SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Mark One
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 000-21430
Riviera Holdings Corporation
(Exact name of Registrant as specified in its charter)
Nevada 88-0296885
(State or other jurisdiction (IRS Employer Identification No.)
of Incorporation or organization)
2901 Las Vegas Boulevard South, Las Vegas, Nevada 89109
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code (702) 794-9527
- -------------------------------------------------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE LAST FIVE YEARS
Indicate by check mark whether the Registrant has filed all
documentation and reports required to be filed by Section 12, 13, or 15(d) of
the Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court. Yes X No
APPLICABLE ONLY TO CORPORATE REGISTRANTS
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date.
As of September 30, 1998 there were 5,107,676 shares of Common Stock, $.001 par
value per share, outstanding.
<PAGE>
RIVIERA HOLDINGS CORPORATION
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Independent Accountants' Report 2
Condensed Consolidated Balance Sheets (Unaudited) at September 30, 3
1998 and December 31, 1997
Condensed Consolidated Statements of Operations (Unaudited) for the
Three Months and Nine Months ended September 30, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows (Unaudited) for the
Three Months and Nine Months ended September 30, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - Employment agreements effective July 1, 1998.
(b) Reports on Form 8-K - none.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
INDEPENDENT ACCOUNTANTS' REPORT
To the Board of Directors
Riviera Holdings Corporation
We have reviewed the accompanying condensed consolidated balance sheet of
Riviera Holdings Corporation (the "Company") and subsidiaries as of September
30, 1998, and the related condensed consolidated statements of operations and of
cash flows for the three months and nine months ended September 30, 1998 and
1997. These financial statements are the responsibility of the Company's
management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Riviera Holdings Corporation as of
December 31, 1997, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the year then ended (not presented
herein); and in our report dated February 6, 1998, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of December 31, 1997, is fairly stated, in all material respects, in relation
to the consolidated balance sheet from which it has been derived.
DELOITTE & TOUCHE LLP
Las Vegas, Nevada
October 26, 1998
<PAGE>
<TABLE>
<CAPTION>
RIVIERA HOLDINGS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Amounts)
September 30, December 31,
1998 1997
------------------- -----------------
ASSETS (Unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 52,078 $ 65,360
Accounts receivable, net 4,727 4,938
Inventories 2,780 3,509
Prepaid expenses and other assets 3,797 3,363
Prepaid federal income tax and refunds receivable 1,092 1,190
------------------- -----------------
Total current assets 64,474 78,360
U.S. TREASURY BILLS HELD TO RETIRE $100 MILLION NOTES - 106,596
PROPERTY AND EQUIPMENT, NET 165,621 153,611
OTHER ASSETS 8,022 9,299
------------------- -----------------
TOTAL ASSETS $ 238,117 $ 347,866
=================== =================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt 447 364
Accounts payable 9,479 10,890
Accrued Interest 2,188 6,570
Accrued Expenses - Other 10,706 8,796
------------------- -----------------
Total current liabilities 22,820 26,620
DEFERRED INCOME TAXES 3,205 5,958
$100 MILLION NOTES TO BE RETIRED BY U.S. TREASURY BILLS - 100,000
OTHER LONG-TERM LIABILITIES 4,659 4,076
LONG-TERM DEBT, NET OF CURRENT PORTION 173,772 173,436
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock ($.001 par value; 20,000,000 shares authorized; 4,916,280 shares
issued and outstanding at December 31, 1997 and 5,107,676 issued and
outstanding at September 30, 1998) 5 5
Additional paid-in capital 13,457 13,711
Notes receivable from Employee Shareholders (4) (207)
Retained earnings 20,203 24,267
------------------- -----------------
Total shareholders' equity 33,661 37,776
------------------- -----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 238,117 $ 347,866
=================== =================
See notes to Condensed Consolidated Financial Statements (Unaudited)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RIVIERA HOLDINGS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Unaudited)
(In Thousands Except Share Amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
------------- ------------ ------------- ------------
REVENUES:
<S> <C> <C> <C> <C>
Casino $ 19,681 $ 16,989 $ 59,160 $ 55,123
Rooms 8,839 9,211 28,969 30,635
Food and beverage 5,999 5,012 18,152 16,260
Entertainment 5,666 5,475 16,439 16,233
Other 2,804 2,663 8,713 7,904
------------- ------------ ------------- ------------
Total 42,989 39,350 131,433 126,155
Less promotional allowances 3,512 2,967 10,600 9,670
------------- ------------ ------------- ------------
Net revenues 39,477 36,383 120,833 116,485
------------- ------------ ------------- ------------
COSTS AND EXPENSES:
Direct costs and expenses of operating departments:
Casino 11,956 10,604 34,863 32,809
Rooms 4,280 4,516 12,815 13,685
Food and beverage 4,252 3,798 12,541 11,801
Entertainment 4,029 4,203 12,066 11,752
Other 836 827 2,494 2,300
Other operating expenses:
Selling, general and administrative 8,520 7,085 23,727 22,923
Corporate expenses, severance pay 551 551
Depreciation and amortization 3,047 2,690 9,037 7,700
------------- ------------ ------------- ------------
Total costs and expenses 37,471 33,723 108,094 102,970
------------- ------------ ------------- ------------
INCOME FROM OPERATIONS 2,006 2,660 12,739 13,515
------------- ------------ ------------- ------------
OTHER INCOME (EXPENSE):
Interest expense on $100 million notes - (2,767) (4,642) (8,300)
Interest income on Treasury bills to retire $100 million notes - 773 2,334 773
Interest expense, other (4,857) (2,505) (14,655) (3,015)
Interest income, other 590 551 1,942 1,175
Interest capitalized 764 1,767
Other, net (567) (220) (1,058) (1,070)
------------- ------------ ------------- ------------
Total other income (expense) (4,070) (4,168) (14,312) (10,437)
------------- ------------ ------------- ------------
INCOME (LOSS) BEFORE TAXES AND EXTRAORDINARY ITEM (2,064) (1,508) (1,573) 3,078
------------- ------------ ------------- ------------
PROVISION (BENEFIT) FOR INCOME TAXES (686) (520) (515) 1,062
------------- ------------ ------------- ------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM (1,378) (988) (1,058) 2,016
------------- ------------ ------------- ------------
EXTRAORDINARY ITEM, NET OF INCOME TAX OF $1.6 MILLION - (3,006)
------------- ------------ ------------- ------------
NET INCOME (LOSS) $ (1,378) $ (988) $ (4,064) $ 2,016
============= ============ ============= ============
Earnings (loss) per share before extraordinary item:
Basic $ (0.27) $ (0.20) $ (0.21) $ 0.41
Diluted $ (0.27) $ (0.20) $ (0.21) $ 0.39
Earnings (loss) per share on extraordinary item:
Basic $ - $ - $ (0.60) $ -
Diluted $ - $ - $ (0.59) $ -
Earnings (loss) per share:
Basic $ (0.27) $ (0.20) $ (0.81) $ 0.41
Diluted $ (0.27) $ (0.20) $ (0.81) $ 0.39
Weighted average common shares outstanding
(used in the computation of basic earnings per share) 5,107,976 4,911,713 5,016,201 4,908,180
Effect of common stock options under the
treasury stock method 14,581 299,206 42,389 300,004
Weighted average common & common equivalent shares
(used in the computation of diluted earnings per share) 5,122,557 5,210,919 5,058,590 5,208,184
</TABLE>
See notes to Condensed Consolidated Financial Statements (Unaudited)
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(Unaudited)
(In Thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
------------ ------------ ------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C> <C>
Net Income (loss) $ (1,378) $ (988) $ (4,064) $ 2,016
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 3,047 2,690 9,038 7,700
Extraordinary item, call premium to defease $100M notes 4,624
Interest income on T-Bills to defease $100M notes (484) (2,334) (484)
Interest expense, $100M notes 2,767 4,642 8,300
Interest paid, $100M notes (4,614) (5,500)
Interest expense, other 4,857 2,520 14,655 3,029
Interest paid, other (8,770) 61 (17,671) (392)
Interest capitalized on construction projects (764) (1,767)
Other expense, net 1,118 1,609 850
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable, net (1,125) (671) 211 (4)
Decrease (increase) in inventories 412 (400) 729 (153)
Decrease (increase) in prepaid expenses
and other assets (122) (622) (433) (196)
Increase in prepaid income taxes and tax refunds 115 98
Increase (decrease) in accounts payable 441 621 (1,411) (1,166)
Increase (decrease) in accrued liabilities (247) 816 (84) (303)
Increase (decrease) in current income taxes payable 1,118 (1,244) (1,079)
Increase (decrease) in deferred income taxes (802) (219) (2,753) 39
Decrease in slot annuities payable (153) (253)
Increase in non-qualified pension plan obligation
to CEO upon retirement 251 241 736 880
------------ ------------ ------------- ------------
Net cash provided by (used in) operating activities (1,849) 5,088 1,058 13,284
------------ ------------ ------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for property and equipment, other (7,236) (4,494) (14,868) (11,379)
Capital expenditures - Black Hawk, Colorado project (2,838) (15,000) (6,179) (15,000)
Interest capitalized on construction projects 764 1,767
Increase in other assets - Black Hawk, Colorado (1) (345) (33) (531)
Decrease (increase) in other assets 185 (6,944) 220 (7,856)
------------ ------------ ------------- ------------
Net cash used in investing activities (9,126) (26,783) (19,093) (34,766)
------------ ------------ ------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 458 172,866 458 172,886
Proceeds from US Tbills invested to defease $100M Notes - (110,083) 108,930 (110,118)
Payments to defease $100 M Notes with call premium - - (104,313) -
Payments on long-term borrowings (94) (4,382) (270) (5,208)
Net collections, cancellations employee stock purchase plan
and exercise of employee stock options (2) 78 (52) 332
------------ ------------ ------------- ------------
Net cash provided by (used in) financing activities 362 58,479 4,753 57,892
------------ ------------ ------------- ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ (10,613) $ 36,784 $ (13,282) $ 36,410
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD $ 62,691 $ 25,834 $ 65,360 $ 26,208
------------ ------------ ------------- ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 52,078 $ 62,618 $ 52,078 $ 62,618
============ ============ ============= ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION-
INCOME TAXES PAID $1,860
------------ ------------ ------------- ------------
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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 1996, RGM incorporated in the State of Nevada as
a wholly owned subsidiary of ROC. In March 1997 Riviera Gaming Management of
Colorado was incorporated in the State of Colorado, and in August 1997 Riviera
Colorado Holdings, Inc. and Riviera Black Hawk, Inc. were incorporated in the
State of Colorado for the purpose of building and operating a casino in Black
Hawk, Colorado.
Nature of Operation
The primary line of business of the Company is the operation of the Riviera
Hotel & Casino on the "Strip" in Las Vegas, Nevada, including the operation of a
hotel/casino with restaurants and related facilities. The Company also manages
the Four Queens Hotel/Casino in downtown Las Vegas and is developing a casino in
Black Hawk, Colorado.
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.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, its
wholly owned subsidiary ROC and various indirect wholly owned subsidiaries
including RGM. All material intercompany accounts and transactions have been
eliminated.
The financial information at September 30, 1998 and for the three months and
nine months ended September 30, 1998 and 1997 is unaudited. However, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) that are, in the opinion of management, necessary for a fair
presentation of the financial position, results of operations, and cash flows
for the interim periods. The results of operations for the three months and nine
months ended September 30, 1998 and 1997, are not necessarily indicative of the
results that will be achieved for the entire year.
These financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto for the year ended December
31, 1997, included in the Company's Annual Report on Form 10-K.
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 or ROC. (See also Note 4 - Paulson Merger, Contingent Value Rights
and Related Regulations).
Estimates and Assumptions
The preparation of condensed consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses during
the reporting period. Significant estimates used by the Company include
estimated useful lives for depreciable and amortizable assets, certain accrued
liabilities and the estimated allowance for receivables. Actual results may
differ from estimates.
Earnings Per Share
For the year ended December 31, 1997, the Company adopted SFAS No. 128 "Earnings
per Share." SFAS No. 128 requires the presentation of basic net income (loss)
per share and diluted net income (loss) per share. Basic per share amounts are
computed by dividing net income (loss) by average shares outstanding during the
period. Diluted net income (loss) per share amounts are computed by dividing net
income (loss) by average shares outstanding plus the dilutive effect of common
share equivalents. Since the Company incurred net income from continuing
operations during the nine-month periods ended September 30, 1998, diluted per
share calculations are based upon average shares outstanding during these
periods. Accordingly the effect of stock options outstanding for approximately
42,000 shares at September 30, 1998, was not included in diluted net loss per
share calculations. The effect of stock options outstanding to purchase
approximately 509,000 shares was not included in diluted per share calculations
during the three-month periods ended September 30, 1998 as the average exercise
price of such options was greater than the average price of the Company's common
stock. The effect of stock options outstanding to purchase approximately 414,000
shares was not included in diluted per share calculations during the nine-month
periods ended September 30, 1998 as the average exercise price of such options
was greater than the average price of the Company's common stock.
Recently Adopted 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 has adopted this FAS and the
impact was not material.
Recently Issued Accounting Standards
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. The Company believes the segment
information required to be disclosed under SFAS No. 131 will be more
comprehensive than previously provided, including expanded disclosure of income
statement and balance sheet items for each of its reportable segments under SFAS
No. 131. However, the Company has not yet completed its analysis of which
operating segments it will report on.
In February of 1998 the FASB issued FAS No. 132, Employer Disclosure about
Pensions and Other Post Retirement Benefits. Management has adopted this FAS and
there was no impact on earnings.
Reclassifications
Certain amounts in the prior periods have been reclassified to conform with the
current period presentation.
2. DEBT
On August 13, 1997, the Company issued 10% First Mortgage Notes ("the 10%
Notes") with a principal amount of $175 million. The Notes were issued at a
discount in the amount of $2.2 million. The discount is being amortized over the
life of the 10% Notes on a straight line basis. On August 13, 1997, under a
contractual defeasance, the Company used part of these proceeds to purchase
United States Government securities ("the Securities") at a cost of $109,828,870
which were deposited into an irrevocable trust. The proceeds from these
securities, together with interest that was earned by the Securities was used to
pay the principal, interest and call premium due on the 11% First Mortgage Notes
(the 11% Notes") on June 1, 1998, the earliest date the 11% Notes could be
redeemed. Interest earned from the Securities is included in interest income.
The interest expense from the 10% Notes and from the 11% Notes is included in
interest expense. A portion of the proceeds from the 10% Notes totaling $4.5
million was paid to a bank to retire the Class 13/14 Notes. The 10% Note
Indenture contains certain covenants, which limit the ability of the Company and
its restricted subsidiaries, subject to certain exceptions, to : (i) incur
additional indebtedness; (ii) pay dividends or other distributions, repurchase
capital stock or other equity interests or subordinated indebtedness; (iii)
enter into certain transactions with affiliates; (iv) create certain liens; sell
certain assets; and (vi) enter into certain mergers and consolidations.
The $100 million notes which were contractually defeased in August 1997, were
redeemed on June 1, 1998. The call premium of $4.3 million and unamortized
deferred financing costs totaling $300,000 were recorded net of the 35% income
tax effect of $1.6 million resulting in an extraordinary loss of $3.0 million.
3. COMMITMENTS
The Company has begun construction of a casino in Black Hawk, Colorado on a site
which was purchased for $15 million in August 1997. As of September 30, 1998 the
Company had expended approximately $ 22.6 million on the project including the
cost of the land.
As a result of the scheduled opening of several new Las Vegas Strip properties
in 1998, 1999 and 2000, an estimated 38,000 jobs must be filled, including 5,000
supervisory positions. Because of the Riviera's performance and reputation, its
employees are prime candidates to fill these positions. In the third quarter of
1998 management instituted an employee retention plan which covers approximately
90 executive, supervisory and technical support positions and includes a
combination of employment contracts, stay put agreements, bonus arrangements and
salary adjustments. The period costs associated with the Plan are being accrued
as additional payroll costs and included approximately $150,000 in the third
quarter of 1998. The total cost of the Plan is estimated to be approximately
$2.0 million over the period July 1, 1998 through June 30, 2001.
4. PAULSON MERGER, CONTINGENT VALUE RIGHTS AND RELATED LITIGATION
On September 15, 1997, The Company entered into an Agreement and Plan of Merger
(the "Merger Agreement") with R&E Gaming Corp. ("R&E Gaming") and its
wholly-owned subsidiary RAS Acquisition Sub, Inc. ("RAS"),and certain entities
controlled by Allen E. Paulson, a California businessman ("Paulson"), pursuant
to which one of such entities would be merged with and into the Company (the
"Merger"). On February 25, 1998, the Company announced that it had been advised
by Paulson, President of R&E Gaming, that R&E Gaming was preserving its right
not to proceed with its acquisition of Elsinore and that an Option and Voting
agreement relating to Elsinore between R&E Gaming and Morgens, Waterfall
Vintiadis & Company, Inc. was void by reason of certain alleged
misrepresentations.
On March 20, 1998, the Company was notified (the "Termination Notice") by
Paulson on behalf of R&E Gaming and its wholly-owned subsidiary RAS that the
Merger Agreement, among the Company, R&E Gaming and RAS is void and
unenforceable against R&E Gaming and RAS, or alternatively, of their intention
to terminate the Merger Agreement. Riviera has disputed the factual and legal
assertions in the Termination Notice and intends to vigorously pursue its rights
against Paulson, including collection of the approximately $5.8 million being
held in escrow (the "Escrow Funds") by State Street Bank and Trust Company of
California, N.A. as escrow agent under an Escrow Agreement dated as of September
15, 1997. The Escrow Funds consist of : (I) $3.00 per share (20%) down payment
for shares of the Company's common stock, which are not owned by the Morgans,
Waterfall, Vintiadis & Company, Inc. managed funds, Sun America Life Insurance
Company, Keyport Life Insurance Company or Paulson and his affiliates, and (ii)
interest at the rate of 7% pre annum on the $15.00 purchase price for such
shares from September 1, 1997 to February 14, 1998. The escrowed funds include
cash of $654,000 and a letter of credit in the amount of $5.2 million which was
to expire on June 10, 1998. The letters of credit were extended for one year and
automatically renew for an additional year if not replaced or cashed.
The Riviera Board of Directors set the close of business on May 1, 1998, as the
record date for the Riviera minority stockholders entitled to receive anything
Riviera collects from the escrow. In September 1998 the Company issued
approximately 1,770,000 Contingent Value Rights (CVR's) to the May 1, 1998
stockholders of record. Excluded from participating are Morgens Waterfall,
SunAmerica, Keyport Life and Paulson, and their affiliates and associates, who
own an aggregate 3,355,000 Riviera shares. Riviera is currently engaged in
litigation with R&E Gaming and its affiliates and there can be no assurance that
Riviera will be successful in collecting all or any part of the funds currently
held in the escrow account. It is possible that Riviera will not recover any of
the escrow funds. The Contingent Value Rights alone will not entitle their
holders to vote in the election of Riviera's directors or to any other benefits
available to stockholders of Riviera. The Contingent Value Rights entitle their
holders to share only in the proceeds of the funds currently in escrow
(approximately $5.8 million or $3.29 per CRV).
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following tables set forth certain operating information for the Company for
the three months and nine months ended September 30, 1998 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>
Three Months Ended Nine Months Ended
September 30, September 30,
Income Statement Data: 1998 1997 1998 1997
---- ---- ---- ----
Revenues:
<S> <C> <C> <C> <C>
Casino 49.9% 46.7% 49.0% 47.3%
Rooms 22.4% 25.3% 24.0% 26.3%
Food and beverage 15.2% 13.8% 15.0% 14.0%
Entertainment 14.4% 15.0% 13.6% 13.9%
Other 7.1% 7.3% 7.2% 6.8%
Less promotional allowances -8.9% -8.2% -8.8% -8.3%
------ ------ ------ ------
Net Revenues 100.0% 100.0% 100.0% 100.0%
------ ------ ------ ------
Costs and Expenses:
Casino 60.7% 62.4% 58.9% 59.5%
Rooms 48.4% 49.0% 44.2% 44.7%
Food and beverage 70.9% 75.8% 69.1% 72.6%
Entertainment 71.1% 76.8% 73.4% 72.4%
Other 29.8% 31.1% 28.6% 29.1%
Selling, general and administrative 21.6% 19.5% 19.6% 19.7%
Corporate expenses, severance pay 1.4% 0.0% 0.5% 0.0%
Depreciation and amortization 7.7% 7.4% 7.5% 6.6%
----- ----- ----- -----
Total costs and expenses 94.9% 92.7% 89.5% 88.4%
----- ----- ----- -----
Income from operations 5.1% 7.3% 10.5% 11.6%
Interest expense on $100 million notes 0.0% -7.6% -3.8% -7.1%
Interest income on Treasury Bills to retire $100 million notes 0.0% 2.1% 1.9% 0.7%
Interest expense, other -12.3% -6.9% -12.1% -2.6%
Interest income, other 1.5% 1.5% 1.6% 1.0%
Interest, capitalized 1.9% 0.0% 1.5% 0.0%
Other, net -1.4% -0.6% -0.9% -0.9%
Income before (benefit) provision for income taxes -5.2% -4.1% -1.3% 2.6%
(Benefit) provision for income taxes -1.7% -1.4% -0.4% 0.9%
----- ----- ----- -----
Net income before extraordinary item -3.5% -2.7% -0.9% 1.7%
Extraordinary item, net of income taxes of $1.6 million 0.0% 0.0% -2.5% 0.0%
----- ----- ----- -----
Net Income (Loss) -3.5% -2.7% -3.4% 1.7%
----- ----- ----- -----
EBITDA Margin 14.2% 14.7% 18.5% 18.2%
----- ----- ----- -----
</TABLE>
1 EBITDA consists of earnings before interest, income taxes, depreciation and
amortization (excluding Paulson Merger costs and write off costs associated with
a secondary offering which was withdrawn in the first quarter 1997 and corporate
expenses, severance pay) 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. EBITDA margin is
EBITDA as a percent of net revenues.
<PAGE>
Three Months Ended September 30, 1998 Compared to Three Months Ended
September 30, 1997
Revenues
Net revenues increased by $3.1 million, or 8.5%, from $36.4 million in the third
quarter of 1997 to $39.5 million in third quarter of 1998. Casino revenues
increased by $2.7 million, or 15.9%, from $17.0 million during 1997 to $19.7
million during 1998 due to a $1.6 million increase in slot revenues and a $1.0
million increase in tables games and other casino revenues. Slot revenues were
up due to the opening of Nickel Town in late 1997 which is designed to offer
value oriented slot customers an attractive location to play. Nickel Town is
attracting additional walk-in customers from the Las Vegas Strip and it competes
with Circus Circus, Slots-of-Fun and Westward Ho with value oriented food,
beverage and merchandise. Table games revenue increased as the result of
significant play from selected regular customers.
Room revenues decreased by $400,000, or 4.0% from $9.2 million in 1997 to $8.8
million in 1998 as the result of a slight decrease in hotel occupancy from 98.4%
to 97.4% and a decrease of $2.10 in average daily rate from $49.95 in 1997 to
$47.85 in 1998. Room revenue from tour operator bookings was down 21% due to the
economic slow down in the Far East and competition from other Las Vegas Strip
hotels.
Food and beverage revenues increased approximately $1.0 million, or 19.7%, from
$5.0 million during 1997 to $6.0 million during 1998 due primarily to the
addition of the Flying R Bar and Hound Doggies snack bar in Nickel Town and
increased revenues in other bars in the main casino area.
Entertainment revenues increased by approximately $200,000, or 3.5%, from $5.5
million during 1997 to $5.7 million during 1998 due to a 7.5% increase in
attendance. The number of cash tickets sold increased 9.0% while the number of
complimentary tickets decreased 2.2%.
Other revenues increased by approximately $100,000, or 5.3%, from $2.7 million
during 1997 to $2.8 million during 1998 due primarily to the Nickel Town gift
shop revenues.
Promotional allowances increased $500,000, or 18.4%, from $3.0 million in 1997
to $3.5 million in 1998 due to competition for gaming revenues on the Las Vegas
Strip.
Direct Costs and Expenses of Operating Departments
Total direct costs and expenses of operating departments increased by
approximately $1.4 million, or 5.9%, from $24.0 million for the three months
ended September 30, 1997 to $25.4 million for the three months ended September
30, 1998.
Casino expenses increased by approximately $1.4 million, or 12.8%, from $10.6
million during 1997 to $12.0 million during 1998 due to casino marketing
programs. Casino expenses as a percent of casino revenue decreased from 62.4% to
60.7% as table games revenues increased at a faster rate than related expenses.
Room costs decreased by approximately $200,000, or 5.2%, from $4.5 million
during the 1997 period to $4.3 million during the 1998 period and room costs as
a percentage of room revenue decreased from 49.0% in 1997 to 48.4% in 1998 due
to operating efficiencies and stringent cost controls.
Food and beverage costs increased approximately $500,000, or 12.0%, from $3.8
million during the 1997 period to $4.3 million for the 1998 period. However,
food and beverage costs as a percentage of revenues decreased from 75.8% in 1997
to 70.9% in 1998 because of the higher beverage promotional revenue from the
casino bars which tend to have a higher profit margin than food outlets.
Entertainment costs decreased by approximately $200,000, or 4.1%, from $4.2
million in 1997 to $4.0 million in 1998 because of a reduction in production
costs related to stagehand labor. Entertainment expense as a percentage of
entertainment revenues decreased from 76.8% in 1997 to 71.1% in 1998 are a
result of these operating efficiencies.
Other expenses remained at approximately $800,000 in 1997 and 1998. Increased
cost of sales for the new Nickel Town gift shop were offset by reduced telephone
operating costs brought about by newly installed technology.
Other Operating Expenses
Selling, general and administrative expenses increased $1.4 million, or 20.1%,
from $7.1 million in 1997 to $8.5 million in 1998. These expenses increased from
19.5% of total net revenues in 1997 to 21.6% during the 1998 period. As a result
of the scheduled opening of several new properties in 1998, 1999 and 2000, an
estimated 38,000 jobs must be filled, including 5,000 supervisory positions.
Because of the Riviera's performance and reputation, its employees are prime
candidates to fill these positions. In the third quarter of 1998 management
instituted an employee retention plan which covers approximately 90 executive,
supervisory and technical support positions and includes a combination of
employment contracts, stay put agreements, bonus arrangements and salary
adjustments. The period costs associated with the Plan are being accrued as
additional payroll costs and included approximately $150,000 in the third
quarter of 1998. The total cost of the Plan is estimated to be approximately
$2.0 million over the period July 1, 1998 through June 30, 2001. In the third
quarter of 1997 certain executive incentives and profit sharing based on EBIDTA
were reduced as it became apparent that the Company would not reach its EBITDA
goal.
Corporate expenses for severance payments resulting from changes in the
composition of the Board of Directors and executive staff totaled $550,000 in
1998. Included were payments for the spread on options, consulting agreements
and other compensation.
Depreciation and amortization increased by approximately $300,000, or 13.3%,
from $2.7 million in 1997 to $3.0 million in 1998 due to capital expenditures
for operating assets in the twelve months ended September 30, 1998 totaling
approximately $11.2 million for the Riviera Hotel and Casino in Las Vegas,
Nevada.
Other Income (Expense)
Combined interest expense (interest expense on the old $100 million defeased
notes, less interest income on T Bills, plus interest on the new bonds)
increased by $400,000 from $4.5 million to $4.9 million because the Company
issued $175.0 million 10% First Mortgage Notes on August 13, 1997,to defease its
old bonds.
Interest income, other increased $40,000 because of the increased cash balances
from the remaining proceeds of the $175.0 million notes. Capitalized interest
increased $764,000 on the Black Hawk, Colorado, and Riviera Convention Center
Expansion projects which commenced in late 1997.
During the third quarter of 1998, $567,000 in costs associated with the Paulson
Merger and related litigation were charged to other expense. In the third
quarter of 1997, $220,000 of costs related to the payoff of bank debt were
charged to other expense.
Net Income (Loss)
As a result of the additional depreciation, litigation costs, and corporate
expenses for severance pay, the net loss increased by approximately $400,000,
from $1.0 million during the third quarter of 1997 to $ 1.4 million during the
third quarter of 1998.
EBITDA
EBITDA increased by approximately $300,000, or 4.8%, from $5.3 million in 1997
to $5.6 million in 1998. Management believes that these results are encouraging
in light of the results of many of its direct competitors on the Las Vegas
Strip. This is the fourth consecutive quarter in which Riviera has shown
stability and growth. However, competition remains intense in Las Vegas with an
apparent oversupply of rooms and significant logistical problems with regard to
air and ground transportation in the immediate future.
Nine Months Ended September 30, 1998 Compared to
Nine Months Ended September 30, 1997
Revenues
Net revenues increased by $4.3 million, or 3.7%, from $116.5 million in 1997 to
$120.8 million in 1998. Casino revenues increased by $4.0 million, or 7.3%, from
$55.1 million during 1997 to $59.1 million during 1998 due to a $3.7 million
increase in slot revenues and a $400,000 increase in table games and other
casino revenue. Slot revenues were up due to the opening of Nickel Town which is
designed to offer value oriented slot customers an attractive location to play.
Room revenues decreased by $1.7 million, or 5.4% from $30.6 million in 1997 to
$28.9 million in 1998 as the result of a decrease in hotel occupancy from 98.2%
to 95.6% and a decrease of $2.20 in average daily rate from $56.20 in 1997 to
$54.00 in 1998. Room revenue from tour operator bookings was down 22% due to the
economic slow down in the Far East, however some of this decrease was made up
with aggressive marketing.
Food and beverage revenues increased approximately $1.9 million, or 11.6%, from
$16.3 million during 1997 to $18.2 million during 1998 due primarily to the
addition of the Flying R Bar and Hound Doggies snack bar in Nickel Town.
Entertainment revenues increased approximately $200,000, or 1.3%, from $16.2
million in 1997 to $16.4 million for 1998, and, the number of cash tickets sold
increased 15,000, or 2.9%.
Other revenues increased by approximately $800,000, or 10.2%, from $7.9 million
during 1997 to $8.7 million during 1998 due primarily to the Company operating
its own pay phones. Prior to June 1997, pay phones were operated through a
concession leased to a third party. In addition, a gift shop for discounted
merchandise was opened in Nickel Town.
Promotional allowances increased $900,000, or 9.6%, from $9.7 million in 1997 to
$10.6 million in 1998. Increased room, food and beverage complimentaries were
partially offset by lower entertainment complimentaries.
Direct Costs and Expenses of Operating Departments
Total direct costs and expenses of operating departments increased by
approximately $2.4 million, or 3.4%, from $72.3 million for 1997 to $74.8
million for 1998.
Casino expenses increased by approximately $2.0 million, or 6.3%, from $32.8
million during 1997 to $34.8 million during 1998 due to slot marketing and
tournament costs. Casino expenses as a percent of casino revenue decreased from
59.5% to 58.9% due to the resulting revenue increases.
Room costs decreased by approximately $900,000, or 6.4%, from $13.7 million
during the 1997 period to $12.8 million during the 1998 period and room costs as
a percentage of room revenue decreased from 44.7% in 1997 to 44.2% in 1998 due
to efficient handling of the reduced room occupancy.
Food and beverage costs increased $700,000, or 6.3%, from $11.8 million in 1997
to $12.5 million in 1998 due to the increased sales. Food and beverage costs as
a percentage of revenues decreased from 72.6% in 1997 to 69.1% in 1998 because
of increased beverage promotional revenue from the casino bars to promote casino
play. Beverage revenues produce a higher profit margin than food revenues.
Entertainment costs increased by approximately $300,000, or 2.7%, from $11.7
million in 1997 to $12.0 million in 1998 because of a reduction in the
allocation of fixed entertainment costs to the casino. The number of
entertainment complimentary tickets used by the casino decreased 10.8% from
83,000 in 1997 to 75,000 in 1998. Entertainment expense as a percentage of
entertainment revenues increased from 72.4% in 1997 to 73.4% in 1998.
Other expenses increased $200,000, or 8.4%, from $2.3 million in 1997 to $2.5
million in 1998 because of the corresponding increase in gift shop revenues.
Other Operating Expenses
Selling, general and administrative expenses increased by approximately $800,000
from $22.9 million in 1997 to $23.7 million in 1998. Selling, general and
administrative expenses decreased from 19.7% of total net revenues during 1997
to 19.6% in 1998 due to a reduction in corporate expenses and legal fees.
Corporate expenses for severance settlements caused by changes in the
composition of the Board of Directors and executive staff totaled $550,000 in
1998. Included were payments for the spread on options, consulting agreements
and other compensation.
Depreciation and amortization increased by approximately $1.3 million, or 17.4%,
from $7.7 million in 1997 to $9.0 million in 1998 and from 6.6% to 7.5% of net
revenues due to a significant increase in depreciable capital expenditures for
operating assets in the twelve months ended September 30, 1998 totaling
approximately $ 11.2 million.
Other Income (Expense)
Interest expense, other increased by $11.7 million because the Company issued
10% First Mortgage Notes in the amount of $175.0 million on August 13, 1997, in
addition to carrying the now defeased 11% $100 million Notes until June 1, 1998,
when the 11% Notes were redeemed. The Company used part of the proceeds of the
10% First Mortgage Notes to purchase United States Government securities which
were deposited into an irrevocable trust held to retire the $100 million notes.
Interest income on these securities was $2.3 million in 1998. Interest income,
other increased $800,000 because of the increased cash balances from the
remaining proceeds of the $175.0 million notes. Capitalized interest increased
$1.8 million on the Black Hawk, Colorado, and Riviera Convention Center
Expansion projects which commenced in late 1997.
During 1997 the Company withdrew a secondary offering due to market conditions
and, as a result, charged costs totaling $850,000 to other expense. During 1998,
$1.1 million in merger and acquisition costs related to the R&E Gaming
Corporation Plan of Merger (Paulson Merger) were charged to other expense.
Extraordinary Item
The $100 million notes, for which retirement monies were put into trust in
August 1997, were retired on June 1, 1998. The call premium of $4.3 million and
unamortized deferred financing costs totaling $300,000 were recorded net of the
35% income tax effect of $1.6 million resulting in an extraordinary loss of $3.0
million.
Net Income (Loss)
As a result of the additional depreciation, interest and extraordinary item, net
income decreased by approximately $6.1 million, from $2.0 million during the
nine months ended September 30, 1997 to a loss of $4.1 million during the nine
months ended September 30, 1998.
EBITDA
EBITDA increased by approximately $1.1 million, or 5.2%, from $21.2 million in
1997 to $22.3 million in 1998. During the same periods, EBITDA margins increased
from 18.2% to 18.5%, respectively. Management believes that these results are
encouraging in light of the results of many of its direct competitors on the Las
Vegas Strip as competition remains intense with an apparent oversupply of rooms
and significant logistical problems with regard to air and ground transportation
in the immediate future.
Liquidity and Capital Resources
The Company had cash and cash equivalents of $52.1 million at September 30,
1998, which was $13.3 million less than balances at December 31, 1997 due to
payments of bond interest on February 15, and August 15, 1998 of $17.5 million
and capital expenditures of $21.0 million.
The Company's net cash from operating activities was approximately $1.8 million
for the nine months ended September 30, 1998 compared to $13.3 million provided
by operations in 1997. EBITDA for the first nine months of 1997 and 1998 was
$21.2 million and $22.3 million, respectively. Management believes that cash
flow from operations, combined with the $52.1 million cash on hand, will be
sufficient to cover the Company's debt service and enable investment in budgeted
capital expenditures for the next twelve months, assuming that $40 million in
project and equipment financing is available for the Black Hawk casino
development. Should the Company not be able to finance all of the $40 million
required for Black Hawk, capital expenditures in Las Vegas will be reduced if
necessary.
Scheduled interest payments on the 11% Mortgage Notes were provided by the use
of the U. S. Treasury Bills held to retire the $100 million notes and the
related interest income. A portion of the proceeds of the 10% Notes was used to
acquire U.S. Treasury Bills sufficient to pay the interest on the 11% Notes in
December 1997 and the interest, principal and premium due June 1, 1998, when the
retirement of the $100 million notes was accomplished. Substantially all of the
covenants on the 11% Notes were released as a result of the "contractual
defeasance" in August of 1997.
Cash flow from operations is not expected to be sufficient to pay 100% of the
principal of the 10% Notes at maturity on August 15, 2004. Accordingly, the
ability of the Company to repay the 10% Notes at maturity will be dependent upon
its ability to refinance those Notes. There can be no assurance that the Company
will be able to refinance the principal amount of the 10% Notes at maturity. The
10% Notes are not redeemable at the option of the Company until August 15, 2001,
and thereafter are redeemable at premiums beginning at 105.0% and declining each
subsequent year to par in 2003.
The 10% Note Indenture provides that, in certain circumstances, the Company must
offer to repurchase the 10% Notes upon the occurrence of a change of control or
certain other events. In the event of such mandatory redemption or repurchase
prior to maturity, the Company would be unable to pay the principal amount of
the 10% Notes without a refinancing. The proposed Paulson Merger was
specifically excluded from the defined transactions which would be considered a
change in control.
The 10% Note Indenture contains certain covenants, which limit the ability of
the Company and its restricted subsidiaries, subject to certain exceptions, to :
(i) incur additional indebtedness; (ii) pay dividends or other distributions,
repurchase capital stock or other equity interests or subordinated indebtedness;
(iii) enter into certain transactions with affiliates; (iv) create certain
liens; sell certain assets; and (vi) enter into certain mergers and
consolidations. As a result of these restrictions, the ability of the Company
and ROC to incur additional indebtedness to fund operations or to make capital
expenditures is limited. In the event that cash flow from operations is
insufficient to cover cash requirements, the Company and ROC would be required
to curtail or defer certain of their capital expenditure programs under these
circumstances, which could have an adverse effect on the Company's operations.
Management considers it important to the competitive position of the Riviera
that expenditures be made to upgrade the property. Capital expenditures in Las
Vegas totaled approximately $8.9 million in 1994, $7.8 million in 1995, $14.9
million in 1996, and $19.8 million in 1997 which excludes the Black Hawk project
expenditures of $22.7 million. Management has budgeted approximately $24.8
million for capital expenditures in Las Vegas for 1998 including the convention
center expansion. For the first nine months of 1998 capital expenditures were
$14.9 million in Las Vegas and $6.2 million in Black Hawk. The Company expects
to finance such capital expenditures from cash flow and the unused proceeds from
the 10% Notes.
In August 1997, the Company, through its indirect 100% owned subsidiary, Riviera
Black Hawk, Inc., purchased approximately 70,000 square feet of land in Black
Hawk, Colorado, which is entirely zoned for gaming. The Company is constructing
a casino containing 1,000 slot machines, 14 table games, a 520-space covered
parking garage, and entertainment and food service amenities. Management intends
to finance the project with a portion of the unused proceeds from the new First
Mortgage Notes, equipment leases and project (first mortgage) financing. The
casino is scheduled to open in 1999. As of September 30, 1998, the company had
invested $22.7 million in the Black Hawk, Colorado project.
Year 2000
In the past, many computer software programs were written using two digits
rather than four to define the applicable year. As a result, date-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000. This situation is generally referred to as the "Year 2000 Problem". If
such situation occurs, the potential exists for computer system failures or
miscalculations by computer programs, which could disrupt operations.
The Company has conducted a comprehensive review of its computer systems and
other systems for the purpose of assessing its potential Year 2000 Problem, and
is in the process of modifying or replacing those systems which are not Year
2000 compliant. Based upon this review, management believes such systems will be
compliant by mid-calendar 1999. However, if modifications are not made or not
completed timely, the Year 2000 Problem could have a significant impact on the
Company's operations.
All costs related to the Year 2000 Problem are expensed as incurred, while the
cost of new hardware and software is capitalized and amortized over its expected
useful life. The costs associated with Year 2000 compliance have not been and
are not anticipated to be material to the Company's financial position or
results of operations. As of September 30, 1998, the Company has incurred costs
of approximately $50,000 (primarily for internal labor) related to the system
applications and anticipates spending an additional $200,000 to become Year 2000
compliant. The estimated completion date and remaining costs are based upon
management's best estimates, as well as third party modification plans and other
factors. However, there can be no guarantee that such estimates will occur and
actual results could differ.
In addition, the Company has communicated with its major vendors and suppliers
to determine their state of readiness relative to the Year 2000 Problem and the
Company's possible exposure to Year 2000 issues of such third parties. However,
there can be no guarantee that the systems of other companies, which the
Company's systems may rely upon, will be timely converted or representations
made to the Company by these parties are accurate. As a result the failure of a
major vendor or supplier to adequately address their Year 2000 Problem could
have a significant adverse impact on the Company's operations.
Planning for the Year 2000 Problem, including contingency planning, is
significantly complete and will be revised, if necessary.
Forward Looking Statements
The Private Securities Litigation Reform Act of 1997 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.
Item 6. Exhibits on Form 8-K
(a) Exhibits - Employment agreements effective July 1, 1998
(b) Reports on Form 8-K - none.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
RIVIERA HOLDINGS CORPORATION
By: /s/ William L. Westerman
William L. Westerman
Chairman of the Board and
Chief Executive Officer
By:/s/ Duane Krohn
Duane Krohn
Treasurer and
Chief Financial Officer
Date: November 5, 1998
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
10.34 Employment Agreement between Riviera Operating
Corporation and Ronald P. Johnson, July 1, 1998.
10.35 Employment Agreement between Riviera Operating
Corporation and Duane R. Krohn, July 1, 1998.
10.36 Employment Agreement between Riviera Operating
Corporation and Robert A. Vannucci, July 1, 1998.
10.37 Employment Agreement between Riviera Operating
Corporation and Jerome P. Grippe, July 1, 1998.
Exhibit 10.34
EMPLOYMENT AGREEMENT
Employment Agreement, dated as of July 1, 1998 (this
"Agreement"), by and between Riviera Holdings Corporation and its wholly-owned
subsidiary Riviera Operating Corporation (collectively the "Company") and Ronald
Johnson ("Executive").
In consideration of the mutual agreements hereinafter set forth,
the parties hereto agree as follows:
1. Employment. During the "Term" (hereinafter defined) the Company agrees to
employ Executive as Executive Vice President of Gaming Operations of the Company
upon the terms and conditions and for the compensation herein provided, and
Executive agrees to be so employed and to render the services herein specified.
2. Term of Employment. The term of employment of Executive hereunder (the
"Term") will be for a three year period commencing on July 1, 1998 and ending on
June 30, 2001, subject to earlier termination as provided in Section 10.
3. Duties. During the Term Executive agrees to (a) devote his full and exclusive
business time and attention to the business of the Company and its subsidiaries
(vacation and sick leave in accordance with the Company's policy and personal
time consistent with his position excluded) and (b) perform such duties as the
Company's chief executive officer shall from time to time assign to Executive.
4. Salary. During the Term Executive shall receive a salary at the following
rates per annum, payable bi-weekly in arrears ("Base Salary"):
One Year Period
Commencing
7/1/98 $200,000
7/1/99 $225,000
7/1/2000 and thereafter $250,000
<PAGE>
5. Stay Put Bonus.
a. Executive shall be entitled to a bonus ("Stay Put Bonus") of $125,000 if he
remains an employee of the Company on each of January 1, 2001 and July 1, 2001
(or an aggregate of $250,000) or if Executive has been discharged without
"Cause" (hereinafter defined) prior to each such date he will receive
immediately any unpaid balance of the $250,000 Stay Put Bonus.
b. At the closing of a "Change of Control" (hereinafter defined) the Stay Put
Bonus (i) shall be deposited in a Rabbi Trust with US Bank and (ii) shall be
invested in a money market fund. One-half of the amount of the Rabbi Trust
established for Executive will be paid on each of January 1, 2001 and July 1,
2001 provided Executive remains an employee on each such date or has been
discharged without Cause.
c. A "Change of Control" shall mean (i) the sale of more than a majority of the
Company's common stock, (ii) a merger in which the Company is not the surviving
company or a majority of the stock of the Company as the surviving company shall
be held by a party or related group of parties (excluding the present holders of
more than 10% of the Company's common stock, Morgens Waterfall, Sun Life and
Keyport Life) or (iii) sale of substantially all of the Company's assets.
6. Incentive Bonus.
a. Executive may be eligible for a bonus ("Normal Incentive Bonus") under the
Company's Senior Management Compensation Plan (the "Plan"). The Plan provides
for a target of $25 million of EBITDA for the Years 1999 and 2000 with amounts
being credited to the Plan pool up to a maximum of $1.2 million ("Cap"). If
William L. Westerman ceases to be the Company's Chief Executive Officer,
Executive shall be entitled to no less a Normal Incentive Bonus (in terms of a
percentage of all bonuses) than in the prior fiscal year and at least 90% of the
bonus pool under the Plan will be distributed to all Plan participants,
including Executive by March 15 of the following year. In calculating EBITDA
there shall be included any management fees earned by the Company from its Black
Hawk, Colorado subsidiary ("Black Hawk"), but there shall be excluded any Black
Hawk EBITDA until at least a 20% return has been earned on capital invested
(debt and equity) in Black Hawk. Also, if the Company becomes involved in
projects other than Black Hawk which require that the Company invest its funds,
a 20% per annum return on such investment must be earned before
<PAGE>
any EBITDA generated from such project will be included in the EBITDA
calculation under the Plan, unless the Company pays more than five times
trailing 12 months' EBITDA, in which case, the ROI will be adjusted accordingly.
Under the Plan the Company's CEO determines in his sole discretion (subject to
approval by the Company's Board of Directors or Compensation Committee) the
persons to whom Normal Incentive Bonuses are paid and the amount thereof.
b. In addition to Normal Incentive Bonuses Executive shall receive a bonus
("Special Incentive Bonus") in an amount equal to one-third of any amount in
excess of $1,200,000 which would otherwise be credited to the Plan pool but for
the Cap until Executive has received Special Incentive Bonuses aggregating
$350,000 during the Term and then shall be entitled to one-sixth (together with
one-sixth for each)* and the other Plan participants 50% of any excess credited
to the Plan pool.
c. For the Year 2001 if the Plan EBITDA target is more than $25 million of
EBITDA, Executive will be entitled to a Special Incentive Bonus based upon a
pro-forma target of $25 million.
d. The amount of the Special Incentive Bonus that has been earned shall be paid
to the Executive on March 15, 2001 and March 15, 2002 provided (i) the
Executive's employment has not been terminated by reason of (A) resignation or
(B) "Cause" (hereinafter defined) and (ii) if the Company terminates for any
reason other than Cause, as the case may be, Executive will be entitled to his
Special Bonus prior to March 15, 2001 or March 15, 2002, as the case may be. If
the Executive's employment has been terminated for (iii) death or (iv)
disability, the Special Incentive Bonus earned for the year of the Executive's
death or disability shall be paid in accordance with Section 7(a)(iii) hereof.
e. On the occurrence of a Change of Control (herebefore defined), at the option
of the Executive:
(i) The greater of the amount earned as a Special Incentive Bonus up until the
time of the Change of Control or $250,000 shall also be placed in the Rabbi
Trust established under 5b and the Executive shall waive the right to any other
amounts under this Section 6(b) or;
<PAGE>
(ii) The Executive may elect to continue to participate in the Special Incentive
Bonus.
7. Death and Disability.
a. Upon the death or "Disability" (hereinafter defined) of Executive, the
following amounts will become payable to (i) Executive's "Designated
Beneficiary" in the case of death or (ii) Executive in the case of Disability:
(i) Base Salary shall be paid to the end of the month in which death or
Disability occurs.
(ii) Stay Put Bonus. A "Pro-Rata" (hereinafter defined) portion shall be paid as
soon as practicable after the date of death or Disability.
(iii) Normal Incentive Bonus. Whether Executive shall be entitled to a Normal
Incentive Bonus for the year of his death or Disability shall be determined and
paid in accordance with the Plan as promptly as practicable after the end of
such year, provided that (A) since payment of any Normal Incentive Bonus is
normally at the discretion of the Company's chief executive officer, in the case
of death or Disability the deceased or disabled Executive shall be entitled to
no less a Normal Incentive Bonus (in terms of percentage of all bonuses) than in
the prior fiscal year adjusted however on a "Pro-Rata" basis, and
(iv) Special Incentive Bonus. With respect to payment of a Special Incentive
Bonus in the case of Executive's death or disability, the bonuses shall be paid
promptly after the end of the year in which death or disability occurred, on a
"Pro-Rata" basis to the end of the month in which death or disability occurred.
b. The following terms shall have the following meanings:
(i) "Pro-Rata" - a fraction the numerator of which is the number of days to the
date of death, Disability or discharge without Cause and the denominator of
which is 365.
<PAGE>
(ii) "Designated Beneficiary" shall be the person designated in writing by the
Executive prior to the Executive's death and if the Executive fails to designate
a beneficiary or if a designated beneficiary does not survive the Executive, all
amounts payable hereunder shall be paid to the Executive's personal
representative or pursuant to the terms of the Executive's will or the laws of
descent and distribution.
(iii) "Disability" - the Company shall find on the basis of medical evidence
satisfactory to it that Executive is so totally mentally or physically disabled
as to be unable to engage in further employment by Company and that such
disability shall be determined to be such that it will cause, or actually does
cause or has caused, Executive to be absent from work for a period, or aggregate
of periods, in excess of three months in any one twelve month period.
8. Profit-Sharing and 401(k) Plan. In addition to the Base Salary, Stay Put
Bonus and Incentive Bonus, Executive shall be eligible for participation in the
Defined Contribution Plan adopted by Company.
9. Additional Benefits and Compensation. During the Term, Executive shall be
entitled to:
a. life insurance, group health insurance, including major medical and
hospitalization, comparable to such benefits offered to other key executives of
the Company;
b. reimbursement for all reasonable expenses incurred by Executive in connection
with the performance of his duties and in accordance with any applicable policy
of the Company (including 100% of reasonable travel and entertainment expenses),
subject to submission of appropriate documentation therefor; and
10. Termination By Company or By Executive.
a. If the Company shall discharge Executive for "Cause" (hereinafter defined),
Executive shall not be entitled to receive any payment with respect to (i) Base
Salary after the date of discharge, (ii) the Stay Put Bonus and (iii) the
Incentive Bonus.
b. If the Company shall discharge Executive without "Cause", subject to his
obligation to "Mitigate" (hereinafter defined), Executive shall be entitled to
(i) Base Salary to the end of the Term, (ii) his full Stay Put Bonus but with
payment accelerated to the date of discharge and (iii) a Normal Incentive Bonus
"Pro-Rata" to the date of discharge and otherwise subject to the proviso of
Sub-Section 7(a)(iii) and (iv) a Special Incentive bonus "Pro-Rata" to the date
of
<PAGE>
discharge and otherwise subject to the proviso of Sub-Section 7(a)(iv).
c. If Executive shall resign prior to the expiration of the Term, he shall not
be entitled to any compensation or benefits from the Company after the date of
his resignation.
d. The following terms shall have the following meanings:
(i) Cause - (A) felony conviction of Executive; (B) a final civil judgment shall
be entered after all appeals shall have been exhausted in which a material
aspect involved Executive's fraud or dishonesty whether or not involving the
Company, provided that the foregoing shall not apply to the action by Allen
Paulson and other plaintiffs against the Company and other defendants which
involves allegations of violation of Nevada law, including RICO and "fraud" on
the part of the Company, and which on the date hereof is pending in the Federal
District Court for the Central District of California; (C) refusal by Executive
to perform "Reasonable Duties" (hereinafter defined) assigned to him by the
Company's chief executive officer, provided Executive shall fail to correct any
such failure within 30 days after written notice ("Cure Period") or (D) the
Gaming Authorities of the State of Nevada or any other state in which the
Company shall conduct gaming operations shall determine that Executive is
unsuitable to act as an executive of a gaming company in his individual
capacity. "Reasonable Duties" - Executive shall not be required (x) on a
permanent basis to spend more than 50% of his business time outside of Las Vegas
(or be required to change his residence), (y) to expose himself to a risk to his
physical safety or jeopardize his ability to be licensed by any state gaming
authority or (z) perform duties which are inconsistent with his role specified
in Section 1 hereof.
(ii) Mitigate - Executive shall be required to use his best efforts to obtain
gainful employment as similar as possible to his duties with the Company,
provided that (A) a finding by an arbitration tribunal that Executive has failed
to do so will result in the Company being relieved of any obligation to pay
Executive and (B) any amount received by Executive from such employment shall
reduce the amount payable by the Company under Section 10(b).
<PAGE>
11. Confidential Information; Non-Competition.
a. During the Term and for a three year period commencing on the termination of
the Term of this Agreement for any reason, (i) Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or its affiliates, and
their respective businesses which shall not be public knowledge (other than
information which becomes public as a result of acts of Executive or his
representatives in violation of this Agreement), including, without limitation,
customer/client lists, matters subject to litigation, and technology or
financial information of the Company or its subsidiaries, and (ii) Executive
shall not, without the prior written consent of the Company, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it in writing.
b. During the Term, the Executive will not, directly or indirectly, own, manage,
operate, control or participate in the ownership, management or control of, or
be connected as an officer, employee, partner, director, or consultant or
otherwise with, or have any financial interest in any hotel or casino.
c. During the Term and for a one-year period commencing on termination of the
Term for any reason, Executive will not solicit or contact any employee of the
Company or its affiliates with a view to inducing or encouraging such employee
to leave the employ of the Company or its affiliates for the purpose of being
employed by Executive, an employer affiliated with Executive, or any competitor
of the Company or any affiliate thereof.
d. Executive acknowledges that the provisions of this Section 11 are reasonable
and necessary for the protection of Company and that the Company will be
irrevocably damaged if such provisions are not specifically enforced.
Accordingly, Executive agrees that, in addition to any other relief to which the
Company may be entitled in the form of actual or punitive damages, the Company
shall be entitled to seek and obtain injunctive relief from a court of competent
jurisdiction (without posting of a bond therefor) for the purposes of
restraining Executive from any actual or threatened breach of such provisions.
<PAGE>
12. Miscellaneous
a. This Agreement shall be governed, construed and interpreted in accordance
with the internal laws of the State of Nevada applicable to agreements executed
in that State.
b This Agreement supersedes all prior agreements and understandings among the
parties, and contains the full understanding of the parties hereto with respect
to the subject matter hereof. Any change, modification or waiver of this
Agreement must be in writing, signed by both parties hereto or, in the case of a
waiver, by the party waiving compliance. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original. The captions of
each article and section are intended for convenience only. All references
herein to days, weeks and months shall mean by calendar unless specifically
stated to the contrary. All references herein to the singular shall include the
plural, and all references to gender shall, as appropriate, include other
genders. All representations and warranties made hereunder shall survive the
execution and delivery and closing of this Agreement. At the termination of this
Agreement, Executive agrees to execute in recordable form an instrument
sufficient to evidence said termination.
c. It is the intention of the parties hereto that this Agreement shall not inure
to the benefit of any third parties not parties to this Agreement, and it is
specifically intended that no third party beneficiary relationships, benefits or
obligations shall arise or be deemed to exist as a result of this Agreement.
d. This Agreement shall inure to the benefit of and be binding upon each of the
parties hereto, their heirs, assigns, successors, executors and personal
representatives, however, as a personal service contract, it shall not be
assignable by Executive.
e. The failure or delay by either party in any one or more instances to enforce
one or more of the terms and conditions of this Agreement or to exercise any
right or privilege under this Agreement shall not thereafter be construed as a
waiver of any such term, condition, right or privilege and the same and all
other terms, conditions, rights or privileges under this Agreement shall
continue to remain in full force and effect as though no such failure or delay
had occurred.
<PAGE>
f. Any and all disputes between the parties hereto, however significant, arising
out of, relating in any way to or in connection with this Agreement (including
the validity, scope, and enforceability of this arbitration clause) will be
solely settled by an arbitration conducted in accordance with the rules of the
American Arbitration Association or any similar successor body before a panel of
three arbitrators. Each party shall appoint one arbitrator. If a party fails to
nominate an arbitrator within 10 days from the date when the claimant's request
for arbitration has been communicated to the other party in writing, the
appointment shall be made within 10 days thereof by the American Arbitration
Association. The two arbitrators so appointed shall attempt to agree upon the
third arbitrator to act as chairman. If the two arbitrators fail to nominate the
chairman within 10 days from the date of appointment of the later appointed
arbitrator, the chairman shall be selected within 10 days thereof by the
American Arbitration Association. The arbitration shall be conducted with a view
to commencing proceedings within 30 days from the date when the claimant's
request for arbitration was communicated to the other party in writing and to
rendering the award or other judgment not more than 15 days thereafter. The
award or other judgment of the arbitrators shall be final, and the parties agree
to waive their right to any form of appeal, to the greatest extent allowed by
law, and to share equally the fees and expenses of the arbitrators. Judgment
upon any award of the arbitrators may be entered in any court having
jurisdiction or application may be made to such court for the judicial
acceptance of the award and for order of enforcement. Such arbitration shall be
held only in Las Vegas, Nevada. Pending resolution of the dispute, there shall
be no stoppage by either party under the terms hereof; rather, the parties
hereto shall perform diligently under this Agreement pending ultimate resolution
of the dispute. By agreeing to arbitration, neither party hereto is waiving any
benefit of any statute of limitations or other equitable defenses.
g. No voluntary or involuntary successor in interest of the Company shall
acquire any rights or powers under this Agreement, except as specifically set
forth herein. Otherwise, the Company shall not assign all or any part of this
Agreement.
<PAGE>
13. Notices. All notices, requests, demands, directions and other communications
provided for hereunder shall be in writing and delivered personally or mailed by
certified or registered mail, return receipt requested, to the following
addresses for each party during the Term or until such time as written notice,
as provided hereby, of a change of address to be used thereafter is given to the
other party, with copies to such legal counsel as each party, from time to time,
may designate:
Company Executive
RIVIERA HOLDINGS CORPORATION Ronald Johnson
2901 Las Vegas Blvd. So. 2901 Las Vegas Blvd. So.
Las Vegas, Nevada 89109 Las Vegas, Nevada 89109
Attn.: William L. Westerman, Chief PERSONAL & CONFIDENTIAL
Executive Officer
Notices delivered personally shall be deemed to have been given upon delivery;
notices delivered by certified or registered mail shall be deemed to have been
given seventy-two (72) hours after the date deposited in the mail, except as
otherwise provided herein.
14. Government Approvals. Notwithstanding any other terms and provisions set
forth in this Agreement, it is understood and agreed that the engagement of
Executive hereunder, the obligation of the parties hereto, and the effect of the
Agreement, shall be subject to the approval of each and all of the terms,
covenants and provisions of this Agreement by the Nevada Gaming Authorities and
other Governmental Authorities from whom approval, if any, is required under the
laws of the State of Nevada, the County of Clark, or any and all other
governmental agencies having jurisdiction thereover. Each of the parties hereby
covenant and agree to exercise their best good faith efforts to proceed to
obtain any and all such necessary approvals.
IN WITNESS WHEREOF, the parties herein have entered into this Agreement the day
and year first above mentioned.
COMPANY: EXECUTIVE:
RIVIERA HOLDINGS CORPORATION
By: /s/ /s/
William L. Westerman Ronald Johnson
Its: Chief Executive Officer
- --------
* Krohn and Vannucci in the case of Johnson
Vannucci and Johnson in the case of Krohn.
Johnson and Krohn in the case of Vannucci.
Exhibit 10.35
EMPLOYMENT AGREEMENT
Employment Agreement, dated as of July 1, 1998 (this
"Agreement"), by and between Riviera Holdings Corporation and its wholly-owned
subsidiary Riviera Operating Corporation (collectively the "Company") and Duane
Krohn ("Executive").
In consideration of the mutual agreements hereinafter set forth,
the parties hereto agree as follows:
1. Employment. During the "Term" (hereinafter defined) the Company agrees to
employ Executive as Executive Vice President of Finance of the Company upon the
terms and conditions and for the compensation herein provided, and Executive
agrees to be so employed and to render the services herein specified.
2. Term of Employment. The term of employment of Executive hereunder (the
"Term") will be for a three year period commencing on July 1, 1998 and ending on
June 30, 2001, subject to earlier termination as provided in Section 10.
3. Duties. During the Term Executive agrees to (a) devote his full and exclusive
business time and attention to the business of the Company and its subsidiaries
(vacation and sick leave in accordance with the Company's policy and personal
time consistent with his position excluded) and (b) perform such duties as the
Company's chief executive officer shall from time to time assign to Executive.
4. Salary. During the Term Executive shall receive a salary at the following
rates per annum, payable bi-weekly in arrears ("Base Salary"):
One Year Period
Commencing
7/1/98 $200,000
7/1/99 $225,000
7/1/2000 and thereafter $250,000
<PAGE>
5. Stay Put Bonus.
a. Executive shall be entitled to a bonus ("Stay Put Bonus") of $125,000 if he
remains an employee of the Company on each of January 1, 2001 and July 1, 2001
(or an aggregate of $250,000) or if Executive has been discharged without
"Cause" (hereinafter defined) prior to each such date he will receive
immediately any unpaid balance of the $250,000 Stay Put Bonus.
b. At the closing of a "Change of Control" (hereinafter defined) the Stay Put
Bonus (i) shall be deposited in a Rabbi Trust with US Bank and (ii) shall be
invested in a money market fund. One-half of the amount of the Rabbi Trust
established for Executive will be paid on each of January 1, 2001 and July 1,
2001 provided Executive remains an employee on each such date or has been
discharged without Cause.
c. A "Change of Control" shall mean (i) the sale of more than a majority of the
Company's common stock, (ii) a merger in which the Company is not the surviving
company or a majority of the stock of the Company as the surviving company shall
be held by a party or related group of parties (excluding the present holders of
more than 10% of the Company's common stock, Morgens Waterfall, Sun Life and
Keyport Life) or (iii) sale of substantially all of the Company's assets.
6. Incentive Bonus.
a. Executive may be eligible for a bonus ("Normal Incentive Bonus") under the
Company's Senior Management Compensation Plan (the "Plan"). The Plan provides
for a target of $25 million of EBITDA for the Years 1999 and 2000 with amounts
being credited to the Plan pool up to a maximum of $1.2 million ("Cap"). If
William L. Westerman ceases to be the Company's Chief Executive Officer,
Executive shall be entitled to no less a Normal Incentive Bonus (in terms of a
percentage of all bonuses) than in the prior fiscal year and at least 90% of the
bonus pool under the Plan will be distributed to all Plan participants,
including Executive by March 15 of the following year. In calculating EBITDA
there shall be included any management fees earned by the Company from its Black
Hawk, Colorado subsidiary ("Black Hawk"), but there shall be excluded any Black
Hawk EBITDA until at least a 20% return has been earned on capital invested
(debt and equity) in Black Hawk. Also, if the Company becomes involved in
projects other than Black Hawk which require that the Company invest its funds,
a 20% per annum return on such investment must be earned before
<PAGE>
any EBITDA generated from such project will be included in the EBITDA
calculation under the Plan, unless the Company pays more than five times
trailing 12 months' EBITDA, in which case, the ROI will be adjusted accordingly.
Under the Plan the Company's CEO determines in his sole discretion (subject to
approval by the Company's Board of Directors or Compensation Committee) the
persons to whom Normal Incentive Bonuses are paid and the amount thereof.
b. In addition to Normal Incentive Bonuses Executive shall receive a bonus
("Special Incentive Bonus") in an amount equal to one-third of any amount in
excess of $1,200,000 which would otherwise be credited to the Plan pool but for
the Cap until Executive has received Special Incentive Bonuses aggregating
$350,000 during the Term and then shall be entitled to one-sixth (together with
one-sixth for each)* and the other Plan participants 50% of any excess credited
to the Plan pool.
c. For the Year 2001 if the Plan EBITDA target is more than $25 million of
EBITDA, Executive will be entitled to a Special Incentive Bonus based upon a
pro-forma target of $25 million.
d. The amount of the Special Incentive Bonus that has been earned shall be paid
to the Executive on March 15, 2001 and March 15, 2002 provided (i) the
Executive's employment has not been terminated by reason of (A) resignation or
(B) "Cause" (hereinafter defined) and (ii) if the Company terminates for any
reason other than Cause, as the case may be, Executive will be entitled to his
Special Bonus prior to March 15, 2001 or March 15, 2002, as the case may be. If
the Executive's employment has been terminated for (iii) death or (iv)
disability, the Special Incentive Bonus earned for the year of the Executive's
death or disability shall be paid in accordance with Section 7(a)(iii) hereof.
e. On the occurrence of a Change of Control (herebefore defined) at the option
of the Executive:
(i) The greater of the amount earned as a Special Incentive Bonus up until the
time of the Change of Control or $250,000 shall also be placed in the Rabbi
Trust established under 5b and the Executive shall waive the right to any other
amounts under this Section 6(b) or;
<PAGE>
(ii) The Executive may elect to continue to participate in the Special Incentive
Bonus.
7. Death and Disability.
a. Upon the death or "Disability" (hereinafter defined) of Executive, the
following amounts will become payable to (i) Executive's "Designated
Beneficiary" in the case of death or (ii) Executive in the case of Disability:
(i) Base Salary shall be paid to the end of the month in which death or
Disability occurs.
(ii) Stay Put Bonus. A "Pro-Rata" (hereinafter defined) portion shall be paid as
soon as practicable after the date of death or Disability.
(iii) Normal Incentive Bonus. Whether Executive shall be entitled to a Normal
Incentive Bonus for the year of his death or Disability shall be determined and
paid in accordance with the Plan as promptly as practicable after the end of
such year, provided that (A) since payment of any Normal Incentive Bonus is
normally at the discretion of the Company's chief executive officer, in the case
of death or Disability the deceased or disabled Executive shall be entitled to
no less a Normal Incentive Bonus (in terms of percentage of all bonuses) than in
the prior fiscal year adjusted however on a "Pro-Rata" basis, and
(iv) Special Incentive Bonus. With respect to payment of a Special Incentive
Bonus in the case of Executive's death or disability, the bonuses shall be paid
promptly after the end of the year in which death or disability occurred, on a
"Pro-Rata" basis to the end of the month in which death or disability occurred.
b. The following terms shall have the following meanings:
(i) "Pro-Rata" - a fraction the numerator of which is the number of days to the
date of death, Disability or discharge without Cause and the denominator of
which is 365.
<PAGE>
(ii) "Designated Beneficiary" shall be the person designated in writing by the
Executive prior to the Executive's death and if the Executive fails to designate
a beneficiary or if a designated beneficiary does not survive the Executive, all
amounts payable hereunder shall be paid to the Executive's personal
representative or pursuant to the terms of the Executive's will or the laws of
descent and distribution.
(iii) "Disability" - the Company shall find on the basis of medical evidence
satisfactory to it that Executive is so totally mentally or physically disabled
as to be unable to engage in further employment by Company and that such
disability shall be determined to be such that it will cause, or actually does
cause or has caused, Executive to be absent from work for a period, or aggregate
of periods, in excess of three months in any one twelve month period.
8. Profit-Sharing and 401(k) Plan. In addition to the Base Salary, Stay Put
Bonus and Incentive Bonus, Executive shall be eligible for participation in the
Defined Contribution Plan adopted by Company.
9. Additional Benefits and Compensation. During the Term, Executive shall be
entitled to:
a. life insurance, group health insurance, including major medical and
hospitalization, comparable to such benefits offered to other key executives of
the Company;
b. reimbursement for all reasonable expenses incurred by Executive in connection
with the performance of his duties and in accordance with any applicable policy
of the Company (including 100% of reasonable travel and entertainment expenses),
subject to submission of appropriate documentation therefor; and
10. Termination By Company or By Executive.
a. If the Company shall discharge Executive for "Cause" (hereinafter defined),
Executive shall not be entitled to receive any payment with respect to (i) Base
Salary after the date of discharge, (ii) the Stay Put Bonus and (iii) the
Incentive Bonus.
b. If the Company shall discharge Executive without "Cause", subject to his
obligation to "Mitigate" (hereinafter defined), Executive shall be entitled to
(i) Base Salary to the end of the Term, (ii) his full Stay Put Bonus but with
payment accelerated to the date of discharge and (iii) a Normal Incentive Bonus
"Pro-Rata" to the date of discharge and otherwise subject to the proviso of
Sub-Section 7(a)(iii) and (iv) a Special Incentive Bonus "Pro-Rata" to the date
<PAGE>
of discharge and otherwise subject to the proviso of Sub-Section 7(a)(iv).
c. If Executive shall resign prior to the expiration of the Term, he shall not
be entitled to any compensation or benefits from the Company after the date of
his resignation.
d. The following terms shall have the following meanings:
(i) Cause - (A) felony conviction of Executive; (B) a final civil judgment shall
be entered after all appeals shall have been exhausted in which a material
aspect involved Executive's fraud or dishonesty whether or not involving the
Company, provided that the foregoing shall not apply to the action by Allen
Paulson and other plaintiffs against the Company and other defendants which
involves allegations of violation of Nevada law, including RICO and "fraud" on
the part of the Company, and which on the date hereof is pending in the Federal
District Court for the Central District of California; (C) refusal by Executive
to perform "Reasonable Duties" (hereinafter defined) assigned to him by the
Company's chief executive officer, provided Executive shall fail to correct any
such failure within 30 days after written notice ("Cure Period") or (D) the
Gaming Authorities of the State of Nevada or any other state in which the
Company shall conduct gaming operations shall determine that Executive is
unsuitable to act as an executive of a gaming company in his individual
capacity. "Reasonable Duties" - Executive shall not be required (x) on a
permanent basis to spend more than 50% of his business time outside of Las Vegas
(or be required to change his residence), (y) to expose himself to a risk to his
physical safety or jeopardize his ability to be licensed by any state gaming
authority or (z) perform duties which are inconsistent with his role specified
in Section 1 hereof.
(ii) Mitigate - Executive shall be required to use his best efforts to obtain
gainful employment as similar as possible to his duties with the Company,
provided that (A) a finding by an arbitration tribunal that Executive has failed
to do so will result in the Company being relieved of any obligation to pay
Executive and (B) any amount received by Executive from such employment shall
reduce the amount payable by the Company under Section 10(b).
<PAGE>
11. Confidential Information; Non-Competition.
a. During the Term and for a three year period commencing on the termination of
the Term of this Agreement for any reason, (i) Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or its affiliates, and
their respective businesses which shall not be public knowledge (other than
information which becomes public as a result of acts of Executive or his
representatives in violation of this Agreement), including, without limitation,
customer/client lists, matters subject to litigation, and technology or
financial information of the Company or its subsidiaries, and (ii) Executive
shall not, without the prior written consent of the Company, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it in writing.
b. During the Term, the Executive will not, directly or indirectly, own, manage,
operate, control or participate in the ownership, management or control of, or
be connected as an officer, employee, partner, director, or consultant or
otherwise with, or have any financial interest in any hotel or casino.
c. During the Term and for a one-year period commencing on termination of the
Term for any reason, Executive will not solicit or contact any employee of the
Company or its affiliates with a view to inducing or encouraging such employee
to leave the employ of the Company or its affiliates for the purpose of being
employed by Executive, an employer affiliated with Executive, or any competitor
of the Company or any affiliate thereof.
d. Executive acknowledges that the provisions of this Section 11 are reasonable
and necessary for the protection of Company and that the Company will be
irrevocably damaged if such provisions are not specifically enforced.
Accordingly, Executive agrees that, in addition to any other relief to which the
Company may be entitled in the form of actual or punitive damages, the Company
shall be entitled to seek and obtain injunctive relief from a court of competent
jurisdiction (without posting of a bond therefor) for the purposes of
restraining Executive from any actual or threatened breach of such provisions.
<PAGE>
12. Miscellaneous
a. This Agreement shall be governed, construed and interpreted in accordance
with the internal laws of the State of Nevada applicable to agreements executed
in that State.
b. This Agreement supersedes all prior agreements and understandings among the
parties, and contains the full understanding of the parties hereto with respect
to the subject matter hereof. Any change, modification or waiver of this
Agreement must be in writing, signed by both parties hereto or, in the case of a
waiver, by the party waiving compliance. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original. The captions of
each article and section are intended for convenience only. All references
herein to days, weeks and months shall mean by calendar unless specifically
stated to the contrary. All references herein to the singular shall include the
plural, and all references to gender shall, as appropriate, include other
genders. All representations and warranties made hereunder shall survive the
execution and delivery and closing of this Agreement. At the termination of this
Agreement, Executive agrees to execute in recordable form an instrument
sufficient to evidence said termination.
c. It is the intention of the parties hereto that this Agreement shall not inure
to the benefit of any third parties not parties to this Agreement, and it is
specifically intended that no third party beneficiary relationships, benefits or
obligations shall arise or be deemed to exist as a result of this Agreement.
d. This Agreement shall inure to the benefit of and be binding upon each of the
parties hereto, their heirs, assigns, successors, executors and personal
representatives, however, as a personal service contract, it shall not be
assignable by Executive.
e. The failure or delay by either party in any one or more instances to enforce
one or more of the terms and conditions of this Agreement or to exercise any
right or privilege under this Agreement shall not thereafter be construed as a
waiver of any such term, condition, right or privilege and the same and all
other terms, conditions, rights or privileges under this Agreement shall
continue to remain in full force and effect as though no such failure or delay
had occurred.
<PAGE>
f. Any and all disputes between the parties hereto, however significant, arising
out of, relating in any way to or in connection with this Agreement (including
the validity, scope, and enforceability of this arbitration clause) will be
solely settled by an arbitration conducted in accordance with the rules of the
American Arbitration Association or any similar successor body before a panel of
three arbitrators. Each party shall appoint one arbitrator. If a party fails to
nominate an arbitrator within 10 days from the date when the claimant's request
for arbitration has been communicated to the other party in writing, the
appointment shall be made within 10 days thereof by the American Arbitration
Association. The two arbitrators so appointed shall attempt to agree upon the
third arbitrator to act as chairman. If the two arbitrators fail to nominate the
chairman within 10 days from the date of appointment of the later appointed
arbitrator, the chairman shall be selected within 10 days thereof by the
American Arbitration Association. The arbitration shall be conducted with a view
to commencing proceedings within 30 days from the date when the claimant's
request for arbitration was communicated to the other party in writing and to
rendering the award or other judgment not more than 15 days thereafter. The
award or other judgment of the arbitrators shall be final, and the parties agree
to waive their right to any form of appeal, to the greatest extent allowed by
law, and to share equally the fees and expenses of the arbitrators. Judgment
upon any award of the arbitrators may be entered in any court having
jurisdiction or application may be made to such court for the judicial
acceptance of the award and for order of enforcement. Such arbitration shall be
held only in Las Vegas, Nevada. Pending resolution of the dispute, there shall
be no stoppage by either party under the terms hereof; rather, the parties
hereto shall perform diligently under this Agreement pending ultimate resolution
of the dispute. By agreeing to arbitration, neither party hereto is waiving any
benefit of any statute of limitations or other equitable defenses.
g. No voluntary or involuntary successor in interest of the Company shall
acquire any rights or powers under this Agreement, except as specifically set
forth herein. Otherwise, the Company shall not assign all or any part of this
Agreement.
<PAGE>
13. Notices. All notices, requests, demands, directions and other communications
provided for hereunder shall be in writing and delivered personally or mailed by
certified or registered mail, return receipt requested, to the following
addresses for each party during the Term or until such time as written notice,
as provided hereby, of a change of address to be used thereafter is given to the
other party, with copies to such legal counsel as each party, from time to time,
may designate:
Company Executive
RIVIERA HOLDINGS CORPORATION Duane Krohn
2901 Las Vegas Blvd. So. 2901 Las Vegas Blvd. So.
Las Vegas, Nevada 89109 Las Vegas, Nevada 89109
Attn.: William L. Westerman, Chief PERSONAL & CONFIDENTIAL
Executive Officer
Notices delivered personally shall be deemed to have been given upon delivery;
notices delivered by certified or registered mail shall be deemed to have been
given seventy-two (72) hours after the date deposited in the mail, except as
otherwise provided herein.
14. Government Approvals. Notwithstanding any other terms and provisions set
forth in this Agreement, it is understood and agreed that the engagement of
Executive hereunder, the obligation of the parties hereto, and the effect of the
Agreement, shall be subject to the approval of each and all of the terms,
covenants and provisions of this Agreement by the Nevada Gaming Authorities and
other Governmental Authorities from whom approval, if any, is required under the
laws of the State of Nevada, the County of Clark, or any and all other
governmental agencies having jurisdiction thereover. Each of the parties hereby
covenant and agree to exercise their best good faith efforts to proceed to
obtain any and all such necessary approvals.
IN WITNESS WHEREOF, the parties herein have entered into this
Agreement the day and year first above mentioned.
COMPANY: EXECUTIVE:
RIVIERA HOLDINGS CORPORATION
By: /s/ /s/
William L. Westerman Duane Krohn
Its: Chief Executive Officer
- --------
* Krohn and Vannucci in the case of Johnson
Vannucci and Johnson in the case of Krohn.
Johnson and Krohn in the case of Vannucci.
Exhibit 10.36
EMPLOYMENT AGREEMENT
Employment Agreement, dated as of July 1, 1998 (this
"Agreement"), by and between Riviera Holdings Corporation and its wholly-owned
subsidiary Riviera Operating Corporation (collectively the "Company") and Robert
Vannucci ("Executive").
In consideration of the mutual agreements hereinafter set forth, the parties
hereto agree as follows:
1. Employment. During the "Term" (hereinafter defined) the Company agrees to
employ Executive as Executive Vice President of Marketing of the Company upon
the terms and conditions and for the compensation herein provided, and Executive
agrees to be so employed and to render the services herein specified.
2. Term of Employment. The term of employment of Executive hereunder (the
"Term") will be for a three year period commencing on July 1, 1998 and ending on
June 30, 2001, subject to earlier termination as provided in Section 10.
3. Duties. During the Term Executive agrees to (a) devote his full and exclusive
business time and attention to the business of the Company and its subsidiaries
(vacation and sick leave in accordance with the Company's policy and personal
time consistent with his position excluded) and (b) perform such duties as the
Company's chief executive officer shall from time to time assign to Executive.
4. Salary. During the Term Executive shall receive a salary at the following
rates per annum, payable bi-weekly in arrears ("Base Salary"):
One Year Period
Commencing
7/1/98 $200,000
7/1/99 $225,000
7/1/2000 and thereafter $250,000
<PAGE>
5. Stay Put Bonus.
a. Executive shall be entitled to a bonus ("Stay Put Bonus") of $125,000 if he
remains an employee of the Company on each of January 1, 2001 and July 1, 2001
(or an aggregate of $250,000) or if Executive has been discharged without
"Cause" (hereinafter defined) prior to each such date he will receive
immediately any unpaid balance of the $250,000 Stay Put Bonus.
b. At the closing of a "Change of Control" (hereinafter defined) the Stay Put
Bonus (i) shall be deposited in a Rabbi Trust with US Bank and (ii) shall be
invested in a money market fund. One-half of the amount of the Rabbi Trust
established for Executive will be paid on each of January 1, 2001 and July 1,
2001 provided Executive remains an employee on each such date or has been
discharged without Cause.
c. A "Change of Control" shall mean (i) the sale of more than a majority of the
Company's common stock, (ii) a merger in which the Company is not the surviving
company or a majority of the stock of the Company as the surviving company shall
be held by a party or related group of parties (excluding the present holders of
more than 10% of the Company's common stock, Morgens Waterfall, Sun Life and
Keyport Life) or (iii) sale of substantially all of the Company's assets.
6. Incentive Bonus.
a. Executive may be eligible for a bonus ("Normal Incentive Bonus") under the
Company's Senior Management Compensation Plan (the "Plan"). The Plan provides
for a target of $25 million of EBITDA for the Years 1999 and 2000 with amounts
being credited to the Plan pool up to a maximum of $1.2 million ("Cap"). If
William L. Westerman ceases to be the Company's Chief Executive Officer,
Executive shall be entitled to no less a Normal Incentive Bonus (in terms of a
percentage of all bonuses) than in the prior fiscal year and at least 90% of the
bonus pool under the Plan will be distributed to all Plan participants,
including Executive by March 15 of the following year. In calculating EBITDA
there shall be included any management fees earned by the Company from its Black
Hawk, Colorado subsidiary ("Black Hawk"), but there shall be excluded any Black
Hawk EBITDA until at least a 20% return has been earned on capital invested
(debt and equity) in Black Hawk. Also, if the Company becomes involved in
projects other than Black Hawk which require that the Company invest its funds,
a 20% per annum return on such investment must be earned before
<PAGE>
any EBITDA generated from such project will be included in the EBITDA
calculation under the Plan, unless the Company pays more than five times
trailing 12 months' EBITDA, in which case, the ROI will be adjusted accordingly.
Under the Plan the Company's CEO determines in his sole discretion (subject to
approval by the Company's Board of Directors or Compensation Committee) the
persons to whom Normal Incentive Bonuses are paid and the amount thereof.
b. In addition to Normal Incentive Bonuses Executive shall receive a bonus
("Special Incentive Bonus") in an amount equal to one-third of any amount in
excess of $1,200,000 which would otherwise be credited to the Plan pool but for
the Cap until Executive has received Special Incentive Bonuses aggregating
$350,000 during the Term and then shall be entitled to one-sixth (together with
one-sixth for each)* and the other Plan participants 50% of any excess credited
to the Plan pool.
c. For the Year 2001 if the Plan EBITDA target is more than $25 million of
EBITDA, Executive will be entitled to a Special Incentive Bonus based upon a
pro-forma target of $25 million.
d. The amount of the Special Incentive Bonus that has been earned shall be paid
to the Executive on March 15, 2001 and March 15, 2002 provided (i) the
Executive's employment has not been terminated by reason of (A) resignation or
(B) "Cause" (hereinafter defined) and (ii) if the Company terminates for any
reason other than Cause, as the case may be, Executive will be entitled to his
Special Bonus prior to March 15, 2001 or March 15, 2002, as the case may be. If
the Executive's employment has been terminated for (iii) death or (iv)
disability, the Special Incentive Bonus earned for the year of the Executive's
death or disability shall be paid in accordance with Section 7(a)(iii) hereof.
e. On the occurrence of a Change of Control (herebefore defined) at the option
of the Executive:
(i) The greater of the amount earned as a Special Incentive Bonus up until the
time of the Change of Control or $250,000 shall also be placed in the Rabbi
Trust established under 5b and the Executive shall waive the right to any other
amounts under this Section 6(b) or;
<PAGE>
(ii) The Executive may elect to continue to participate in the Special Incentive
Bonus.
7. Death and Disability.
a. Upon the death or "Disability" (hereinafter defined) of Executive, the
following amounts will become payable to (i) Executive's "Designated
Beneficiary" in the case of death or (ii) Executive in the case of Disability:
(i) Base Salary shall be paid to the end of the month in which death or
Disability occurs.
(ii) Stay Put Bonus. A "Pro-Rata" (hereinafter defined) portion shall be paid as
soon as practicable after the date of death or Disability.
(iii) Normal Incentive Bonus. Whether Executive shall be entitled to a Normal
Incentive Bonus for the year of his death or Disability shall be determined and
paid in accordance with the Plan as promptly as practicable after the end of
such year, provided that (A) since payment of any Normal Incentive Bonus is
normally at the discretion of the Company's chief executive officer, in the case
of death or Disability the deceased or disabled Executive shall be entitled to
no less a Normal Incentive Bonus (in terms of percentage of all bonuses) than in
the prior fiscal year adjusted however on a "Pro-Rata" basis, and
(iv) Special Incentive Bonus. With respect to payment of a Special Incentive
Bonus in the case of Executive's death or disability, the bonuses shall be paid
promptly after the end of the year in which death or disability occurred, on a
"Pro-Rata" basis to the end of the month in which death or disability occurred.
b. The following terms shall have the following meanings:
(i) "Pro-Rata" - a fraction the numerator of which is the number of days to the
date of death, Disability or discharge without Cause and the denominator of
which is 365.
<PAGE>
(ii) "Designated Beneficiary" shall be the person designated in writing by the
Executive prior to the Executive's death and if the Executive fails to designate
a beneficiary or if a designated beneficiary does not survive the Executive, all
amounts payable hereunder shall be paid to the Executive's personal
representative or pursuant to the terms of the Executive's will or the laws of
descent and distribution.
(iii) "Disability" - the Company shall find on the basis of medical evidence
satisfactory to it that Executive is so totally mentally or physically disabled
as to be unable to engage in further employment by Company and that such
disability shall be determined to be such that it will cause, or actually does
cause or has caused, Executive to be absent from work for a period, or aggregate
of periods, in excess of three months in any one twelve month period.
8. Profit-Sharing and 401(k) Plan. In addition to the Base Salary, Stay Put
Bonus and Incentive Bonus, Executive shall be eligible for participation in the
Defined Contribution Plan adopted by Company.
9. Additional Benefits and Compensation. During the Term, Executive shall be
entitled to:
a. life insurance, group health insurance, including major medical and
hospitalization, comparable to such benefits offered to other key executives of
the Company;
b. reimbursement for all reasonable expenses incurred by Executive in connection
with the performance of his duties and in accordance with any applicable policy
of the Company (including 100% of reasonable travel and entertainment expenses),
subject to submission of appropriate documentation therefor; and
10. Termination By Company or By Executive.
a. If the Company shall discharge Executive for "Cause" (hereinafter defined),
Executive shall not be entitled to receive any payment with respect to (i) Base
Salary after the date of discharge, (ii) the Stay Put Bonus and (iii) the
Incentive Bonus.
b. If the Company shall discharge Executive without "Cause", subject to his
obligation to "Mitigate" (hereinafter defined), Executive shall be entitled to
(i) Base Salary to the end of the Term, (ii) his full Stay Put Bonus but with
payment accelerated to the date of discharge and (iii) a Normal Incentive Bonus
"Pro-Rata" to the date of discharge and otherwise subject to the proviso of
Sub-Section 7(a)(iii), and (iv) a Special Incentive Bonus "Pro-Rata" to the date
<PAGE>
of discharge and otherwise subject to the proviso of Sub-Section 7(a)(iv).
c. If Executive shall resign prior to the expiration of the Term, he shall not
be entitled to any compensation or benefits from the Company after the date of
his resignation.
d. The following terms shall have the following meanings:
(i) Cause - (A) felony conviction of Executive; (B) a final civil judgment shall
be entered after all appeals shall have been exhausted in which a material
aspect involved Executive's fraud or dishonesty whether or not involving the
Company, provided that the foregoing shall not apply to the action by Allen
Paulson and other plaintiffs against the Company and other defendants which
involves allegations of violation of Nevada law, including RICO and "fraud" on
the part of the Company, and which on the date hereof is pending in the Federal
District Court for the Central District of California; (C) refusal by Executive
to perform "Reasonable Duties" (hereinafter defined) assigned to him by the
Company's chief executive officer, provided Executive shall fail to correct any
such failure within 30 days after written notice ("Cure Period") or (D) the
Gaming Authorities of the State of Nevada or any other state in which the
Company shall conduct gaming operations shall determine that Executive is
unsuitable to act as an executive of a gaming company in his individual
capacity. "Reasonable Duties" - Executive shall not be required (x) on a
permanent basis to spend more than 50% of his business time outside of Las Vegas
(or be required to change his residence), (y) to expose himself to a risk to his
physical safety or jeopardize his ability to be licensed by any state gaming
authority or (z) perform duties which are inconsistent with his role specified
in Section 1 hereof.
(ii) Mitigate - Executive shall be required to use his best efforts to obtain
gainful employment as similar as possible to his duties with the Company,
provided that (A) a finding by an arbitration tribunal that Executive has failed
to do so will result in the Company being relieved of any obligation to pay
Executive and (B) any amount received by Executive from such employment shall
reduce the amount payable by the Company under Section 10(b).
<PAGE>
11. Confidential Information; Non-Competition.
a. During the Term and for a three year period commencing on the termination of
the Term of this Agreement for any reason, (i) Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or its affiliates, and
their respective businesses which shall not be public knowledge (other than
information which becomes public as a result of acts of Executive or his
representatives in violation of this Agreement), including, without limitation,
customer/client lists, matters subject to litigation, and technology or
financial information of the Company or its subsidiaries, and (ii) Executive
shall not, without the prior written consent of the Company, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it in writing.
b. During the Term, the Executive will not, directly or indirectly, own, manage,
operate, control or participate in the ownership, management or control of, or
be connected as an officer, employee, partner, director, or consultant or
otherwise with, or have any financial interest in any hotel or casino.
c. During the Term and for a one-year period commencing on termination of the
Term for any reason, Executive will not solicit or contact any employee of the
Company or its affiliates with a view to inducing or encouraging such employee
to leave the employ of the Company or its affiliates for the purpose of being
employed by Executive, an employer affiliated with Executive, or any competitor
of the Company or any affiliate thereof.
d. Executive acknowledges that the provisions of this Section 11 are reasonable
and necessary for the protection of Company and that the Company will be
irrevocably damaged if such provisions are not specifically enforced.
Accordingly, Executive agrees that, in addition to any other relief to which the
Company may be entitled in the form of actual or punitive damages, the Company
shall be entitled to seek and obtain injunctive relief from a court of competent
jurisdiction (without posting of a bond therefor) for the purposes of
restraining Executive from any actual or threatened breach of such provisions.
<PAGE>
12. Miscellaneous
a. This Agreement shall be governed, construed and interpreted in accordance
with the internal laws of the State of Nevada applicable to agreements executed
in that State.
b This Agreement supersedes all prior agreements and understandings among the
parties, and contains the full understanding of the parties hereto with respect
to the subject matter hereof. Any change, modification or waiver of this
Agreement must be in writing, signed by both parties hereto or, in the case of a
waiver, by the party waiving compliance. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original. The captions of
each article and section are intended for convenience only. All references
herein to days, weeks and months shall mean by calendar unless specifically
stated to the contrary. All references herein to the singular shall include the
plural, and all references to gender shall, as appropriate, include other
genders. All representations and warranties made hereunder shall survive the
execution and delivery and closing of this Agreement. At the termination of this
Agreement, Executive agrees to execute in recordable form an instrument
sufficient to evidence said termination.
c. It is the intention of the parties hereto that this Agreement shall not inure
to the benefit of any third parties not parties to this Agreement, and it is
specifically intended that no third party beneficiary relationships, benefits or
obligations shall arise or be deemed to exist as a result of this Agreement.
d. This Agreement shall inure to the benefit of and be binding upon each of the
parties hereto, their heirs, assigns, successors, executors and personal
representatives, however, as a personal service contract, it shall not be
assignable by Executive.
e. The failure or delay by either party in any one or more instances to enforce
one or more of the terms and conditions of this Agreement or to exercise any
right or privilege under this Agreement shall not thereafter be construed as a
waiver of any such term, condition, right or privilege and the same and all
other terms, conditions, rights or privileges under this Agreement shall
continue to remain in full force and effect as though no such failure or delay
had occurred.
<PAGE>
f. Any and all disputes between the parties hereto, however significant, arising
out of, relating in any way to or in connection with this Agreement (including
the validity, scope, and enforceability of this arbitration clause) will be
solely settled by an arbitration conducted in accordance with the rules of the
American Arbitration Association or any similar successor body before a panel of
three arbitrators. Each party shall appoint one arbitrator. If a party fails to
nominate an arbitrator within 10 days from the date when the claimant's request
for arbitration has been communicated to the other party in writing, the
appointment shall be made within 10 days thereof by the American Arbitration
Association. The two arbitrators so appointed shall attempt to agree upon the
third arbitrator to act as chairman. If the two arbitrators fail to nominate the
chairman within 10 days from the date of appointment of the later appointed
arbitrator, the chairman shall be selected within 10 days thereof by the
American Arbitration Association. The arbitration shall be conducted with a view
to commencing proceedings within 30 days from the date when the claimant's
request for arbitration was communicated to the other party in writing and to
rendering the award or other judgment not more than 15 days thereafter. The
award or other judgment of the arbitrators shall be final, and the parties agree
to waive their right to any form of appeal, to the greatest extent allowed by
law, and to share equally the fees and expenses of the arbitrators. Judgment
upon any award of the arbitrators may be entered in any court having
jurisdiction or application may be made to such court for the judicial
acceptance of the award and for order of enforcement. Such arbitration shall be
held only in Las Vegas, Nevada. Pending resolution of the dispute, there shall
be no stoppage by either party under the terms hereof; rather, the parties
hereto shall perform diligently under this Agreement pending ultimate resolution
of the dispute. By agreeing to arbitration, neither party hereto is waiving any
benefit of any statute of limitations or other equitable defenses.
g. No voluntary or involuntary successor in interest of the Company shall
acquire any rights or powers under this Agreement, except as specifically set
forth herein. Otherwise, the Company shall not assign all or any part of this
Agreement.
<PAGE>
13. Notices. All notices, requests, demands, directions and other communications
provided for hereunder shall be in writing and delivered personally or mailed by
certified or registered mail, return receipt requested, to the following
addresses for each party during the Term or until such time as written notice,
as provided hereby, of a change of address to be used thereafter is given to the
other party, with copies to such legal counsel as each party, from time to time,
may designate:
Company Executive
RIVIERA HOLDINGS CORPORATION Robert Vannucci
2901 Las Vegas Blvd. So. 2901 Las Vegas Blvd. So.
Las Vegas, Nevada 89109 Las Vegas, Nevada 89109
Attn.: William L. Westerman, Chief PERSONAL & CONFIDENTIAL
Executive Officer
Notices delivered personally shall be deemed to have been given upon delivery;
notices delivered by certified or registered mail shall be deemed to have been
given seventy-two (72) hours after the date deposited in the mail, except as
otherwise provided herein.
14. Government Approvals. Notwithstanding any other terms and provisions set
forth in this Agreement, it is understood and agreed that the engagement of
Executive hereunder, the obligation of the parties hereto, and the effect of the
Agreement, shall be subject to the approval of each and all of the terms,
covenants and provisions of this Agreement by the Nevada Gaming Authorities and
other Governmental Authorities from whom approval, if any, is required under the
laws of the State of Nevada, the County of Clark, or any and all other
governmental agencies having jurisdiction thereover. Each of the parties hereby
covenant and agree to exercise their best good faith efforts to proceed to
obtain any and all such necessary approvals.
IN WITNESS WHEREOF, the parties herein have entered into this
Agreement the day and year first above mentioned.
COMPANY: EXECUTIVE:
RIVIERA HOLDINGS CORPORATION
By:_______________________________ ____________________
William L. Westerman Robert Vannucci
Its: Chief Executive Officer
- --------
* Krohn and Vannucci in the case of Johnson
Vannucci and Johnson in the case of Krohn.
Johnson and Krohn in the case of Vannucci.
Exhibit 10.37
EMPLOYMENT AGREEMENT
Employment Agreement, dated as of July 1, 1998 (this
"Agreement"), by and between Riviera Holdings Corporation and its wholly-owned
subsidiary Riviera Operating Corporation (collectively the "Company") and Jerome
Grippe ("Executive").
In consideration of the mutual agreements hereinafter set forth, the parties
hereto agree as follows:
1. Employment. During the "Term" (hereinafter defined) the Company agrees to
employ Executive as Vice President Operations of the Company upon the terms and
conditions and for the compensation herein provided, and Executive agrees to be
so employed and to render the services herein specified.
2. Term of Employment. The term of employment of Executive hereunder (the
"Term") will be for the two year period commencing on July 1, 1998 and ending on
June 30, 2000, subject to earlier termination as provided in Section 10.
3. Duties. During the Term Executive agrees to (a) devote his full and exclusive
business time and attention to the business of the Company and its subsidiaries
(vacation and sick leave in accordance with the Company's policy and personal
time consistent with his position excluded); and (b) perform such duties as the
Company's chief executive officer shall from time to time assign to Executive.
4. Salary. During the Term Executive shall receive a salary at the following
rates per annum, payable bi-weekly in arrears ("Base Salary"):
One Year Period
Commencing
7/1/98 $150,000
7/1/99 and thereafter $175,000
5. Stay Put Bonus.
a. Executive shall be entitled to a bonus ("Stay Put Bonus") of $87,500 if he
remains an employee of the Company on each of January 1, 2001 and July 1, 2001
(or an aggregate of $175,000) or if Executive has been discharged without
"Cause" (hereinafter defined) prior to each such date, he will immediately
receive any unpaid balance of the $175,000 Stay Put Bonus.
<PAGE>
b. At the closing of a "Change of Control" (hereinafter defined) the Stay Put
Bonus (i) shall be deposited in a Rabbi Trust with US Bank, and one-half of the
amount of the Rabbi Trust established for Executive will be paid on each of
January 1, 2001 and July 1, 2001 provided Executive remains an employee on each
such date or has been discharged without Cause.
c. A "Change of Control" shall mean (i) the sale of more than a majority of the
Company's common stock, (ii) a merger in which the Company is not the surviving
company or a majority of the stock of the Company as the surviving company shall
be held by a party or related group of parties (excluding the present holders of
more than 10% of the Company's common stock, Morgens Waterfall, Sun Life and
Keyport Life) or (iii) sale of substantially all of the Company's assets.
6. Incentive Bonus.
Executive may be eligible for a bonus ("Normal Incentive Bonus") under the
Company's Senior Management Compensation Plan (the "Plan"). The Plan provides
for a target of $25 million of "EBITDA" for the Years 1999 and 2000 with amounts
being credited to the Plan pool up to a maximum of $1.2 million ("Cap"). If
William L. Westerman ceases to be the Company's Chief Executive Officer,
Executive shall be entitled to no less a Normal Incentive Bonus (in terms of a
percentage of all bonuses) than in the prior fiscal year and at least 90% of the
bonus pool under the Plan will be distributed to all Plan participants,
including Executive, by March 15th of the following year. In calculating EBITDA
there shall be included any management fees earned by the Company from its Black
Hawk, Colorado subsidiary ("Black Hawk"), but there shall be excluded any Black
Hawk EBITDA until at least a 20 return has been earned on capital invested (debt
and equity) in Black Hawk. Also, if the Company becomes involved in projects
other than Black Hawk which require that the Company invest its funds, a 20% per
annum return on such investment must be earned before any EBITDA generated from
such project will be included in the EBITDA calculation under the Plan, unless
the Company pays more than five times trailing 12 months' EBITDA, in which case,
the ROI will be adjusted accordingly. Executive's incentive bonus ("Incentive
Bonus"), if any, shall be determined by the Company's chief executive officer
subject to approval by the Company's Board of Directors or Compensation
Committee.
7. Death and Disability.
a. Upon the death or "Disability" (hereinafter defined) of Executive, the
following amounts will become payable to (i) Executive's "Designated
Beneficiary" in the case of death or (ii) Executive in the case of Disability:
<PAGE>
(i) Base Salary shall be paid to the end of the month in which death or
Disability occurs.
(ii) Stay Put Bonus. A "Pro-Rata" (hereinafter defined) portion shall be paid as
soon as practicable after the date of death or Disability.
(iii) Incentive Bonus. Whether Executive shall be entitled to an Incentive Bonus
for the year of his death or Disability shall be determined and paid in
accordance with the Plan as promptly as practicable after the end of such year
on a "Pro-Rata" basis.
b. The following terms shall have the following meanings:
(i) "Pro-Rata" - a fraction, the numerator of which is the number of days to the
date of death, Disability or discharge without Cause and the denominator of
which is 365.
(ii) "Designated Beneficiary" shall be the person designated in writing by the
Executive prior to the Executive's death and if the Executive fails to designate
a beneficiary or if a designated beneficiary does not survive the Executive, all
amounts payable hereunder shall be paid to the Executive's personal
representative or pursuant to the terms of the Executive's will or the laws of
descent and distribution.
(iii) "Disability" - the Company shall find on the basis of medical evidence
satisfactory to it that Executive is so totally mentally or physically disabled
as to be unable to engage in further employment by Company and that such
disability shall be determined to be such that it will cause, or actually does
cause or has caused, Executive to be absent from work for a period, or aggregate
of periods, in excess of three months in any one twelve month period.
8. Profit-Sharing and 401(k) Plan. In addition to the Base Salary, Stay Put
Bonus and Incentive Bonus, Executive shall be eligible for participation in the
Defined Contribution Plan adopted by Company.
9. Additional Benefits and Compensation. During the Term, Executive shall be
entitled to:
a. life insurance, group health insurance, including major medical and
hospitalization, comparable to such benefits offered to other key executives of
the Company;
<PAGE>
b. reimbursement for all reasonable expenses incurred by Executive in connection
with the performance of his duties and in accordance with any applicable policy
of the Company (including 100% of reasonable travel and entertainment expenses),
subject to submission of appropriate documentation therefor; and
10. Termination By Company or By Executive.
a. If the Company shall discharge Executive for "Cause" (hereinafter defined),
Executive shall not be entitled to receive any payment with respect to (i) Base
Salary after the date of discharge, (ii) the Stay Put Bonus and (iii) the
Incentive Bonus.
b. If the Company shall discharge Executive without "Cause", subject to his
obligation to "Mitigate" (hereinafter defined), Executive shall be entitled to
(i) Base Salary to the end of the Term, (ii) his full Stay Put Bonus but with
payment accelerated to the date of discharge and (iii) an Incentive Bonus
Pro-Rata to the date of discharge.
c. If Executive shall resign prior to the expiration of the Term, he shall not
be entitled to any compensation or benefits from the Company after the date of
his resignation.
d. The following terms shall have the following meanings:
(i) Cause - (A) a felony conviction of Executive, (B) a final civil judgment
shall be entered after all appeals shall have been exhausted in which a material
aspect involved Executive's fraud or dishonesty whether or not involving the
Company, provided that the foregoing shall not apply to the action by Allen
Paulson and other plaintiffs, against the Company and other defendants which
involves allegations of violation of Nevada law, including RICO and "fraud" on
the part of the Company and which on the date hereof is pending in the Federal
District Court for the Central District of California; (C) refusal by Executive
to perform "Reasonable Duties" (hereinafter defined) assigned to him by the
Company's chief executive officer, provided, Executive shall fail to correct any
such failure within 30 days after written notice ("Cure Period") or (D) the
Gaming Authorities of the State of Nevada or any other state in which the
Company shall conduct gaming operations shall determine that Executive is
unsuitable to act as an executive of a gaming company. "Reasonable Duties" -
Executive shall not be required (x) on a permanent basis to spend more than 50%
of his business time outside of Las Vegas (or be
<PAGE>
required to change his residence), (y) to expose himself to a risk to his
physical safety or jeopardize his ability to be licensed by any state gaming
authority or (z) perform duties which are inconsistent with his role specified
in Section 1 hereof.
(ii) Mitigate - Executive shall be required to use his best efforts to obtain
gainful employment as similar as possible to his duties with the Company,
provided that (A) a finding by an arbitration tribunal that Executive has failed
to do so will result in the Company being relieved of any obligation to pay
Executive and (B) any amount received by Executive from such employment shall
reduce the amount payable by the Company under Section 10(b).
11. Confidential Information; Non-Competition.
a. During the Term and for a three year period commencing on the termination of
the Term of this Agreement for any reason, (i) Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or its affiliates, and
their respective businesses which shall not be public knowledge (other than
information which becomes public as a result of acts of Executive or his
representatives in violation of this Agreement), including, without limitation,
customer/client lists, matters subject to litigation, and technology or
financial information of the Company or its subsidiaries, and (ii) Executive
shall not, without the prior written consent of the Company, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it in writing.
b. During the Term, the Executive will not, directly or indirectly, own, manage,
operate, control or participate in the ownership, management or control of, or
be connected as an officer, employee, partner, director, or consultant or
otherwise with, or have any financial interest in any hotel/casino except for
(i) ownership of less than 5% of the outstanding equity interest in any entity
and (ii) management or consulting duties vis-a-vis another hotel/casino (such as
Four Queens) for which the company is performing management or consulting
duties.
<PAGE>
c. During the Term and for a one-year period commencing on termination of the
Term for any reason, Executive will not solicit or contact any employee of the
Company or its affiliates with a view to inducing or encouraging such employee
to leave the employ of the Company or its affiliates for the purpose of being
employed by Executive, an employer affiliated with Executive, or any competitor
of the Company or any affiliate thereof.
d. Executive acknowledges that the provisions of this Section 11 are reasonable
and necessary for the protection of Company and that the Company will be
irrevocably damaged if such provisions are not specifically enforced.
Accordingly, Executive agrees that, in addition to any other relief to which the
Company may be entitled in the form of actual or punitive damages, the Company
shall be entitled to seek and obtain injunctive relief from a court of competent
jurisdiction (without posting of a bond therefor) for the purposes of
restraining Executive from any actual or threatened breach of such provisions.
12. Miscellaneous
a. This Agreement shall be governed, construed and interpreted in accordance
with the internal laws of the State of Nevada applicable to agreements executed
in that State.
b. This Agreement supersedes all prior agreements and understandings among the
parties, and contains the full understanding of the parties hereto with respect
to the subject matter hereof. Any change, modification or waiver of this
Agreement must be in writing, signed by both parties hereto or, in the case of a
waiver, by the party waiving compliance. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original. The captions of
each article and section are intended for convenience only. All references
herein to days, weeks and months shall mean by calendar unless specifically
stated to the contrary. All references herein to the singular shall include the
plural, and all references to gender shall, as appropriate, include other
genders. All representations and warranties made hereunder shall survive the
execution and delivery and closing of this Agreement. At the termination of this
Agreement, Executive agrees to execute in recordable form an instrument
sufficient to evidence said termination.
c. It is the intention of the parties hereto that this Agreement shall not inure
to the benefit of any third parties not parties to this Agreement, and it is
specifically intended that no third party beneficiary relationships, benefits or
obligations shall arise or be deemed to exist as a result of this Agreement.
d. This Agreement shall inure to the benefit of and be binding upon each of the
parties hereto, their heirs, assigns, successors, executors and personal
representatives, however, as a personal service contract, it shall not be
assignable by Executive.
e. The failure or delay by either party in any one or more instances to enforce
one or more of the terms and conditions of this Agreement or to exercise any
right or privilege under this Agreement shall not thereafter be construed as a
waiver of any such term, condition, right or privilege and the same and all
other terms, conditions, rights or privileges under this Agreement shall
continue to remain in full force and effect as though no such failure or delay
had occurred.
f. Any and all disputes between the parties hereto, however significant, arising
out of, relating in any way to or in connection with this Agreement (including
the validity, scope, and enforceability of this arbitration clause) will be
solely settled by an arbitration conducted in accordance with the rules of the
American Arbitration Association or any similar successor body before a panel of
three arbitrators. Each party shall appoint one arbitrator. If a party fails to
nominate an arbitrator within 10 days from the date when the claimant's request
for arbitration has been communicated to the other party in writing, the
appointment shall be made within 10 days thereof by the American Arbitration
Association. The two arbitrators so appointed shall attempt to agree upon the
third arbitrator to act as chairman. If the two arbitrators fail to nominate the
chairman within 10 days from the date of appointment of the later appointed
arbitrator, the chairman shall be selected within 10 days thereof by the
American Arbitration Association. The arbitration shall be conducted with a view
to commencing proceedings within 30 days from the date when the claimant's
request for arbitration was communicated to the other party in writing and to
rendering the award or other judgment not more than 15 days thereafter. The
award or other judgment of the arbitrators shall be final, and the parties agree
to waive their right to any form of appeal, to the greatest extent allowed by
law, and to share equally the fees and expenses of the arbitrators. Judgment
upon any award of the arbitrators may be entered in any court having
jurisdiction or application may be made to such court for the judicial
acceptance of the award and for order of enforcement. Such arbitration shall be
held only in Las Vegas, Nevada. Pending resolution of the dispute, there shall
be no stoppage by either party under the terms hereof; rather, the parties
hereto shall perform diligently under this Agreement pending ultimate resolution
of the dispute. By agreeing to arbitration, neither party hereto is waiving any
benefit of any statute of limitations or other equitable defenses.
<PAGE>
g. No voluntary or involuntary successor in interest of the Company shall
acquire any rights or powers under this Agreement, except as specifically set
forth herein. Otherwise, the Company shall not assign all or any part of this
Agreement.
13. Notices. All notices, requests, demands, directions and other communications
provided for hereunder shall be in writing and delivered personally or mailed by
certified or registered mail, return receipt requested, to the following
addresses for each party during the Term or until such time as written notice,
as provided hereby, of a change of address to be used thereafter is given to the
other party, with copies to such legal counsel as each party, from time to time,
may designate:
Company Executive
RIVIERA HOLDINGS CORPORATION Jerome P. Grippe
2901 Las Vegas Blvd. So. 2072 Sutton Way
Las Vegas, Nevada 89109 Henderson, NV 89014
Attn.: William L. Westerman, Chief PERSONAL & CONFIDENTIAL
Executive Officer
Notices delivered personally shall be deemed to have been given upon delivery;
notices delivered by certified or registered mail shall be deemed to have been
given seventy-two (72) hours after the date deposited in the mail, except as
otherwise provided herein.
14. Government Approvals. Notwithstanding any other terms and provisions set
forth in this Agreement, it is understood and agreed that the engagement of
Executive hereunder, the obligation of the parties hereto, and the effect of the
Agreement, shall be subject to the approval of each and all of the terms,
covenants and provisions of this Agreement by the Nevada Gaming Authorities and
other Governmental Authorities from whom approval, if any, is required under the
laws of the State of Nevada, the County of Clark, or any and all other
governmental agencies having jurisdiction thereover. Each of the parties hereby
covenant and agree to exercise their best good faith efforts to proceed to
obtain any and all such necessary approvals.
IN WITNESS WHEREOF, the parties herein have entered into this Agreement the day
and year first above mentioned.
COMPANY: EXECUTIVE:
RIVIERA HOLDINGS CORPORATION
By: /s/ /s/
William L. Westerman Jerome Grippe
Its: Chief Executive Officer
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
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