RIVIERA HOLDINGS CORPORATION
2901 Las Vegas Boulevard South
Las Vegas, Nevada 89109
-------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on June 8, 1999
TO THE STOCKHOLDERS OF
RIVIERA HOLDINGS CORPORATION
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of Riviera Holdings Corporation, a Nevada corporation (the
"Company"), will be held at the Riviera Hotel & Casino, 2901 Las Vegas Boulevard
South, Las Vegas, Nevada 89109 on June 8, 1999, at 2 p.m., local time, for the
following purposes:
1. To elect a Board of Directors;
2. To adopt an amendment to the Second Restated Articles of Incorporation of the
Company which will provide that all persons owning or controlling securities of
the Company and its affiliated companies (which securities were acquired after
the amendment becomes effective) must comply with all gaming laws in each
jurisdiction in which the Company or its affiliated companies conduct or plan to
conduct gaming activities. The amendment would also provide that the Company
could redeem, or force the divestiture of, the Company's securities owned by any
person or an affiliate of such person who was found to be "unsuitable" by a
gaming authority to own or control securities of the Company or any of its
affiliated companies, or who causes the Company or any of its affiliated
companies to be threatened with the loss of any gaming license. The full text of
the proposed amendment is included in the proxy statement as Annex I; and
3. To consider and act upon such other matters as may properly come before the
meeting or any adjournments or postponements thereof.
The Board of Directors fixed Friday, May 7, 1999 as the record date for
determination of stockholders entitled to notice of and to vote at the Annual
Meeting and any adjournments or postponements thereof. Accordingly, only holders
of record of Common Stock, par value $.001 per share, at the close of business
on such date (the "Stockholders") shall be entitled to vote at the Annual
Meeting and any adjournments or postponements thereof. A complete list of
Stockholders is open to the examination of any Stockholder for any purpose
germane to the meeting, during ordinary business hours, at the offices of the
Company located at 2901 Las Vegas Boulevard South, Las Vegas, Nevada 89109.
A copy of the Company's Annual Report for the fiscal year ended
December 31, 1998 is enclosed herewith. A copy of the Company's Annual Report to
the Securities and Exchange Commission on Form 10-K for the fiscal year ended
December 31, 1998 will be provided, without charge, to any Stockholder upon
written request.
By Order of the Board of Directors,
William L. Westerman
Chairman of the Board
Dated: May 14, 1999
YOU ARE URGED TO PROMPTLY COMPLETE, SIGN, DATE AND MAIL THE ENCLOSED PROXY. IF
YOU ATTEND THE MEETING AND VOTE IN PERSON, THE PROXY WILL NOT BE USED. IF THE
PROXY IS MAILED IN THE UNITED STATES IN THE ENCLOSED ENVELOPE, NO POSTAGE IS
REQUIRED.
<PAGE>
RIVIERA HOLDINGS CORPORATION
2901 Las Vegas Boulevard South
Las Vegas, Nevada 89109
PROXY STATEMENT
for Annual Meeting of Stockholders
to be held on June 8, 1999
May 14,1999
TO THE STOCKHOLDERS:
This Proxy Statement ("Proxy Statement") is being furnished to
stockholders of Riviera Holdings Corporation, a Nevada corporation (the
"Company"), in connection with the solicitation of proxies by the Board of
Directors of the Company (the "Board of Directors" or the "Board") for use at
the Annual Meeting of Stockholders (including any adjournments or postponements
thereof, the "Annual Meeting") to be held at the Riviera Hotel & Casino, 2901
Las Vegas Boulevard South, Las Vegas, Nevada 89109 on Tuesday, June 8, 1999 at 2
p.m., local time. This Proxy Statement and the accompanying form of proxy is
being mailed to the stockholders on May 14, 1999.
All holders of record (the "Stockholders") of the Company's common
stock, par value $.001 per share (the "Common Stock"), at the close of business
on Friday, May 7, 1999 (the "Record Date") are entitled to one vote at the
meeting for each outstanding share of Common Stock as of the Record Date held by
such shareholder. At the close of business on May 7, 1999, 5,068,376 shares of
Common Stock were outstanding.
The Board of Directors requests each Stockholder to execute and return
the enclosed proxy as soon as possible. The person who signs the proxy must be
either (i) the registered Stockholder of such shares of Common Stock or (ii) a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or any other person acting in a fiduciary or representative capacity
on behalf of such registered Stockholder. A Stockholder can, of course, revoke a
proxy at any time before it is voted, if so desired, by filing with the
Secretary of the Company an instrument revoking the proxy or by returning a duly
executed proxy bearing a later date, or by attending the Annual Meeting and
voting in person. Any such filing should be sent to Riviera Holdings
Corporation, 2901 Las Vegas Boulevard South, Las Vegas, Nevada 89109; Attention:
Secretary. Attendance at the Annual Meeting will not by itself constitute
revocation of a proxy.
The Company is paying all costs of the solicitation of proxies,
including the expenses of printing and mailing to its Stockholders this Proxy
Statement, the accompanying Notice of Annual Meeting of Stockholders, the
enclosed proxy and the Annual Report. The Company will also reimburse brokerage
houses and other custodians, nominees and fiduciaries for their expenses, in
accordance with the regulations of the Securities and Exchange Commission, in
sending proxies and proxy materials to the beneficial owners of the Company's
Common Stock. Officers or employees of the Company may also solicit proxies in
person, or by mail, telegram or telephone, but such persons will receive no
compensation for such work, other than their normal compensation as such
officers or employees.
PURPOSE OF THE ANNUAL MEETING
At the Annual Meeting, the Stockholders will consider and vote upon:
1. the election of four directors to hold office until the next annual meeting
and until their respective successors shall have been elected and qualified, or,
until resignation, removal or death as provided in the Bylaws of the Company;
2. to adopt an amendment to the Second Restated Articles of Incorporation of the
Company which will provide that all persons owning or controlling securities of
the Company and its affiliated companies (which securities were acquired after
the amendment becomes effective) must comply with all gaming laws in each
jurisdiction in which the Company or its affiliated companies conduct or plan to
conduct gaming activities. The amendment would also provide that the Company
could redeem, or force the divestiture of, the Company's securities owned by any
person or an affiliate of such person who was found to be "unsuitable" by a
gaming authority to own or control securities of the Company or
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any of its affiliated companies, or who causes the Company or any of its
affiliated companies to be threatened with the loss of any gaming license. The
full text of the proposed amendment is included in the proxy statement as Annex
I; and
3. such other matters as may properly come before the Annual Meeting or any
adjournments or postponements thereof.
VOTE REQUIRED; PROXIES
The presence in person or by proxy of a majority of the shares of
Common Stock outstanding and entitled to vote as of the Record Date is required
for a quorum at the Annual Meeting. If a quorum is present, those nominated
directors who receive an affirmative vote of a majority of the shares
represented at the meeting shall be elected. Accordingly, shares which are
counted toward a quorum but are not voted in the election of directors
(including shares covered by a proxy as to which authority is withheld to vote
for all nominees) and shares not voted for any particular nominee (including
shares covered by a proxy as to which authority is withheld to vote for only one
or less than all of the identified nominees) could prevent the election of any
of the nominees for director. In addition, the affirmative vote of the
Stockholders holding at least sixty percent (60%) of the voting power of the
Common Stock outstanding on the Record Date will be required to adopt the
Amendment. Any Shares not voted in favor of the adoption of the Amendment,
including abstentions, will have the effect of a vote against the Amendment. For
all other matters submitted to Stockholders at the meeting, if a quorum is
present, the affirmative vote of a majority of the shares represented at the
meeting and entitled to vote is required for approval. As a result, abstention
votes will have the effect of a vote against such matters.
Shares of Common Stock which are represented by properly executed
proxies, unless such proxies shall have previously been properly revoked, will
be voted in accordance with the instructions indicated in such proxies. If no
contrary instructions are indicated, such shares will be voted (1) FOR the
election of all of the nominees for director named in this Proxy Statement, (2)
FOR the adoption of the Amendment, and (3) in the discretion of the persons
named in the proxies as proxy appointees as to any other matter that may
properly come before the Annual Meeting.
Shares held by brokers and other Stockholder nominees may be voted on
certain matters but not others. This can occur, for example, when the broker or
nominee does not have the discretionary authority to vote shares of Common Stock
and is instructed by the beneficial owner thereof to vote on a particular matter
but is not instructed on other matters. These are known as "non-voted" shares.
Non-voted shares will be counted for purposes of determining whether there is a
quorum at the meeting, but with respect to the matters as to which they are
"non- voted," they will have no effect upon the outcome of the vote thereon.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors of the Company consists of four members, all of
whom have been nominated for election at the Annual Meeting. If elected, such
directors will hold office until the next annual meeting of stockholders and
until their respective successors shall have been elected and qualified, or,
until resignation, removal or death as provided in the Bylaws of the Company.
Directors
The following table sets forth certain information as of April 5, 1999
regarding the four nominees for director:
Name Age Position
William L. Westerman 67 Chairman of the Board and Chief
Executive Officer of the
Company and Riviera Operating
Corporation ("ROC"), a wholly-
owned subsidiary of the Company,
and President of the Company
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Robert R. Barengo 57 Director of the Company and ROC
Richard. L. Barovick 69 Director of the Company and ROC
James N. Land, Jr. 69 Director of the Company and ROC
William L. Westerman has been Chairman of the Board and Chief Executive
Officer of the Company since February 1993. Mr. Westerman was a consultant to
Riviera, Inc. from July 1, 1991 until he was appointed Chairman of the Board and
Chief Executive Officer of Riviera, Inc. (the Company's predecessor) on January
1, 1992. From 1973 to June 30, 1991, Mr. Westerman was President and Chief
Executive Officer of Cellu-Craft Inc., a manufacturer of flexible packaging
primarily for food products, and then later had several positions with
Alusuisse, a multi-national aluminum and chemical company, following its
acquisition of Cellu-Craft in 1989.
Robert R. Barengo has been a Director of the Company and ROC since
February 1993. Mr. Barengo was a consultant to Riviera, Inc. from January 1993
until June 30, 1993. Since 1972, Mr. Barengo has been engaged in the private
practice of law in Reno, Nevada. From 1978 to 1993, Mr. Barengo was Speaker Pro
Tempore and Speaker of the Nevada Assembly. From October 1992 to May 1996, Mr.
Barengo was a director and 10% shareholder of Leroy's Horse & Sports Place, Inc.
("Leroy's"). In May 1996, Leroy's became a wholly owned subsidiary of American
Wagering, Inc. ("AWI"), a publicly held corporation listed on NASDAQ. Since May
1996, Mr. Barengo has been a director of AWI and currently owns 7% of the
outstanding stock of AWI. Since 1993, Mr. Barengo has been the President and the
sole stockholder of Silver State Disseminators Company, a company licensed by
Nevada gaming authorities to disseminate racing information in the State of
Nevada and Chairman of the Nevada Dairy Commission.
Richard L. Barovick is currently a private investor and a founder and
member of the board of the Bank of Westport, in Westport, Connecticut. Mr.
Barovick was elected a director of the Company and ROC on August 4, 1998. Mr.
Barovick was Chief Executive Officer of Grundy Worldwide from 1994 until it was
acquired by Pearson plc in May, 1995. From 1991 to 1994, Mr. Barovick was
Managing Director and a member of the Board of Grundy. Mr. Barovick graduated
from the Harvard Law School and shortly thereafter joined the legal department
of MCA/Universal, where he was involved in the financial and administrative
aspects of television packaging. Thereafter, Mr. Barovick was in private
practice and served, at various times, as General Counsel to the New York Jets
and Association of Tennis Professionals, special counsel to IBM, Time
Incorporated, The William Morris Agency, Reader's Digest Entertainment, MCA,
Inc., and HBO, among others.
James N. Land, Jr. is currently a corporate consultant. Mr. Land was
elected a director of the Company and ROC on January 21, 1999. Mr. Land is a
director of Raytheon Company and E. W. Blanch Holdings, Inc. During the period
1956 to 1976, Mr. Land was employed by The First Boston Corporation in various
capacities, including Director, Senior Vice President, Co-Head of Corporate
Finance, and Head of International Operations. From 1971 through 1989, he served
as a director of various companies, including Kaiser Industries Corporation,
Marathon Oil Company, Castle & Cooke, Inc., Manville Corporation, NWA, Inc. and
Northwest Airlines, Inc. Since 1976, Mr. Land has been a financial consultant to
such companies as Castle & Cooke, Inc., Kaiser Cement Corporation, Kaiser Steel
Corporation, Scripps League Newspapers, Inc., Xerox Corporation, PPG Industries,
Inc., Mellon Bank, McLeod Young & Weir, Shilling & Co., Pollio Dairy Products,
Air Products and Chemicals, Inc. and Cellu-Craft, Inc.
Compensation of Directors
Each of Messrs. Barengo, Barovick and Land is paid an annual fee of
$50,000 for services as a director of the Company and ROC. Each director is also
reimbursed for expenses incurred in connection with attendance at meetings of
the Board of Directors. On March 5, 1996 the Board of Directors adopted a
Nonqualified Stock Option Plan for Non-Employee Directors (the "Directors'
Option Plan"), which was approved by the stockholders on May 10, 1996. Under the
Directors' Option Plan, each individual elected, re-elected or continuing as a
non-employee director will automatically receive a non-qualified stock option
for 2,000 shares of Common Stock, with an option exercise price equal to the
fair market value of the Common Stock on the date of grant. 50,000 shares have
been reserved for issuance under the Directors' Option Plan. Under the
Directors' Option Plans, options to purchase 2,000 shares at an exercise price
of $13.25 were granted to Mr. Barengo on May 10, 1996, options to purchase 2,000
shares at an exercise price of $13.50 were granted to Mr. Barengo on May 12,
1997, and options to purchase 2,000 shares
3
<PAGE>
at an exercise price of $9.00 were granted to Mr. Barengo on May 11, 1998. Upon
becoming Directors of the Company, under the Directors' Option Plan Mr. Barovick
was granted options to purchase 2,000 shares at an exercise price of $7.50 on
August 4, 1998, and Mr. Land was granted options to purchase 2,000 shares at an
exercise price of $5.50 on January 21,1999. Options to purchase 2,000 shares at
an exercise price of $9.00 were granted to Phillip P. Hannifin on May 11, 1998.
Options to purchase 2,000 shares at an exercise price of $9.00 were granted to
William Friedman on May 11, 1998. Messrs. Hannifin and Friedman resigned from
the Board of Directors on June 24, 1998 and July 27, 1998, respectively.
Directors who are also officers or employees of the Company or ROC do not
receive any additional compensation for services as a director. Currently, Mr.
Westerman is the only such director. The Board of Directors has granted the
members of the Compensation Committee the right to elect to receive all or part
of their annual fees in the form of the Company's Common Stock in a number of
shares having a fair market value equal to the cash compensation subject to such
election pursuant to the Company's Compensation Plan for Directors serving on
the Compensation Committee. Of the 50,000 shares reserved for issuance under
this plan, 3,103 shares were issued to Mr. Barengo for a portion of his
director's fees in 1996 and 877 shares were issued to Mr. Barengo for a portion
of his director's fees in 1997.
Board of Directors and Committee Meetings
The Company established an Audit Committee at the beginning of 1994.
The Audit Committee is composed of Messrs. Barengo, Barovick and Land. The Audit
Committee recommends to the Board of Directors the selection of an auditor,
reviews the plan and scope of an audit, reviews the auditors' critique of
management and internal controls and management's response to such critique and
reviews the results of the audit.
The Company and ROC each has a Compensation Committee composed of
Messrs. Barovick and Land. The Compensation Committee is responsible for
recommending executive compensation programs to the Board of Directors and for
approving all compensation decisions with respect to the Chief Executive Officer
and his recommendations for the other executive officers of the Company.
In 1998, the Audit Committee met 2 times and the Compensation Committee
met 2 times.
In 1998, the Board of Directors of the Company held 12 meetings. No
member of the Board of Directors attended in 1998, fewer than 75% of the
aggregate of (1) the total number of meetings of the Board of Directors held
during the period for which he has been a director and (2) the total number of
meetings held by all committees on which he served.
The Board of Directors recommends that Stockholders vote "FOR" each of
the nominees listed above.
PROPOSAL NO. 2
AMENDMENT TO THE ARTICLES OF INCORPORATION
The Board of Directors has approved a proposal to adopt an amendment
(the "Amendment") to the Company's Second Restated Articles of Incorporation.
The affirmative vote of the holders of sixty percent of the shares of Common
Stock outstanding on the Record Date is required to approve and adopt the
Amendment. The Board of Directors is proposing the Amendment at this time
because the Company, through Riviera Black Hawk, is constructing a casino in
Black Hawk, Colorado, which will subject the Company to the jurisdiction of the
gaming authorities in Colorado, and may in the future conduct gaming activities
in additional jurisdictions.
The following is a description of the material provisions of the
proposed Amendment. However, Stockholders are encouraged to read the full text
of the Amendment, which is included in this Proxy Statement as Annex I. Terms
which are capitalized in this summary but not otherwise defined have the
definitions assigned to them in the Amendment.
If adopted, the Amendment would require that all Persons Owning or
Controlling securities of the Company and any Affiliated Companies (which were
acquired after the Amendment becomes effective), as well as directors and
officers of the Company and Affiliated Companies, must comply with all
requirements of Gaming Laws in each Gaming Jurisdiction in which the Company or
Affiliated Companies conduct or seeks to conduct Gaming Activities.
4
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The Amendment would provide that all securities of the Company shall be held
subject to the requirements of such Gaming Laws.
An entity is an "Affiliated Company" if it is affiliated with or
controlled, directly or indirectly, by the Company, and is or is seeking to be
registered or licensed under Gaming Laws.
The Amendment would also provide that the Company can redeem the
securities of an Unsuitable Person, or an Affiliate of an Unsuitable Person, and
can also force such Persons to divest of the securities of the Company if the
Company chooses not to redeem such securities. An Unsuitable Person is a Person
which Owns or Controls securities of the Company or in any Affiliated Company,
or an Affiliate of such Person, who meets one of the following criteria:
o a Gaming Authority has determined that such Person is
unsuitable to Own or Control such securities or is
unsuitable to be connected or associated with a Person
engaged in Gaming Activities in that Gaming Jurisdiction;
o a Gaming Authority has determined that a Person has an
Affiliate that is unsuitable to Own or Control such
securities or unsuitable to be connected or associated with
a Person engaged in Gaming Activities in that Gaming
Jurisdiction;
o the Person has caused or threatens to cause the Company or
any Affiliated Company to lose a Gaming License or the Board
of Directors of the Company believes such Person will likely
jeopardize the Company's or any Affiliated Company's use of,
entitlement to or application for a Gaming License.
The Company can redeem the securities Owned or Controlled by an
Unsuitable Person to the extent required by any Gaming Authority, or as required
to comply with Gaming Laws to obtain or maintain Gaming Licenses in such
jurisdictions, or to the extent determined by the Board of Directors in good
faith to be necessary or advisable. Following the time the Company notifies an
Unsuitable Person of the redemption, the securities to be redeemed shall no
longer be deemed to be outstanding and all rights of the Unsuitable Person shall
cease, other than the right to receive the redemption price. The redemption
price will be the price per share required to be paid by the Gaming Authority
making the finding of unsuitability. If the Gaming Authority does not require a
certain price to be paid, the redemption price will be the amount deemed
reasonable by the corporation, which shall not be in excess of the closing sales
price of the securities on the national securities exchange on which the shares
were listed on the date of the redemption notice (or as quoted in the NASDAQ
national market or the mean between the bid and asked price on any system on
which the securities are then quoted). The redemption price will be paid in cash
or promissory notes, or a combination of both, as the Gaming Authority requiring
the redemption may direct. If no direction is given by the Gaming Authority, the
redemption price will be paid in the manner elected by the Company.
The Amendment also provides that if the Board of Directors determines
that a redemption of the securities of an Unsuitable Person would adversely
affect the Corporation, the Company may require the Unsuitable Person to divest
of such securities by a certain date by selling the securities in a manner which
would not violate federal or state securities laws and which would not result in
any other Person being required to be licensed or registered by a Gaming
Authority. The Company may, but is not obligated to, register the securities to
be divested under the federal securities laws.
Additionally, the Amendment will provide that an Unsuitable Person will
not be permitted to receive dividends on, or vote, the securities or receive any
other remuneration from the Company until the securities are redeemed or
divested. The Amendment will require the Company to include, in each future
indenture governing debt securities issued by the Company or an Affiliated
Company, provisions containing the same requirements as those contained in the
Amendment.
If approved, the Amendment will take effect prospectively and the
provisions regarding Unsuitable Persons would not apply to holders of the
Company's securities on the date the Amendment becomes effective.
5
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OTHER INFORMATION
Executive Officers
The following table sets forth certain information as of March 31, 1999
regarding the executive officers of the Company and ROC:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
William L. Westerman 67 Chairman of the Board and Chief Executive Officer of the
Company and ROC, and President of the Company
Duane R. Krohn 53 Treasurer of the Company, and Executive Vice President of
Finance and Treasurer of ROC
John A. Wishon, Esq. 54 Vice President and General Counsel of ROC, Secretary of the
Company and ROC
Ronald P. Johnson 50 Executive Vice President of Gaming Operations of ROC
Robert A. Vannucci 51 Executive Vice President of Marketing and Entertainment of ROC
Jerome P. Grippe 56 Senior Vice President of Operations of ROC
Robert E. Nickels, Sr. 69 Senior Vice President of Administration of ROC
Michael L. Falba 56 Vice President of Casino Operations of ROC
</TABLE>
For a description of the business experience of William L. Westerman,
see "Directors."
Duane R. Krohn, CPA, assumed the position of Treasurer of the Company
and ROC on June 30, 1993 and was elected Vice President of Finance of ROC on
April 26, 1994, and Executive Vice President of Finance of ROC on July 1, 1998.
Mr. Krohn was initially employed by Riviera, Inc. in April 1990, as Director of
Corporate Finance and served as Vice President-Finance from March 1992 to June
30, 1993. Mr. Krohn served as Chief Financial Officer of Imperial Palace, Inc.
(a casino/hotel operator in Las Vegas) from February 1987 to March 1990. Prior
to 1987, Mr. Krohn was Chief Financial Officer of the Mint and the Dunes in Las
Vegas, Nevada, and Bally's Park Place in Atlantic City, New Jersey.
John A. Wishon, Esq. was elected Secretary of the Company and ROC, and
General Counsel of ROC in September 1994, and was elected Vice President of ROC
in November 1996. Mr. Wishon was initially employed by ROC as a Marketing
Analyst in February 1994. From January 1992 to February 1994, Mr. Wishon was a
legal and management consultant to Gold River Gambling Hall & Resort, the
Bicycle Club Casino, and Tierra del Sol Casino Resort. From October 1990 to
January 1992, Mr. Wishon served as Vice President of Hotel Operations and later
as Vice President of Administration and Legal Affairs at the Sands Hotel Casino
in Las Vegas. Prior to December 1988, Mr. Wishon served as General Manager of
the Airtel Plaza and Westwood Plaza Hotels in Los Angeles, California. From 1976
until 1988, Mr. Wishon was Senior Vice President of the Hotel del Coronado
Corporation and held the positions of Resident Manager and General Counsel. Mr.
Wishon is a member of the Nevada and California Bars, has practiced law with
emphasis on real estate and contract law and has been employed in law
enforcement.
Ronald P. Johnson became Vice President of Gaming Operations of ROC in
September 1994, and Executive Vice President of Gaming Operations of ROC on July
1, 1998. Mr. Johnson became Director of Slots of ROC on June 30, 1993 and was
elected Vice President of Slot Operations and Marketing on April 26, 1994. Mr.
Johnson was Vice President-Slot Operations and Marketing of Riviera, Inc. from
April 1991 until June 30, 1993. Mr. Johnson was Vice President-Slot Operations
for Sands Hotel and Casino Inc. from September 1989 until he joined Riviera,
Inc. From September 1986 until September 1989, Mr. Johnson was Assistant Slot
Manager at Bally's Grand Las Vegas.
Robert A. Vannucci was elected Vice President of Marketing and
Entertainment of ROC on April 26, 1994, and Executive Vice President of
Marketing and Entertainment on July 1, 1998. Mr. Vannucci had been Director of
Marketing of ROC since July 19, 1993. Mr. Vannucci was Senior Vice President of
Marketing and Operations at the Sands Casino Hotel in Las Vegas from April 1991
to February 1993. Mr. Vannucci was Vice President and General Manager of
Fitzgerald's Las Vegas (a casino/hotel operator) from 1988 to January 1991.
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Jerome P. Grippe was elected Vice President of Operations of ROC on
April 26, 1994, and Senior Vice President of Operations of ROC on July 1, 1998.
Mr. Grippe became Director of Operations of ROC on June 30, 1993. Mr. Grippe was
Assistant to the Chairman of the Board of Riviera, Inc. from July 1990 until May
1993. Mr. Grippe had served in the United States Army from 1964 until his
retirement as a Colonel in July 1990.
Robert E. Nickels, Sr. was elected Vice President of Administration of ROC on
June 30, 1993, and Senior Vice President of Administration of ROC on July 1,
1998. From March 1992 until June 30, 1993, Mr. Nickels was Vice President of
Administration of Riviera, Inc. From November 1991 to February 1992, Mr. Nickels
was a self- employed business consultant. From March 1979 to April 1986, Mr.
Nickels was Director of Internal Audit for MGM-Reno. From April 1986 to November
1991, Mr. Nickels served as Vice President of Administration at Bally's Reno and
Las Vegas.
Michael L. Falba was elected Vice President of Casino Operations of ROC
on April 26, 1994. Mr. Falba became Director of Casino Operations of ROC on June
30, 1993. Mr. Falba was employed by Riviera, Inc. from March 1989 until November
1991 as Assistant Casino Manager, and from November 1991 to June 30, 1993 as
Vice President of Casino Operations.
Officers of each of the Company and ROC serve at the discretion of
their respective Boards of Directors and are also subject to the licensing
requirements of the Nevada Gaming Commission.
Compensation of Executive Officers
The following table sets forth a summary of the compensation paid by
the Company in the Years ended December 31, 1996, 1997 and 1998, to the Chief
Executive Officer of the Company and ROC, and to the Company's four most highly
compensated executive officers who received over $100,000 in compensation during
1997 from the Company (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
Summary Compensation Table
Name and Other Annual All Other
Principal Position Year Salary Bonus Compensation(1) Compensation(2)
- ------------------ ---- ------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
William L. Westerman 1998 $600,000(5) $900,000(5) $413,300(4)(5) $2,402
Chairman of the Board and 1997 600,000 ----- 782,175(4) 1,809
Chief Executive Officer of the 1996 400,000 1,213,969(3) 441,375(4) 1,566
Company and ROC
Ronald P. Johnson 1998 188,757 84,000 7,300 818
Executive Vice President of 1997 180,996 82,000 7,175 763
Gaming Operations of ROC 1996 170,961 100,000 6,875 791
Robert Vannucci 1998 183,710 84,000 7,300 818
Executive Vice President of 1997 167,055 82,000 7,175 681
Marketing and Entertainment 1996 145,961 100,000 6,875 536
of ROC
Duane R. Krohn 1998 160,040 84,000 7,300 563
Treasurer of the Company and 1997 123,351 82,000 7,175 394
Executive Vice President of 1996 117,715 100,000 6,875 408
Finance and Treasurer of ROC
Jerome P. Grippe 1998 134,196 84,000 7,300 469
Senior Vice President of 1997 122,580 82,000 7,175 394
Operations of ROC 1996 118,653 100,000 6,837 408
</TABLE>
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(1) Includes amounts contributed by the Company under the Company's Profit
Sharing and 401(k) Plans. The Company contributed for the account of
each executive, $2,500 in 1998 and $2,375 in each of 1997 and 1996.
(2) Includes premiums paid by the Company for excess life insurance.
(3) Includes $614,000 of Mr. Westerman's 1996 Incentive Bonus which was
credited to his retirement account pursuant to his employment
agreement.
(4) Includes contributions to Mr. Westerman's retirement account of
$406,000 in 1998, $775,000 in 1997, and $425,000 in 1996. Does not
include interest earned on retirement account of $410,159 in 1998 and
$343,914 in 1997. (See "Employment Agreements")
(5) See "Employment Agreements" for a summary of certain of the provisions
of Mr. Westerman's employment agreement.
Option Grants
The number of shares available for purchase under the Company's 1993
Employee Stock Option Plan, as amended (the "Stock Option Plan") is 1,000,000
(as adjusted pursuant to antidilution provisions). Options for an aggregate of
770,000 shares have been granted under the Stock Option Plan as of December 31,
1998. During the Company's 1998 fiscal year, 95,000 options were granted under
the Stock Option Plan.
Option Exercises, Year-End Options Values and Option Grants in 1998
The following table presents at December 31, 1998 the value of
unexercised in-the-money options held by the Named Executive Officers.
<TABLE>
<CAPTION>
Number of Value of Unexercised,
Unexercised Options In-The-Money Options
Name Vested Not Vested Vested Not Vested
- ---- ------ ---------- ----------- -----------
<S> <C> <C> <C> <C>
William L. Westerman 240,000 80,000 $0 $0
Ronald P. Johnson 7,750 9,250 0 0
Duane R. Krohn 7,750 9,250 0 0
Robert Vannucci 7,750 9,250 0 0
Jerome P. Grippe 7,000 7,000 0 0
</TABLE>
The following table presents options granted during 1998.
<TABLE>
<CAPTION>
Individual Grants
Potential Realizable Value at
--------------------------------------------------------- Assumed Annual Rates of
Percent of Stock Price Appreciation for
Number of Total Options Option Term
Underlying Granted to Exercise of ---------------------
Options Employees in Base Price Expiration
Name Granted 1998 Per Share Date 5% 10%
- ---- ------------ ------------ ------------ ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald P. Johnson 10,000 10.5% 7.000 6/11/08 $114,023 $181,562
Duane R. Krohn 10,000 10.5% 7.000 6/11/08 114,023 181,562
Robert Vannucci 10,000 10.5% 7.000 6/11/08 114,023 181,562
Jerome P. Grippe 7,000 7.4% 7.000 6/11/08 79,816 127,093
</TABLE>
8
<PAGE>
The following table presents aggregated option exercises during 1998 and their
values as of December 31, 1998.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised Options In-The-Money Options at
Options Exercised at 12/31/98 12/31/98(1)
Shares Value
Name Acquired Realized(1) Exercisable Unexercisable Exercisable Unexercisable
- ---- -------- -------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William L. Westerman 180,000 $1,400,000 240,000 80,000 $0.00 $0.00
Ronald P. Johnson 18,000 147,875 7,750 9,250 0.00 0.00
Duane R. Krohn 18,000 140,000 7,750 9,250 0.00 0.00
Robert Vannucci 14,168 116,461 7,750 9,250 0.00 0.00
Jerome P. Grippe 14,168 116,461 7,750 9,250 0.00 0.00
</TABLE>
- ----------------------------
(1) Market value of the underlying securities at the exercise date or year-end,
as the case may be, less the exercise price of "in-the-money" options.
Messrs. Westerman, Johnson and Krohn paid cash for their option shares,
while Messrs. Vannucci and Grippe elected cashless exercise and received
14,168 shares.
Employment Agreements
William L. Westerman serves as Chairman of the Board, President and
Chief Executive Officer of the Company, and as Chairman of the Board and Chief
Executive Officer of ROC.
Under Mr. Westerman's existing employment agreement with the Company,
which was last amended on June 24, 1998, Mr. Westerman shall be employed by the
Company for an indefinite period subject to termination by either the Company or
Mr. Westerman on not less than 120 days prior written notice. Mr. Westerman's
base compensation is $600,000.
Under the employment agreement, Mr. Westerman is entitled to
participate in the Company's Senior Management Compensation Plan or such other
executive bonus plan as shall be established by the Company's Board of Directors
(collectively the "Plan"). If at least 80% of targeted net income, as defined by
the Plan, is met, Mr. Westerman shall be entitled to receive a bonus under the
Plan expressed as a percentage of his $600,000 base salary depending on the
percentage of targeted net income realized by the Company in a particular year,
with a maximum bonus of $900,000. Mr. Westerman received an incentive bonus of
$900,000 for 1998.
The employment agreement provides that the Company fund a retirement
account for Mr. Westerman. Pursuant to the employment agreement, an aggregate of
$4,877,968 had been credited to the retirement account from its inception
through January 1, 1999. Under the employment agreement, each year that Mr.
Westerman continues to be employed, an amount equal to Mr. Westerman's base
salary for that year will be credited to the account on January 1 of that year
and in the event that Mr. Westerman is no longer employed by the Company (except
for termination for cause, in which case Mr. Westerman would forfeit all rights
to monies in the retirement account), Mr. Westerman will be entitled to receive
the amount in the retirement account as of the date he ceases to be employed by
the Company in 20 quarterly installments. Pursuant to the employment agreement,
the retirement account was credited quarterly with interest and shall be
credited with additional amounts on the first day of each succeeding calendar
quarter equal to the product of (i) the Company's average borrowing cost for the
immediately preceding fiscal year, as determined by the Company's chief
financial officer and (ii) the average outstanding balance in the retirement
account during the preceding calendar quarter. Total interest earned for 1998
and 1997 was $410,159 and $343,914, respectively. In the event of Mr.
Westerman's death, an amount equal to the applicable federal estate tax (now
60%) on the retirement account will be pre-paid prior to the date or dates such
taxes are due.
The Company retains beneficial ownership of all monies in the
retirement account, which monies are earmarked to pay Mr. Westerman's retirement
benefits. However, upon (i) the vote of a majority of the outstanding shares of
Common Stock approving a "Change of Control" (as defined below), (ii) the
occurrence of a Change of Control without Mr. Westerman's consent, (iii) a
breach by the Company of a material term of the employment agreement or (iv) the
expiration or earlier termination of the term of the employment agreement for
any reason other than cause, Mr. Westerman may require the Company to establish
a "Rabbi Trust" for the benefit of Mr. Westerman and to fund such trust with an
amount of cash equal to the amount then credited to the retirement account,
including any amount to be credited to the retirement account upon a Change of
Control discussed below.
9
<PAGE>
On February 5, 1998, the shareholders of the Company by a majority vote
approved the Agreement and the Plan of Merger (the "Riviera Merger Agreement")
with R&E Gaming Corp. and its wholly-owned subsidiary Riviera Acquisition Sub,
Inc. (See,"Security Ownership of Certain Beneficial Owners and Management" for a
description of the Riviera Merger Agreement and events that have taken place
since the February 5, 1998 shareholder approval.) Such shareholder approval
constituted a Change of Control. On March 5, 1998, subsequent to this Change of
Control, Mr. Westerman exercised his right to require the Company to establish
and fund a Rabbi Trust for his benefit. On March 20, 1998, Mr. Westerman and the
Company entered into an agreement whereby Mr. Westerman waived his right to have
the Company fund the Rabbi Trust in exchange for the Company agreeing to fund
such Rabbi Trust within five business days after notice from Mr. Westerman.
Mr. Westerman's employment agreement provides (a) that the sum of Mr.
Westerman's base salary, bonus, and credits to his Retirement Account in any one
year shall not exceed that which would have been payable under his previous
employment agreement with the Company, and (b) that Mr. Westerman shall instruct
the Company of any reductions in base salary, bonus, and credits to his
Retirement Account necessary to comply with this limitation. The Company has
determined that for the year 1998, a reduction of $194,000 would be necessary to
comply with this provision. Prior to December 31, 1998, Mr. Westerman instructed
the Company that this be applied to reduce the amount to be credited to his
retirement account from $600,000 to $406,000.
In addition to Mr. Westerman, four executives have employment contracts
with the Company for fixed terms of either 2 or 3 years. Each of these
employment contracts contains a Termination Fee Agreement and a Stay Bonus
Agreement. See "Termination Fee Agreements" and "Stay Bonus Agreements." These
employment agreements also provide for a "Normal Incentive Bonus" entitling the
executive to participate in the Company's Senior Management Compensation Plan
(the "Plan") whereby the employee may share a portion of the Plan's pool which
provides for a target of $25 million EBITDA for the years 1999 and 2000 with
amounts being credited to the Plan's pool up to a maximum of $1.2 million. Three
of these employment agreements also provide for a "Special Incentive Bonus" in
an amount equal to one-third of any excess of $1.2 million.
Employee Stock Purchase Plan
On March 5, 1996, the Board of Directors adopted an employee stock
purchase plan (the "Stock Purchase Plan"), which was approved by the
stockholders on May 10, 1996. A total of 300,000 shares of Common Stock (subject
to adjustment for capital changes) in the aggregate may be granted under the
Stock Purchase Plan. The Stock Purchase Plan is administered by the Compensation
Committee. The purchase price per share of stock shall be 85% of per share
market value of the Common Stock on the purchase date. On May 31, 1996,
approximately 560 union and non-union employees participated in the Stock
Purchase Plan. Under the Stock Purchase Plan, 137,000 shares were issued to
employees at $11.26 (85% of market price at May 10, 1996), for $160,000 cash and
the balance in notes receivable of $1,383,000 which were payable over two years
via payroll deduction. During 1997, 6,200 shares were reissued at $11.47 for
notes receivable of $71,145. During 1996, 1997 and 1998 respectively, 17,600,
25,900 and 65,100 shares were returned to the Stock Purchase Plan, and 265,400
shares remained eligible to be issued under the plan at December 31, 1998.
The Company has registered the issuance of all the shares issuable
under the Stock Purchase Plan on Form S-8 under the Securities Act of 1933, as
amended (the "Securities Act").
Profit Sharing and 401(k) Plans
On June 30, 1993, the Company and ROC assumed, pursuant to an Adoption
Agreement, the combined profit sharing and 401(k) plans of Riviera, Inc. (the
"Profit Sharing and 401(k) Plans") and the Company and ROC have continued the
Profit Sharing and 401(k) Plans after June 30, 1993. The Company and ROC have
amended the Adoption Agreement to provide that all current employees of the
Riviera Hotel & Casino (the "Riviera") who were employed by the Riviera on April
1, 1992, who are at least 21 years of age and who are not covered by a
collective bargaining agreement are immediately eligible to participate in the
Profit Sharing and 401(k) Plans. The amendment provides further that all current
employees who were employed by the Riviera after April 1, 1992, who are at least
21 years of age and who are not covered by a collective bargaining agreement are
eligible to participate after one year of service at the Riviera.
10
<PAGE>
The profit sharing component of the Profit Sharing and 401(k) Plans
provides that the Company will make a contribution equal to 1% of each eligible
employee's annual compensation if a prescribed annual operating earnings target
is attained and an additional 1/10th of 1% thereof for each $200,000 by which
operating earnings is exceeded, up to a maximum of 3% thereof. The Company may
elect not to contribute to the Profit Sharing and 401(k) Plans if it notifies
its employees by January of the Profit Sharing and 401(k) Plans year. An
employee will become vested in the Company's contributions based on the
employee's years of service. An employee will receive a year of vesting service
for each plan year in which the employee completed 1,000 hours of service.
Vesting credit will be allocated in 20% increments for each year of service
commencing with the attainment of two years of service. An employee will be
fully vested following the completion of six years of service.
Key Employee Retention Plan
As a result of the scheduled openings 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 85 executive, supervisory and technical support positions
and includes a combination of employment contracts, stay put agreements, bonus
arrangements and salary adjustments.
Termination Fee Agreements
Approximately 85 executive officers and significant employees
(excluding Mr. Westerman) of ROC have termination fee agreements effective
through January 2000, pursuant to which each of such employees will be entitled
to receive (1) either six months' or one year's base salary if their employment
with the Company is terminated, without cause, within 12 or 24 months of a
change of control of the Company or ROC; and (2) group health insurance for
periods of either one or two years. The base salary payments are payable in
bi-weekly installments subject to the employee's duty to mitigate by using his
or her best efforts to find employment. The estimated total amount that would be
payable under all such agreements is approximately $5 million in salaries and
$1.5 million in benefits as of December 31, 1998.
Stay Bonus Agreements
Approximately 85 executive officers and significant employees
(excluding Mr. Westerman) of ROC are party to agreements pursuant to which each
such employee is entitled to receive a "stay bonus" (varying amounts) if the
employee is discharged without cause (as defined in the stay bonus agreements),
or continues to be employed by the Company on each of January 1, 2000, January
1, 2001 and June 30, 2001. The estimated total amount that would be payable
under all such agreements is approximately $2.3 million.
11
<PAGE>
Compensation Committee Report on Executive Compensation
The Compensation Committee endeavors to ensure that the compensation
program for executive officers of the Company is effective in attracting and
retaining key executives responsible for the success of the Company and is
tailored to promote the long-term interests of the Company and its stockholders.
The Company's executive officer compensation program in its last completed
fiscal year was principally comprised of base salary, an executive incentive
plan, a 401(k) plan, a profit-sharing plan and long-term incentive compensation
in the form of incentive stock options or non-qualified stock options.
The Compensation Committee takes into account various qualitative and
quantitative indicators of corporate and individual performance in determining
the level and composition of compensation for the Company's Chief Executive
Officer and his recommendations regarding the other executive officers. In
particular, the Compensation Committee considers several financial performance
measures, including revenue growth and net income. However, the Compensation
Committee does not apply any specific quantitative formula in making
compensation decisions. The Committee also considers achievements that, while
difficult to quantify, are important to the Company's long-term success. The
Compensation Committee seeks to create a mutuality of interest between the
executive officers and the Company's stockholders by increasing the executive
officers' ownership of the Company's Common Stock through the Stock Option Plan.
Salary levels for the Company's executive officers are significantly
influenced by the need to attract and retain management employees with high
levels of expertise. In each case, consideration is given both to personal
factors, such as the individual's experience, responsibilities and work
performance, and to external factors, such as salaries paid by comparable
companies in the gaming industry. With regard to the latter, it is important to
recognize that because of the opening of a new property on the Las Vegas Strip
in 1998, the scheduled openings of several new properties in 1999 and 2000, and
the growth of riverboat and dockside gaming and the proliferation of
jurisdictions in which gaming is permitted, the Company competes with numerous
other companies for a limited pool of experienced and skilled personnel.
Therefore, it is critical that the Company provide base salaries that are
competitive in the casino industry. With respect to the personal factors, the
Compensation Committee makes salary decisions in an annual review based on the
recommendations of the Chief Executive Officer. This annual review considers the
decision-making responsibilities of each position as well as the experience and
work performance of each executive. The Chief Executive Officer views work
performance as the single most important measurement factor.
The compensation of Mr. Westerman for the Company's last completed
fiscal year was set pursuant to the employment agreement described in the
"Compensation of Executive Officers" section.
THE COMPENSATION COMMITTEE
Richard L. Barovick, Chairman
James N. Land, Jr.
12
<PAGE>
Performance Graph
The following graph compares the annual change in the cumulative total
return, assuming reinvestment of dividends, on the Company's Common Stock with
the annual change in the cumulative total returns of the NASDAQ Broad Market,
the American Stock Exchange Index (the "AMEX Index"), the New York Stock
Exchange (the "NYSE") and the NASDAQ Amusement and Recreation Services Index
(the "NASDAQ 79xx"), which the Company considers to be its peer industry group.
The graph assumes an investment of $100 on December 31, 1993, in each of the
Common Stock, the stocks comprising the NASDAQ Broad Market, the stocks
comprising the AMEX Index and the stocks comprising the NASDAQ 79xx.
Comparison of Cumulative Total Return Among the Company, NASDAQ Broad
Market, the AMEX Index, the NYSE and the NASDAQ 79xx1
PERFORMANCE GRAPH APPEARS HERE
Date Riviera Nasdaq Nasdaq 79xx Amex NYSE
- -------- ------- ------ ----------- ---- ----
12/31/93 100 100 100 100 100
12/31/94 126 97 59 93 100
12/31/95 337 135 47 120 136
12/31/96 622 166 47 122 164
12/31/97 613 202 54 153 218
12/31/98 210 282 55 163 262
- --------
1 Comprised of companies whose stock is traded on the NASDAQ
National Market and whose standard industrial classification
is within 7900-7999. The Company does not necessarily believe
that this is an indication of the value of the Company's stock.
13
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
The Common Stock is traded on the American Stock Exchange. The
following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of April 30, 1999, by (i) each person who, to
the knowledge of the Company, beneficially owns more than 5% of the outstanding
Common Stock of the Company (based on reports filed with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, or upon
information furnished to the Company), (ii) the directors and certain officers
of the Company and (iii) all directors and officers of the Company and ROC as a
group. The percentages of shares of Common Stock held or beneficially owned by
any Stockholder or group of Stockholders are based upon the total number of
shares of Common Stock outstanding as of May 7, 1999. Except as indicated, each
person listed below has sole voting and investment power with respect to the
shares set forth opposite such person's name.
<TABLE>
<CAPTION>
Shares Beneficially Owned
--------------------------------
Name Number Percentage
- ---- ------ ----------
<S> <C> <C>
William L. Westerman(1)(2) 504,200 9.5%
Robert R. Barengo(1)(7) 9,380 *
Richard L. Barovick(1) 10,000 *
James N. Land, Jr. 1,500 *
Ronald P. Johnson(1)(3) 47,750 *
Duane R. Krohn(1)(4) 39,750 *
Robert Vannucci(1)(5) 26,918 *
Jerome P. Grippe(1)(6) 24,668 *
Keyport Life Insurance Co.(8) 857,160 16.9
SunAmerica Life Insurance Company(9) 756,920 14.9
Morgens Entities:(10)
Betje Partners 29,360 0.6
Morgens Waterfall Income Partners 43,920 0.9
Phoenix Partners, L.P. 79,440 1.6
Restart Partners, L.P. 177,997 3.5
Restart Partners II, L.P. 374,374 7.4
Restart Partners III, L.P. 298,600 5.9
Endowment Restart LLC 261,109 5.2
---------- ----
Total Morgens Entities 1,264,800 25.0
James D. Bennett(11) 497,065 9.8
Allen E. Paulson(12) 463,655 9.1
All executive officers and directors as a group 721,563 13.4
(11 persons).(1)(2)(3)(4)(5)(6)(7)
- --------------------------------
* Less than 1%.
</TABLE>
(1) The address for each director and officer of the Company or ROC is c/o
Riviera Holdings Corporation, 2901 Las Vegas Boulevard South, Las Vegas, Nevada
89109.
(2) Includes 240,000 shares which may be acquired within 60 days of April 30,
1999, upon the exercise of outstanding options.
14
<PAGE>
(3) Includes 12,750 shares which may be acquired within 60 days of April 30,
1999, upon the exercise of outstanding options.
(4) Includes 12,750 shares which may be acquired within 60 days of April 30,
1999, upon the exercise of outstanding options.
(5) Includes 12,750 shares which may be acquired within 60 days of April 30,
1999, upon the exercise of outstanding options.
(6) Includes 10,500 shares which may be acquired within 60 days of April 30,
1999, upon the exercise of outstanding options.
(7) Includes 2,400 shares which may be acquired within 60 days of April 30,
1999, upon the exercise of outstanding options.
(8) The address for Keyport Life Insurance Company ("Keyport") is 125 High
Street, Boston Massachusetts 02110. Stein Roe & Farnham Incorporated, an
affiliate of Keyport, is Keyport's investment advisor, and, as such, has the
power and authority to direct the disposition of the securities, and
accordingly, could be deemed to be a "beneficial" owner within the meaning of
Rule 13d-3 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Stein Roe & Farnham Incorporated, however, disclaims actual beneficial
ownership of such securities.
(9) The address for SunAmerica Life Insurance Company ("SunAmerica") is One
SunAmerica Center, Los Angeles, California 90067.
(10) The address for Morgens, Waterfall, Vintiadis & Company, Inc. ("Morgens")
is 10 East 50th Street, New York, New York 10022. Morgens or its principals are
either investment advisors to, or trustees or general partners of, the eight
entities listed in the above table ("Morgens Entities") that are the owners of
the Common Stock of the Company. Morgens or its principals have the power and
authority to direct the disposition of these securities and, accordingly, could
be deemed to be "beneficial" owners within the meaning of Rule l3d-3 of the
Exchange Act. Each of Morgens, its principals and the Morgens Entities, however,
disclaims beneficial ownership with respect to any securities not actually
beneficially owned by it.
(11) Includes (a) 323,003 shares held by Restructuring Capital Associates, L.P.
and Bennett Restructuring Fund, L.P. and (b) 161,262 shares held by Bennett
Offshore Restructuring Fund, Inc. The address for Mr. Bennett is c/o
Restructuring Capital Associates, L.P., 450 Park Avenue, New York, New York
10022.
(12) The address for Mr. Paulson is Del Mar Country Club, 6001 Clubhouse Drive,
Rancho Santa Fe, California 92067.
The Company is a party to a registration rights agreement with, among
others, Morgens, Keyport, SunAmerica and affiliates of Restructuring Capital,
each of which owns more than 5% of the Common Stock. Pursuant to the Equity
Registration Rights Agreement dated June 30, 1993, among the Company and the
Holders of Registerable Shares referred to therein, each of the three largest
holders of Common Stock is entitled to cause the Company to file a registration
statement and holders of 51% or more of the shares of Common Stock then subject
to the Equity Registration Rights Agreement are entitled to cause the Company to
file two registration statements, registering under the Securities Act, the
offer and sale of Common Stock owned by such persons. All other Holders of
Registerable Shares will be entitled to have shares of Common Stock owned by
them included in any such registrations in addition, the agreement grants to
each party the right to have included, subject to certain limitations, all
shares of Common Stock owned by such party in any registration statement filed
by the Company under the Securities Act, including those filed on behalf of the
Company or security holders not party to the Equity Registration Rights
Agreement. Pursuant to the agreement, the Company will pay all costs and
expenses, other than underwriting discounts and commissions, in connection with
the registration and sale of Common Stock under the agreement.
Certain Relationships and Related Transactions
Robert R. Barengo was formerly a director and 10% stockholder of Leroy's. In May
1996, Leroy's became a wholly-owned subsidiary of AWI, a publicly hold
corporation listed on NASDAQ. Mr. Barengo is currently a director of AWI and
owns 7% of the outstanding stock of AWI, which leases approximately 12,000
square feet of the Riviera Hotel & Casino's casino floor. AWI is the operator of
the Riviera Hotel & Casino's sports book operations. This lease was assumed by
the Company from Riviera, Inc. and is still in effect. The lease provides for
rental payments based upon the monthly and annual revenues derived by AWI from
the location. From January 1, 1998
15
<PAGE>
through December 31, 1998, AWI paid aggregate rent to ROC of approximately
$212,000 The Company believes that the terms of the lease with AWI are at least
as favorable to the Company and ROC as could have been obtained from
unaffiliated third parties and are at least as favorable as terms obtained by
other casino hotels in Las Vegas. AWI also owns Howard Johnson Hotel & Casino
located at the intersection of Tropicana Avenue and Interstate 15 in Las Vegas,
Nevada. The hotel's operations include an International House of Pancakes
restaurant, on-site food and beverage sales, 150 guest rooms (no suites) and
approximately 53 gaming machines. The Company believes that this casino/hotel's
operations are not competitive with the Riviera Hotel & Casino.
As of April 1, 1998, the Company entered into a letter agreement with Mr.
Barengo, a member of the Bar of the State of Nevada, pursuant to which Mr.
Barengo has been assisting the Company and its outside counsel in enforcing the
Company's rights under the Riviera Merger Agreement and with related matters.
Under such letter agreement, Mr. Barengo receives a fee of $10,000 per month for
his consulting services, which services commenced on April 1, 1998. Either party
may terminate the letter agreement on no less than seven days prior written
notice.
From August 1996 until February 1997, Riviera Gaming Management-Elsinore, Inc.
("RGME"), an indirect wholly-owned subsidiary of the Company, operated the Four
Queens located adjacent to the Golden Nugget on Fremont Street in downtown Las
Vegas under an interim management agreement for a fee of $83,333 per month, A
long-term management agreement (the "Management Agreement") with Elsinore
Corporation ("Elsinore"), which owns the Four Queens through its wholly-owned
subsidiary Four Queens, Inc., went into effect on February 28, 1997, the
effective date of the Chapter 11 plan of reorganization of Elsinore. The Morgens
Entities, beneficial owners of approximately 25% of the common stock of the
Company, own over 94% of the voting stock of Elsinore. The Company believes that
the terms of the Management Agreement are no less favorable to the Company than
if the Company had negotiated with an independent third party. The term of the
Management Agreement is approximately 40 months, subject to earlier termination
or extension. Either party can terminate the Management Agreement if (i)
substantially all the Four Queens' assets are sold; (ii) the Four Queens is
merged; or (iii) a majority of the Four Queens' or Elsinore's shares are sold.
Upon such termination RGME will receive a $2.0 million termination bonus minus
any amount realized or realizable upon exercise of the warrants. Either party
may terminate the Agreement if cumulative earnings before interest, taxes,
depreciation, and amortization ("EBITDA") for the first two fiscal years are
less than $12.8 million. The Four Queens EBITDA for the 24 months ending March
31, 1999 was approximately $10.2 million. Management and the Board of Directors
of Elsinore have agreed to continue the agreement for its original term
provided, however, that it can be terminated by either party on six month's
notice. RGME is paid a minimum annual management fee of $1.0 million, payable in
equal monthly installments. In addition, RGME is entitled to a fee of 25% of the
amount by which the Four Queens EBITDA exceeds $8 million in any fiscal year.
Based upon current historical and projected EBITDA, it is unlikely that the $8
million threshold will be met. RGME has received warrants to purchase 1,125,000
shares of common stock of Elsinore, exercisable during the term or extended term
of the Management Agreement at an exercise price of $1 per share. In
consideration of Four Queens' failure to meet the $12.8 million EBITDA threshold
for the first two years of the agreement, RGME and Elsinore are negotiating a
revised termination bonus.
Since March 5, 1997, Mr. Westerman has been the President and a director of Four
Queens, Inc. Mr. Westerman has also been a director of Darling International
Inc., a publicly held company, since June 23, 1997. Morgens Entities own 46.13%
of the stock of Darling International, Inc. which is primarily in the business
of processing animal and bakery waste by-products.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's directors and executive
officers and any persons who own more than ten percent of the Company's Common
Stock to file with the Securities and Exchange Commission various reports as to
ownership of such Common Stock. Such persons are required by Securities and
Exchange Commission regulation to furnish the Company with copies of all Section
16(a) forms they file. To the Company's knowledge, based solely on its review of
the copies of such reports furnished to the Company and written representations
to the Company, during the last fiscal year (i) the Form 5 filed by Mr. Barengo
for the fiscal year ending December 31, 1998 was not timely filed, (ii) a Form 4
filed by Richard Barovick to report purchases of Common Stock in August 1998 was
18 days late; (iii) a Form 4 filed by Michael Falba to report dispositions of
16
<PAGE>
Common Stock in March 1998 was 13 days late; and (iv) other than these specific
exceptions, the aforesaid Section 16(a) filing requirements of these and all
other officers and directors were met on a timely basis during 1998.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Deloitte & Touche LLP, certified public
accountants, as the independent certified public accountants of the Company for
the fiscal year ending December 31, 1999. Deloitte & Touche LLP have been the
accountants for the Company and its predecessor since prior to 1988.
Representatives of Deloitte & Touche LLP ("Representatives") are expected to be
present at the Annual Meeting. The Representatives will have the opportunity to
make a statement, although they are currently not expected to do so. The
Representatives are expected to be available to respond to appropriate
questions.
OTHER MATTERS
The Board of Directors of the Company knows of no other matters which are to be
brought before the Annual Meeting. If any other matters should be presented for
proper action, it is the intention of the persons named in the Proxy to vote in
accordance with their discretion pursuant to the terms of the proxy.
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders intended to be presented at the 2000 Annual Meeting of
Stockholders must be received at the Company's executive offices on or before
December 31, 1999, for inclusion in the Company's Proxy Statement with respect
to such meeting.
RIVIERA HOLDINGS CORPORATION
By William L. Westerman
President, Chief Executive Officer and
Chairman of the Board of Directors
IT IS IMPORTANT THAT THE PROXIES BE RETURNED PROMPTLY. THEREFORE, STOCKHOLDERS
WHO DO NOT EXPECT TO ATTEND THE MEETING IN PERSON ARE URGED TO FILL IN, SIGN,
DATE AND RETURN THE ENCLOSED PROXY.
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ANNEX I
ARTICLE IX
COMPLIANCE WITH THE APPLICABLE GAMING LAWS
Section 1. Definitions. For purposes of this Article IX, the following
terms shall have the meaning specified below:
(a) "Affiliate" shall have the meaning ascribed to
such term in Rule 12b-2 promulgated by the Securities and Exchange
Commission ("SEC") under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
(b) "Affiliated Companies" shall mean those companies
directly or indirectly affiliated or under common Ownership or Control
with the corporation, including, without limitation, subsidiaries,
holding companies and intermediary companies (as those and similar
terms are defined in the Gaming Laws of the applicable Gaming
Jurisdictions) that are registered or licensed under applicable Gaming
Laws, or which are seeking to be registered or licensed.
(c) "Divestiture" shall mean the sale or other
disposition of securities in a manner which would not (i) violate the
federal securities laws or the securities laws of any state and (ii)
result or be likely to result in any Person being required to be
licensed, found suitable or otherwise approved by any Gaming Authority.
(d) "Divestiture Date" shall mean, with respect to
any Divestiture, the date on which such Divestiture must be completed,
as determined by any Gaming Authority or the Board of Directors of the
corporation in its sole discretion, as applicable.
(e) "Divestiture Notice" shall mean that notice
requiring Divestiture served by the corporation on an Unsuitable person
if a Gaming Authority requires the corporation, or the Board of
Directors of the corporation deems it necessary or advisable, to
require such Unsuitable Person to undertake a Divestiture of the
corporation's securities. Each Divestiture Notice shall set forth (a)
the Divestiture Date, (b) the kind and number of shares of securities
required to be divested, and (c) any other requirements relating to
such Divestiture.
(f) "Effective Date" shall mean the date that a
Certificate of Amendment amending the Second Restated Articles of
Incorporation of the corporation to include the provisions of this
Article IX becomes effective under Nevada law.
(g) "Existing Holder" shall mean any Person who Owns
or Controls on the Effective Date any securities of the corporation or
any securities of or interest in any affiliated Company, and any
Affiliate of such Person as of such date.
(h) "Gaming" or "Gaming Activities" shall mean the
conduct of gaming and gambling activities, or the use of gaming
devices, equipment and supplies in the operation of a casino or other
gaming enterprise, including, without limitation, slot machines, gaming
devices, games, gaming tables, cards, dice, gaming chips, player
tracking systems, cashless wagering systems and related and associated
equipment and supplies.
(i) "Gaming Authorities" shall mean all
international, foreign, federal, state and local regulatory and
licensing bodies and agencies with authority over Gaming within any
Gaming Jurisdiction.
(j) "Gaming Jurisdictions" shall mean all
jurisdictions, domestic and foreign, and their political subdivisions,
in which Gaming Activities are lawfully conducted.
(k) "Gaming Laws" shall mean all laws, statutes and
ordinances pursuant to which any Gaming Authority possesses regulatory
and licensing authority over Gaming within any Gaming Jurisdiction, and
all rules and regulations promulgated by such Gaming Authority
thereunder.
(l) "Gaming Licenses" shall mean all licenses,
permits, approvals, authorizations, registrations, findings of
suitability, franchises and entitlements issued by a Gaming Authority
necessary for or relating to the conduct of Gaming Activities.
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(m) "Ownership or Control" (and derivatives thereof)
shall mean (i) ownership or record, (ii) "beneficial ownership" as
defined in Rule 13d-3 promulgated by the SEC under the Securities Act,
and (iii) the power to direct and manage, by agreement, contract,
agency or other manner, the voting or management rights or disposition
of securities of the corporation.
(n) "Person" shall mean an individual, partnership,
corporation, limited liability company, trust or any other entity.
(o) "Redemption Date" shall mean the date by which
the securities Owned or Controlled by an Unsuitable Person are to be
redeemed by the corporation.
(p) "Redemption Notice" shall mean that notice of
redemption served by the corporation on an Unsuitable Person if a
Gaming Authority requires the corporation, or the Board of Directors of
the corporation deems it necessary or advisable, to redeem such
Unsuitable Person's securities. Each Redemption Notice shall set forth
(a) the Redemption Date; (b) the kind and number of shares of
securities to be redeemed; (c) the Redemption Price and the manner of
payment therefor; (d) the place where certificates for such shares
shall be surrendered for payment; and (e) any other requirements of
surrender of the certificates, including how they are to be endorsed,
if at all.
(q) "Redemption Price" shall mean the per share price
for the redemption of any securities to be redeemed pursuant to this
Article, which shall be that price (if any) required to be paid by the
Gaming Authority making the finding of unsuitability, or if such Gaming
Authority does not require a certain price per share to be paid, that
sum deemed reasonable by the Corporation, which shall in no event be in
excess of the closing sales price of the securities on the national
securities exchange on which such shares are then listed on the date
the notice of redemption is delivered to the Unsuitable Person by the
corporation; or, if such shares are not then listed for trading on any
national securities exchange, then the closing sales price of such
shares as quoted in the NASDAQ National Market System; or if the shares
are not then so quoted, then the mean between the representative bid
and the ask price as quoted by NASDAQ or another generally recognized
reporting system. The Redemption Price may be paid in cash, by
promissory note, or both, as required by the applicable Gaming
Authority and, if not so required, as the corporation elects.
(r) "Unsuitable Person" shall mean a Person who Owns
or Controls any securities of the corporation or any securities of or
interest in any Affiliated Company, and any Affiliate of such Person,
(i) that is determined by a Gaming Authority to be unsuitable to Own or
Control such securities or unsuitable to be connected or associated
with a Person engaged in Gaming Activities in that Gaming Jurisdiction,
(ii) that has an Affiliate that is determined by a Gaming Authority to
be unsuitable to Own or Control such securities or unsuitable to be
connected or associated with a Person engaged in Gaming Activities in
that Gaming Jurisdiction, or (iii) who causes the corporation or any
Affiliated Company to lose or to be threatened with the loss of, or
who, in the sole discretion of the Board of Directors of the
corporation, is deemed likely to jeopardize the corporation's or any
Affiliated Company's right to use of, entitlement to or application
for, any Gaming License.
Section 2. Compliance with Gaming Laws. The corporation, all
Persons Owning or Controlling securities of the corporation and any
Affiliated Companies, and each director and officer of the corporation
and any Affiliated Companies shall comply with all requirements of the
Gaming Laws in each Gaming Jurisdiction in which the corporation or any
Affiliated Companies conducts or seeks to conduct Gaming Activities.
All securities of the corporation shall be held subject to the
requirements of such Gaming Laws.
Section 3. Finding of Unsuitability
(a) The securities Owned or Controlled by an
Unsuitable Person shall be redeemable by the corporation, out of funds
legally available therefor, by appropriate action of the Board of
Directors, to the extent required by the Gaming Authority making the
determination of unsuitability or as required to comply with the Gaming
Laws to obtain or maintain, Gaming Licenses in such jurisdictions, or
renewals thereof, or to the extent deemed necessary or advisable by the
Board of Directors of the corporation in its good faith determination.
If a Gaming Authority requires the corporation, or the Board of
Directors of the corporation deems it necessary or advisable, to redeem
such securities, the corporation shall serve a Redemption Notice on the
Unsuitable Person and shall purchase
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the securities on the Redemption Date and for the Redemption Price set
forth in the Redemption Notice. From and after the Redemption Date,
such securities shall no longer be deemed to be outstanding and all
rights of the Unsuitable Person or any Affiliate of the Unsuitable
Person therein, other than the right to receive the Redemption Price,
shall cease. The Unsuitable Person shall surrender the certificates for
any securities to be redeemed in accordance with the requirements of
the Redemption Notice.
(b) In the event the Board of Directors of the
corporation in its sole discretion determines that a redemption of the
securities of an Unsuitable Person in the manner set forth in clause
(a) of this Section 3 would adversely affect the corporation, then in
lieu of a Redemption Notice, the corporation shall serve the Unsuitable
Person with a Divestiture Notice. The Unsuitable Person shall
thereafter promptly undertake to complete such Divestiture by the
Divestiture Date. The corporation may elect to, but shall not be
required to, file a registration statement under applicable securities
laws to register such securities, in which case the Unsuitable Person
will cooperate fully with the corporation in the preparation and filing
of such registration statement.
(c) Commencing on the date that a Person is found to
be an Unsuitable Person, and until the securities Owned or Controlled
by the Unsuitable Person or the Affiliate of an Unsuitable Person are
redeemed or divested in accordance with this Section 3, or such Person
is no longer an Unsuitable Person or an affiliate of an Unsuitable
Person, the Unsuitable Person and each Affiliate of an Unsuitable
Person may not (a) receive any dividend or interest with regard to the
securities; (b) exercise, directly or indirectly or through any proxy,
trustee, or nominee, any voting or other right conferred by such
securities, and such securities shall not for any purposes be included
in the securities of the corporation entitled to vote, or (c) receive
any remuneration in any form from the corporation or an Affiliate
Company for services rendered or otherwise.
Section 4. Issuance and Transfer of Securities. The
corporation shall not issue or transfer any securities or any interest,
claim or charge thereon or thereto except in accordance with applicable
Gaming Laws. The issuance or transfer of any securities in violation
thereof shall be ineffective until (a) the corporation shall cease to
be subject to the jurisdiction of the applicable Gaming Authorities, or
(b) the applicable Gaming Authorities shall, by affirmative action or
notice, validate said issuance or transfer or waive any defect in said
issuance or transfer.
Section 5. Indenture Restrictions. From and after Effective
Date, the corporation shall cause to be placed in every indenture or
other operative document relating to publicly traded securities (other
than capital stock) of the corporation or any of its subsidiaries
entered into following such date a provision requiring that any Person
or Affiliate of a Person who holds the indebtedness represented by that
indenture and is found to be unsuitable to hold such interest shall
have the interest redeemed or shall dispose of the interest in the
corporation in the manner set forth in the indenture or other document.
Section 6. Notices. All notices given by the corporation
pursuant to this Article, including Redemption Notices, shall be in
writing and shall be deemed given when delivered by personal service or
telegram, facsimile, overnight courier or first class mail, postage
prepaid, to the Person's address as shown on the corporation's books
and records.
Section 7. Indemnification. Any Unsuitable Person and any
Affiliate of an Unsuitable Person shall indemnify the corporation and
its Affiliated Companies for any and all costs, including attorneys'
fees, incurred by the corporation and its Affiliated Companies as a
result of such Unsuitable Person's or Affiliate's continuing Ownership
or Control or failure to promptly divest itself of any securities in
the corporation.
Section 8. Injunctive Relief. The corporation is entitled to
injunctive relief in any court of competent jurisdiction to enforce the
provisions of this Article and each holder of the securities of the
corporation shall be deemed to have acknowledged, by acquiring the
securities of the corporation, that the failure to comply with this
Article will expose the corporation to irreparable injury for which
there is no adequate remedy at law and that the corporation is entitled
to injunctive relief to enforce the provisions of this Article.
Section 9. Use of terms. All references to any term in the
plural shall be deemed to include the singular of such term and vice
versa.
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RIVIERA HOLDINGS CORPORATION
2901 Las Vegas Boulevard South, Las Vegas, Nevada 89109
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS ON JUNE 8, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitute(s) and appoint(s) William L. Westerman
and Duane R. Krohn, and each of them, as proxies, with full power of
substitution, to vote all shares of Common Stock of Riviera Holdings Corporation
(the "Company") which the undersigned is (are) entitled to vote at the Annual
Meeting of Stockholders of the Company to be held at the Riviera Hotel, 2901 Las
Vegas Boulevard South, Las Vegas, Nevada 89109, on Tuesday, June 8, 1999, at
2:00 p.m., local time, and at any adjournment(s) or postponement(s) thereof (the
"Annual Meeting"), on all matters that may come before such Annual Meeting. Said
proxies are instructed to vote on the following matters in the manner herein
specified.
(Continued and to be signed on reverse side)
<PAGE>
The Board of Directors recommends a vote FOR the nominees for directors.
- --------------------------------------------------------------------------------
1. Election of the following Four Nominees as Directors of the Company:
William L. Westerman; Robert R. Barengo; Richard L. Barovick; and
James N. Land, Jr.
FOR nominees listed above WITHHOLDING AUTHORITY
(except as indicated below) to vote for all nominees listed above
FOR all nominees listed above except withhold authority to vote for the
following nominee(s):
The Board of Directors recommends a vote FOR the adoption of Proposal 2.
2. Proposal to approve and adopt the Amendment to the Company's Second Restated
Articles of Incorporation which is attached in its entirety as Annex I to the
Proxy Statement. The Amendment would provide that (i) all persons owning or
controlling securities of the Company and its affiliated companies (which
securities were acquired after the Amendment becomes effective) must comply with
all gaming laws in each jurisdiction in which the Company or its affiliated
companies conduct or plan to conduct gaming activities, and (ii) the Company
could redeem, or force the divestiture of, the Company's securities owned by any
person or an affiliate of such person who was found to be "unsuitable" by a
gaming authority to own or control securities of the Company or its affiliated
companies or who causes the Company or any of its affiliated companies to be
threatened with the loss of any gaming license.
FOR AGAINST ABSTAIN
3. In their discretion the proxies are authorized to vote upon such other
matters as may properly come before the Annual Meeting.
IF THIS PROXY IS PROPERLY EXECUTED, THE SHARES OF COMMON STOCK COVERED HEREBY
WILL BE VOTED AS SPECIFIED HEREIN. IF NO SPECIFICATION IS MADE, SUCH SHARES WILL
BE VOTED "FOR" THE NOMINEES FOR DIRECTOR AND AS THE PROXIES DEEM ADVISABLE ON
SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
The undersigned hereby revoke(s) all previous Proxies and acknowledge(s) receipt
of the copy of the Notice of Annual Meeting dated May 14, 1999, the Proxy
Statement attached thereto and the Annual Report of the Company for the fiscal
year ended December 31, 1998 as forwarded therewith.
PLEASE MARK, SIGN AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
Signature _____________ Signature _______________ Dated ___________, 1999
Note: If stock is held in the names of joint owners, each should sign. Persons
signing as an attorney, executor, administrator, guardian, trustee, corporate
officer or in any other fiduciary or representative capacity should give full
title.
