximately $173.9 million. The Notes will be guaranteed (the "Subsidiary
Guarantees") on a senior secured basis by each of the Company's existing and
future Restricted Subsidiaries. The Notes and the Subsidiary Guarantees will be
secured by the Collateral as set forth below under "-- Security."
Principal, Maturity and Interest
The Notes will be limited in aggregate principal amount to $175.0
million and will mature on August 15, 2004. Interest on the Notes will accrue at
the rate of 10% per annum and will be payable semi-annually in arrears on
February 15 and August 15, commencing on February 15, 1998, to Holders of record
on the immediately preceding February 1 and August 1 Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of original issuance. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Principal, premium, if any, interest and Liquidated Damages, if any, on the
Notes will be payable at the office or agency of the Company maintained for such
purpose within the City and State of New York or, at the option of the Company,
payment of interest and Liquidated Damages, if any, may be made by check mailed
to the Holders at their respective addresses set forth in the register of
Holders of the Notes; provided that all payments of principal, premium, interest
and Liquidated Damages, if any, with respect to the Notes, the Holders of which
have given wire transfer instructions to the Company, will be required to be
made by wire transfer of immediately available funds to the accounts specified
by the Holders thereof. Until otherwise designated by the Company, the Company's
office or agency in New York will be the office of the Trustee maintained for
such purpose. The Notes will be issued in denominations of $1,000 and integral
multiples thereof.
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Security
The Notes and the Subsidiary Guarantees will be secured by the
Collateral (as defined below) owned by the Company or any Guarantor,
respectively, whether now owned or hereafter acquired. "Collateral" means,
subject to Permitted Liens, (i) a first mortgage lien on the Riviera property in
Las Vegas, Nevada, including all improvements thereon, provided, that up to six
undeveloped acres of the Riviera property located adjacent to the Riviera
hotel-casino (the "Six Acre Tracts") may be released without consideration from
the mortgage for purposes of future development; (ii) a first priority lien on
FF&E, excluding Gaming Equipment, of the Company and all existing and future
Restricted Subsidiaries; (iii) a first priority lien on certain contract rights
and other general intangibles, trademarks, trade names and other personal
property of the Company and all existing and future Restricted Subsidiaries, and
licenses and permits entered into by, or granted to, the Company or any
Guarantor, in each case to the extent permitted by applicable gaming and other
laws, but not including inventory, accounts receivables, or Gaming Licenses;
(iv) subject to approval of Nevada Gaming Authorities, a pledge of the Capital
Stock of all existing and future Guarantors and other Subsidiaries directly
owned by the Company or such Guarantors; and (v) until the Net Proceeds of the
sale of the Existing Notes are applied in accordance with the provisions set
forth in the Prospectus under "Use of Proceeds," a lien on the bank account into
which such Net Proceeds have been deposited.
The Company and the Guarantors will enter into security agreements,
mortgages, deeds of trust, certain other collateral assignment agreements and
pledge agreements (collectively, the "Collateral Documents") that will provide
for the grant of a security interest in or pledge of the Collateral to the
Trustee, as collateral agent (in such capacity, the "Collateral Agent") for the
Holders of the Notes. Such pledges and security interests will secure the
payment and performance when due of all of the Obligations of the Company and
the Guarantors under the Indenture, the Notes, the Subsidiary Guarantees and the
Collateral Documents.
The Company has used $15.0 million of the net proceeds of the Existing
Notes to purchase the Black Hawk Land (and the Company may contribute additional
cash amounts to the development of the Black Hawk Project in accordance with the
terms of the covenant entitled "Restricted Payments"). The Black Hawk Land was
purchased by or contributed to Black Hawk Operating Company. The Indenture will
allow Black Hawk Operating Company to incur Indebtedness, and to create Liens on
the purchased or contributed land, only in respect of third-party financing for
the Black Hawk Project ("Permitted Black Hawk Debt"). The Indenture will not
restrict Black Hawk Operating Company's ability to create Liens on equipment,
receivables or other personal property. Holders of Notes will have no mortgage
or other security interest in the land or potential improvements relating to the
Black Hawk Project, except as set forth below. Under certain circumstances if
and when the inclusion of Black Hawk Operating Company as a Restricted
Subsidiary would result in an increase in the Fixed Charge Coverage Ratio of the
Company, provided that no Default or Event of Default shall have occurred and be
continuing and provided that a Default or Event of Default would not thereby be
created, Black Hawk Operating Company (i) automatically will become and remain a
Restricted Subsidiary, and (ii) will execute a Subsidiary Guarantee and such
Collateral Documents as are necessary to create and convey a perfected first
priority Lien on the Black Hawk Land and other Collateral (subject to Permitted
Liens) held by such Restricted Subsidiary; provided, that no such Subsidiary
Guarantee shall be executed, and no such Lien shall be created or conveyed with
respect to the Black Hawk Land or other real or personal property owned by Black
Hawk Operating Company, if the execution, creation or conveyance thereof would
violate or conflict with any law or the provisions of any Permitted Black Hawk
Debt outstanding at the time of such conversion. Notwithstanding the foregoing,
if the execution, creation or conveyance thereof would satisfy the conditions in
the preceding sentence but for any filing with or
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approval of any Gaming Authority or other regulatory entity, the Company shall
use, and shall cause Black Hawk Operating Company to use, its best efforts to
make all such required filings and obtain all such required approvals in order
to permit such execution, creation and conveyance. See "Certain Covenants --
Additional Subsidiary Guarantees." See "Certain Covenants -- Additional
Subsidiary Guarantees."
So long as no Event of Default shall have occurred and be continuing,
and subject to certain terms and conditions in the Indenture and the Collateral
Documents, the Company and its Restricted Subsidiaries will be entitled to
receive all cash dividends, interest and other payments made upon or with
respect to the Capital Stock pledged by them and to exercise any voting and
other consensual rights pertaining to the Collateral pledged by them. Upon the
occurrence and during the continuance of an Event of Default, and subject to the
prior approval of Nevada Gaming Authorities, (a) all rights of the Company and
its Restricted Subsidiaries to exercise such voting or other consensual rights
will cease, and all such rights will become vested in the Collateral Agent,
which, to the extent permitted by law, will have the sole right to exercise such
voting and other consensual rights and (b) all rights of the Company and its
Restricted Subsidiaries to receive all cash dividends, interest and other
payments made upon or with respect to the pledged Collateral will cease and such
cash dividends, interest and other payments will be paid to the Collateral
Agent, and (c) the Collateral Agent may sell the pledged Collateral or any part
thereof in accordance with the terms of the Collateral Documents. All funds
distributed under the Collateral Documents and received by the Collateral Agent
for the benefit of the Holders of the Notes will be distributed by the
Collateral Agent in accordance with the provisions of the Indenture.
Under the terms of the Collateral Documents, the Collateral Agent will
determine the circumstances and manner in which the Collateral shall be disposed
of, including, but not limited to, the determination of whether to release all
or any portion of the Collateral from the Liens created by the Collateral
Documents and whether to foreclose on the pledged Collateral following an Event
of Default. Moreover, upon the full and final payment and performance of all
Obligations of the Company under the Indenture and the Notes, the Collateral
Documents will terminate and the Collateral will be released. In addition, in
the event that Collateral is sold and the Net Proceeds are applied in accordance
with the terms of the covenant entitled "Asset Sales," the Collateral Agent will
release the Liens in favor of the Collateral Agent in the assets sold; provided
that in no event shall the Riviera property, or any improvements thereon (except
for the Six-Acre Tracts) be sold or released from such Lien, and provided
further, that the Collateral Agent will have received from the Company an
Officers' Certificate that such Net Proceeds have been or will be so applied,
and after giving effect to such sale, no Default or Event of Default shall have
occurred and be continuing or would occur as a consequence thereof.
Certain Gaming Law Limitations
The Trustee's ability to foreclose upon the Collateral will be limited
by relevant gaming laws, which generally require that persons who own or operate
a casino or own equity securities of a gaming licensee (including capital stock)
or purchase, possess or sell gaming equipment hold a valid gaming license. No
person can hold a license in the States of Nevada or Colorado unless the person
is found qualified or suitable by the relevant Gaming Authorities. In order for
the Trustee or a purchaser at or after foreclosure to be found qualified or
suitable, such Gaming Authorities would have discretionary authority to require
the Trustee, any or all of the Holders of the Notes or any such purchaser to
file applications, be investigated and be found qualified or suitable as an
owner or operator of gaming establishments. The applicant for qualification, a
finding of suitability or licensing must pay filing fees as well as all costs of
such investigation to determine suitability to hold a gaming license or
interest. If the Trustee is unable or chooses not to qualify, be found suitable,
or licensed to own, operate or sell such assets, it would have to retain or sell
to an entity licensed to operate or sell such assets. In addition, in any
foreclosure sale or subsequent resale by the Trustee, licensing requirements
under the relevant gaming laws may limit the number of potential bidders and may
delay any sale, either of which
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events would have an adverse effect on the sale price of the Collateral.
Moreover, the gaming industry could become subject to different or additional
regulations during the term of the Notes, which could further adversely affect
the practical rights and remedies of the Trustee. Therefore, the practical value
of realizing on the Collateral may, without the appropriate approvals, be
limited.
Certain Bankruptcy Limitations
The right of the Trustee to repossess and dispose of the Collateral
upon the occurrence of an Event of Default is likely to be significantly
impaired by applicable bankruptcy law if a bankruptcy proceeding were to be
commenced by or against the Company or a Guarantor prior to the Trustee having
repossessed and disposed of the Collateral. Under the Bankruptcy Code, a secured
creditor such as the Trustee is prohibited from repossessing its security from a
debtor in a bankruptcy case, or from disposing of security repossessed from such
debtor, without bankruptcy court approval. Moreover, the Bankruptcy Code permits
the debtor to continue to retain and to use collateral (and the proceeds,
products, offspring, rents or profits of such collateral) even though the debtor
is in default under the applicable debt instruments, provided that the secured
creditor is given "adequate protection." The meaning of the term "adequate
protection" may vary according to circumstances, but it is intended in general
to protect the value of the secured creditor's interest in the collateral and
may include, if approved by the court, cash payments or the granting of
additional security for any diminution in the value of the collateral as a
result of the stay of repossession or the disposition or any use of the
collateral by the debtor during the pendency of the bankruptcy case. The court
has broad discretionary powers in all these matters, including the valuation of
the Collateral. In addition, since the enforcement of the Lien of the Trustee in
cash, deposit accounts and cash equivalents may be limited in a bankruptcy
proceeding, the Holders of the Notes may not have any consent rights with
respect to the use of those funds by the Company or any of its Subsidiaries
during the pendency of the proceeding. In view of these considerations, it is
impossible to predict how long payments under the Notes could be delayed
following commencement of a bankruptcy case, whether or when the Trustee could
repossess or dispose of the Collateral or whether or to what extent Holders of
the Notes would be compensated for any delay in payment or loss of value of the
Collateral.
Subsidiary Guarantees
The Company's payment obligations under the Notes will be jointly and
severally guaranteed by the Guarantors, which consist of all of the Company's
present and future Restricted Subsidiaries, except for three immaterial
Subsidiaries that will be dissolved following issuance of the Notes. The
Subsidiary Guarantees will provide that the obligations of each Guarantor under
its Subsidiary Guarantee will be limited so as not to constitute a fraudulent
conveyance under applicable law. See "Risk Factors -- Fraudulent Transfer
Considerations."
The Indenture will provide that no Guarantor may consolidate with or
merge with or into (whether or not such Guarantor is the surviving Person),
another corporation, Person or entity whether or not affiliated with such
Guarantor (other than any other Guarantor or the Company) unless (i) subject to
the provisions of the following paragraph, the Person formed by or surviving any
such consolidation or merger (if other than such Guarantor, any other Guarantor
or the Company) assumes all the obligations of such Guarantor pursuant to a
supplemental indenture and appropriate Collateral Documents in form and
substance reasonably satisfactory to the Trustee, under the Notes, the Indenture
and the Collateral Documents; (ii) immediately after giving effect to such
transaction, no Default or Event of Default exists; (iii) such Guarantor, or any
Person formed by or surviving any such consolidation or merger, would have
Consolidated Net Worth (immediately after giving effect to such transaction but
without giving effect to purchase accounting adjustments), equal to or greater
than the Consolidated Net Worth of such Guarantor immediately preceding the
transaction; (iv) the Company would be permitted by virtue of the Company's
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pro forma Fixed Charge Coverage Ratio, immediately after giving effect to such
transaction, to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the covenant described below under
the caption "-- Incurrence of Indebtedness and Issuance of Preferred Stock," and
(v) such transaction would not result in the loss or suspension or material
impairment of any Gaming License (unless a replacement Gaming License is
effective prior to or simultaneously with such loss, suspension or material
impairment).
The Indenture will provide that in the event of a sale or other
disposition of all of the assets of any Guarantor (other than ROC), by way of
merger, consolidation or otherwise, or a sale or other disposition of all of the
Capital Stock of any Guarantor (other than ROC), then such Guarantor (in the
event of a sale or other disposition, by way of such a merger, consolidation or
otherwise, of all of the capital stock of such Guarantor) or the corporation
acquiring the property (in the event of a sale or other disposition of all of
the assets of such Guarantor) will be released and relieved of any obligations
under its Subsidiary Guarantee and any Liens in favor of the Collateral Agent
upon the Collateral owned by such Guarantor will be released; provided that (i)
immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing or would occur as a consequence
thereof and (ii) the Net Proceeds of such sale or other disposition are applied
in accordance with the applicable provisions of the Indenture. See "Repurchase
at the Option of Holders -- Asset Sales."
The Indenture will further provide that in the event that a Guarantor
that is a Restricted Subsidiary is properly designated as an Unrestricted
Subsidiary in accordance with the Indenture, then such Guarantor will be
released and relieved of any obligations under its Subsidiary Guarantee, and any
Liens in favor of the Collateral Agent upon the Collateral owned by such
Guarantor will be released.
Optional Redemption
The Notes will not be redeemable at the Company's option prior to
August 15, 2001. Thereafter, the Notes will be subject to redemption at any time
at the option of the Company, in whole or in part, upon not less than 30 nor
more than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on August 15 of the years
indicated below:
Year Percentage
---- -------------
2001............................................ 105.000%
2002............................................ 102.500%
2003 and thereafter............................. 100.000%
Notwithstanding the foregoing or any other provisions of the Indenture,
if any Gaming Authority requires that a Holder or beneficial owner of the Notes
must be licensed, qualified or found suitable under any applicable Gaming Law in
order to maintain any or obtain any applied-for Gaming License or franchise of
the Company or any of its Subsidiaries under any applicable Gaming Law, and such
Holder or beneficial owner fails to apply for a license, qualification or
finding of suitability within 30 days after being requested to do so by such
Gaming Authority (or such lesser period that may be required by such Gaming
Authority or Gaming Law) or if such Holder or beneficial owner is not so
licensed, qualified or found suitable by such Gaming Authority (a "Disqualified
Holder"), the Company shall have the right, at its option, (i) to require such
Disqualified Holder or beneficial owner to dispose of such Disqualified Holder's
or beneficial owner's Notes within 30 days of notice of such finding by the
applicable Gaming Authority that such Disqualified Holder or beneficial owner
will not be licensed, qualified or found suitable as
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directed by such Gaming Authority (or such earlier date as may be required by
the applicable Gaming Authority or Gaming Law) or (ii) to call for redemption of
the Notes of such Holder or beneficial owner at a redemption price equal to the
lesser of 100% of the principal amount thereof or the price at which the Holder
or beneficial owner acquired such Notes together with, in either case, accrued
and unpaid interest and Liquidated Damages, if any, thereon to the earlier of
the date of redemption or the date of the finding of unsuitability by such
Gaming Authority, which may be less than 30 days following the notice of
redemption if so ordered by such Gaming Authority. In connection with any such
redemption, and except as otherwise may be required by a Gaming Authority, the
Company will comply with the procedures contained in the Indenture for
redemption of the Notes. Immediately upon a determination of unsuitability, the
Disqualified Holder shall have no further rights whatsoever with respect to the
Notes (i) to exercise, directly or indirectly, through any trustee, nominee or
any other Person or entity, any right conferred by the Notes or (ii) to receive
any interest or any other distribution or payment with respect to the Notes, or
any remuneration in any form from the Company for services rendered or
otherwise, except the redemption price of the Notes. Under the Indenture, the
Company is not required to pay or reimburse any Holder or beneficial owner of
Notes who is required to apply for such license, qualification or finding of
suitability for the costs of such application including investigatory costs.
Such expenses will, therefore, be the obligation of such Holder or beneficial
owner. See "Risk Factors -- Regulation."
Notwithstanding the foregoing, during the period commencing upon
issuance of the Notes and ending on August 15, 2000, the Company may redeem up
to one-third of the principal amount of Notes at a redemption price of 110.0% of
the principal amount thereof, plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the redemption date, with the net cash proceeds of
an offering of common stock of the Company; provided that at least $116.7
million in aggregate principal amount of Notes remain outstanding immediately
after the occurrence of such redemption; and provided further, that the call for
such redemption shall occur within 30 days of the date of the closing of such
offering.
Selection and Notice
If less than all of the Notes are to be redeemed at any time, selection
of the Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by
lot or by such method as the Trustee shall deem fair and appropriate; provided
that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of the Notes to be redeemed at its registered
address. Notices of redemption may not be conditional. If any Note is to be
redeemed in part only, the notice of redemption that relates to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Note. Notes called
for redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on the Notes or portions of them
called for redemption.
Mandatory Redemption
Except as set forth below under "Repurchase at the Option of Holders,"
the Company is not required to make mandatory redemption, purchase or sinking
fund payments with respect to the Notes.
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Repurchase at the Option of Holders
Change of Control
Upon the occurrence of a Change of Control, each Holder of Notes will
have the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer described below (the "Change of Control Offer") at an offer price in cash
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of purchase (the
"Change of Control Payment"). Within 30 days following any Change of Control,
the Company will mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Notes on the date specified in such notice, which date shall be no earlier than
30 days and no later than 60 days from the date such notice is mailed (the
"Change of Control Payment Date"), pursuant to the procedures required by the
Indenture and described in such notice.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent will promptly mail to each Holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. The Company will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
The Change of Control provisions described above will be applicable
whether or not any other provisions of the Indenture are applicable. Except as
described above with respect to a Change of Control, the Indenture does not
contain provisions that permit the Holders of the Notes to require that the
Company repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
The Company's Revolving Credit Facility contains prohibitions of
certain events that would constitute a Change of Control. In addition, the
exercise by the Holders of Notes of their right to require the Company to
repurchase the Notes could cause a default under such other senior indebtedness,
even if the Change of Control itself does not, due to the financial effect of
such repurchases on the Company. Finally, the Company's ability to pay cash to
the Holders of Notes upon a repurchase may be limited by the Company's then
existing financial resources.
The Company will not be required to make a Change of Control Offer upon
a Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
The definition of Change of Control includes a phrase relating to the
sale, lease, transfer, conveyance or other disposition of "all or substantially
all" of the assets of the Company and its Restricted Subsidiaries taken as a
whole. Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a Holder of Notes to require
the Company to repurchase such Notes as a result
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of a sale, lease, transfer, conveyance or other disposition of less than all of
the assets of the Company and its Restricted Subsidiaries taken as a whole to
another Person or group may be uncertain.
Asset Sales
The Indenture will provide that the Company will not, and will not
permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless
(i) the Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value (evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 80% of the
consideration therefor received by the Company or such Restricted Subsidiary is
in the form of cash; provided that the amount of (x) any liabilities (as shown
on the Company's or such Restricted Subsidiary's most recent balance sheet), of
the Company or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any guarantee
thereof) that are assumed by the transferee of any such assets and (y) any
securities, notes or other obligations received by the Company or any such
Restricted Subsidiary from such transferee that, within 30 days of such receipt,
are converted by the Company or such Restricted Subsidiary into cash (to the
extent of the cash received), will be deemed to be cash for purposes of this
provision.
Within 360 days after the receipt of any Net Proceeds from an Asset
Sale or Event of Loss, the Company may apply such Net Proceeds to the
acquisition of an interest in another business, the making of a capital
expenditure, cost of construction or real property improvements or the
acquisition of other assets, in each case, in the same line of business as the
Permitted Businesses. Any Net Proceeds received from the sale of assets that do
not constitute Collateral may be applied also to the repayment of any senior
debt secured by such assets. Pending the final application of any such Net
Proceeds, the Company may temporarily reduce the Revolving Credit Facility or
otherwise invest such Net Proceeds in any manner that is not prohibited by the
Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the first two sentences of this paragraph will be deemed to
constitute "Excess Proceeds." Within fifteen days of each date on which when the
aggregate amount of Excess Proceeds exceeds $5.0 million, the Company will be
required to commence an offer to all Holders of Notes (an "Asset Sale Offer") to
purchase the maximum principal amount of Notes that may be purchased out of the
Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest and Liquidated
Damages, if any, thereon, to the date of purchase, in accordance with the
procedures set forth in the Indenture. To the extent that the aggregate amount
of Notes tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, the Company may use any remaining Excess Proceeds for general
corporate purposes. If the aggregate principal amount of Notes surrendered by
Holders thereof exceeds the amount of Excess Proceeds, the Trustee will select
the Notes to be purchased on a pro rata basis. Upon completion of such offer to
purchase, the amount of Excess Proceeds will be reset at zero.
Conduct of Offers
Any Change of Control Offer or Asset Sale Offer will remain open for a
period of 20 business days, and the purchase date thereunder will not be more
than 60 days after the commencement of the applicable offer. Notwithstanding any
other provisions of the Indenture, any Change of Control Offer or Asset Sale
Offer will be conducted in compliance with applicable regulations under the
federal securities laws, including Rule 14e-1 under the Exchange Act.
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Certain Covenants
Restricted Payments
The Indenture will provide that the Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly: (i)
declare or pay any dividend or make any other payment or distribution on account
of the Company's or any of its Restricted Subsidiaries' Equity Interests or to
the direct or indirect holders of the Company's or any of its Restricted
Subsidiaries' Equity Interests in their capacity as such (other than payments,
dividends or distributions payable in Equity Interests (other than Disqualified
Stock) of the Company or payments, dividends or distributions payable to the
Company or any Restricted Subsidiary); (ii) purchase, redeem or otherwise
acquire or retire for value any Equity Interests of the Company or any
Restricted Subsidiary (other than any such Equity Interests owned by the Company
or any Restricted Subsidiary); (iii) make any payment on or with respect to, or
purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the Notes, except for payment of interest
when due or principal at Stated Maturity; or (iv) make any Restricted Investment
(all such payments and other actions set forth in clauses (i) through (iv) above
being collectively referred to as "Restricted Payments"), unless, at the time of
and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment
and after giving pro forma effect thereto (in the case of a Restricted
Investment, as if such Restricted Investment had been made at the
beginning of the applicable four-quarter period), have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of
the covenant described above under caption "-- Incurrence of
Indebtedness and Issuance of Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by the Company and its
Restricted Subsidiaries after the date of the Indenture (excluding
Restricted Payments permitted by clauses (ii) through (xi) of the next
succeeding paragraph), is less than the sum of (i) 50% of the
Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter
commencing after the date of the Indenture to the end of the Company's
most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if
such Consolidated Net Income for such period is a deficit, less 100% of
such deficit), plus (ii) 100% of the aggregate net cash proceeds
received by the Company from the issue or sale since the date of the
Indenture of Equity Interests of the Company (other than Disqualified
Stock) or of Disqualified Stock or debt securities of the Company that
have been converted into such Equity Interests (other than Equity
Interests (or Disqualified Stock or convertible debt securities) sold
to a Subsidiary of the Company and other than Disqualified Stock or
convertible debt securities that have been converted into Disqualified
Stock), plus (iii) to the extent that any Restricted Investment that
was made after the date of the Indenture is sold for cash or otherwise
liquidated or repaid for cash, the lesser of (A) the cash return of
capital with respect to such Restricted Investment (less the cost of
disposition, if any) and (B) the initial amount of such Restricted
Investment, plus (iv) 50% of any dividends received by the Company or a
Wholly Owned Restricted Subsidiary after the date of the Indenture from
an Unrestricted Subsidiary of the Company, to the extent that such
dividends were not otherwise included in Consolidated Net Income for
such period.
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The foregoing provisions will not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness of the Company or a Restricted
Subsidiary or Equity Interests of the Company in exchange for, or out of the net
cash proceeds of the substantially concurrent sale (other than to a Subsidiary
of the Company) of, other Equity Interests of the Company (other than any
Disqualified Stock); provided that the amount of any such net cash proceeds that
are utilized for any such redemption, repurchase, retirement, defeasance or
other acquisition shall be excluded from clause (c) (ii) of the preceding
paragraph; (iii) the redemption, repurchase, retirement, defeasance or other
acquisition of subordinated Indebtedness of the Company or a Restricted
Subsidiary or Disqualified Stock of the Company, in either case in exchange for
or with the net cash proceeds from an incurrence of Permitted Refinancing
Indebtedness or from the issuance of Disqualified Stock; (iv) the redemption,
repurchase, retirement, defeasance or other acquisition, substantially
concurrently with the consummation of the sale of the Existing Notes, of
subordinated Indebtedness of the Company or a Restricted Subsidiary with Net
Proceeds of the sale of the Existing Notes; (v) the repurchase, redemption or
other acquisition or retirement for value of any Equity Interests of the Company
or any Restricted Subsidiary of the Company held by any employee of the Company
(or any of its Restricted Subsidiaries); provided that the aggregate price paid
for all such repurchased, redeemed, acquired or retired Equity Interests under
this clause (v) will not exceed $1.0 million in any calendar year, provided
further that commencing the second full calendar year following the date of the
Indenture, the aggregate price that may be so paid shall be increased by any
amount of such $1.0 million that was not used for the repurchase of Equity
Interests in the immediately preceding calendar year; (vi) loans or advances to
employees of the Company or its Restricted Subsidiaries; provided that all such
loans and advances will not exceed $1.0 million in any twelve-month period;
(vii) payment of dividends on preferred stock of the Company that was permitted
to be issued pursuant to the Indenture; (viii) the repurchase, redemption or
other acquisition or retirement for value of any Equity Interests of the Company
held by any member of the Company's management, in connection with the Merger
and provided that the aggregate price paid for all such repurchased, redeemed,
acquired or retired Equity Interests under this clause (viii) will not exceed
$6.0 million; (ix) Restricted Investments in an aggregate amount, taken together
since the date of the Indenture, of not more than $10,000,000 (it being
understood that if any Restricted Investment acquired with a Restricted Payment
after the date of original issuance of the Notes pursuant to this clause (ix) is
sold, transferred or otherwise conveyed to any person other than the Company or
a Restricted Subsidiary, the portion of the net cash proceeds or fair market
value of securities or properties paid to the Company and its Restricted
Subsidiaries in connection with such sale, transfer or conveyance that relates
or corresponds to the repayment or return of the original cost of such a
Restricted Investment will replenish or increase the amount of Restricted
Investments permitted to be made pursuant to this clause (ix), so that up to
$10,000,000 of Restricted Investments may be outstanding under this clause (ix)
at any given time); (x) following the Merger, distributions, loans or payments
from the Company or its Restricted Subsidiaries to the Company's direct parent
corporation pursuant to intercompany Indebtedness, intercompany tax sharing
agreements (so long as the distributions, loans or payments thereunder by the
Company and its Subsidiaries shall not exceed the amount of taxes the Company
would be required to pay if it were the filing person for all applicable taxes,
and other intercompany payments for the purpose of enabling the parent
corporation to perform accounting, legal, corporate reporting and administrative
functions (including, without limitation, amounts necessary to pay fees and
expenses in connection with the Merger); and (xi) additional Restricted Payments
in an aggregate amount, taken together since the date of the Indenture, of not
more than $5,000,000; provided that with respect to the actions described in
clauses (i), (v), (vii), (viii), (ix) and (xi), no Default or Event of Default
shall have occurred and be continuing, or would occur as a consequence of such
actions.
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The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default; provided
that in no event shall the business currently operated by ROC or RGM be
transferred to or held by an Unrestricted Subsidiary, and provided, further that
following any conversion of Black Hawk Operating Company to a Restricted
Subsidiary pursuant to the provisions described above under "-- Security," in no
event shall the Black Hawk Project or related business thereafter operated by
Black Hawk Operating Company be transferred to or held by an Unrestricted
Subsidiary. For purposes of making such determination, all outstanding
Investments by the Company and its Restricted Subsidiaries (except to the extent
repaid in cash) in the Subsidiary so designated will be deemed to be Restricted
Payments at the time of such designation and will reduce the amount available
for Restricted Payments under the first paragraph of this covenant. All such
outstanding Investments will be deemed to constitute Investments in an amount
equal to the greatest of (x) the net book value of such Investments at the time
of such designation, (y) the fair market value of such Investments at the time
of such designation and (z) the original fair market value of such Investments
at the time they were made. Such designation will only be permitted if such
Restricted Payment would be permitted at such time and if such Restricted
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) will be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash Restricted Payment shall be determined by the Board
of Directors whose resolution with respect thereto shall be delivered to the
Trustee, such determination to be based upon an opinion or appraisal issued by
an accounting, appraisal or investment banking firm of national standing if such
fair market value exceeds $5.0 million. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by the covenant "Restricted
Payments" were computed, together with a copy of any fairness opinion or
appraisal required by the Indenture.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture will provide that following the issuance of the Notes and
Subsidiary Guarantees, the Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt) and that the Company will not issue any Disqualified Stock and will not
permit any Restricted Subsidiary to issue any shares of preferred stock;
provided, however, that the Company or its Subsidiaries may incur Indebtedness
(including Acquired Debt) and the Company may issue shares of Disqualified Stock
if (i) the Fixed Charge Coverage Ratio for the Company's most recently ended
four full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
or such stock is issued would have been at least equal to 2.00 to 1, determined
on a pro forma basis (including a pro forma application of the net proceeds
therefrom), as if the additional Indebtedness had been incurred, or the stock
had been issued, as the case may be, at the beginning of such four-quarter
period and (ii) except with respect to revolving credit Indebtedness, the
Weighted Average Life to Maturity of such Indebtedness is greater than the
remaining Weighted Average Life to Maturity of the Notes.
The provisions of the first paragraph of this covenant will not apply
to the incurrence of any of the following items of Indebtedness, so long as
after giving effect to such incurrence, no Default or Event of Default shall
have occurred and be continuing or would occur as a consequence thereof
(collectively, "Permitted Debt"):
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(i) the incurrence of revolving credit Indebtedness and
letters of credit (with letters of credit being deemed to have
a principal amount equal to the maximum potential liability of
the Company and its Subsidiaries thereunder) under the
Revolving Credit Facility; provided that the aggregate
principal amount outstanding under the Revolving Credit
Facility after giving effect to such incurrence, including all
Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any other Indebtedness incurred pursuant
to this clause (i), does not exceed an amount equal to $20.0
million;
(ii) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease
Obligations, mortgage financings or purchase money
obligations, in each case incurred for the purpose of
financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment
(including slot machines and other gaming equipment) used in
the business of the Company or such Restricted Subsidiary, in
an aggregate principal amount not to exceed $15.0 million at
any time outstanding;
(iii) the incurrence by the Company or any of its Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to refund, refinance or replace
Indebtedness that was permitted by the Indenture to be
incurred or was existing on the date of the Indenture;
(iv) the incurrence by the Company or any of its Subsidiaries
of Hedging Obligations that are incurred for the purpose of
fixing or hedging interest rate risk with respect to any
floating rate Indebtedness that is permitted by the terms of
this Indenture to be outstanding;
(v) the guarantee by the Company or any of the Guarantors of
Indebtedness of the Company or a Restricted Subsidiary of the
Company that was permitted to be incurred by another provision
of this covenant;
(vi) the incurrence of additional Indebtedness in an aggregate
principal amount (or accreted value, as applicable) at any
time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any
other Indebtedness incurred pursuant to this clause (vi), not
to exceed $10.0 million;
(vii) the incurrence by the Company of additional Indebtedness
that is subordinated to the Notes pursuant to customary
subordination provisions, that has no mandatory obligation to
pay principal on a date earlier than the final maturity date
of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of, the
Notes, and that is in an aggregate principal amount (or
accreted value, as applicable) at any time outstanding,
including all Permitted Refinancing Indebtedness incurred to
refund, refinance or replace any other Indebtedness incurred
pursuant to this clause (vii), not to exceed $10.0 million;
(viii) the incurrence by Black Hawk Operating Company of
Permitted Black Hawk Debt;
(ix) the incurrence by the Company's Unrestricted Subsidiaries
(other than Black Hawk Operating Company) of Non-Recourse
Debt, provided, however, that if any such Indebtedness ceases
to be Non- Recourse Debt, such event will be deemed to
constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company; and provided,
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further, that any Permitted Black Hawk Debt outstanding at the
time, if at all, that Black Hawk Operating Company becomes a
Restricted Subsidiary pursuant to the provisions described
above under "-- Security" shall not be deemed at such time to
constitute an incurrence of Indebtedness for purposes of this
covenant so long as such Indebtedness is taken into account in
the calculation of the Fixed Charge Coverage Ratio of the
Company as described above under "-- Security";
(x) reimbursement obligations with respect to letters of
credit issued in the ordinary course of business,
indemnifications, adjustments of purchase prices, performance
bonds, appeal bonds, surety bonds, workers' compensation
obligations, insurance obligations or bonds, completion
guaranties and other similar bonds or obligations incurred in
the ordinary course of business;
(xi) Indebtedness owed by (i) a Restricted Subsidiary to the
Company or to another Restricted Subsidiary or (ii) the
Company to a Restricted Subsidiary;
(xii) Indebtedness arising from the honoring by a bank or
other financial institution of a check, draft or similar
instrument inadvertently drawn against insufficient funds in
the ordinary course of business;
(xiii) Indebtedness representing the balance deferred and
unpaid of the purchase price of any property or services used
in the ordinary course of the business of the Company and its
Restricted Subsidiaries that would constitute ordinarily a
trade payable to trade creditors;
(xiv) a bond or surety obligation posted in order to prevent
the loss or material impairment of a Gaming License or as
otherwise required by an order of any Gaming Authority, in
each case to the extent required by applicable law and
consistent in character and amount with customary industry
practice; and
(xv) guarantees, "keep well" provisions or other evidences of
credit support by the Company or its Restricted Subsidiaries
of Permitted Black Hawk Debt, provided that the terms of such
guarantees or other instruments shall not require or permit
payments thereunder by the Company or its Restricted
Subsidiaries in an amount greater than $5.0 million in any
twelve-month period.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xv) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company will, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this covenant and such item of Indebtedness will be
treated as having been incurred pursuant to only one of such clauses or pursuant
to the first paragraph hereof. Accrual of interest and the accretion of accreted
value will not be deemed to be an incurrence of Indebtedness for purposes of
this covenant.
Liens
The Indenture will provide that the Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, create,
incur, assume or suffer to exist any Lien on any asset now owned or hereafter
acquired, or any income or profits therefrom or assign or convey any right to
receive income therefrom, except Permitted Liens. So long as Black Hawk
Operating Company is an Unrestricted
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Subsidiary, the Indenture will allow Black Hawk Operating Company to create,
incur, assume or suffer to exist (i) Liens (in addition to Permitted Liens) on
the Black Hawk Land only in respect of Permitted Black Hawk Debt and (ii) Liens
upon any other assets without restriction. See "-- Incurrence of Indebtedness
and Issuance of Preferred Stock."
Dividend and Other Payment Restrictions Affecting Subsidiaries
The Indenture will provide that the Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary to (i)(a) pay dividends
or make any other distributions to the Company or any of its Restricted
Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest
or participation in, or measured by, its profits, or (b) pay any indebtedness
owed to the Company or any of its Restricted Subsidiaries, (ii) make loans or
advances to the Company or any of its Restricted Subsidiaries or (iii) transfer
any of its properties or assets to the Company or any of its Restricted
Subsidiaries, except for such encumbrances or restrictions existing under or by
reason of (a) the Indenture and the Notes, (b) Indebtedness outstanding upon the
acquisition of a Subsidiary, or upon the conversion of Black Hawk Operating
Company to a Restricted Subsidiary pursuant to the provisions described above
under "-- Security," provided, that such Indebtedness was not incurred in
connection with, or in contemplation of, such acquisition or conversion, and
such encumbrance or restriction is not applicable to any Person or the property
or assets of any Person other than the new Restricted Subsidiary, (c) a
Permitted Lien, solely to the extent that such Lien limits the sale, disposition
or transfer of the property which is the subject thereof, (d) applicable law,
(e) by reason of customary non-assignment, subletting and net worth provisions
in leases entered into in the ordinary course of business and consistent with
past practices, (f) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions of the nature described in
clause (iii) above on the property so acquired, or (g) Permitted Refinancing
Indebtedness, provided that the restrictions contained in the agreements
governing such Permitted Refinancing Indebtedness are no more restrictive than
those contained in the agreements governing the Indebtedness being refinanced.
Merger, Consolidation or Sale of Assets
The Indenture will provide that the Company may not consolidate or
merge with or into (whether or not the Company is the surviving corporation), or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets in one or more related
transactions, to another corporation, Person or entity unless (i) the Company is
the surviving corporation or the entity or the Person formed by or surviving any
such consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Notes and the Indenture pursuant to a supplemental indenture
in a form reasonably satisfactory to the Trustee; (iii) immediately after such
transaction no Default or Event of Default exists; (iv) except in the case of a
merger of the Company with or into a Wholly Owned Restricted Subsidiary of the
Company, the Company or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (A) will have Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of the Company immediately
preceding the transaction and (B) will, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to
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the Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant described above under the caption "-- Incurrence of Indebtedness and
Issuance of Preferred Stock", and (v) such transaction would not require any
Holder or beneficial owner of Notes to obtain a Gaming License or be qualified
or found suitable under the law of any applicable gaming jurisdiction; provided,
that such Holder or beneficial owner would not have been required to obtain a
Gaming License or be qualified or found suitable under the laws of any
applicable gaming jurisdiction in the absence of such transaction. The foregoing
provision will not prohibit the Merger.
Transactions with Affiliates
The Indenture will provide that the Company will not, and will not
permit any of its Restricted Subsidiaries to, make any payment to, or sell,
lease, transfer or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into or make or amend any
transaction, contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person and (ii) the Company delivers to
the Trustee (a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $1.0
million, a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5.0 million (except with respect to any
Management Agreement, in which case the following requirement will not apply),
an opinion as to the fairness to the Holders of such Affiliate Transaction from
a financial point of view issued by an accounting, appraisal or investment
banking firm of national standing; provided that (u) purchases of goods and
services in the ordinary course of business, (v) any employment agreement
entered into by the Company or any of its Restricted Subsidiaries in the
ordinary course of business and consistent with the past practice of the Company
or such Restricted Subsidiary, (w) registration rights agreements, existing on
the date of the Indenture, (x) transactions between or among the Company and/or
its Restricted Subsidiaries, (y) Restricted Payments that are permitted by the
provisions of the Indenture described above under the caption "-- Restricted
Payments," and (z) reasonable fees and compensation (including, without
limitation, bonuses retirement plans and securities, stock options and stock
ownership plans) paid or issued to and indemnity provided on behalf of,
officers, directors, employees or consultants of the Company or any Restricted
Subsidiary in the ordinary course of business, in each case, shall not be deemed
Affiliate Transactions.
Business Activities
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any business other than Permitted Businesses, except to such extent as
would not be material to the Company and its Restricted Subsidiaries taken as a
whole.
Use of Proceeds
The Company and its Subsidiaries will apply the Net Proceeds from the
sale of the Existing Notes in accordance with the disclosure set forth under the
caption "Use of Proceeds."
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Additional Subsidiary Guarantees
The Indenture will provide that if the Company or any of its Restricted
Subsidiaries acquire or create another Subsidiary after the date of the
Indenture, then such newly acquired or created Subsidiary will execute a
supplemental indenture setting forth its Subsidiary Guarantee, together with
such Collateral Documents as are necessary to create and convey to the Trustee
or other Collateral Agent, for the benefit of the Holders, a perfected
first-priority Lien on all Collateral (subject to Permitted Liens) held by such
Subsidiary, provided such Subsidiary shall have first obtained all approvals
required, if any, by Gaming Authorities to execute the supplemental indenture
and such Collateral Documents, and deliver an opinion of counsel, in accordance
with the terms of the Indenture, except in either case for all Subsidiaries that
have properly been designated as Unrestricted Subsidiaries in accordance with
the Indenture for so long as they continue to constitute Unrestricted
Subsidiaries. Upon any conversion of (i) Black Hawk Operating Company from an
Unrestricted Subsidiary to a Restricted Subsidiary pursuant to the provisions
described above under "-- Security," or (ii) any other Unrestricted Subsidiary
to a Restricted Subsidiary pursuant to the definition below of "Unrestricted
Subsidiary," the newly-created Restricted Subsidiary will also be subject to the
requirements of the preceding sentence; provided, that no such Subsidiary
Guarantee shall be executed, and no such Lien shall be created or conveyed with
respect to the Black Hawk Land or other real or personal property owned by Black
Hawk Operating Company, if the execution, creation or conveyance thereof would
violate or conflict with any law or the provisions of any Permitted Black Hawk
Debt outstanding at the time of such conversion. In addition, if the Company or
any of its Restricted Subsidiaries acquires or creates another Subsidiary after
the date of the Indenture, whether such acquired or newly-created Subsidiary is
a Restricted Subsidiary or an Unrestricted Subsidiary, the Company or such
Restricted Subsidiary that is the owner of Capital Stock of such Subsidiary
shall execute a Pledge Agreement with respect to such Capital Stock, in
substantially the same form as the Pledge Agreements executed as of the date of
the Indenture, pledging to the Trustee or other Collateral Agent designated by
the Trustee all of such Capital Stock owned by pledgor.
Maintenance of Insurance
The Indenture will provide that, from and at all times after the date
of issuance of the Notes until the Notes have been paid in full, the Company and
the Guarantors will, and will cause their Restricted Subsidiaries to, have and
maintain in effect insurance with responsible carriers against such risks and in
such amounts as is customarily carried by similar businesses with such
deductibles, retentions, self insured amounts and coinsurance provisions as are
customarily carried by similar businesses of similar size, including, without
limitation, property and casualty.
Reports
The Indenture will provide that, whether or not required by the rules
and regulations of the Securities and Exchange Commission (the "Commission"), so
long as any Notes are outstanding, the Company will furnish to the Trustee and
the Holders of Notes (i) all quarterly and annual financial information that
would be required to be contained in a filing with the Commission on Forms 10-Q
and 10-K if the Company were required to file such Forms that describe the
financial condition and results of the Company and its consolidated Subsidiaries
(showing in reasonable detail, either on the face of the financial statements or
in the footnotes thereto and in "Management's Discussion and Analysis of
Financial Condition and Results of Operations," the financial condition and
results of operations of the Company and its Restricted Subsidiaries separate
from the financial condition and results of operations of the Unrestricted
Subsidiaries of the Company) and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the Commission on Form
8-K if the Company were required to file such reports. In
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addition, whether or not required by the rules and regulations of the
Commission, the Company will file a copy of all such information and reports
with the Commission for public availability (unless the Commission will not
accept such a filing) and make such information available to securities analysts
and prospective investors upon request. In addition, the Company and the
Guarantors have agreed that, for so long as any Notes remain outstanding, they
will furnish to the trustee and all Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Events of Default and Remedies
The Indenture will provide that each of the following constitutes an
Event of Default: (i) default for 30 days in the payment when due of interest
on, or Liquidated Damages with respect to, the Notes; (ii) default in payment
when due of the principal of or premium, if any, on the Notes; (iii) failure by
the Company to comply with the provisions described under the captions "--
Change of Control" or "-- Merger, Consolidation or Sale of Assets"; (iv) failure
by the Company for 60 days after notice to comply with any of its other
agreements in the Indenture or the Notes; (v) default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company or any
of its Restricted Subsidiaries (or the payment of which is guaranteed by the
Company or any of its Restricted Subsidiaries) whether such Indebtedness or
guarantee now exists, or is created after the date of the Indenture, which
default (a) is caused by a failure to pay principal of or premium, if any, or
interest on such Indebtedness prior to the expiration of the grace period
provided in such Indebtedness on the date of such default (a "Payment Default")
or (b) results in the acceleration of such Indebtedness prior to its express
maturity and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under which
there has been a Payment Default or the maturity of which has been so
accelerated, aggregates $5.0 million or more; (vi) failure by the Company or any
of its Restricted Subsidiaries to pay final judgments aggregating in excess of
$5.0 million, which judgments are not paid, discharged or stayed for a period of
60 days; (vii) breach by the Company or any Guarantor in any material respect of
any representation or warranty set forth in the Collateral Documents, or default
by the Company or any Guarantor in the performance of any covenant set forth in
the Collateral Documents (in either case, continuing for 60 days after receiving
notice of such breach), or repudiation by the Company or any Guarantor of its
obligations under the Collateral Documents or the unenforceability of the
Collateral Documents against the Company or any Guarantor for any reason; (viii)
certain events of bankruptcy or insolvency with respect to the Company or any of
its Restricted Subsidiaries; (ix) except as permitted by the Indenture, any
Subsidiary Guarantee shall be held in any judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect or any Guarantor, or any Person acting on behalf of any Guarantor, shall
deny or disaffirm its obligations under its Subsidiary Guarantee; and (x) under
certain circumstances if a Gaming License of the Company is revoked or
suspended, resulting in the cessation of operation of the Company's casino
business for 90 days.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Company, any Significant
Subsidiary or any group of Subsidiaries that, taken together, would constitute a
Significant Subsidiary, all outstanding Notes will become due and payable
without further action or notice. Holders of the Notes may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Holders of the Notes notice of any continuing Default or
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Event of Default (except a Default or Event of Default relating to the payment
of principal or interest) if it determines that withholding notice is in their
interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to
August 15, 2001 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to August 15, 2001, then the
premium specified in the Indenture shall also become immediately due and payable
to the extent permitted by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of the
Company, Subsidiary or Affiliate thereof, as such, shall have any liability for
any obligations of the Company under the Notes, the Indenture or the Collateral
Documents or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. Such waiver may not be effective to
waive liabilities under the federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
Legal Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have all of
its obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
and Liquidated Damages on such Notes when such payments are due from the trust
referred to below, (ii) the Company's obligations with respect to the Notes
concerning issuing temporary Notes, registration of Notes, mutilated, destroyed,
lost or stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust, (iii) the rights, powers, trusts,
duties and immunities of the Trustee, and the Company's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to certain material covenants
that are described herein ("Covenant Defeasance") and thereafter any omission to
comply with such obligations shall not constitute a Default or Event of Default
with respect to the Notes. In the event Covenant Defeasance occurs, certain
events (not including non-payment, bankruptcy, receivership, rehabilitation and
insolvency events) described under "Events of Default" will no longer constitute
an Event of Default with respect to the Notes.
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In order to exercise either Legal Defeasance or Covenant Defeasance,
(i) the Company must irrevocably deposit with the Trustee, in trust, for the
benefit of the Holders of the Notes, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest and
Liquidated Damages on the outstanding Notes on the stated maturity or on the
applicable redemption date, as the case may be, and the Company must specify
whether the Notes are being defeased to maturity or to a particular redemption
date; (ii) in the case of Legal Defeasance, the Company shall have delivered to
the Trustee an opinion of counsel in the United States reasonably acceptable to
the Trustee confirming that (A) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (B) since the date of the
Indenture, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel shall
confirm that, the Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Legal
Defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Legal
Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the
Company shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred; (iv) no
Default or Event of Default shall have occurred and be continuing on the date of
such deposit (other than a Default or Event of Default resulting from the
borrowing of funds to be applied to such deposit); (v) such Legal Defeasance or
Covenant Defeasance will not result in a breach or violation of, or constitute a
default under any material agreement or instrument (other than the Indenture) to
which the Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries is bound; (v) the Company must deliver to the Trustee
an Officers' Certificate stating that the deposit was not made by the Company
with the intent of preferring the Holders of Notes over the other creditors of
the Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and (vi) the Company must deliver to the
Trustee an Officers' Certificate and an opinion of counsel, each stating,
subject to certain factual assumptions and bankruptcy and insolvency exceptions
that all conditions precedent provided for relating to the Legal Defeasance or
the Covenant Defeasance have been complied with.
Transfer and Exchange
A Holder may transfer or exchange Notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Company is not required to transfer or exchange
any Note selected for redemption. Also, the Company is not required to transfer
or exchange any Note for a period of 15 days before a selection of Notes to be
redeemed.
The registered Holder of a Note will be treated as the owner of it for
all purposes.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the Indenture
or the Notes may be amended or supplemented with the consent of the Holders of
at least a majority in principal amount of the Notes then outstanding
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
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outstanding Notes (including consents obtained in connection with a tender offer
or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may
not (with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the timing of, and payment with respect
to, redemption of the Notes (other than provisions relating to the covenants
described above under the caption "-- Repurchase at the Option of Holders" or
"---Asset Sales"), (iii) reduce the rate of or change the time for payment of
interest on any Note, (iv) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Notes (except a rescission
of acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the Notes and a waiver of the payment default that resulted
from such acceleration), (v) make any Note payable in money other than that
stated in the Notes, (vi) make any change in the provisions of the Indenture
relating to waivers of past Defaults or the rights of Holders of Notes to
receive payments of principal of or premium, if any, or interest on the Notes,
(vii) waive a redemption payment with respect to any Note (other than a payment
required by one of the covenants described above under the caption "--
Repurchase at the Option of Holders" or "--Asset Sales") or (viii) make any
change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of
Notes, the Company and the Trustee may amend or supplement the Indenture or the
Notes to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Company's obligations to Holders of Notes in
the case of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders of Notes or that does not adversely
affect the legal rights under the Indenture of any such Holder, to release
Collateral that is permitted to be released under the Indenture, or to comply
with requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
Concerning the Trustee
The Indenture provides that the Trustee may make loans to, accept
deposits from, and perform services for, the Company and its affiliates, and may
otherwise deal with the Company or its affiliates, as if it were not the
Trustee. However, if the Trustee acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue or resign.
The Holders of a majority in principal amount of the then outstanding
Notes will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of Notes, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
Additional Information
Anyone who receives this Prospectus may obtain a copy of the Indenture,
the Collateral Documents and Registration Rights Agreement without charge by
writing to Riviera Holdings Corporation, 2901 Las Vegas Boulevard South, Las
Vegas, Nevada 89109, Attention: Chief Financial Officer.
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Book-Entry, Delivery and Form
Except as set forth in the next paragraph, the Notes to be resold as
set forth herein will initially be issued in the form of one Global Note (the
"Global Note"). The Global Note will be deposited on the date of the closing of
the sale of the Notes offered hereby (the "Closing Date") with, or on behalf of,
The Depository Trust Company (the "Depositary") and registered in the name of
Cede & Co., as nominee of the Depositary (such nominee being referred to herein
as the "Global Note Holder").
Notes that are issued as described below under "-- Certificated
Securities" will be issued in the form of registered definitive certificates
(the "Certificated Securities"). Upon the transfer of Certificated Securities,
such Certificated Securities may, unless the Global Note has previously been
exchanged for Certificated Securities, be exchanged for an interest in the
Global Note representing the principal amount of Notes being transferred.
The Depositary is a limited-purpose trust company that was created to
hold securities for its participating organizations (collectively, the
"Participants" or the "Depositary's Participants") and to facilitate the
clearance and settlement of transactions in such securities between Participants
through electronic book-entry changes in accounts of its Participants. The
Depositary's Participants include securities brokers and dealers (including the
Initial Purchasers), banks and trust companies, clearing corporations and
certain other organizations. Access to the Depositary's system is also available
to other entities such as banks, brokers, dealers and trust companies
(collectively, the "Indirect Participants" or the "Depositary's Indirect
Participants") that clear through or maintain a custodial relationship with a
Participant, either directly or indirectly. Persons who are not Participants may
beneficially own securities held by or on behalf of the Depositary only thorough
the Depositary's Participants or the Depositary's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Note, the Depositary will credit the
accounts of Participants designated by the Initial Purchasers with portions of
the principal amount of the Global Note and (ii) ownership of the Notes
evidenced by the Global Note will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by the Depositary
(with respect to the interests of the Depositary's Participants), the
Depositary's Participants and the Depositary's Indirect Participants.
Prospective purchasers are advised that the laws of some states require that
certain persons take physical delivery in definitive form of securities that
they own. Consequently, the ability to transfer Notes evidenced by the Global
Note will be limited to such extent. For certain other restrictions on the
transferability of the Notes, see "Notice to Investors."
So long as the Global Note Holder is the registered owner of any Notes,
the Global Note Holder will be considered the sole Holder under the Indenture of
any Notes evidenced by the Global Note. Beneficial owners of Notes evidenced by
the Global Note will not be considered the owners or Holders thereof under the
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Company nor the Trustee will have any responsibility or liability for any aspect
of the records of the Depositary or for maintaining, supervising or reviewing
any records of the Depositary relating to the Notes.
Payments in respect of the principal of, premium, if any, interest and
Liquidated Damages, if any, on any Notes registered in the name of the Global
Note Holder on the applicable record date will be payable by the Trustee to or
at the direction of the Global Note Holder in its capacity as the registered
Holder under the Indenture. Under the terms of the Indenture, the Company and
the Trustee may treat the persons in whose names Notes, including the Global
Note, are registered as the owners thereof for the
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purpose of receiving such payments. Consequently, neither the Company nor the
Trustee has or will have any responsibility or liability for the payment of such
amounts to beneficial owners of Notes. The Company believes, however, that it is
currently the policy of the Depositary to immediately credit the accounts of the
relevant Participants with such payments, in amounts proportionate to their
respective holdings of beneficial interests in the relevant security as shown on
the records of the Depositary. Payments by the Depositary's Participants and the
Depositary's Indirect Participants to the beneficial owners of Notes will be
governed by standing instructions and customary practice and will be the
responsibility of the Depositary's Participants or the Depositary's Indirect
Participants.
Certificated Securities
Subject to certain conditions, any person having a beneficial interest
in the Global Note may, upon request to the Trustee, exchange such beneficial
interest for Notes in the form of Certificated Securities. Upon any such
issuance, the Trustee is required to register such Certificated Securities in
the name of, and cause the same to be delivered to, such person or persons (or
the nominee of any thereof). All such certificated Notes would be subject to the
legend requirements described herein under "Notice to Investors." In addition,
if (i) the Company notifies the Trustee in writing that the Depositary is no
longer willing or able to act as a depositary and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of Notes in
the form of Certificated Securities under the Indenture, then, upon surrender by
the Global Note Holder of its Global Note, Notes in such form will be issued to
each person that the Global Note Holder and the Depositary identify as being the
beneficial owner of the related Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
Same Day Settlement and Payment
The Indenture will require that payments in respect of the Notes
represented by the Global Note (including principal, premium, if any, interest
and Liquidated Damages, if any) be made by wire transfer of immediately
available funds to the accounts specified by the Global Note Holder. With
respect to Certificated Securities, the Company will make all payments of
principal, premium, if any, interest and Liquidated Damages, if any, by wire
transfer of immediately available funds to the accounts specified by the Holders
thereof or, if no such account is specified, by mailing a check to each such
Holder's registered address. The Notes represented by the Global Note are
expected to be eligible to trade in the PORTAL market and to trade in the
Depositary's Same-Day Funds Settlement system, and any permitted secondary
market trading activity in such Notes will, therefore, be required by the
Depositary to be settled in immediately available funds. The Company expects
that secondary trading in the Certificated Securities will also be settled in
immediately available funds.
Registration Rights; Liquidated Damages
The Company and the Initial Purchasers have entered into the
Registration Rights Agreement. Pursuant to the Registration Rights Agreement,
the Company has agreed to file with the Commission the Exchange Offer
Registration Statement on the appropriate form under the Securities Act with
respect to the New Notes. Upon the effectiveness of the Exchange Offer
Registration Statement, the Company will offer to the Holders of Transfer
Restricted Securities pursuant to the Exchange Offer who are able to make
certain representations the opportunity to exchange their Transfer Restricted
Securities for New Notes. If
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(i) the Company is not required to file the Exchange Offer Registration
Statement or permitted to consummate the Exchange Offer because the Exchange
Offer is not permitted by applicable law or Commission policy or (ii) any Holder
of Transfer Restricted Securities notifies the Company within 20 business days
of the consummation of the Exchange Offer that (A) it is prohibited by law or
Commission policy from participating in the Exchange Offer or (B) that it may
not resell the New Notes acquired by it in the Exchange Offer to the public
without delivering a prospectus and the prospectus contained in the Exchange
Offer Registration Statement is not appropriate or available for such resales or
(C) that it is a broker-dealer and owns Existing Notes acquired directly from
the Company or an affiliate of the Company, the Company will file with the
Commission a Shelf Registration Statement to cover resales of all Transfer
Restricted Securities by the Holders thereof who satisfy certain conditions
relating to the provision of information in connection with the Shelf
Registration Statement. The Company will use its best efforts to cause the
applicable registration statement to be declared effective by the Commission on
or prior to the 120th day following such filing. For purposes of the foregoing,
"Transfer Restricted Securities" means each Note until the earliest to occur of
(a) the date on which such Series A Note is exchanged in the Exchange Offer and
entitled to be resold to the public by the Holder thereof without complying with
the prospectus delivery requirements of the Act, (b) the date on which such
Series A Note has been effectively registered under the Act and disposed of in
accordance with a Shelf Registration Statement and (c) the date on which such
Series A Note is distributed to the public pursuant to Rule 144 under the Act or
by a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (including delivery of the Prospectus
contained herein).
The Registration Rights Agreement provides that the Company and the
Restricted Subsidiaries will (i) file an Exchange Offer Registration Statement
with the Commission on or prior to 60 days after the Closing Date, (ii) use
their best efforts to have the Exchange Offer Registration Statement declared
effective by the Commission on or prior to 120 days after the Closing Date,
(iii) unless the Exchange Offer would not be permitted by applicable law or
Commission policy, the Company will commence the Exchange Offer and use its best
efforts to issue on or prior to 30 business days after the date on which the
Exchange Offer Registration Statement was declared effective by the Commission,
New Notes in exchange for all Notes tendered prior thereto in the Exchange Offer
and (iv) if obligated to file the Shelf Registration Statement, the Company will
file the Shelf Registration Statement with the Commission on or prior to 60 days
after such filing obligation arises and use its best efforts to cause the Shelf
Registration to be declared effective by the Commission on or prior to 120 days
after such obligation arises. If (a) the Company fails to file any of the
Registration Statements required by the Registration Rights Agreement on or
before the date specified for such filing, (b) any of such Registration
Statements is not declared effective by the Commission on or prior to the date
specified for such effectiveness (the "Effectiveness Target Date"), or (c) the
Company fails to consummate the Exchange Offer within 30 business days of the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement, or (d) the Shelf Registration Statement or the Exchange Offer
Registration Statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Transfer Restricted Securities
during the periods specified in the Registration Rights Agreement (each such
event referred to in clauses (a) through (d) above a "Registration Default"),
then the Company will pay Liquidated Damages to each Holder of Notes, with
respect to the first 90-day period immediately following the occurrence of the
first Registration Default in an amount equal to $.05 per week per $1,000
principal amount of Notes held by such Holder. The amount of the Liquidated
Damages will increase by an additional $.05 per week per $1,000 principal amount
of Notes with respect to each subsequent 90-day period until all Registration
Defaults have been cured, up to a maximum amount of Liquidated Damages of $.50
per week per $1,000 principal amount of Notes. All accrued Liquidated Damages
will be paid by the Company on each Damages Payment Date to the Global Note
Holder by wire transfer of immediately available funds or by federal funds check
and to Holders of Certificated Securities by wire transfer to the accounts
specified by them or by mailing checks to their
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registered addresses if no such accounts have been specified. Following the cure
of all Registration Defaults, the accrual of Liquidated Damages will cease.
Holders of Notes will be required to make certain representations to
the Company (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information to
be used in connection with the Shelf Registration Statement and to provide
comments on the Shelf Registration Statement within the time periods set forth
in the Registration Rights Agreement in order to have their Notes included in
the Shelf Registration Statement and benefit from the provisions regarding
Liquidated Damages set forth above.
Certain Definitions
Set forth below are certain defined terms used in the Indenture.
Reference is made to the Indenture for a full disclosure of all such terms, as
well as any other capitalized terms used herein for which no definition is
provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition
by the Company or a Restricted Subsidiary of any assets or rights (including,
without limitation, by way of a sale and leaseback) other than sales of assets
(excluding capital assets) or rights in the ordinary course of business
consistent with past practices (provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company and
its Restricted Subsidiaries taken as a whole will be governed by the provisions
of the Indenture described above under the caption "-- Change of Control" and/or
the provisions described above under the caption "-- Merger, Consolidation or
Sale of Assets" and not by the provisions of the Asset Sale covenant), and (ii)
the issuance of Equity Interests by the Company or any Restricted Subsidary, or
the sale by the Company or any of its Restricted Subsidiaries of Equity
Interests of any of the Company's Subsidiaries (other than directors' qualifying
shares), in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $1.0 million or (b) for net proceeds in excess of $1.0
million. Notwithstanding the foregoing: (i) a transfer of assets by the Company
to a Restricted Subsidiary or by a Restricted Subsidiary to the Company or to
another Restricted Subsidiary, (ii) an issuance of Equity Interests by a
Restricted Subsidiary to the Company or to another Restricted Subsidiary, (iii)
a Restricted Payment that is permitted by the covenant described above under the
caption "-- Restricted Payments," (iv) the surrender or waiver of contract
rights or the settlement, release or surrender of contract, tort or other claims
of any kind, and (v) the grant in the ordinary course of business of any
non-exclusive license of patents, trademarks, registrations therefor and other
similar intellectual property, will not be deemed to be Asset Sales. In
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addition, no sale or disposition of the Riviera real property or any improvement
thereon (except a sale or disposition of the Six Acre Tracts) shall be a
permitted Asset Sale.
"Attributable Debt" in respect of a sale and leaseback transaction
means, at the time of determination, the present value (discounted at the rate
of interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Black Hawk Land" means that certain 71,000 square foot parcel of real
property in Black Hawk, Colorado which has been purchased by the Company as
described in the Prospectus.
"Black Hawk Project" means the pending project to develop, construct,
equip, open and operate a casino, substantially as described in this Prospectus,
which will be located on the Black Hawk Land. See "Business -- The Black Hawk
Project."
"Capital Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited), and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than twelve months from the date of acquisition, (iii) certificates of
deposit and eurodollar time deposits with maturities of six months or less from
the date of acquisition, bankers' acceptances with maturities not exceeding
twelve months and overnight bank deposits, in each case with any domestic
commercial bank having capital and surplus in excess of $500 million and a Keefe
Bank Watch Rating of "B" or better, provided that any deposit accounts with
balances at all times less than $250,000 individually or $1,000,000 in the
aggregate need not meet such capital, surplus or rating requirements, (iv)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clauses (ii) and (iii) above entered into
with any financial institution meeting the qualifications specified in clause
(iii) above, (v) commercial paper having the highest rating obtainable from
Moody's Investors Service, Inc. or Standard & Poor's Corporation and in each
case maturing within twelve months after the date of acquisition, and (vi) money
market funds, substantially all the assets of which comprise securities of the
types described in clauses (ii) through (v) above.
"Change of Control" means the occurrence of any of the following: (i)
the sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act) other than any Controlling Person or its Related Parties, (ii)
the adoption of a plan relating to the liquidation or dissolution of the
Company, (iii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than any Controlling Person and its Related
Parties, becomes the "beneficial owner" (as such term is defined in Rule 13d-3
and
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Rule 13d-5 under the Exchange Act, except that a person shall be deemed to have
"beneficial ownership" of all securities that such person has the right to
acquire, whether such right is currently exercisable or is exercisable only upon
the occurrence of a subsequent condition), directly or indirectly, of more than
35% of the outstanding Voting Stock of the Company (measured by voting power
rather than number of shares) and a greater percentage of the outstanding Voting
Stock of the Company than the percentage of such Voting Stock beneficially owned
by the Controlling Person and its Related Parties, holding the largest such
percentage, (iv) the first day prior to the Merger, if any, on which a majority
of the members of the Board of Directors of the Company are not Continuing
Directors, or (v) the Company consolidates with, or merges with or into, any
Person or sells, assigns, conveys, transfers, leases or otherwise disposes of
all or substantially all of its assets to any Person, or any Person consolidates
with, or merges with or into, the Company, in any such event pursuant to a
transaction in which any of the outstanding Voting Stock of the Company is
converted into or exchanged for cash, securities or other property, other than
any such transaction where the Voting Stock of the Company outstanding
immediately prior to such transaction is converted into or exchanged for Voting
Stock (other than Disqualified Stock) of the surviving or transferee Person
constituting a majority of the outstanding shares of such Voting Stock of such
surviving or transferee Person (immediately after giving effect to such
issuance). Notwithstanding the foregoing clauses (i) through (v), neither the
consummation of the Merger nor any acquisition of Elsinore by the Company
(whether effected by way of merger, stock or asset purchase, or otherwise) will
constitute an event of "Change of Control."
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus (i) an
amount equal to any extraordinary loss plus any net loss realized in connection
with an Asset Sale (to the extent such losses were deducted in computing such
Consolidated Net Income), plus (ii) provision for taxes based on income or
profits of such Person and its Subsidiaries for such period, to the extent that
such provision for taxes was included in computing such Consolidated Net Income,
plus (iii) consolidated interest expense of such Person and its Subsidiaries for
such period, whether paid or accrued and whether or not capitalized (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of letter
of credit or bankers' acceptance financings, and net payments (if any) pursuant
to Hedging Obligations), to the extent that any such expense was deducted in
computing such Consolidated Net Income, plus (iv) depreciation, amortization
(including amortization of goodwill and other intangibles but excluding
amortization of prepaid cash expenses, other than pre-opening expenses, that
were paid in a prior period) and other non-cash expenses (excluding any such
non-cash expense to the extent that it represents an accrual of or reserve for
cash expenses in any future period or amortization of a prepaid cash expense,
other than preopening expenses, that was paid in a prior period) of such Person
and its Subsidiaries for such period to the extent that such depreciation,
amortization and other non-cash expenses were deducted in computing such
Consolidated Net Income, plus (v) all expenses relating to the defeasance and
redemption of the Company's Exiting First Mortgage Notes, including any
redemption premium and the excess, if any, of the interest expense over interest
income earned from the amounts deposited in trust for the defeasance to the
extent such expenses were deducted in computed such Consolidated Net Income,
minus (vi) non-cash items increasing such Consolidated Net Income for such
period, in each case, on a consolidated basis and determined in accordance with
GAAP. Notwithstanding the foregoing, the provision for taxes based on the income
or profits of, and the depreciation and amortization and other non-cash charges
of, a Subsidiary of the referent Person shall be added to Consolidated Net
Income to compute Consolidated Cash Flow only to the extent (and in the same
proportion) that the Net Income of such Subsidiary was included in calculating
the Consolidated Net Income of such Person and only if a corresponding amount
would be permitted at the date of determination
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to be dividended to the Company by such Subsidiary without prior governmental
approval (that has not been obtained), and without direct or indirect
restriction pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income (but not loss) of any Person that is
not a Subsidiary or that is accounted for by the equity method of accounting
shall be included only to the extent of the amount of dividends or distributions
paid in cash to the referent Person or a Wholly Owned Restricted Subsidiary
thereof, (ii) the Net Income of any Restricted Subsidiary shall be excluded to
the extent that the declaration or payment of dividends or similar distributions
by that Restricted Subsidiary of that Net Income is not at the date of
determination permitted without any prior governmental approval (that has not
been obtained) or, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded, (iv) the cumulative effect of a change in accounting principles
shall be excluded and (v) the Net Income of any Unrestricted Subsidiary will be
excluded, whether or not distributed to the Company or one of its Subsidiaries.
"Consolidated Net Worth" means, with respect to any Person as of any
date, the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock), but
only to the extent of any cash received by such Person upon issuance of such
preferred stock, less (x) all write-ups (other than write-ups resulting from
foreign currency translations and write-ups of tangible assets of a going
concern business made within 12 months after the acquisition of such business)
subsequent to the date of the Indenture in the book value of any asset owned by
such Person or a consolidated Subsidiary of such Person, (y) all investments as
of such date in unconsolidated Subsidiaries and in Persons that are not
Subsidiaries (except, in each case, Permitted Investments), and (z) all
unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date of the Indenture or (ii) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such Board at the time of such
nomination or election.
"Controlling Person" means Mr. Allen Paulson, Morgens Waterfall or the
"Morgens Entities" referred to in this Prospectus, Sun America Life Insurance
Company, or Keyport Life Insurance Co.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Notes mature.
"Elsinore" means Elsinore Corporation, a Nevada corporation.
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"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Event of Loss" means, with respect to any property or asset (tangible
or intangible, real or personal) constituting Collateral owned by the Company or
any Restricted Subsidiary, any of the following: (i) any loss, destruction or
damage of such property or asset; (ii) any actual condemnation, seizure or
taking by exercise of the power of eminent domain or otherwise of such property
or asset, or confiscation of such property or asset or the requisition of the
use of such property or asset; or (iii) any settlement in lieu of clause (ii)
above, in the case of clause (i), (ii) or (iii), whether in a single event or a
series of related events, which results in Net Proceeds in excess of $500,000.
"Fixed Charges" means, with respect to any Person for any period, the
sum, without duplication, of (i) the consolidated interest expense, of such
Person and its Restricted Subsidiaries for such period, whether paid or accrued
(excluding amortization of debt issuance costs and issuance discount in
connection with the sale of the Existing Notes and costs of extinguishing
Indebtedness to be repaid with the net proceeds of the sale of the Existing
Notes, but including, without limitation, amortization of other debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, imputed interest with
respect to Attributable Debt, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated
interest expense of such Person and its Restricted Subsidiaries that was
capitalized during such period, and (iii) any interest expense on Indebtedness
of another Person that is Guaranteed by such Person or any of its Restricted
Subsidiaries or secured by a Lien on assets of such Person or any of its
Restricted Subsidiaries (whether or not such Guarantee or Lien is called upon)
and (iv) the product of (a) all dividend payments, whether or not in cash, on
any series of preferred stock of such Person or any of its Restricted
Subsidiaries, other than dividend payments on Equity Interests payable solely in
Equity Interests of the Company, times (b) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined federal,
state and local statutory tax rate of such Person, expressed as a decimal, in
each case, on a consolidated basis and in accordance with GAAP.
"FF&E" means furnitures, fixtures and equipment.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person and its
Restricted Subsidiaries for such period to the Fixed Charges of such Person or
its Restricted Subsidiaries for such period. In the event that the Company or
any of its Restricted Subsidiaries incurs, assumes, guarantees or redeems any
Indebtedness (other than revolving credit borrowings) or issues preferred stock
subsequent to the commencement of the period for which the Fixed Charge Coverage
Ratio is being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such
issuance or redemption of preferred stock, as if the same had occurred at the
beginning of the applicable four-quarter reference period. In addition, for
purposes of making the computation referred to above, (i) acquisitions that have
been made by the Company or any of its Restricted Subsidiaries, including
through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall be given pro
forma effect as though they had occurred on the first day of the four-quarter
reference period and Consolidated Cash Flow for such reference period shall be
calculated without giving effect to clause (iii) of the proviso set forth in the
definition of Consolidated Net Income, and (ii) the Consolidated Cash Flow
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall be
excluded on a pro forma basis, and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with
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GAAP, and operations or businesses disposed of prior to the Calculation Date,
shall be excluded on a pro forma basis, but only to the extent that the
obligations giving rise to such Fixed Charges will not be obligations of the
referent Person or any of its Restricted Subsidiaries following the Calculation
Date.
"GAAP" means 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 have been approved by a significant segment of the accounting
profession, which are in effect on the date of the Indenture.
"Gaming Authority" means any agency, authority, board, bureau,
commission, department, office or instrumentality of any nature whatsoever of
the United States of America or foreign government, any state, province or any
city or other political subdivision, whether now or hereafter existing, or any
officer or official thereof, including without limitation, the Nevada
Commission, the Nevada Board, the Colorado Commission and any other agency with
authority to regulate any gaming operation (or proposed gaming operation) owned,
managed or operated by the Company or any of its Subsidiaries.
"Gaming Equipment" means slot machines, gaming tables and other gaming
devices, including, without limitation, gaming devices as defined in Nevada
Revised Statutes Section 463.0155, and related equipment.
"Gaming Law" means the gaming laws of any jurisdiction or jurisdictions
to which the Company, any of its Subsidiaries or any of the Guarantors is, or
may at any time after the date of the Indenture, be subject.
"Gaming License" means every material license, franchise or other
authorization required to own, lease, operate or otherwise conduct gaming
activities of the Company or any of its Subsidiaries, including without
limitation all such licenses granted under the Nevada Gaming Act, the
regulations promulgated pursuant thereto, and other applicable federal, state,
foreign or local laws.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantors" means each of (i) ROC, RGM, RGMC, and RGME and (ii) any
other subsidiary that executes a Subsidiary Guarantee in accordance with the
provisions of the Indenture, and their respective successors and assigns.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any
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property or representing any Hedging Obligations, except any such balance that
constitutes an accrued expense or trade payable, if and to the extent any of the
foregoing indebtedness (other than letters of credit and Hedging Obligations)
would appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP, as well as all indebtedness of others secured by a Lien on
any asset of such Person (whether or not such indebtedness is assumed by such
Person) and, to the extent not otherwise included, the Guarantee by such Person
of any indebtedness of any other Person but excluding the Company's 11% First
Mortgage Notes and any guaranty by ROC of payment thereof. The amount of any
Indebtedness outstanding as of any date shall be (i) the accreted value thereof,
in the case of any Indebtedness that does not require current payments of
interest, and (ii) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
Investments do not include amounts deposited in trust for employee benefit
plans, and without limiting the generality of the foregoing, do not include
amounts deposited by the Company in any "rabbi" trust for the benefit of
executive officers or other employees of the Company. If the Company or any
Subsidiary of the Company sells or otherwise disposes of any Equity Interests of
any direct or indirect Restricted Subsidiary of the Company such that, after
giving effect to any such sale or disposition, such Person is no longer a
Subsidiary of the Company, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair market
value of the Equity Interests of such Restricted Subsidiary not sold or disposed
of in an amount determined as provided in the final paragraph of the covenant
described above under the caption "-- Restricted Payments."
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Management Agreement" means an agreement providing for the management
by the Company or any of its Restricted Subsidiaries of a Person engaged in
Permitted Businesses, provided that the only cash consideration payable
thereunder shall be payable to the Company or a Restricted Subsidiary.
"Merger" means the acquisition of the Company by one or more entities
controlled by Mr. Allen Paulson.
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any net gain or
loss, together with any related provision for taxes on such gain or loss,
realized in connection with (a) any Asset Sale (including, without limitation,
dispositions pursuant to sale and leaseback transactions) or (b) the disposition
of any securities by such Person or any of its Restricted Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Restricted
Subsidiaries and (ii) any extraordinary or nonrecurring net gain or loss,
together with any related provision for taxes on such extraordinary or
nonrecurring net gain or loss.
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"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale or
Event of Loss or in respect of the initial issuance and sale of the Notes
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale or Event of
Loss and insurance proceeds), net of the direct costs relating to such Asset
Sale, Event of Loss or sale of Notes (including, without limitation, legal,
accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness (other than the Revolving Credit Facility) secured
by a Lien on the asset or assets that were the subject of such Asset Sale and
any reserve for adjustment in respect of the sale price of such asset or assets,
or for liabilities retained by the Company or its Restricted Subsidiaries at the
time of the Asset Sale, in each case established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable as a guarantor or
otherwise), or (c) constitutes the lender.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Businesses" means the lines of business engaged in by the
Company and its Subsidiaries on the date of the Indenture, and all businesses
related, complementary, or incidental thereto, including but not limited to
gaming, lodging, entertainment and food and beverage service, retail store
leasing and concessions, licensing products, services and trade names, and
consulting with and managing third parties who are engaged in the foregoing and
similar lines of businesses.
"Permitted Investments" means (a) any Investment in the Company or in a
Restricted Subsidiary of the Company that is a Guarantor; (b) any Investment in
Cash Equivalents; (c) any Investment by the Company or any Restricted Subsidiary
of the Company in a Person if as a result of such Investment (i) such Person
becomes a Restricted Subsidiary of the Company and a Guarantor; or (ii) such
Person is merged, consolidated or amalgamated with or into, or transfers or
conveys substantially all of its assets to, or is liquidated into, the Company
or a Restricted Subsidiary of the Company that is a Guarantor; (d) any
Investment made as a result of the receipt of non-cash consideration from an
Asset Sale that was made pursuant to and in compliance with the covenant
described above under the caption "-- Repurchase at the Option of Holders --
Asset Sales"; (e) any acquisition of assets solely in exchange for the issuance
of Equity Interests (other than Disqualified Stock) of the Company; (f) Hedging
Obligations; (g) any Investment in the Black Hawk Project (or an alternative
project as to which the Company is permitted to invest Net Proceeds of the sale
of the Existing Notes pursuant to the covenant described under "Use of
Proceeds") not to exceed $30.0 million; (h) any Investment in an entity formed
for the purpose of developing the Six Acre Tracts not to exceed $5.0 million
(plus the value of the underlying real property, if contributed to such entity);
and (i) credit extensions to gaming customers.
"Permitted Liens" means (i) Liens created or permitted by the
Collateral Documents; (ii) Liens on Gaming Equipment, inventory and receivables
securing Indebtedness that was permitted by the terms of the Indenture to be
incurred; (iii) Liens in favor of the Company; (iv) Liens on property of a
Person existing at the time such Person is merged into, consolidated with or
acquired by the Company or any Subsidiary of the Company; provided that such
Liens were in existence prior to the contemplation of such merger, consolidation
or acquisition and do not extend to any assets other than those of the Person
merged into, consolidated with or acquired by the Company; (v) Liens on property
(other than the Black Hawk Land)
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existing at the time of acquisition thereof by the Company or any Subsidiary of
the Company, provided that such Liens were in existence prior to the
contemplation of such acquisition and do not extend to any property other than
the property acquired; (vi) Liens to secure the performance of statutory
obligations, surety or appeal bonds, performance bonds or other obligations of a
like nature incurred in the ordinary course of business; (vii) Liens to secure
Indebtedness (including Capital Lease Obligations) permitted by clause (ii) of
the third paragraph of the covenant entitled "Incurrence of Indebtedness and
Issuance of Preferred Stock" (and any refinancing thereof) covering only the
assets acquired, constructed or improved with such Indebtedness; (viii) Liens
existing on the date of the Indenture; (ix) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted, provided that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor; (x)
Liens incurred in the ordinary course of business of the Company or any
Subsidiary of the Company with respect to obligations that do not exceed $5.0
million at any one time outstanding and that (a) are not incurred in connection
with the borrowing of money or the obtaining of advances or credit (other than
trade credit in the ordinary course of business) and (b) do not in the aggregate
materially detract from the value of the property or materially impair the use
thereof in the operation of business by the Company or such Subsidiary; (xi)
Liens incurred in the ordinary course of business in respect of Hedging
Obligations; (xii) Liens arising by reason of any judgment, decree or order of
any court with respect to which the Company or any of its Restricted
Subsidiaries is then in good faith diligently prosecuting an appeal or other
proceedings for review, provided that the existence of such judgment, decree or
order is not a Default or Event of Default under the Indenture and any reserve
or other appropriate provision as shall be required in conformity with GAAP
shall have been made therefor; (xiii) Liens securing the Permitted Black Hawk
Debt in existence on the date, if any, on which Black Hawk Operating Company
becomes a Restricted Subsidiary pursuant to the provisions described above under
"Security"; (xiv) carriers' liens, warehousemen's liens, repairmen's liens,
vendors' liens, and similar encumbrances, rights or restrictions on personal
property, not in existence on the date of the Indenture and not interfering in
any material respect with the ordinary conduct of the business of the Company or
any of its Subsidiaries and not impairing in any material respect the value of
the Collateral; (xv) leases, subleases, easements, licenses and rights of way
not in existence on the date of the Indenture and not interfering in any
material respect with the ordinary conduct of the business of the Company or any
of its Subsidiaries and not impairing in any material respect the value of the
Collateral; (xvi) mechanics' liens incurred in the ordinary course of business,
provided that the same are being contested in good faith by appropriate
proceedings and (if required) bonded in an amount sufficient to cover the amount
of any such lien; (xvii) Liens securing Permitted Refinancing Indebtedness in
compliance with the Indenture with respect to secured Indebtedness, provided
that the Liens securing such Permitted Refinancing Indebtedness do not extend to
any assets other than those that secured the Indebtedness refinanced; (xviii)
with respect to any vessel included in the Collateral, certain maritime liens,
including liens for crew's wages and salvage; and (xix) any extension, renewal,
or replacement (or successive extensions, renewals or replacements) in whole or
in part, of Liens described in clauses (i) through (xviii) above.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or any of its Restricted Subsidiaries; provided
that: (i) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount of (or
accreted value, if applicable), plus accrued interest on, the Indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded (plus the amount
of reasonable expenses incurred in connection therewith); (ii) except for
revolving credit Indebtedness, such Permitted Refinancing Indebtedness has no
mandatory obligation to pay principal on a date earlier than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater
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than the Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness is subordinated in right of payment to the Notes on terms at least
as favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the
Company, or by the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"pro forma" means, with respect to any calculation made or required to
be made pursuant to the terms of the Indenture, a calculation in accordance with
Article 11 of Regulation S-X under the Securities Act of 1933, as amended, as
interpreted by the Company's chief financial officer or Board of Directors in
consultation with its independent certified public accountants.
"Related Party" with respect to any Controlling Person means (a) any
Affiliate, or spouse or immediate family member (in the case of an individual)
of such Controlling Person, or (b) any trust, corporation, partnership or other
entity, the beneficiaries, stockholders, partners, owners or Persons
beneficially holding a majority interest of which consist of such Controlling
Person and/or such other Persons referred to in the immediately preceding clause
(a), or (c) any trustee, executor or receiver appointed to manage or administer
the assets of a Controlling Person who is an individual following the death of
such individual.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"Revolving Credit Facility" means the Revolving Line of Credit Loan
Agreement, entered into on February 28, 1997 between the Company and the lender
named therein, as the same may be further amended, modified, renewed, refunded,
replaced or refinanced from time to time, including (i) any related notes,
letters of credit, guarantees, collateral documents, instruments and agreements
executed in connection therewith, and in each case as amended, modified,
renewed, refunded, replaced or refinanced from time to time, and (ii) any notes,
guarantees, collateral documents, instruments and agreements executed in
connection with such amendments, modification, renewal, refunding, replacement
or refinancing.
"Significant Subsidiary" means any Restricted Subsidiary that would be
a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the date hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries
109
<PAGE>
of that Person (or a combination thereof) and (ii) any partnership (a) the sole
general partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners of which are such
Person or of one or more Subsidiaries of such Person (or any combination
thereof).
"Unrestricted Subsidiary" means (i) any Subsidiary that is designated
by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution; but only to the extent that such Subsidiary: (a) has no Indebtedness
other than Non-Recourse Debt; (b) is not party to any agreement, contract,
arrangement or understanding with the Company or any Restricted Subsidiary of
the Company unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted Subsidiary
than those that might be obtained at the time from Persons who are not
Affiliates of the Company; (c) is a Person with respect to which neither the
Company nor any of its Restricted Subsidiaries has any direct or indirect
obligation, except as permitted pursuant to clause (xv) under the caption
"Certain Covenants---Incurrence of Indebtedness and Issuance of Preferred
Stock," (x) to subscribe for additional Equity Interests or (y) to maintain or
preserve such Person's financial condition or to cause such Person to achieve
any specified levels of operating results; and (d) has not guaranteed or
otherwise directly or indirectly provided credit support for any Indebtedness of
the Company or any of its Restricted Subsidiaries. Any such designation by the
Board of Directors shall be evidenced to the Trustee by filing with the Trustee
a certified copy of the Board Resolution giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing conditions and was permitted by the covenant described above under the
caption "Certain Covenants Restricted Payments." If, at any time, any
Unrestricted Subsidiary would fail to meet the foregoing requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary
shall be deemed to be incurred by a Restricted Subsidiary of the Company as of
such date (and, if such Indebtedness is not permitted to be incurred as of such
date under the covenant described under the caption "Incurrence of Indebtedness
and Issuance of Preferred Stock," the Company shall be in default of such
covenant). The Board of Directors of the Company may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (i) such Indebtedness
is permitted under the covenant described under the caption "Certain Covenants
- -- Incurrence of Indebtedness and Issuance of Preferred Stock," calculated on a
pro forma basis as if such designation had occurred at the beginning of the
four-quarter reference period, and (ii) no Default or Event of Default would be
in existence following such designation.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
110
<PAGE>
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person.
111
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Existing Notes
where such Existing Notes were acquired as a result of market-making activities
or other trading activities. The Company has agreed that, for a period of one
year after the Effective Date, it will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale. In addition, until ______, 1997 (90 days after the date of this
Prospectus), all dealers effecting transactions in the New Notes may be required
to deliver a prospectus.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market price or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such New Notes. Any broker-dealer that
resells New Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. For a period of one year
after the Effective Date, the Company will promptly send additional copies of
this Prospectus and any amendment or supplement to this Prospectus to any
broker-dealer that requests such documents in the Letter of Transmittal. The
Company has agreed to pay all expenses incident to the Exchange Offer (including
the expenses of one counsel for the holders of the Existing Notes) other than
commissions or concessions of any brokers or dealers and will indemnify the
holders of the Existing Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
The Company has covenanted with the Initial Purchasers that it will
file with the Commission an Exchange Offer Registration Statement under the
Securities Act with respect to an issue of New Notes, will use its best efforts
to cause the Exchange Offer Registration Statement to become effective under the
Securities Act, will offer to the holders of the Notes who are not prohibited by
law or policy of the Commission from participating in the Exchange Offer the
opportunity to exchange their Notes for New Notes, which New Notes will be
substantially identical in all respects to the Notes (except that the New Notes
generally will not contain terms with respect to transfer restrictions). Under
certain circumstances, the Company has agreed to file a Shelf Registration
Statement and to use its best efforts to cause such Shelf Registration Statement
to be declared effective. The Company, under certain circumstances, will be
required to pay liquidated damages if the Company is not in compliance with
certain of its obligations under the Registration Rights Agreement. See
"Description of Notes -- Registration Rights; Liquidated Damages."
Under a letter agreement dated July 14, 1997 between the Company and
Jefferies & Company, Inc., the Company has agreed to engage Jefferies & Company,
Inc. as exclusive financial advisor and sole placement agent to the Company for
a period ending October 30, 1997 in connection with the structuring and
consummation of project financing for the Company's Black Hawk Project ("Project
Financing"). In
112
<PAGE>
consideration of the services rendered by Jefferies & Company, Inc. as exclusive
financial advisor and sole placement agent in connection with the Project
Financing, the Company has agreed to pay to Jefferies & Company, Inc. a
customary fee.
LEGAL MATTERS
The validity of the New Notes offered hereby will be passed upon for
the Company by Dechert Price & Rhoads, New York, New York.
EXPERTS
The consolidated financial statements of Riviera Holdings Corporation
and its subsidiaries as of December 31, 1995 and 1996 and for each of the three
years in the period ended December 31, 1996 included in this Prospectus have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report appearing herein and elsewhere in the Registration Statement, and is
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
The statements as to matters of law and legal conclusions concerning
Nevada gaming laws included under the caption "Business -- Regulation and
Licensing" have been prepared by Schreck Morris, Las Vegas, Nevada, Nevada
gaming counsel for the Company. The statements as to matters of law and legal
conclusions concerning Colorado gaming laws included under the caption "Business
- -- Regulation and Licensing" have been prepared by Holme Roberts & Owen LLP,
Denver, Colorado, Colorado gaming counsel for the Company.
113
<PAGE>
RIVIERA HOLDINGS CORPORATION
TABLE OF CONTENTS
Page
----
Independent Auditors' Report............................................... F-2
Consolidated Balance Sheets as of December 31, 1995
and 1996, and June 30, 1997 (unaudited)................................. F-3
Consolidated Statements of Operations for the Years
Ended December 31, 1994, 1995 and 1996, and for the
Six Months Ended June 30, 1996 and 1997 (unaudited)...................... F-4
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1994, 1995 and 1996, and
for the Six Months Ended June 30, 1997 (unaudited)....................... F-5
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1994, 1995 and 1996, and for
the Six Months Ended June 30, 1996 and 1997 (unaudited).................. F-6
Notes to Consolidated Financial Statements................................. F-7
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Riviera Holdings Corporation
d.b.a. Riviera Hotel & Casino
Las Vegas, Nevada
We have audited the accompanying consolidated balance sheets of Riviera
Holdings Corporation and subsidiaries (the "Company") d.b.a. Riviera Hotel &
Casino as of December 31, 1995 and 1996, and the related consolidated statements
of operations, stockholders' equity, and cash flows for each of the three years
in the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of the Company as of December
31, 1995 and 1996, and the results of their operations and their cash flows for
each of the years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Las Vegas, Nevada
February 28, 1997
F-2
<PAGE>
RIVIERA HOLDINGS CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
ASSETS
<TABLE>
<CAPTION>
December 31,
-------------------------- June 30,
1995 1996 1997
------------ ------------ --------
(unaudited)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents (Note 1)................................... $ 21,962 $ 25,747 $ 25,625
Accounts receivable, net (Notes 1 and 2)............................. 4,334 5,113 4,446
Inventories (Note 1)................................................. 2,186 3,039 2,792
Prepaid expenses and other assets.................................... 2,602 2,692 2,266
----------- ---------- ----------
Total current assets.............................................. 31,084 36,591 35,129
PROPERTY AND EQUIPMENT, NET
(Notes 1, 3, 6 and 8)................................................ 121,049 127,760 129,635
OTHER ASSETS........................................................... 4,759 2,853 3,102
RESTRICTED CASH FOR PERIODIC SLOT PAYMENTS
(Notes 1 and 5)...................................................... 1,039 461 208
------------ ---------- ----------
TOTAL ASSETS........................................................... $ 157,931 $ 167,665 $ 168,074
============ ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt (Note 6)........................... $ 2,005 $ 1,297 $ 1,119
Accounts payable (Notes 1 and 4)..................................... 8,364 8,530 6,740
Current income taxes payable (Note 7)................................ 51 413 578
Accrued expenses (Notes 1 and 4)..................................... 9,640 9,757 8,462
------------ ---------- ----------
Total current liabilities......................................... 20,060 19,997 16,899
------------ ---------- ----------
DEFERRED INCOME TAXES PAYABLE (Note 7)................................. 3,023 4,626 4,884
------------ ---------- ----------
OTHER LONG-TERM LIABILITIES (Note 5)................................... 2,749 3,210 3,597
------------ ---------- ----------
LONG-TERM DEBT, NET OF CURRENT PORTION (Notes
1 and 6)............................................................ 105,817 104,581 104,186
------------ ---------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 8, 9, 10, 11
and 13)
STOCKHOLDERS' EQUITY: (Note 1)
Common stock ($.001 par value; 20,000,000 shares
authorized; 4,800,000 shares at December 31, 1995,
4,922,503 shares at December 31, 1996, and 4,914,080
shares at June 30, 1997, issued and outstanding)..................... 5 5 5
Additional paid-in capital........................................... 12,537 13,919 13,828
Notes receivable from Employee Stockholders.......................... -- (853) (508)
Retained earnings.................................................... 13,740 22,180 25,183
------------ ---------- ----------
Total stockholders' equity........................................ 26,282 35,251 38,508
------------ ---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............................. $ 157,931 $ 167,665 $ 168,074
============ ========== ==========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
RIVIERA HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share data)
<TABLE>
<CAPTION>
Six Months Ended Three Months
Years Ended December 31, June 30, Ended June 30,
------------------------------------ ----------------------- ------------------------
1994 1995 1996 1996 1997 1996 1997
----------- ---------- ----------- ----------- ---------- ---------- -----------
(unaudited) (unaudited)
REVENUES: (Note 1)
<S> <C> <C> <C> <C> <C> <C> <C>
Casino................................ $ 82,060 $ 77,337 $ 80,384 $ 40,382 $ 38,134 $ 20,217 $ 19,332
Rooms................................. 5,422 39,848 41,835 21,771 21,424 10,514 10,930
Food and beverage..................... 22,961 21,895 22,641 12,043 11,248 6,215 5,787
Entertainment......................... 6,945 14,423 20,883 11,247 10,759 5,493 5,327
Other (Notes 8 and 10)................ 9,390 9,515 11,293 4,752 5,241 2,398 2,670
--------- ---------- --------- ----------- ---------- --------- -----------
166,778 163,018 177,036 90,195 86,806 44,837 44,046
Less promotional allowances (Note 1).. 12,857 11,873 12,627 6,922 6,703 3,285 3,424
--------- ---------- --------- ---------- ---------- --------- ----------
Net revenues.................. 153,921 151,145 164,409 83,273 80,103 41,552 40,622
--------- --------- --------- ---------- ---------- --------- ----------
COSTS AND EXPENSES: (Notes 1, 8,
and 11)
Direct costs and expenses of
operating departments:
Casino.................................. 48,826 45,325 47,509 24,472 22,187 12,066 10,930
Rooms.............................. 17,594 18,787 18,834 9,365 9,166 4,701 4,574
Food and beverage.................. 15,588 15,768 15,916 8,089 8,002 4,163 4,015
Entertainment...................... 13,982 10,329 15,290 7,907 7,571 3,927 3,790
Other.............................. 3,516 3,527 3,913 1,451 1,473 738 797
Other operating expenses:
Selling, general and
administrative................... 28,822 29,618 31,454 15,602 15,839 7,999 8,164
Depreciation and amortization...... 5,674 6,811 8,212 3,862 5,010 1,974 2,578
------- -------- --------- ---------- ---------- --------- ----------
Total costs and expenses...... 134,002 130,165 141,128 70,748 69,248 35,568 34,848
------- -------- --------- ---------- ---------- --------- ----------
INCOME FROM OPERATIONS.................. 19,919 20,980 23,281 12,525 10,855 5,984 5,774
------- -------- --------- ---------- ---------- --------- ----------
OTHER INCOME (EXPENSE):
Interest expense (Notes 6 and 8)...... (12,764) (12,453) (12,085) (6,100) (6,043) (3,039) (3,030)
Interest income....................... 510 1,149 1,167 593 623 316 328
Other, net (Notes 6 and 13)........... 505 (850)
------- -------- --------- ---------- ---------- --------- ----------
Total other income
(expense)................... (12,254) (11,304) (10,413) (5,507) (6,270) (2,723) (2,702)
------- -------- --------- ---------- ---------- --------- ----------
INCOME BEFORE PROVISION FOR
INCOME TAXES.......................... 7,665 9,676 12,868 7,018 4,585 3,261 3,072
PROVISION FOR INCOME TAXES
(Notes 1 and 7)....................... 2,875 3,332 4,428 2,402 1,582 1,116 1,053
------- -------- --------- ---------- ---------- --------- ----------
NET INCOME.............................. $ ,790 $ 6,344 $ 8,440 $ 4,616 $ 3,003 $ 2,145 $ 2,019
======= ======== ========= ========== ========== ========= ==========
Weighted average common and common
equivalent shares outstanding (Notes
1 and 12)............................. 4,800 5,040 5,177 5,109 5,212 5,132 5,208
------- -------- --------- ---------- ---------- --------- ----------
Net income per common and common
equivalent shares (Notes 1 and 12).... $ 1.00 $ 1.26 $ 1.63 $ 0.90 $ 0.58 $ 0.42 $ 0.39
======= ======== ======== ========== ========== ========= =========
See notes to consolidated financial statements.
</TABLE>
F-4
<PAGE>
RIVIERA HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For The Years Ended December 31, 1994, 1995, and 1996
and For the Six Months Ended June 30, 1997 (Unaudited)
(in thousands, except share data)
<TABLE>
<CAPTION>
Notes
Receivable
Additional from
Shares Common Paid-in Retained Employee
Outstanding Stock Capital Earnings Stockholders Total
----------- ----- ------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1994...................... 4,800,000 $ 5 $ 12,537 $ 2,606 -- $ 15,148
Net Income..................................... 4,790 -- 4,790
---------- ------ --------- ---------- ---------- ----------
Balances, December 31, 1994.................... 4,800,000 5 12,537 7,396 -- 19,938
Net Income..................................... 6,344 -- 6,344
---------- ------ --------- ---------- ---------- ----------
Balances, December 31, 1995.................... 4,800,000 5 12,537 13,740 -- 26,282
Stock Issued Under Employee Stock
Purchase Plan................................ 137,000 -- 1,543 -- $ (1,383) 160
Collections of Stockholders' Receivables....... -- -- -- -- 332 332
Refunds on Employee Stock Purchases............ (17,600) -- (198) -- 198
Director Compensation.......................... 3,103 -- 37 -- -- 37
Plan......................................... -- -- -- -- -- --
Net Income..................................... -- -- -- 8,440 8,440
---------- ------ --------- ---------- ---------- ----------
Balances, December 31, 1996.................... 4,922,503 5 13,919 22,180 (853) 35,251
Stock Issued Under Employee Stock
Purchase Plan (unaudited).................... 6,200 -- 71 -- (71) --
Collections of Stockholders' Receivables
(unaudited).................................. -- -- -- -- 241 241
Refunds on Employee Stock Purchases
(unaudited).................................. (15,500) -- (175) -- 175 --
Director Compensation Plan (unaudited)......... 877 -- 13 -- -- 13
Net Income (unaudited)......................... -- -- -- 3,003 -- 3,003
---------- ------ --------- ---------- ---------- ----------
Balances, June 30, 1997 (unaudited)............ 4,914,080 $ 5 $ 13,828 $ 25,183 $ (508) $ 38,508
========= ====== ========= ========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
RIVIERA HOLDINGS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years Ended Six Months Ended Three Months Ended
December 31, June 30, June 30,
----------------------------- ------------------- --------------------
1994 1995 1996 1996 1997 1996 1997
---- ---- ---- ---- ---- ---- ----
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C> <C> <C> <C> <C>
Net income........................................ $ 4,790 $ 6,344 $ 8,440 $ 4,616 $ 3,003 $ 2,145 $ 2,019
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization................... 5,674 6,811 8,212 3,862 5,010 1,974 2,578
Provision for bad debts......................... 991 478 524 240 (62) 97 (156)
Provision for gaming discounts.................. 133 143 232 14 (66) -- (69)
Write-off of secondary offering costs........... -- -- -- -- 850 -- --
Gain on disposition of long-term debt, net..... -- -- (505) -- --
Interest expense................................ 12,764 12,453 12,085 6,100 6,043 3,039 3,030
Interest paid................................... (13,052) (12,489) (12,072) (6,120) (5,634) (5,979) (5,610)
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable.... (1,116) 126 (1,535) (81) 795 (31) 97
Decrease (increase) in inventories............ (508) 86 (853) (327) 247 152 23
Decrease (increase) in prepaid expenses and
other assets............................... (310) (212) (90) (830) 426 (935) 248
Decrease in restricted cash for periodic
slot payments.............................. 591 318 578 253 253 253 253
Increase (decrease) in accounts payable....... 1,064 1,033 166 (909) (1,790) 268 (1,161)
Increase (decrease) in accrued expenses....... 2,393 758 104 46 (1,704) 168 (1,184)
Increase (decrease) in current income
taxes payable.............................. 573 (522) 362 (51) 165 (747) 97
Increase in deferred income taxes payable..... 2,010 1,013 1,603 1,008 258 468 (4)
Increase in non-qualified pension plan
obligation to CEO upon retirement.......... 375 400 1,039 212 640 106 235
------- ------- ------- ------- -------- ------- --------
Net cash provided by operating activities.. 16,372 16,740 18,290 8,033 8,434 978 397
------- ------- ------- ------- -------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for property and equipment... (8,933) (7,836) (14,923) (5,259) (6,885) (3,025) (2,644)
Increase (decrease) in other assets............... (1,506) (382) 1,906 2,699 (1,099) 1,052 (527)
------- ------- ------- ------- -------- ------- --------
Net cash used in investing activities...... (10,439) (8,218) (13,017) (2,560) (7,984) (1,973) (3,171)
------- ------- ------- ------- -------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings................ 675 176 209 98 -- 49 --
Payments on long-term borrowings.................. (3,371) (3,159) (2,226) (1,622) (826) (1,030) (745)
Proceeds from issuance of stock to employees
and directors................................... -- -- 197 12 (91) 12 (23)
Collections of notes receivable from employees.... -- -- 332 160 345 160 134
------- ------- ------- ------- -------- ------- --------
Net cash used in financing activities...... (2,696) (2,983) (1,488) (1,352) (572) (809) (634)
------- ------- ------- ------- -------- ------- --------
INCREASE IN CASH AND CASH EQUIVALENTS:.............. 3,237 5,539 3,785 4,121 (122) ($1,804) ($3,408)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD:........................................... 13,186 16,423 21,962 21,962 25,747 $27,887 $ 29,033
------- ------- ------- ------- -------- ------- --------
CASH AND CASH EQUIVALENTS, END OF
PERIOD:............................................ $16,423 $21,962 $25,747 $26,083 $ 25,625 $26,083 $ 25,625
======= ======= ======= ======= ======== ======= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Income taxes paid................................. $ 292 $ 2,852 $ 2,463 $ 2,032 $ 1,160 $ 1,982 $ 960
======= ======= ======= ======= ======== ======= ========
SUPPLEMENTAL DISCLOSURE OF NON-CASH
FINANCING ACTIVITIES
Stock issued to employees for notes receivable.... -- -- $ 1,383 -- -- -- --
=======
Non-cash reductions of long-term debt............. -- -- $ 845 -- -- -- --
=======
See notes to consolidated financial statements.
</TABLE>
F-6
<PAGE>
RIVIERA HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Basis of Presentation
Riviera Holdings Corporation (the "Company") and its wholly-owned
subsidiary Riviera Operating Corporation ("ROC") were incorporated on January
27, 1993, in order to acquire all assets and liabilities of Riviera, Inc.
Casino-Hotel Division on June 30, 1993, pursuant to a plan of reorganization.
In July 1994, management established a new division, Riviera Gaming
Management, Inc. ("RGM") for the purpose of obtaining management contracts in
Nevada and other jurisdictions. In August 1995, RGM incorporated in the state of
Nevada as a wholly owned subsidiary of ROC.
Nature of Operations
The primary line of business of the Company is the operation of the
Riviera Hotel and Casino on the "Strip" in Las Vegas, Nevada. The Company is
engaged in a single industry segment, the operation of a hotel/ casino with
restaurants and related facilities. The Company also manages the Four Queens
Hotel & Casino in downtown Las Vegas (see Note 10).
Casino operations are subject to extensive regulation in the State of
Nevada by the Gaming Control Board and various other state and local regulatory
agencies. Management believes that the Company's procedures for supervising
casino operations, for recording casino and other revenues and for granting
credit comply, in all material respects, with the applicable regulations.
Interim Financial Information
The financial information at June 30, 1997 and for the three and six
months ended June 30, 1996 and 1997, is unaudited. However, such information
reflects all adjustments (consisting solely of normal recurring adjustments)
that are, in the opinion of management, necessary to a fair presentation of the
financial position results of operations and cash flows for the interim period.
The results of operations for the three and six months ended June 30, 1996 and
1997, are not necessarily indicative of the results that will be achieved for
the entire year.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries ROC and RGM entities. All material
intercompany accounts and transactions have been eliminated.
Cash and Cash Equivalents
All highly liquid investments securities with a maturity of three
months or less when acquired are considered to be cash equivalents. The Company
accounts for investment securities in accordance with Statement of Financial
Accounting Standards No. 115 ("SFAS 115"), Accounting for Certain Investments in
Debt and Equity Securities.
F-7
<PAGE>
RIVIERA HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company's investment securities, along with certain cash and cash
equivalents that are not deemed securities under SFAS 115, are carried on the
consolidated balance sheets in the cash and cash equivalents category. SFAS 115
addresses the accounting and reporting for investments in equity securities that
have readily determinable fair values and for all investments in debt
securities, and requires such securities to be classified as either
held-to-maturity, trading or available-for-sale. Management determines the
appropriate classification of its investment securities at the time of purchase
and re-evaluates such determination at each balance sheet date. Held to maturity
securities are required to be carried at amortized cost. At December 31, 1995
and 1996, securities classified as held to maturity were comprised of debt
securities issued by the U.S. Treasury and other U.S. government corporations
and agencies and repurchase agreements with an amortized cost of $15,000,000 and
$19,756,000 maturing in three months or less.
Inventories
Inventories consist primarily of food, beverage, gift shop and
promotional inventories and are stated at the lower of cost (determined on a
first-in, first-out basis) or market.
Property and Equipment
Property and equipment are stated at the lower of cost or market, and
capitalized lease assets are stated at the lower of the present value of future
minimum lease payments at the date of lease inception or market value. Interest
incurred during construction of new facilities or major additions to facilities
is capitalized and amortized over the life of the asset. Depreciation is
computed by the straight-line method over the shorter of the estimated useful
lives or lease terms, if applicable, of the related assets, which range from 5
to 40 years. The costs of normal maintenance and repairs is charged to expense
as incurred. Gains or losses on disposals are recognized as incurred.
Restricted Cash for Periodic Slot Payments
At December 31, 1995 and 1996, the Company had interest-bearing
deposits with a commercial bank in the amount of $1,039,000 and $461,000
respectively, which are restricted as to use. These amounts represent deposits
required by the State of Nevada Gaming Control Board to fund periodic slot
payments due customers through the year 2000.
Fair Value Disclosure as of December 31, 1996
Cash and cash equivalents, accounts receivable, restricted cash for
periodic slot payments, accounts payable and accrued liabilities -- The carrying
value of these items are a reasonable estimate of their fair value.
Long-term Debt -- The fair value of the Company's long-term debt is
estimated based on the quoted market prices for the same or similar issues or on
the current rates offered to the Company for debt of the same remaining
maturities. Based on the borrowing rates currently available to the Company for
debt with similar terms and average maturities, the estimated fair value of
long-term debt is approximately $112,588,000.
F-8
<PAGE>
RIVIERA HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Casino Revenue
The Company recognizes, as gross revenue, the net win from gaming
activities, which is the difference between gaming wins and losses.
Promotional Allowances
Promotional allowances consist primarily of accommodations,
entertainment, and food and beverage services furnished without charge to
customers. The retail value of such services is included in the respective
revenue classifications and is then deducted as promotional allowances.
The estimated costs of providing promotional allowances are classified
as costs of the casino operating department through interdepartmental
allocations. These allocations for the years ended December 31, 1994, 1995 and
1996, are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
----------- ---------- --------
(in thousands)
<S> <C> <C> <C>
Food and beverage................................. $ 7,225 $ 6,570 $ 6,671
Rooms............................................. 1,843 1,451 1,410
Entertainment..................................... 2,121 2,280 2,592
-------- -------- ---------
Total costs allocated to casino................... $ 11,189 $ 10,301 $ 10,673
======== ======== =========
</TABLE>
Federal Income Taxes
The Company and its subsidiaries file a consolidated federal tax
return. The Company accounts for income taxes in accordance with SFAS 109,
Accounting for Income Taxes. SFAS 109 requires recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Deferred income
taxes reflect the net tax effects of (i) temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes, and (ii) operating loss and tax credit
carryforwards.
Net Income Per Share
Earnings per common and common equivalent share is computed using the
weighted average number of shares outstanding adjusted for the incremental
shares attributed to outstanding options to purchase common stock. Fully diluted
per share amounts are substantially the same as primary per share amounts for
the periods presented.
On November 16, 1995, the stockholders of the Company approved an
amendment to the Company's Amended and Restated Articles of Incorporation to
increase the authorized shares of common stock from 5,000,000 to 20,000,000 and
a four for one stock split. Accordingly, per share information, average number
of shares outstanding and number of shares outstanding in the accompanying
consolidated financial statements have been adjusted for the stock split as of
the earliest date presented (January 1, 1994).
F-9
<PAGE>
RIVIERA HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Estimates and Assumptions
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results may differ from estimates.
Reclassifications
Certain reclassifications have been made to the 1994 and 1995 financial
statements to conform with the current year presentation.
Recently Adopted Accounting Standards
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement No. 121 ("SFAS 121"), Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of. During 1996 the Company
adopted the provisions of SFAS 121. SFAS 121 requires that long-lived assets and
certain identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. SFAS 121 is effective for fiscal years beginning after December
15, 1995. Adoption of SFAS 121 in the current year did not have a material
impact on the consolidated financial statements of the Company.
In October 1995, the FASB issued Statement No. 123 ("SFAS 123"),
Accounting for Stock-Based Compensation, which establishes financial accounting
and reporting standards for stock-based employee compensation plans and for
transactions in which an entity issues its equity instruments to acquire goods
or services from nonemployees. The Company continues to account for stock based
compensation arrangements in accordance with Accounting Principles Board No. 25,
Accounting for Stock Issued to Employees, and therefore the adoption of SFAS No.
123 had no effect on the financial position or results of operations of the
Company. The Company has included additional disclosures about stock-based
employee compensation plans as required by SFAS 123 (see Note 12).
Recently Issued Accounting Standards
The FASB recently issued SFAS No. 128, Earnings Per Share. This
statement establishes standards for computing and presenting earnings per share
and is effective for financial statements issued for periods ending after
December 15, 1997. Earlier application of this statement is not permitted and
upon adoption requires restatement (as applicable) of all prior-period earnings
per share data presented. Management believes that the implementation of this
standard will not have a significant impact on earnings per share.
In addition, the FASB issued SFAS No. 129, Disclosure of Information
about Capital Structure in February 1997. This statement establishes standards
for disclosing information about an entity's capital structure. Management
intends to comply with the disclosure requirements of this statement which are
effective for periods ending after December 15, 1997.
F-10
<PAGE>
RIVIERA HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Accounts Receivable
Accounts receivable consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
---- ----
(in thousands)
<S> <C> <C>
Casino........................................................ $ 2,581 $ 2,280
Hotel......................................................... 2,494 3,479
-------- -------
Total......................................................... 5,075 5,759
Less allowance for bad debts and discounts.................... 741 646
-------- -------
Total......................................................... $ 4,334 $ 5,113
======== =======
</TABLE>
Changes in the casino and hotel allowance for bad debts and discounts
for the years ended December 31, 1995, and 1996, consist of the following:
<TABLE>
1995 1996
---- ----
(in thousands)
<S> <C> <C>
Beginning balance............................................. $ 1,424 $ 741
Write-offs.................................................... (1,358) (912)
Recoveries.................................................... 54 61
Provision for bad debts....................................... 478 524
Provision for gaming discounts................................ 143 232
-------- --------
Ending balance................................................ $ 741 $ 646
======== ========
</TABLE>
3. Property and Equipment
Property and equipment consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
---- ----
(in thousands)
<S> <C> <C>
Land and improvements....................................... $ 21,751 $ 21,751
Buildings and improvements.................................. 75,875 77,455
Equipment, furniture, and fixtures.......................... 38,307 51,650
----------- ---------
Total property and equipment.............................. 135,933 150,856
Less accumulated depreciation............................... 14,884 23,096
----------- ---------
Net property and equipment.................................. $ 121,049 $ 127,760
=========== =========
</TABLE>
F-11
<PAGE>
RIVIERA HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. Accounts Payable and Accrued Expenses
Accounts payable consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
---- ----
(in thousands)
<S> <C> <C>
Outstanding chip and token liability...................... $ 854 $ 836
Casino account deposits................................... 642 498
Unpaid race and sports book winners....................... 26 17
Miscellaneous gaming...................................... 850 762
----------- --------
Total liabilities related to gaming activities.......... 2,372 2,113
Accounts payable to vendors............................... 4,497 5,118
Hotel deposits............................................ 1,415 1,123
Other..................................................... 80 176
----------- --------
Total..................................................... $ 8,364 $ 8,530
=========== ========
</TABLE>
Accrued expenses consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
---- ----
(in thousands)
<S> <C> <C>
Payroll, related payroll taxes and vacation............... $ 5,095 $ 5,244
Health and other liability claims......................... 548 450
Union benefits and dues................................... 816 663
Progressive slot machine liability........................ 226 203
Taxes..................................................... 518 631
Professional fees......................................... 208 176
Incentive plans........................................... 2,209 2,357
Interest.................................................. 20 33
-------- --------
Total..................................................... $ 9,640 $ 9,757
======== ========
</TABLE>
5. Other Long Term Liabilities
Other long term liabilities consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
---- ----
(in thousands)
<S> <C> <C>
Periodic slot payments due to customers through
2000, prefunded by restricted cash (see Note 1)......... $ 1,039 $ 461
Non-qualified pension plan obligation to the CEO
of the Company, payable in 20 quarterly
installments upon expiration of his employment 1,710 2,749
---------- ---------
contract................................................
$ 2,749 $ 3,210
=========== ==========
</TABLE>
F-12
<PAGE>
RIVIERA HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. Long-Term Debt
Long-term debt consists of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
----------- -----------
(in thousands)
<S> <C> <C>
First Mortgage Notes maturing on December 31, 2002, bearing
interest at the rate of 11% per annum, payable
semi-annually on June 30 and December 31, redeemable
beginning June 1, 1998, at 104.3125%; 1999 at 102.8750%;
2000 at 101.4375%; and 2001 and thereafter at 100%. These
notes are collateralized by the physical structures
comprising the Riviera
Hotel and Casino........................................... $ 100,000 $ 100,000
Unsecured, non-interest bearing notes to settle
Class 4, 5 and 12 claims, discounted at 16.8%,
paid in 1996............................................... 2,056 --
Unsecured, non-interest bearing promissory note
in an original principal amount of $8,000,000 (the "Class
13/14 Note") to settle the claims of the former sole
shareholder, and his affiliates, payable to a bank in
semi-annual installments of $250,000 until the Class 12
Note is paid in full and commencing on the next payment
due thereafter in semi-annual installments of
$500,000 to $750,000 discounted at 12%..................... 4,159 4,707
Capitalized lease obligations (see Note 8)................... 1,341 986
Unsecured, promissory notes in the original
principal amount of $441,262, bearing interest
at the rate of 8.5% per annum, payable monthly
and maturing December 31, 1998............................. 266 185
---------- ----------
Total long-term debt......................................... 107,822 105,878
Less current maturities by terms of debt..................... 2,005 1,297
---------- ----------
Total........................................................ $ 105,817 $ 104,581
========== ==========
</TABLE>
Maturities of long-term debt for the years ending December 31, were as follows:
(in thousands)
1997................ $ 1,297
1998................ 1,181
1999................ 1,215
2000................ 1,491
2001................ 694
Thereafter.......... 100,000
-----------
Total............... $ 105,878
===========
The Indenture for the First Mortgage Notes imposes certain financial
covenants and restrictions on the Company, including but not limited to the
maintenance of a minimum consolidated net worth, which
F-13
<PAGE>
RIVIERA HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
should not be less than $2,542,000 for any two consecutive fiscal quarters, and
limitations on (i) dividends on common stock, (ii) liquidation of assets, (iii)
incurrence of indebtedness, (iv) creation of subsidiaries and joint ventures and
(v) capital purchases. Capital purchases are limited to cash expenditures of
$6,000,000 plus 80% of cumulative available cash flow from the Company's
inception at July 1, 1993, to the extent that this cash flow has not been
utilized in any prior year. Management believes the Company is in compliance
with the covenants of the Indenture as of December 31, 1996.
Effective September 8, 1995, the Board of Directors and holders of 94%
of the Company's First Mortgage Notes approved amendments to certain note
restrictive covenants. Noteholders who consented to the modification of the
restrictive covenants were paid a fee of $5.00 for each $1,000 of Notes held for
a total payment of $500,000 which is included in other assets at December 31,
1995 and 1996 and amortized over the life of the related debt. These costs are
being amortized using the straight-line method which approximates the effective
interest method over the life of the indebtedness. The amendments to the
restrictive covenants were designed to permit the Company's management team to
utilize its expertise in turning around troubled gaming properties which are
either in or on the verge of bankruptcy and to manage casinos in so called "new
venues".
During the fourth quarter of 1996, the Company made the final payment
on the note issued to settle the Class 12 claim, which was less than what was
recorded and resulted in income of approximately $845,000. Also during the
fourth quarter of 1996, the terms of the Class 13/14 Note was revised, which
resulted in a decrease in the discount rate from 16.8% to 12.0% and increased
principal, resulting in additional expense of $340,000. Other, net income for
the year ended December 31, 1996, includes the net effect of the above
transactions.
In February, 1997, the Company entered into a $15.0 million five year
reducing revolving line of credit collateralized by equipment. The revolving
line of credit bears interest at 0.5% or LIBOR plus 2.9%. Availability of loans
under the Revolving Credit Facility is subject to compliance by the Company and
ROC with certain conditions precedent, including the maintenance of certain
financial ratios. As a result of the sale of the Existing Notes, the Company
ceased to meet such conditions for borrowing availability. The Company intends
to renegotiate the conditions to borrowing under the Revolving Credit Facility
or to seek a replacement facility. There can be no assurance, however, that such
renegotiations or replacement will be successful. The Company has not utilized
this line of credit.
The Company has credit facilities totaling $1,100,000 at banks for
letters of credit issued periodically to foreign vendors for purchases of
merchandise.
7. Federal Income Taxes
SFAS 109 requires the Company to compute deferred income taxes based
upon the difference between the financial statement and tax basis of assets and
liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse.
F-14
<PAGE>
RIVIERA HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The effective income tax rates on income attributable to continuing
operations differ from the statutory federal income tax rates for the years
ended December 31, 1994, 1995 and 1996, as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---------------------- --------------------- ----------------------
Amount Rate Amount Rate Amount Rate
------ ---- ------ ---- ------ ----
(in thousands)
Taxes at federal
<S> <C> <C> <C> <C> <C> <C>
statutory rate........... $ 2,680 35.0% $ 3,386 35.0% $ 4,504 35.0%
Other...................... 195 2.5 (54) (1.0) (76) (1.0)
-------- -------- -------- --------- --------- ---------
Provision for income
taxes.................... $ 2,875 37.5% $ 3,332 34.0% $ 4,428 34.0%
======== ======== ======== ========= ========= =========
</TABLE>
The tax effects of the items comprising the Company's net deferred tax
liability consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
---- ----
(in thousands)
Deferred Tax Liabilities:
<S> <C> <C>
Basis in long-term debt obligations.................. $ 640 $ 457
Reserve differential for hospitality and gaming
activities........................................ 1,090 1,133
Difference between book and tax depreciable
property.......................................... 4,430 5,226
Other................................................ 383 806
-------- --------
Total........................................ 6,543 7,622
-------- --------
Deferred Tax Assets:
Reserves not currently deductible.................... 1,500 1,806
Bad debt reserves.................................... 260 226
AMT credit........................................... 1,760 964
-------- --------
Total........................................ 3,520 2,996
-------- --------
Net deferred tax liability........................... $ 3,023 $ 4,626
======== ========
</TABLE>
The Company has $964,000 of alternative minimum tax credit available to
offset future income tax liabilities. The credit has no expiration date.
8. Leasing Activities
The Company leases certain equipment under capital leases. These
agreements have been capitalized at the present value of the future minimum
lease payments at lease inception and are included with property and equipment.
Management estimates the fair market value of the property and equipment subject
to the leases approximates the net present value of the leases. The leased
property and equipment consist primarily of signs and air conditioning
equipment.
F-15
<PAGE>
RIVIERA HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The following is a schedule by year of the minimum rental payments due
under capital leases, as of December 31, 1996:
(in thousands)
1997 $ 441
1998 441
1999 429
2000 227
--------
Total minimum lease payments 1,538
Less taxes, maintenance and insurance 390
Less interest portion of payments 162
--------
Present value of net minimum lease payments $ 986
========
Rental expense for the years ended December 31, 1994, 1995 and 1996, was
approximately $295,000, $406,000 and $334,000, respectively.
In addition, the Company leases retail space to third parties under
terms of noncancelable operating leases which expire in various years through
1999. Rental income, which is included in other income, for the years ended
December 31, 1994, 1995 and 1996, was approximately $1,687,000, $1,533,000 and
$1,573,000, respectively.
At December 31, 1996, the Company had future minimum annual rental
income due under noncancelable operating leases as follows:
(in thousands)
1997...... $ 1,159
1998...... 946
1999...... 748
2000...... 494
2001...... 351
Thereafter 993
--------
Total..... $ 4,691
========
9. Commitments and Contingencies
The Company is party to several routine lawsuits both as plaintiff and
defendant arising from normal operations of a hotel. Management does not believe
that the outcome of such litigation in the aggregate, will have a material
adverse effect on the financial position, results of operations, or cash flows
of the Company.
10. Management Agreements
From August 1996 until February 1997, RGM has been operating the Four
Queens located adjacent to the Golden Nugget on Fremont Street in downtown Las
Vegas under an interim management agreement for a fee of $83,333 per month. The
long-term management agreement (the "Management Agreement") with Elsinore
Corporation ("Elsinore"), the owner of the Four Queens, went into effect on
February 28, 1997, the effective date of the Chapter 11 plan of reorganization
of Elsinore. The Company
F-16
<PAGE>
RIVIERA HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
believes that the terms of the Management Agreement are no less favorable to the
Company than if the Company had negotiated with an independent party.
The term of the Management Agreement is approximately 40 months,
subject to earlier termination or extension. Either party may terminate if
cumulative earnings before interest, taxes, depreciation and amortization
("EBITDA") for the first two fiscal years is less than $12.8 million. The term
can be extended by an additional 24 months at RGM's option, if cumulative EBITDA
for the three fiscal years of the term is at least $19.2 million. RGM will be
paid a fee of 25% of any increase in annual EBITDA over $4.0 million, subject to
a $1.0 million minimum fee, payable in equal monthly installments. In addition,
the management agreement entitles RGM to receive warrants for 1,125,000 shares
of common stock of Elsinore, exercisable during the term or extended term of the
management agreement at an exercise price based on the higher of (i) the per
share book value on the effective date of the Elsinore bankruptcy plan or (ii)
total stockholders' equity of $5.0 million.
Either party can terminate the management agreement if (i)
substantially all the Four Queens' assets are sold, (ii) the Four Queens is
merged or (iii) a majority of the Four Queens' or Elsinore's shares are sold.
Upon such termination, RGM will receive a $2.0 million termination bonus minus
any amount realized or realizable upon exercise of the warrants.
11. Employment Agreements and Employee Benefit Plans
The Company has an employment agreement with Mr. Westerman, Chairman of
the Board and Chief Executive Officer of the Company. This agreement includes an
annual base salary, an incentive bonus based upon the extent of adjusted
operating earnings, contributions to a Non-Qualified Pension Plan and
contributions to a Profit Sharing and 401(k) Plan. In addition, the Company has
termination fee agreements with each of the Directors, Executive Officers and
Significant Employees pursuant to which each of such employees will be entitled
to receive one year's salary and health insurance benefits if their employment
with the Company is terminated within one year of a change of control of the
Company and without cause, or the involuntary termination of Mr. Westerman. On
November 21, 1996, the Company amended Mr. Westerman's employment agreement
subject to stockholder approval, which was granted at the annual meeting held on
May 8, 1997.
The Company has an incentive compensation plan, covering employees of
the Company who, in the opinion of the Chairman of the Board, either serve in
key executive, administrative, professional or technical capacities with the
Company or other employees who also have made a significant contribution to the
successful and profitable operation of the Company. The amount of the bonus is
based on operating earnings before depreciation, amortization, interest expense,
provision for income taxes, extraordinary losses and gains, any provisions or
payments made pursuant to the Plan, and any provisions or payments made pursuant
to the incentive compensation of the Chairman and Chief Executive Officer.
During the years ended December 31, 1994, 1995 and 1996, the Company recorded
accrued bonuses of $1,430,000 and $2,123,000 and $2,588,000, respectively, based
upon the above incentive compensation plan and the incentive compensation plan
established for the Chairman of the Board under his employment agreement.
The Company contributes to multi-employer pension plans under various
union agreements to which the Company is a party. Contributions, based on wages
paid to covered employees, were approximately $1,725,000, $1,576,000 and
$1,650,000 for the years ended December 31, 1994, 1995 and 1996. These
contributions were for approximately 1,364 employees including food and beverage
F-17
<PAGE>
RIVIERA HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
employees, room department employees, carpenters, engineers, stage hands,
electricians, painters and teamsters. The Company's share of any unfunded
liability related to multi-employer plans, if any, is not determinable.
The Company sponsors a Profit Sharing and 401(k) Plan which incurred
administrative expenses of approximately $67,000, $59,000 and $34,000 for the
years ended 1994, 1995 and 1996.
The profit sharing component of the Profit Sharing and 401(k) Plan
provides that the Company will make a contribution equal to 1% of each eligible
employee's annual compensation if a prescribed annual operating earnings target
is attained and an additional 1/10th of 1% thereof for each $200,000 by which
operating earnings is exceeded, up to a maximum of 3% thereof. The Company may
elect not to contribute to the Profit Sharing and 401(k) Plan if it notifies its
employees by January of the Profit Sharing and 401(k) Plan year. An employee
will become vested in the Company's contributions based on the employee's years
of service. An employee will receive a year of vesting service for each plan
year in which the employee completed 1,000 hours of service. Vesting credit will
be allocated in 20% increments for each year of service commencing with the
attainment of two years of service. An employee will be fully vested following
the completion of six years of service.
The 401(k) component of the Profit Sharing and 401(k) Plan provides
that each eligible employee may contribute up to 15% of such employee's annual
compensation, and that the Company will contribute 1% of each employee's annual
compensation for each 4% of compensation contributed by the employee, up to a
maximum of 2%. All non-union employees of the Company are eligible to
participate in the Profit Sharing and 401(k) Plan after twelve consecutive
months of service with the Company.
ROC is a party to termination fee agreements with certain significant
employees pursuant to which each such employee is entitled to receive one year's
salary and benefits if his or her employment with ROC is terminated within one
year of a change of control of the Company or ROC, or the involuntary
termination of Mr. Westerman's employment. The estimated total amount that would
be payable under all such agreements at December 31, 1996 is approximately $1.3
million in salaries and $400,000 in benefits.
ROC is a party to stay bonus agreements with certain significant
employees pursuant to which each such employee is entitled to receive one year's
salary (less the amount of any incentive bonus paid in 1997 for 1996) in the
event there is a change of control of the Company. The agreements expire on
December 31, 1997. The estimated total amount that would be payable under all
such agreements is approximately $300,000.
12. Stock Option Plans
At a meeting held on July 27, 1993, the Company's Board of Directors
adopted a stock option plan providing for the issuance of both non-qualified and
incentive stock options (as defined in the Internal Revenue Code). This stock
option plan was ratified by the Company's stockholders at the April 26, 1994
annual meeting. The number of shares available for purchase under the Stock
Option Plan as adopted was 120,000 (as adjusted pursuant to antidilution
provisions). The stockholders approved a four-for-one stock split, increasing
the number of shares of Common Stock available for purchase under the Stock
Option Plan to 480,000. Options were granted for 228,000 shares for 1993,
132,000 shares for 1994, none for 1995, and 110,000 for 1996, leaving a balance
available for future grants of 10,000 shares. No options were exercised in 1994,
1995 or 1996. On November 21, 1996, the Company amended the Stock Option Plan,
which was approved at the annual meeting held on May 8, 1997, to increase the
number of shares
F-18
<PAGE>
RIVIERA HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
available under the Stock Option Plan from 480,000 shares to 1,000,000 shares
and granted options to purchase 300,000 additional shares to Mr. Westerman.
Options vest 25% one year after the date of grant and 25% each subsequent year.
The term of an option can in no event be exercisable more than ten years (five
years in the case of an incentive option granted to a shareholder owning more
than 10% of the Common Stock), or such shorter period, if any, as may be
necessary to comply with the requirements of state securities laws, from the
date such option is granted.
On March 5, 1996, the Board of Directors adopted an employee stock
purchase plan (the "Stock Purchase Plan"), which was approved by the
stockholders on May 10, 1996. A total of 300,000 shares of common stock (subject
to adjustment for capital changes) in the aggregate may be granted under the
stock purchase plan. The Stock Purchase Plan is administered by the compensation
committee. The purchase price per share of stock shall be 85% of per share
market value of the common stock on the purchase date. On May 31, 1996,
approximately 560 union and non-union employees participated in the 1996
employee stock purchase plan. Under the plan, 137,000 shares were issues to
employees at $11.26 (85 percent of market price at May 10, 1996), for $160,000
cash and the balance in notes receivable of $1,383,000 which are payable over
two years via payroll deduction. During 1996, 17,600 shares were returned
through the plan as the result of refunds through the employees.
On May 10, 1996, the stockholders approved a Nonqualified Stock Option
Plan for Non-Employee Directors (the "Nonqualified Stock Option Plan") and a
Stock Compensation Plan for Directors serving on the Compensation Committee (the
"Stock Compensation Plan"). The total number of shares available for purchase
under each plan is 50,000. Pursuant to the Nonqualified Stock Option Plan, two
directors were granted options to purchase 4,000 shares at an exercise price of
$13.25, which represented fair market value. As of December 31, 1996, 3,103
shares were issued pursuant to the Stock Compensation Plan at $12.08 per share.
The Company has adopted the disclosures-only provision of Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation.
Accordingly, no compensation cost has been recognized for the stock option plan.
Had compensation cost for the Company's stock option plan been determined based
on the fair value at the date of grant for awards consistent with the provisions
of SFAS 123, the Company's net income and pro forma net income common share and
common share equivalent would have been decreased to the pro forma amounts
indicated below.
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31
1995 1996
--------------- ----------
(in thousands, except per share data)
<S> <C> <C>
Net income-- as reported........................... $ 6,344 $ 8,440
Net income-- pro forma............................. 6,289 8,380
Net income per common and common share
equivalent-- as reported......................... $ 1.26 $ 1.63
Net income per common and common share
equivalent-- pro forma........................... $ 1.25 $ 1.61
</TABLE>
F-19
<PAGE>
RIVIERA HOLDINGS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. Subsequent Events (Unaudited)
Secondary Offering Costs -- The Company withdrew its secondary offering
due to market conditions and, as a result, charged costs totaling $850,000 to
earnings for the quarter ended March 31, 1997.
Proposed Merger -- The Company intends to execute in the near future an
Agreement and Plan of Merger (the "Merger Agreement") among the Company and
certain entities controlled by Allen E. Paulson, a California businessman,
pursuant to which one of new entities would be merged with and into the Company
(the "Merger"). The closing of the Merger would be subject to a number of
conditions, including (i) approval by the affirmative vote of the holders of at
least 60% of all issued and outstanding shares of Common Stock, par value $.001
per share (the "Common Stock") (excluding the shares of Common Stock owned by
Mr. Paulson or his affiliates) at a meeting scheduled to be held this fall, (ii)
Mr. Paulson's licensure by the Nevada Gaming Authorities, (iii) the absence of
any regulation, judgment or other law that prohibits the consummation of the
Merger or would prohibit or limit the Company's ownership or control of a
material portion of the Company's bussiness or assets following the Merger, and
(iv) the absence of any material adverse change in the Company's cumulative
EBITDA for the period commencing on April 1, 1997 and through and including the
most recent month prior to such closing for which the Company's financial
statements are available. The Company expects that the holders of approximately
56% of the Company's Common Stock will enter into an option and voting agreement
simultaneously with the execution of the Merger Agreement and agree to vote for
the Merger. However, there can be no assurance that the Merger Agreement or such
option and voting agreement will be executed or that the Merger will be
consummated.
Proposed Black Hawk Project -- On August 21, 1997 the Company acquired
a 71,000 square foot site in Black Hawk, Colorado (the "Black Hawk Land"). The
Black Hawk Land is in an area zoned for gaming, and the Company plans to
construct a casino, on the site, which is expected to include 1,000 slot
machines, 14 gaming tables and entertainment, food and beverage and parking
facilities. The Company has applied for a Colorado gaming license. The Company
expects that site clearance work will begin in the fall of 1997, with the
opening of the casino scheduled for the spring of 1999.
Subsequent Financing -- On August 13, 1997, the Company issued $175
million aggregate principal amount of 10% First Mortgage Notes due 2004 (the
"First Mortgage Notes") in a transaction exempt from registration under the
Securities Act of 1933, as amended. The net proceeds from the sale of the First
Mortgage Notes were approximately $172.8 million, a portion of which were used
as follows: (i) $109.8 million was used to defease the Company's 11% First
Mortgage Notes due 2002, (ii) $4.5 million was used to repay the outstanding
principal of any and accrued and unpaid interest on the Company's Class 13/14
Unsecured Promissory Note and (iii) $7.0 million was used to pay fees and
expenses relating to the foregoing as well as the sale of the First Mortgage
Notes. In addition, the Company has used $15 million of the net proceeds to
acquire the Black Hawk Land. The Company also intends to use the remaining net
proceeds from the sale of the First Mortgage Notes to fund the development of
Nickel Plaza and the expansion of the convention center, and, if necessary, to
provide additional financing for the Black Hawk Project and any remainder for
general corporate purposes.
The First Mortgage Notes are unconditionally guaranteed by all existing
and future restricted subsidiaries of the Company, which will not initially
include Black Hawk Operating Company. As of June 30, 1997, Black Hawk Operating
Company had not been formed and had no operations. Therefore the Company has not
included separate financial information for the guarantors as of June 30, 1997.
The Company intends to disclose such information in the future as the subsidiary
develops.
The Company is obligated to register with the Securities Exchange
Commission securities identical to the 10% First Mortgage Notes and to exchange
such registered securities for the First Mortgage Notes.
F-20
<PAGE>
Recently Issued Accounting Standards
On June 30, 1997, the FASB issued SFAS No. 130, Reporting Comprehensive
Income. This statement requires companies to classify items of other
comprehensive income by their nature in a financial statement and display the
accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position, and is effective for financial statements issued for fiscal
years beginning after December 15, 1997. Management does not believe this new
FASB will have material impact on their financial statements.
On June 30, 1997, the FASB issued SFAS No. 131, Disclosure About
Segments of an Enterprise and Related Information. This statement establishes
additional standards for segment reporting in the financial statements and is
effective for fiscal years beginning after December 15, 1997. Management has not
determined the effect of this statement on its financial statement disclosure.
F-21
<PAGE>
<TABLE>
<CAPTION>
============================================================== ======================================================
<S> <C>
No dealer, salesperson or other person has been authorized to $175,000,000
give any information or to make any representations not
contained in this Prospectus, and, if given or made, such
information or representations must not be relied upon as
having been authorized by the Company or the Initial
Purchasers. This Prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy, any of the Notes
offered hereby in any jurisdiction to any person to whom it
is unlawful to make such offer or solicitation in such [LOGO]
jurisdiction. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create
any implication that the information contained herein is
correct as of any time subsequent to the date hereof or that
there has been no change in the affairs of the Company since RIVIERA HOLDINGS CORPORATION
such date.
---------------
-----------------------
Page
Available Information................................ PROSPECTUS
Summary.............................................. _______________________
Risk Factors.........................................
Use of Proceeds......................................
Capitalization.......................................
Selected Historical Financial and
Operating Data.....................................
Ratio of Earnings to Fixed Charges...................
Management's Discussion and Analysis of OFFER TO EXCHANGE
Financial Condition and Results of 10% First Mortgage Notes
Operations......................................... due 2004
The Exchange Offer................................... for all outstanding
Certain Federal Income Tax Considerations............ 10% First Mortgage Notes
Business............................................. due 2004
The Proposed Merger..................................
Management...........................................
Ownership of the Company.............................
Certain Relationships and Related , 1997
Transactions.......................................
Description of Certain Indebtedness..................
Description of Notes.................................
Plan of Distribution.................................
Legal Matters........................................
Experts..............................................
Index to Combined Financial Statements
and Information....................................
Until , 1997 (90 days after the date of this
Prospectus), all dealers effecting transactions in
the Notes, whether or not participating in the
original distribution, may be required to deliver a
Prospectus. This is in addition to the obligation of
dealers to deliver a Prospectus when acting as
underwriters and with respect to their unsold
allotments or subscriptions.
============================================================== ======================================================
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Nevada law provides that Nevada corporations may include within their
articles of incorporation provisions eliminating or limiting the personal
liability of their directors and officers in shareholder actions brought to
obtain damages for alleged breaches of fiduciary duties, as long as the alleged
acts or omissions did not involve intentional misconduct, fraud, a knowing
violation of law or payment of dividends in violation of the Nevada statutes.
Nevada law also allows Nevada corporations to include in their articles of
incorporation or bylaws provisions to the effect that expenses of officers and
directors incurred in defending a civil or criminal action must be paid by the
corporation as they are incurred, subject to an undertaking on behalf of the
director or officer that he or she will repay such expenses if it is ultimately
determined by a court of competent jurisdiction that such officer or director is
not entitled to be indemnified by the corporation because such officer or
director did not act in good faith and in a manner reasonably believed to be in
or not opposed to the best interests of the corporation.
Nevada law provides that Nevada corporations may eliminate or limit the
personal liability of its directors and officers. This means that the articles
of incorporation could state a dollar maximum for which directors would be
liable, either individually or collectively, rather than eliminating liability
to the full extent permitted by the law.
The Articles of the Company and the Additional Registrants (other than
Riviera Gaming Management of Colorado, Inc.) provide that a director or officer
of such company shall not be personally liable to such company or its
shareholders for damages for any breach of fiduciary duty as a director or
officer, except for liability for (i) acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law, or (ii) the payment
of distributions in violation of NRS 78.300. In addition, NRS 78.751 and Article
VII of the Bylaws of each of such companies, under certain circumstances,
provide for the indemnification of the officers and directors of such company
against liabilities which they may incur in such capacities. A summary of the
circumstances in which such indemnification is provided for is set forth in the
following paragraph, but such summary is qualified in its entirety by reference
to Article VII of the Bylaws of such company.
In general, any director or officer of the Company and the Additional
Registrants (other than Riviera Gaming Management of Colorado, Inc.) (an
"Indemnitee") who was or is a party to, or is threatened to be made a party to,
or is otherwise involved in any threatened, pending or completed action or suit
(including without limitation an action, suit or proceeding by or in the right
of such company), whether civil, criminal, administrative or investigative (a
"Proceeding") by reason of the fact that the Indemnitee is or was a director or
officer of such company or is or was serving in any capacity at the request of
such company as a director, officer, employee, agent, partner or fiduciary of,
or in any other capacity for, another corporation or any partnership, joint
venture, trust or other enterprise shall be indemnified and held harmless by
such company for actions taken by the Indemnitee and for all omissions to the
full extent permitted by Nevada law against all expense, liability and loss
(including without limitation attorneys' fees, judgments, fines, taxes,
penalties and amounts paid or to be paid in settlement) reasonably incurred or
suffered by the Indemnitee in connection with any Proceeding. The rights to
indemnification specifically include the right to reimbursement from such
company for all reasonable costs and expenses incurred in connection with the
Proceeding and indemnification continues as to an Indemnitee who has ceased to
be a director or officer. The Board of Directors may include employees and other
persons as though they were Indemnitees. The rights to indemnification are not
exclusive of any other rights that any person may have by law, agreement or
otherwise.
The Bylaws of the Company and the Additional Registrants (other than
Riviera Gaming Management of Colorado, Inc.) each provide that such company may
purchase and maintain insurance or make other financial arrangements on behalf
of any person who otherwise qualifies as an Indemnitee under the foregoing
provisions. Other financial arrangements to assist the Indemnitee are also
permitted, such as the creation of a trust fund, the establishment of a program
of self-insurance, the securing of such company's obligation of indemnification
by
II-1
<PAGE>
granting a security interest or other lien on any assets (including cash) of
such company and the establishment of a letter of credit, guarantee or surety.
The Company and ROC have entered into agreements with each of their
respective directors, executive officers and significant employees providing for
indemnification by the Company and ROC of each of them to the extent permitted
by their respective Articles of Incorporation and Bylaws.
The Bylaws and Articles of Incorporation of Riviera Gaming Management
of Colorado, Inc. ("RGMC") provide that the Company shall, to the full extent
permitted by the Colorado Business Corporation Act, as amended from time to
time, indemnify all directors and officers of such company. Sections 7-109-101
to 7-109-110 of the Colorado Business Corporation Act provide in part that a
corporation shall have the power to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceedings (other than an action by or in the right of the
corporation) by reason of the fact that such person is or was a director,
officer, employee or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceedings if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceedings, had no reasonable cause to believe his conduct was unlawful.
Similar indemnity is authorized for such persons against expenses (including
attorneys' fees) actually and reasonably incurred in defense or settlement of
any threatened, pending or completed action or suit by or in the right of the
corporation, if such person acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation, and
provided further that (unless a court of competent jurisdiction otherwise
provides) such person shall not have been adjudged liable to the corporation.
Any such indemnification may be made only as authorized in each specific case
upon a determination by the shareholders or disinterested directors that
indemnification is proper because the indemnitee has met the applicable standard
of conduct. The indemnitee is presumed to be entitled to indemnification and
RGMC has the burden of proof to overcome that presumption. Where an officer or a
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses which
such officer or director actually or reasonably incurred.
Additionally, the Articles of Incorporation and Bylaws provide for
mandatory indemnification of directors to the fullest extent permitted by
Colorado law. This provision does not eliminate the liability of a director (i)
for a breach of the director's duty of loyalty to RGMC or its shareholders; (ii)
for acts or omissions by the director not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) for liability
arising under Section 7-108-403 of the Colorado Business Corporation Act
(relating to distributions to shareholders in violation of the Colorado Business
Corporation Act); or (iv) for any transaction from which the director derived an
improper personal benefit.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits.
3.1 Second Restated Articles of Incorporation of the Company.
3.2 Bylaws of the Company.
3.3 Articles of Incorporation of Riviera Operating Corporation.
3.4 Bylaws of Riviera Operating Corporation.
3.5 Articles of Incorporation of Riviera Gaming Management, Inc.
3.6 Bylaws of Riviera Gaming Management, Inc.
3.7 Articles of Incorporation of Riviera Gaming Management - Elsinore,
Inc.
3.8 Bylaws of Riviera Gaming Management - Elsinore, Inc.
II-2
<PAGE>
3.9 Articles of Incorporation for Riviera Gaming Management of Colorado,
Inc.+
3.10 Bylaws of Riviera Gaming Management of Colorado, Inc. +
4.1 Indenture dated as of August 13, 1997 between the Company and
Norwest Bank Minnesota, N.A., as trustee, the Guarantors party
thereto, Jefferies & Company, Inc. and Ladenburg Thalmann & Co.
Inc.+
4.2 Form of the Company's 10% Senior Notes due 2004+
5.1 Opinion of Dechert Price & Rhoads re: legality+
10.1 Registration Rights Agreement dated as of August 13, 1997 by and
among the Company, the Guarantors party thereto, Jefferies &
Company, Inc. and Ladenburg Thalmann & Co. Inc. (filed as Exhibit
4.1 to the Company's Current Report on Form 8-K filed August 27,
1997, Commission File No. 0-21430)*
10.2 Purchase Agreement dated August 8, 1997 among the Company, the
Guarantors party thereto, Jefferies & Company, Inc. and Ladenburg
Thalmann & Co., Inc. (filed as Exhibit 1.1 to the Company's Current
Report on Form 8-K filed August 27, 1997, Commission File No.
0-21430)*
10.3 Lease Agreement between Riviera, Inc. and Mardi Gras Food Court,
Inc. dated April 1, 1990 (filed as Exhibit 10.1 to Form 10,
Commission File No. 0-21430)*
10.4 Amendment to Lease Agreement between Riviera, Inc. and Mardi Gras
Food Court, Inc. dated April 1, 1990 (filed as Exhibit 10.2 to
Registration Statement Form S-1 filed with the Commission on August
11, 1993, File No. 33-67206)*
10.5 Lease Agreement between Riviera, Inc. and Leroy's Horse and Sports
Place (filed as Exhibit 10.3 to Form 10, Commission File No.
0-21430)*
10.6 Indemnity Agreement, dated June 30, 1993, from Riviera, Inc. and
Meshulam Riklis in favor of the Registrant and Riviera Operating
Corporation (filed as Exhibit 10.7 to Registration Statement Form
S-1 filed with the Commission on August 11, 1993, File No.
33-67206)*
10.7 Indemnity Agreement, dated June 30, 1993, from the Registrant in
favor of IBJ Schroder Bank & Trust Company (filed as Exhibit 10.8 to
Registration Statement Form S-1 filed with the Commission on August
11, 1993, File No. 33-67206)*
10.8 Equity Registration Rights Agreement, dated June 30, 1993, among the
Registrant and the Holders of Registerable Shares (filed as Exhibit
10.9 to Registration Statement Form S-1 filed with the Commission on
August 11, 1993, File No. 33-67206)*
10.9 Operating Agreement, dated June 30, 1993, between the Registrant and
Riviera Operating Corporation (filed as Exhibit 10.15 to
Registration Statement Form S-1 filed with the Commission on August
11, 1993, File No. 33-67206)*
10.10 Adoption Agreement regarding Profit Sharing and 401(k) Plans of the
Registrant (filed as Exhibit 10.16 to Registration Statement Form
S-1 filed with the Commission on August 11, 1993, File No.
33-67206)*
10.11 Howard Johnson & Company Regional Defined Contribution Plan, dated
March 16, 1990 (adopted by the Company pursuant to the Adoption
Agreement filed as Exhibit 10.17 to Registration Statement Form S-1
filed with the Commission on August 11, 1993, File No. 33-67206)*
10.12 Employment Agreement between Riviera, Inc. and William L. Westerman,
dated January 6, 1993 (filed as Exhibit 10.18 to Form 10, Commission
File No. 0-21430)*
10.13 Form of Agreement between the Company and Directors (filed as
Exhibit 10.19 to Form 10, Commission File No. 0-21430)*
10.14 Form of Termination Fee Agreement (filed as Exhibit 10.20 to Form
10, Commission File No. 0-21430)*
II-3
<PAGE>
10.15 Restricted Account Agreement, dated June 30, 1993, among Riviera
Operating Corporation (IBJ Schroder Bank & Trust Company and Bank of
America Nevada (filed as Exhibit 10.22 to Registration Statement
Form S-1 filed with the Commission on August 11, 1993, File No.
33-67206)*
10.16 Disbursement Agreement, dated June 30, 1993, between the
Registration and IBJ Schroder Bank & Trust Company (filed as Exhibit
10.23 to Registration Statement Form S-1 filed with the Commission
on August 11, 1993, File No. 33-67206)*
10.17 Tax Sharing Agreement between the Registrant and Riviera Operating
Corporation dated June 30, 1993 (filed as Exhibit 10.24 to Amendment
No. 1 to Registration Statement Form S-1 filed with the Commission
on August 19, 1993, File No. 33-67206)*
10.18 The Registrant's 1993 Stock Option Plan (filed as Exhibit 10.25 to
Amendment No. 1 to Registration Statement Form S-1 filed with the
Commission on August 19, 1993, File No. 33-67206)*
10.19 Form of Stay Bonus Agreement (filed as Exhibit 10.27 to Form 10-Q
filed with the Commission November 9, 1994, Commission File No.
000-21430)*
10.20 Amendment dated February 19, 1995, to Lease Agreement between
Riviera, Inc. and Mardi Gras Food Court, Inc. (filed with Exhibits
10.4 and 10.5)*
10.21 Amendment dated September 30, 1994, to Employment Agreement between
Riviera, Inc. and William L. Westerman (filed with Exhibit 10.12)*
10.22 Management Agreement by and between Elsinore Corporation, Four
Queens, Inc. and Riviera Gaming Management Corp. - Elsinore (filed
as Exhibit 10.30 to the Company's Form 10-K for the fiscal year
ended December 31, 1996, Commission File No. 000-21430)*
10.23 Employment Agreement dated as of November 21, 1996 by and between
the Company, Riviera Operating Corporation and William L. Westerman
(filed as Exhibit 10.31 to the Company's Form 10-K for the fiscal
year ended December 31, 1996, Commission File No. 000-21430)*
10.24 Revolving Line of Credit Loan Agreement dated February 28, 1997 by
and between the Company, Riviera Operating Corporation and U.S. Bank
of Nevada (filed as Exhibit 10.32 to the Company's Form 10-K for the
fiscal year ended December 31, 1996, Commission File No. 000-21430)*
10.25 Letter of Intent dated March 4, 1997 between the Company and Eagle
Gaming, L.P. (filed as Exhibit 10.33 to the Company's Form 10-K for
the fiscal year ended December 31, 1996, Commission File No.
000-21430)*
10.26 Deed of Trust, Assignment of Rents, Leases, Fixture Filing and
Security Agreement, dated August 13, 1997, executed by Riviera
Holdings Corporation for the benefit of Norwest Bank Minnesota,
National Association (filed as Exhibit 10.1 to the Company's Report
on Form 8-K filed August 18, 1997, Commission File No. 000-21430)*
10.27 Security Agreement, dated August 13, 1997, by and among Riviera
Holdings Corporation, Riviera Operating Corporation, Riviera Gaming
Management, Inc., Riviera Gaming Management of Colorado, Inc.,
Riviera Gaming Management-Elsinore, Inc. and Norwest Bank Minnesota,
National Association (filed as Exhibit 10.2 to the Company's Report
on Form 8-K filed August 18, 1997, Commission File No. 000-21430)*
10.28 Stock Pledge and Security Agreement, dated August 13, 1997, executed
by Riviera Holdings Corporation (filed as Exhibit 10.3 to the
Company's Report on Form 8-K filed August 18, 1997, Commission File
No. 000-21430)*
10.29 Stock Pledge and Security Agreement, dated August 13, 1997, executed
by Riviera Operating Corporation (filed as Exhibit 10.4 to the
Company's Report on Form 8-K filed August 18, 1997, Commission File
No. 000-21430)*
II-4
<PAGE>
10.30 Stock Pledge and Security Agreement, dated August 13, 1997, executed
by Riviera Gaming Management, Inc. (filed as Exhibit 10.5 to the
Company's Report on Form 8-K filed August 18, 1997, Commission File
No. 000-21430)*
10.31 Restricted Account Agreement, dated August 13, 1997, by and among
Riviera Holdings Corporation, Norwest Bank Minnesota, National
Association and U.S. Bank of Nevada (filed as Exhibit 10.6 to the
Company's Report on Form 8-K filed August 18, 1997, Commission File
No. 000-21430)*
10.32 First Amendment to Revolving Line of Credit Loan Agreement, dated
August 12, 1997, between Riviera Holdings Corporation, Riviera
Operating Corporation and U.S. Bank (filed as Exhibit 10.7 to the
Company's Report on Form 8-K filed August 18, 1997, Commission File
No. 000-21430)*
21.1 Subsidiaries of the Company and the Additional Registrants
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Dechert Price & Rhoads (included in Exhibit 5.1)+
24 Power of Attorney (included on pages II-6 and II-7)
25 Statement of Eligibility and Qualification of Norwest Bank
Minnesota, N.A. on Form T-1
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery+
- --------------------
* Incorporated by reference.
+ To be filed by Amendment.
(b) Financial Statement Schedules
Schedules not listed above are omitted because of the absence of the
conditions under which they are required or because the information required by
such omitted schedules is set forth in the financial statements or the notes
thereto.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrants have duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Las Vegas,
State of Nevada on August 29, 1997.
RIVIERA HOLDINGS CORPORATION
By: \s\ William L. Westerman
---------------------------------
William L. Westerman
President
ADDITIONAL REGISTRANTS:
By: \s\ William L. Westerman
---------------------------------
William L. Westerman
President
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints each of William L. Westerman, Duane R.
Krohn and John A. Wishon his or her true and lawful attorney-in-fact and agents,
each acting alone, with full power of substitution and resubstitution, for him
or her and in his or her name, place and stead, in any and all capacities, to
sign any or all amendments to this Registration Statement, including
post-effective amendments, as well as any related registration statement (or
amendment thereto) filed pursuant to Rule 462 promulgated under the Securities
Act of 1933, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, and hereby ratifies and
confirms all his or her said attorneys-in-fact and agents or any of them or his
or her substitute or substitutes may lawfully do or cause to be done by virtue
thereof.
This Power of Attorney may be executed in multiple counterparts, each
of which shall be deemed an original, but which taken together shall constitute
one instrument.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
RIVIERA HOLDINGS CORPORATION
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ William L. Westerman Chairman of the Board, Chief Executive August 29, 1997
- ---------------------------------- Office and President and Director
William L. Westerman (Principal Executive Officer)
/s/ Duane R. Krohn Treasurer (Principal Financial Officer August 29, 1997
- ---------------------------------- and Accounting Officer)
Duane R. Krohn
/s/ Robert R. Barengo Director August 29, 1997
- ----------------------------------
Robert R. Barengo
/s/ William Friedman Director August 29, 1997
- ----------------------------------
William Friedman
/s/ Philip P. Hannifin Director August 29, 1997
- ------------------------------------
Philip P. Hannifin
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
RIVIERA OPERATING CORPORATION
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ William L. Westerman President and Director (Principal August 29, 1997
- ---------------------------------- Executive Officer)
William L. Westerman
/s/ Duane R. Krohn Treasurer (Principal Financial Officer August 29, 1997
- ---------------------------------- and Accounting Officer)
Duane R. Krohn
/s/ Robert R. Barengo Director August 29, 1997
- ----------------------------------
Robert R. Barengo
/s/ William Friedman Director August 29, 1997
- ----------------------------------
William Friedman
/s/ Philip P. Hannifin Director August 29, 1997
- ------------------------------------
Philip P. Hannifin
</TABLE>
<TABLE>
<CAPTION>
RIVIERA GAMING MANAGEMENT, INC.
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ William L. Westerman President and Director (Principal August 29, 1997
- ---------------------------------- Executive Officer)
William L. Westerman
/s/ Duane R. Krohn Treasurer (Principal Financial Officer August 29, 1997
- ---------------------------------- and Accounting Officer)
Duane R. Krohn
/s/ Robert R. Barengo Director August 29, 1997
- ----------------------------------
Robert R. Barengo
/s/ William Friedman Director August 29, 1997
- ----------------------------------
William Friedman
/s/ Philip P. Hannifin Director August 29, 1997
- ------------------------------------
Philip P. Hannifin
</TABLE>
<TABLE>
<CAPTION>
RIVIERA GAMING MANAGEMENT - ELSINORE, INC.
RIVIERA GAMING MANAGEMENT OF COLORADO, INC.
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ William L. Westerman President, Secretary, Treasurer and August 29, 1997
- ---------------------------------- Director (Principal Executive,
William L. Westerman Financial and Accounting Officer)
</TABLE>
II-7
<PAGE>
SECOND RESTATED
ARTICLES OF INCORPORATION
OF
RIVIERA HOLDINGS CORPORATION
Pursuant to the provisions of Nevada Revised Statutes ("NRS") Section
78.403 the undersigned corporation adopts these Second Restated Articles of
Incorporation. The Amended and Restated Articles of Incorporation filed June 18,
1993, and as amended to the date of this certificate, are hereby Restated as
follows:
ARTICLE I
NAME
The name of the corporation shall be RIVIERA HOLDINGS CORPORATION.
ARTICLE II
REGISTERED OFFICE
The name of the Resident Agent and the street address of the registered
office in the State of Nevada where process may be served upon the corporation
is John A. Wishon, Riviera Hotel & Casino, 2901 Las Vegas Boulevard South, Las
Vegas, Clark County, Nevada 89109. The corporation may, from time to time, in
the manner provided by law, change the resident agent and the registered office
within the State of Nevada. The corporation may also maintain an office or
offices for the conduct of its business, either within or without the State of
Nevada.
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ARTICLE III
CAPITAL STOCK
Section 1. Authorized Shares. The total number of shares of capital
stock of the corporation which the corporation shall have authority to issue is
20,000,000 shares of common stock, par value $.001 (the "Common Stock").
Notwithstanding the foregoing, the corporation shall be prohibited from issuing
equity securities having no voting rights whatsoever.
Section 2. Consideration for Shares. The capital stock authorized by
Section 1 of this Article shall be issued for such consideration as shall be
fixed, from time to time, by the Board of Directors.
Section 3. Assessment of Stock. The capital stock of the corporation,
after the amount of the subscription price has been fully paid in, shall not be
assessable for any purpose, and no stock issued as fully paid shall ever be
assessable or assessed. No stockholder of the corporation is individually liable
for the debts or liabilities of the corporation.
Section 4. Cumulative Voting For Directors. No stockholder of the
corporation shall be entitled to cumulative voting of their shares for the
election of directors.
Section 5. Preemptive Rights. No stockholder of the corporation shall
have any preemptive rights.
Section 6. Special Common Stock Voting Provisions. The holders of
Common Stock shall, subject to Section 7, be entitled to one (1) vote for each
share held and any action requiring the consent of the holders of Common stock
shall be approved by the stockholders holding at least a majority of the voting
power of the shares then outstanding, subject to the following special
requirements.
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<PAGE>
(a) Commencing on the date of initial issuance of shares of Common
Stock and ending on the first anniversary thereof, the affirmative vote of the
stockholders holding at least sixty percent (60%) of the voting power of the
shares of Common Stock outstanding, voting separately as a single class, in
person or in proxy, either in writing without a meeting or at a special or
annual meeting of holders of Common Stock called for that purpose, shall be
required before the corporation may Issue, in any single or related series of
transactions, preferred stock, warrants, options or other securities (other than
shares of Common Stock), exchangeable for, convertible into, or having the right
to purchase with or without consideration, an amount of Common Stock equal to up
to twenty percent (20%) or more of the Common Stock or common stock equivalents
outstanding immediately prior to the proposed transaction.
(b) At any time after the initial Issuance of shares of Common
Stock, the affirmative vote of sixty percent (60%) of the shares of Common Stock
then outstanding, voting separately as a single class, in person or in proxy,
either in writing without a meeting or at a special or annual meeting of holders
of Common Stock called for that purpose, shall be necessary to:
(i) Amend the Articles of Incorporation of the corporation or
approve any resolution adopted by the Board of Directors which would materially
alter or change the powers, preferences or special rights of the Common Stock so
as to adversely affect the holders of the Common Stock, or to otherwise amend
Section 7 of the Articles of Incorporation (to the extent provided in Subsection
7(m)).
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<PAGE>
(ii) Amend the Articles of Incorporation of the corporation or
approve any resolution adopted by the Board of Directors which would authorize
or increase the authorized number of shares of any class or series of stock of
the corporation ranking senior in preference or privilege to the Common Stock
either as to dividends or upon liquidation, dissolution or winding up;
(iii) Authorize any merger or consolidation, the effect of
which is that (A) the corporation will not be the continuing or surviving
person, or (B) if the corporation is the continuing or surviving person, the
shares of Common Stock of the corporation outstanding immediately prior to such
transaction shall be changed into or exchanged for equity securities, or other
securities of any other person, or for cash or any property other than
securities; and
(iv) Authorize (A) any sale, lease or exchange of all or
substantially all of the properties or assets of the corporation in one
transaction or a related series of transactions, or (8) the voluntary
liquidation, dissolution or winding up of the corporation.
Section 7. Substantial Stockholders.
(a) It is the declared intent and policy of this corporation and
its stockholders that control of this corporation is an asset that belongs to
all stockholders of this corporation and that all such stockholders are entitled
(i) to participate, through an election to sell or otherwise dispose of their
shares, in any proposed acquisition of control of this corporation by another
person, and (ii) to be offered a price for their shares which is fair and
equitable under the circumstances and which includes an appropriate premium for
the acquisition of such control.
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<PAGE>
(b) From and after the date any person first becomes a Substantial
Stockholder (as defined in Subsection 7(f)(2)) until such time as such person
shall cease to be a Substantial Stockholder, holders of issued and outstanding
shares of Common Stock (as defined in Subsection 7(f)(10)) beneficially owned
(as defined in Subsection 7(f)(3)) by such Substantial Stockholder, as of any
record date for the determination of stockholders entitled to vote on or consent
to any matter, in excess of 10% of the then issued and outstanding shares of
Common Stock shall, subject to the provisions of the last two sentences of this
Subsection 7(b), be entitled to cast only one-hundredth (1/100) of one vote per
share for each such share in excess of 10% of the then issued and outstanding
shares of Common Stock. Notwithstanding the foregoing, in the event such
Substantial Stockholder, or an Affiliate (as defined in Subsection 7(f)(7))
thereof, or any other person deemed to be the beneficial owner of Common Stock
also beneficially owned by such Substantial Stockholder, shall consummate a
Tender Offer (as defined in Subsection 7(f)(9)) conforming with the provisions
of Subsections 7(d) and 7(e), holders of all Common Stock beneficially owned by
such Substantial Stockholder shall thereupon be entitled to cast one vote per
share of Common Stock on each matter voted upon or consented to by the holders
of Common Stock of this corporation. The number of votes which may be cast by
any record owner by virtue of the provisions of this Section 7 in respect of
Common Stock beneficially owned by a Substantial Stockholder shall be a number
equal to the total number of votes which a single record owner of all shares of
Common Stock beneficially owned by such Substantial Stockholder would be
entitled to cast, multiplied by a fraction, the numerator of which is the number
of shares of Common Stock beneficially owned by such Substantial
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<PAGE>
Stockholder and owned of record by such record owner and the denominator of
which is the total number of shares of Common Stock beneficially owned by such
Substantial Stockholder, whether or not owned of record.
(c) Until such time as a Substantial Stockholder (or an Affiliate
thereof or any other person deemed to be the beneficial owner of Common Stock
also beneficially owned by such Substantial Stockholder) shall consummate a
Tender Offer conforming with the provisions of Subsections 7(d) and 7(e), in no
event (but subject to the provisions of the last sentence of this Subsection
7(c)) shall such Substantial Stockholder and the record owner(s) of all shares
of any Common Stock beneficially owned by such Substantial Stockholder
collectively be entitled or permitted to cast, by virtue of their beneficial or
record ownership of Common Stock beneficially owned by such Substantial
Stockholder, in excess of 15% of the total number of votes which the holders of
all then outstanding Common Stock would (after giving effect to the provisions
of Subsection 7(b)) be entitled to cast on any matter presented to the holders
of Common Stock for vote. If the provisions of the preceding sentence shall have
the effect of reducing the total number of votes which any Substantial
Stockholder and the record owner(s) of Common Stock beneficially owned by such
Substantial Stockholder shall be entitled to cast, such reduction shall be
effected, and the number of votes which such record owner(s) shall be entitled
to cast (by reason of this Subsection 7(c)) shall be determined, in accordance
with the provisions of the last sentence of Subsection 7(b).
(d) The Tender Offer referred to in the second sentence of
Subsection 7(b) and in the first sentence of Subsection 7(c) shall mean a Tender
Offer to acquire at not less
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<PAGE>
than the applicable Offer Price (as defined in Subsection 7(e)) any and all
shares of Common Stock then outstanding and not beneficially owned by the
Substantial Stockholder to which such Tender Offer relates. In no event shall
any Tender Offer referred to in this Subsection 7(d) remain open for less than
twenty (20) business days (as defined in the General Rules and Regulations under
the Securities Exchange Act of 1934, as in effect on the Effective Date) or
provide that shares duly tendered pursuant thereto will not be purchased within
forty (40) business days after the commencement of such Tender Offer, and in the
event that at the time such Tender Offer is commenced the terms and conduct
thereof shall riot be directly regulated by Sections 14(d) or 13(a) of the
Securities Exchange Act of 1934 and the Rules and Regulations thereunder, or any
successor federal laws and regulations, then such Tender Offer shall conform in
all respects with the provisions of the Securities Exchange Act of 1934 and the
General Rules and Regulations thereunder, as in effect on the Effective Date.
The consideration to be received by holders of Common Stock in any such Tender
Offer shall be in the form of cash (which may be payable by check) exclusively,
and such Tender Offer shall be deemed consummated only when payment in full
shall be made for all duly tendered shares. A Tender Offer shall not be deemed
to have conformed or compiled with the provisions of this Subsection 7(d) unless
(i) such Substantial Stockholder or Affiliate requests the Board of Directors to
note it if the board or a majority of the Continuing Directors (as defined in
Subsection 7(f)(5)), as the case may be, exercises its discretion to utilize an
"Established Price, as contemplated by Subsection 7(e)(2) and (ii) such Tender
Offer is commenced within thirty (30) days after the first public announcement
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<PAGE>
thereof setting forth the Offer Price thereof (such public announcement being
hereinafter referred to as the "Announcement" of such Tender Offer.)
(e) (1) The "Offer Price" for any Tender Offer referred to in
Subsection 7(d) shall be an amount per share of Common Stock equal to the
highest price per share of Common Stock (including brokerage commissions,
transfer taxes and soliciting dealers' fees) paid or agreed to be paid by such
Substantial Stockholder (or any of its Affiliates or any other person deemed to
be the beneficial owner of Common Stock also beneficially owned by such
Substantial Stockholder) in acquiring any shares of Common Stock within the
consecutive three (3) year period preceding the date of the Tender Offer;
provided, however, that a majority of the Whole Board (as defined in Subsection
7(f)(6)), in its discretion, may determine, but only if a majority of the Whole
Board shall then consist of Continuing Directors or, if a majority of the Whole
Board shall not then consist of Continuing Directors, a majority of the then
Continuing Directors, in their discretion, may determine, that, in lieu of an
amount per share of Common Stock determined above, such Offer Price shall be an
amount per share of Common Stock which shall not be less than a price per share
of Common Stock (the "Established Price") established and determined in writing
by an independent, nationally recognized investment-banking firm selected by a
majority of the Whole Board, but only if a majority of the Whole Board shall
then consist of Continuing Directors, or, if a majority of the Whole Board does
not then consist of Continuing Directors, by a majority of the then Continuing
Directors, as then a fair and appropriate price (considering this corporation,
on a consolidated basis, as a going concern or on the basis of its value in
liquidation, whichever circumstance would result in the highest such price) for
the sale of this corporation in a
8
<PAGE>
privately negotiated, arm's-length transaction with a person other than a
Substantial Stockholder or an Affiliate of such Substantial Stockholder, in
light of then prevailing economic conditions, the business and assets of and
future prospects for this corporation, the synergistic benefits expected to be
derived by the acquiring person(s) from an acquisition of or combination with
this corporation, recent examples of similar transactions and other factors then
generally considered and relied upon by the investment banking community in
making determinations or recommendations as to price in arm's-length acquisition
transactions.
(2) This corporation shall furnish to any Substantial
Stockholder requesting in writing (such request to be addressed to this
corporation's chairman of the board at the principal executive offices of this
corporation), within ninety (90) days after receipt of such request, a
certificate of an officer of this corporation either specifying the Established
Price, or stating that the Board of Directors or a majority of the Continuing
Directors, as the case may be, has determined not to utilize an Established
Price, pursuant to Subsection 7(e)(1). Each such request by a Substantial
Stockholder shall specify the price paid or agreed to be paid for shares of
Common Stock within the three (3) year period referred to in Subsection 7(e)(1).
In the event there shall be no Announcement of a Tender Offer complying with the
provisions of Subsections 7(d) and 7(e) within forty-five (45) days after
receipt of any such certificate by the Substantial Stockholder making such
request, such Substantial Stockholder shall no longer be entitled to rely
thereon or act on the basis thereof. In such event, such Substantial Stockholder
shall be entitled to make a further request as to the determination to utilize
an Established Price, and the Board of Directors, or
9
<PAGE>
the Continuing Directors, as the case may be, shall be authorized and empowered,
in response to any such subsequent request (such subsequent request and response
to conform with and to be subject to the foregoing provisions of this Subsection
7(e)(2) to determine whether to utilize an Established Price as contemplated by
Subsection 7(e)(1)) established and determined (as hereinabove provided) on the
basis of then prevailing circumstances.
(3) Historical prices per share applied in accordance with
Subsection 7(e)(1) shall be appropriately adjusted to reflect stock splits,
combinations and recapitalization of the shares of Common Stock subsequent to
the date on or as of which such prices are to be determined.
(f) For the purposes of this Section 7:
(1) A "Person" shall mean any individual, firm, corporation or
other entity.
(2) "Substantial Stockholder" shall mean any person or Group
(as defined in Subsection 7(f)(13)), other than this corporation or any
Subsidiary (as defined in Subsection 7(f)(8)), who or which has acquired within
any consecutive three year period beneficial ownership, directly or indirectly,
of more than 10% of the outstanding Common Stock (determined solely on the basis
of the total number of shares of Common Stock so beneficially owned (and without
giving effect to the number or percentage of votes entitled to be cast in
respect of such shares), in relation to the total number of shares of Common
Stock issued and outstanding, provided, however, that a person shall not be
deemed to be a Substantial Stockholder by reason of any shares of Common Stock
issued to such person
10
<PAGE>
pursuant to the Joint Plan (as defined in Subsection 7(f)(11)), provided
further, however, that a person shall not be deemed to be a Substantial
Stockholder for any purposes hereof, it such person (or an Affiliate thereof or
any other person deemed to be the beneficial owner of Common Stock also
beneficially owned such person) shall, prior to the time such person becomes the
beneficial owner directly or indirectly of more than 10% of the outstanding
Common Stock, commences and thereafter shall consummate a Tender Offer for any
and all shares of Common Stock, the terms of which shall be approved and
recommended to stockholders as in the best interests of the Company and its
stockholders, by two-thirds of the members of the Whole Board (but only if at
least a majority of the members of the Board of Directors acting upon such
matter shall be Continuing Directors).
(3) "Beneficial ownership" shall be determined pursuant to
Rule 13d-3 of the General Rules and Regulations under the Securities Exchange
Act of 1934 (or any successor rule or statutory provision), or if said Rule
13d-3 shall be rescinded and there shall be no successor rule or statutory
provision thereto, pursuant to said Rule 13d-3 as in effect as of the Effective
Date; provided however that a person shall, in any event, also be deemed the
"beneficial owner" of any Common Stock
(a) which such person or any of its Affiliates or Group
beneficially owns, directly or indirectly; or
(b) which such person or any of its Affiliates has (i)
the right to acquire (whether such right is exercisable immediately or only
after the passage of time) pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants, or options, or otherwise, or (ii) sole or shared
11
<PAGE>
voting or investment power with respect thereto pursuant to any agreement,
arrangement, understanding, relationship or otherwise (but shall not be deemed
to be the beneficial owner of any Common Stock solely by reason of a revocable
proxy granted for a particular meeting of stockholders, pursuant to a public
solicitation of proxies for such meeting, with respect to shares of which
neither such person nor any such Affiliate is otherwise deemed the beneficial
owner); or
(c) which are beneficially owned, directly or
indirectly, by any other person with which such first mentioned person or any of
its Affiliates acts as a partnership, limited partnership, syndicate or other
group pursuant to any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any shares of capital stock of this
corporation; and provided further, however, that (i) no director or officer of
this corporation (nor any Affiliate of any such director or officer) shall,
solely by reason of any or all of such directors or officers acting in their
capacities as such, be deemed, for any purposes hereof, to beneficially own any
Common Stock beneficially owned by any other such director or officer (or any
Affiliate thereof, and (ii) no employee stock ownership or similar plan of this
corporation or any Subsidiary nor any trustee with respect thereto (nor any
Affiliate of such trustee) shall, solely by reason of such capacity of such
trustee, be deemed, for any purposes hereof, to beneficially own any Common
Stock held under any such plan.
(4) For purposes of computing the percentage of beneficial
ownership of Common Stock of a person in order to determine whether such person
is a Substantial Stockholder, the outstanding Common Stock shall Include shares
deemed
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<PAGE>
owned by such person through application of Subsection 7(f)(3) but shall not
include any other Common Stock which may be issuable by this corporation
pursuant to any agreement, or upon exercise of conversion rights, warrants or
options, or otherwise. For all other purposes, the outstanding Common Stock
shall include only Common Stock then outstanding and shall not include any
Common Stock which may be issuable by this corporation pursuant to any
agreement, or upon the exercise of conversion rights, warrants or options, or
otherwise.
(5) "Continuing Director" shall mean a person who was a member
of the Board of Directors as of the Effective Date or thereafter elected by the
stockholders or appointed by the Board of Directors of this corporation prior to
the date as of which the Substantial Stockholder in question became a
substantial Stockholder, or a person designated (before his initial election or
appointment as a director) as a Continuing Director by a minority of the Whole
Board, but only if a majority of the Whole Board shall then consist of
Continuing Directors, or, if a majority of the Whole Board shall not then
consist of Continuing Directors, by a majority of the then Continuing Directors.
(6) "Whole Board" shall mean the total number of directors
which this corporation would have if there were no vacancies.
(7) "Affiliate" of any specified person means a person that
directly or indirectly, through one or more intermediaries, controls, or is
controlled by or under direct or indirect common control with, such specified
person. For purposes of this definition, "control" (including, with correlative
meanings, the terms "controlled by" and "under common control with",) as used
with respect to any person, shall mean the possession, directly or
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<PAGE>
indirectly, or the power to direct or cause the direction of the management or
polices of such person, whether through the ownership of Common Stock or by
agreement or otherwise.
(8) "Subsidiary" shall mean any corporation of which a
majority of each class of equity security (as defined in Rule 3a11-1 of the
General Rules and Regulations under the Securities Exchange Act of 1934, as in
effect on the Effective Date) Is owned, directly or indirectly, by this
corporation.
(9) "Tender Offer" shall mean an offer to acquire equity
securities pursuant to a request or invitation for tenders.
(10) "Common Stock" shall mean this corporation's common stock
authorized as of the Effective Date and shall also include any capital stock of
any class or series of this corporation thereafter authorized which shall be
neither limited nor entitled to a fixed sum or percentage in respect of
dividends and in the distribution of assets upon the voluntary or involuntary
liquidation, dissolution or winding up of this corporation. In the event there
shall at any time be more than one class or series of capital stock issued and
outstanding which constitutes Common Stock, all references In this Section 7 to
Common Stock, or to any Tender Offer, Offer Price or Established Price, shall be
deemed to refer to and apply to each such class or series of Common Stock
individually and the provisions of this Section 7 shall be deemed to apply
separately to each such class or series of Common Stock.
(11) "Joint Plan" means the Debtor's and Bondholders'
Committee's Joint Plan of Reorganization, dated October 30, 1992, as amended by
the Amended Joint Plan of Reorganization dated November 30, 1992, the Second
Amended Joint Plan of Reorganization dated January 8, 1993 and the Modified and
Restated Second Amended
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<PAGE>
Joint Plan of Reorganization dated June 4, 1993 (and as may be further amended
or modified) in connection with the Reorganization case.
(12) "Effective Date" means the date of initial issuance of
the Common Stock.
(13) "Group" means a "group" as used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (or any successor rule or statutory
provision).
(g) Notwithstanding anything to the contrary contained
in this Section 7, at any time prior to the time that a Stockholder becomes a
Substantial Stockholder, if two-thirds of the Whole Board shall have the power
to waive, but only if two-thirds of the Whole Board shall then consist of
Continuing Directors, or, if two-thirds of the Whole Board shall not then
consist of Continuing Directors, two-thirds of the then Continuing Directors
shall have the power to waive, the voting limitation with respect to a
Substantial Stockholder set forth in Subsection 7(b) if it is determined by
two-thirds of such Whole Board (or Continuing Directors, as the case may be)
that the accumulation of such shares of Common Stock by the Substantial
Stockholder will not have an adverse effect on this corporation,
(h) A majority of the Whole Board shall have the power
to determine, but only if a majority of the Whole Board shall then consist of
Continuing Directors, or, if a majority of the Whole Board shall not then
consist of Continuing Directors, a majority of the then Continuing Directors,
for the purposes of this Section 7, on the basis of information known to them:
(i) the number of shares of Common Stock beneficially owned by any person; (ii)
whether a person is an Affiliate of another; (iii) whether a person has an
agreement, arrangement or understanding with another as to the matters referred
to in Subsection 7(f)(3); (iv) whether the purchase price offered pursuant to
any Tender Offer referred to
15
<PAGE>
in Subsection 7(d) conforms to the requirements as to minimum Offer Price set
forth in Subsection 7(e); and (v) any other factual matter relating to the
applicability or effect of this Section 7.
(i) A majority of the Whole Board shall have the right
to demand, but only if a majority of the Whole Board shall then consist of
Continuing Directors, or, if a majority of the Whole Board shall not then
consist of Continuing Directors, a majority of the then Continuing Directors,
that any person who it is reasonably believed is a Substantial Stockholder (or
holds of record Common Stock beneficially owned by any Substantial Stockholder)
supply this corporation with complete information as to: (i) the record owner(s)
of all shares beneficially owned by such person who it is reasonably believed is
a Substantial Stockholder; (ii) the number of, and class or series of, shares
beneficially owned by such person who it is reasonably believed is a Substantial
Stockholder and held of record by each such record owner and the number(s) of
the stock certificate(s) evidencing such shares; and (iii) any other factual
matter relating to the applicability or effect of this Section 7, as may
reasonably be requested of such person, and such person shall furnish such
information within 10 days after the receipt of such demand.
(j) Except as otherwise provided by law, the presence,
in person or by proxy, of the holders of record of shares of Common Stock of
this corporation entitling the holders thereof to cast a majority of the votes
(after giving effect, if required, to the provisions of this Section 7) entitled
to be cast by the holders of shares of Common Stock of the corporation entitled
to vote shall constitute a quorum at all meetings of the holders of Common
Stock, and every reference in the Articles of Incorporation to a majority or
other
16
<PAGE>
proportion of Common Stock (or the holders thereof) for purposes of determining
any quorum requirement or any requirement for stockholder consent or approval
shall be deemed to refer to such majority or other proportion of the votes (or
the holders thereof) then entitled to be cast in respect of such Common Stock.
(k) Any determinations made by the Board of Directors or
by the Continuing Directors, as the case may be, pursuant to this Section 7 in
good faith and on the basis of such information as was then reasonably available
for such purpose shall be conclusive and binding upon this corporation and its
stockholders, including any Substantial Stockholder.
(l) Anything to the contrary contained in this Section 7
notwithstanding, and without limiting the powers, duties and obligations of the
Board of Directors, the Board of Directors is entitled and authorized,
consistent with its duties as such and its obligations to this corporation and
its stockholders, to consider the terms of any proposed Tender Offer or
acquisition proposed by any person, and to determine if and whether to recommend
acceptance or rejection thereof, notwithstanding compliance thereof with the
provisions of Subsections 7(d) and 7(e), and in connection therewith, to take or
authorize any and all appropriate and proper action deemed in the judgment of
the Board of Directors in the best interests of this corporation and the
stockholders in the event the Board of Directors shall determine to recommend
rejection thereof.
(m) Any amendment, alteration, change or repeal of this
Section 7 shall require the affirmative vote of the holders of then outstanding
Common Stock entitling the holders thereof to cast at least 60% of the votes
entitled to be cast by the holders of all of the then outstanding Common Stock,
provided, however, that this Subsection 7(m) shall not
17
<PAGE>
apply to, and such 60% vote shall not be required for, any amendment,
alteration, change or repeal declared advisable by the Board of Directors by the
affirmative vote of two-thirds of the Whole Board and submitted to the
stockholders for their consideration, but only if a majority of the members of
the Board of Directors acting upon such matter shall be Continuing Directors.
(n) Nothing contained in this Section 7 shall be
construed to relieve any Substantial Stockholder from any fiduciary obligation
imposed by law.
(o) In the event any Subsection (or portion thereof) of
this Section 7, including, without limitation Subsection 7(c), shall be found to
be invalid, prohibited or unenforceable for any reason, the remaining provisions
(or portions thereof) of this Section 7 shall be deemed to remain in full force
and effect, and shall be construed as if such invalid, prohibited or
unenforceable provision had been stricken herefrom or otherwise rendered
inapplicable, it being the intent of this corporation and its stockholders that
each such remaining provision (or portion thereof) of this Section 7 remain, to
the fullest extent permitted by law, applicable and enforceable as to all
stockholders, including Substantial Stockholders, notwithstanding any such
finding.
ARTICLE IV
DIRECTORS AND OFFICERS
Section 1. Number of Directors. The members of the governing board of
the corporation are styled as directors. The number of directors may be fixed
and changed from time to time In such manner as shall be provided In the bylaws
of the corporation and shall be no less than three (3) nor more than ten (10).
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<PAGE>
Section 2. Initial Directors. The names and post office box or street
addresses of the directors constituting the Board of Directors, which shall be
four (4) in number are:
NAME ADDRESS
William Westerman 2901 Las Vegas Boulevard South
Las Vegas, NV 89109
Philip Hannifin 2901 Las Vegas Boulevard South
Las Vegas, NV 89109
William Friedman 2901 Las Vegas Boulevard South
Las Vegas, NV 89109
Robert Barengo 2901 Las Vegas Boulevard South
Las Vegas, NV 89109
Section 3. Limitation of Personal Liability. No director or officer of
the corporation shall be personally liable to the corporation or its
stockholders for damages for breach of fiduciary duty as a director or officer,
provided, however, that the foregoing provision does not eliminate or limit the
liability of a director or officer of the corporation for:
(a) Acts or omissions which involve intentional misconduct, fraud
or a knowing violation of law; or
(b) The payment of distributions in violation of Nevada Revised
Statutes 78.300.
Section 4. Payment of Expenses. In addition to any other rights of
indemnification permitted by the laws of the State of Nevada as may be provided
for by the corporation in its bylaws or by agreement, the reasonable expenses of
officers and directors incurred in defending a civil or criminal action, suit,
or proceeding, involving alleged acts or omissions of such officer or director
in his or her capacity as an officer or director of the corporation, must
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be paid, by the corporation or through insurance purchased and maintained by the
corporation or through other financial arrangements made by the corporation, as
they are incurred and in advance of the final disposition of the action, suit or
proceeding, upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he or she is not entitled to be indemnified by the
corporation,
Section 5. Repeal And Conflicts. Any repeal or modification of Sections
3 or 4 above approved by the stockholders of the corporation shall be
prospective only. In the event of any conflict between Sections 3 or 4 of this
Article and any other Article of the Corporation's Articles of Incorporation,
the terms and provisions of Sections 3 or 4 of this Article shall control.
Section 6. Compliance with Gaming Control Act. All of the directors of
the corporation shall be subject to, and the composition of the Board of
Directors shall be in compliance with, the requirements and qualifications
imposed by the Nevada Gaming Control Act (Nevada Revised Statutes ss.463.010 et
seq., as amended from time to time), or any successor provision of Nevada law,
and the regulations promulgated thereunder, and the rules and regulations of any
governmental agency responsible for the licensing and regulation of gaming
operations, including without limitation, the Nevada State Gaming Control Board,
the Nevada State Gaming Commission and the Clark County Liquor and Gaming
Licensing Board.
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ARTICLE V
INCORPORATOR
The name and post office box or street address of the incorporator who
signed the original Articles of Incorporation is:
NAME ADDRESS
---- -------
Kenneth A. Woloson 600 East Charleston Boulevard
Las Vegas, Nevada 89104
ARTICLE VI
AMENDMENT OF ARTICLES OF INCORPORATION
Subject to the special voting provisions with respect to Common Stock
contained In Article III, these Articles of Incorporation may be amended,
modified, altered or repealed only with the affirmative vote of stockholders
holding shares in the corporation of each class entitling them to exercise at
least a major of the voting power.
ARTICLE VII
LIMITATION ON POWER OF DIRECTORS
Notwithstanding any other provision of these Articles of Incorporation,
the affirmative vote of two-thirds (2/3rds) of the directors then in office
shall be required to authorize or approve any amendment, modification or
supplement to (a) the Indenture and the First Supplemental Indenture to be
entered into by and among the corporation, as issuer, Riviera Operating
Corporation ("ROC"), as guarantor, and IBJ Schroder Bank & Trust Company, as
trustee (the "Trustee"), relating to the 11% First Mortgage Notes Due December
31, 2002 (or any other series of notes issued thereunder (collectively, the
"Notes")) of the corporation in the form finally confirmed by the court in the
reorganization case of Riviera, Inc. under
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Chapter 11 of Title 11 of the United States Code (Case No. BK-S91-24940)
("Reorganization Case"); (b) the Notes, (c) the Dead of Trust, Assignment of
Rents and Security Agreement of the corporation, as trustor, in favor of the
Trustee, as beneficiary, relating to the Notes; (d) the Security Agreement by
and among the corporation and ROC as debtors, and the Trustee, as secured party,
relating to the Notes; or (a) any of the other agreements entered into by the
corporation In connection with the Issuance of the Notes or the provision of
security for payment of the Notes which are listed in the Confirmation Order
entered in the Reorganization Case.
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Exhibit 3.2
BYLAWS
OF
RIVIERA HOLDINGS CORPORATION, INC.
ARTICLE I
STOCKHOLDERS
Section 1.01. Annual Meeting. An annual meeting of the stockholders of the
corporation shall be held at 2:00 o'clock in the afternoon on the second
Thursday of May in each year, at the principal place of business of the
corporation (unless a different time, date and place shall be approved by a
resolution of the Board of Directors) commencing after the first anniversary of
incorporation, but if such date is a legal holiday, then on the next succeeding
business day, for the purpose of electing directors of the corporation to serve
during the ensuing year and for the transaction of such other business as may
properly come before the meeting. If the election of the directors is not held
on the day designated herein for any annual meeting of the stockholders, or at
any adjournment thereof, the president shall cause the election to be held at a
special meeting of the stockholders as soon thereafter as is convenient.
Section 1.02. Special Meeting.
(a) Special meetings of the stockholders may be called by the
chairman, president or the Board of Directors and shall be called by the
chairman, the president or the Board of Directors at the written request of the
holders of not less than a majority of the voting power of any class of the
corporation's stock entitled to vote for the election of directors or for the
matters relating to the purposes for which such meeting is being called.
(b) No business shall be acted upon at a special meeting except as set
forth in the notice calling the meeting, unless one of the conditions for the
holding of a meeting without notice set forth in Section 1.05 shall be
satisfied, in which case any business may be transacted and the meeting shall be
valid for all purposes.
Section 1.03 Place of Meeting. Any meeting of the stockholders of the
corporation may be held at its registered office in the State of Nevada or at
such other place in or out of the United States as the Board of Directors may
designate. A waiver of notice signed by stockholders entitled to vote may
designate any place for the holding of such meeting.
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Section 1.04 Notice of Meeting.
(a) The president, a vice president, the secretary, an assistant
secretary or any other individual designated by the Board of Directors shall
sign and deliver written notice of any meeting at least ten (10) days, but not
more than sixty (60) days, before the date of such meeting. The notice shall
state the place, date and time of the meeting and the purpose or purposes for
which the meeting is called.
(b) In the case of an annual meeting, any proper business may be
presented for action, except that action on any of the following items shall be
taken only if the general nature of the proposal is stated in the notice:
(1) Action with respect to any contract or transaction between the
corporation and one or more of its directors or officers or between the
corporation and one or more of its directors or officers or between the
corporation and any corporation, firm or association in which one or more of the
corporation's directors or officers is a director or officer or is financially
interested;
(2) Adoption of amendments to the Articles of Incorporation; or
(3) Action with respect to a merger, share exchange,
reorganization, consolidation, partial or complete liquidation, or dissolution
of the corporation.
(c) A copy of the notice shall be personally delivered or mailed
postage prepaid to each stockholder of record entitled to vote at the meeting at
the address appearing on the records of the corporation, and the notice shall be
deemed delivered the date the same is deposited in the United States mail for
transmission to such stockholder. If the address of any stockholder does not
appear upon the records of the corporation, it will be sufficient to address any
notice to such stockholder at the registered office of the corporation.
(d) The written certificate of the individual signing a notice of
meeting, setting forth the substance of the notice or having a copy thereof
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attached, the date the notice was mailed or personally delivered to the
stockholders and the addresses to which the notice was mailed, shall be prima
facie evidence of the manner and fact of giving such notice.
(e) Any stockholder may waive notice of any meeting by a signed
writing, either before or after the meeting.
Section 1.05 Meeting Without Notice.
(a) Whenever all persons entitled to vote at any meeting consent,
either by:
(1) A writing on the records of the meeting or filed with the
secretary; or
(2) Presence at such meeting and oral consent entered on the
minutes; or
(3) Taking part in the deliberations at such meeting without
objection;
the doings of such meeting shall be as valid as if had at a meeting regularly
called and noticed.
(b) At such meeting any business may be transacted which is not
excepted from the written consent or to the consideration of which no objection
for want of notice is made at the time.
(c) If any meeting be irregular for want of notice or of such consent,
provided a quorum was present at such meeting, the proceedings of the meeting
may be ratified and approved and rendered likewise valid and the irregularity or
defect therein waived by a writing signed by all parties having the right to
vote at such meeting.
(d) Such consent or approval may be by proxy or attorney, but all such
proxies and powers of attorney must be in writing.
Section 1.06 Determination of Stockholders of Record.
(a) For the purpose of determining the stockholders entitled to notice
of and to vote at any meeting of stockholders or any adjournment
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thereof, or to express consent to corporate action in writing without a meeting
or entitled to receive payment of any distribution or the allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion,
or exchange of stock or for the purpose of any other lawful action, the
directors may fix, in advance, a record date which shall not be more than sixty
(60) days, nor less than ten (10) days before the date of such meeting, nor more
than sixty (60) days prior to any other action.
(b) If no record date is fixed, the record date for determining
stockholders: (i) entitled to notice of and to vote at a meeting of stockholders
shall be at the close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held; (ii) entitled to express
consent to corporate action in writing without a meeting shall be the day on
which the first written consent is expressed; and (iii) for any other purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto. A determination of stockholders of
record entitled to notice of or to vote at any meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
Section 1.07 Quorum: Adjourned Meeting
(a) Unless the Articles of Incorporation or these Bylaws provide for a
different proportion, stockholders holding at lease a majority of the voting
power of the corporation's stock, represented in person or by proxy, are
necessary to constitute a quorum for the transaction of business at any meeting.
If, on any issue, voting by classes is required by the laws of the State of
Nevada, the Articles of Incorporation or these Bylaws, at least a majority of
the voting power within each such class is necessary to constitute a quorum of
each such class, unless the Articles of Incorporation provide for a different
proportion.
(b) If a quorum is not represented, a majority of the voting power so
represented may adjourn the meeting from time to time until holders of the
voting power required to constitute a quorum shall be represented. At any such
adjourned meeting at which a quorum shall be represented, any business may be
transacted which might have been transacted as originally called. When a
stockholder's meeting is adjourned to another time or place hereunder, notice
need not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. The
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stockholders present at a duly convened meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum of the voting power.
Section 1.08 Voting.
(a) Unless otherwise provided in the Articles of Incorporation, or in
the resolution providing for the issuance of the stock adopted by the Board of
Directors pursuant to authority expressly vested in it by the provisions of the
Articles of Incorporation, each stockholder of record, or such stockholder's
duly authorized proxy or attorney-in-fact, shall be entitled to one (1) vote for
each share of stock entitled to vote on such matter standing registered in such
stockholder's name on the record date.
(b) Except as otherwise provided herein, all votes with respect to
shares standing in the name of an individual on the record date (including
pledged shares) shall be cast only by that individual or such individual's duly
authorized proxy, attorney-in-fact, or voting trustee(s) pursuant to a voting
trust. With respect to shares held by a representative of the estate of a
deceased stockholder, guardian, conservator, custodian or trustee, votes may be
cast by such holder upon proof of capacity, even though the shares do not stand
in the name of such holder. In the case of shares under the control of a
receiver, the receiver may cast votes carried by such shares even though the
shares do not stand in the name of the receiver; provided that the order of the
court of competent jurisdiction which appoints the receiver contains the
authority to cast votes carried by such shares. If shares stand in the name of a
minor, votes may be cast only by the duly appointed guardian of the estate of
such minor if such guardian has provided the corporation with written proof of
such appointment.
(c) With respect to shares standing in the name of another
corporation, partnership, limited liability company or other legal entity on the
record date, votes may be cast: (i) in the case of a corporation, by such
individual as the bylaws of such other corporation prescribe, by such individual
as may be appointed by resolution of the Board of Directors of such other
corporation or by such individual (including the officer making the
authorization) authorized in writing to do so by the chairman of the Board of
Directors, president or any vice-president of such corporation and (ii) in the
case of a partnership, limited liability company or other legal entity, by an
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individual representing such stockholder upon presentation to the corporation of
satisfactory evidence of his authority to do so.
(d) Notwithstanding anything to the contrary herein contained, no
votes may be cast for shares owned by this corporation or its subsidiaries, if
any. If shares are held by this corporation or its subsidiaries, if any, in a
fiduciary capacity, no votes shall be cast with respect thereto on any matter
except to the extent that the beneficial owner thereof possesses and exercises
either a right to vote or to give the corporation holding the same binding
instruction on how to vote.
(e) Any holder of shares entitled to vote on any matter may cast a
portion of the votes in favor of such matter and refrain from casting the
remaining votes or cast the same against the proposal, except in the case of
elections of directors. If such holder entitled to vote fails to specify the
number of affirmative votes, it will be conclusively presumed that the holder is
casting affirmative votes with respect to all shares held.
(f) With respect to shares standing in the name of two or more
persons, whether fiduciaries, members of a partnership, joint tenants, tenants
in common, husband and wife as community property, tenants by the entirety,
voting trustees, persons entitled to vote under a stockholder voting agreement
or otherwise and shares held by two or more persons (including proxy holders)
having the same fiduciary relationship in respect to the same shares, votes may
be cast in the following manner:
(1) If only one person votes, the vote of such person binds all.
(2) If more than one person casts votes, the act of the majority
so voting binds all.
(3) If more than one person casts votes, but the vote is evenly
split on a particular matter, the votes shall be deemed cast
proportionately, as split.
(g) If a quorum is present, unless the Articles of Incorporation or
these Bylaws provide for a different proportion, the affirmative vote of holders
of at least a majority of the voting power represented at the meeting and
entitled to vote on any matter shall be the act of the stockholders, unless
voting by classes is required for any action of the stockholders by the laws of
the State of Nevada, the Articles of Incorporation or these Bylaws, in which
case the affirmative vote of holders of at least a majority of the voting power
of each such class shall be required.
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Section 1.09 Proxies.
At any meeting of stockholders, any holder of shares entitled to
vote may designate, in a manner permitted by the laws of the State of Nevada,
another person or persons to act as a proxy or proxies. No proxy is valid after
the expiration of six (6) months from the date of its creation, unless it is
coupled with an interest or unless otherwise specified in the proxy. In no event
shall the term of a proxy exceed seven (7) years from the date of its creation.
Every proxy shall continue in full force and effect until its expiration or
revocation in a manner permitted by the laws of the State of Nevada.
Section 1.10 Order of Business. At the annual stockholder's meeting,
the regular order of business shall be as follows:
1. Determination of stockholders present and existence of a
quorum, in person or by proxy;
2. Reading and approval of the minutes of the previous meeting
or meetings;
3. Reports of the Board of Directors, and if any, the
president, treasurer and secretary of the corporation;
4. Reports of committees;
5. Election of directors;
6. Unfinished business;
7. New business;
8. Adjournment.
Section 1.11 Absentees' Consent to Meeting. Transactions of any meeting of
the stockholders are as valid as though had at a meeting duly held after regular
call and notice if a quorum is represented, either in person or by proxy, and
if, either before or after the meeting, each of the persons entitled to vote,
not represented in person or by proxy (and those who, although present, either
object at the beginning of the meeting to the transaction of any business
because the meeting has not been lawfully called or convened or expressly object
at the meeting to the consideration of matters not included in the notice which
are legally required to be included therein), signs a written waiver of notice
and/or consent to the holding of the meeting or an approval of the minutes
thereof. All such waivers, consents, and approvals shall be filed with the
corporate records and made a part of the minutes of the meeting. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting,
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except when the person objects at the beginning of the meeting to the
transaction of any business because the meeting is not lawfully called or
convened and except that attendance at a meeting is not a waiver of any right to
object to the consideration of matters not properly included in the notice if
such objection is expressly made at the time any such matters are presented at
the meeting. Neither the business to be transacted at nor the purpose of any
regular or special meeting of stockholders need be specified in any written
waiver of notice or consent, except as otherwise provided in Sections 1.04(a)
and (b) of these Bylaws.
Section 1.12 Telephonic Meeting. Stockholders may participate in a meeting
of the stockholders by means of a telephone conference or similar method of
communication by which all individuals participating in the meeting can hear
each other. Participation in a meeting pursuant to this Section 1.12 constitutes
presence in person at the meeting.
Section 1.13 Action Without Meeting. Any action required or permitted to be
taken at a meeting of the stockholders may be taken without a meeting if a
written consent thereto is signed by the holders of the voting power of the
corporation that would be required at a meeting to constitute the act of the
stockholders. Whenever action is taken by written consent, a meeting of
stockholders need not be called or notice given. The written consent may be
signed in counterparts and must be filed with the minutes of the proceedings of
the stockholders. Such action shall be deemed effective on the date when the
signatures of holders of the requisite number of shares approving the matter
have been obtained.
ARTICLE II
DIRECTORS
Section 2.01 Number, Tenure, and Qualifications. Unless a larger number is
required by the laws of the State of Nevada or the Articles of Incorporation or
until changed in the manner provided herein, the authorized number of directors
shall be such number, not less than three (3) nor more than ten (10)
individuals, as shall be fixed from time to time by the Board of Directors. All
directors shall hold office for one (1) year or until his or her successor or
successors are elected and qualify. A director need not be a stockholder of the
corporation.
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Section 2.02 Change in Number. Subject to any limitations in the laws of
the State of Nevada, the Articles of Incorporation or these Bylaws, the
authorized number of directors may be changed from time to time by resolution
adopted by the Board of Directors.
Section 2.03 Reduction in Number. No reduction of the number of directors
shall have the effect of removing any director prior to the expiration of his or
her term of office.
Section 2.04 Resignation. Any director may resign effective upon giving
written notice to the chairman of the Board of Directors, the president, the
secretary, or in the absence of all of them, any other officer, unless the
notice specifies a later time for effectiveness of such resignation. Unless
otherwise specified in the Articles of Incorporation, a majority of the
remaining directors, though less than a quorum, may appoint a successor to take
office when the resignation becomes effective, each director so appointed to
hold office during the remainder of the term of office of the resigning
director.
Section 2.05 Removal.
(a) The Board of Directors of the corporation, by majority vote, may
declare vacant the office of a director who has been declared incompetent by an
order of a court of competent jurisdiction or convicted of a felony.
(b) Any director may be removed from office by the vote or written
consent of stockholders representing not less than two-thirds of the voting
power of the issued and outstanding stock entitled to vote for the election of
directors.
Section 2.06 Vacancies.
(a) Unless it is otherwise provided in the Articles of Incorporation,
all vacancies, including those caused by an increase in the number of directors,
may be filled by a majority of the remaining directors, though less than a
quorum unless, in the case of removal of one or more directors, the stockholders
by a majority of voting power entitled to vote for election of directors shall
have appointed a successor to the removed director. Subject to the provisions of
Subsection (b) below, (i) in the case of the replacement of a director, the
appointed director shall hold office during the remainder of the term of office
of the replaced director, and (ii) in the case of an increase in the number of
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directors, the appointed director shall hold office until the next meeting of
stockholders at which directors are elected.
(b) If, after the filling of any vacancy by the directors, the
directors then in office who have been elected by the stockholders shall
constitute less than a majority of the directors then in office, any holder or
holders of an aggregate of five percent (5%) or more of the total voting power
entitled to vote for the election of directors may call a special meeting of the
stockholders to elect the entire Board of Directors.
Section 2.07 Annual and Regular Meetings. Immediately following the
adjournment of, and at the same place as the annual or any special meeting of
the stockholders at which directors are elected other than pursuant to Section
2.06 of this Article, the Board of Directors, including directors newly elected,
shall hold its annual meeting without notice, other than this provision, to
elect officers and to transact such further business as may be necessary or
appropriate. The Board of Directors may provide by resolution the place, date,
and hour for holding regular meetings between annual meetings.
Section 2.08 Special Meetings. Special meetings of the Board of Directors
may be called by the chairman, or if there be no chairman, by the president or
secretary and shall be called by the chairman, the president or the secretary
upon the request of any two (2) directors. If the chairman, or if there be no
chairman both the president and secretary, refuses or neglects to call such
special meeting, a special meeting may be called by notice signed by any two (2)
directors.
Section 2.09 Place of Meetings. Any regular or special meeting of the
directors of the corporation may be held at such place as the Board of
Directors, or in the absence of such designation, as the notice calling such
meeting may designate. A waiver of notice signed by directors may designate any
place for the holding of such meeting.
Section 2.10 Notice of Meeting. Except as otherwise provided in Section
2.07, there shall be delivered to all directors, at least forty-eight (48) hours
before the time of such meeting, a copy of a written notice of any meeting by
delivery of such notice personally, by mailing such notice postage prepaid or by
telegram or facsimile. Such notice shall be addressed in the manner provided for
notice to stockholders in Section 1.04(c). If mailed, the notice shall be deemed
delivered two (2) business days following the date the same is deposited in the
United States mail, postage prepaid. Any director may waive
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notice of any meeting, and the attendance of a director at a meeting and oral
consent entered on the minutes of the meeting or taking part in deliberations of
the meeting without objection shall constitute a waiver of notice of such
meeting. Attendance for the express purpose of objecting to the transaction of
business thereat because the meeting is not properly called or convened shall
not constitute presence nor a waiver of notice for purposes hereof.
Section 2.11 Quorum: Adjourned Meetings.
(a) A majority of the directors in office, at a meeting duly
assembled, is necessary to constitute a quorum for the transaction of business.
(b) At any meeting of the Board of Directors where a quorum is not
present, a majority of those present may adjourn, from time to time, until a
quorum is present, and no notice of such adjournment shall be required. At any
adjourned meeting where a quorum is present, any business may be transacted
which could have been transacted at the meeting originally called.
Section 2.12 Board of Directors' Decisions. Subject to the Articles of
Incorporation, the affirmative vote of a majority of the directors present at a
meeting at which a quorum is present is the act of the Board of Directors.
Section 2.13 Telephonic Meetings. Members of the Board of Directors or of
any committee designated by the Board of Directors may participate in a meeting
of the Board of Directors or committee by means of a telephone conference or
similar method of communication by which all persons participating in such
meeting can hear each other. Participation in a meeting pursuant to this Section
2.13 constitutes presence in person at the meeting.
Section 2.14 Action Without Meeting. Any action required or permitted to be
taken at a meeting of the Board of Directors or of a committee thereof may be
taken without a meeting if, before or after the action, a written consent
thereto is signed by all of the members of the Board of Directors or the
committee. The written consent may be signed in counterparts and must be filed
with the minutes of the proceedings of the Board of Directors or committee.
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Section 2.15 Powers and Duties.
(a) Except as otherwise restricted in the laws of the State of Nevada
or the Articles of Incorporation or these Bylaws, the Board of Directors has
full control over the affairs of the corporation. The Board of Directors may
delegate any of its authority to manage, control or conduct the business of the
corporation to any standing or special committee or to any officer or agent and
to appoint any persons to be agents of the corporation with such powers,
including the power to subdelegate, and upon such terms as may be deemed fit.
(b) The Board of Directors may present to the stockholders at annual
meetings of the stockholders, and when called for by a majority vote of the
stockholders at an annual meeting or a special meeting of the stockholders shall
so present, a full and clear report of the condition of the corporation.
(c) The Board of Directors, in its discretion, may submit any contract
or act for approval or ratification at any annual meeting of the stockholders or
any special meeting properly called for the purpose of considering any such
contract or act, provided a quorum is present.
(d) Notwithstanding any other provision of these Bylaws, the
affirmative vote of two-thirds (2/3rds) of the directors then in office shall be
required to authorize or approve any amendment, modification or supplement to
(a) the Indenture and the first Supplemental Indenture to be entered into by and
among the corporation, as issuer, Riviera Operating Corporation ("ROC"), as
guarantor, and IBJ Schroeder Bank & Trust Company, as trustee (the "Trustee"),
relating to the 11% First Mortgage Notes Due December 31, 2002 (or any other
series of notes issued thereunder (collectively, the "Notes")) of the
corporation in the form finally confirmed by the Court in the reorganization
case of Riviera, Inc., under Chapter 11 of Title 11 of the United States Code
(Case No. BK-S-91-24940) ("Reorganization Case"); (b) the Notes; (c) the Deed of
Trust, Assignment of Rents and Security Agreement of the corporation, as
trustor, in favor of the Trustee, as beneficiary, relating to the Notes; (d) the
Security Agreement by and among the corporation and ROC as debtors, and the
Trustee, as secured party, relating to the Notes; or (e) any of the other
agreements entered into by the corporation in connection with the issuance of
the Notes or the provision of security for payment of the Notes which are listed
in the Confirmation Order entered in the Reorganization Case.
Section 2.16 Compensation. The Board of Directors may pay reasonable
compensation to persons who are not full-time employees of the corporation or
any subsidiary or parent company who serve as directors and members of
committees for their services as such. The directors and members of committees
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shall be allowed and paid all necessary expenses incurred in attending any
meetings of the Board of Directors or committees. Directors shall also receive
reasonable compensation for their services as directors, in such amounts and at
such times as may be determined by the Board of Directors from time to time.
Section 2.17 Order of Business. The order of business at any meeting of the
Board of Directors shall be as follows:
1. Determination of members present and existence of quorum;
2. Reading and approval of the minutes of any previous meeting or
meetings;
3. Reports of officers and committee members;
4. Elections of officers (annual meeting);
5. Unfinished business;
6. New business;
7. Adjournment.
ARTICLE III
OFFICERS
Section 3.01 Election. The Board of Directors, at its annual meeting, shall
elect a Chairman of the Board, a president, a secretary and a treasurer to hold
office for a term of one (1) year or until their successors are chosen and
qualify. Any individual may hold two or more offices. The Board of Directors
may, from time to time, by resolution, elect one or more vice-presidents,
assistant secretaries and assistant treasurers and appoint agents of the
corporation, prescribe their duties and fix their compensation.
Section 3.02 Removal; Resignation. Any officer or agent elected or
appointed by the Board of Directors may be removed by it with or without cause.
Any officer may resign at any time upon written notice to the corporation. Any
such removal or resignation shall be subject to the rights, if any, of the
respective parties under any contract between the corporation and such officer
or agent.
Section 3.03 Vacancies. Any vacancy in any office because of death,
resignation, removal or otherwise may be filled by the Board of Directors for
the unexpired portion of the term of such office.
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Section 3.04 Chairman of the Board. The Chairman of the Board shall be the
Chief Executive Officer of the corporation and shall have general direction over
the policies and affairs of the corporation and compliance with these Bylaws and
resolutions and directions of the Board of Directors, subject only to the
control and direction of the Board of Directors. He shall preside at all
meetings of the stockholders and the Board of Directors. He may call meetings of
the Directors and of any committee of the Board whenever he deems it advisable.
He may appoint ad hoc committees of the Board of Directors and prescribe the
scope of their duties. He shall, in the absence or incapacity of the President,
perform all duties and functions and exercise all of the powers of the
President. He shall have such other powers and duties as may from time to time
be prescribed in these Bylaws or by the resolution of the Board of Directors.
Section 3.05 President.
(a) The President shall be the Chief Operating Officer of the
corporation, subject to the control and direction of the Board of Directors and
the Chairman of the Board. He shall report to the Chairman of the Board and keep
the Chairman of the Board informed concerning the affairs and condition of the
business of the Company. He shall have such other powers and duties as may from
time to time be prescribed by these Bylaws, by resolution of the Board of
Directors, or by the Chairman of the Board. In the absence or incapacity of the
Chairman of the Board, he shall preside as Chairman at all meetings of the
stockholders or the Board of Directors.
(b) The President shall have full power and authority on behalf of the
corporation to attend and to act and to vote, or designate such other officer or
agent of the corporation to attend and to act and to vote, at any meetings of
the stockholders of any corporation in which the corporation may hold stock and,
at any such meetings, shall possess and may exercise any and all rights and
powers incident to the ownership of such stock. The Board of Directors, by
resolution from time to time, may confer like powers on any person or persons in
place of the president to exercise such powers for these purposes.
Section 3.06 Executive Vice-Presidents and Vice-Presidents. The Board of
Directors may elect one or more executive vice-presidents and vice-presidents
who shall be vested with all the powers and perform all the duties of the
president whenever the president is absent or unable to act and such other
duties as shall be prescribed by the Board of Directors or the president.
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Section 3.07 Secretary. The secretary shall keep, or cause to be kept, the
minutes of proceedings of the stockholders and the Board of Directors in books
provided for that purpose. The secretary shall attend to the giving and service
of all notices of the corporation, may sign with the president in the name of
the corporation all contracts in which the corporation is authorized to enter,
shall have the custody or designate control of the corporate seal, shall affix
the corporate seal to all certificates of stock duly issued by the corporation,
shall have charge or designate control of stock certificate books, transfer
books and stock ledgers, and such other books and papers as the Board of
Directors or appropriate committee may direct, and shall, in general, perform
all duties incident to the office of the secretary.
Section 3.08 Assistant Secretaries. The Board of Directors may appoint one
or more assistant secretaries who shall have such powers and perform such duties
as may be prescribed by the Board of Directors or the secretary.
Section 3.09 Treasurer.
(a) The treasurer shall be the chief financial officer of the
corporation, subject to the supervision and control of the Board of Directors,
and shall have custody of all the funds and securities of the corporation. When
necessary or proper, the treasurer shall endorse on behalf of the corporation
for collection checks, notes, and other obligations, and shall deposit all
monies to the credit of the corporation in such bank or banks or other
depository as the Board of Directors may designate, and shall sign all receipts
and vouchers for payments made by the corporation. Unless otherwise specified by
the Board of Directors, the treasurer may sign with the president all bills of
exchange and promissory notes of the corporation. Shall also have the care and
custody of the stocks, bonds, certificates, vouchers, evidence of debts,
securities, and such other property belonging to the corporation as the Board of
Directors shall designate, and shall sign all papers required by law, by these
Bylaws, or by the Board of Directors to be signed by the treasurer. The
treasurer shall enter, or cause to be entered, regularly in the financial
records of the corporation, to be kept for that purpose, full and accurate
accounts of all monies received and paid on account of the corporation and,
whenever required by the Board of Directors, the treasurer shall render a
statement of any or all accounts. The treasurer shall at all reasonable times
exhibit the books of account to any director of the corporation and shall
perform all acts incident to the position of the treasurer subject to the
control of the Board of Directors.
(b) The treasurer shall, if required by the Board of Directors, give
bond to the corporation in such sum and with such security as shall be
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approved by the Board of Directors for the faithful performance of all the
duties of treasurer and for restoration to the corporation, in the event of the
treasurer's death, resignation, retirement or removal from office, of all books,
records, papers, vouchers, money and other property in the treasurer's custody
or control and belonging to the corporation. The expense of such bond shall be
borne by the corporation.
Section 3.10 Assistant Treasurers. The Board of Directors may appoint one
or more assistant treasurers who shall have such powers and perform such duties
as may be prescribed by the Board of Directors or the treasurer. The Board of
Directors may prescribe an assistant treasurer to give a bond to the corporation
in such sum and with such security as it may approve, for the faithful
performance of the duties of assistant treasurer, and for restoration to the
corporation, in the event of the assistant treasurer's death, resignation,
retirement or removal from office, of all books, records, papers, vouchers,
money and other property in the assistant treasurer's custody or control and
belonging to the corporation. The expense of such bond shall be borne by the
corporation.
ARTICLE IV
CAPITAL STOCK
Section 4.01 Issuance. Shares of the corporation's authorized stock shall,
subject to any provisions or limitations of the laws of the State of Nevada, the
Articles of Incorporation or any contracts or agreements to which the
corporation may be a party, be issued in such manner, at such times, upon such
conditions and for such consideration as shall be prescribed by the Board of
Directors
Section 4.02 Certificates. Ownership in the corporation shall be evidenced
by certificates for shares of stock in such form as shall be prescribed by the
Board of Directors, shall be under the seal of the corporation and shall be
manually signed by the president or a vice-president and also by the secretary
or an assistant secretary; provided however, whenever any certificate is
countersigned or otherwise authenticated by a transfer agent or transfer clerk,
and by a registrar, then a facsimile of the signatures of said officers of the
corporation may be printed or lithographed upon the certificate in lieu of the
actual signatures. If the corporation uses facsimile signatures of its officers
on its stock certificates, it shall not act as registrar of its own stock, but
its transfer agent
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and registrar may be identical if the institution acting in those dual
capacities countersigns any stock certificates in both capacities. Each
certificate shall contain the name of the record holder, the number,
designation, if any, class or series of shares represented, a statement or
summary of any applicable rights, preferences, privileges or restrictions
thereon, and a statement if applicable, that the shares are assessable. All
certificates shall be consecutively numbered. If provided by the stockholder,
the name, address and federal tax identification number of the stockholder, the
number of shares, and the date of issue shall be entered in the stock transfer
records of the corporation.
Section 4.03 Surrendered; Lost or Destroyed Certificates. All certificates
surrendered to the corporation, except those representing shares of treasury
stock, shall be canceled and no new certificate shall be issued until the former
certificate for a like number of shares shall have been canceled, except that in
case of a lost, stolen, destroyed or mutilated certificate, a new one may be
issued therefor. However, any stockholder applying for the issuance of a stock
certificate in lieu of one alleged to have been lost, stolen, destroyed or
mutilated shall, prior to the issuance of a replacement, provide the corporation
with his, her or its affidavit of the facts surrounding the loss, theft,
destruction or mutilation and, if required by the Board of Directors, an
indemnity bond in an amount not less than twice the current market value of the
stock, and upon such terms as the treasurer or the Board of Directors shall
require which shall indemnify the corporation against any loss, damage, cost or
inconvenience arising as a consequence of the issuance of a replacement
certificate.
Section 4.04 Replacement Certificate. When the Articles of Incorporation
are amended in any way affecting the statements contained in the certificates
for outstanding shares of capital stock of the corporation or it becomes
desirable for any reason, in the discretion of the Board of Directors,
including, without limitation, following the merger of the corporation with
another corporation or the reorganization of the corporation, to cancel any
outstanding certificate for shares and issue a new certificate therefor
conforming to the rights of the holder, the Board of Directors may order any
holders of outstanding certificates for shares to surrender and exchange the
same for new certificates within a reasonable time to be fixed by the Board of
Directors. The order may provide that a holder of any certificate(s) ordered to
be surrendered shall not be entitled to vote, receive distributions or exercise
any other rights of stockholders of record until the holder has complied with
the order, but the order operates to suspend such rights only after notice and
until compliance.
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Section 4.05 Transfer of Shares. No transfer of stock shall be valid as
against the corporation except on surrender and cancellation of the certificates
therefor accompanied by an assignment or transfer by the registered owner made
either in person or under assignment. Whenever any transfer shall be expressly
made for collateral security and not absolutely, the collateral nature of the
transfer shall be reflected in the entry of transfer in the records of the
corporation.
Section 4.06 Transfer Agent; Registrars. The Board of Directors may appoint
one or more transfer agents, transfer clerk and registrars of transfer and may
require all certificates for shares of stock to bear the signature of such
transfer agent, transfer clerk and/or registrar of transfer.
Section 4.07 Stock Transfer Records. The stock transfer records shall be
closed for a period of at least ten (10) days prior to all meetings of the
stockholders and shall be closed for the payment of distributions as provided in
Article V hereof and during such periods as, from time to time, may be fixed by
the Board of Directors, and during such periods, no stock shall be transferable
for purposes of Article V and no voting rights shall be deemed transferred
during such periods. Subject to the forgoing limitations, nothing contained
herein shall cause transfers during such periods to be void or voidable.
Section 4.08 Miscellaneous. The Board of Directors shall have the power and
authority to make such rules and regulations not inconsistent herewith as it may
deem expedient concerning the issue, transfer, and registration of certificates
for shares of the corporation's stock.
ARTICLE V
DISTRIBUTIONS
Section 5.01 Distributions may be declared, subject to the provisions of
the laws of the State of Nevada and the Articles of Incorporation, by the Board
of Directors at any regular or special meeting and may be paid in cash,
property, shares of corporate stock, or any other medium. The Board of Directors
may fix in advance a record date, as provided in Section 1.06, prior to the
distribution for the purpose of determining stockholders entitled to receive any
distribution. The Board of Directors may close the stock transfer books for such
purpose for a period of not more than ten (10) days prior to the date of such
distribution.
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ARTICLE VI
RECORDS; REPORTS; SEAL; AND FINANCIAL MATERS
Section 6.01 Records. All original records of the corporation shall be kept
by or under the direction of the secretary or at such places as may be
prescribed by the Board of Directors.
Section 6.02 Directors' and Officers' Right of Inspection. Every director
and officer shall have the absolute right at any reasonable time for a purpose
reasonably related to the exercise of such individual's duties to inspect and
copy all of the corporation's books, records, and documents of every kind and to
inspect the physical properties of the corporation and/or its subsidiary
corporations. Such inspection may be made in person or by agent or attorney.
Section 6.03 Corporate Seal. The Board of Directors may, by resolution,
authorize a seal, and the seal may be used by causing it, or a facsimile, to be
impressed or affixed or reproduced or otherwise. Except when otherwise
specifically provided herein, any officer of the corporation shall have the
authority to affix the seal to any document requiring it.
Section 6.04 Fiscal Year-End. The fiscal year-end of the corporation shall
be such date as may be fixed from time to time by resolution of the Board of
Directors.
Section 6.05 Reserves. The Board of Directors may create, by resolution,
such reserves, in accordance with generally accepted accounting principles, as
the directors may, from time to time, in their discretion, think proper to
provide for contingencies, or to equalize distributions or to repair or maintain
any property of the corporation, or for such other purpose as the Board of
Directors may deem beneficial to the corporation, and the directors may modify
or abolish any such reserves in the manner in which they were created.
ARTICLE VII
INDEMNIFICATION
Section 7.01 Indemnification and Insurance.
(a) Indemnification of Directors and Officers.
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(i) For purposes of this Article: (a) "Indemnitee" shall mean each
director or officer of the corporation who was or is a party to, or is
threatened to be made a party to, or is otherwise involved in, any Proceeding
(as hereinafter defined), by reason of the fact that he or she is or was a
director or officer of the corporation or is or was serving in any capacity at
the request of the corporation as a director, officer, employee, agent, partner,
or fiduciary of, or in any other capacity for, another corporation or any
partnership, joint venture, trust, or other enterprise; and (b) "Proceeding"
shall mean any threatened, pending or completed action or suit (including
without limitation an action, suit or proceeding by or in the right of the
corporation), whether civil, criminal, administrative or investigative.
(ii) Each Indemnitee shall be indemnified and held harmless by the
corporation for all actions taken by him or her and for all omissions
(regardless of the date of any such action or omission), to the fullest extent
permitted by Nevada law, against all expense, liability and loss (including
without limitation attorneys' fees, judgments, fines, taxes, penalties, and
amounts paid or to be paid in settlement) reasonably incurred or suffered by the
Indemnitee in connection with any Proceeding. The indemnification provided for
herein shall include, but not be limited to, the right to reimbursement from the
corporation for all reasonable costs and expenses incurred by the Indemnitee in
connection with the Proceeding. The corporation shall promptly reimburse such
costs and expenses upon submission by the Indemnitee of invoices or other
evidence of such costs and expenses, in form satisfactory to the corporation.
(iii) Indemnification pursuant to this Section shall continue as
to an Indemnitee who has ceased to be a director or officer and shall inure to
the benefit of his or her heirs, executors and administrators.
(b) Indemnification of Employees and Other Persons. The corporation
may, by action of its Board of Directors and to the extent provided in such
action, indemnify employees, agents and other persons as though they were
Indemnitees.
(c) Non-Exclusivity of Rights. The rights to indemnification provided
in this Article shall not be exclusive of any other rights that any person may
have or hereafter acquire under any statute, provision of the corporation's
Articles of Incorporation or Bylaws, agreement, vote of stockholders or
directors, or otherwise.
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(d) Insurance. The corporation may purchase and maintain insurance or
make other financial arrangements on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise for
any liability asserted against him or her and liability and expenses incurred by
him or her in his or her capacity as a director, officer, employee or agent, or
arising out of his or her status as such, whether or not the corporation has the
authority to indemnify him or her against such liability and expenses.
(e) Other Financial Arrangements. The other financial arrangements
which may be made by the corporation may include the following: (i) the creation
of a trust fund; (ii) the establishment of a program of self-insurance; (iii)
the securing of its obligation of indemnification by granting a security
interest or other lien on any assets (including cash) of the corporation; (iv)
the establishment of a letter of credit, guarantee or surety. No financial
arrangement pursuant to this subsection may provide protection for a person
adjudged by a court of competent jurisdiction, after exhaustion of all appeals
therefrom, to be liable for intentional misconduct, fraud, or a knowing
violation of law, except with respect to advancement of expenses or
indemnification ordered by a court.
(f) Other Matters Relating to Insurance or Financial Arrangements. Any
insurance or other financial arrangement made on behalf of a person pursuant to
this Section may be provided by the corporation or any other person approved by
the Board of Directors, even if all or part of the other person's stock or other
securities is owned by the corporation. In the absence of fraud:
(i) the decision of the Board of Directors as to the propriety of
the terms and conditions of any insurance or other financial arrangement made
pursuant to this Section and the choice of the person to provide the insurance
or other financial arrangement is conclusive; and
(ii) the insurance or other financial arrangement:
(a) is not void or voidable; and
(b) does not subject any director approving it to personal
liability for his action, even if a director
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approving the insurance or other financial arrangement is
a beneficiary of the insurance or other financial
arrangement.
Section 7.02 Amendment. The provisions of this Article relating to
indemnification shall constitute a contract between the corporation and each of
its directors and officers which may be modified as to any director or officer
only with that person's consent or as specifically provided in this Section.
Notwithstanding any other provision of these Bylaws relating to their amendment
generally, any repeal or amendment of this Article which is adverse to any
director or officer shall apply to such director or officer only on a
prospective basis and shall not limit the rights of an Indemnitee to
indemnification with respect to any action or failure to act occurring prior to
the time of such repeal or amendment. Notwithstanding any other provision of
these Bylaws, no repeal or amendment of these Bylaws shall affect any or all of
this Article so as to limit or reduce the indemnification in any manner unless
adopted by (a) the vote of a majority of the directors of the corporation then
serving, or (b) by the stockholders as set forth in Article VIII hereof;
provided that no such amendment shall have retroactive effect inconsistent with
the preceding sentence.
Section 7.03 Changes in Nevada Law. References in this Article to Nevada
law or to any provision thereof shall be to such law as it existed on the date
this Article was adopted or as such law thereafter may be changed; provided that
(a) in the case of any change which expands the liability of directors or
officers or limits the indemnification rights or the rights to advancement of
expenses which the corporation may provide, the rights to limited liability, to
indemnification and to the advancement of expenses provided in the corporation's
Articles of Incorporation and/or these Bylaws shall continue as theretofore to
the extent permitted by law; and (b) if such change permits the corporation,
without the requirement of any further action by stockholders or directors, to
limit further the liability of directors or limit the liability of officers, or
to provide broader indemnification rights, or rights to the advancement of
expenses than the corporation was permitted to provide prior to such change,
then liability thereupon shall be so limited and the rights to indemnification
and the advancement of expenses shall be so broadened to the extent permitted by
law.
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ARTICLE VIII
AMENDMENT OR REPEAL
Section 8.01. Amendment. Except as otherwise restricted in the Articles of
Incorporation or these Bylaws:
(a) Any provision of these Bylaws may be altered, amended or repealed
at the annual or any regular meeting of the Board of Directors without prior
notice, or at any special meeting of the Board of Directors if notice of such
alteration, amendment or repeal be contained in the notice of such special
meeting.
(b) These Bylaws may also be altered, amended, or repealed at a duly
convened meeting of the stockholders by the affirmative vote of the holders of a
majority of the voting power of the issued and outstanding stock of the
corporation entitled to vote. The stockholders may provide by resolution that
any Bylaw provision be repealed, amended, adopted or altered by them may not be
repealed, amended, adopted or altered by the Board of Directors.
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Exhibit 3.3
ARTICLES OF INCORPORATION
OF
RIVIERA OPERATING CORPORATION
The undersigned, for the purpose of forming a corporation, pursuant to and by
virtue of Chapter 78 of the Nevada Revised Statutes, hereby adopts, executes and
acknowledges the following Articles of Incorporation.
ARTICLE I
NAME
The name of the corporation shall be RIVIERA OPERATING CORPORATION.
ARTICLE II
REGISTERED OFFICE
The name of the initial resident agent and the street address of the
initial registered office in the State of Nevada where process may be served
upon the corporation is Schreck, Jones, Bernhard, Woloson & Godfrey, Chartered,
600 East Charleston Blvd., Las Vegas, Clark County, Nevada 89104. The
corporation may, from time to time, in the manner provided by law, change the
resident agent and the registered office within the State of Nevada. The
corporation may also maintain an office or offices for the conduct of its
business, either within or without the State of Nevada.
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ARTICLE III
CAPITAL STOCK
Section 1. Authorized Shares. The aggregate number of shares which the
corporation shall have authority to issue shall consist of One Thousand (1,000)
shares of common stock without par value. The corporation shall be prohibited
from issuing equity securities having no voting rights whatsoever.
Section 2. Consideration for Shares. The common stock authorized by Section
1 of this Article shall be issued for such consideration as shall be fixed, from
time to time, by the Board of Directors.
Section 3. Assessment of Stock. The capital stock of the corporation, after
the amount of the subscription price has been fully paid in, shall not be
assessable for any purpose, and no stock issued as fully paid shall ever be
assessable or assessed. No stockholder of the corporation is individually liable
for the debts or liabilities of the corporation.
Section 4. Cumulative Voting For Directors. No stockholder of the
corporation shall be entitled to cumulative voting of his shares for the
election of directors.
Section 5. Preemptive Rights. No stockholder of the corporation shall have
any preemptive rights.
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ARTICLE IV
DIRECTORS AND OFFICERS
Section 1. Number of Directors. The members of the governing board of the
corporation are styled as directors. The number of directors may be fixed and
changed from time to time in such manner as shall be provided in the bylaws of
the corporation and shall be no less than three (3) nor more than ten (10).
Section 2. Initial Directors. The name and post office box or street
addresses of the directors constituting the first Board of Directors, which
shall be five (5) in number ,are:
NAME ADDRESS
William Westerman 600 E. Charleston Blvd.
Las Vegas, NV 89104
Philip Hannifin Same
Bill Friedman Same
Robert Barengo Same
Albert Rapuano Same
Section 3. Limitation of Personal Liability. No director or officer of the
corporation shall be personally liable to the corporation or its stockholders
for damages for breach of fiduciary duty as a director or officer; provided,
however, that the foregoing provision does not eliminate or limit the liability
of a director or officer of the corporation for:
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(a) Acts or omissions which involve intentional misconduct, fraud or a
knowing violation of law; or
(b) The payment of distributions in violation of Nevada Revised Statutes
78.300.
Section 4. Payment of Expenses. In addition to any other rights of
indemnification permitted by the law of the State of Nevada as may be provided
for by the corporation in its bylaws or by agreement, the reasonable expenses of
officers and directors incurred in defending a civil or criminal action, suit or
proceeding, involving alleged acts or omissions of such officer or director in
his or her capacity as an officer or director of the corporation, must be paid,
by the corporation or through insurance purchased and maintained by the
corporation or through other financial arrangements made by the corporation, as
they are incurred and in advance of the final disposition of the action, suit or
proceeding, upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he or she is not entitled to be indemnified by the
corporation.
Section 5. Repeal And Conflicts. Any repeal or modification of Sections 3
or 4 above approved by the stockholders of the corporation shall be prospective
only. In the event of any conflict between Sections 3 or 4 of this Article and
any other Article of the corporation's Articles of Incorporation, the terms and
provisions of Sections 3 or 4 of this Article shall control.
Section 6. Compliance with Gaming Control Act. All of the directors of the
corporation shall be subject to, and the composition of the Board of Directors
shall be in compliance with, the
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requirements and qualifications imposed by the Nevada Gaming Control Act (Nevada
Revised Statutes ss.483.010 et seq., as amended from time-to-time), or any
successor provision of Nevada law, and the regulations promulgated thereunder,
and the rules and regulations of any governmental agency responsible for the
licensing and regulation of gaming operations including without limitation, the
Nevada State Gaming Control Board, the Nevada State Gaming Commission and the
Clark County Liquor and Gaming Licensing Board.
ARTICLE V
INCORPORATOR
The name and post office box or street address of the incorporator signing
these Articles of Incorporation is:
NAME ADDRESS
Kenneth A. Woloson 600 East Charleston Boulevard
Las Vegas, Nevada 89104
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CERTIFICATE OF AMENDMENT
OF ARTICLES OF INCORPORATION
OF
RIVIERA OPERATING CORPORATION
Pursuant to Nevada Revised Statutes ss.78,380, the undersigned does hereby
declare
1. He constitutes the sole original Incorporator of RIVIERA OPERATING
CORPORATION, (the "Corporation") a corporation duly organized and existing under
the laws of the State of Nevada.
2. The original Articles of Incorporation were filed with the Secretary of
State on January 27, 1993.
3. To the date of execution of this Certificate, no portion of the capital
of the Corporation has been paid.
4. The sole Incorporator hereby amends the Articles of Incorporation as
follows:
A. The Articles of Incorporation be amended by adding VI to read as
follows:
ARTICLE VI
PURPOSES
The purposes for which the Corporation is formed are:
(a) To conduct gaming in the State of Nevada in accordance with he
laws of the State of Nevada and the United States of America; and
(b) To engage in any other business or activity not forbidden by law
of these Articles of Incorporation.
B. The Articles be further amended by adding Article VII to read as
follows:
ARTICLE VII
RESTRICTIONS
(a) The Corporation shall not issue any stock or securities except in
accordance with the provisions of the Nevada Gaming Control Act and the
Regulations thereunder. The issuance of any stock or securities in violation
thereof shall be ineffective and such stock or securities shall be deemed not to
be issued and outstanding until (1) the Corporation
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shall cease to be subject tot he jurisdiction of the Nevada Gaming Commission,
or (2) the Nevada Gaming Commission shall, by affirmative action, validate such
issuance or waive any defect in issuance.
(b) No stock or securities issued by the Corporation and no interest,
claim, or change therein or thereto shall be transferred in any manner
whatsoever, except in accordance with the provisions of the Nevada Gaming
Control Act and the regulations thereunder. Any transfer in violation thereof
shall be ineffective until (1) the corporation shall cease to be subject to the
jurisdiction of the Nevada Gaming Commission, or (2) the Nevada Gaming
Commission shall, by affirmative action, validate said transfer or waive any
defect in said transfer.
(c ) If the Commission at any time determines that a holder of stock
or other securities of this corporation is unsuitable to hold such securities,
then, until such securities are owned by persons found by the Commission to be
suitable to own them, (1) the Corporation shall not be required or permitted to
pay any dividend or interest with regard to the securities, (2) the holder of
such securities shall not be entitled to vote on any matter as the holder of the
securities, and such securities shall not for any purposes be included in the
securities of the Corporation entitled to vote, and (3) the Corporation shall
not pay nay remuneration in any form to the holder of the securities.
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Exhibit 3.4
BYLAWS
OF
RIVIERA OPERATING CORPORATION, INC.
ARTICLE I
STOCKHOLDERS
Section 1.01. Annual Meeting. An annual meeting of the stockholders of the
corporation shall be held at 2:00 o'clock in the afternoon on the second
Thursday of May in each year, at the principal place of business of the
corporation (unless a different time, date and place shall be approved by a
resolution of the Board of Directors) commencing after the first anniversary of
incorporation, but if such date is a legal holiday, then on the next succeeding
business day, for the purpose of electing directors of the corporation to serve
during the ensuing year and for the transaction of such other business as may
properly come before the meeting. If the election of the directors is not held
on the day designated herein for any annual meeting of the stockholders, or at
any adjournment thereof, the president shall cause the election to be held at a
special meeting of the stockholders as soon thereafter as is convenient.
Section 1.02. Special Meeting.
(a) Special meetings of the stockholders may be called by the
chairman, president or the Board of Directors and shall be called by the
chairman, the president or the Board of Directors at the written request of the
holders of not less than a majority of the voting power of any class of the
corporation's stock entitled to vote for the election of directors or for the
matters relating to the purposes for which such meeting is being called.
(b) No business shall be acted upon at a special meeting except as set
forth in the notice calling the meeting, unless one of the conditions for the
holding of a meeting without notice set forth in Section 1.05 shall be
satisfied, in which case any business may be transacted and the meeting shall be
valid for all purposes.
Section 1.03 Place of Meeting. Any meeting of the stockholders of the
corporation may be held at its registered office in the State of Nevada or at
such other place in or out of the United States as the Board of Directors may
designate. A waiver of notice signed by stockholders entitled to vote may
designate any place for the holding of such meeting.
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Section 1.04 Notice of Meeting.
(a) The president, a vice president, the secretary, an assistant
secretary or any other individual designated by the Board of Directors shall
sign and deliver written notice of any meeting at least ten (10) days, but not
more than sixty (60) days, before the date of such meeting. The notice shall
state the place, date and time of the meeting and the purpose or purposes for
which the meeting is called.
(b) In the case of an annual meeting, any proper business may be
presented for action, except that action on any of the following items shall be
taken only if the general nature of the proposal is stated in the notice:
(1) Action with respect to any contract or transaction between
the corporation and one or more of its directors or officers or between the
corporation and one or more of its directors or officers or between the
corporation and any corporation, firm or association in which one or more of the
corporation's directors or officers is a director or officer or is financially
interested;
(2) Adoption of amendments to the Articles of Incorporation; or
(3) Action with respect to a merger, share exchange,
reorganization, consolidation, partial or complete liquidation, or dissolution
of the corporation.
(c) A copy of the notice shall be personally delivered or mailed
postage prepaid to each stockholder of record entitled to vote at the meeting at
the address appearing on the records of the corporation, and the notice shall be
deemed delivered the date the same is deposited in the United States mail for
transmission to such stockholder. If the address of any stockholder does not
appear upon the records of the corporation, it will be sufficient to address any
notice to such stockholder at the registered office of the corporation.
(d) The written certificate of the individual signing a notice of
meeting, setting forth the substance of the notice or having a copy thereof
attached, the date the notice was mailed or personally delivered to the
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stockholders and the addresses to which the notice was mailed, shall be prima
facie evidence of the manner and fact of giving such notice.
(e) Any stockholder may waive notice of any meeting by a signed
writing, either before or after the meeting.
Section 1.05 Meeting Without Notice.
(a) Whenever all persons entitled to vote at any meeting consent,
either by:
(1) A writing on the records of the meeting or filed with the
secretary; or
(2) Presence at such meeting and oral consent entered on the
minutes; or
(3) Taking part in the deliberations at such meeting without
objection;
the doings of such meeting shall be as valid as if had at a meeting regularly
called and noticed.
(b) At such meeting any business may be transacted which is not
excepted from the written consent or to the consideration of which no objection
for want of notice is made at the time.
(c) If any meeting be irregular for want of notice or of such consent,
provided a quorum was present at such meeting, the proceedings of the meeting
may be ratified and approved and rendered likewise valid and the irregularity or
defect therein waived by a writing signed by all parties having the right to
vote at such meeting.
(d) Such consent or approval may be by proxy or attorney, but all such
proxies and powers of attorney must be in writing.
Section 1.06 Determination of Stockholders of Record.
(a) For the purpose of determining the stockholders entitled to notice
of and to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting or entitled to
receive payment of any distribution or the allotment of any rights,
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or entitled to exercise any rights in respect of any change, conversion, or
exchange of stock or for the purpose of any other lawful action, the directors
may fix, in advance, a record date which shall not be more than sixty (60) days,
nor less than ten (10) days before the date of such meeting, nor more than sixty
(60) days prior to any other action.
(b) If no record date is fixed, the record date for determining
stockholders: (i) entitled to notice of and to vote at a meeting of stockholders
shall be at the close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held; (ii) entitled to express
consent to corporate action in writing without a meeting shall be the day on
which the first written consent is expressed; and (iii) for any other purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto. A determination of stockholders of
record entitled to notice of or to vote at any meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
Section 1.07 Quorum: Adjourned Meeting
(a) Unless the Articles of Incorporation or these Bylaws provide for a
different proportion, stockholders holding at lease a majority of the voting
power of the corporation's stock, represented in person or by proxy, are
necessary to constitute a quorum for the transaction of business at any meeting.
If, on any issue, voting by classes is required by the laws of the State of
Nevada, the Articles of Incorporation or these Bylaws, at least a majority of
the voting power within each such class is necessary to constitute a quorum of
each such class, unless the Articles of Incorporation provide for a different
proportion.
(b) If a quorum is not represented, a majority of the voting power so
represented may adjourn the meeting from time to time until holders of the
voting power required to constitute a quorum shall be represented. At any such
adjourned meeting at which a quorum shall be represented, any business may be
transacted which might have been transacted as originally called. When a
stockholder's meeting is adjourned to another time or place hereunder, notice
need not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. The stockholders
present at a duly convened meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave less
than a quorum of the voting power.
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Section 1.08 Voting.
(a) Unless otherwise provided in the Articles of Incorporation, or in
the resolution providing for the issuance of the stock adopted by the Board of
Directors pursuant to authority expressly vested in it by the provisions of the
Articles of Incorporation, each stockholder of record, or such stockholder's
duly authorized proxy or attorney-in-fact, shall be entitled to one (1) vote for
each share of stock entitled to vote on such matter standing registered in such
stockholder's name on the record date.
(b) Except as otherwise provided herein, all votes with respect to
shares standing in the name of an individual on the record date (including
pledged shares) shall be cast only by that individual or such individual's duly
authorized proxy, attorney-in-fact, or voting trustee(s) pursuant to a voting
trust. With respect to shares held by a representative of the estate of a
deceased stockholder, guardian, conservator, custodian or trustee, votes may be
cast by such holder upon proof of capacity, even though the shares do not stand
in the name of such holder. In the case of shares under the control of a
receiver, the receiver may cast votes carried by such shares even though the
shares do not stand in the name of the receiver; provided that the order of the
court of competent jurisdiction which appoints the receiver contains the
authority to cast votes carried by such shares. If shares stand in the name of a
minor, votes may be cast only by the duly appointed guardian of the estate of
such minor if such guardian has provided the corporation with written proof of
such appointment.
(c) With respect to shares standing in the name of another
corporation, partnership, limited liability company or other legal entity on the
record date, votes may be cast: (i) in the case of a corporation, by such
individual as the bylaws of such other corporation prescribe, by such individual
as may be appointed by resolution of the Board of Directors of such other
corporation or by such individual (including the officer making the
authorization) authorized in writing to do so by the chairman of the Board of
Directors, president or any vice-president of such corporation and (ii) in the
case of a partnership, limited liability company or other legal entity, by an
individual representing such stockholder upon presentation to the corporation of
satisfactory evidence of his authority to do so.
(d) Notwithstanding anything to the contrary herein contained, no
votes may be cast for shares owned by this corporation or its subsidiaries, if
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any. If shares are held by this corporation or its subsidiaries, if any, in a
fiduciary capacity, no votes shall be cast with respect thereto on any matter
except to the extent that the beneficial owner thereof possesses and exercises
either a right to vote or to give the corporation holding the same binding
instruction on how to vote.
(e) Any holder of shares entitled to vote on any matter may cast a
portion of the votes in favor of such matter and refrain from casting the
remaining votes or cast the same against the proposal, except in the case of
elections of directors. If such holder entitled to vote fails to specify the
number of affirmative votes, it will be conclusively presumed that the holder is
casting affirmative votes with respect to all shares held.
(f) With respect to shares standing in the name of two or more
persons, whether fiduciaries, members of a partnership, joint tenants, tenants
in common, husband and wife as community property, tenants by the entirety,
voting trustees, persons entitled to vote under a stockholder voting agreement
or otherwise and shares held by two or more persons (including proxy holders)
having the same fiduciary relationship in respect to the same shares, votes may
be cast in the following manner:
(1) If only one person votes, the vote of such person binds all.
(2) If more than one person casts votes, the act of the majority
so voting binds all.
(3) If more than one person casts votes, but the vote is evenly
split on a particular matter, the votes shall be deemed cast
proportionately, as split.
(g) If a quorum is present, unless the Articles of Incorporation or
these Bylaws provide for a different proportion, the affirmative vote of holders
of at least a majority of the voting power represented at the meeting and
entitled to vote on any matter shall be the act of the stockholders, unless
voting by classes is required for any action of the stockholders by the laws of
the State of Nevada, the Articles of Incorporation or these Bylaws, in which
case the affirmative vote of holders of at least a majority of the voting power
of each such class shall be required.
Section 1.09 Proxies.
At any meeting of stockholders, any holder of shares entitled to vote
may designate, in a manner permitted by the laws of the State of Nevada,
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another person or persons to act as a proxy or proxies. No proxy is valid after
the expiration of six (6) months from the date of its creation, unless it is
coupled with an interest or unless otherwise specified in the proxy. In no event
shall the term of a proxy exceed seven (7) years from the date of its creation.
Every proxy shall continue in full force and effect until its expiration or
revocation in a manner permitted by the laws of the State of Nevada.
Section 1.10 Order of Business. At the annual stockholder's meeting, the
regular order of business shall be as follows:
1. Determination of stockholders present and existence of a
quorum, in person or by proxy;
2. Reading and approval of the minutes of the previous meeting
or meetings;
3. Reports of the Board of Directors, and if any, the
president, treasurer and secretary of the corporation;
4. Reports of committees;
5. Election of directors;
6. Unfinished business;
7. New business; 8. Adjournment.
Section 1.11 Absentees' Consent to Meeting. Transactions of any meeting of
the stockholders are as valid as though had at a meeting duly held after regular
call and notice if a quorum is represented, either in person or by proxy, and
if, either before or after the meeting, each of the persons entitled to vote,
not represented in person or by proxy (and those who, although present, either
object at the beginning of the meeting to the transaction of any business
because the meeting has not been lawfully called or convened or expressly object
at the meeting to the consideration of matters not included in the notice which
are legally required to be included therein), signs a written waiver of notice
and/or consent to the holding of the meeting or an approval of the minutes
thereof. All such waivers, consents, and approvals shall be filed with the
corporate records and made a part of the minutes of the meeting. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person objects at the beginning of the meeting to the transaction of
any business because the meeting is not lawfully called or convened and except
that attendance at a meeting is not a waiver of any right to object to the
consideration of matters not properly included in the notice if such objection
is expressly made at the time any such matters are presented at the meeting.
Neither the business to be transacted at nor the
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purpose of any regular or special meeting of stockholders need be specified in
any written waiver of notice or consent, except as otherwise provided in
Sections 1.04(a) and (b) of these Bylaws.
Section 1.12 Telephonic Meeting. Stockholders may participate in a meeting
of the stockholders by means of a telephone conference or similar method of
communication by which all individuals participating in the meeting can hear
each other. Participation in a meeting pursuant to this Section 1.12 constitutes
presence in person at the meeting.
Section 1.13 Action Without Meeting. Any action required or permitted to be
taken at a meeting of the stockholders may be taken without a meeting if a
written consent thereto is signed by the holders of the voting power of the
corporation that would be required at a meeting to constitute the act of the
stockholders. Whenever action is taken by written consent, a meeting of
stockholders need not be called or notice given. The written consent may be
signed in counterparts and must be filed with the minutes of the proceedings of
the stockholders. Such action shall be deemed effective on the date when the
signatures of holders of the requisite number of shares approving the matter
have been obtained.
ARTICLE II
DIRECTORS
Section 2.01 Number, Tenure, and Qualifications. Unless a larger number is
required by the laws of the State of Nevada or the Articles of Incorporation or
until changed in the manner provided herein, the authorized number of directors
shall be such number, not less than three (3) nor more than ten (10)
individuals, as shall be fixed from time to time by the Board of Directors. All
directors shall hold office for one (1) year or until his or her successor or
successors are elected and qualify. A director need not be a stockholder of the
corporation.
Section 2.02 Change in Number. Subject to any limitations in the laws of
the State of Nevada, the Articles of Incorporation or these Bylaws, the
authorized number of directors may be changed from time to time by resolution
adopted by the Board of Directors.
Section 2.03 Reduction in Number. No reduction of the number of directors
shall have the effect of removing any director prior to the expiration of his or
her term of office.
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Section 2.04 Resignation. Any director may resign effective upon giving
written notice to the chairman of the Board of Directors, the president, the
secretary, or in the absence of all of them, any other officer, unless the
notice specifies a later time for effectiveness of such resignation. Unless
otherwise specified in the Articles of Incorporation, a majority of the
remaining directors, though less than a quorum, may appoint a successor to take
office when the resignation becomes effective, each director so appointed to
hold office during the remainder of the term of office of the resigning
director.
Section 2.05 Removal.
(a) The Board of Directors of the corporation, by majority vote, may
declare vacant the office of a director who has been declared incompetent by an
order of a court of competent jurisdiction or convicted of a felony.
(b) Any director may be removed from office by the vote or written
consent of stockholders representing not less than two-thirds of the voting
power of the issued and outstanding stock entitled to vote for the election of
directors.
Section 2.06 Vacancies.
(a) Unless it is otherwise provided in the Articles of Incorporation,
all vacancies, including those caused by an increase in the number of directors,
may be filled by a majority of the remaining directors, though less than a
quorum unless, in the case of removal of one or more directors, the stockholders
by a majority of voting power entitled to vote for election of directors shall
have appointed a successor to the removed director. Subject to the provisions of
Subsection (b) below, (i) in the case of the replacement of a director, the
appointed director shall hold office during the remainder of the term of office
of the replaced director, and (ii) in the case of an increase in the number of
directors, the appointed director shall hold office until the next meeting of
stockholders at which directors are elected.
(b) If, after the filling of any vacancy by the directors, the
directors then in office who have been elected by the stockholders shall
constitute less than a majority of the directors then in office, any holder or
holders of an aggregate of five percent (5%) or more of the total voting power
entitled to vote for the election of directors may call a special meeting of the
stockholders to elect the entire Board of Directors.
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Section 2.07 Annual and Regular Meetings. Immediately following the
adjournment of, and at the same place as the annual or any special meeting of
the stockholders at which directors are elected other than pursuant to Section
2.06 of this Article, the Board of Directors, including directors newly elected,
shall hold its annual meeting without notice, other than this provision, to
elect officers and to transact such further business as may be necessary or
appropriate. The Board of Directors may provide by resolution the place, date,
and hour for holding regular meetings between annual meetings.
Section 2.08 Special Meetings. Special meetings of the Board of Directors
may be called by the chairman, or if there be no chairman, by the president or
secretary and shall be called by the chairman, the president or the secretary
upon the request of any two (2) directors. If the chairman, or if there be no
chairman both the president and secretary, refuses or neglects to call such
special meeting, a special meeting may be called by notice signed by any two (2)
directors.
Section 2.09 Place of Meetings. Any regular or special meeting of the
directors of the corporation may be held at such place as the Board of
Directors, or in the absence of such designation, as the notice calling such
meeting may designate. A waiver of notice signed by directors may designate any
place for the holding of such meeting.
Section 2.10 Notice of Meeting. Except as otherwise provided in Section
2.07, there shall be delivered to all directors, at least forty-eight (48) hours
before the time of such meeting, a copy of a written notice of any meeting by
delivery of such notice personally, by mailing such notice postage prepaid or by
telegram or facsimile. Such notice shall be addressed in the manner provided for
notice to stockholders in Section 1.04(c). If mailed, the notice shall be deemed
delivered two (2) business days following the date the same is deposited in the
United States mail, postage prepaid. Any director may waive notice of any
meeting, and the attendance of a director at a meeting and oral consent entered
on the minutes of the meeting or taking part in deliberations of the meeting
without objection shall constitute a waiver of notice of such meeting.
Attendance for the express purpose of objecting to the transaction of business
thereat because the meeting is not properly called or convened shall not
constitute presence nor a waiver of notice for purposes hereof.
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Section 2.11 Quorum: Adjourned Meetings.
(a) A majority of the directors in office, at a meeting duly
assembled, is necessary to constitute a quorum for the transaction of business.
(b) At any meeting of the Board of Directors where a quorum is not
present, a majority of those present may adjourn, from time to time, until a
quorum is present, and no notice of such adjournment shall be required. At any
adjourned meeting where a quorum is present, any business may be transacted
which could have been transacted at the meeting originally called.
Section 2.12 Board of Directors' Decisions. Subject to the Articles of
Incorporation, the affirmative vote of a majority of the directors present at a
meeting at which a quorum is present is the act of the Board of Directors.
Section 2.13 Telephonic Meetings. Members of the Board of Directors or of
any committee designated by the Board of Directors may participate in a meeting
of the Board of Directors or committee by means of a telephone conference or
similar method of communication by which all persons participating in such
meeting can hear each other. Participation in a meeting pursuant to this Section
2.13 constitutes presence in person at the meeting.
Section 2.14 Action Without Meeting. Any action required or permitted to be
taken at a meeting of the Board of Directors or of a committee thereof may be
taken without a meeting if, before or after the action, a written consent
thereto is signed by all of the members of the Board of Directors or the
committee. The written consent may be signed in counterparts and must be filed
with the minutes of the proceedings of the Board of Directors or committee.
Section 2.15 Powers and Duties.
(a) Except as otherwise restricted in the laws of the State of Nevada
or the Articles of Incorporation or these Bylaws, the Board of Directors has
full control over the affairs of the corporation. The Board of Directors may
delegate any of its authority to manage, control or conduct the business of the
corporation to any standing or special committee or to any officer or agent and
to appoint any persons to be agents of the corporation with such powers,
including the power to subdelegate, and upon such terms as may be deemed fit.
(b) The Board of Directors may present to the stockholders at annual
meetings of the stockholders, and when called for by a majority vote of
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the stockholders at an annual meeting or a special meeting of the stockholders
shall so present, a full and clear report of the condition of the corporation.
(c) The Board of Directors, in its discretion, may submit any contract
or act for approval or ratification at any annual meeting of the stockholders or
any special meeting properly called for the purpose of considering any such
contract or act, provided a quorum is present.
(d) Notwithstanding any other provision of these Bylaws, the
affirmative vote of two-thirds (2/3rds) of the directors then in office shall be
required to authorize or approve any amendment, modification or supplement to
(a) the Indenture and the first Supplemental Indenture to be entered into by and
among the corporation, as issuer, Riviera Operating Corporation ("ROC"), as
guarantor, and IBJ Schroeder Bank & Trust Company, as trustee (the "Trustee"),
relating to the 11% First Mortgage Notes Due December 31, 2002 (or any other
series of notes issued thereunder (collectively, the "Notes")) of the
corporation in the form finally confirmed by the Court in the reorganization
case of Riviera, Inc., under Chapter 11 of Title 11 of the United States Code
(Case No. BK-S-91-24940) ("Reorganization Case"); (b) the Notes; (c) the Deed of
Trust, Assignment of Rents and Security Agreement of the corporation, as
trustor, in favor of the Trustee, as beneficiary, relating to the Notes; (d) the
Security Agreement by and among the corporation and ROC as debtors, and the
Trustee, as secured party, relating to the Notes; or (e) any of the other
agreements entered into by the corporation in connection with the issuance of
the Notes or the provision of security for payment of the Notes which are listed
in the Confirmation Order entered in the Reorganization Case.
Section 2.16 Compensation. The Board of Directors may pay reasonable
compensation to persons who are not full-time employees of the corporation or
any subsidiary or parent company who serve as directors and members of
committees for their services as such. The directors and members of committees
shall be allowed and paid all necessary expenses incurred in attending any
meetings of the Board of Directors or committees. Directors shall also receive
reasonable compensation for their services as directors, in such amounts and at
such times as may be determined by the Board of Directors from time to time.
Section 2.17 Order of Business. The order of business at any meeting of the
Board of Directors shall be as follows:
1. Determination of members present and existence of quorum;
2. Reading and approval of the minutes of any previous meeting
or meetings;
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3. Reports of officers and committee members;
4. Elections of officers (annual meeting);
5. Unfinished business;
6. New business;
7. Adjournment.
ARTICLE III
OFFICERS
Section 3.01 Election. The Board of Directors, at its annual meeting, shall
elect a Chairman of the Board, a president, a secretary and a treasurer to hold
office for a term of one (1) year or until their successors are chosen and
qualify. Any individual may hold two or more offices. The Board of Directors
may, from time to time, by resolution, elect one or more vice-presidents,
assistant secretaries and assistant treasurers and appoint agents of the
corporation, prescribe their duties and fix their compensation.
Section 3.02 Removal; Resignation. Any officer or agent elected or
appointed by the Board of Directors may be removed by it with or without cause.
Any officer may resign at any time upon written notice to the corporation. Any
such removal or resignation shall be subject to the rights, if any, of the
respective parties under any contract between the corporation and such officer
or agent.
Section 3.03 Vacancies. Any vacancy in any office because of death,
resignation, removal or otherwise may be filled by the Board of Directors for
the unexpired portion of the term of such office.
Section 3.04 Chairman of the Board. The Chairman of the Board shall be the
Chief Executive Officer of the corporation and shall have general direction over
the policies and affairs of the corporation and compliance with these Bylaws and
resolutions and directions of the Board of Directors, subject only to the
control and direction of the Board of Directors. He shall preside at all
meetings of the stockholders and the Board of Directors. He may call meetings of
the Directors and of any committee of the Board whenever he deems it advisable.
He may appoint ad hoc committees of the Board of Directors and prescribe the
scope of their duties. He shall, in the absence or incapacity of the President,
perform all duties and functions and exercise all of the powers of the
President. He shall have such other powers and duties as may from time to time
be prescribed in these Bylaws or by the resolution of the Board of Directors.
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Section 3.05 President.
(a) The President shall be the Chief Operating Officer of the
corporation, subject to the control and direction of the Board of Directors and
the Chairman of the Board. He shall report to the Chairman of the Board and keep
the Chairman of the Board informed concerning the affairs and condition of the
business of the Company. He shall have such other powers and duties as may from
time to time be prescribed by these Bylaws, by resolution of the Board of
Directors, or by the Chairman of the Board. In the absence or incapacity of the
Chairman of the Board, he shall preside as Chairman at all meetings of the
stockholders or the Board of Directors.
(b) The President shall have full power and authority on behalf of the
corporation to attend and to act and to vote, or designate such other officer or
agent of the corporation to attend and to act and to vote, at any meetings of
the stockholders of any corporation in which the corporation may hold stock and,
at any such meetings, shall possess and may exercise any and all rights and
powers incident to the ownership of such stock. The Board of Directors, by
resolution from time to time, may confer like powers on any person or persons in
place of the president to exercise such powers for these purposes.
Section 3.06 Executive Vice-Presidents and Vice-Presidents. The Board of
Directors may elect one or more executive vice-presidents and vice-presidents
who shall be vested with all the powers and perform all the duties of the
president whenever the president is absent or unable to act and such other
duties as shall be prescribed by the Board of Directors or the president.
Section 3.07 Secretary. The secretary shall keep, or cause to be kept, the
minutes of proceedings of the stockholders and the Board of Directors in books
provided for that purpose. The secretary shall attend to the giving and service
of all notices of the corporation, may sign with the president in the name of
the corporation all contracts in which the corporation is authorized to enter,
shall have the custody or designate control of the corporate seal, shall affix
the corporate seal to all certificates of stock duly issued by the corporation,
shall have charge or designate control of stock certificate books, transfer
books and stock ledgers, and such other books and papers as the Board of
Directors or appropriate committee may direct, and shall, in general, perform
all duties incident to the office of the secretary.
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Section 3.08 Assistant Secretaries. The Board of Directors may appoint one
or more assistant secretaries who shall have such powers and perform such duties
as may be prescribed by the Board of Directors or the secretary.
Section 3.09 Treasurer.
(a) The treasurer shall be the chief financial officer of the
corporation, subject to the supervision and control of the Board of Directors,
and shall have custody of all the funds and securities of the corporation. When
necessary or proper, the treasurer shall endorse on behalf of the corporation
for collection checks, notes, and other obligations, and shall deposit all
monies to the credit of the corporation in such bank or banks or other
depository as the Board of Directors may designate, and shall sign all receipts
and vouchers for payments made by the corporation. Unless otherwise specified by
the Board of Directors, the treasurer may sign with the president all bills of
exchange and promissory notes of the corporation. Shall also have the care and
custody of the stocks, bonds, certificates, vouchers, evidence of debts,
securities, and such other property belonging to the corporation as the Board of
Directors shall designate, and shall sign all papers required by law, by these
Bylaws, or by the Board of Directors to be signed by the treasurer. The
treasurer shall enter, or cause to be entered, regularly in the financial
records of the corporation, to be kept for that purpose, full and accurate
accounts of all monies received and paid on account of the corporation and,
whenever required by the Board of Directors, the treasurer shall render a
statement of any or all accounts. The treasurer shall at all reasonable times
exhibit the books of account to any director of the corporation and shall
perform all acts incident to the position of the treasurer subject to the
control of the Board of Directors.
(b) The treasurer shall, if required by the Board of Directors, give
bond to the corporation in such sum and with such security as shall be approved
by the Board of Directors for the faithful performance of all the duties of
treasurer and for restoration to the corporation, in the event of the
treasurer's death, resignation, retirement or removal from office, of all books,
records, papers, vouchers, money and other property in the treasurer's custody
or control and belonging to the corporation. The expense of such bond shall be
borne by the corporation.
Section 3.10 Assistant Treasurers. The Board of Directors may appoint one
or more assistant treasurers who shall have such powers and perform such duties
as may be prescribed by the Board of Directors or the treasurer. The Board of
Directors may prescribe an assistant treasurer to give a bond to the
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corporation in such sum and with such security as it may approve, for the
faithful performance of the duties of assistant treasurer, and for restoration
to the corporation, in the event of the assistant treasurer's death,
resignation, retirement or removal from office, of all books, records, papers,
vouchers, money and other property in the assistant treasurer's custody or
control and belonging to the corporation. The expense of such bond shall be
borne by the corporation.
ARTICLE IV
CAPITAL STOCK
Section 4.01 Issuance. Shares of the corporation's authorized stock shall,
subject to any provisions or limitations of the laws of the State of Nevada, the
Articles of Incorporation or any contracts or agreements to which the
corporation may be a party, be issued in such manner, at such times, upon such
conditions and for such consideration as shall be prescribed by the Board of
Directors
Section 4.02 Certificates. Ownership in the corporation shall be evidenced
by certificates for shares of stock in such form as shall be prescribed by the
Board of Directors, shall be under the seal of the corporation and shall be
manually signed by the president or a vice-president and also by the secretary
or an assistant secretary; provided however, whenever any certificate is
countersigned or otherwise authenticated by a transfer agent or transfer clerk,
and by a registrar, then a facsimile of the signatures of said officers of the
corporation may be printed or lithographed upon the certificate in lieu of the
actual signatures. If the corporation uses facsimile signatures of its officers
on its stock certificates, it shall not act as registrar of its own stock, but
its transfer agent and registrar may be identical if the institution acting in
those dual capacities countersigns any stock certificates in both capacities.
Each certificate shall contain the name of the record holder, the number,
designation, if any, class or series of shares represented, a statement or
summary of any applicable rights, preferences, privileges or restrictions
thereon, and a statement if applicable, that the shares are assessable. All
certificates shall be consecutively numbered. If provided by the stockholder,
the name, address and federal tax identification number of the stockholder, the
number of shares, and the date of issue shall be entered in the stock transfer
records of the corporation.
Section 4.03 Surrendered; Lost or Destroyed Certificates. All certificates
surrendered to the corporation, except those representing shares of treasury
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stock, shall be canceled and no new certificate shall be issued until the former
certificate for a like number of shares shall have been canceled, except that in
case of a lost, stolen, destroyed or mutilated certificate, a new one may be
issued therefor. However, any stockholder applying for the issuance of a stock
certificate in lieu of one alleged to have been lost, stolen, destroyed or
mutilated shall, prior to the issuance of a replacement, provide the corporation
with his, her or its affidavit of the facts surrounding the loss, theft,
destruction or mutilation and, if required by the Board of Directors, an
indemnity bond in an amount not less than twice the current market value of the
stock, and upon such terms as the treasurer or the Board of Directors shall
require which shall indemnify the corporation against any loss, damage, cost or
inconvenience arising as a consequence of the issuance of a replacement
certificate.
Section 4.04 Replacement Certificate. When the Articles of Incorporation
are amended in any way affecting the statements contained in the certificates
for outstanding shares of capital stock of the corporation or it becomes
desirable for any reason, in the discretion of the Board of Directors,
including, without limitation, following the merger of the corporation with
another corporation or the reorganization of the corporation, to cancel any
outstanding certificate for shares and issue a new certificate therefor
conforming to the rights of the holder, the Board of Directors may order any
holders of outstanding certificates for shares to surrender and exchange the
same for new certificates within a reasonable time to be fixed by the Board of
Directors. The order may provide that a holder of any certificate(s) ordered to
be surrendered shall not be entitled to vote, receive distributions or exercise
any other rights of stockholders of record until the holder has complied with
the order, but the order operates to suspend such rights only after notice and
until compliance.
Section 4.05 Transfer of Shares. No transfer of stock shall be valid as
against the corporation except on surrender and cancellation of the certificates
therefor accompanied by an assignment or transfer by the registered owner made
either in person or under assignment. Whenever any transfer shall be expressly
made for collateral security and not absolutely, the collateral nature of the
transfer shall be reflected in the entry of transfer in the records of the
corporation.
Section 4.06 Transfer Agent; Registrars. The Board of Directors may appoint
one or more transfer agents, transfer clerk and registrars of transfer and may
require all certificates for shares of stock to bear the signature of such
transfer agent, transfer clerk and/or registrar of transfer.
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Section 4.07 Stock Transfer Records. The stock transfer records shall be
closed for a period of at least ten (10) days prior to all meetings of the
stockholders and shall be closed for the payment of distributions as provided in
Article V hereof and during such periods as, from time to time, may be fixed by
the Board of Directors, and during such periods, no stock shall be transferable
for purposes of Article V and no voting rights shall be deemed transferred
during such periods. Subject to the forgoing limitations, nothing contained
herein shall cause transfers during such periods to be void or voidable.
Section 4.08 Miscellaneous. The Board of Directors shall have the power and
authority to make such rules and regulations not inconsistent herewith as it may
deem expedient concerning the issue, transfer, and registration of certificates
for shares of the corporation's stock.
ARTICLE V
DISTRIBUTIONS
Section 5.01 Distributions may be declared, subject to the provisions of
the laws of the State of Nevada and the Articles of Incorporation, by the Board
of Directors at any regular or special meeting and may be paid in cash,
property, shares of corporate stock, or any other medium. The Board of Directors
may fix in advance a record date, as provided in Section 1.06, prior to the
distribution for the purpose of determining stockholders entitled to receive any
distribution. The Board of Directors may close the stock transfer books for such
purpose for a period of not more than ten (10) days prior to the date of such
distribution.
ARTICLE VI
RECORDS; REPORTS; SEAL; AND FINANCIAL MATERS
Section 6.01 Records. All original records of the corporation shall be kept
by or under the direction of the secretary or at such places as may be
prescribed by the Board of Directors.
Section 6.02 Directors' and Officers' Right of Inspection. Every director
and officer shall have the absolute right at any reasonable time for a purpose
reasonably related to the exercise of such individual's duties to inspect and
copy all of the corporation's books, records, and documents of every kind and to
inspect the physical properties of the corporation and/or its subsidiary
corporations. Such inspection may be made in person or by agent or attorney.
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Section 6.03 Corporate Seal. The Board of Directors may, by resolution,
authorize a seal, and the seal may be used by causing it, or a facsimile, to be
impressed or affixed or reproduced or otherwise. Except when otherwise
specifically provided herein, any officer of the corporation shall have the
authority to affix the seal to any document requiring it.
Section 6.04 Fiscal Year-End. The fiscal year-end of the corporation shall
be such date as may be fixed from time to time by resolution of the Board of
Directors.
Section 6.05 Reserves. The Board of Directors may create, by resolution,
such reserves, in accordance with generally accepted accounting principles, as
the directors may, from time to time, in their discretion, think proper to
provide for contingencies, or to equalize distributions or to repair or maintain
any property of the corporation, or for such other purpose as the Board of
Directors may deem beneficial to the corporation, and the directors may modify
or abolish any such reserves in the manner in which they were created.
ARTICLE VII
INDEMNIFICATION
Section 7.01 Indemnification and Insurance.
(a) Indemnification of Directors and Officers.
(i) For purposes of this Article: (a) "Indemnitee" shall mean
each director or officer of the corporation who was or is a party to, or is
threatened to be made a party to, or is otherwise involved in, any Proceeding
(as hereinafter defined), by reason of the fact that he or she is or was a
director or officer of the corporation or is or was serving in any capacity at
the request of the corporation as a director, officer, employee, agent, partner,
or fiduciary of, or in any other capacity for, another corporation or any
partnership, joint venture, trust, or other enterprise; and (b) "Proceeding"
shall mean any threatened, pending or completed action or suit (including
without limitation an action, suit or proceeding by or in the right of the
corporation), whether civil, criminal, administrative or investigative.
(ii) Each Indemnitee shall be indemnified and held harmless by
the corporation for all actions taken by him or her and for all
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omissions (regardless of the date of any such action or omission), to the
fullest extent permitted by Nevada law, against all expense, liability and loss
(including without limitation attorneys' fees, judgments, fines, taxes,
penalties, and amounts paid or to be paid in settlement) reasonably incurred or
suffered by the Indemnitee in connection with any Proceeding. The
indemnification provided for herein shall include, but not be limited to, the
right to reimbursement from the corporation for all reasonable costs and
expenses incurred by the Indemnitee in connection with the Proceeding. The
corporation shall promptly reimburse such costs and expenses upon submission by
the Indemnitee of invoices or other evidence of such costs and expenses, in form
satisfactory to the corporation.
(iii) Indemnification pursuant to this Section shall continue as
to an Indemnitee who has ceased to be a director or officer and shall inure to
the benefit of his or her heirs, executors and administrators.
(b) Indemnification of Employees and Other Persons. The corporation
may, by action of its Board of Directors and to the extent provided in such
action, indemnify employees, agents and other persons as though they were
Indemnitees.
(c) Non-Exclusivity of Rights. The rights to indemnification provided
in this Article shall not be exclusive of any other rights that any person may
have or hereafter acquire under any statute, provision of the corporation's
Articles of Incorporation or Bylaws, agreement, vote of stockholders or
directors, or otherwise.
(d) Insurance. The corporation may purchase and maintain insurance or
make other financial arrangements on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise for
any liability asserted against him or her and liability and expenses incurred by
him or her in his or her capacity as a director, officer, employee or agent, or
arising out of his or her status as such, whether or not the corporation has the
authority to indemnify him or her against such liability and expenses.
(e) Other Financial Arrangements. The other financial arrangements
which may be made by the corporation may include the following: (i) the creation
of a trust fund; (ii) the establishment of a program of self-insurance; (iii)
the securing of its obligation of indemnification by granting a
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security interest or other lien on any assets (including cash) of the
corporation; (iv) the establishment of a letter of credit, guarantee or surety.
No financial arrangement pursuant to this subsection may provide protection for
a person adjudged by a court of competent jurisdiction, after exhaustion of all
appeals therefrom, to be liable for intentional misconduct, fraud, or a knowing
violation of law, except with respect to advancement of expenses or
indemnification ordered by a court.
(f) Other Matters Relating to Insurance or Financial Arrangements. Any
insurance or other financial arrangement made on behalf of a person pursuant to
this Section may be provided by the corporation or any other person approved by
the Board of Directors, even if all or part of the other person's stock or other
securities is owned by the corporation. In the absence of fraud:
(i) the decision of the Board of Directors as to the propriety of
the terms and conditions of any insurance or other financial arrangement made
pursuant to this Section and the choice of the person to provide the insurance
or other financial arrangement is conclusive; and
(ii) the insurance or other financial arrangement:
(a) is not void or voidable; and
(b) does not subject any director approving it to personal
liability for his action, even if a director approving
the insurance or other financial arrangement is a
beneficiary of the insurance or other financial
arrangement.
Section 7.02 Amendment. The provisions of this Article relating to
indemnification shall constitute a contract between the corporation and each of
its directors and officers which may be modified as to any director or officer
only with that person's consent or as specifically provided in this Section.
Notwithstanding any other provision of these Bylaws relating to their amendment
generally, any repeal or amendment of this Article which is adverse to any
director or officer shall apply to such director or officer only on a
prospective basis and shall not limit the rights of an Indemnitee to
indemnification with respect to any action or failure to act occurring prior to
the time of such repeal or amendment. Notwithstanding any other provision of
these Bylaws, no repeal or amendment of these Bylaws shall affect any or all of
this Article so as to limit or reduce the indemnification in any manner unless
adopted by (a) the vote of a majority of the directors of the corporation then
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serving, or (b) by the stockholders as set forth in Article VIII hereof;
provided that no such amendment shall have retroactive effect inconsistent with
the preceding sentence.
Section 7.03 Changes in Nevada Law. References in this Article to Nevada
law or to any provision thereof shall be to such law as it existed on the date
this Article was adopted or as such law thereafter may be changed; provided that
(a) in the case of any change which expands the liability of directors or
officers or limits the indemnification rights or the rights to advancement of
expenses which the corporation may provide, the rights to limited liability, to
indemnification and to the advancement of expenses provided in the corporation's
Articles of Incorporation and/or these Bylaws shall continue as theretofore to
the extent permitted by law; and (b) if such change permits the corporation,
without the requirement of any further action by stockholders or directors, to
limit further the liability of directors or limit the liability of officers, or
to provide broader indemnification rights, or rights to the advancement of
expenses than the corporation was permitted to provide prior to such change,
then liability thereupon shall be so limited and the rights to indemnification
and the advancement of expenses shall be so broadened to the extent permitted by
law.
ARTICLE VIII
AMENDMENT OR REPEAL
Section 8.01. Amendment. Except as otherwise restricted in the Articles of
Incorporation or these Bylaws:
(a) Any provision of these Bylaws may be altered, amended or repealed
at the annual or any regular meeting of the Board of Directors without prior
notice, or at any special meeting of the Board of Directors if notice of such
alteration, amendment or repeal be contained in the notice of such special
meeting.
(b) These Bylaws may also be altered, amended, or repealed at a duly
convened meeting of the stockholders by the affirmative vote of the holders of a
majority of the voting power of the issued and outstanding stock of the
corporation entitled to vote. The stockholders may provide by resolution that
any Bylaw provision be repealed, amended, adopted or altered by them may not be
repealed, amended, adopted or altered by the Board of Directors.
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Exhibit 3.5
ARTICLES OF INCORPORATION
OF
RIVIERA GAMING MANAGEMENT, INC.
The undersigned, natural persons acting as incorporators of a corporation
(the "Corporation") under the provisions of Chapter 78 of the Nevada Revised
Statutes, adopt the following Articles of Incorporation.
ARTICLE 1
NAME
The name of the Corporation is RIVIERA GAMING MANAGEMENT, INC.
ARTICLE 2
PERIOD OF DURATION
The period of duration of the Corporation is perpetual.
ARTICLE 3
PURPOSE
The purpose for which the Corporation is organized is to engage in any
lawful activity.
ARTICLE 4
AUTHORIZED SHARES AND ASSESSMENT OF SHARES
Section 4.01. Authorized Shares. The aggregate number of shares that the
Corporation shall have the authority to issue is 5,000,000 shares of Capital
Stock with $0.01 par value.
Section 4.02. Assessment of Shares. The Capital Stock of the Corporation,
after the amount of the subscription price has been paid, shall not be subject
to pay the debts of the Corporation, and no Capital Stock issued as fully paid
up shall ever be assessable or assessed.
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Section 4.03. Denial of Preemptive Rights. No shareholder of the
Corporation shall have any preemptive or other right, by reason of his status as
a shareholder, to acquire any unissued shares, treasury shares, or securities
convertible into shares of the Capital Stock of the Corporation. This denial of
preemptive rights is pursuant to NRS 78.267.
ARTICLE 5
REGISTERED OFFICE AND RESIDENT AGENT
Section 5.01. Registered Office. The registered office of the Corporation
is to be located in Clark County, Nevada, at 2901 Las Vegas Boulevard South, Las
Vegas, Nevada 89109.
Section 5.02. Resident Agent. The name of the resident agent of the
Corporation, a resident of the State of Nevada, whose business address is set
forth in Section 5.01, is JOHN A. WISHON.
ARTICLE 6
DATA RESPECTING DIRECTORS
Section 6.01. Style of Governing Board. The members of the governing board
of the Corporation shall be styled Directors.
Section 6.02. Initial Board of Directors. The Board of Directors shall
consist of one (1) member, who need not be a resident of the State of Nevada, or
a shareholder of the Corporation.
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Section 6.03. Names and Addresses. The name and post office address of the
person who is to serve as Director until the first annual meeting of the
shareholders, or until his successor shall have been elected and qualified, is
as follows:
Name Address
William L. Westerman 2901 Las Vegas Boulevard South
Las Vegas, NV 89109
Section 6.04. Increase or Decrease of Number of Directors. The number of
Directors of the Corporation may be increased or decreased from time to time as
shall be provided in the Bylaws of the Corporation.
Section 6.05. Liability of Directors and Officers. The Directors and
Officers of the Corporation shall not be personally liable to the Corporation of
to its stockholders for damages for breach of fiduciary duty as a director or
officer, except as to acts or omissions which involve intentional misconduct,
fraud or a knowing violation of law, or the payment of dividends in violation of
NRS 78.300.
Section 6.06. Indemnification. The Corporation may indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, except an action by or in the right of the corporation, by
reason of the fact that he or she is or was a director, officer, employee or
agent of the corporation, in accordance with NRS 78.751, as amended in the
Sixty-fourth Session of the Nevada Legislature (1987) or as subsequently
amended.
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ARTICLE 7
DATA RESPECTING INCORPORATORS
The name and post office address of the incorporators of this Corporation
are as follows:
Name Address
John A. Wishon 2901 Las Vegas Boulevard South
Las Vegas, NV 89109
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Exhibit 3.6
BYLAWS
OF
RIVIERA GAMING MANAGEMENT, INC.
ARTICLE I
STOCKHOLDERS
Section 1.01. Annual Meeting. An annual meeting of the stockholders of the
corporation shall be held during the month of May in each year, at the principal
place of business of the corporation (unless a different time, date and place
shall be approved by a resolution of the Board of Directors) commencing after
the first anniversary of incorporation, but if such date is a legal holiday,
then on the next succeeding business day, for the purpose of electing directors
of the corporation to serve during the ensuing year and for the transaction of
such other business as may properly come before the meeting. If the election of
the directors is not held on the day designated herein for any annual meeting of
the stockholders, or at any adjournment thereof, the president shall cause the
election to be held at a special meeting of the stockholders as soon thereafter
as is convenient.
Section 1.02. Special Meeting.
(a) Special meetings of the stockholders may be called by the
chairman, president or the Board of Directors and shall be called by the
chairman, the president or the Board of Directors at the written request of the
holders of not less than a majority of the voting power of any class of the
corporation's stock entitled to vote for the election of directors or for the
matters relating to the purposes for which such meeting is being called.
(b) No business shall be acted upon at a special meeting except as set
forth in the notice calling the meeting, unless one of the conditions for the
holding of a meeting without notice set forth in Section 1.05 shall be
satisfied, in which case any business may be transacted and the meeting shall be
valid for all purposes.
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Section 1.03 Place of Meeting. Any meeting of the stockholders of the
corporation may be held at its registered office in the State of Nevada or at
such other place in or out of the United States as the Board of Directors may
designate. A waiver of notice signed by stockholders entitled to vote may
designate any place for the holding of such meeting.
Section 1.04 Notice of Meeting.
(a) The president, a vice president, the secretary, an assistant
secretary or any other individual designated by the Board of Directors shall
sign and deliver written notice of any meeting at least ten (10) days, but not
more than sixty (60) days, before the date of such meeting. The notice shall
state the place, date and time of the meeting and the purpose or purposes for
which the meeting is called.
(b) In the case of an annual meeting, any proper business may be
presented for action, except that action on any of the following items shall be
taken only if the general nature of the proposal is stated in the notice:
(1) Action with respect to any contract or transaction between the
corporation and one or more of its directors or officers or between the
corporation and one or more of its directors or officers or between the
corporation and any corporation, firm or association in which one or more of the
corporation's directors or officers is a director or officer or is financially
interested;
(2) Adoption of amendments to the Articles of Incorporation; or (3)
Action with respect to a merger, share exchange, reorganization, consolidation,
partial or complete liquidation, or dissolution of the corporation.
(c) A copy of the notice shall be personally delivered or mailed
postage prepaid to each stockholder of record entitled to vote at the meeting at
the address appearing on the records of the corporation, and the notice shall be
deemed delivered the date the same is deposited in the United States mail for
transmission to such stockholder. If the address of any stockholder does not
appear upon the records of the corporation, it will be sufficient to address any
notice to such stockholder at the registered office of the corporation.
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(d) The written certificate of the individual signing a notice of
meeting, setting forth the substance of the notice or having a copy thereof
attached, the date the notice was mailed or personally delivered to the
stockholders and the addresses to which the notice was mailed, shall be prima
facie evidence of the manner and fact of giving such notice.
(e) Any stockholder may waive notice of any meeting by a signed
writing, either before or after the meeting.
Section 1.05 Meeting Without Notice.
(a) Whenever all persons entitled to vote at any meeting consent,
either by:
(1) A writing on the records of the meeting or filed with the
secretary; or
(2) Presence at such meeting and oral consent entered on the
minutes; or
(3) Taking part in the deliberations at such meeting without
objection;
the doings of such meeting shall be as valid as if had at a meeting regularly
called and noticed.
(b) At such meeting any business may be transacted which is not
excepted from the written consent or to the consideration of which no objection
for want of notice is made at the time.
(c) If any meeting be irregular for want of notice or of such consent,
provided a quorum was present at such meeting, the proceedings of the meeting
may be ratified and approved and rendered likewise valid and the irregularity or
defect therein waived by a writing signed by all parties having the right to
vote at such meeting.
(d) Such consent or approval may be by proxy or attorney, but all such
proxies and powers of attorney must be in writing.
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Section 1.06 Determination of Stockholders of Record.
(a) For the purpose of determining the stockholders entitled to notice
of and to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting or entitled to
receive payment of any distribution or the allotment of any rights, or entitled
to exercise any rights in respect of any change, conversion, or exchange of
stock or for the purpose of any other lawful action, the directors may fix, in
advance, a record date which shall not be more than sixty (60) days, nor less
than ten (10) days before the date of such meeting, nor more than sixty (60)
days prior to any other action.
(b) If no record date is fixed, the record date for determining
stockholders: (i) entitled to notice of and to vote at a meeting of stockholders
shall be at the close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held; (ii) entitled to express
consent to corporate action in writing without a meeting shall be the day on
which the first written consent is expressed; and (iii) for any other purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto. A determination of stockholders of
record entitled to notice of or to vote at any meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
Section 1.07 Quorum: Adjourned Meeting
(a) Unless the Articles of Incorporation or these Bylaws provide for a
different proportion, stockholders holding at lease a majority of the voting
power of the corporation's stock, represented in person or by proxy, are
necessary to constitute a quorum for the transaction of business at any meeting.
If, on any issue, voting by classes is required by the laws of the State of
Nevada, the Articles of Incorporation or these Bylaws, at least a majority of
the voting power within each such class is necessary to constitute a quorum of
each such class, unless the Articles of Incorporation provide for a different
proportion.
(b) If a quorum is not represented, a majority of the voting power so
represented may adjourn the meeting from time to time until holders of the
voting power required to constitute a quorum shall be represented. At any such
adjourned meeting at which a quorum shall be represented, any business may be
transacted which might have been transacted as originally called. When a
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stockholder's meeting is adjourned to another time or place hereunder, notice
need not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. The stockholders
present at a duly convened meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave less
than a quorum of the voting power.
Section 1.08 Voting.
(a) Unless otherwise provided in the Articles of Incorporation, or in
the resolution providing for the issuance of the stock adopted by the Board of
Directors pursuant to authority expressly vested in it by the provisions of the
Articles of Incorporation, each stockholder of record, or such stockholder's
duly authorized proxy or attorney-in-fact, shall be entitled to one (1) vote for
each share of stock entitled to vote on such matter standing registered in such
stockholder's name on the record date.
(b) Except as otherwise provided herein, all votes with respect to
shares standing in the name of an individual on the record date (including
pledged shares) shall be cast only by that individual or such individual's duly
authorized proxy, attorney-in-fact, or voting trustee(s) pursuant to a voting
trust. With respect to shares held by a representative of the estate of a
deceased stockholder, guardian, conservator, custodian or trustee, votes may be
cast by such holder upon proof of capacity, even though the shares do not stand
in the name of such holder. In the case of shares under the control of a
receiver, the receiver may cast votes carried by such shares even though the
shares do not stand in the name of the receiver; provided that the order of the
court of competent jurisdiction which appoints the receiver contains the
authority to cast votes carried by such shares. If shares stand in the name of a
minor, votes may be cast only by the duly appointed guardian of the estate of
such minor if such guardian has provided the corporation with written proof of
such appointment.
(c) With respect to shares standing in the name of another
corporation, partnership, limited liability company or other legal entity on the
record date, votes may be cast: (i) in the case of a corporation, by such
individual as the bylaws of such other corporation prescribe, by such individual
as may be appointed by resolution of the Board of Directors of such other
corporation or by such individual (including the officer making the
authorization) authorized in writing to do so by the chairman of the Board of
Directors, president or any vice-president of such corporation and (ii) in the
case of a partnership, limited liability company or other legal entity, by an
individual
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representing such stockholder upon presentation to the corporation of
satisfactory evidence of his authority to do so.
(d) Notwithstanding anything to the contrary herein contained, no
votes may be cast for shares owned by this corporation or its subsidiaries, if
any. If shares are held by this corporation or its subsidiaries, if any, in a
fiduciary capacity, no votes shall be cast with respect thereto on any matter
except to the extent that the beneficial owner thereof possesses and exercises
either a right to vote or to give the corporation holding the same binding
instruction on how to vote.
(e) Any holder of shares entitled to vote on any matter may cast a
portion of the votes in favor of such matter and refrain from casting the
remaining votes or cast the same against the proposal, except in the case of
elections of directors. If such holder entitled to vote fails to specify the
number of affirmative votes, it will be conclusively presumed that the holder is
casting affirmative votes with respect to all shares held.
(f) With respect to shares standing in the name of two or more
persons, whether fiduciaries, members of a partnership, joint tenants, tenants
in common, husband and wife as community property, tenants by the entirety,
voting trustees, persons entitled to vote under a stockholder voting agreement
or otherwise and shares held by two or more persons (including proxy holders)
having the same fiduciary relationship in respect to the same shares, votes may
be cast in the following manner:
(1) If only one person votes, the vote of such person binds all.
(2) If more than one person casts votes, the act of the majority
so voting binds all.
(3) If more than one person casts votes, but the vote is evenly
split on a particular matter, the votes shall be deemed cast
proportionately, as split.
(g) If a quorum is present, unless the Articles of Incorporation or
these Bylaws provide for a different proportion, the affirmative vote of holders
of at least a majority of the voting power represented at the meeting and
entitled to vote on any matter shall be the act of the stockholders, unless
voting by classes is required for any action of the stockholders by the laws of
the State of
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Nevada, the Articles of Incorporation or these Bylaws, in which case the
affirmative vote of holders of at least a majority of the voting power of each
such class shall be required.
Section 1.09 Proxies.
At any meeting of stockholders, any holder of shares entitled to vote
may designate, in a manner permitted by the laws of the State of Nevada, another
person or persons to act as a proxy or proxies. No proxy is valid after the
expiration of six (6) months from the date of its creation, unless it is coupled
with an interest or unless otherwise specified in the proxy. In no event shall
the term of a proxy exceed seven (7) years from the date of its creation. Every
proxy shall continue in full force and effect until its expiration or revocation
in a manner permitted by the laws of the State of Nevada.
Section 1.10 Order of Business. At the annual stockholder's meeting, the
regular order of business shall be as follows:
1. Determination of stockholders present and existence of a
quorum, in person or by proxy;
2. Reading and approval of the minutes of the previous meeting
or meetings;
3. Reports of the Board of Directors, and if any, the
president, treasurer and secretary of the corporation;
4. Reports of committees;
5. Election of directors;
6. Unfinished business;
7. New business;
8. Adjournment.
Section 1.11 Absentees' Consent to Meeting. Transactions of any meeting of
the stockholders are as valid as though had at a meeting duly held after regular
call and notice if a quorum is represented, either in person or by proxy, and
if, either before or after the meeting, each of the persons entitled to vote,
not represented in person or by proxy (and those who, although present, either
object at the beginning of the meeting to the transaction of any business
because the meeting has not been lawfully called or convened or expressly object
at the meeting to the consideration of matters not included in the notice which
are legally required to be included therein), signs a written waiver of
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notice and/or consent to the holding of the meeting or an approval of the
minutes thereof. All such waivers, consents, and approvals shall be filed with
the corporate records and made a part of the minutes of the meeting. Attendance
of a person at a meeting shall constitute a waiver of notice of such meeting,
except when the person objects at the beginning of the meeting to the
transaction of any business because the meeting is not lawfully called or
convened and except that attendance at a meeting is not a waiver of any right to
object to the consideration of matters not properly included in the notice if
such objection is expressly made at the time any such matters are presented at
the meeting. Neither the business to be transacted at nor the purpose of any
regular or special meeting of stockholders need be specified in any written
waiver of notice or consent, except as otherwise provided in Sections 1.04(a)
and (b) of these Bylaws.
Section 1.12 Telephonic Meeting. Stockholders may participate in a meeting
of the stockholders by means of a telephone conference or similar method of
communication by which all individuals participating in the meeting can hear
each other. Participation in a meeting pursuant to this Section 1.12 constitutes
presence in person at the meeting.
Section 1.13 Action Without Meeting. Any action required or permitted to be
taken at a meeting of the stockholders may be taken without a meeting if a
written consent thereto is signed by the holders of the voting power of the
corporation that would be required at a meeting to constitute the act of the
stockholders. Whenever action is taken by written consent, a meeting of
stockholders need not be called or notice given. The written consent may be
signed in counterparts and must be filed with the minutes of the proceedings of
the stockholders. Such action shall be deemed effective on the date when the
signatures of holders of the requisite number of shares approving the matter
have been obtained.
ARTICLE II
DIRECTORS
Section 2.01 Number, Tenure, and Qualifications. Unless a larger number is
required by the laws of the State of Nevada or the Articles of Incorporation or
until changed in the manner provided herein, the authorized number of directors
shall be such number, not less than one (1) nor more than ten (10) individuals,
as shall be fixed from time to time by the Board of Directors.
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All directors shall hold office for one (1) year or until his or her successor
or successors are elected and qualify. A director need not be a stockholder of
the corporation.
Section 2.02 Change in Number. Subject to any limitations in the laws of
the State of Nevada, the Articles of Incorporation or these Bylaws, the
authorized number of directors may be changed from time to time by resolution
adopted by the Board of Directors.
Section 2.03 Reduction in Number. No reduction of the number of directors
shall have the effect of removing any director prior to the expiration of his or
her term of office.
Section 2.04 Resignation. Any director may resign effective upon giving
written notice to the chairman of the Board of Directors, the president, the
secretary, or in the absence of all of them, any other officer, unless the
notice specifies a later time for effectiveness of such resignation. Unless
otherwise specified in the Articles of Incorporation, a majority of the
remaining directors, though less than a quorum, may appoint a successor to take
office when the resignation becomes effective, each director so appointed to
hold office during the remainder of the term of office of the resigning
director.
Section 2.05 Removal.
(a) The Board of Directors of the corporation, by majority vote, may
declare vacant the office of a director who has been declared incompetent by an
order of a court of competent jurisdiction or convicted of a felony.
(b) Any director may be removed from office by the vote or written
consent of stockholders representing not less than two-thirds of the voting
power of the issued and outstanding stock entitled to vote for the election of
directors.
Section 2.06 Vacancies.
(a) Unless it is otherwise provided in the Articles of Incorporation,
all vacancies, including those caused by an increase in the number of directors,
may be filled by a majority of the remaining directors, though less than a
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quorum unless, in the case of removal of one or more directors, the stockholders
by a majority of voting power entitled to vote for election of directors shall
have appointed a successor to the removed director. Subject to the provisions of
Subsection (b) below, (i) in the case of the replacement of a director, the
appointed director shall hold office during the remainder of the term of office
of the replaced director, and (ii) in the case of an increase in the number of
directors, the appointed director shall hold office until the next meeting of
stockholders at which directors are elected.
(b) If, after the filling of any vacancy by the directors, the
directors then in office who have been elected by the stockholders shall
constitute less than a majority of the directors then in office, any holder or
holders of an aggregate of five percent (5%) or more of the total voting power
entitled to vote for the election of directors may call a special meeting of the
stockholders to elect the entire Board of Directors.
Section 2.07 Annual and Regular Meetings. Immediately following the
adjournment of, and at the same place as the annual or any special meeting of
the stockholders at which directors are elected other than pursuant to Section
2.06 of this Article, the Board of Directors, including directors newly elected,
shall hold its annual meeting without notice, other than this provision, to
elect officers and to transact such further business as may be necessary or
appropriate. The Board of Directors may provide by resolution the place, date,
and hour for holding regular meetings between annual meetings.
Section 2.08 Special Meetings. Special meetings of the Board of Directors
may be called by the chairman, or if there be no chairman, by the president or
secretary and shall be called by the chairman, the president or the secretary
upon the request of any two (2) directors. If the chairman, or if there be no
chairman both the president and secretary, refuses or neglects to call such
special meeting, a special meeting may be called by notice signed by any two (2)
directors.
Section 2.09 Place of Meetings. Any regular or special meeting of the
directors of the corporation may be held at such place as the Board of
Directors, or in the absence of such designation, as the notice calling such
meeting may designate. A waiver of notice signed by directors may designate any
place for the holding of such meeting.
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Section 2.10 Notice of Meeting. Except as otherwise provided in Section
2.07, there shall be delivered to all directors, at least forty-eight (48) hours
before the time of such meeting, a copy of a written notice of any meeting by
delivery of such notice personally, by mailing such notice postage prepaid or by
telegram or facsimile. Such notice shall be addressed in the manner provided for
notice to stockholders in Section 1.04(c). If mailed, the notice shall be deemed
delivered two (2) business days following the date the same is deposited in the
United States mail, postage prepaid. Any director may waive notice of any
meeting, and the attendance of a director at a meeting and oral consent entered
on the minutes of the meeting or taking part in deliberations of the meeting
without objection shall constitute a waiver of notice of such meeting.
Attendance for the express purpose of objecting to the transaction of business
thereat because the meeting is not properly called or convened shall not
constitute presence nor a waiver of notice for purposes hereof.
Section 2.11 Quorum: Adjourned Meetings.
(a) A majority of the directors in office, at a meeting duly
assembled, is necessary to constitute a quorum for the transaction of business.
(b) At any meeting of the Board of Directors where a quorum is not
present, a majority of those present may adjourn, from time to time, until a
quorum is present, and no notice of such adjournment shall be required. At any
adjourned meeting where a quorum is present, any business may be transacted
which could have been transacted at the meeting originally called.
Section 2.12 Board of Directors' Decisions. Subject to the Articles of
Incorporation, the affirmative vote of a majority of the directors present at a
meeting at which a quorum is present is the act of the Board of Directors.
Section 2.13 Telephonic Meetings. Members of the Board of Directors or of
any committee designated by the Board of Directors may participate in a meeting
of the Board of Directors or committee by means of a telephone conference or
similar method of communication by which all persons participating in such
meeting can hear each other. Participation in a meeting pursuant to this Section
2.13 constitutes presence in person at the meeting.
Section 2.14 Action Without Meeting. Any action required or permitted to be
taken at a meeting of the Board of Directors or of a committee thereof may be
taken without a meeting if, before or after the action, a written consent
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thereto is signed by all of the members of the Board of Directors or the
committee. The written consent may be signed in counterparts and must be filed
with the minutes of the proceedings of the Board of Directors or committee.
Section 2.15 Powers and Duties.
(a) Except as otherwise restricted in the laws of the State of Nevada
or the Articles of Incorporation or these Bylaws, the Board of Directors has
full control over the affairs of the corporation. The Board of Directors may
delegate any of its authority to manage, control or conduct the business of the
corporation to any standing or special committee or to any officer or agent and
to appoint any persons to be agents of the corporation with such powers,
including the power to subdelegate, and upon such terms as may be deemed fit.
(b) The Board of Directors may present to the stockholders at annual
meetings of the stockholders, and when called for by a majority vote of the
stockholders at an annual meeting or a special meeting of the stockholders shall
so present, a full and clear report of the condition of the corporation. (c) The
Board of Directors, in its discretion, may submit any contract or act for
approval or ratification at any annual meeting of the stockholders or any
special meeting properly called for the purpose of considering any such contract
or act, provided a quorum is present.
Section 2.16 Compensation. The Board of Directors may pay reasonable
compensation to persons who are not full-time employees of the corporation or
any subsidiary or parent company who serve as directors and members of
committees for their services as such. The directors and members of committees
shall be allowed and paid all necessary expenses incurred in attending any
meetings of the Board of Directors or committees. Directors shall also receive
reasonable compensation for their services as directors, in such amounts and at
such times as may be determined by the Board of Directors from time to time.
Section 2.17 Order of Business. The order of business at any meeting of the
Board of Directors shall be as follows:
1. Determination of members present and existence of quorum;
2. Reading and approval of the minutes of any previous meeting
or meetings;
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3. Reports of officers and committee members;
4. Elections of officers (annual meeting);
5. Unfinished business;
6. New business;
7. Adjournment.
ARTICLE III
OFFICERS
Section 3.01 Election. The Board of Directors, at its annual meeting, shall
elect a Chairman of the Board, a president, a secretary and a treasurer to hold
office for a term of one (1) year or until their successors are chosen and
qualify. Any individual may hold two or more offices. The Board of Directors
may, from time to time, by resolution, elect one or more vice-presidents,
assistant secretaries and assistant treasurers and appoint agents of the
corporation, prescribe their duties and fix their compensation.
Section 3.02 Removal; Resignation. Any officer or agent elected or
appointed by the Board of Directors may be removed by it with or without cause.
Any officer may resign at any time upon written notice to the corporation. Any
such removal or resignation shall be subject to the rights, if any, of the
respective parties under any contract between the corporation and such officer
or agent.
Section 3.03 Vacancies. Any vacancy in any office because of death,
resignation, removal or otherwise may be filled by the Board of Directors for
the unexpired portion of the term of such office.
Section 3.04 Chairman of the Board. The Chairman of the Board shall be the
Chief Executive Officer of the corporation and shall have general direction over
the policies and affairs of the corporation and compliance with these Bylaws and
resolutions and directions of the Board of Directors, subject only to the
control and direction of the Board of Directors. He shall preside at all
meetings of the stockholders and the Board of Directors. He may call meetings of
the Directors and of any committee of the Board whenever he deems it advisable.
He may appoint ad hoc committees of the Board of Directors and prescribe the
scope of their duties. He shall, in the absence or incapacity of the President,
perform all duties and functions and exercise all of the powers of the
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President. He shall have such other powers and duties as may from time to time
be prescribed in these Bylaws or by the resolution of the Board of Directors.
Section 3.05 President.
(a) The President shall be the Chief Operating Officer of the
corporation, subject to the control and direction of the Board of Directors and
the Chairman of the Board. He shall report to the Chairman of the Board and keep
the Chairman of the Board informed concerning the affairs and condition of the
business of the Company. He shall have such other powers and duties as may from
time to time be prescribed by these Bylaws, by resolution of the Board of
Directors, or by the Chairman of the Board. In the absence or incapacity of the
Chairman of the Board, he shall preside as Chairman at all meetings of the
stockholders or the Board of Directors.
(b) The President shall have full power and authority on behalf of the
corporation to attend and to act and to vote, or designate such other officer or
agent of the corporation to attend and to act and to vote, at any meetings of
the stockholders of any corporation in which the corporation may hold stock and,
at any such meetings, shall possess and may exercise any and all rights and
powers incident to the ownership of such stock. The Board of Directors, by
resolution from time to time, may confer like powers on any person or persons in
place of the president to exercise such powers for these purposes.
Section 3.06 Executive Vice-Presidents and Vice-Presidents. The Board of
Directors may elect one or more executive vice-presidents and vice-presidents
who shall be vested with all the powers and perform all the duties of the
president whenever the president is absent or unable to act and such other
duties as shall be prescribed by the Board of Directors or the president.
Section 3.07 Secretary. The secretary shall keep, or cause to be kept, the
minutes of proceedings of the stockholders and the Board of Directors in books
provided for that purpose. The secretary shall attend to the giving and service
of all notices of the corporation, may sign with the president in the name of
the corporation all contracts in which the corporation is authorized to enter,
shall have the custody or designate control of the corporate seal, shall affix
the corporate seal to all certificates of stock duly issued by the corporation,
shall have charge or designate control of stock certificate books, transfer
books and stock ledgers, and such other books and papers as the Board of
Directors or appropriate committee may direct, and shall, in general, perform
all duties incident to the office of the secretary.
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Section 3.08 Assistant Secretaries. The Board of Directors may appoint one
or more assistant secretaries who shall have such powers and perform such duties
as may be prescribed by the Board of Directors or the secretary.
Section 3.09 Treasurer.
(a) The treasurer shall be the chief financial officer of the
corporation, subject to the supervision and control of the Board of Directors,
and shall have custody of all the funds and securities of the corporation. When
necessary or proper, the treasurer shall endorse on behalf of the corporation
for collection checks, notes, and other obligations, and shall deposit all
monies to the credit of the corporation in such bank or banks or other
depository as the Board of Directors may designate, and shall sign all receipts
and vouchers for payments made by the corporation. Unless otherwise specified by
the Board of Directors, the treasurer may sign with the president all bills of
exchange and promissory notes of the corporation. Shall also have the care and
custody of the stocks, bonds, certificates, vouchers, evidence of debts,
securities, and such other property belonging to the corporation as the Board of
Directors shall designate, and shall sign all papers required by law, by these
Bylaws, or by the Board of Directors to be signed by the treasurer. The
treasurer shall enter, or cause to be entered, regularly in the financial
records of the corporation, to be kept for that purpose, full and accurate
accounts of all monies received and paid on account of the corporation and,
whenever required by the Board of Directors, the treasurer shall render a
statement of any or all accounts. The treasurer shall at all reasonable times
exhibit the books of account to any director of the corporation and shall
perform all acts incident to the position of the treasurer subject to the
control of the Board of Directors.
(b) The treasurer shall, if required by the Board of Directors, give
bond to the corporation in such sum and with such security as shall be approved
by the Board of Directors for the faithful performance of all the duties of
treasurer and for restoration to the corporation, in the event of the
treasurer's death, resignation, retirement or removal from office, of all books,
records, papers, vouchers, money and other property in the treasurer's custody
or control and belonging to the corporation. The expense of such bond shall be
borne by the corporation.
Section 3.10 Assistant Treasurers. The Board of Directors may appoint one
or more assistant treasurers who shall have such powers and perform such duties
as may be prescribed by the Board of Directors or the treasurer. The Board of
Directors may prescribe an assistant treasurer to give a bond to the corporation
in such sum and with such security as it may approve, for the faithful
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performance of the duties of assistant treasurer, and for restoration to the
corporation, in the event of the assistant treasurer's death, resignation,
retirement or removal from office, of all books, records, papers, vouchers,
money and other property in the assistant treasurer's custody or control and
belonging to the corporation. The expense of such bond shall be borne by the
corporation.
ARTICLE IV
CAPITAL STOCK
Section 4.01 Issuance. Shares of the corporation's authorized stock shall,
subject to any provisions or limitations of the laws of the State of Nevada, the
Articles of Incorporation or any contracts or agreements to which the
corporation may be a party, be issued in such manner, at such times, upon such
conditions and for such consideration as shall be prescribed by the Board of
Directors
Section 4.02 Certificates. Ownership in the corporation shall be evidenced
by certificates for shares of stock in such form as shall be prescribed by the
Board of Directors, shall be under the seal of the corporation and shall be
manually signed by the president or a vice-president and also by the secretary
or an assistant secretary; provided however, whenever any certificate is
countersigned or otherwise authenticated by a transfer agent or transfer clerk,
and by a registrar, then a facsimile of the signatures of said officers of the
corporation may be printed or lithographed upon the certificate in lieu of the
actual signatures. If the corporation uses facsimile signatures of its officers
on its stock certificates, it shall not act as registrar of its own stock, but
its transfer agent and registrar may be identical if the institution acting in
those dual capacities countersigns any stock certificates in both capacities.
Each certificate shall contain the name of the record holder, the number,
designation, if any, class or series of shares represented, a statement or
summary of any applicable rights, preferences, privileges or restrictions
thereon, and a statement if applicable, that the shares are assessable. All
certificates shall be consecutively numbered. If provided by the stockholder,
the name, address and federal tax identification number of the stockholder, the
number of shares, and the date of issue shall be entered in the stock transfer
records of the corporation.
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Section 4.03 Surrendered; Lost or Destroyed Certificates. All certificates
surrendered to the corporation, except those representing shares of treasury
stock, shall be canceled and no new certificate shall be issued until the former
certificate for a like number of shares shall have been canceled, except that in
case of a lost, stolen, destroyed or mutilated certificate, a new one may be
issued therefor. However, any stockholder applying for the issuance of a stock
certificate in lieu of one alleged to have been lost, stolen, destroyed or
mutilated shall, prior to the issuance of a replacement, provide the corporation
with his, her or its affidavit of the facts surrounding the loss, theft,
destruction or mutilation and, if required by the Board of Directors, an
indemnity bond in an amount not less than twice the current market value of the
stock, and upon such terms as the treasurer or the Board of Directors shall
require which shall indemnify the corporation against any loss, damage, cost or
inconvenience arising as a consequence of the issuance of a replacement
certificate.
Section 4.04 Replacement Certificate. When the Articles of Incorporation
are amended in any way affecting the statements contained in the certificates
for outstanding shares of capital stock of the corporation or it becomes
desirable for any reason, in the discretion of the Board of Directors,
including, without limitation, following the merger of the corporation with
another corporation or the reorganization of the corporation, to cancel any
outstanding certificate for shares and issue a new certificate therefor
conforming to the rights of the holder, the Board of Directors may order any
holders of outstanding certificates for shares to surrender and exchange the
same for new certificates within a reasonable time to be fixed by the Board of
Directors. The order may provide that a holder of any certificate(s) ordered to
be surrendered shall not be entitled to vote, receive distributions or exercise
any other rights of stockholders of record until the holder has complied with
the order, but the order operates to suspend such rights only after notice and
until compliance.
Section 4.05 Transfer of Shares. No transfer of stock shall be valid as
against the corporation except on surrender and cancellation of the certificates
therefor accompanied by an assignment or transfer by the registered owner made
either in person or under assignment. Whenever any transfer shall be expressly
made for collateral security and not absolutely, the collateral nature of the
transfer shall be reflected in the entry of transfer in the records of the
corporation.
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Section 4.06 Transfer Agent; Registrars. The Board of Directors may appoint
one or more transfer agents, transfer clerk and registrars of transfer and may
require all certificates for shares of stock to bear the signature of such
transfer agent, transfer clerk and/or registrar of transfer.
Section 4.07 Stock Transfer Records. The stock transfer records shall be
closed for a period of at least ten (10) days prior to all meetings of the
stockholders and shall be closed for the payment of distributions as provided in
Article V hereof and during such periods as, from time to time, may be fixed by
the Board of Directors, and during such periods, no stock shall be transferable
for purposes of Article V and no voting rights shall be deemed transferred
during such periods. Subject to the forgoing limitations, nothing contained
herein shall cause transfers during such periods to be void or voidable.
Section 4.08 Miscellaneous. The Board of Directors shall have the power and
authority to make such rules and regulations not inconsistent herewith as it may
deem expedient concerning the issue, transfer, and registration of certificates
for shares of the corporation's stock.
ARTICLE V
DISTRIBUTIONS
Section 5.01 Distributions may be declared, subject to the provisions of
the laws of the State of Nevada and the Articles of Incorporation, by the Board
of Directors at any regular or special meeting and may be paid in cash,
property, shares of corporate stock, or any other medium. The Board of Directors
may fix in advance a record date, as provided in Section 1.06, prior to the
distribution for the purpose of determining stockholders entitled to receive any
distribution. The Board of Directors may close the stock transfer books for such
purpose for a period of not more than ten (10) days prior to the date of such
distribution.
ARTICLE VI
RECORDS; REPORTS; SEAL; AND FINANCIAL MATERS
Section 6.01 Records. All original records of the corporation shall be kept
by or under the direction of the secretary or at such places as may be
prescribed by the Board of Directors.
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Section 6.02 Directors' and Officers' Right of Inspection. Every director
and officer shall have the absolute right at any reasonable time for a purpose
reasonably related to the exercise of such individual's duties to inspect and
copy all of the corporation's books, records, and documents of every kind and to
inspect the physical properties of the corporation and/or its subsidiary
corporations. Such inspection may be made in person or by agent or attorney.
Section 6.03 Corporate Seal. The Board of Directors may, by resolution,
authorize a seal, and the seal may be used by causing it, or a facsimile, to be
impressed or affixed or reproduced or otherwise. Except when otherwise
specifically provided herein, any officer of the corporation shall have the
authority to affix the seal to any document requiring it. Section 6.04 Fiscal
Year-End. The fiscal year-end of the corporation shall be such date as may be
fixed from time to time by resolution of the Board of Directors.
Section 6.05 Reserves. The Board of Directors may create, by resolution,
such reserves, in accordance with generally accepted accounting principles, as
the directors may, from time to time, in their discretion, think proper to
provide for contingencies, or to equalize distributions or to repair or maintain
any property of the corporation, or for such other purpose as the Board of
Directors may deem beneficial to the corporation, and the directors may modify
or abolish any such reserves in the manner in which they were created.
ARTICLE VII
INDEMNIFICATION
Section 7.01 Indemnification and Insurance.
(a) Indemnification of Directors and Officers.
(i) For purposes of this Article: (a) "Indemnitee" shall mean
each director or officer of the corporation who was or is a party to, or is
threatened to be made a party to, or is otherwise involved in, any Proceeding
(as hereinafter defined), by reason of the fact that he or she is or was a
director or officer of the corporation or is or was serving in any capacity at
the request of the corporation as a director, officer, employee, agent, partner,
or fiduciary of, or in any other capacity for, another corporation or any
partnership, joint venture, trust, or other enterprise; and (b) "Proceeding"
shall mean any
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threatened, pending or completed action or suit (including without limitation an
action, suit or proceeding by or in the right of the corporation), whether
civil, criminal, administrative or investigative.
(ii) Each Indemnitee shall be indemnified and held harmless by
the corporation for all actions taken by him or her and for all omissions
(regardless of the date of any such action or omission), to the fullest extent
permitted by Nevada law, against all expense, liability and loss (including
without limitation attorneys' fees, judgments, fines, taxes, penalties, and
amounts paid or to be paid in settlement) reasonably incurred or suffered by the
Indemnitee in connection with any Proceeding. The indemnification provided for
herein shall include, but not be limited to, the right to reimbursement from the
corporation for all reasonable costs and expenses incurred by the Indemnitee in
connection with the Proceeding. The corporation shall promptly reimburse such
costs and expenses upon submission by the Indemnitee of invoices or other
evidence of such costs and expenses, in form satisfactory to the corporation.
(iii) Indemnification pursuant to this Section shall continue as
to an Indemnitee who has ceased to be a director or officer and shall inure to
the benefit of his or her heirs, executors and administrators.
(b) Indemnification of Employees and Other Persons. The corporation
may, by action of its Board of Directors and to the extent provided in such
action, indemnify employees, agents and other persons as though they were
Indemnitees.
(c) Non-Exclusivity of Rights. The rights to indemnification provided
in this Article shall not be exclusive of any other rights that any person may
have or hereafter acquire under any statute, provision of the corporation's
Articles of Incorporation or Bylaws, agreement, vote of stockholders or
directors, or otherwise.
(d) Insurance. The corporation may purchase and maintain insurance or
make other financial arrangements on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise for
any liability asserted against him or her and liability and expenses incurred by
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him or her in his or her capacity as a director, officer, employee or agent, or
arising out of his or her status as such, whether or not the corporation has the
authority to indemnify him or her against such liability and expenses.
(e) Other Financial Arrangements. The other financial arrangements
which may be made by the corporation may include the following: (i) the creation
of a trust fund; (ii) the establishment of a program of self-insurance; (iii)
the securing of its obligation of indemnification by granting a security
interest or other lien on any assets (including cash) of the corporation; (iv)
the establishment of a letter of credit, guarantee or surety. No financial
arrangement pursuant to this subsection may provide protection for a person
adjudged by a court of competent jurisdiction, after exhaustion of all appeals
therefrom, to be liable for intentional misconduct, fraud, or a knowing
violation of law, except with respect to advancement of expenses or
indemnification ordered by a court.
(f) Other Matters Relating to Insurance or Financial Arrangements. Any
insurance or other financial arrangement made on behalf of a person pursuant to
this Section may be provided by the corporation or any other person approved by
the Board of Directors, even if all or part of the other person's stock or other
securities is owned by the corporation. In the absence of fraud:
(i) the decision of the Board of Directors as to the propriety of
the terms and conditions of any insurance or other financial arrangement made
pursuant to this Section and the choice of the person to provide the insurance
or other financial arrangement is conclusive; and
(ii) the insurance or other financial arrangement:
(a) is not void or voidable; and
(b) does not subject any director approving it to personal
liability for his action,
even if a director approving the insurance or other financial arrangement is a
beneficiary of the insurance or other financial arrangement.
Section 7.02 Amendment. The provisions of this Article relating to
indemnification shall constitute a contract between the corporation and each of
its directors and officers which may be modified as to any director or officer
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only with that person's consent or as specifically provided in this Section.
Notwithstanding any other provision of these Bylaws relating to their amendment
generally, any repeal or amendment of this Article which is adverse to any
director or officer shall apply to such director or officer only on a
prospective basis and shall not limit the rights of an Indemnitee to
indemnification with respect to any action or failure to act occurring prior to
the time of such repeal or amendment. Notwithstanding any other provision of
these Bylaws, no repeal or amendment of these Bylaws shall affect any or all of
this Article so as to limit or reduce the indemnification in any manner unless
adopted by (a) the vote of a majority of the directors of the corporation then
serving, or (b) by the stockholders as set forth in Article VIII hereof;
provided that no such amendment shall have retroactive effect inconsistent with
the preceding sentence.
Section 7.03 Changes in Nevada Law. References in this Article to Nevada
law or to any provision thereof shall be to such law as it existed on the date
this Article was adopted or as such law thereafter may be changed; provided that
(a) in the case of any change which expands the liability of directors or
officers or limits the indemnification rights or the rights to advancement of
expenses which the corporation may provide, the rights to limited liability, to
indemnification and to the advancement of expenses provided in the corporation's
Articles of Incorporation and/or these Bylaws shall continue as theretofore to
the extent permitted by law; and (b) if such change permits the corporation,
without the requirement of any further action by stockholders or directors, to
limit further the liability of directors or limit the liability of officers, or
to provide broader indemnification rights, or rights to the advancement of
expenses than the corporation was permitted to provide prior to such change,
then liability thereupon shall be so limited and the rights to indemnification
and the advancement of expenses shall be so broadened to the extent permitted by
law.
ARTICLE VIII
AMENDMENT OR REPEAL
Section 8.01. Amendment. Except as otherwise restricted in the Articles of
Incorporation or these Bylaws:
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(a) Any provision of these Bylaws may be altered, amended or repealed
at the annual or any regular meeting of the Board of Directors without prior
notice, or at any special meeting of the Board of Directors if notice of such
alteration, amendment or repeal be contained in the notice of such special
meeting.
(b) These Bylaws may also be altered, amended, or repealed at a duly
convened meeting of the stockholders by the affirmative vote of the holders of a
majority of the voting power of the issued and outstanding stock of the
corporation entitled to vote. The stockholders may provide by resolution that
any Bylaw provision be repealed, amended, adopted or altered by them may not be
repealed, amended, adopted or altered by the Board of Directors.
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Exhibit 3.7
ARTICLES OF INCORPORATION
OF
RIVIERA GAMING MANAGEMENT - ELSINORE, INC.
The undersigned, natural persons acting as incorporators of a corporation
(the "Corporation") under the provisions of Chapter 78 of the Nevada Revised
Statutes, adopt the following Articles of Incorporation.
ARTICLE 1
NAME
The name of the Corporation is RIVIERA GAMING MANAGEMENT - ELSINORE, INC.
ARTICLE 2
PERIOD OF DURATION
The period of duration of the Corporation is perpetual.
ARTICLE 3
PURPOSE
The purpose for which the Corporation is organized is to engage in any
lawful activity.
ARTICLE 4
AUTHORIZED SHARES AND ASSESSMENT OF SHARES
Section 4.01. Authorized Shares. The aggregate number of shares that the
Corporation shall have the authority to issue is 5,000,000 shares of Capital
Stock with $0.01 par value.
Section 4.02. Assessment of Shares. The Capital Stock of the Corporation,
after the amount of the subscription price has been paid, shall not be subject
to pay the
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debts of the Corporation, and no Capital Stock issued as fully paid up shall
ever be assessable or assessed. Section 4.03. Denial of Preemptive Rights. No
shareholder of the Corporation shall have any preemptive or other right, by
reason of his status as a shareholder, to acquire any unissued shares, treasury
shares, or securities convertible into shares of the Capital Stock of the
Corporation. This denial of preemptive rights is pursuant to NRS 78.267.
ARTICLE 5
REGISTERED OFFICE AND RESIDENT AGENT
Section 5.01. Registered Office. The registered office of the Corporation
is to be located in Clark County, Nevada, at 2901 Las Vegas Boulevard South, Las
Vegas, Nevada 89109.
Section 5.02. Resident Agent. The name of the resident agent of the
Corporation, a resident of the State of Nevada, whose business address is set
forth in Section 5.01, is JOHN A. WISHON.
ARTICLE 6
DATA RESPECTING DIRECTORS
Section 6.01. Style of Governing Board. The members of the governing board
of the Corporation shall be styled Directors.
Section 6.02. Initial Board of Directors. The Board of Directors shall
consist of one (1) member, who need not be a resident of the State of Nevada, or
a shareholder of the Corporation.
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Section 6.03. Names and Addresses. The name
and post office address of the person who is to serve as Director until the
first annual meeting of the shareholders, or until his successor shall have been
elected and qualified, is as follows:
Name Address
William L. Westerman 2901 Las Vegas Boulevard South
Las Vegas, NV 89109
Section 6.04. Increase or Decrease of Number of Directors. The number of
Directors of the Corporation may be increased or decreased from time to time as
shall be provided in the Bylaws of the Corporation.
Section 6.05. Liability of Directors and Officers. The Directors and
Officers of the Corporation shall not be personally liable to the Corporation of
to its stockholders for damages for breach of fiduciary duty as a director or
officer, except as to acts or omissions which involve intentional misconduct,
fraud or a knowing violation of law, or the payment of dividends in violation of
NRS 78.300.
Section 6.06. Indemnification. The Corporation may indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, except an action by or in the right of the corporation, by
reason of the facthat he or she is or was a director, officer, employee or agent
of the corporation, in accordance with NRS 78.751, as amended in the
Sixty-fourth Session of the Nevada Legislature (1987) or as subsequently
amended.
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ARTICLE 7
DATA RESPECTING INCORPORATORS
The name and post office address of the incorporators of this Corporation
are as follows:
Name Address
John A. Wishon 2901 Las Vegas Boulevard South
Las Vegas, NV 89109
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Exhibit 3.8
BYLAWS
OF
RIVIERA GAMING MANAGEMENT - ELSINORE, INC.
ARTICLE I
STOCKHOLDERS
Section 1.01. Annual Meeting. An annual meeting of the stockholders of the
corporation shall be held during the month of May in each year, at the principal
place of business of the corporation (unless a different time, date and place
shall be approved by a resolution of the Board of Directors) commencing after
the first anniversary of incorporation, but if such date is a legal holiday,
then on the next succeeding business day, for the purpose of electing directors
of the corporation to serve during the ensuing year and for the transaction of
such other business as may properly come before the meeting. If the election of
the directors is not held on the day designated herein for any annual meeting of
the stockholders, or at any adjournment thereof, the president shall cause the
election to be held at a special meeting of the stockholders as soon thereafter
as is convenient.
Section 1.02. Special Meeting.
(a) Special meetings of the stockholders may be called by the
chairman, president or the Board of Directors and shall be called by the
chairman, the president or the Board of Directors at the written request of the
holders of not less than a majority of the voting power of any class of the
corporation's stock entitled to vote for the election of directors or for the
matters relating to the purposes for which such meeting is being called.
(b) No business shall be acted upon at a special meeting except as set
forth in the notice calling the meeting, unless one of the conditions for the
holding of a meeting without notice set forth in Section 1.05 shall be
satisfied, in which case any business may be transacted and the meeting shall be
valid for all purposes.
Section 1.03 Place of Meeting. Any meeting of the stockholders of the
corporation may be held at its registered office in the State of Nevada or at
such other place in or out of the United States as the Board of Directors may
designate. A waiver of notice signed by stockholders entitled to vote may
designate any place for the holding of such meeting.
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Section 1.04 Notice of Meeting.
(a) The president, a vice president, the secretary, an assistant
secretary or any other individual designated by the Board of Directors shall
sign and deliver written notice of any meeting at least ten (10) days, but not
more than sixty (60) days, before the date of such meeting. The notice shall
state the place, date and time of the meeting and the purpose or purposes for
which the meeting is called.
(b) In the case of an annual meeting, any proper business may be
presented for action, except that action on any of the following items shall be
taken only if the general nature of the proposal is stated in the notice:
(1) Action with respect to any contract or transaction between
the corporation and one or more of its directors or officers or between the
corporation and one or more of its directors or officers or between the
corporation and any corporation, firm or association in which one or more of the
corporation's directors or officers is a director or officer or is financially
interested;
(2) Adoption of amendments to the Articles of Incorporation; or
(3) Action with respect to a merger, share exchange, reorganization,
consolidation, partial or complete liquidation, or dissolution of the
corporation.
(c) A copy of the notice shall be personally delivered or mailed
postage prepaid to each stockholder of record entitled to vote at the meeting at
the address appearing on the records of the corporation, and the notice shall be
deemed delivered the date the same is deposited in the United States mail for
transmission to such stockholder. If the address of any stockholder does not
appear upon the records of the corporation, it will be sufficient to address any
notice to such stockholder at the registered office of the corporation.
(d) The written certificate of the individual signing a notice of
meeting, setting forth the substance of the notice or having a copy thereof
attached, the date the notice was mailed or personally delivered to the
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stockholders and the addresses to which the notice was mailed, shall be prima
facie evidence of the manner and fact of giving such notice.
(e) Any stockholder may waive notice of any meeting by a signed writing,
either before or after the meeting.
Section 1.05 Meeting Without Notice.
(a) Whenever all persons entitled to vote at any meeting consent,
either by: (1) A writing on the records of the meeting or filed with the
secretary; or (2) Presence at such meeting and oral consent entered on the
minutes; or (3) Taking part in the deliberations at such meeting without
objection;
the doings of such meeting shall be as valid as if had at a meeting regularly
called and noticed.
(b) At such meeting any business may be transacted which is not
excepted from the written consent or to the consideration of which no objection
for want of notice is made at the time.
(c) If any meeting be irregular for want of notice or of such consent,
provided a quorum was present at such meeting, the proceedings of the meeting
may be ratified and approved and rendered likewise valid and the irregularity or
defect therein waived by a writing signed by all parties having the right to
vote at such meeting.
(d) Such consent or approval may be by proxy or attorney, but all such
proxies and powers of attorney must be in writing.
Section 1.06 Determination of Stockholders of Record.
(a) For the purpose of determining the stockholders entitled to notice
of and to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting or entitled to
receive payment of any distribution or the allotment of any rights,
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or entitled to exercise any rights in respect of any change, conversion, or
exchange of stock or for the purpose of any other lawful action, the directors
may fix, in advance, a record date which shall not be more than sixty (60) days,
nor less than ten (10) days before the date of such meeting, nor more than sixty
(60) days prior to any other action.
(b) If no record date is fixed, the record date for determining
stockholders: (i) entitled to notice of and to vote at a meeting of stockholders
shall be at the close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held; (ii) entitled to express
consent to corporate action in writing without a meeting shall be the day on
which the first written consent is expressed; and (iii) for any other purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto. A determination of stockholders of
record entitled to notice of or to vote at any meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
Section 1.07 Quorum: Adjourned Meeting
(a) Unless the Articles of Incorporation or these Bylaws provide for a
different proportion, stockholders holding at lease a majority of the voting
power of the corporation's stock, represented in person or by proxy, are
necessary to constitute a quorum for the transaction of business at any meeting.
If, on any issue, voting by classes is required by the laws of the State of
Nevada, the Articles of Incorporation or these Bylaws, at least a majority of
the voting power within each such class is necessary to constitute a quorum of
each such class, unless the Articles of Incorporation provide for a different
proportion.
(b) If a quorum is not represented, a majority of the voting power so
represented may adjourn the meeting from time to time until holders of the
voting power required to constitute a quorum shall be represented. At any such
adjourned meeting at which a quorum shall be represented, any business may be
transacted which might have been transacted as originally called. When a
stockholder's meeting is adjourned to another time or place hereunder, notice
need not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. The stockholders
present at a duly convened meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave less
than a quorum of the voting power.
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Section 1.08 Voting.
(a) Unless otherwise provided in the Articles of Incorporation, or in
the resolution providing for the issuance of the stock adopted by the Board of
Directors pursuant to authority expressly vested in it by the provisions of the
Articles of Incorporation, each stockholder of record, or such stockholder's
duly authorized proxy or attorney-in-fact, shall be entitled to one (1) vote for
each share of stock entitled to vote on such matter standing registered in such
stockholder's name on the record date.
(b) Except as otherwise provided herein, all votes with respect to
shares standing in the name of an individual on the record date (including
pledged shares) shall be cast only by that individual or such individual's duly
authorized proxy, attorney-in-fact, or voting trustee(s) pursuant to a voting
trust. With respect to shares held by a representative of the estate of a
deceased stockholder, guardian, conservator, custodian or trustee, votes may be
cast by such holder upon proof of capacity, even though the shares do not stand
in the name of such holder. In the case of shares under the control of a
receiver, the receiver may cast votes carried by such shares even though the
shares do not stand in the name of the receiver; provided that the order of the
court of competent jurisdiction which appoints the receiver contains the
authority to cast votes carried by such shares. If shares stand in the name of a
minor, votes may be cast only by the duly appointed guardian of the estate of
such minor if such guardian has provided the corporation with written proof of
such appointment.
(c) With respect to shares standing in the name of another
corporation, partnership, limited liability company or other legal entity on the
record date, votes may be cast: (i) in the case of a corporation, by such
individual as the bylaws of such other corporation prescribe, by such individual
as may be appointed by resolution of the Board of Directors of such other
corporation or by such individual (including the officer making the
authorization) authorized in writing to do so by the chairman of the Board of
Directors, president or any vice-president of such corporation and (ii) in the
case of a partnership, limited liability company or other legal entity, by an
individual representing such stockholder upon presentation to the corporation of
satisfactory evidence of his authority to do so.
(d) Notwithstanding anything to the contrary herein contained, no
votes may be cast for shares owned by this corporation or its subsidiaries, if
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any. If shares are held by this corporation or its subsidiaries, if any, in a
fiduciary capacity, no votes shall be cast with respect thereto on any matter
except to the extent that the beneficial owner thereof possesses and exercises
either a right to vote or to give the corporation holding the same binding
instruction on how to vote.
(e) Any holder of shares entitled to vote on any matter may cast a
portion of the votes in favor of such matter and refrain from casting the
remaining votes or cast the same against the proposal, except in the case of
elections of directors. If such holder entitled to vote fails to specify the
number of affirmative votes, it will be conclusively presumed that the holder is
casting affirmative votes with respect to all shares held.
(f) With respect to shares standing in the name of two or more
persons, whether fiduciaries, members of a partnership, joint tenants, tenants
in common, husband and wife as community property, tenants by the entirety,
voting trustees, persons entitled to vote under a stockholder voting agreement
or otherwise and shares held by two or more persons (including proxy holders)
having the same fiduciary relationship in respect to the same shares, votes may
be cast in the following manner:
(1) If only one person votes, the vote of such person binds all.
(2) If more than one person casts votes, the act of the majority
so voting binds all.
(3) If more than one person casts votes, but the vote is evenly
split on a particular matter, the votes shall be deemed cast proportionately, as
split.
(g) If a quorum is present, unless the Articles of Incorporation or
these Bylaws provide for a different proportion, the affirmative vote of holders
of at least a majority of the voting power represented at the meeting and
entitled to vote on any matter shall be the act of the stockholders, unless
voting by classes is required for any action of the stockholders by the laws of
the State of Nevada, the Articles of Incorporation or these Bylaws, in which
case the affirmative vote of holders of at least a majority of the voting power
of each such class shall be required.
Section 1.09 Proxies.
At any meeting of stockholders, any holder of shares entitled to vote
may designate, in a manner permitted by the laws of the State of Nevada,
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another person or persons to act as a proxy or proxies. No proxy is valid after
the expiration of six (6) months from the date of its creation, unless it is
coupled with an interest or unless otherwise specified in the proxy. In no event
shall the term of a proxy exceed seven (7) years from the date of its creation.
Every proxy shall continue in full force and effect until its expiration or
revocation in a manner permitted by the laws of the State of Nevada.
Section 1.10 Order of Business. At the annual stockholder's meeting, the
regular order of business shall be as follows:
1. Determination of stockholders present and existence of a
quorum, in person or by proxy;
2. Reading and approval of the minutes of the previous meeting or
meetings;
3. Reports of the Board of Directors, and if any, the president,
treasurer and secretary of the corporation;
4. Reports of committees;
5. Election of directors;
6. Unfinished business;
7. New business;
8. Adjournment.
Section 1.11 Absentees' Consent to Meeting. Transactions of any meeting of
the stockholders are as valid as though had at a meeting duly held after regular
call and notice if a quorum is represented, either in person or by proxy, and
if, either before or after the meeting, each of the persons entitled to vote,
not represented in person or by proxy (and those who, although present, either
object at the beginning of the meeting to the transaction of any business
because the meeting has not been lawfully called or convened or expressly object
at the meeting to the consideration of matters not included in the notice which
are legally required to be included therein), signs a written waiver of notice
and/or consent to the holding of the meeting or an approval of the minutes
thereof. All such waivers, consents, and approvals shall be filed with the
corporate records and made a part of the minutes of the meeting. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person objects at the beginning of the meeting to the transaction of
any business because the meeting is not lawfully called or convened and except
that attendance at a meeting is not a waiver of any right to object to the
consideration of matters not properly included in the notice if such objection
is expressly made at the time any such matters are presented at the meeting.
Neither the business to be transacted at nor the
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purpose of any regular or special meeting of stockholders need be specified in
any written waiver of notice or consent, except as otherwise provided in
Sections 1.04(a) and (b) of these Bylaws.
Section 1.12 Telephonic Meeting. Stockholders may participate in a meeting
of the stockholders by means of a telephone conference or similar method of
communication by which all individuals participating in the meeting can hear
each other. Participation in a meeting pursuant to this Section 1.12 constitutes
presence in person at the meeting.
Section 1.13 Action Without Meeting. Any action required or permitted to be
taken at a meeting of the stockholders may be taken without a meeting if a
written consent thereto is signed by the holders of the voting power of the
corporation that would be required at a meeting to constitute the act of the
stockholders. Whenever action is taken by written consent, a meeting of
stockholders need not be called or notice given. The written consent may be
signed in counterparts and must be filed with the minutes of the proceedings of
the stockholders. Such action shall be deemed effective on the date when the
signatures of holders of the requisite number of shares approving the matter
have been obtained.
ARTICLE II
DIRECTORS
Section 2.01 Number, Tenure, and Qualifications. Unless a larger number is
required by the laws of the State of Nevada or the Articles of Incorporation or
until changed in the manner provided herein, the authorized number of directors
shall be such number, not less than one (1) nor more than ten (10) individuals,
as shall be fixed from time to time by the Board of Directors. All directors
shall hold office for one (1) year or until his or her successor or successors
are elected and qualify. A director need not be a stockholder of the
corporation.
Section 2.02 Change in Number. Subject to any limitations in the laws of
the State of Nevada, the Articles of Incorporation or these Bylaws, the
authorized number of directors may be changed from time to time by resolution
adopted by the Board of Directors.
Section 2.03 Reduction in Number. No reduction of the number of directors
shall have the effect of removing any director prior to the expiration of his or
her term of office.
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Section 2.04 Resignation. Any director may resign effective upon giving
written notice to the chairman of the Board of Directors, the president, the
secretary, or in the absence of all of them, any other officer, unless the
notice specifies a later time for effectiveness of such resignation. Unless
otherwise specified in the Articles of Incorporation, a majority of the
remaining directors, though less than a quorum, may appoint a successor to take
office when the resignation becomes effective, each director so appointed to
hold office during the remainder of the term of office of the resigning
director.
Section 2.05 Removal.
(a) The Board of Directors of the corporation, by majority vote, may
declare vacant the office of a director who has been declared incompetent by an
order of a court of competent jurisdiction or convicted of a felony.
(b) Any director may be removed from office by the vote or written
consent of stockholders representing not less than two-thirds of the voting
power of the issued and outstanding stock entitled to vote for the election of
directors.
Section 2.06 Vacancies.
(a) Unless it is otherwise provided in the Articles of Incorporation,
all vacancies, including those caused by an increase in the number of directors,
may be filled by a majority of the remaining directors, though less than a
quorum unless, in the case of removal of one or more directors, the stockholders
by a majority of voting power entitled to vote for election of directors shall
have appointed a successor to the removed director. Subject to the provisions of
Subsection (b) below, (i) in the case of the replacement of a director, the
appointed director shall hold office during the remainder of the term of office
of the replaced director, and (ii) in the case of an increase in the number of
directors, the appointed director shall hold office until the next meeting of
stockholders at which directors are elected.
(b) If, after the filling of any vacancy by the directors, the
directors then in office who have been elected by the stockholders shall
constitute less than a majority of the directors then in office, any holder or
holders of an aggregate of five percent (5%) or more of the total voting power
entitled to vote for the election of directors may call a special meeting of the
stockholders to elect the entire Board of Directors.
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Section 2.07 Annual and Regular Meetings. Immediately following the
adjournment of, and at the same place as the annual or any special meeting of
the stockholders at which directors are elected other than pursuant to Section
2.06 of this Article, the Board of Directors, including directors newly elected,
shall hold its annual meeting without notice, other than this provision, to
elect officers and to transact such further business as may be necessary or
appropriate. The Board of Directors may provide by resolution the place, date,
and hour for holding regular meetings between annual meetings.
Section 2.08 Special Meetings. Special meetings of the Board of Directors
may be called by the chairman, or if there be no chairman, by the president or
secretary and shall be called by the chairman, the president or the secretary
upon the request of any two (2) directors. If the chairman, or if there be no
chairman both the president and secretary, refuses or neglects to call such
special meeting, a special meeting may be called by notice signed by any two (2)
directors.
Section 2.09 Place of Meetings. Any regular or special meeting of the
directors of the corporation may be held at such place as the Board of
Directors, or in the absence of such designation, as the notice calling such
meeting may designate. A waiver of notice signed by directors may designate any
place for the holding of such meeting.
Section 2.10 Notice of Meeting. Except as otherwise provided in Section
2.07, there shall be delivered to all directors, at least forty-eight (48) hours
before the time of such meeting, a copy of a written notice of any meeting by
delivery of such notice personally, by mailing such notice postage prepaid or by
telegram or facsimile. Such notice shall be addressed in the manner provided for
notice to stockholders in Section 1.04(c). If mailed, the notice shall be deemed
delivered two (2) business days following the date the same is deposited in the
United States mail, postage prepaid. Any director may waive notice of any
meeting, and the attendance of a director at a meeting and oral consent entered
on the minutes of the meeting or taking part in deliberations of the meeting
without objection shall constitute a waiver of notice of such meeting.
Attendance for the express purpose of objecting to the transaction of business
thereat because the meeting is not properly called or convened shall not
constitute presence nor a waiver of notice for purposes hereof.
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Section 2.11 Quorum: Adjourned Meetings.
(a) A majority of the directors in office, at a meeting duly
assembled, is necessary to constitute a quorum for the transaction of business.
(b) At any meeting of the Board of Directors where a quorum is not
present, a majority of those present may adjourn, from time to time, until a
quorum is present, and no notice of such adjournment shall be required. At any
adjourned meeting where a quorum is present, any business may be transacted
which could have been transacted at the meeting originally called.
Section 2.12 Board of Directors' Decisions. Subject to the Articles of
Incorporation, the affirmative vote of a majority of the directors present at a
meeting at which a quorum is present is the act of the Board of Directors.
Section 2.13 Telephonic Meetings. Members of the Board of Directors or of
any committee designated by the Board of Directors may participate in a meeting
of the Board of Directors or committee by means of a telephone conference or
similar method of communication by which all persons participating in such
meeting can hear each other. Participation in a meeting pursuant to this Section
2.13 constitutes presence in person at the meeting.
Section 2.14 Action Without Meeting. Any action required or permitted to be
taken at a meeting of the Board of Directors or of a committee thereof may be
taken without a meeting if, before or after the action, a written consent
thereto is signed by all of the members of the Board of Directors or the
committee. The written consent may be signed in counterparts and must be filed
with the minutes of the proceedings of the Board of Directors or committee.
Section 2.15 Powers and Duties.
(a) Except as otherwise restricted in the laws of the State of Nevada
or the Articles of Incorporation or these Bylaws, the Board of Directors has
full control over the affairs of the corporation. The Board of Directors may
delegate any of its authority to manage, control or conduct the business of the
corporation to any standing or special committee or to any officer or agent and
to appoint any persons to be agents of the corporation with such powers,
including the power to subdelegate, and upon such terms as may be deemed fit.
(b) The Board of Directors may present to the stockholders at annual
meetings of the stockholders, and when called for by a majority vote of
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the stockholders at an annual meeting or a special meeting of the stockholders
shall so present, a full and clear report of the condition of the corporation.
(c) The Board of Directors, in its discretion, may submit any contract
or act for approval or ratification at any annual meeting of the stockholders or
any special meeting properly called for the purpose of considering any such
contract or act, provided a quorum is present.
Section 2.16 Compensation. The Board of Directors may pay reasonable
compensation to persons who are not full-time employees of the corporation or
any subsidiary or parent company who serve as directors and members of
committees for their services as such. The directors and members of committees
shall be allowed and paid all necessary expenses incurred in attending any
meetings of the Board of Directors or committees. Directors shall also receive
reasonable compensation for their services as directors, in such amounts and at
such times as may be determined by the Board of Directors from time to time.
Section 2.17 Order of Business. The order of business at any meeting of the
Board of Directors shall be as follows:
1. Determination of members present and existence of quorum;
2. Reading and approval of the minutes of any previous meeting or
meetings;
3. Reports of officers and committee members;
4. Elections of officers (annual meeting);
5. Unfinished business;
6. New business;
7. Adjournment.
ARTICLE III
OFFICERS
Section 3.01 Election. The Board of Directors, at its annual meeting, shall
elect a Chairman of the Board, a president, a secretary and a treasurer to hold
office for a term of one (1) year or until their successors are chosen and
qualify. Any individual may hold two or more offices. The Board of Directors
may, from time to time, by resolution, elect one or more vice-presidents,
assistant secretaries and assistant treasurers and appoint agents of the
corporation, prescribe their duties and fix their compensation.
Section 3.02 Removal; Resignation. Any officer or agent elected or
appointed by the Board of Directors may be removed by it with or without
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cause. Any officer may resign at any time upon written notice to the
corporation. Any such removal or resignation shall be subject to the rights, if
any, of the respective parties under any contract between the corporation and
such officer or agent.
Section 3.03 Vacancies. Any vacancy in any office because of death,
resignation, removal or otherwise may be filled by the Board of Directors for
the unexpired portion of the term of such office.
Section 3.04 Chairman of the Board. The Chairman of the Board shall be the
Chief Executive Officer of the corporation and shall have general direction over
the policies and affairs of the corporation and compliance with these Bylaws and
resolutions and directions of the Board of Directors, subject only to the
control and direction of the Board of Directors. He shall preside at all
meetings of the stockholders and the Board of Directors. He may call meetings of
the Directors and of any committee of the Board whenever he deems it advisable.
He may appoint ad hoc committees of the Board of Directors and prescribe the
scope of their duties. He shall, in the absence or incapacity of the President,
perform all duties and functions and exercise all of the powers of the
President. He shall have such other powers and duties as may from time to time
be prescribed in these Bylaws or by the resolution of the Board of Directors.
Section 3.05 President.
(a) The President shall be the Chief Operating Officer of the
corporation, subject to the control and direction of the Board of Directors and
the Chairman of the Board. He shall report to the Chairman of the Board and keep
the Chairman of the Board informed concerning the affairs and condition of the
business of the Company. He shall have such other powers and duties as may from
time to time be prescribed by these Bylaws, by resolution of the Board of
Directors, or by the Chairman of the Board. In the absence or incapacity of the
Chairman of the Board, he shall preside as Chairman at all meetings of the
stockholders or the Board of Directors.
(b) The President shall have full power and authority on behalf of the
corporation to attend and to act and to vote, or designate such other officer or
agent of the corporation to attend and to act and to vote, at any meetings of
the stockholders of any corporation in which the corporation may hold stock and,
at any such meetings, shall possess and may exercise any and all rights and
powers incident to the ownership of such stock. The Board of Directors, by
resolution from time to time, may confer like powers on any person
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<PAGE>
or persons in place of the president to exercise such powers for these purposes.
Section 3.06 Executive Vice-Presidents and Vice-Presidents. The Board of
Directors may elect one or more executive vice-presidents and vice-presidents
who shall be vested with all the powers and perform all the duties of the
president whenever the president is absent or unable to act and such other
duties as shall be prescribed by the Board of Directors or the president.
Section 3.07 Secretary. The secretary shall keep, or cause to be kept, the
minutes of proceedings of the stockholders and the Board of Directors in books
provided for that purpose. The secretary shall attend to the giving and service
of all notices of the corporation, may sign with the president in the name of
the corporation all contracts in which the corporation is authorized to enter,
shall have the custody or designate control of the corporate seal, shall affix
the corporate seal to all certificates of stock duly issued by the corporation,
shall have charge or designate control of stock certificate books, transfer
books and stock ledgers, and such other books and papers as the Board of
Directors or appropriate committee may direct, and shall, in general, perform
all duties incident to the office of the secretary.
Section 3.08 Assistant Secretaries. The Board of Directors may appoint one
or more assistant secretaries who shall have such powers and perform such duties
as may be prescribed by the Board of Directors or the secretary.
Section 3.09 Treasurer.
(a) The treasurer shall be the chief financial officer of the
corporation, subject to the supervision and control of the Board of Directors,
and shall have custody of all the funds and securities of the corporation. When
necessary or proper, the treasurer shall endorse on behalf of the corporation
for collection checks, notes, and other obligations, and shall deposit all
monies to the credit of the corporation in such bank or banks or other
depository as the Board of Directors may designate, and shall sign all receipts
and vouchers for payments made by the corporation. Unless otherwise specified by
the Board of Directors, the treasurer may sign with the president all bills of
exchange and promissory notes of the corporation. Shall also have the care and
custody of the stocks, bonds, certificates, vouchers, evidence of debts,
securities, and such other property belonging to the corporation as the Board of
Directors shall designate, and shall sign all papers required by law, by these
Bylaws, or by the Board of Directors to be signed by the treasurer. The
treasurer shall enter, or cause to be entered, regularly in the financial
records of the corporation, to be kept for that purpose, full and accurate
accounts of all monies received and
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<PAGE>
paid on account of the corporation and, whenever required by the Board of
Directors, the treasurer shall render a statement of any or all accounts. The
treasurer shall at all reasonable times exhibit the books of account to any
director of the corporation and shall perform all acts incident to the position
of the treasurer subject to the control of the Board of Directors.
(b) The treasurer shall, if required by the Board of Directors, give
bond to the corporation in such sum and with such security as shall be approved
by the Board of Directors for the faithful performance of all the duties of
treasurer and for restoration to the corporation, in the event of the
treasurer's death, resignation, retirement or removal from office, of all books,
records, papers, vouchers, money and other property in the treasurer's custody
or control and belonging to the corporation. The expense of such bond shall be
borne by the corporation.
Section 3.10 Assistant Treasurers. The Board of Directors may appoint one
or more assistant treasurers who shall have such powers and perform such duties
as may be prescribed by the Board of Directors or the treasurer. The Board of
Directors may prescribe an assistant treasurer to give a bond to the corporation
in such sum and with such security as it may approve, for the faithful
performance of the duties of assistant treasurer, and for restoration to the
corporation, in the event of the assistant treasurer's death, resignation,
retirement or removal from office, of all books, records, papers, vouchers,
money and other property in the assistant treasurer's custody or control and
belonging to the corporation. The expense of such bond shall be borne by the
corporation.
ARTICLE IV
CAPITAL STOCK
Section 4.01 Issuance. Shares of the corporation's authorized stock shall,
subject to any provisions or limitations of the laws of the State of Nevada, the
Articles of Incorporation or any contracts or agreements to which the
corporation may be a party, be issued in such manner, at such times, upon such
conditions and for such consideration as shall be prescribed by the Board of
Directors
Section 4.02 Certificates. Ownership in the corporation shall be evidenced
by certificates for shares of stock in such form as shall be prescribed by the
Board of Directors, shall be under the seal of the corporation and shall
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<PAGE>
be manually signed by the president or a vice-president and also by the
secretary or an assistant secretary; provided however, whenever any certificate
is countersigned or otherwise authenticated by a transfer agent or transfer
clerk, and by a registrar, then a facsimile of the signatures of said officers
of the corporation may be printed or lithographed upon the certificate in lieu
of the actual signatures. If the corporation uses facsimile signatures of its
officers on its stock certificates, it shall not act as registrar of its own
stock, but its transfer agent and registrar may be identical if the institution
acting in those dual capacities countersigns any stock certificates in both
capacities. Each certificate shall contain the name of the record holder, the
number, designation, if any, class or series of shares represented, a statement
or summary of any applicable rights, preferences, privileges or restrictions
thereon, and a statement if applicable, that the shares are assessable. All
certificates shall be consecutively numbered. If provided by the stockholder,
the name, address and federal tax identification number of the stockholder, the
number of shares, and the date of issue shall be entered in the stock transfer
records of the corporation.
Section 4.03 Surrendered; Lost or Destroyed Certificates. All certificates
surrendered to the corporation, except those representing shares of treasury
stock, shall be canceled and no new certificate shall be issued until the former
certificate for a like number of shares shall have been canceled, except that in
case of a lost, stolen, destroyed or mutilated certificate, a new one may be
issued therefor. However, any stockholder applying for the issuance of a stock
certificate in lieu of one alleged to have been lost, stolen, destroyed or
mutilated shall, prior to the issuance of a replacement, provide the corporation
with his, her or its affidavit of the facts surrounding the loss, theft,
destruction or mutilation and, if required by the Board of Directors, an
indemnity bond in an amount not less than twice the current market value of the
stock, and upon such terms as the treasurer or the Board of Directors shall
require which shall indemnify the corporation against any loss, damage, cost or
inconvenience arising as a consequence of the issuance of a replacement
certificate.
Section 4.04 Replacement Certificate. When the Articles of Incorporation
are amended in any way affecting the statements contained in the certificates
for outstanding shares of capital stock of the corporation or it becomes
desirable for any reason, in the discretion of the Board of Directors,
including, without limitation, following the merger of the corporation with
another corporation or the reorganization of the corporation, to cancel any
outstanding certificate for shares and issue a new certificate therefor
conforming to the rights of the holder, the Board of Directors may order any
holders of outstanding certificates for shares to surrender and exchange the
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<PAGE>
same for new certificates within a reasonable time to be fixed by the Board of
Directors. The order may provide that a holder of any certificate(s) ordered to
be surrendered shall not be entitled to vote, receive distributions or exercise
any other rights of stockholders of record until the holder has complied with
the order, but the order operates to suspend such rights only after notice and
until compliance.
Section 4.05 Transfer of Shares. No transfer of stock shall be valid as
against the corporation except on surrender and cancellation of the certificates
therefor accompanied by an assignment or transfer by the registered owner made
either in person or under assignment. Whenever any transfer shall be expressly
made for collateral security and not absolutely, the collateral nature of the
transfer shall be reflected in the entry of transfer in the records of the
corporation.
Section 4.06 Transfer Agent; Registrars. The Board of Directors may appoint
one or more transfer agents, transfer clerk and registrars of transfer and may
require all certificates for shares of stock to bear the signature of such
transfer agent, transfer clerk and/or registrar of transfer.
Section 4.07 Stock Transfer Records. The stock transfer records shall be
closed for a period of at least ten (10) days prior to all meetings of the
stockholders and shall be closed for the payment of distributions as provided in
Article V hereof and during such periods as, from time to time, may be fixed by
the Board of Directors, and during such periods, no stock shall be transferable
for purposes of Article V and no voting rights shall be deemed transferred
during such periods. Subject to the forgoing limitations, nothing contained
herein shall cause transfers during such periods to be void or voidable.
Section 4.08 Miscellaneous. The Board of Directors shall have the power and
authority to make such rules and regulations not inconsistent herewith as it may
deem expedient concerning the issue, transfer, and registration of certificates
for shares of the corporation's stock.
ARTICLE V
DISTRIBUTIONS
Section 5.01 Distributions may be declared, subject to the provisions of
the laws of the State of Nevada and the Articles of Incorporation, by the Board
of Directors at any regular or special meeting and may be paid in cash,
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<PAGE>
property, shares of corporate stock, or any other medium. The Board of Directors
may fix in advance a record date, as provided in Section 1.06, prior to the
distribution for the purpose of determining stockholders entitled to receive any
distribution. The Board of Directors may close the stock transfer books for such
purpose for a period of not more than ten (10) days prior to the date of such
distribution.
ARTICLE VI
RECORDS; REPORTS; SEAL; AND FINANCIAL MATERS
Section 6.01 Records. All original records of the corporation shall be kept
by or under the direction of the secretary or at such places as may be
prescribed by the Board of Directors.
Section 6.02 Directors' and Officers' Right of Inspection. Every director
and officer shall have the absolute right at any reasonable time for a purpose
reasonably related to the exercise of such individual's duties to inspect and
copy all of the corporation's books, records, and documents of every kind and to
inspect the physical properties of the corporation and/or its subsidiary
corporations. Such inspection may be made in person or by agent or attorney.
Section 6.03 Corporate Seal. The Board of Directors may, by resolution,
authorize a seal, and the seal may be used by causing it, or a facsimile, to be
impressed or affixed or reproduced or otherwise. Except when otherwise
specifically provided herein, any officer of the corporation shall have the
authority to affix the seal to any document requiring it.
Section 6.04 Fiscal Year-End. The fiscal year-end of the corporation shall
be such date as may be fixed from time to time by resolution of the Board of
Directors.
Section 6.05 Reserves. The Board of Directors may create, by resolution,
such reserves, in accordance with generally accepted accounting principles, as
the directors may, from time to time, in their discretion, think proper to
provide for contingencies, or to equalize distributions or to repair or maintain
any property of the corporation, or for such other purpose as the Board of
Directors may deem beneficial to the corporation, and the directors may modify
or abolish any such reserves in the manner in which they were created.
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<PAGE>
ARTICLE VII
INDEMNIFICATION
Section 7.01 Indemnification and Insurance.
(a) Indemnification of Directors and Officers.
(i) For purposes of this Article: (a) "Indemnitee" shall mean each
director or officer of the corporation who was or is a party to, or is
threatened to be made a party to, or is otherwise involved in, any Proceeding
(as hereinafter defined), by reason of the fact that he or she is or was a
director or officer of the corporation or is or was serving in any capacity at
the request of the corporation as a director, officer, employee, agent, partner,
or fiduciary of, or in any other capacity for, another corporation or any
partnership, joint venture, trust, or other enterprise; and (b) "Proceeding"
shall mean any threatened, pending or completed action or suit (including
without limitation an action, suit or proceeding by or in the right of the
corporation), whether civil, criminal, administrative or investigative.
(ii) Each Indemnitee shall be indemnified and held harmless by the
corporation for all actions taken by him or her and for all omissions
(regardless of the date of any such action or omission), to the fullest extent
permitted by Nevada law, against all expense, liability and loss (including
without limitation attorneys' fees, judgments, fines, taxes, penalties, and
amounts paid or to be paid in settlement) reasonably incurred or suffered by the
Indemnitee in connection with any Proceeding. The indemnification provided for
herein shall include, but not be limited to, the right to reimbursement from the
corporation for all reasonable costs and expenses incurred by the Indemnitee in
connection with the Proceeding. The corporation shall promptly reimburse such
costs and expenses upon submission by the Indemnitee of invoices or other
evidence of such costs and expenses, in form satisfactory to the corporation.
(iii) Indemnification pursuant to this Section shall continue as to
an Indemnitee who has ceased to be a director or officer and shall inure to the
benefit of his or her heirs, executors and administrators.
(b) Indemnification of Employees and Other Persons. The corporation
may, by action of its Board of Directors and to the extent provided in such
action, indemnify employees, agents and other persons as though they were
Indemnitees.
(c) Non-Exclusivity of Rights. The rights to indemnification provided
in this Article shall not be exclusive of any other rights that any person
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may have or hereafter acquire under any statute, provision of the corporation's
Articles of Incorporation or Bylaws, agreement, vote of stockholders or
directors, or otherwise.
(d) Insurance. The corporation may purchase and maintain insurance or
make other financial arrangements on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise for
any liability asserted against him or her and liability and expenses incurred by
him or her in his or her capacity as a director, officer, employee or agent, or
arising out of his or her status as such, whether or not the corporation has the
authority to indemnify him or her against such liability and expenses.
(e) Other Financial Arrangements. The other financial arrangements
which may be made by the corporation may include the following: (i) the creation
of a trust fund; (ii) the establishment of a program of self-insurance; (iii)
the securing of its obligation of indemnification by granting a security
interest or other lien on any assets (including cash) of the corporation; (iv)
the establishment of a letter of credit, guarantee or surety. No financial
arrangement pursuant to this subsection may provide protection for a person
adjudged by a court of competent jurisdiction, after exhaustion of all appeals
therefrom, to be liable for intentional misconduct, fraud, or a knowing
violation of law, except with respect to advancement of expenses or
indemnification ordered by a court.
(f) Other Matters Relating to Insurance or Financial Arrangements. Any
insurance or other financial arrangement made on behalf of a person pursuant to
this Section may be provided by the corporation or any other person approved by
the Board of Directors, even if all or part of the other person's stock or other
securities is owned by the corporation. In the absence of fraud:
(i) the decision of the Board of Directors as to the propriety of
the terms and conditions of any insurance or other financial arrangement made
pursuant to this Section and the choice of the person to provide the insurance
or other financial arrangement is conclusive; and
(ii) the insurance or other financial arrangement:
(a) is not void or voidable; and
(b) does not subject any director approving it to
personal liability for his action,
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even if a director approving the insurance or other financial arrangement is a
beneficiary of the insurance or other financial arrangement.
Section 7.02 Amendment. The provisions of this Article relating to
indemnification shall constitute a contract between the corporation and each of
its directors and officers which may be modified as to any director or officer
only with that person's consent or as specifically provided in this Section.
Notwithstanding any other provision of these Bylaws relating to their amendment
generally, any repeal or amendment of this Article which is adverse to any
director or officer shall apply to such director or officer only on a
prospective basis and shall not limit the rights of an Indemnitee to
indemnification with respect to any action or failure to act occurring prior to
the time of such repeal or amendment. Notwithstanding any other provision of
these Bylaws, no repeal or amendment of these Bylaws shall affect any or all of
this Article so as to limit or reduce the indemnification in any manner unless
adopted by (a) the vote of a majority of the directors of the corporation then
serving, or (b) by the stockholders as set forth in Article VIII hereof;
provided that no such amendment shall have retroactive effect inconsistent with
the preceding sentence.
Section 7.03 Changes in Nevada Law. References in this Article to Nevada
law or to any provision thereof shall be to such law as it existed on the date
this Article was adopted or as such law thereafter may be changed; provided that
(a) in the case of any change which expands the liability of directors or
officers or limits the indemnification rights or the rights to advancement of
expenses which the corporation may provide, the rights to limited liability, to
indemnification and to the advancement of expenses provided in the corporation's
Articles of Incorporation and/or these Bylaws shall continue as theretofore to
the extent permitted by law; and (b) if such change permits the corporation,
without the requirement of any further action by stockholders or directors, to
limit further the liability of directors or limit the liability of officers, or
to provide broader indemnification rights, or rights to the advancement of
expenses than the corporation was permitted to provide prior to such change,
then liability thereupon shall be so limited and the rights to indemnification
and the advancement of expenses shall be so broadened to the extent permitted by
law.
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ARTICLE VIII
AMENDMENT OR REPEAL
Section 8.01. Amendment. Except as otherwise restricted in the Articles of
Incorporation or these Bylaws:
(a) Any provision of these Bylaws may be altered, amended or repealed
at the annual or any regular meeting of the Board of Directors without prior
notice, or at any special meeting of the Board of Directors if notice of such
alteration, amendment or repeal be contained in the notice of such special
meeting.
(b) These Bylaws may also be altered, amended, or repealed at a duly
convened meeting of the stockholders by the affirmative vote of the holders of a
majority of the voting power of the issued and outstanding stock of the
corporation entitled to vote. The stockholders may provide by resolution that
any Bylaw provision be repealed, amended, adopted or altered by them may not be
repealed, amended, adopted or altered by the Board of Directors.
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Riviera Holdings Corporation
Organization Structure
|--------------------------------------------|
| |
| Riviera Holdings Corporation |
| |
|----------------------|---------------------|
|
|----------------------|---------------------|
| |
| Riviera Operating Corporation |
| |
|----------------------|---------------------|
|
|----------------------|---------------------|
| |
| Riviera Gaming Management, Inc. |
| |
|----------------------|---------------------|
|
|----------------------------------------|
| |
|---------------|----------------| |------------------|-----------------|
| Riviera Gaming | | Riviera Gaming Management of |
| Management-Elsinore, Inc. | | Colorado, Inc. |
|--------------------------------| |------------------|-----------------|
|
|------------------|-----------------|
| |
| Riviera Colorado Holdings, Inc. |
| |
|------------------|-----------------|
|
|------------------|-----------------|
| |
| Riviera Black Hawk, Inc. |
| |
|------------------------------------|
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTS
INDEPENDENT AUDITOR'S CONSENT
Riviera Holdings Corporation
Las Vegas, Nevada
We consent to the use in this Registration Statement on Form S-4 relating to the
Offer to Exchange $175 million of 10% First Mortgage Notes due 2004 for all
outstanding $175 million of 10% First Mortgage Notes due 2004 of Riviera
Holdings Corporation (the "Company") of our report dated February 28, 1997
appearing in the Prospectus which is a part of this Registration Statement, and
to the references to us under the heading "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Las Vegas, Nevada
September 10, 1997
<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
-----------------------------
__CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b) (2)
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
(Exact name of trustee as specified in its charter)
A U.S. National Banking Association 41-1592157
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national Identification No.)
bank)
Sixth Street and Marquette Avenue 55479
Minneapolis, Minnesota (Zip code)
(Address of principal executive offices)
Stanley S. Stroup, General Counsel
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Sixth Street and Marquette Avenue
Minneapolis, Minnesota 55479
(612) 667-1234
(Agent for Service)
-----------------------------
RIVIERA HOLDINGS CORPORATION
(Exact name of obligor as specified in its charter)
Nevada 88-0296885
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2901 Las Vegas Boulevard South
Las Vegas, Nevada 89109
(Address of principal executive offices) (Zip code)
-----------------------------
10% First Mortgage Notes Due 2004
(Title of the indenture securities)
================================================================================
<PAGE>
Item 1. General Information. Furnish the following information as to the
trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
Comptroller of the Currency
Treasury Department
Washington, D.C.
Federal Deposit Insurance Corporation
Washington, D.C.
The Board of Governors of the Federal Reserve System
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust
powers.
The trustee is authorized to exercise corporate trust
powers.
Item 2. Affiliations with Obligor. If the obligor is an affiliate of the
trustee, describe each such affiliation.
None with respect to the trustee.
No responses are included for Items 3-14 of this Form T-1 because the obligor is
not in default as provided under Item 13.
Item 15. Foreign Trustee. Not applicable.
Item 16. List of Exhibits. List below all exhibits filed as a part of this
Statement of Eligibility. Norwest Bank
incorporates by reference into this Form T-1 the
exhibits attached hereto.
Exhibit 1. a. A copy of the Articles of Association of the
trustee now in effect.*
Exhibit 2. a. A copy of the certificate of authority of the
trustee to commence business issued June 28,
1872, by the Comptroller of the Currency to The
Northwestern National Bank of Minneapolis.*
b. A copy of the certificate of the Comptroller of
the Currency dated January 2, 1934, approving the
consolidation of The Northwestern National Bank of
Minneapolis and The Minnesota Loan and Trust
Company of Minneapolis, with the surviving entity
being titled Northwestern National Bank and Trust
Company of Minneapolis.*
c. A copy of the certificate of the Acting
Comptroller of the Currency dated January 12,
1943, as to change of corporate title of
Northwestern National Bank and Trust Company of
Minneapolis to Northwestern National Bank of
Minneapolis.*
<PAGE>
d. A copy of the letter dated May 12, 1983 from the
Regional Counsel, Comptroller of the Currency,
acknowledging receipt of notice of name change
effective May 1, 1983 from Northwestern National
Bank of Minneapolis to Norwest Bank Minneapolis,
National Association.*
e. A copy of the letter dated January 4, 1988 from
the Administrator of National Banks for the
Comptroller of the Currency certifying approval of
consolidation and merger effective January 1, 1988
of Norwest Bank Minneapolis, National Association
with various other banks under the title of
"Norwest Bank Minnesota, National Association."*
Exhibit 3. A copy of the authorization of the trustee to exercise
corporate trust powers issued January 2, 1934, by the
Federal Reserve Board.*
Exhibit 4. Copy of By-laws of the trustee as now in effect.*
Exhibit 5. Not applicable.
Exhibit 6. The consent of the trustee required by Section 321(b)
of the Act.
Exhibit 7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its
supervising or examining authority.**
Exhibit 8. Not applicable.
Exhibit 9. Not applicable.
* Incorporated by reference to exhibit number 25 filed with
registration statement number 33-66026.
** Incorporated by reference to exhibit number 25 filed with
registration statement number 333-7575.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, Norwest Bank Minnesota, National Association, a national banking
association organized and existing under the laws of the United States of
America, has duly caused this statement of eligibility to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Minneapolis and State of Minnesota on the 29th day of August, 1997.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/
-----------------------------
Jane Y. Schweiger
Corporate Trust Officer
<PAGE>
EXHIBIT 1
August 29, 1997
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In accordance with Section 321(b) of the Trust Indenture Act of 1939, as
amended, the undersigned hereby consents that reports of examination of the
undersigned made by Federal, State, Territorial, or District authorities
authorized to make such examination may be furnished by such authorities to the
Securities and Exchange Commission upon its request therefor.
Very truly yours,
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
/s/
-----------------------------
Jane Y. Schweiger
Corporate Trust Officer
<PAGE>
Exhibit 99.1
FORM OF
LETTER OF TRANSMITTAL
To Tender for Exchange
10% First Mortgage Notes due 2004
of
RIVIERA HOLDINGS CORPORATION
Pursuant to the Prospectus dated ______ __, 1997
==============================================================================
| |
| THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT ____ P.M., |
| ______________ TIME, ON _______ __, 1997 (THE "EXPIRATION DATE"), |
| UNLESS THE EXCHANGE OFFER IS EXTENDED BY THE COMPANY IN ITS SOLE |
| DISCRETION, IN WHICH CASE THE TERM "EXPIRATION DATE" SHALL MEAN THE |
| LATEST DATE AND TIME TO WHICH THE EXCHANGE OFFER IS EXTENDED. TENDERS |
| MAY BE WITHDRAWN AT ANY TIME PRIOR TO ____ P.M., _____________ TIME, ON |
| THE EXPIRATION DATE. |
| |
==============================================================================
The Exchange Agent is:
Norwest Bank Minnesota, National Association
By Registered or Certified Mail: In Person:
Norwest Bank Minnesota, N.A. Norwest Bank Minnesota, N.A.
Corporate Trust Operations Northstar East Building
P.O. Box 1517 608 Second Avenue South, 12th Floor
Minneapolis, MN 55480-1517 Corporate Trust Services
Minneapolis, MN
By Overnight Courier: By Facsimile
(for Eligible Institutions only):
Norwest Bank Minnesota, N.A. (612) 667-4927
Corporate Trust Services
Sixth and Marquette Avenue Confirm Receipt of Notice of
Minneapolis, MN 55479-0113 Guaranteed Delivery by Telephone.
(612) 667-9764
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS SET FORTH IN THIS
LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL
IS COMPLETED.
<PAGE>
The undersigned acknowledges receipt of the Prospectus dated ____ __,
1997 (the "Prospectus"), of Riviera Holdings Corporation, a Nevada corporation
(the "Company"), and this Letter of Transmittal (the "Letter of Transmittal"),
which together with the Prospectus constitutes the Company's offer (the
"Exchange Offer") to exchange $1,000 principal amount of its 10% First Mortgage
Notes due 2004 (the "Exchange Notes") for each $1,000 principal amount of its
outstanding 10% First Mortgage Notes due 2004 (the "Existing Notes"). Recipients
of the Prospectus should read the requirements described in such Prospectus with
respect to eligibility to participate in the Exchange Offer. Capitalized terms
used but not defined herein have the meaning given to them in the Prospectus.
The undersigned hereby tenders the Existing Notes described in the
box entitled "Description of Existing Notes" below pursuant to the terms and
conditions described in the Prospectus and this Letter of Transmittal. The
undersigned is the registered owner of all the Existing Notes tendered herewith
and the undersigned represents that it has received from each beneficial owner
of Existing Notes ("Beneficial Owners") a duly completed and executed form of
"Instruction to Registered Holder from Beneficial Owner" accompanying this
Letter of Transmittal, instructing the undersigned to take the action described
in this Letter of Transmittal.
This Letter of Transmittal is to be used by a holder of Existing
Notes (i) if certificates representing Existing Notes are to be forwarded
herewith, (ii) if delivery of Existing Notes is to be made by book-entry
transfer to the Exchange Agent's account at The Depository Trust Company
("DTC"), pursuant to the procedures set forth in the section of the Prospectus
entitled "The Exchange Offer--Procedures for Tendering Existing Notes," or (iii)
if a tender is made pursuant to the guaranteed delivery procedures in the
section of the Prospectus entitled "The Exchange Offer--Guaranteed Delivery
Procedures."
The undersigned hereby represents and warrants that the information
received from the beneficial owners is accurately reflected in the boxes
entitled "Beneficial Owner(s)-Purchaser Status" and "Beneficial
Owner(s)-Residence."
Any beneficial owner whose Existing Notes are registered in the name
of a broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender should contact such registered holder of Existing Notes
promptly and instruct such registered holder of Existing Notes to tender on
behalf of the beneficial owner. If such beneficial owner wishes to tender on its
own behalf, such beneficial owner must, prior to completing and executing this
Letter of Transmittal and delivering its Existing Notes, either make appropriate
arrangements to register ownership of the Existing Notes in such beneficial
owner's name or obtain a properly completed bond power from the registered
holder of Existing Notes. The transfer of record ownership may take considerable
time.
In order to properly complete this Letter of Transmittal, a holder of
Existing Notes must (i) complete the box entitled "Description of Tendered
Notes," (ii) complete the boxes entitled "Beneficial Owner(s)-Purchaser Status"
and "Beneficial Owner(s)-Residence", (iii) if appropriate, check and complete
the boxes relating to book-entry transfer, guaranteed delivery, Special Issuance
Instructions and Special Delivery Instructions, (iv) sign the Letter of
Transmittal by completing the box entitled "Sign Here" and (v) complete the
Substitute Form W-9. Each holder of Existing Notes should carefully read the
detailed instructions below prior to completing the Letter of Transmittal.
Holders of Existing Notes who desire to tender their Existing Notes
for exchange and (i) whose Existing Notes are not immediately available or (ii)
who cannot deliver their Existing Notes, this Letter of Transmittal and all
other documents required hereby to the Exchange Agent on or prior to the
Expiration Date, must tender the Existing Notes pursuant to the guaranteed
delivery procedures set forth in the section of the Prospectus entitled "The
Exchange Offer--Guaranteed Delivery Procedures." See Instruction 2.
2
<PAGE>
Holders of Existing Notes who wish to tender their Existing Notes for
exchange must complete columns (1) through (3) in the box below entitled
"Description of Tendered Notes," complete the boxes entitled and sign the box
below entitled "Sign Here." If only those columns are completed, such holder of
Existing Notes will have tendered for exchange all Existing Notes listed in
column (3) below. If the holder of Existing Notes wishes to tender for exchange
less than all of such Existing Notes, column (4) must be completed in full. In
such case, such holder of Existing Notes should refer to Instruction 5.
<TABLE>
<CAPTION>
======================================================================================================================
| |
| DESCRIPTION OF TENDERED NOTES |
|=====================================================================================================================|
<S> <C> <C> <C> <C>
| (1) | (2) | (3) | (4) |
| | | | |
| | | | |
| | | | Principal |
| | | | Amount |
| | | | Tendered |
| | Existing | | For |
| | Note | Aggregate | Exchange |
| | Number(s) | Principal | (complete only |
| Name(s) and Address(es) of Registered | (Attach | Amount | if tendering |
| Holder(s) of Existing Note(s), exactly as name(s) | signed List | Represented | less than all |
| appear(s) on Existing Note Certificate(s) | if | by | Existing |
| (Please fill in, if blank) | necessary) | Certificate(s)(1)| Notes)(2) |
| | | | |
|-----------------------------------------------------------|------------------|------------------|-------------------|
| | | | |
| |------------------|------------------|-------------------|
| | | | |
| |------------------|------------------|-------------------|
| | | | |
| |------------------|------------------|-------------------|
| | | | |
| |------------------|------------------|-------------------|
| | | | |
| |------------------|------------------|-------------------|
| | | | |
| |------------------|------------------|-------------------|
| | | | |
| |------------------|------------------|-------------------|
| | | | |
- ---------------------------------------------------------------------------------------------------------------------
<FN>
1. Unless indicated in the column "Principal Amount Tendered For
Exchange," any tendering Holder of 10% Senior Notes due 2004 will be
deemed to have tendered the entire aggregate principal amount
represented by the column labeled "Aggregate Principal Amount
Represented by Certificate(s)."
2. The minimum permitted tender is $1,000 in principal amount of 10% First
Mortgage Notes due 2004. All tenders must be in integral multiples of
$1,000.
</FN>
</TABLE>
[ ] CHECK HERE IF ANY TENDERED EXISTING NOTE CERTIFICATES ARE ENCLOSED
HEREWITH.
3
<PAGE>
[ ] CHECK HERE IF ANY TENDERED EXISTING NOTE CERTIFICATES ARE BEING
DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE
EXCHANGE AGENT WITH DTC AND COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE
INSTITUTIONS (AS HEREINAFTER DEFINED) ONLY):
Name of Tendering Institution: _______________________________
Account Number: _______________________________
Transaction Code Number: _______________________________
[ ] CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE
FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name of Registered Holder of Existing Note(s): ___________________
Date of Execution of Notice of Guaranteed Delivery: ___________________
Window Ticket Number (if available): ___________________
Name of Institution which Guaranteed Delivery: ___________________
Account Number (if delivered by book-entry transfer): ___________________
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: _____________________________________________
Address: _____________________________________________
_____________________________________________
4
<PAGE>
<TABLE>
<CAPTION>
====================================================== ========================================================
| SPECIAL ISSUANCE INSTRUCTIONS | | SPECIAL DELIVERY INSTRUCTIONS |
| (See Instructions 1, 6, 7 and 8) | | (See Instructions 1, 6, 7 and 8) |
| | | |
<S> <C>
| To be completed ONLY (i) if the New Notes issued | | To be completed ONLY if the New Notes issued in |
|in exchange for Existing Notes, certificates for | | exchange for Existing Notes, certificates for Existing |
|Existing Notes in a principal amount not exchanged | | Notes in a principal amount not exchanged for New |
|for New Notes, or Existing Notes (if any) not | | Notes, or Existing Notes (if any) not tendered for |
|tendered for exchange, are to be issued in the name | | exchange, are to be mailed or delivered (i) to someone |
|of someone other than the undersigned or (ii) if | | other than the undersigned or (ii) to the undersigned |
|Existing Notes tendered by book-entry transfer which | | at an address other than the address shown below the |
|are not exchanged are to be returned by credit to an | | undersigned's signature. |
|account maintained at DTC. | | Mail or delivered to: |
|Issue to: | | Issue to: |
| Name______________________________________________| | Name________________________________________________|
| (Please Print) | | (Please Print) |
|Address________________________________________________| | Address__________________________________________________|
| ________________________________________________| | __________________________________________________|
| ________________________________________________| | __________________________________________________|
| (Include Zip Code) | | (Include Zip Code) |
| | | |
|_______________________________________________________| | ________________________________________________________|_
| (Tax Identification or Social Security No.) | | (Tax Identification or Social Security No.) |
| | | |
| | | |
| Credit Existing Notes not exchanged and | | |
|delivered by book-entry transfer to DTC account | | |
|set forth below: | | |
| | | |
|_______________________________________________________| | |
| (Account Number) | | |
======================================================= =========================================================
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================
| BENEFICIAL OWNER(S) - RESIDENCE |
|--------------------------------------------------------------------------------------------------------------------|
<S> <C>
| State of Domicile/Principal Place of Business of | Principal Amount of Existing Notes |
| Each Beneficial Owner of Existing Notes | Held for Account of Beneficial Owner(s) |
|----------------------------------------------------------|---------------------------------------------------------|
| | |
|----------------------------------------------------------|---------------------------------------------------------|
| | |
|----------------------------------------------------------|---------------------------------------------------------|
| | |
|----------------------------------------------------------|---------------------------------------------------------|
| | |
|----------------------------------------------------------|---------------------------------------------------------|
| | |
|----------------------------------------------------------|---------------------------------------------------------|
| | |
|----------------------------------------------------------|---------------------------------------------------------|
| | |
====================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
=====================================================================================================================
| |
| BENEFICIAL OWNER(S) - PURCHASER STATUS |
|---------------------------------------------------------------------------------------------------------------------|
|The beneficial owner of each of the Existing Notes described herein is (check the box that applies): |
| |
<S> <C>
|[ ] A "Qualified Institutional Buyer" (as defined in Rule 144A under the Securities Act) |
| |
|[ ] An "Accredited Investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) |
| |
|[ ] A non "U.S. person" (as defined in Regulation S of the Securities Act) that purchased the Existing Notes |
| outside the United States in accordance with Rule 904 of the Securities Act |
| |
|[ ] Other (describe)___________________________________________________________________________________________ |
| ___________________________________________________________________________________________________________ |
| |
=====================================================================================================================
</TABLE>
6
<PAGE>
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Pursuant to the offer by Riviera Holdings Corporation, a Nevada
corporation (the "Company"), upon the terms and subject to the conditions set
forth in the Prospectus dated _____ __, 1997 (the "Prospectus") and this Letter
of Transmittal (the "Letter of Transmittal"), which together with the Prospectus
constitutes the Company's offer (the "Exchange Offer") to exchange $1,000
principal amount of its 10% First Mortgage Notes due 2004 (the "New Notes") for
each $1,000 principal amount of its outstanding 10% First Mortgage Notes due
2004 (the "Existing Notes"), the undersigned hereby tenders to the Company for
exchange the Existing Notes indicated above.
By executing this Letter of Transmittal and subject to and effective
upon acceptance for exchange of the Existing Notes tendered for exchange
herewith, the undersigned will have irrevocably sold, assigned, transferred and
exchanged, to the Company, all right, title and interest in, to and under all of
the Existing Notes tendered for exchange hereby, and hereby will have appointed
the Exchange Agent as the true and lawful agent and attorney-in-fact (with full
knowledge that the Exchange Agent also acts as agent of the Company) of such
holder of Existing Notes with respect to such Existing Notes, with full power of
substitution to (i) deliver certificates representing such Existing Notes, or
transfer ownership of such Existing Notes on the account books maintained by DTC
(together, in any such case, with all accompanying evidences of transfer and
authenticity), to the Company, (ii) present and deliver such Existing Notes for
transfer on the books of the Company and (iii) receive all benefits and
otherwise exercise all rights and incidents of beneficial ownership with respect
to such Existing Notes, all in accordance with the terms of the Exchange Offer.
The power of attorney granted in this paragraph shall be deemed to be
irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that (i) the
undersigned is the owner; (ii) has a net long position within the meaning of
Rule 14e-4 under the Securities Exchange Act as amended ("Rule 14e-4"') equal to
or greater than the principal amount of Existing Notes tendered hereby; (iii)
the tender of such Existing Notes complies with Rule 14e-4 (to the extent that
Rule 14e-4 is applicable to such exchange); (iv) the undersigned has full power
and authority to tender, exchange, assign and transfer the Existing Notes and
(v) that when such Existing Notes are accepted for exchange by the Company, the
Company will acquire good and marketable title thereto, free and clear of all
liens, restrictions, charges and encumbrances and not subject to any adverse
claims. The undersigned will, upon receipt, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the exchange, assignment and transfer of the Existing
Notes tendered for exchange hereby.
By tendering, the undersigned hereby further represents to the
Company that (i) the New Notes to be acquired by the undersigned in exchange for
the Existing Notes tendered hereby and any beneficial owner(s) of such Existing
Notes in connection with the Exchange Offer will be acquired by the undersigned
and such beneficial owner(s) in the ordinary course of business of the
undersigned, (ii) the undersigned have no arrangement or understanding with any
person to participate in the distribution of the New Notes, (iii) the
undersigned and each beneficial owner acknowledge and agree that any person who
is a broker-dealer registered under the Exchange Act or is participating in the
Exchange Offer for the purpose of distributing the New Notes must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction of the New Notes acquired by such
person and cannot rely on the position of the staff of the Commission set forth
in certain no-action letters, (iv) the undersigned and each beneficial owner
understand that a secondary resale transaction described in clause
7
<PAGE>
(iii) above and any resales of Exchange Notes obtained by the undersigned in
exchange for the Existing Notes acquired by the undersigned directly from the
Company should be covered by an effective registration statement containing the
selling securityholder information required by Item 507 or Item 508, as
applicable, of Regulation S-K of the Commission and (vi) neither the undersigned
nor any beneficial owner is an "affiliate," as defined under Rule 405 under the
Securities Act, of the Company. If the undersigned is a broker-dealer that will
receive Exchange Notes for its own account in exchange for Existing Notes that
were acquired as a result of market-making activities or other trading
activities, it acknowledges that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
For purposes of the Exchange Offer, the Company will be deemed to
have accepted for exchange and to have exchanged, validly tendered Existing
Notes, if, as and when the Company gives oral or written notice thereof to the
Exchange Agent. Tenders of Existing Notes for exchange may be withdrawn at any
time prior to ____ p.m., ___________ time, on the Expiration Date. See "The
Exchange Offer - Withdrawal of Tenders" in the Prospectus. Any Existing Notes
tendered by the undersigned and not accepted for exchange will be returned to
the undersigned at the address set forth above unless otherwise indicated in the
box above entitled "Special Delivery Instructions" as promptly as practicable
after the Expiration Date.
The undersigned acknowledges that the Company's acceptance of
Existing Notes validly tendered for exchange pursuant to any one of the
procedures described in the section of the Prospectus entitled "The Exchange
Offer" and in the instructions hereto will constitute a binding agreement
between the undersigned and the Company upon the terms and subject to the
conditions of the Exchange Offer.
Unless otherwise indicated in the box entitled "Special Issuance
Instructions," please return any Existing Notes not tendered for exchange in the
name(s) of the undersigned. Similarly, unless otherwise indicated in the box
entitled "Special Delivery Instructions," please mail any certificates for
Existing Notes not tendered or exchanged (and accompanying documents, as
appropriate) to the undersigned at the address shown below the undersigned's
signature(s). In the event that both "Special Issuance Instructions" and
"Special Delivery Instructions" are completed, please issue the certificates
representing the New Notes issued in exchange for the Existing Notes accepted
for exchange in the name(s) of, and return any Existing Notes not tendered for
exchange or not exchanged to, the person(s) so indicated. The undersigned
recognizes that the Company has no obligation pursuant to the "Special Issuance
Instructions" and "Special Delivery Instructions" to transfer any Existing Notes
from the name of the holder of Existing Note(s) thereof if the Company does not
accept for exchange any of the Existing Notes so tendered for exchange or if
such transfer would not be in compliance with any transfer restrictions
applicable to such Existing Note(s).
In order to validly tender Existing Notes for exchange, holders of
Existing Notes must complete, execute, and deliver this Letter of Transmittal.
Except as stated in the Prospectus, all authority herein conferred or
agreed to be conferred shall survive the death, incapacity, or dissolution of
the undersigned, and any obligation of the undersigned hereunder shall be
binding upon the heirs, personal representatives, successors and assigns of the
undersigned. Except as otherwise stated in the Prospectus, this tender for
exchange of Existing Notes is irrevocable.
8
<PAGE>
==============================================================================
| SIGN HERE |
| _____________________________________________________________________________|
| (Signature(s) of Owner(s)) |
| |
| Date: ______________, 1996 |
| |
| Must be signed by the registered holder(s) of Existing Notes exactly as |
|name(s) appear(s) on certificate(s) representing the Existing Notes or on a |
|security position listing or by person(s) authorized to become registered |
|Existing Note holder(s) by certificates and documents transmitted herewith. |
|If signature is by trustees, executors, administrators, guardians, |
|attorneys-in-fact, officers of corporations or others acting in a fiduciary |
|or representative capacity, please provide the following information. (See |
|Instruction 6). |
| |
| Name(s):_____________________________________________________________________|
| _____________________________________________________________________________|
| _____________________________________________________________________________|
| (Please Print) |
| |
|Capacity (full title):________________________________________________________|
|______________________________________________________________________________|
|______________________________________________________________________________|
| |
|Address:______________________________________________________________________|
|______________________________________________________________________________|
|______________________________________________________________________________|
| (Include Zip Code) |
| |
|Principal place of business (if different from address listed above):_________|
|______________________________________________________________________________|
|______________________________________________________________________________|
|______________________________________________________________________________|
| (Include Zip Code) |
| |
|Area Code and Telephone No.: (____)___________________________________________|
|Tax Identification or Social Security Nos.:___________________________________|
| Please complete Substitute Form W-9 |
| |
| |
|GUARANTEE OF SIGNATURE(S) |
|(Signature(s) must be guaranteed if required by Instruction 1) |
| |
|Authorized Signature:_________________________________________________________|
|Dated:________________________________________________________________________|
|Name and Title:_______________________________________________________________|
| (Please Print) |
| |
|Name of Firm:_________________________________________________________________|
| |
==============================================================================
9
<PAGE>
(THIS PAGE INTENTIONALLY LEFT BLANK)
10
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Exchange Offer
1. Guarantee of Signatures. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by an institution
which is (1) a member firm of a registered national securities exchange or of
the National Association of Securities Dealers, Inc., (2) a commercial bank or
trust company having an office or correspondent in the United States, or (3) an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Securities Exchange Act of 1934 which is a member of one of the following
recognized Signature Guarantee Programs (an "Eligible Institution"):
a. The Securities Transfer Agents Medallion Program (STAMP)
b. The New York Stock Exchange Medallion Signature Program (MSP)
c. The Stock Exchange Medallion Program (SEMP)
Signatures on this Letter of Transmittal need not be guaranteed (i) if this
Letter of Transmittal is signed by the registered holder(s) of the Existing
Notes tendered herewith and such registered holder(s) have not completed the box
entitled "Special Issuance Instructions" or the box entitled "Special Delivery
Instructions" on this Letter of Transmittal or (ii) if such Existing Notes are
tendered for the account of an Eligible Institution. IN ALL OTHER CASES, ALL
SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION.
2. Delivery of this Letter of Transmittal and Existing Notes;
Guaranteed Delivery Procedures. This Letter of Transmittal is to be completed by
holders of Existing Notes (i) if certificates are to be forwarded herewith or
(ii) if tenders are to be made pursuant to the procedures for tender by
book-entry transfer or guaranteed delivery set forth in the section of the
Prospectus entitled "The Exchange Offer." Certificates for all physically
tendered Existing Notes or any timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation"), as well as a properly completed and duly executed
copy of this Letter of Transmittal or facsimile hereof, and any other documents
required by this Letter of Transmittal, must be received by the Exchange Agent
at its address set forth on the cover of this Letter of Transmittal prior to
_____ p.m., _________ time, on the Expiration Date, Holders of Existing Notes
who elect to tender Existing Notes and (i) whose Existing Notes are not
immediately available or (ii) who cannot deliver the Existing Notes, this Letter
of Transmittal or other required documents to the Exchange Agent prior to ____
p.m., ____________ time, on the Expiration Date, must tender their Existing
Notes according to the guaranteed delivery procedures set forth in the
Prospectus. Holders may have such tender effected if: (a) such tender is made
through an Eligible Institution; (b) prior to ____ p.m., _________ time, on the
Expiration Date, the Exchange Agent has received from such Eligible Institution
a properly completed and duly executed Notice of Guaranteed Delivery, setting
forth the name and address of the holder of such Existing Notes, the certificate
number(s) of such Existing Notes and the principal amount of Existing Notes
tendered for exchange, stating that tender is being made thereby and
guaranteeing that, within five New York Stock Exchange trading days after the
Expiration Date, this Letter of Transmittal (or a facsimile thereof), together
with the certificate(s) representing such Existing Notes (or a Book-Entry
Confirmation), in proper form for transfer, and any other documents required by
this Letter of Transmittal, will be deposited by
11
<PAGE>
such Eligible Institution with the Exchange Agent; and a properly executed
Letter of Transmittal (or facsimile hereof), as well as the certificate(s) for
all tendered Existing Notes in proper form for transfer or a Book-Entry
Confirmation, together with any other documents required by this Letter of
Transmittal, are received by the Exchange Agent within five New York Stock
Exchange trading days after the Expiration Date.
THE METHOD OF DELIVERY OF EXISTING NOTES, THIS LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND
RISK OF THE HOLDER. EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT.
INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR
HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE.
NEITHER THIS LETTER OF TRANSMITTAL NOR ANY EXISTING NOTES SHOULD BE SENT TO THE
COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL
BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH
HOLDERS.
No alternative, conditional or contingent tenders will be accepted.
All tendering holders of Existing Notes, by execution of this Letter of
Transmittal (or facsimile here, if applicable), waive any right to receive
notice of the acceptance of their Existing Notes for exchange.
3. Inadequate Space. If the space provided in the box entitled
"Description of Existing Notes" above is inadequate, the certificate numbers and
principal amounts of the Existing Notes being tendered should be listed on a
separate signed schedule affixed hereto.
4. Withdrawals. A tender of Existing Notes may be withdrawn at any
time prior to ____ p.m., __________ time, on the Expiration Date by delivery of
written or facsimile notice of withdrawal to the Exchange Agent at the address
set forth on the cover of this Letter of Transmittal. To be effective, a notice
of withdrawal of Existing Notes must (i) specify the name of the person having
deposited the Existing Notes to be withdrawn (the "Depositor"), (ii) identify
the Existing Notes to be withdrawn (including the certificate number or numbers
and aggregate principal amount of such Existing Notes), and (iii) be signed by
the holder of the Existing Notes in the same manner as the original signature on
the Letter of Transmittal by which such Existing Notes were tendered (including
any required signature guarantees). All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
the Company in its sole discretion, whose determination shall be final and
binding on all parties. Any Existing Notes so withdrawn will be deemed not to
have been validly tendered for purposes of the Exchange Offer and no New Notes
will be issued with respect thereto unless the Existing Notes so withdrawn are
validly retendered. Properly withdrawn Existing Notes may be retendered by
following one of the procedures described in the section of the Prospectus
entitled "The Exchange Offer--Procedures for Tendering" at any time prior to
____ p.m., ___________ time, on the Expiration Date.
12
<PAGE>
5. Partial Tenders. Tenders of Existing Notes will be accepted only
in integral multiples of $1,000 principal amount. If a tender for exchange is to
be made with respect to less than the entire principal amount of any Existing
Notes, fill in the principal amount of Existing Notes which are tendered for
exchange in column (4) of the box entitled "Description of Tendered Notes," as
more fully described in the footnotes thereto. In case of a partial tender for
exchange, a new certificate, in fully registered form, or the remainder of the
principal amount of the Existing Notes, will be sent to the holders of Existing
Notes unless otherwise indicated in the appropriate box on this Letter of
Transmittal as promptly as practicable after the expiration or termination of
the Exchange Offer.
6. Signatures on this Letter of Transmittal, Assignment and
Endorsements.
(a) The signature(s) of the holder of Existing Notes on this Letter
of Transmittal must correspond with the name(s) written on the face of the
Existing Notes without alteration, enlargement or any change whatsoever.
(b) If tendered Existing Notes are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
(c) If any tendered Existing Notes are registered in different names
on several certificates, it will be necessary to complete, sign and submit as
many separate copies of this Letter of Transmittal and any necessary or required
documents as there are different registrations or certificates.
(d) When this Letter of Transmittal is signed by the holder of the
Existing Notes listed and transmitted hereby, no endorsements of Existing Notes
or bond powers are required. If, however, Existing Notes not tendered or not
accepted, are to be issued or returned in the name of a person other than the
holder of Existing Notes, then the Existing Notes transmitted hereby must be
endorsed or accompanied by a properly completed bond power, in a form
satisfactory to the Company, in either case signed exactly as the name(s) of the
holder of Existing Notes appears(s) on the Existing Notes. Signatures on such
Existing Notes or bond powers must be guaranteed by an Eligible Institution
(unless signed by an Eligible Institution).
(e) If this Letter of Transmittal or Existing Notes or bond powers
are signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with this Letter of Transmittal.
(f) If this Letter of Transmittal is signed by a person other than
the registered holder of Existing Notes listed, the Existing Notes must be
endorsed or accompanied by a properly completed bond power, in either case
signed by such registered holder exactly as the name(s) of the registered holder
of Existing Notes appear(s) on the certificates. Signatures on such Existing
Notes or bond powers must be guaranteed by an Eligible Institution (unless
signed by an Eligible Institution).
7. Transfer Taxes. Except as set forth in this Instruction 7, the
Company will pay all transfer taxes, if any, applicable to the exchange of
Existing Notes pursuant to the Exchange
13
<PAGE>
Offer. If, however, a transfer tax is imposed for any reason other than the
exchange of the Existing Notes pursuant to the Exchange Offer, then the amount
of any such transfer taxes (whether imposed on the registered holder or any
other persons) will be payable by the tendering holder. If satisfactory evidence
of payment of such taxes or exemptions therefrom is not submitted with this
Letter of Transmittal, the amount of such transfer taxes will be billed directly
to such tendering holder.
8. Special Issuance and Delivery Instructions. If the New Notes are
to be issued, or if any Existing Notes not tendered for exchange are to be
issued or sent to someone other than the holder of Existing Notes or to an
address other than that shown above, the appropriate boxes on this Letter of
transmittal should be completed. Holders of Existing Notes tendering Existing
Notes by book-entry transfer may request that Existing Notes not accepted be
credited so such account maintained at DTC as such holder of Existing Notes may
designate.
9. Irregularities. All questions as to the validity, form,
eligibility (including time of receipt), compliance with conditions, acceptance
and withdrawal of tendered Existing Notes will be determined by the Company in
its sole discretion, which determination will be final and binding. The Company
reserves the absolute right to reject any and all Existing Notes not properly
tendered or any Existing Notes the Company's acceptance of which would, in the
opinion of counsel for the Company, be unlawful. The Company also reserves the
right to waive any defects, irregularities or conditions of tender as to
particular Existing Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Existing Notes must be
cured within such time as the Company shall determine. Although the Company
intends to notify holders of defects or irregularities with respect to tenders
of Existing Notes, neither the Company, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Tenders of
Existing Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Existing Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders, unless otherwise provided in this Letter of
Transmittal, as soon as practicable following the Expiration Date.
10. Waiver of Conditions. The Company reserves the absolute right to
waive, amend or modify certain of the specified conditions as described under
"The Exchange Offer--Certain Conditions to the Exchange Offer" in the Prospectus
in the case of any Existing Notes tendered (except as otherwise provided in the
Prospectus).
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<PAGE>
11. Mutilated, Lost, Stolen or Destroyed Existing Notes. Any
tendering Holder whose Existing Notes have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address below for further
instructions:
Norwest Bank Minnesota, N.A.
Corporate Trust Operations
Sixth and Marquette Avenue
Minneapolis, MN 55479-0113
Telephone: (612) 667-9764
12. Requests for Information or Additional Copies. Requests for
information or for additional copies of the Prospectus and this Letter of
Transmittal may be directed to the Exchange Agent at the address or telephone
number set forth on the cover of this Letter of Transmittal.
IMPORTANT: This Letter of Transmittal (or a facsimile thereof, if
applicable) together with certificates, to confirmation of book-entry or the
Notice of Guaranteed Delivery, and all other required documents must be received
by the Exchange Agent prior to ____ p.m., ________ time, on the Expiration Date.
IMPORTANT TAX INFORMATION
Under current federal income tax law, a holder of Existing Notes
whose tendered Existing Notes are accepted for exchange may be subject to backup
withholding unless the holder provides the Company (as payor), through the
Exchange Agent, with either (i) such holder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 attached hereto, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such holder of Existing
Notes is awaiting a TIN) and that (A) the holder of Existing Notes has not been
notified by the Internal Revenue Service that he or she is subject to backup
withholding as a result of a failure to report all interest or dividends or (B)
the Internal Revenue Service has notified the holder of Existing Notes that he
or she is subject to backup withholding; or (ii) an adequate basis for exemption
from backup withholding. If such holder of Existing Notes is an individual, the
TIN is such holder's social security number. If the Exchange Agent is not
provided with the correct taxpayer identification number, the holder of Existing
Notes may be subject to certain penalties imposed by the Internal Revenue
Service.
Certain holders of Existing Notes (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. Exempt holders of Existing Notes should
indicate their exempt status on Substitute Form W-9. A foreign individual may
qualify as an exempt recipient by submitting to the Exchange Agent a properly
completed Internal Revenue Service Form W-8 (which the Exchange Agent will
provide upon request) signed under penalty of perjury, attesting to the holder's
exempt status. See the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 (the "Guidelines") for additional
instructions.
If backup withholding applies, the Company is required to withhold
31% of any payment made to the holder of Existing Notes or other payee. Backup
withholding is not an additional federal income tax. Rather, the federal income
tax liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained from the Internal Revenue Service.
15
<PAGE>
The holder of Existing Notes is required to give the Exchange Agent
the TIN (e.g., social security number or employer identification number) of the
record owner of the Existing Notes. If the Existing Notes are held in more than
one name or are not held in the name of the actual owner, consult the enclosed
Guidelines for additional guidance regarding which number to report.
16
<PAGE>
INSTRUCTION TO REGISTERED HOLDER
FROM BENEFICIAL OWNER
OF 10% FIRST MORTGAGE NOTES DUE 2004 OF
RIVIERA HOLDINGS CORPORATION
The undersigned hereby acknowledges receipt of the Prospectus dated
____ __, 1997 (the "Prospectus") of Riviera Holdings Corporation, a Nevada
corporation (the "Company"), and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), that together constitute the Company's offer (the
"Exchange Offer"). Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder, as to the action to be
taken by you relating to the Exchange Offer with respect to the 10% First
Mortgage Notes due 2004 (the "Existing Notes") held by you for the account of
the undersigned.
The aggregate face amount of the Existing Notes held by you for the
account of the undersigned is (fill in amount):
$ _____________ of the Existing Notes.
With respect to the Exchange Offer, the undersigned hereby instructs
you (check appropriate box):
[ ] To TENDER the following Existing Notes held by you for the
account of the undersigned (insert principal amount of Existing Notes to be
tendered, if any):
$ ______________ of the Existing Notes.
[ ] NOT to TENDER any Existing Notes held by you for the account of
the undersigned.
If the undersigned instructs you to tender the Existing Notes held by
you for the account of the undersigned, it is understood that you are authorized
(a) to make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations and warranties contained in the
Letter of Transmittal that are to be made with respect to the undersigned as a
beneficial owner of the Existing Notes, including but not limited to the
representations that (i) the undersigned's principal residence is in the state
of (fill in state) ______________, (ii) the undersigned is acquiring the New
Notes in the ordinary course of business of the undersigned, (iii) the
undersigned has no arrangement or understanding with any person to participate
in the distribution of New Notes, (iv) the undersigned acknowledges that any
person who is a broker-dealer registered under the Exchange Act is participating
in the Exchange Offer for the purpose of distributing the New Notes must comply
with the registration and prospectus delivery requirements of the Securities Act
of 1933, as amended (the "Securities Act"), in connection with a secondary
resale transaction of the Exchange Notes acquired by such person and cannot rely
on the position of the Staff of the Securities and Exchange Commission set forth
in certain no-action letters (See the section of the Prospectus entitled "The
Exchange Offer--Consequences of Failure to Exchange; Resales of New Notes"), (v)
the undersigned understands that a secondary resale transaction described in
clause (iv) above and any resales of New Notes obtained by the undersigned in
exchange for the Existing Notes acquired by the undersigned directly from the
Company should be covered by an effective registration statement containing the
selling securityholder information required by Item 507 or Item 508, if
applicable, of regulation S-K of the Securities Act, (vi) the undersigned is not
an "affiliate," as defined in
17
<PAGE>
Rule 405 under the Securities Act, of the Company, and (vii) if the undersigned
is a broker-dealer that will receive New Notes for its own account in exchange
for Existing Notes that were acquired as a result of market-making activities or
other trading activities, it acknowledges that it will deliver a prospectus
meeting the requirements of the Securities Act in connection with any resale of
such New Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act; (b) to agree, on behalf of the undersigned, as
set forth in the Letter of Transmittal; and (c) to take such other action as
necessary under the Prospectus or the Letter of Transmittal to effect the valid
tender of Existing Notes.
The purchaser status of the undersigned is (check the box that
applies):
[ ] A "Qualified Institutional Buyer" (as defined in Rule 144A under the
Securities Act)
[ ] An "Accredited Investor" (as defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act)
[ ] A non "U.S. person" (as defined in Regulation S of the Securities
Act) that purchased the Existing Notes outside the United States in
accordance with Rule 904 of the Securities Act.
[ ] Other (describe)____________________________________________________
____________________________________________________________________
SIGN HERE
Name of Beneficial Owner(s):___________________________________________________
_______________________________________________________________________________
Signature(s):__________________________________________________________________
_______________________________________________________________________________
Name(s)(please print):_________________________________________________________
_______________________________________________________________________________
Address:_______________________________________________________________________
_______________________________________________________________________________
Principal place of business (if different from address listed above):
_______________________________________________________________________________
_______________________________________________________________________________
Telephone Number(s):___________________________________________________________
_______________________________________________________________________________
Taxpayer Identification or Social Security Number(s):__________________________
_______________________________________________________________________________
Date:__________________________________________________________________________
18
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================
| PAYER'S NAME: _____________________________ |
|---------------------------------------------------------------------------------------------------------------------|
| | | |
<S> <C>
|SUBSTITUTE | Part 1 - PLEASE PROVIDE YOUR | |
|FORM W-9 | TIN IN THE BOX AT RIGHT AND | __________________________________________ |
| | CERTIFY BY SIGNING AND DATING | Social Security Number |
| | BELOW | |
|Department of the Treasury Internal | | |
|Revenue Service | | OR |
| | | |
|Payer's Request for Taxpayer | | __________________________________________ |
|Identification Number (TIN) | | Employer Identification Number |
| | | |
| |------------------------------------------------------------------------------|
| | Part 2 - Part 3 - |
| | |
| | Certification Under Penalties of Perjury, I Awaiting |
| | certify that TIN [ ] |
| | |
| | (1) The number shown on this form is |
| | my current taxpayer |
| | identification number (or I am |
| | waiting for a number to be |
| | issued to me) and |
| | |
| | (2) I am not subject to backup |
| | withholding either because I |
| | have not been notified by the |
| | Internal Revenue Service (the |
| | "IRS") that I am subject to |
| | backup withholding as a result |
| | of a failure to report all |
| | interest or dividends, or the |
| | IRS has notified me that I am no |
| | longer subject to backup |
| | withholding.. |
| | -----------------------------------------------------------------------------|
| | Certificate instructions - You must |
| | cross out item (2) in Part 2 above if |
| | you have been notified by the IRS that |
| | you are subject to backup withholding |
| | because of underreporting interest or |
| | dividends on your tax return. However, |
| | if after being notified by the IRS that |
| | you are subject to backup withholding |
| | you receive another notification from |
| | the IRS stating that you are no longer |
| | subject to backup withholding, do not |
| | cross out item (2) |
| | |
| | SIGNATURE_____________________________________ DATE__________________________|
| | NAME_________________________________________________________________________|
| | ADDRESS______________________________________________________________________|
| | CITY ____________________________ STATE_______________ZIP CODE_______________|
| | |
=====================================================================================================================
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENT
MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS
</TABLE>
19
<PAGE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECK THE BOX IN PART 3 OF SUBSTITUTE FORM W-9
==============================================================================
| |
| PAYOR'S NAME: NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION |
| |
|----------------------------------------------------------------------------- |
| CERTIFICATE OF AWAITING AT TAXPAYER IDENTIFICATION NUMBER |
| |
| |
| |
| I certify under penalties of perjury that a taxpayer identification |
|number has not been issued to me, and either (a) I have mailed or delivered |
|an application to receive a taxpayer identification number to the appropriate |
|Internal Revenue Service Center or Social Security Administration Office or |
|(b) I intend to mail or deliver such an application in the near future. I |
|understand that if I do not provide a taxpayer identification number with |
|sixty (60) days, 31% of all reportable payments made to me thereafter will be |
|withheld until I provide such a number. |
| |
| |
| |
|_______________________________________________ __________________________|
|Signature Date |
===============================================================================
20
<PAGE>
