As filed with the Securities and Exchange Commission on _______ __, 1999
Registration No. 333-81613
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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Riviera Black Hawk, Inc.
(Exact name of registrant as specified in its charter)
Colorado 0000899647 86-0886265
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
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444 Main Street
Black Hawk, Colorado 80422
(303) 582-1000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
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William L. Westerman
Chief Executive Officer and Director
Riviera Black Hawk, Inc.
444 Main Street Black Hawk,
Colorado 80422
(303) 582-1000
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
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With Copies to:
Fredric J. Klink
Dechert Price & Rhoads
30 Rockefeller Plaza
New York, New York 10112
(212)698-3500
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration
Statement.
If any of the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box.
If this form is filed to register additional securities or an offering
pursuant to Rule 462(b)under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
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CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Offering Price Aggregate Offering Amount of
Securities to be Registered Registered Per Unit (1) Price (1) Registration Fee
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13% First Mortgage Notes due 2005 With Contingent
Interest....................................... $45,000,000 100% $45,000,000 $12,510
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(1) Estimated pursuant to Rule 457(f) solely for purposes of calculating the
registration fee.
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The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED ________ __, 1999
PROSPECTUS
Offer to Exchange
13% First Mortgage Notes due 2005 With Contingent Interest for all outstanding
13% First Mortgage Notes due 2005 With Contingent Interest
of
RIVIERA BLACK HAWK, INC.
The exchange offer will expire at 5:00 P.M.,
New York City time, on ______________ __, 1999 (90 days after
the effective date of this Registration Statement), unless extended.
-------------------------
Terms of the exchange offer:
- We will exchange all existing notes that are validly tendered and not
withdrawn prior to the expiration of the exchange offer.
- You may withdraw tenders of existing notes at any time prior to the
expiration of the exchange offer.
- We believe that the exchange of existing notes will not be a taxable
event for U.S. federal income tax purposes, but you should see "United
States Federal Income Tax Considerations" on page 64 for more
information.
- We will not receive any proceeds from the exchange offer.
- The terms of the exchange notes are substantially identical to the
existing notes, except that the exchange notes are registered under
the Securities Act of 1933 and the transfer restrictions and
registration rights applicable to the existing notes do not apply to
the exchange notes.
- Each broker-dealer that receives exchange notes are required to
deliver a prospectus in connection with any resale of such note.
- Each broker-dealer that acquired existing notes as a result of market
making or other trading activities may use the exchange offer
prospectus, as supplemented or amended for resales of exchange notes.
- Broker-dealers that acquired the existing notes directly from the
Company in the initial offering and not as a result of market making
or trading activities cannot use the prospectus for the exchange offer
in connection with resales of the exchange notes and, absent an
exemption, must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with secondary resale
of the exchange notes and cannot rely on the position of the staff in
Exxon Capital Holdings Corporation (avail. April 13, 1989).
-------------------------
See "Risk Factors" beginning on page 8 for a discussion of risks that
should be considered by holders.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
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The date of this prospectus is _______ __, 1999.
TABLE OF CONTENTS
Page
Summary......................................................1
Risk Factors.................................................8
Use Of Proceeds.............................................15
Capitalization..............................................15
Selected Financial Information..............................16
Ratio Of Earnings To Fixed Charges..........................17
Management's Discussion And Analysis Of Financial Condition
And Results Of Operations...................................18
The Exchange Offer..........................................21
Business....................................................28
Gaming And Liquor Regulatory Matters........................33
Material Agreements.........................................37
Management..................................................39
Principal Stockholders......................................41
Relationships And Related Transactions......................43
Description Of Notes........................................44
United States Federal Income Tax Considerations.............64
Plan Of Distribution........................................67
Legal Matters...............................................68
Experts.....................................................68
Available Information.......................................68
You should rely only on the information contained in this prospectus or to which
we have referred you. We have not authorized anyone to provide you with
information that is different. This prospectus may only be used where it is
legal to sell these securities. The information in this prospectus may only be
accurate on the date of this document.
ii
FORWARD-LOOKING STATEMENTS
We make "forward-looking statements" throughout this prospectus. Whenever
you read a statement that is not simply a statement of historical fact (such as
when we describe what we "believe," "expect" or "anticipate" will occur, and
other similar statements), you must remember that our expectations may not be
correct, even though we believe they are reasonable. We do not guarantee that
the transactions and events described in this prospectus will happen as
described or that they will happen at all. The forward-looking information
contained in this prospectus is generally located in the material set forth
under the headings "Summary," "Risk Factors," "Capitalization," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business" but may be found in other locations as well. These forward-looking
statements generally relate to our plans and objectives for future operations
and are based upon our management's reasonable estimates of future results or
trends. The factors that may affect our expectations of our operations, markets
and services include, among others, the following:
- - local and regional economic and business conditions;
- - changes or developments in laws, regulations or taxes;
- - actions taken or omitted to be taken by third parties, including our
customers, suppliers, competitors and stockholders, as well as governmental
authorities;
- - competition;
- - the loss of any licenses or permits or our failure to obtain our gaming or
liquor license on a timely basis;
- - delays in completing the construction of the casino;
- - changes in our business strategy, capital improvements or development
plans;
- - the availability of additional capital to support capital improvements and
development; and
- - other factors discussed under "Risk Factors" or elsewhere in this
prospectus.
You should read this prospectus completely and with the understanding that
actual future results may be materially different from what we expect. We will
not update these forward-looking statements, even though our situation may
change in the future.
iii
SUMMARY
This summary highlights selected information from this prospectus and may
not contain all the information that is important to you. You should carefully
read this entire prospectus, including any information to which we refer you,
before deciding to purchase any of the notes. The terms "Company," "our
company," "we" and "us" refer to Riviera Black Hawk, Inc. and the terms "Riviera
Black Hawk" and "our casino" refer to the casino we are constructing in Black
Hawk, Colorado. The term "Riviera Holdings" refers to Riviera Holdings
Corporation, our parent company.
The Exchange Offer
On June 3, 1999, we sold $45.0 million aggregate principal amount of 13%
First Mortgage Notes due 2005 With Contingent Interest (the "existing notes").
In connection with this offering, we entered into a registration rights
agreement with the initial purchaser of the existing notes, Jefferies & Company,
Inc., in which we agreed, among other things, to deliver this prospectus to you
and to complete an exchange offer for the existing notes. We are offering to
exchange $45.0 million aggregate principal amount of our 13% First Mortgage
Notes due 2005 With Contingent Interest, which have been registered under the
Securities Act (the "exchange notes" or the "notes"), for a like aggregate
principal amount of our existing notes (the "exchange offer"). You are entitled
to exchange your existing notes for exchange notes with substantially identical
terms. We urge you to read the discussions under the headings "The exchange
offer" and "The exchange notes" in this Summary for further information
regarding the exchange offer and the exchange notes.
The Company
Our company, a wholly-owned subsidiary of Riviera Holdings, is constructing
and will own and operate a casino with entertainment and parking facilities in
Black Hawk, Colorado, approximately 40 miles west of Denver. Our casino will be
one of the largest in Colorado with approximately 1,000 slot machines and 12
blackjack tables. In Colorado, each slot machine and each table game is
considered one gaming position.
We expect to open our casino in the first quarter of 2000. The total cost
for our casino, excluding capitalized interest, is expected to be $77.1 million.
Riviera Holdings owns all of our stock as a result of a $20 million equity
investment in us (excluding capitalized interest).
Our casino will be managed by a wholly-owned subsidiary of Riviera
Holdings. Riviera Holdings owns and operates the Riviera Hotel & Casino located
on the Las Vegas Strip. Upon completion, our casino will be the only casino in
the Black Hawk/Central City market developed and operated by a Las Vegas Strip
casino company.
The Black Hawk/Central City Market
Limited stakes gaming -- a maximum single bet of $5 -- is permitted in
Colorado in three historic mining towns -- Black Hawk, Central City and Cripple
Creek. 95% of Colorado gaming revenues are attributable to slot play. The Black
Hawk/Central City market primarily caters to "day-trip" customers from Denver,
Boulder, Fort Collins and Golden as well as Cheyenne, Wyoming area.
Approximately 3.3 million people reside within a 100-mile radius of the Black
Hawk/Central City market, of which 1.9 million reside in the Denver metropolitan
area.
Strengths
We believe that the following competitive strengths will contribute to the
success of our casino:
- Our casino is located at the entrance to Black Hawk and will be one of
the first three casinos encountered when traveling from Denver to the
Black Hawk/Central City market.
- The Black Hawk/Central City market lacks adequate parking. Our casino
will feature an attached 175,000 square foot multi-level parking
facility with capacity for approximately 520 vehicles (92% of which
will be covered). In addition to valet parking, we will offer patrons
the convenience of a self-park option. We will not charge for parking.
1
- Our approximately 1,000 gaming positions will be significantly larger
than the market average of 336 positions per casino as of December 31,
1998, and combined with our ability to place all gaming devices on a
single floor, we will create an atmosphere that is closer to that
found in Las Vegas casinos than that typically found in casinos in the
Black Hawk/Central City market. Unlike most other Central City/Black
Hawk casinos, we will offer food service through our 265-seat casual
dining restaurant and entertainment through our 7,000 square foot
entertainment center.
Weaknesses
- Neither we nor Riviera Holdings has managed a casino in Colorado.
- Our attempt to stress the atmosphere of a Las Vegas casino may not be
accepted in the Black Hawk/Central City market.
- Our cash flow may be insufficient to enable us to pay the $5.85
million of fixed interest per annum on the notes after the first three
years of operation.
- Our equity is limited and Riviera Holdings has made only limited
commitments related to construction and opening and to subsidize cash
flow shortfalls and interest on the notes for the first three years of
operation.
Riviera Holdings Corporation
Riviera Holdings owns the Riviera Hotel & Casino located on the Las Vegas
Strip. Riviera Holdings will be obligated under the completion capital
commitment to contribute to us up to $10.0 million of cash if at any time there
are insufficient funds available to enable our casino to be operating by May 31,
2000. In addition, if our casino is not operating by May 31, 2000, Riviera
Holdings will be obligated to contribute on that date $10.0 million in cash less
any amounts previously contributed under the completion capital commitment.
Furthermore, if (1) we do not have the necessary funds to make a payment of
fixed interest on the notes during our first three years of operations or (2)
our cash flow is less than $9.0 million in any of our first three years of
operations, Riviera Holdings will be obligated under the keep-well agreement to
contribute cash to us to make up those amounts, subject to a maximum of $5.0
million for any one operating year and $10.0 million in the aggregate. Riviera
Holdings has also deposited $5.0 million to insure a title insurance company
against potential mechanics lien claims. As of June 30, 1999, Riviera Holdings
had about $46.6 million of unrestricted cash and short term investments to
support these commitments.
The Transactions
The existing notes were issued on June 3, 1999. The proceeds from the sale
of the existing notes was approximately $45.0 million, which were used as
follows: (1) approximately $31.9 million was deposited into a construction
disbursement account, of which $10.1 million was used to reimburse Riviera
Holdings for amounts advanced to us to cover construction and development costs
incurred prior to the sale of the existing notes, and the remaining $21.8
million has been and will continue to be used to finance the cost to develop,
construct, equip and open the Riviera Black Hawk, (2) $5.0 million was deposited
into a completion reserve account to be held as a reserve in case there are
insufficient funds in the construction disbursement account to complete the
Riviera Black Hawk, (3) $5.1 million was deposited into an interest reserve
account and used to purchase government securities representing funds sufficient
to pay the first two payments of fixed interest on the notes and (4)
approximately $3.0 million was used to pay fees and expenses relating to the
foregoing as well as the sale of the existing notes.
2
The Exchange Offer
Securities Offered............ Up to $45,000,000 aggregate principal amount
of 13% First Mortgage Notes due 2005 With
Contingent Interest. The terms of the
exchange notes and existing notes are
identical in all material respects, except
for transfer restrictions and registration
rights relating to the existing notes.
The Exchange Offer............. We are offering the exchange notes to you in
exchange for a like principal amount of
existing notes. Existing notes may be
exchanged only in integral multiples of
$1,000.
Expiration date; Withdrawal
of Tender................... The exchange offer will expire at 5:00 p.m.,
New York City time, on ______ __ , 1999 (90
days after the effective date of this
Registration Statement), or such later date
and time to which it may be extended by us
but in no event beyond December 31, 1999. The
tender of existing notes pursuant to the
exchange offer may be withdrawn at any time
prior to the expiration date. Any existing
notes not accepted for exchange for any
reason will be returned without expense to
the tendering holder thereof as promptly as
practicable after the expiration or
termination of the exchange offer.
Conditions to the Exchange
Offer........................ Our obligation to accept for exchange, or to
issue exchange notes in exchange for, any
existing notes is subject to customary
conditions relating to compliance with any
applicable law or any applicable
interpretation by the staff of the Securities
and Exchange Commission, the receipt of any
applicable governmental approvals and the
absence of any actions or proceedings of any
governmental agency or court which could
materially impair our ability to consummate
the exchange offer. We currently expect that
each of the conditions will be satisfied and
that no waivers will be necessary. See "The
Exchange Offer--Conditions to the exchange
offer."
Procedures for Tendering Existing
Notes......................... If you wish to accept the exchange offer and
tender your existing notes, you must
complete, sign and date the Letter of
Transmittal, or a facsimile thereof, in
accordance with its instructions and the
instructions in this prospectus, and mail or
otherwise deliver such Letter of Transmittal,
or such facsimile, together with such
existing notes and any other required
documentation, to the exchange agent at the
address set forth herein. See "The Exchange
Offer--Procedures for Tendering existing
notes."
Use of Proceeds.................. We will not receive any proceeds from the
exchange offer.
Exchange Agent................... IBJ Whitehall Bank & Trust Company is serving
as the exchange agent in connection with the
exchange offer.
Federal Income Tax Consequences.. The exchange of Notes pursuant to the
exchange offer should not be a taxable event
for federal income tax purposes. See "United
States Federal Income Tax Considerations." We
will not receive any proceeds from the
exchange offer.
3
Consequences of Exchange Offer
Based on certain interpretive letters issued by the staff of the Securities
and Exchange Commission to third parties in unrelated transactions, we are of
the view that holders of existing notes (other than any holder who is an
"affiliate" of our company within the meaning of Rule 405 under the Securities
Act) who exchange their existing notes for exchange notes pursuant to the
exchange offer generally may offer such exchange notes for resale, resell such
exchange notes and otherwise transfer such exchange notes without compliance
with the registration and prospectus delivery provisions of the Securities Act,
provided:
- the exchange notes are acquired in the ordinary course of the holders'
business;
- the holders have no arrangement with any person to participate in a
distribution of such exchange notes; and
- neither the holder nor any other person is engaging in or intends to
engage in a distribution of the exchange notes.
Each broker-dealer that receives exchange notes for its own account in
exchange for existing notes must acknowledge that it will deliver a prospectus
in connection with any resale of such exchange notes. See "Plan of
Distribution." In addition, to comply with the securities laws of certain
jurisdictions, if applicable, the exchange notes may not be offered or sold
unless they have been registered or qualified for sale in such jurisdiction or
in compliance with an available exemption from registration or qualification. We
have agreed, pursuant to the registration rights agreement and subject to
limitations specified in the registration rights agreement, to register or
qualify the exchange notes for offer or sale under the securities or blue sky
laws of such jurisdictions as any holder of the Notes reasonably requests in
writing. If a holder of existing notes does not exchange such existing notes for
exchange notes pursuant to the exchange offer, such existing notes will continue
to be subject to the restrictions on transfer contained in the legend printed on
the existing notes. In general, the existing notes may not be offered or sold,
unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. Holders of existing notes do not have any appraisal or
dissenters' rights under the Colorado Business Corporation Act in connection
with the exchange offer. See "The Exchange Offer--Consequences of Failure to
Exchange; Resales of exchange notes."
The existing notes are currently eligible for trading in the Private
Offerings, Resales and Trading through Automated Linkages ("PORTAL") market.
Following commencement of the exchange offer but prior to its consummation, the
existing notes may continue to be traded in the PORTAL market. Following
consummation of the exchange offer, the exchange notes will not be eligible for
PORTAL trading.
4
The Exchange Notes
The terms of the exchange notes and the existing notes are identical in all
material respects, except for transfer restrictions and registration rights
relating to the existing notes.
Securities Offered.............. $45.0 million principal amount of 13% First
Mortgage Notes due 2005 With Contingent
Interest.
Maturity Date................... May 1, 2005.
Interest Payment Dates.......... May 1 and November 1 of each year, beginning
on November 1, 1999.
Fixed Interest.................. Fixed interest will be payable on the notes
at a rate of 13% per annum.
Contingent Interest............. Contingent interest will be payable on the
notes on each interest payment date after the
Riviera Black Hawk begins operating. However,
no contingent interest will accrue prior to
the date that the Riviera Black Hawk begins
operating. The amount of contingent interest
will, subject to certain limits, be equal to
5% of our cash flow for the two fiscal
quarters ending prior to the record date
applicable to the relevant interest payment
date. We may defer paying any or all of an
installment of contingent interest under
circumstances described in the section
"Description of Notes-- Principal, Maturity
and Interest."
Ranking......................... The notes will be senior secured obligations,
will rank equal in payment preference with
all of our existing and future senior
indebtedness and will rank senior in right of
payment to all of our existing and future
subordinated indebtedness. Currently, the
notes are our only outstanding senior
indebtedness and we have no existing
subordinated indebtedness.
Security........................ The notes will, with certain exceptions, be
secured by a first priority lien on
substantially all of our existing and future
assets, including, without limitation:
o a pledge of the net proceeds from the sale
of the existing notes which have been
deposited into restricted disbursement
accounts to be used to fund construction
and development of the Riviera Black Hawk
and pay the first two payments of fixed
interest on the notes;
o substantially all of the assets that will
comprise our casino, other than (1)
furniture, fixtures and equipment and (2)
the assets of our future unrestricted
subsidiaries;
o agreements pursuant to which our casino
will be constructed, operated and managed;
and
o licenses and permits relating to the
construction, operation and management of
our casino, other than our Colorado gaming
and liquor licenses.
5
Completion Capital Commitment... Riviera Holdings, our parent company, will be
obligated under the completion capital
commitment to contribute to us up to $10.0
million of cash if at any time there are
insufficient funds available to enable our
casino to be operating by May 31, 2000. The
contributions will be made at the times
necessary to enable our casino to be
operating by May 31, 2000. In addition, if
our casino is not operating by May 31, 2000,
Riviera Holdings will be obligated to
contribute to us on that date $10.0 million
in cash less any amounts previously
contributed under the completion capital
commitment. See "Description of Notes--
Completion Capital Commitment."
Keep-Well Agreement............. If (1) we do not have the necessary funds to
make a payment of fixed interest on the notes
during our first three years of operations or
(2) our cash flow is less than $9.0 million
in any of our first three years of
operations, Riviera Holdings will be
obligated under the keep-well agreement to
contribute cash to us to make up those
amounts, subject to a maximum of $5.0 million
for any one operating year and $10.0 million
in the aggregate.
Optional Redemption............. On or after May 1, 2002, we may redeem some
or all of the notes at any time at the
redemption prices described in the section
"Description of Notes -- Optional
Redemption."
Prior to May 1, 2001, we may redeem up to 35%
of the notes with the proceeds of a public
offering of our equity or the proceeds
contributed to us of offerings by our parent
company of its equity at the redemption
prices listed in the section "Description of
Notes -- Optional Redemption."
Gaming Redemption............... The notes will be subject to mandatory
disposition and redemption requirements in
accordance with determinations by any gaming
authority.
Change of Control............... If we experience a change of control, we must
offer to repurchase the notes at the prices
listed in the section "Description of Notes--
Repurchase at the Option of Holders-- Change
of Control."
Asset Sales and Events of Loss.. If we sell assets or experience events of
loss, we may be required to offer to
repurchase the notes at the prices listed in
the section "Description of Notes--
Repurchase at the Option of Holders-- Asset
Sales" and "--Events of Loss."
Excess Cash Purchase Offers..... At the end of each four fiscal quarters after
our casino begins operating, we must offer to
repurchase the maximum principal amount of
notes that can be purchased with 50% of our
excess cash flow from that four fiscal
quarter period. The prices for the
repurchases are listed in the section
"Description of Notes-- Repurchase at the
Option of Holders-- Excess Cash Purchase
Offers."
6
Basic Covenants of the
Indenture..................... We will issue the notes under an indenture
that will, among other things, restrict our
ability to:
borrow money;
pay dividends on or repurchase our capital
stock;
make investments;
use our assets as security in other
transactions; and
sell assets or enter into mergers or
consolidations.
7
RISK FACTORS
Before you invest in the notes, you should carefully consider the following
factors, in addition to the other information contained in this prospectus.
Substantial leverage and ability to service debt
- We will be substantially leveraged. In addition to our obligation to pay
principal and interest on the notes, we will also be incurring construction and
operating expenses for the Riviera Black Hawk.
- At June 30, 1999, our total indebtedness was $45.8 million, our
stockholders' equity was $23.4 million and our debt to equity ratio was 2.0 to
1.
- The indenture will permit us to incur additional indebtedness, including
up to $15.0 million of indebtedness to finance the purchase of furniture,
fixtures and equipment which, when incurred, will rank equal in payment
preference with the notes. Our substantial indebtedness could have important
consequences to you. For example, it could: (1) make it more difficult for us to
satisfy our obligations with respect to these notes; (2) increase our
vulnerability to general adverse economic and industry conditions; (3) limit our
ability to fund future working capital, capital expenditures and other general
corporate requirements; (4) require us to dedicate a substantial portion of our
cash flow from operations to payments on our indebtedness, thereby reducing the
availability of our cash flow to fund working capital, capital expenditures and
other general corporate purposes; (5) limit our flexibility in planning for, or
reacting to, changes in our business and the industry in which we operate; (6)
place us at a competitive disadvantage compared to our competitors that have
less debt; and (7) limit, along with the financial and other restrictive
covenants in our indebtedness, among other things, our ability to borrow
additional funds.
Completion and operation of our casino
Our ability to make payments on the notes and our other debt obligations
depends upon the timely completion and successful operation of our casino.
Successful operation will depend on prevailing economic conditions and
financial, business, regulatory and other factors beyond our control.
It is difficult for us to predict with accuracy our casino's potential
earning ability given the inherent uncertainties and variables in the factors
affecting such earning ability. The ability to generate profit from slot
machines will determine our cash flow. Table games, food and beverage and
entertainment are all loss leader adjuncts to the generation of slot machine
profits. If our casino cannot generate sufficient cash flow, we may be forced to
reduce or delay planned capital expenditures, restructure or refinance our debt
or obtain additional equity capital. We might not be able to implement any of
these alternatives on satisfactory terms or at all.
Construction and related risks
- We have entered into a construction contract with The Weitz Company, Inc.
to construct our casino and perform all necessary excavation and other site
work. The construction contract provides for our casino to be completed by
January 15, 2000 for a price of $27.6 million. The construction contract allows
for increases in this price if: (1) we make changes to the plans and
specifications; (2) work is delayed due to our actions; or (3) "force majeure"
events occur during construction. See "Business -- Design and Construction
Summary" and "Material Agreements -- Construction Contract."
- The construction of our casino involves significant risks, including cost
overruns, shortages of materials, labor disputes and work stoppages, unforeseen
environmental or engineering conditions, natural disasters, construction
scheduling problems and weather interferences. Any of these risks, if they
occurred, could delay construction or substantially increase the construction
costs of our casino. Furthermore, other items, including offsite improvements,
permit fees and independent testing, are not included in the construction
contract costs.
No loss proceeds
We have no obligation to make any purchase of notes with the net loss
proceeds, following a loss with respect to collateral with a fair market value
between $1.0 million and $20.0 million.
8
Gaming licenses, permits and approvals
In general we, Riviera Holdings, the principal executive officers of us and
Riviera Holdings, and any of our employees who will be involved in our gaming
operations, will be required to be licensed by the State of Colorado. Colorado
also requires that significant stockholders of Riviera Holdings be licensed or
certified as suitable for licensure. None of such licenses have been obtained
and there can be no assurance that all necessary licenses will be obtained prior
to the time our casino is otherwise ready to open. The licensure process
involves the filling out of a form prescribed by the Colorado Gaming Commission,
an interview of the prospective licensee and an investigation of such licensee
to the extent the Staff of the Colorado Gaming Commission deems necessary. We
pay the investigation costs. If any such officer, director or employee were
found to be unsuitable for licensure by the Colorado Gaming Commission, we would
have to replace such an employee. If the Colorado Gaming Commission objected to
our licensure or that of Riviera Holdings or its significant stockholders, we
might be forced to sell our interest in Riviera Black Hawk and pay off the notes
to the extent of the net sale proceeds. If the objection of the Colorado Gaming
Commission related to licensure or suitability for licensure of any of Riviera
Holdings' significant stockholders, Riviera Holdings might attempt to purchase
or arrange for the purchase of the Riviera Holdings shares owned by the
stockholder to which the Colorado Gaming Commission objected, but Riviera
Holdings' ability to make such purchase is limited and it is uncertain whether
Riviera Holdings could arrange for such stock repurchase.
Competition
- The Black Hawk/Central City gaming market is characterized by intense
competition. If our casino is unable to compete effectively in this market, we
may not be able to generate sufficient cash flow to satisfy our obligations
under the notes. The primary competitive factors in the market are location,
availability and convenience of parking, number of slot machines and gaming
tables, types and pricing of non-gaming amenities, name recognition and overall
atmosphere. Our main competitors will be the larger gaming facilities,
particularly those with considerable on-site or nearby parking and established
reputations in the local market. These facilities have high-profile brand names
in the local market, including the Isle of Capri Casino, Harvey's Wagon Wheel
Casino Hotel, Colorado Central Station, Bullwhackers Black Hawk, Canyon Casino,
Fitzgeralds Casino, the Lodge at Black Hawk and Gilpin Hotel Casino. These
competitors have more gaming experience in the Black Hawk/Central City market
and some have greater financial resources than we do. Construction has also
begun on the "Mardi Gras" casino, which is expected to feature over 600 slot
machines. Other projects have also been announced, proposed, discussed or
rumored for the Black Hawk/Central City market.
- We expect that the gaming facilities near the intersection of Main and
Mill Streets will provide significant competition to our casino. Colorado
Central Station, which has been the most successful casino in Colorado, is
located across the street from our casino and has approximately 700 slot
machines, 20 gaming tables and approximately 700 valet parking spaces. The Isle
of Capri Casino, operated by Casino America, which opened in December 1998, is
located directly across the street from our casino and features approximately
1,100 slot machines, 14 table games and 1,100 parking spaces.
- Casinos offering hotel accommodations for overnight stay may have a
competitive advantage over our casino. The number of hotel rooms currently in
the Black Hawk/Central City market is approximately 170, with only two gaming
facilities providing hotel accommodations to patrons. These include Harvey's
Wagon Wheel Casino Hotel with approximately 120 rooms and the Lodge at Black
Hawk with approximately 50 rooms. In addition, the Isle of Capri Casino began
construction in 1999 of an approximately 240 room hotel on top of its recently
completed casino.
- Customers now drive through Black Hawk to reach Central City. Central
City has proposed the development of a road directly connecting Central City and
Black Hawk with Interstate 70 which would allow customers to reach Central City
without driving by or through Black Hawk.
- Currently, limited stakes gaming in Colorado is constitutionally
authorized in Central City, Black Hawk, Cripple Creek and two Native American
reservations in southwest Colorado. However, gaming could be approved in other
Colorado communities in the future. The legalization of gaming closer to Denver
would likely have a material adverse effect on our future results of operations.
We will also compete with other forms of gaming in Colorado, including lottery
gaming, and horse and dog racing as well as other forms of entertainment.
9
- Our operations to date have been limited to development activities and
construction. We have had no earnings or operations. Riviera Gaming Management
of Colorado, Inc., which will manage our casino, has no experience operating a
gaming facility in Colorado. If our casino is not successfully marketed and
managed, we may not be able to generate sufficient cash flow to make payments of
principal and interest on the notes.
Dependence upon a single gaming site
We will be solely dependent upon our casino for our cash flow, (except for
the keep well agreement with Riviera Holdings as to the first three years of
operations). Therefore, we will be subject to greater risks than a
geographically diversified gaming company. These greater risks include those
caused by: (1) local economic and competitive conditions; (2) inaccessibility
due to road construction or closure on primary access routes; (3) changes in
local and state governmental laws and regulations; (4) natural and other
disasters; (5) a decline in the number of residents near or visitors to the
Black Hawk/Central City market; or (6) a decrease in gaming activities in the
Black Hawk/Central City market.
Any of such factors could have a material adverse effect on our ability to
generate sufficient cash flow to make payments on the notes.
Adverse weather and road conditions; seasonality
The City of Black Hawk is located in the Colorado Rocky Mountains, which can
be subject to inclement weather. Adverse weather conditions could delay the
construction of our casino, resulting in cost overruns or a delayed opening
date. In addition, severe weather conditions could adversely affect our
operations. The City of Black Hawk is serviced by a single lane winding mountain
road that requires cautious driving, particularly in bad weather. The road has
tunnels that are subject to closure. Congestion on the road leading to our
casino is not uncommon during the peak summer season, holidays and other times
of year and may discourage potential customers from traveling to our casino,
particularly if road construction is in process.
Limitations on the trustee's exercise of rights with respect to collateral
You may be unable to obtain the full value of your notes by foreclosing upon
collateral. The exchange notes, like the existing notes, will be secured by a
first priority lien on substantially all of our assets. Furniture, fixtures and
equipment and the assets of our future unrestricted subsidiaries are excluded.
Gaming law restrictions
Under Colorado gaming laws, the trustee could be precluded from or otherwise
limited or delayed in exercising its rights, including selling slot machines at
a foreclosure sale, since only persons licensed by the Colorado gaming
authorities may have slot machines in their possession. In addition, the trustee
may encounter difficulty in selling collateral due to various legal
restrictions. These restrictions include that the purchaser or the operator of a
gaming facility must be licensed by state authorities or that prior approval of
a sale or disposition of collateral must be obtained. If the trustee sought to
operate, or retain an operator for, our casino, the trustee or its agents would
be required to be licensed under Colorado gaming laws in order to conduct gaming
operations in the casino. Since potential purchasers who wish to operate the
casino must satisfy such requirements, the number of potential purchasers in a
sale of the casino could be less than in the sale of other types of facilities.
Additionally, these requirements may delay the sale of, and may adversely affect
the price paid for, the collateral.
State law restrictions
The ability of the trustee to repossess and dispose of collateral for the
noteholders will also be subject to the procedural and other restrictions of
state real estate and commercial law. If the holders of the notes were
undersecured, the trustee may be entitled to a deficiency judgment under certain
circumstances after application of any proceeds from any foreclosure sale. There
can be no assurance, however, that the trustee would successfully obtain a
deficiency judgment, and we cannot predict what the amount of such judgment
would be. In addition, we might not be able to satisfy any such judgment.
Bankruptcy
10
- The right of the trustee to repossess and dispose of the collateral is
likely to be significantly impaired by applicable bankruptcy laws if a
proceeding under the United States Bankruptcy Code were to be commenced by or
against us prior to or possibly even after the trustee has repossessed and
disposed of the collateral. If the holders of the notes were undersecured in a
bankruptcy case, the trustee for the noteholders will be entitled to assert a
secured claim to the extent of the value of the collateral and an unsecured
claim for any deficiency. In view of the broad discretionary powers of a
bankruptcy court, we cannot predict, following commencement of and during a
bankruptcy case: (1) whether payments under the notes would be made; (2) whether
or when the trustee could foreclose upon or sell the collateral; (3) whether the
term of the notes could be altered in a bankruptcy case; or (4) whether or to
what extent holders of the notes would be compensated for any delay in payment
or loss of value of the collateral.
- In the event of a bankruptcy case, we may be able to retain collateral
over the claims of the holders of the notes as long as such holders are afforded
"adequate protection." "Adequate protection" is within the discretionary powers
of the bankruptcy court, and payments on the notes may be delayed and
compensation for such a delay is questionable.
- If a bankruptcy court were to determine that the value of the collateral
is not sufficient to repay all amounts due on the notes, the holders of the
notes would be "undersecured" to the extent of any such deficiency. Applicable
federal bankruptcy laws do not permit the payment and/or accrual of interest or
costs and attorneys' fees to the holders of "undersecured" claims against the
debtor during the debtor's bankruptcy case.
- Under the provisions contained in the indenture, we may discharge our
obligations under the indenture or have our obligations released with respect to
covenants in the indenture. To do either of these, among other things, we must
deposit with the trustee enough money or securities to make all of the required
payments on the notes through maturity or a redemption date. It is possible that
the deposit may be subject to recovery or avoidance as a preference or
fraudulent transfer by us, our creditors or a bankruptcy trustee. For example,
if the amount of the deposit exceeds the value of the collateral which has been
pledged to the holders of the notes, it is possible that the excess may be
subject to recovery or avoidance. In addition, because the holders of the notes
will release their liens at the time the funds are deposited into the account,
it is possible that a bankruptcy court would consider a payment on the notes at
redemption or maturity subject to recovery or avoidance. In addition, it is
possible that if we receive the funds for the deposit from a third party, and
that third party subsequently becomes a debtor in a bankruptcy case, the deposit
may be recoverable if the original transfer from the third party to us is a
preferential or fraudulent conveyance. Furthermore, if we were in bankruptcy
after the deposit but before redemption or maturity of the notes, it is possible
that a bankruptcy court would allow us to use the deposited funds during the
pendency of the bankruptcy case as "cash collateral," subject to the right of
the holders of the notes to request adequate protection of their interest in the
deposit.
- We have overlapping officers and directors with our affiliates. In the
event that one of our affiliates is the subject of a bankruptcy proceeding, that
affiliate, its creditors or the trustee in bankruptcy may argue that the assets
and liabilities of the various affiliated entities, including our company,
should be consolidated and our assets made available for satisfaction of claims
against the affiliate that is in bankruptcy. There can be no assurance that a
bankruptcy court would not order consolidation of our assets with those of our
affiliates.
Fraudulent conveyance considerations
In connection with the issuance of the existing notes, we granted security
interests in the collateral to the trustee. Various fraudulent conveyance and
avoidance laws have been enacted for the protection of creditors. Some of these
laws protect parties who were not creditors at the time of the challenged
transfer but who subsequently became creditors. These laws may permit a court to
nullify any transfer of a property interest or any obligation incurred by any of
the parties involved in the transactions described in this prospectus.
Generally, if a court were to find that: (1) the debtor made the challenged
transfer or obligation with the intent of hindering, delaying or defrauding its
present or future creditors; or (2) the debtor (A) received less than reasonably
equivalent value or fair consideration for incurring the challenged obligation
or making the challenged transfer and (B) (i) was insolvent or was rendered
insolvent by reason of incurring the challenged obligation or making the
challenged transfer, (ii) was engaged or about to engage in a business or
transaction for which its assets constituted unreasonably small capital or (iii)
intended to incur, or believed that it would incur, debts beyond its ability to
pay as such debts matured, the court could void the challenged obligation or
transfer in whole or in part. The court could also subordinate any claims with
respect to the challenged obligation or transfer to all other debts of the
debtor. The court's determination as to whether the above is true at any
relevant time will vary depending upon the law applied in any such proceeding.
11
Generally, a debtor will be considered insolvent if: (1) the sum of its
debts was greater than the fair saleable value of all of its assets at a fair
valuation; or (2) if the present fair saleable value of its assets was less than
the amount that would be required to pay its probable liability on its existing
debts, as they become fixed in amount and nature. Also, a debtor generally will
be considered to have been left with unreasonably small capital if its remaining
capital, including its reasonably projected cash flow, was reasonably likely to
be insufficient for its foreseeable needs, taking into account its foreseeable
business operations and reasonably foreseeable economic conditions.
With respect to our company and Riviera Holdings, the transfers made by
Riviera Holdings in connection with the capitalization of our company present
the most significant possible fraudulent conveyance issues. In capitalizing our
company, Riviera Holdings has contributed $20.0 million of equity capital in
cash, comprised of (1) $15.1 million contributed in August 1997 to purchase the
land and (2) additional contributions of $4.9 million as of June 30, 1999. See
"Capitalization."
There can be no assurance that Riviera Holdings' past contributions to us
will not be found to have constituted either an actual or a constructive
fraudulent transfer. In addition, future contributions by Riviera Holdings,
including amounts contributed under the completion capital commitment and the
keep-well agreement, might also be found to be an actual or constructive
fraudulent transfer. Any such possible fraudulent transfer challenges, even if
ultimately unsuccessful, could lead to a disruption of our business and alter
the manner in which we manage our business and, ultimately, could have a
material adverse effect on our ability to meet our obligations under the notes.
Mechanic's liens
Colorado law provides architects, engineers, contractors, subcontractors
and material suppliers with a lien on real property being improved by their
services or materials in order to secure their right to be paid. These parties
may foreclose their liens if they are not paid in full. The priority of all
mechanic's liens arising out of a particular construction project relates back
to the date on which construction of the project first commenced. Construction
of our casino commenced prior to the recording of the deed of trust securing the
notes. Accordingly, all architects, engineers, contractors, subcontractors and
material suppliers who provide services or materials in connection with our
casino and otherwise comply with the applicable requirements of Colorado law
will have a lien on the project senior in priority to the lien of the deed of
trust securing the notes. Riviera Holdings has deposited $5.0 million to insure
a title insurance company against mechanics liens.
Environmental matters
The site of our casino is located in a 400-square mile watershed basin that
was designated in 1983 by the United States Environmental Protection Agency as a
"National Priorities List" Study Area under the Comprehensive Environmental
Response, Compensation and Liability Act, sometimes also called the Superfund
Act. The Study Area received this designation because of hazardous substance
contamination in the soil, groundwater and surface water caused by historical
mining activity. The EPA has identified several areas of contamination within
the Study Area and in the vicinity of our property that require remediation. The
EPA and the State of Colorado have not required remediation of any contamination
on or from our property as part of their Superfund investigation and remedial
activities. However, sampling of our property disclosed the existence of
contaminated groundwater. The EPA or the State of Colorado could require
remediation for contaminated groundwater or any remaining contaminated soil on
the property some time in the future, and, as the current owner of the property,
we could be required to pay for or perform such remediation.
Legislative issues
Additional legalization of gaming in or near any area from which our casino
is expected to draw customers would affect the profitability of our business and
lead to a failure on our part to satisfy our obligations under the notes.
Currently, Colorado law does not authorize video lottery terminals.
However, Colorado law permits the legislature, with executive approval, to
authorize new types of lottery gaming, such as video lottery terminals, at
certain locations. Video lottery terminals are games of chance, similar to slot
machines, in which the player pushes a button that causes a random set of
numbers or characters to be displayed on a video screen. The player may be
awarded a ticket, which can be exchanged for cash or credit play. This form of
gaming could compete with slot machine gaming.
12
In 1997, the state legislature passed, but then Governor Romer vetoed, a
bill that would have permitted video lottery terminals in dog and horse race
tracks under certain terms and conditions. Additionally, several cities within
Colorado have active citizens' lobbies that were able to place gaming
initiatives on recent statewide ballots. Although these initiatives have failed,
new initiatives could be introduced on future statewide ballots to allow
expansion of gaming in Colorado or prohibit gaming in the gaming market our
casino would serve. Future initiatives, if passed, could significantly increase
the competition for gaming customers, thereby adversely affecting business in
the gaming market our casino would serve. There can be no assurance against
future legislation that would create additional competition or that would impose
additional restrictions or prohibitions on, or assess additional fees with
respect to our business.
In 1996, Congress created the National Gambling Impact Study Commission
(the "NGISC") to study the economic and social impact of all forms of gambling
in the United States. The NGISC was composed of both individuals who are
associated with the gaming industry and individuals opposed to it. The NGISC
commenced its hearings in June 1997, and on June 18, 1999, presented its final
report (the "Report"). The Report recommended, among other things, that the
regulation of gambling continue to be the responsibility of the states, except
for Internet and Indian issues; that Internet gambling be banned; that there be
increased federal regulation of Indian gambling; and that Congress direct other
agencies to conduct studies of gambling as part of their regular research. The
Report also called upon state and local policy makers to consider a moratorium
on new or expanded forms of gambling in their jurisdictions, pending further
study of gambling. The recommendations of the Report are not binding on any
governmental body, but portions of the report are likely to be cited, in both
Congress and in state legislatures, by those who are opposed to the presence or
expansion of gambling in their jurisdictions and who are seeking additional
limitation, regulation, or taxation of gambling facilities or operations that
may result could have an adverse impact on the gaming industry in general and on
our business or results of operations, in particular.
Additionally, from time to time, some federal legislators have proposed the
imposition of a federal tax on gaming revenues. Any such tax would reduce our
cash flow and could prevent us from fulfilling our obligations under the notes.
State gaming tax issues
The amendment to the Colorado Constitution that legalized limited gaming
also subjects casinos in Colorado to an annual gaming tax of up to 40% of the
total amounts wagered less all payouts to players. With respect to games of
poker, the tax is calculated based on the sums wagered which are retained by the
casino as compensation. Effective July 1 of each year, the Colorado Commission
establishes the gaming tax for the following 12 months. Currently, the gaming
tax is: 2% on the first $2 million of these amounts; 4% on amounts from $2
million to $4 million; 14% on amounts from $4 million to $5 million; 18% on
amounts from $5 million to $10 million; and 20% on amounts over $10 million.
There can be no assurance that tax rates or fees applicable to our casino will
not be increased in the future, either by the Colorado electorate, legislation
or action by the Colorado Commission, reducing the profitability of our
operations.
Reliability of market data
We have based the Black Hawk/Central City market data and other information
in this prospectus, including parking data, on information supplied by the City
of Black Hawk and various public announcements and filings made by some of the
larger casinos in the Black Hawk/Central City market. However, we have not
independently verified any such information, announcements or filings.
Dependence on key personnel
Our success will largely depend upon the efforts and skills of (1) Riviera
Gaming Management of Colorado, Inc. (the "manager") with whom we have a
management contract and its Chairman of the Board of Directors and Chief
Executive Officer, William Westerman, its Chief Operating Officer, (the
"manager") Ronald Johnson, its Chief Financial Officer, Duane Krohn and (2) our
General Manager, Thomas Guth and our Director of Slot Operations, James Davey.
The loss of the services of our manager or any of our key officers could have a
material adverse effect on our operations. There can be no assurance that we
would be able to attract and hire suitable replacements in the event of any such
loss of services.
13
Difficulty in attracting and retaining qualified employees
The operation of our business requires skilled employees with gaming
industry experience and qualifications to obtain the requisite licenses.
Currently there is a shortage of skilled labor in the gaming industry. We
believe this shortage will make it increasingly difficult and expensive to
attract and retain qualified employees. Increasing competition in the Black
Hawk/Central City and competing markets may lead to higher costs in order to
retain and attract qualified employees. We may incur higher labor costs to
attract qualified employees from existing gaming facilities.
No recourse against Riviera Holdings
You should not expect Riviera Holdings or any of its affiliates to
participate in servicing the principal, fixed interest, contingent interest or
other payments due on the notes. Neither Riviera Holdings nor any of its
affiliates has any obligation to make any payments of any kind to the holders of
the notes except for its limited obligations under the completion capital
commitment and the keep well agreement.
Adverse tax treatment
The notes provide for the payment of both fixed interest and contingent
interest. Contingent interest will be calculated based on a percentage of our
cash flow after we begin operating. The notes and the indenture will have terms
typically contained in instruments evidencing indebtedness and are intended to
create a debtor-creditor relationship between us and the holders of the notes.
We intend to treat the notes as indebtedness for federal income tax purposes.
However, this treatment is not binding on the Internal Revenue Service or any
court and there can be no assurance that the Internal Revenue Service will not
successfully argue that the notes should be treated as equity for federal income
tax purposes. If the notes are treated as equity rather than indebtedness, we
would not be able to deduct the interest on that portion of the notes. This
could have a material adverse effect on our after-tax cash flow and prevent us
from fulfilling our obligations under the notes. In addition, the interest
payments made on the portion of the notes that are treated as equity will be
taxable to the recipient as dividends to the extent of our current and
accumulated earnings and profits. This could adversely affect the timing,
character and amounts includible in the income of a holder of notes.
Holders may be required to include amounts in income prior to receipt of
cash payments attributable to such income.
No prior market for notes
The existing notes are currently eligible for trading in the PORTAL market.
The exchange notes are new securities for which there is no established market.
We have been informed by the initial purchaser that it intends to make a market
in these notes. However, the initial purchaser may cease its market making at
any time. In addition, the liquidity of the trading market in these notes, and
the market price quoted for these notes, may be adversely affected by changes in
the overall market for high yield securities and by changes in our financial
performance or prospects or in the prospects for companies in our industry in
general. As a result, you cannot be sure that an active trading market will
develop for these notes.
Failure to exchange existing notes for exchange notes
If you do not exchange your existing notes for exchange notes pursuant to
the exchange offer, you will not be able to resell, offer to resell or otherwise
transfer the existing notes unless they are registered under the Securities Act
or unless you resell them, offer to resell or otherwise transfer them under an
exemption from the registration requirements of, or in a transaction not subject
to, the Securities Act. We will no longer be under an obligation to register the
existing notes under the Securities Act except in the limited circumstances
provided under the registration rights agreement. In addition, if you want to
exchange your existing notes in the exchange offer for the purpose of
participating in a distribution of the exchange notes, you may be deemed to have
received restricted securities, and, if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction.
To the extent that existing notes are not tendered for exchange and
accepted in the exchange offer, the trading market for the notes could be
adversely affected because of an insufficient float of notes available for
trading.
14
USE OF PROCEEDS
We will not receive any proceeds from the exchange offer. The existing
notes were issued on June 3, 1999.
CAPITALIZATION
The following table sets forth our capitalization at June 30, 1999. This
table should be read in conjunction with the more detailed information and
financial statements, including the notes thereto, included elsewhere in this
prospectus.
At June 30, 1999
----------------
Actual
(dollars in millions)
Cash and cash equivalents................... $ 0.8
Cash, restricted (1)........................ 26.3
Short term investments, restricted (1)...... 5.1
Debt: $ 32.2
========
First Mortgage Notes...................... $ 45.0
Special Improvement District Bonds(2)..... 0.8
--------
Total debt........................ 45.8
Stockholder's equity(3)(4).................. 23.4
--------
Total capitalization.............. $ 69.2
========
- ----------
(1) Includes $21.3 million in the construction disbursement account (after
reimbursement to Riviera Holdings of $10.1 million for amounts advanced to
us to cover construction and development costs incurred as of June 30,
1999), $5.0 million in the completion reserve account and $5.1 million in
the interest reserve account at June 30, 1999.
(2) Our casino and the Isle of Capri Casino, the casino located across the
street from our casino, have entered into development agreements with the
City of Black Hawk to relocate utilities and widen a bridge to access both
properties from the highway. The total estimated cost of these improvements
is approximately $2.9 million which will be shared equally by us and the
Isle of Capri Casino. We will repay our portion of the cost of such
improvements over 10 years beginning in January 2000.
(3) Includes capitalized interest of $3.4 million associated with Riviera
Holdings' investment at June 30, 1999.
(4) Excludes Riviera Holdings' commitment to contribute to us up to $10.0
million of cash if at any time there are insufficient funds available to
enable the Riviera Black Hawk to be operating by May 31, 2000. See
"Description of Notes -- Completion Capital Commitment."
15
SELECTED FINANCIAL INFORMATION
We were organized in August 1997 for the purpose of developing,
constructing, equipping and operating the Riviera Black Hawk. Since that time,
we have been in the development stage and our activities have been limited to
transactions relating to the development of the Riviera Black Hawk.
The selected financial information presented below at December 31, 1997 and
1998, for the period from August 18, 1997 (Date of Inception) to December 31,
1997, and for the year ended December 31, 1998 has been derived from our audited
financial statements included elsewhere in this prospectus. The financial
statement information at and for the six months ended June 30, 1999 has been
derived from our unaudited financial statements included elsewhere in this
prospectus. The unaudited financial statements have been prepared by us on a
basis consistent with the audited financial statements and including all normal
recurring adjustments necessary for a fair presentation of the information set
forth therein. Operating results for the six months ended June 30, 1999 are not
necessarily indicative of the results that will be achieved for future periods,
including the entire year ending December 31, 1999.
This information is qualified in its entirety by, and should be read in
conjunction with, "Management's Discussion and Analysis of Financial Condition
and Results of Operations," and the financial statements, including the notes
thereto, and other financial information included elsewhere in this prospectus.
At At
June 30, December 31,
1999 1998 1997
--------------- -------------- --------------
(dollars in thousands)
Balance Sheet Data:
Cash................................... $ 809 $ 543 $ 49
Total assets........................... 28,138 16,632
75,787
Long-term debt, including current 45,784 687 0
maturities.............................
Due to Riviera Holdings................ 62 6,241 0
Total liabilities...................... 52,387 8,138 7
Stockholder's equity (1)............... 23,400 20,000 16,625
From
For the August 18,
Six 1997 (Date
Months For the Year of Inception)
Ended Ended through
June 30, December 31, December 31,
1999 1998 1997
------------- ------------- ---------
(dollars in thousands)
Statement of Operations:
General and administrative expenses..... $ (75) $ 0 $ 0
Interest expense, other.................
(193)
Interest income, other.................. 115
------
Loss before taxes....................... (153)
------
Tax benefit............................. 94
------
Net loss................................ 59) 0 0
======
0
- ----------
(1) Includes capitalized interest of $3.4 million associated with Riviera
Holdings' investment.
16
RATIO OF EARNINGS TO FIXED CHARGES
Six Months Ended Year Ended
June 30, December 31,
1999 1998 1998
---- ---- ----
(in thousands) (in thousands)
Earnings:
Pre-tax income (loss) (1)............................. (59) - -
Fixed charges.......................................... 1,485 1,300 1,972
Less capitalized interest.............................. (1,485) (1,300) (1,972)
Earnings (loss) available for fixed charges............ (59) - -
Ratio of earnings to fixed charges (2)................. Note(3) Note(3) Note(3)
Fixed charges include interest expense on indebtedness, plus
amortization of deferred financing costs.
(1) The Company is in the development stage and has not commenced its
intended operations. The net loss is the result of general administrative
expenses incurred prior to the opening of the Casino.
(2) For purposes of determining fixed charges, earnings (losses) are defined
as earnings (loss) before income taxes plus fixed charges.
(3) Since the Company is in the development stage and has not commenced
operations, its earnings were not sufficient to cover fixed charges by
$1,485,000 and $1,300,000 for the six months ended June 30, 1999 and 1998,
respectively, and $1,972,000 for the year ended December 31, 1998.
17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with, and is
qualified in its entirety by, our financial statements, including the notes
thereto, and the other financial information included elsewhere in this
prospectus.
Development Activities
We were organized in August 1997 and were initially capitalized with $15.1
million of cash contributions from Riviera Holdings. Since that time, our
activities have been limited to development activities with respect to the
Riviera Black Hawk. We purchased the land on which the Riviera Black Hawk is
being constructed in August 1997 and commenced construction in July 1998. We
have completed all site improvements, excavation and foundation work. Erection
of the steel structure began in April 1999, and the building is expected to be
enclosed by mid-August 1999. We will have a 300,000 square foot gaming facility
featuring (1) a 31,000 square foot casino with approximately 1,000 slot machines
and 12 blackjack tables; (2) parking for 520 vehicles (92% of which will be
covered) with convenient self-park and valet options; (3) a 265-seat casual
dining restaurant; (4) two themed bars; and (5) an entertainment center with
seating for approximately 500 customers. Subject to the delays inherent in
construction projects of the magnitude of our casino, and subject to obtaining
the necessary gaming licenses, other permits and financing, we expect to open
our casino in the first quarter of 2000.
Results Of Operations
We are in the development stage and do not have any historical operating
results other than interest income on unused loan proceeds and interest expense
(the majority of which has been capitalized) on our outstanding indebtedness to
Riviera Holdings, the receipt of capital contributions and the capitalization of
other costs and pre-opening general and administrative expenses in the first six
months of 1999 which have been expensed as required under generally accepted
accounting principles. See "-- Recently Issued Accounting Standards." The
capitalized costs have consisted primarily of license and permit applications,
design costs, construction costs and interest during development and
construction. Future operating results are subject to significant business,
economic, regulatory and competitive uncertainties and contingencies, many of
which are beyond our control. We believe that the Riviera Black Hawk, if
completed and opened, will be able to attract a sufficient number of patrons and
achieve the level of activity and revenues necessary to permit us to meet our
obligations, including with respect to the notes. However, there can be no
assurance that we will be able to achieve these results.
Liquidity And Capital Resources
Our purchase of the site and all development expenses to date were financed
by the proceeds from the sale of the existing notes and by capital contributions
and advances from Riviera Holdings. We expect to fund the remaining development
of the Riviera Black Hawk from a combination of (1) $21.8 million of the net
proceeds from the sale of the existing notes, which remained in the construction
disbursement account after reimbursing Riviera Holdings $10.1 million in cash
for advances made to us prior to the sale of the existing notes, (2) $10.1
million of the net proceeds from the sale of the existing notes, which were
deposited into the completion reserve account and the interest reserve account,
(3) furniture, fixtures and equipment financing in the amount of up to $10.6
million and (4) Special Improvement District Bonds in the amount of $1.5
million. In addition, Riviera Holdings will be obligated under the completion
capital commitment to contribute to us up to $10.0 million of cash to us if at
any time there are insufficient funds available to enable our casino to be
operating by May 31, 2000. In addition, if our casino is not operating by May
31, 2000, Riviera Holdings will be obligated to contribute on that date $10.0
million in cash less any amounts previously contributed under the completion
capital commitment. Furthermore, if (1) we do not have the necessary funds to
make a payment of fixed interest on the notes during our first three years of
operations or (2) our cash flow is less than $9.0 million in any of our first
three years of operations, Riviera Holdings will be obligated under the
keep-well agreement to contribute cash to us to make up those amounts, subject
to a maximum of $5.0 million for any one operating year and $10.0 million in the
aggregate.
After our casino opens, we expect to fund our operating and capital needs
from operating cash flow. We intend to have sufficient working capital to
provide for reasonably anticipated short-term liquidity needs. In addition,
Riviera Holdings has committed to provide us with additional financing under the
circumstances described above. However, there can be no assurance that any
additional financing, if needed to meet liquidity needs, will be available to us
on favorable terms or at all. There can be no assurance that our estimate of
foreseeable liquidity needs is accurate or that no new business developments or
other unforeseen events will not
18
occur, any of which could result in the need to raise additional funds. We
expect that the adequacy of our operating cash flow will depend upon customer
acceptance of the Riviera Black Hawk, the continued development of the Black
Hawk/Central City market as a gaming destination, the intensity of our
competition, the efficiency of operations, the depth of customer demand, the
effectiveness of our marketing and promotional efforts and the performance by
Riviera Holdings of its agreements to provide capital to us pursuant to the
completion capital commitment and the keep-well agreement.
Recently Issued Accounting Standards
The American Institute of Certified Public Accountants' Accounting
Standards Executive Committee recently issued Statement of Position No. 98-5,
Reporting on the Costs of Start-Up Activities. This standard provides guidance
on the financial reporting for start-up costs and organization costs. This
standard requires costs of start-up activities and organization costs to be
expensed as incurred, and is effective for fiscal years beginning after December
15, 1998, although earlier application is encouraged. We adopted this standard
effective January 1, 1999. The impact has been to record a general expense of
$75,000 for the six months ended June 30, 1999, that we would have otherwise
deferred as pre-opening costs.
The Financial Accounting Standards Board recently issued FAS No. 137,
`Deferral of FAS 133 Accounting for Derivatives' which delays the implementation
of that pronouncement to June 15, 2000. We have not determined what effect, if
any, that FAS 133 may have on our results of operations.
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.
We have conducted a comprehensive review of our computer systems and other
systems for the purpose of assessing our potential Year 2000 Problem, and we are
in the process of modifying or replacing those systems which are not Year 2000
compliant. Based upon this review, our 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 our
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 our financial position or results
of operations. As of June 30, 1999, we have incurred costs of approximately
$2,000 (primarily for analysis by internal labor) related to the system
applications and anticipates spending an additional $2,000 to become Year 2000
compliant. The estimated completion date and remaining costs are based upon our
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, we have communicated with our major vendors and suppliers to
determine their state of readiness relative to the Year 2000 Problem and our
possible exposure to Year 2000 issues of such third parties. However, there can
be no guarantee that the systems of other companies, which our systems may rely
upon, will be timely converted or representations made to us 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 our operations.
As a result of various external risk factors, we could be adversely
impacted and the effect could be material regardless of the readiness of our own
systems. The most reasonable worst case scenario - if one or more of our utility
providers (of electric, natural gas, water, sewer) experiences Year 2000
problems that impact their ability to provide their services, our operations
could be adversely impacted. Furthermore, disruption of services for any of the
markets for our customers could result in an adverse change in customer visits
from the affected market. Automobile traffic to and from the Black Hawk/Central
City market could be disrupted by Year 2000 problems, which would limit the
ability of potential customers to visit our property. The possible long term
disruption of banking services due to Year 2000 problems could ultimately impair
our daily financial transactions, including the deposit of monies and processing
of checks. Furthermore, credit card processing and customers' access to cash via
automated teller machines could also be disrupted. In the event of this type of
disruption, we intend to provide minimal services to our customers and assist
19
them, if possible, with transportation to the metropolitan Denver area as hotel
facilities are extremely limited in the Black Hawk/Central City area.
We have developed, and continue to update and revise, contingency plans to
address the identified risks. However, given the nature of many of the external
risk factors, we do not believe viable alternatives would be available. For
example, we cannot develop a meaningful contingency plan to address a disruption
of utilities services. Consequently, the occurrence of any of the aforementioned
disruptions could, depending upon their severity and duration, have a material
adverse impact on our operating results.
20
THE EXCHANGE OFFER
Purpose and Effect of the Exchange Offer
We issued and sold the existing notes to the Initial Purchaser on June 3,
1999 (the "Issue Date"). The Initial Purchaser subsequently sold the existing
notes to qualified institutional buyers in reliance on Rule 144A under the
Securities Act. Because the existing notes are subject to transfer restrictions,
our company and the Initial Purchaser entered into a registration rights
agreement dated June 3, 1999 (the "registration rights agreement"), pursuant to
which we agreed:
- within 45 days after the Issue Date, to prepare and file with the
Securities and Exchange Commission the Registration Statement of which
this prospectus is a part;
- within 150 days after the Issue Date, to use our best efforts to cause
the Registration Statement to become effective under the Securities
Act;
- upon the effectiveness of the Registration Statement, to offer the
exchange notes in exchange for surrender of the existing notes; and
- to keep the exchange offer open for not less than 30 days (or longer
if required by applicable law) after the date notice of the exchange
offer is mailed to the holders of the existing notes.
The Registration Statement is intended to satisfy in part our obligations with
respect to the existing notes under the registration rights agreement.
Under existing interpretations of the Securities and Exchange Commission,
the exchange notes will be freely transferable by holders other than our
affiliates after the exchange offer without further registration under the
Securities Act if the holder of the exchange notes represents that:
- it is acquiring the exchange notes in the ordinary course of its
business;
- it has no arrangement or understanding with any person to participate
in the distribution of the exchange notes;
- it is not an affiliate of the Company, as such terms are interpreted
by the Securities and Exchange Commission; and
- if such holder is not a broker-dealer, then such holder is not engaged
in and does not intend to engage in, a distribution of the exchange
notes.
However, broker-dealers ("Participating Broker-Dealers") receiving exchange
notes in the exchange offer will have a prospectus delivery requirement with
respect to resales of such exchange notes. The Securities and Exchange
Commission has taken the position that Participating Broker-Dealers may fulfill
their prospectus delivery requirements with respect to exchange notes, other
than a resale of an unsold allotment from the original sale of the existing
notes, with this prospectus. Under the registration rights agreement, we are
required to allow Participating Broker-Dealers and other persons, if any, with
similar prospectus delivery requirements to use this prospectus in connection
with the resale of such exchange notes. Each broker-dealer that receives
exchange notes for its own account in exchange for existing notes, where such
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. See "Plan of
Distribution."
Terms of The Exchange Offer; Period For Tendering Existing Notes
Upon the terms and subject to the conditions set forth in this prospectus
and in the accompanying Letter of Transmittal (which together constitute the
exchange offer), we will accept for exchange existing notes which are properly
tendered on or prior to the expiration date and not withdrawn as permitted
below. As used in the prospectus, the term "expiration date" means 5:00 p.m.,
New York City time, on __________ __, 1999 (90 days after the effective date of
this Registration Statement).
21
However, if we, in our sole discretion, have extended the period of time for
which the exchange offer is open, the term "expiration date" means the latest
time and date to which the exchange offer is extended.
As of the date of this prospectus, $45.0 million aggregate principal amount
of the existing notes are outstanding. This prospectus, together with the Letter
of Transmittal, is first being sent on or about ___________ __, 1999, to all
holders of existing notes known to us. Our obligation to accept existing notes
for exchange pursuant to the exchange offer is subject to the conditions as set
forth under "--Conditions to the Exchange Offer" below.
We expressly reserve the right, at any time or from time to time, to extend
the period of time during which the exchange offer is open, and thereby delay
acceptance for any exchange of any existing notes, by giving notice of such
extension to the holders of existing notes as described below. During any such
extension, all existing notes previously tendered will remain subject to the
exchange offer and may be accepted for exchange by us. Any existing notes not
accepted for exchange for any reason will be returned without expense to the
tendering holder as promptly as practicable after the expiration or termination
of the exchange offer.
We expressly reserve the right to amend or terminate the exchange offer,
and not to accept for exchange any existing notes not previously accepted for
exchange, upon the occurrence of any of the conditions of the exchange offer
specified below under "--Conditions to the Exchange Offer." We will give notice
of any extension, amendment, non-acceptance or termination to the holders of the
existing notes as promptly as practicable, such notice in the case of any
extension to be issued no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled expiration date.
Holders of existing notes do not have any appraisal or dissenters' rights
in connection with the exchange offer.
Procedures for Tendering existing notes
The tender to us of existing notes by a holder of existing notes as set
forth below and the acceptance of such tender by us will constitute a binding
agreement between the tendering holder and us upon the terms and subject to the
conditions set forth in this prospectus and in the accompanying Letter of
Transmittal. Except as set forth below, a holder who wishes to tender existing
notes for exchange pursuant to the exchange offer must transmit a properly
completed and duly executed Letter of Transmittal, including all other documents
required by such Letter of Transmittal, to IBJ Whitehall Bank & Trust Company of
New York at one of the addresses set forth below under "--Exchange Agent" on or
prior to the expiration date. In addition, the exchange agent must receive:
- certificates for such existing notes along with the Letter of
Transmittal, or
- prior to the expiration date, a timely confirmation of a book-entry
transfer (a "book-entry confirmation") of such existing notes into the
exchange agent's account at The Depository Trust Company (the
"book-entry transfer facility" or the "Depositary") pursuant to the
procedure for book-entry transfer described below, or
- the holder must comply with the guaranteed delivery procedure
described below.
The method of delivery of existing notes, Letters of Transmittal and all
other required documents is at your election and risk. If such delivery is by
mail, we recommend that you use registered mail, properly insured, with return
receipt requested. In all cases, you should allow sufficient time to assure
timely delivery. You should not send Letters of Transmittal or existing notes to
us.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the existing notes surrendered for
exchange are tendered:
- by a registered holder of the existing notes who has not completed the
box entitled "Special Issuance Instruction" or "Special Delivery
Instruction" on the Letter of Transmittal; or
- for the account of an Eligible Institution.
In the event that signatures on a Letter of Transmittal or a notice of
withdrawal, as the case may be, are required to be guaranteed, such guarantees
must be by a firm which is a member of a registered national securities exchange
or a member of the National Association of Securities Dealers, Inc. or by a
commercial bank or trust company having an office or correspondent in the
22
United States (collectively, "Eligible Institutions"). If existing notes are
registered in the name of a person other than a signer of the Letter of
Transmittal, the existing notes surrendered for exchange must be endorsed by, or
be accompanied by a written instrument or instruments of transfer or exchange,
in satisfactory form as determined by us in our sole discretion, duly executed
by the registered holder with the signature on such existing notes guaranteed by
an Eligible Institution.
Any beneficial owner whose existing notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee, and who wishes
to tender, should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such owner's own behalf, such owner must,
prior to completing and executing the Letter of Transmittal and delivering such
owner's existing notes, either (1) make appropriate arrangements to register
ownership of the existing notes in such owner's name or (2) obtain a properly
completed bond power from the registered holder. The transfer of registered
ownership may take considerable time.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of existing notes tendered for exchange will be
determined by us in our sole discretion. This determination shall be final and
binding. We reserve the absolute right to reject any and all tenders of any
particular existing notes not properly tendered or to not accept any particular
existing notes which acceptance might, in our judgment or our counsel's
judgment, be unlawful. We also reserve the absolute right to waive any defects
or irregularities or conditions of the exchange offer as to any particular
existing notes either before or after the expiration date including the right to
waive the ineligibility of any holder who seeks to tender existing notes in the
exchange offer. The interpretation of the terms and conditions of the exchange
offer as to any particular existing notes either before or after the expiration
date, including the Letter of Transmittal and the instructions to such Letter of
Transmittal, by us shall be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of existing notes for
exchange must be cured within such reasonable period of time as we shall
determine. Neither we, the exchange agent nor any other person shall be under
any duty to give notification of any defect or irregularity with respect to any
tender of existing notes for exchange, nor shall any of them incur any liability
for failure to give such notification.
If the Letter of Transmittal or any existing notes or powers of attorney
are signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
us, proper evidence satisfactory to us of their authority to so act must be
submitted.
By tendering, each holder of existing notes will represent to us in writing
that, among other things:
- the exchange notes acquired pursuant to the exchange offer are being
obtained in the ordinary course of business of the holder and any
beneficial holder;
- neither the holder nor any such beneficial holder has an arrangement
or understanding with any person to participate in the distribution of
such exchange notes; and
- neither the holder nor any such other person is an "affiliate," as
defined under Rule 405 of the Securities Act, of our company. If the
holder is not a broker-dealer, the holder must represent that it is
not engaged in nor does it intend to engage in it distribution of the
exchange notes.
If any holder or any such other person is an "affiliate," as defined under
Rule 405 of the Securities Act of ours, or is engaged in, or intends to engage
in, or has an arrangement or understanding with any person to participate in, a
distribution of such exchange notes to be acquired pursuant to the exchange
offer, such holder or any such other person (1) may not rely on the applicable
interpretations of the staff of the Securities and Exchange Commission and (2)
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction.
If the holder is a broker-dealer, the holder must represent that it will
receive exchange notes for its own account in exchange for existing notes that
were acquired as a result of market-making activities or other trading
activities. Each broker-dealer that receives exchange notes for its own account
in exchange for existing notes, where such existing notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities (an "Exchanging Dealer"), must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. See "Plan of
Distribution."
23
Acceptance of existing notes for exchange; Delivery Of exchange notes
Upon satisfaction or waiver of all of the conditions to the exchange offer,
we will accept, promptly after the expiration date, all existing notes property
tendered, and will issue the exchange notes promptly after acceptance of the
existing notes. See "--Conditions to the Exchange Offer" below. For purposes of
the exchange offer, we shall be deemed to have accepted properly tendered
existing notes for exchange when, as and if we have given oral and written
notice to the exchange agent.
The exchange notes will bear interest from the most recent date to which
interest has been paid on the existing notes, or if no interest has been paid on
the existing notes, from June 3, 1999. Accordingly, registered holders of
exchange notes on the relevant record date for the first interest payment date
following the consummation of the exchange offer will receive interest accruing
from the most recent date to which interest has been paid or, if no interest has
been paid, from June 3, 1999. Existing notes accepted for exchange will cease to
accrue interest from and after the date of consummation of the exchange offer.
Holders of existing notes whose existing notes are accepted for exchange will
not receive any payment in respect of accrued interest on such existing notes
otherwise payable on any interest payment date the record date for which occurs
on or after consummation of the exchange offer and will be deemed to have waived
their rights to receive such accrued interest on the existing notes.
In all cases, issuance of exchange notes for existing notes that are
accepted for exchange pursuant to the exchange offer will be made only after
timely receipt by the exchange agent of (1) certificates for such existing notes
or a timely book-entry confirmation of such existing notes into the exchange
agent's account at the book-entry transfer facility, (2) a properly completed
and duly executed Letter of Transmittal and (3) all other required documents. If
any tendered existing notes are not accepted for any reason set forth in the
terms and conditions of the exchange offer or if existing notes are submitted
for a greater principal amount than the holder desires to exchange, such
unaccepted or non-exchanged existing notes will be returned without expense to
the tendering holder of such existing notes (or, in the case of existing notes
tendered by book-entry transfer into the exchange agent's account at the
book-entry transfer facility pursuant to the book-entry transfer procedures
described below, such non-exchanged existing notes will be credited to an
account maintained with such book-entry transfer facility) as promptly as
practicable after the expiration of the exchange offer.
Book-Entry Transfer
Any financial institution that is a participant in the book-entry transfer
facility's systems may make book-entry delivery of existing notes by causing the
book-entry transfer facility to transfer such existing notes into the exchange
agent's account at the book-entry transfer facility in accordance with such
book-entry transfer facility's procedures for transfer. However, although
delivery of existing notes may be effected through book-entry transfer at the
book-entry transfer facility, the Letter of Transmittal or facsimile thereof
with any required signature guarantees and any other required documents must, in
any case, be transmitted to and received by the exchange agent at one of the
addresses set forth below under "--Exchange Agent" on or prior to the expiration
date, unless such holder has strictly complied with the guaranteed delivery
procedures described below.
We understand that the exchange agent has confirmed with the book-entry
transfer facility that any financial institution that is a participant in the
book-entry transfer facility's system may utilize the book-entry transfer
facility's Automated Tender Offer Program ("ATOP") to tender existing notes. We
further understand that the exchange agent will request, within two business
days after the date the exchange offer commences, that the book-entry transfer
facility establish an account with respect to the existing notes for the purpose
of facilitating the exchange offer, and any participant may make book-entry
delivery of existing notes by causing the book-entry transfer facility to
transfer such existing notes into the exchange agent's account in accordance
with the book-entry transfer facility's ATOP procedures for transfer. However,
the exchange of the existing notes so tendered will only be made after timely
confirmation (a "book-entry confirmation") of such book-entry transfer and
timely receipt by the exchange agent of an agent's message, an appropriate
Letter of Transmittal with any required signature guarantee, and any other
documents required. The term "agent's message" means a message, transmitted by
the book-entry transfer facility and received by the exchange agent and forming
part of book-entry confirmation, which states that the book-entry transfer
facility has received an express acknowledgment from a participant tendering
existing notes which are the subject of such book-entry confirmation and that
such participant has received and agrees to be bound by the terms of the Letter
of Transmittal and that we may enforce such agreement against such participant.
24
Guaranteed Delivery Procedures
If a registered holder of the existing notes desires to tender such
existing notes and the existing notes are not immediately available, or time
will not permit such holder's existing notes or other required documents to
reach the exchange agent before the expiration date, or the procedure for
book-entry transfer cannot be completed on a timely basis, a tender may
nonetheless be effected if:
- the tender is made through an Eligible Institution;
- prior to the expiration date, the exchange agent received from such
Eligible Institution a properly completed and duly executed Letter of
Transmittal and Notice of Guaranteed Delivery, substantially in the
form provided by us by telegram, telex, facsimile transmission, mail
or hand delivery, setting forth the name and address of the holder of
existing notes and the amount of existing notes tendered, stating that
the tender is being made thereby and guaranteeing that within five New
York Stock Exchange ("NYSE") trading days after the date of execution
of the Notice of Guaranteed Delivery, the certificates for all
physically tendered existing notes, in proper form for transfer, or a
book-entry confirmation, as the case may be, and any other documents
required by the Letter of Transmittal will be deposited by the
Eligible Institution with the exchange agent; and
- the certificates for all physically tendered existing notes, in proper
form for transfer, or a book-entry confirmation, as the case may be,
and all other documents required by the Letter of Transmittal are
received by the exchange agent within five NYSE trading days after the
date of execution of the Notice of Guaranteed Delivery.
Withdrawal Rights
Tenders of existing notes may be withdrawn at any time prior to the
expiration date. For a withdrawal to be effective, a written notice of
withdrawal must be received by the exchange agent at one of the addresses set
forth below under "--Exchange Agent." Any such notice of withdrawal must:
- specify the name of the person having tendered the existing notes to
be withdrawn;
- identify the existing notes to be withdrawn and the principal amount
of such existing notes; and
- where certificates for existing notes have been transmitted specify
the name in which such existing notes are registered, if different
from that of the withdrawing holder.
If certificates for existing notes have been delivered or otherwise
identified to the exchange agent, then, prior to the release of such
certificates, the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such holder is an
Eligible Institution.
If existing notes have been tendered pursuant to the procedure for
book-entry transfer described above, any notice of withdrawal must specify the
name and number of the account at the book-entry transfer facility to be
credited with the withdrawn existing notes and otherwise comply with the
procedures of such facility. All questions as to the validity, form and
eligibility, including time of receipt, of such notices will be determined by
us, whose determination shall be final and binding on all parties. Any existing
notes so withdrawn will be deemed not to have been validly tendered for exchange
for purposes of the exchange offer. Any existing notes which have been tendered
for exchange but which are not exchanged for any reason will be returned to the
holder thereof without cost to such holder (or in the case of existing notes
tendered by book-entry transfer into the exchange agent's account at the
book-entry transfer facility pursuant to the book-entry transfer procedures
described above, such existing notes will be credited to an account maintained
with such book-entry transfer facility for the existing notes) as soon as
practicable after withdrawal, rejection of tender or termination of the exchange
offer. Properly withdrawn existing notes May be retendered by following one of
the procedures described under "--Procedures for Tendering existing notes" above
at any time on or prior to the expiration date.
25
Conditions To The Exchange Offer
Notwithstanding any other provision of the exchange offer, we shall not be
required to accept for exchange, or to issue exchange notes in exchange for, any
existing notes. We may terminate or amend the exchange offer if it any time
before the acceptance of such existing notes for exchange or the exchange of
exchange notes for such existing notes, we determine that:
- the exchange offer does not comply with any applicable law or any
applicable interpretation of the staff of the Securities and Exchange
Commission;
- we have not received all applicable governmental approvals; or
- any actions or proceedings of any governmental agency or court exist
which could materially impair our ability to consummate the exchange
offer.
The foregoing conditions are for our sole benefit and may be asserted by us
regardless of the circumstances giving rise to any such condition or may be
waived by us in whole or in part at any time and from time to time in its
reasonable discretion. Our failure at any time to exercise any of the foregoing
rights shall not be deemed a waiver of such right and each such right shall be
deemed an ongoing right which may be asserted at any time and from time to time.
In addition, we will not accept for exchange any existing notes tendered,
and no exchange notes will be issued in exchange for any such existing notes, if
at such time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"). In any such event we are required to use every
reasonable effort to obtain the withdrawal of any stop order at the earliest
possible time.
Exchange Agent
IBJ Whitehall Bank & Trust Company has been appointed as the exchange agent
for the exchange offer. All executed Letters of Transmittal should be directed
to the exchange agent at one of the addresses set forth below. Questions and
requests for assistance, requests for additional copies of this prospectus or of
the Letter of Transmittal and requests for Notices of Guaranteed Delivery should
be directed to the exchange agent addressed as follows:
By Hand, up to 4:30 p.m.: By Registered or Certified Mail: By Overnight Courier & By Hand after 4:30
p.m. on the expiration date only:
IBJ Whitehall Bank & IBJ Whitehall Bank & IBJ Whitehall Bank &
Trust Company Trust Company Trust Company
One State Street P.O. Box 84 One State Street
New York, New York 10004 Bowling Green Station New York, New York 10004
Attn: Securities Processing Window, New York, New York 10274-0084 Attn: Securities Processing Window,
Subcellar One, (SC-1) Subcellar One, (SC-1)
By Facsimile:
(212) 858-2611
Confirm by Telephone:
(212) 858-2103
Delivery other than as set forth above will not constitute a valid delivery.
26
Fees and Expenses
We will not make any payments to brokers, dealers or others soliciting
acceptances of the exchange offer. The principal solicitation is being made by
mail. However, additional solicitations may be made in person or by telephone by
officers and employees of the Company.
The expenses to be incurred in connection with the exchange offer will be
paid by us. Such expenses include fees and expenses of the exchange agent and
Trustee, accounting and legal fees and printing costs, among others.
Accounting Treatment
The exchange notes will be recorded at the same carrying amount as the
existing notes, which is the principal amount as reflected in our accounting
records on the date of the exchange and, accordingly, no gain or loss will be
recognized. The debt issuance costs will be capitalized and amortized to
interest expense over the term of the exchange notes.
Transfer Taxes
Holders who tender their existing notes for exchange will not be obligated
to pay any transfer taxes in connection therewith, except that holders who
instruct us to register exchange notes in the name of, or request that existing
notes not tendered or not accepted in the exchange offer be returned to, a
person other than the registered tendering holder will be responsible for the
payment of any applicable transfer tax thereon.
Consequences of failure to exchange; Resales of exchange notes
Holders of existing notes who do not exchange their existing notes for
exchange notes in the exchange offer will continue to be subject to the
restrictions on transfer of such existing notes as set forth in the legend
thereon as a consequence of the issuance of the existing notes pursuant to the
exemptions from, or in transactions not subject to, the registration
requirements of, the Securities Act and applicable state securities laws.
Existing notes not exchanged pursuant to the exchange offer will continue to
accrue interest at 13% per annum and will otherwise remain outstanding in
accordance with their terms. Holders of existing notes do not have any appraisal
or dissenters' rights under the Colorado Business Corporation Act in connection
with the exchange offer. In general, the existing notes may not be offered or
sold unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. We do not currently anticipate that we will register the
existing notes under the Securities Act. However, (1) if the Initial Purchaser
so requests with respect to existing notes not eligible to be exchanged for
exchange notes in the exchange offer and held by it following consummation of
the exchange offer or (2) if any holder of existing notes other than an
Exchanging Dealer is not eligible to participate in the exchange offer or, in
the case of any holder of existing notes other than an Exchanging Dealer that
participates in the exchange offer, does not receive exchange notes in exchange
for existing notes that may be sold without restriction under state and federal
securities laws (other than due solely to the status of such holder as an
affiliate of us within the meaning of the Securities Act), we are obligated to
file a shelf registration statement on the appropriate form under the Securities
Act relating to the existing notes held by such persons.
Based on certain interpretive letters issued by the staff of the Securities
and Exchange Commission to third parties in unrelated transactions, we are of
the view that exchange notes issued pursuant to the exchange offer may be
offered for resale, resold or otherwise transferred by holders thereof (other
than (1) any such holder which is our "affiliate" within the meaning of Rule 405
under the Securities Act or (2) any broker-dealer that purchases notes from us
to resell pursuant to Rule 144A or any other available exemption) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such exchange notes are acquired in the ordinary
course of such holders' business and such holders have no arrangement or
understanding with any person to participate in the distribution of such
exchange notes. If any holder has any arrangement or understanding with respect
to the distribution of the exchange notes to be acquired pursuant to the
exchange offer, such holder (1) could not rely on the applicable interpretations
of the staff of the Securities and Exchange Commission and (2) must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. A broker-dealer who holds
existing notes that were acquired for its own account as a result of
27
market-making or other trading activities may be deemed to be all
"underwriter" within the meaning of the Securities Act and must, therefore,
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of exchange notes. Each such broker-dealer that
receives exchange notes for its own account in exchange for existing notes,
where such existing notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge in the
Letter of Transmittal that it will deliver a prospectus in connection with any
resale of such exchange notes. See "Plan of Distribution." We have not requested
the staff of the Securities and Exchange Commission to consider the exchange
offer in the context of a no-action letter, and there can be no assurance that
the staff would take positions similar to those taken in the interpretive
letters referred to above if we were to make such a no-action request.
In addition, the exchange notes may not be offered or sold in a
jurisdiction unless they have been registered or qualified for sale in such
jurisdictions or an exemption from registration or qualification is available
and is complied with. We have agreed, pursuant to the registration rights
agreement and subject to the specified limitations therein, to register or
qualify the exchange notes for offer or sale under the securities or blue sky
laws of such jurisdictions in the United States as any selling holder of the
Notes reasonably requests in writing.
28
BUSINESS
Riviera Black Hawk
Riviera Black Hawk, is constructing and will own and operate one of the
largest integrated casino, entertainment and parking facilities in the state of
Colorado. Located in Black Hawk, Colorado, approximately 40 miles west of
Denver, our casino will be one of the first three encountered when traveling
from Denver to the adjacent gaming cities of Black Hawk and Central City. Our
casino will feature the second largest number of gaming positions in the market
with approximately 1,000 slot machines and 12 blackjack tables. We also expect
to offer a variety of non-gaming amenities designed to further differentiate our
casino including: (1) parking for 520 vehicles (92% of which will be covered)
with convenient and free self-park and valet options, (2) a 265-seat casual
dining restaurant, (3) two themed bars and (4) an entertainment center with
seating for approximately 500 people.
The initial participants in this market were small, privately held gaming
facilities whose inability to offer convenient parking and a full range of
traditional casino amenities limited the growth of this market. Subsequently,
larger casinos offering such amenities have entered the market, have been
gaining market share and have contributed to the consistent growth in the
overall market. As of June 30, 1999, there were 29 casinos in the Black
Hawk/Central City market, with eight casinos each offering more than 400 gaming
positions. Anchor Gaming's Colorado Central Station, located across the street
from our casino with approximately 700 gaming machines and 700 valet parking
spaces, has been the market leader in terms of win per gaming device. We believe
that our casino will be successful due to our: (1) premier location; (2)
convenient, covered self-parking; and (3) superior size and amenities.
We expect to open our casino in the first quarter of 2000. The total cost
for our casino, excluding capitalized interest, is expected to be $77.1 million,
which includes (1) $15.1 million for the original purchase of the land on which
our casino is being developed, (2) $27.6 million of construction costs, (3)
$10.6 million for furniture, fixtures and equipment, (4) $8.0 million for
project development costs, fees and permits, (5) $2.7 million for pre-opening
costs, opening bankroll and other working capital requirements, (6) $10.1
million for a completion reserve and an interest reserve and (7) $3.0 million
for fees and expenses related to the sale of the existing notes. We believe the
construction budget and timetable for our casino can be achieved based on the
following:
- construction costs will be incurred pursuant to a construction
contract with a maximum price of $27.6 million, except for our changes
in specifications or delays caused by our company or "force majeure"
events;
- the foundation and external structure of the facility has been
substantially completed;
- $14.9 million (54%) of the $27.6 million construction budget had been
expended under the construction contract as of June 30, 1999;
- the construction contract provides for a completion date of January
15, 2000 with incentives for finishing early and penalties for
finishing late.
Description of the Riviera Black Hawk
General. The Riviera Black Hawk is designed to be an integrated gaming
facility, providing customers with a broad selection of gaming activities, food
and entertainment as well as convenient on-site covered parking. Our casino is
being constructed on a 71,000 square foot (1.63 acres) site zoned entirely for
gaming, providing us with the flexibility to add additional gaming space as
allowable under Colorado gaming regulations. Total square footage for the
facility will be 300,000 square feet, which includes a 175,000 square foot
parking structure. The land is not subject to any material encumbrances.
The exterior design of our casino is based on the historic Western
Victorian influence found in the Black Hawk area in the late 19th century.
Patrons will be able to enter the casino from three entrances: (1) a
glass-covered pedestrian entrance facing the Colorado Central Station on the
corner of Main and Mill Street, which will serve as the main entrance for
pedestrians coming from the Colorado Central Station and other casinos across
Mill Street as well as the west entrance of the Isle of Capri Casino; (2) a
valet and pedestrian entrance facing the Isle of Capri Casino across Main
Street, which will serve as the main entrance for our valet customers, bus
customers and pedestrians leaving the Isle of Capri Casino through the north
entrance; and (3) elevator access from our attached self-parking structure.
29
The interior of the casino will blend the Western Victorian theme with the
exciting atmosphere of a modern casino, complete with state-of-the-art slot
machines and blackjack tables. The ambiance on the casino floor will be enhanced
by the view of the surrounding mountains offered through large windows. Also
adding to the Western Victorian theme will be a large, ornate bar located in the
center of the casino floor. Our casino will include 30,000 square feet of gaming
space located "Las Vegas-style" on a single floor. We expect to offer one of the
largest selections of gaming in the market with approximately 1,000
state-of-the-art slot machines and 12 blackjack tables. Each slot machine and
each gaming table is considered one gaming position. The slot machines will be
available to customers in numerous denominations, including 5(cent), 25(cent),
$1 and $5 and will be grouped together to generate an atmosphere of excitement
consistent with that typically found in Las Vegas-style casinos.
The Black Hawk/Central City Market
Gaming was first introduced to the Black Hawk/Central City market in
October 1991 following a state-wide referendum where Colorado voters approved
limited stakes gaming for three historic mining towns -- Black Hawk, Central
City and Cripple Creek. Limited stakes gaming is defined as a maximum single bet
of $5. Black Hawk and Central City are contiguous cities located approximately
40 miles west of Denver and about ten miles north of Interstate Highway 70, the
main east-west artery from Denver. Historically, these two gold mining
communities were popular tourist towns. However, since the inception of casino
gaming in October 1991, many of the former tourist-related businesses have been
displaced by gaming establishments.
The first casino in the Black Hawk/Central City market was opened in
October 1991 with 14 casinos open by the end of that year. The pace of expansion
increased further in 1992 with the number of casinos in the market peaking at 42
casinos. However, due to a trend of consolidation in the market and the
displacement of small casinos by the entry of larger, better capitalized
operators, the number of casinos has declined to 29 as of June 30, 1999.
The Black Hawk/Central City market primarily caters to "day-trip" customers
from Denver, Boulder, Fort Collins and Golden as well as Cheyenne, Wyoming.
Approximately 3.3 million people reside within this 100-mile radius of Black
Hawk. Denver provides the market with a demographic base of approximately 1.9
million residents. In addition, residents within a 100 mile radius of the City
of Black Hawk had an average household income in excess of $51,000 per annum in
1998. Daily traffic counts passing the Black Hawk/Central City market on Highway
119, as reported by the Colorado Department of Transportation, averaged over
14,000 vehicles per day in 1998.
The Black Hawk/Central City market's location has contributed to consistent
growth in the market since the legalization of gaming in 1991. Gaming revenues
have grown from $127.6 million in 1992 to $366.0 million in 1998, representing a
19% compound annual growth rate. These revenues represented approximately 76% of
total Colorado gaming revenues (excluding gaming on Native American land).
30
The following table sets forth gaming statistics for the Black Hawk/Central
City market and well as the individual cities of Black Hawk and Central City:
Year Ended December 31,
1994 1995 1996 1997 1998
Black Hawk
Gaming revenues (in thousands).. $ 173,703 $195,857 $219,911 $234,631 $272,008
Number of casinos(1)............ 19 19 19 19 19
Number of slots(1).............. 4,231 4,877 5,276 5,340 7,181
Number of tables(1)............. 103 113 111 106 125
Win per slot per day(2)......... $ 97.71 $ 104.70 $ 110.68 $ 113.77 $ 122.24
Win per table per day(2)........ $ 375.06 $ 365.57 $ 365.83 $ 370.50 $ 383.69
Central City
Gaming revenues (in thousands).. $ 69,702 $ 94,468 $ 88,870 $ 87,391 $ 93,980
Number of casinos(1)............ 17 13 12 12 12
Number of slots(1).............. 4,311 3,670 3,259 3,196 3,142
Number of tables(1)............. 92 72 60 58 46
Win per slot per day(2)......... $ 54.63 $ 60.51 $ 66.96 $ 67.97 $ 81.15
Win per table per day(2)........ $ 245.32 $ 282.12 $ 244.14 $ 219.63 $ 224.21
Black Hawk/Central City Market
Gaming revenues (in thousands).. $ 243,405 $290,325 $308,781 $322,022 $365,988
Number of casinos(1)............ 36 32 31 31 31
Number of slots(1).............. 8,542 8,547 8,535 8,536 10,323
Number of tables(1)............. 195 185 171 164 171
- ----------
(1) As of December 31 for each period shown.
(2) Win per gaming position per day is based on the weighted average number of
units during the period presented. Source: Colorado Division of Gaming and Urban
Systems, Inc.
Slot machines account for approximately 95% of the market's total gaming
revenues. In contrast, as of December 31, 1998, slot machines in the developed
gaming markets of Nevada and New Jersey generate between 65% and 69% of total
revenues while slot revenues in emerging markets such as Iowa and Indiana
account for approximately 78% of total revenues.
Since 1992, the number of gaming positions in the Black Hawk/Central City
market has grown approximately 44.7% from 7,252 positions in 1992 to 10,494
positions in 1998. The total number of slot machines has increased 45.8% since
1992 to 10,323 in 1998 while the total number of tables in the market has
remained relatively flat with 171 tables in the market at the end of 1998. Win
per gaming position per day has continued to grow despite the increase in the
number of gaming positions.
The City of Black Hawk has experienced more significant growth in gaming
revenues than Central City since 1992. The popularity of Black Hawk in
comparison to Central City is due primarily to Black Hawk's superior access to
major highways, as patrons must first pass through Black Hawk to access Central
City from Denver. Due to this superior location, larger casino operators have
focused on building in the City of Black Hawk. As a result, casinos in Black
Hawk now generally feature a larger average number of gaming positions, a wider
variety of high quality amenities and convenient and free parking for patrons.
These factors have contributed to growth in Black Hawk gaming revenues at a
compound annual rate of 30.1% since 1992 compared to a more moderate growth for
Central City of 4.7% over the same period. The number of slot machines and
tables in the City of Black Hawk have increased 125.0% and 50.6%, respectively
since 1992, while the number of slot machines and tables in Central City have
declined 19.1% and 49.5%, respectively over the same period.
The information contained in this discussion of the Black Hawk/Central City
market was derived from publicly available data, except where stated otherwise.
See "Risk Factors -- Competition" and "Risk Factors -- Reliability of Market
Data."
31
Marketing Strategy
We plan to attract customers to our casino by implementing marketing
strategies and promotions designed specifically for this market. In doing so, we
hope to create customer loyalty and benefit from repeat visits by our customers.
We intend to capitalize on our superior facilities. Specific marketing programs
to support this strategy include the Riviera Player's Club and "V.I.P." services
offered to repeat gaming customers. The Player's Club is a promotion that
rewards casino play and repeat visits to the casino with various privileges and
amenities such as cash bonuses, logo gift items and invitations to special
events, including free slot tournaments and parties. Riviera Holdings has used
the Player's Club promotion in its casino in Las Vegas and, in its capacity as
manager of the Riviera Black Hawk, will tailor it for the Black Hawk/Central
City market and implement it at our casino. "V.I.P." services will be available
to the highest level of players and will include special valet and self-parking
services, complimentary food and entertainment offerings and special events
specifically designed for this group of customers.
We believe that we will benefit from strong "walk-in" traffic due to the
proximity of our casino to the Colorado Central Station and the Isle of Capri
Casino. We intend to develop specific marketing programs designed to attract
these "walk-in" customers. We further intend to emphasize quality food and
beverage amenities with customer friendly service as a marketing tool. In
addition, we will provide entertainment programs designed to meet the tastes of
the Black Hawk/Central City market, such as live music performances by popular
regional and national groups.
We also intend to utilize proven database marketing techniques previously
implemented by Riviera Holdings at its casino in Las Vegas. Approximately two to
three months prior to opening, we expect to begin to solicit members for our
Players Club using direct mail advertising. Once our casino is opened to the
public, the database will be primarily derived from information supplied by the
Players Club, which will help us to identify our best customers by reference to
levels of play and frequency of visits. We plan to rely on database marketing in
order to best identify target customer segments of the population and to tailor
the casino's promotions and amenities to our core group of customers. We will
use the current database maintained by Riviera Hotel & Casino in Las Vegas to
identify and stratify slot players living in Colorado (approximately 7,000 slot
players have been identified) for appropriate incentives. We will establish a
bus program that will offer bus patrons incentives directed specifically to them
with an accelerated award program based on levels of play. In addition, we plan
to promote our casino by advertising in newspapers and on billboards in the
local areas.
Competition
We believe that the primary competitive factors in the market are casino
location, availability and convenience of parking, number of slot machines and
gaming tables, types and pricing of non-gaming amenities, name recognition and
overall atmosphere. We believe our casino will compete favorably with respect to
each of these factors.
See "Risk Factors" for a description of the competitive factors that could
impact our casino's financial performance.
Design and Construction Summary
We have assembled what we believe to be a qualified team to design and
construct the Riviera Black Hawk.
- The Weitz Company, Inc. has been retained as general contractor to
build the Riviera Black Hawk. Based on industry sources, Weitz is
ranked among the top 50 building contractors in the United States
based on total revenues from general building and is the fifth largest
contractor in the State of Colorado. Weitz has extensive experience
building in mountainous terrain, including projects in Vail, Colorado
and Keystone, Colorado.
- Melick Associates, Inc. has been retained as the architects for the
Riviera Black Hawk. Melick Associates has experience with casino
projects in mountainous terrain, including projects in Black Hawk,
Central City and Cripple Creek.
- John Franzoi, Riviera Operating Corporation's Vice President of
Construction, is managing project development and construction for the
Riviera Black Hawk. Mr. Franzoi has a State of Nevada general
contractors license and has over 30 years of experience in the
construction industry.
- Phillip Harris has been retained as our representative and
construction consultant for the Riviera Black Hawk project. Mr. Harris
is assisting Mr. Franzoi in monitoring the progress of the
construction of the Riviera Black Hawk. Mr. Harris is a construction
consultant with over 30 years construction experience, most recently
as Vice President and Operations Manager for GE Johnson Construction
Company.
32
We have entered into a construction contract with Weitz. The construction
contract provides that Weitz and various subcontractors will construct the
Riviera Black Hawk, including site development, excavation and construction of
the casino and parking garage. For a description of the terms of the
construction contract, see "Material Agreements -- Construction Contract."
We have also entered into an architectural contract with Melick Associates
for the architectural design of our casino. The architectural contract covers
architectural and interior design and specifications. Melick Associates will
administer the construction contract and coordinate and integrate its work with
the design build subcontractors. For a description of the terms of our contract
with Melick Associates, see "Material Agreements -- Architectural Contract."
The scope of permits and approvals required for the construction of our
casino is extensive and includes state and local land use permits, excavation,
building and zoning permits, architectural approvals and approval of street and
traffic signals. To date, we have obtained all City of Black Hawk, State of
Colorado and federal permits required to construct our casino.
Management
Riviera Gaming Management of Colorado, Inc. (the "Manager"), which is our
direct corporate parent and an indirect, wholly-owned subsidiary of Riviera
Holdings, will manage the operations of our casino. We have entered into a
management contract for the provision of these management services, which is
described in greater detail under the section "Material Agreements -- Management
Agreement."
Intellectual Property
We have entered into a license agreement with Riviera Operating
Corporation, a subsidiary of Riviera Holdings, which permits us to use the
trademark "Riviera" and other trademarks and logos in connection with our casino
on a royalty free basis. The terms of this license agreement are summarized in
greater detail in the section "Material Agreements -- Intellectual Property
License Agreement."
Property
Our casino is being constructed on a 71,000 square foot (1.63 acres) parcel
of land in Black Hawk, Colorado, which we own. We have no other properties.
Employees
We anticipate that when the Riviera Black Hawk opens, it will have an
average of approximately 350 full-time equivalent employees, with the highest
number of employees expected during the summer season.
Legal Proceedings
We are not a party to any litigation.
Riviera Holdings Corporation
Riviera Holdings, through its wholly-owned subsidiaries, owns and operates
the Riviera Hotel & Casino located on the Las Vegas Strip. Opened in 1955, the
Riviera Hotel & Casino is situated on a 26-acre site located across the Strip
from Circus Circus and across Paradise Road from the Las Vegas Hilton and the
Las Vegas Convention Center.
33
GAMING AND LIQUOR REGULATORY MATTERS
Summary
In general we, Riviera Holdings, our principal executive officers and those
of Riviera Holdings, and any of our employees who will be involved in our gaming
operations, will be required to be licensed by the State of Colorado. Colorado
also requires that significant stockholders of Riviera Holdings be licensed or
certified as suitable for licensure. The licensure process involves the filling
out of a form proscribed by the Colorado Gaming Commission, an interview of the
prospective licensee and an investigation of such licensee to the extent the
Staff of the Colorado Gaming Commission deems necessary. We pay the
investigation costs. If any such officer, director or employee were found to be
unsuitable for licensure by the Colorado Gaming Commission, we would have to
replace such person. If the Colorado Gaming Commission objected to our licensure
or that of Riviera Holdings or its significant stockholders, we might be forced
to sell our interest in Riviera Black Hawk and pay off the notes to the extent
of the net sale proceeds. If the objection of the Colorado Gaming Commission
related to licensure or suitability for licensure of any of Riviera Holdings'
significant stockholders, Riviera Holdings might attempt to purchase or arrange
for the purchase of the Riviera Holdings shares owned by the stockholder to
which the Colorado Gaming Commission objected, but Riviera Holdings' ability to
make such purchase is limited and it is uncertain whether Riviera Holdings could
arrange for such stock repurchase. At present, we have no reason to believe that
we will have any problem with respect to licensure by Colorado. See "Risk
Factors -- Gaming Licenses, Permits and Approvals."
Background
Pursuant to an amendment to the Colorado Constitution (the "Colorado
Amendment"), limited stakes gaming became lawful in the cities of Central City,
Black Hawk and Cripple Creek on October 1, 1991. Limited stakes gaming means a
maximum single bet of five dollars on slot machines and in the card games of
blackjack and poker.
The Colorado Amendment, restricts limited stakes gaming to structures that
conform to the architectural styles and designs that were common to the areas
prior to World War 1, and which conform to the requirements of applicable city
ordinances regardless of the age of the structures. No more than 35% of the
square footage of any building and no more than 50% of any one floor of any
building may be used for limited stakes gaming. The Colorado Amendment also
prohibits limited stakes gaming between the hours of 2:00 a.m. and 8:00 a.m.,
and allows limited stakes gaming to occur in establishments licensed to sell
alcoholic beverages.
Further, the Colorado Amendment provides that, in addition to any other
applicable license fees, up to a maximum of 40% of the total amounts wagered
less payouts to players may be payable by a licensee for conducting limited
stakes gaming. Such percentage is to be established by the Colorado Commission
annually.
Regulatory Structure
The Colorado Amendment subjects the ownership and operation of limited
stakes gaming facilities in Colorado to extensive regulation by the Colorado
Commission and prohibits persons under the age of 21 from participating in
limited stakes gaming. No limited stakes gaming may be conducted in Colorado
unless all appropriate gaming licenses are approved by and obtained from the
Colorado Commission. The Colorado Commission has full and exclusive authority to
promulgate, and has promulgated, rules and regulations governing the licensing,
conducting and operating of limited stakes gaming (the "Colorado Regulations").
Such authority does not require any approval by or delegation of authority from
the Colorado Department of Revenue (the "Colorado Revenue Department"). The
Colorado Amendment also created the Colorado Division of Gaming (the "Division
of Gaming") within the Colorado Revenue Department to license, implement,
regulate and supervise the conduct of limited stakes gaming in Colorado, which
division is supervised and administered by the Director of the Division of
Gaming (the "Division Director").
Gaming Licenses
The Colorado Commission may issue: (1) slot machine or distributor, (2)
operator, (3) retail gaming, (4) support and (5) key employee gaming licenses.
The first three licenses require annual renewal by the Colorado Commission.
Support and key employee licenses are issued for two year periods and are
renewable by the Division Director. The Colorado Commission has broad discretion
to condition, suspend for up to six months, revoke, limit or restrict a license
at any time and also has the authority to impose fines.
34
An applicant for a gaming license must complete comprehensive application
forms, pay required fees and provide all information required by the Colorado
Commission and the Division of Gaming. Prior to licensure, applicants must
satisfy the Colorado Commission that they are suitable for licensing. Applicants
have the burden of proving their qualifications and must pay the full cost of
any background investigations. There is no limit on the cost of such background
investigations.
Gaming employees must hold either a support or key employee license. Every
retail gaming licensee must have a key employee licensee in charge of all
limited stakes gaming activities when limited stakes gaming is being conducted.
The Colorado Commission may determine that a gaming employee is a key employee
and, require that such person apply for a key employee license.
A retail gaming license is required for all persons conducting limited
stakes gaming on their premises. In addition, an operator license is required
for all persons who engage in the business of placing and operating slot
machines on the premises of a retailer. However, a retailer is not required to
hold an operator license. No person may have an ownership interest in more than
three retail licenses. A slot machine manufacturer or distributor license is
required for all persons who manufacture, import or distribute slot machines in
Colorado.
The Colorado Amendment requires that every officer, director, and
stockholder of private corporations or equivalent office or ownership holders
for non-corporate applicants, and every officer, director or stockholder holding
either a 5% or greater interest or controlling interest of a publicly traded
corporation or owners of an applicant or licensee shall be a person of good
moral character and submit to a full background investigation conducted by the
Division of Gaming and the Colorado Commission. The Colorado Commission may
require any person having an interest in a license to undergo a full background
investigation and pay the cost of investigation in the same manner as an
applicant.
Persons found unsuitable by the Colorado Commission may be required
immediately to terminate any interest, association, or agreement with or
relationship to a licensee. A finding of unsuitability with respect to any
officer, director, employee, associate, lender or beneficial owner of a licensee
or applicant also may jeopardize the licensee's license or the applicant's
application. A license approval may be conditioned upon the termination of any
relationship with unsuitable persons.
Duties of Licensees
An applicant or licensee must report to the Division of Gaming or Colorado
Commission all leases not later than 30 days after the effective date of the
lease. Also, an applicant or a license, upon the request of the Colorado
Commission or the Division Director, must submit copies of all written gaming
contracts and summaries of all oral gaming contracts to which it is or intends
to become a party. The Division Director or the Colorado Commission may require
changes in the lease or gaming contract before an applicant is approved or
participation in such agreement is allowed or may require termination of the
lease or gaming contract.
The Colorado Amendment and the Colorado Regulations require licensees to
maintain detailed records that account for all business transactions. Records
must be furnished upon demand to the Colorado Commission, the Division of Gaming
and other law enforcement authorities. The Colorado Regulations also establish
extensive playing procedures and rules of play for poker, blackjack and slot
machines. Retail gaming licenses must adopt comprehensive internal control
procedures. Such procedures must be approved in advance by the Division of
Gaming and include the areas of accounting, surveillance, security, cashier
operations, key control and fill and drop procedures, among others. No gaming
devices may be used in limited stakes gaming without the approval of the
Division Director or the Colorado Commission.
Licensees have a continuing duty to immediately report to the Division of
Gaming the name, date of birth and social security number of all persons who
obtain an ownership, financial or equity interest in the licensee of 5% or
greater, who have the ability to control the licensee, who have the ability to
exercise significant influence over the licensee or who loan any money or other
thing of value to the licensee. Licensees must report to the Division of Gaming
all licenses, and all applications for licenses, in foreign jurisdictions.
With limited exceptions applicable to licensees that are publicly traded
entities, no person may sell, lease, purchase, convey or acquire any interest in
a retail gaming or operator license or business without the prior approval of
the Colorado Commission.
All agreements, contracts, leases, or arrangements in violation of the
Colorado Amendment or the Colorado Regulations are void and unenforceable.
35
Taxes, Fees and Fines
The Colorado Amendment requires an annual tax of up to 40% on the total
amount wagered less all payouts to players. With respect to games of poker, the
tax is calculated based on the sums wagered which are retained by the licensee
as compensation. Effective July 1 of each year, the Colorado Commission
establishes the gaming tax for the following 12 months. Currently, the gaming
tax is: 2% on the first $2 million of these amounts; 4% on amounts from $2
million to $4 million; 14% on amounts from $4 million to $5 million; 18% on
amounts from $5 million to $10 million; and 20% on amounts over $10 million.
The Colorado Commission requires all gaming licensees to pay an annual
device fee for each slot machine, blackjack table and poker table of $75. The
municipality of Black Hawk assesses an annual device fee of $750 per device.
There is no statutory limit on state or city device fees, which may be increased
at the discretion of the Colorado Commission or the city. In addition, a
business improvement fee of as much as $102 per device and a transportation
authority device fee of $77 per device also may apply depending upon the
location of the licensed premises in Black Hawk. The current annual business
improvement fee is $89.04.
Black Hawk also imposes taxes and fees on other aspects of the businesses
of gaming licensees, such as parking, alcoholic beverage licenses and other
municipal taxes and fees. Significant increases in these fees and taxes, or the
imposition of new taxes and fees, may occur.
Violation of the Colorado Amendment constitutes a class 1 misdemeanor which
may subject the violator to fines or incarceration or both. A licensee who
violates the Colorado Amendment or Colorado Regulations is subject to suspension
of the license for a period of up to six months, fines or both, or to license
revocation.
Requirements for Publicly Traded Corporations
The Colorado Commission has enacted Rule 4.5, which imposes requirements on
publicly traded corporations holding gaming licenses in Colorado and on gaming
licenses owned directly or indirectly by a publicly traded corporation, whether
through a subsidiary or intermediary company. The term "publicly traded
corporation" includes corporations, firms, limited liability companies, trusts,
partnerships and other forms of business organizations even if created under the
laws of a foreign country. Such requirements shall automatically apply to any
ownership interest held by a publicly traded corporation, holding company or
intermediary company thereof, where such ownership interest directly or
indirectly is, or will be upon approval of the Colorado Commission, 5% or more
of the entire licensee. In any event, if the Colorado Commission determines that
a publicly traded corporation, or a subsidiary, intermediary company or holding
company has the actual ability to exercise influence over a licensee, regardless
of the percentage of ownership possessed by said entity, the Colorado Commission
may require that entity to comply with the disclosure regulations contained in
Rule 4.5.
Under Rule 4.5, gaming licensees, affiliated companies and controlling
persons commencing a public offering of voting securities must notify the
Colorado Commission within 10 days of the initial filing of a registration
statement with the Securities and Exchange Commission. Licensed publicly traded
corporations are also required to send proxy statements to the Division of
Gaming within 5 days after distribution of such statement. Licensees to whom
Rule 4.5 applies must include in their articles of organization or similar
charter documents provisions that: restrict the rights of the licensees to issue
voting interests or securities except in accordance with the Colorado Amendment
and the Colorado Regulations; limit the rights of persons to transfer voting
interests or securities of licensees except in accordance with the Colorado
Amendment and the Colorado Regulations; and provide that holders of voting
interests or securities of licensees found unsuitable by the Colorado Commission
may, within 60 days of such finding of unsuitability, be required to sell their
interests or securities back to the issuer at the lesser of the cash equivalent
of the holders' investment or the market price as of the date of the finding of
unsuitability. Alternatively, the holders may, within 60 days after the finding
of unsuitability, transfer the voting interests or securities to a suitable
person (as determined by the Colorado Commission). Until the voting interests or
securities are held by suitable persons, the issuer may not pay dividends or
interest, the securities may not be voted, they may not be included in the
voting or securities of the issuer, and the issuer may not pay any remuneration
in any form to the holders of the securities.
Pursuant to Rule 4.5, persons who acquire direct or indirect beneficial
ownership of (1) 5% or more of any class of voting securities of a publicly
traded corporation are required to include in its articles of organization the
Rule 4.5 charter language provisions or (2) 5% or more of the beneficial
interest in a gaming licensee directly or indirectly through any class of voting
securities of any holding company or intermediary company of a licensee (all
such persons hereinafter referred to as "qualifying
36
persons"), shall notify the Division of Gaming within 10 days of such
acquisition, are required to submit all requested information and are subject to
a finding of suitability as required by the Division of Gaming or the Colorado
Commission. Licensees also must notify any qualifying persons of these
requirements. A qualifying person whose interest equals 10% or more must apply
to the Colorado Commission for a finding of suitability within 45 days after
acquiring such securities. Licensees must also notify any qualifying persons of
these requirements. Whether or not notified, qualifying persons are responsible
for complying with these requirements.
A qualifying person who is an institutional investor under Rule 4.5 and who
individually or in association with others, acquires, directly or indirectly,
the beneficial ownership of 15% or more of any class of voting securities must
apply to the Colorado Commission for a finding of suitability within 45 days
after acquiring such interests.
The Colorado Regulations also provide for exemption from the requirements
for a finding of suitability when the Colorado Commission finds such action to
be consistent with the purposes of the Colorado Amendment.
Pursuant to Rule 4.5, persons found unsuitable by the Colorado Commission
must be removed from any position as an officer, director, or employee of a
licensee, or from a holding or intermediary company. Such unsuitable persons
also are prohibited from any beneficial ownership of the voting securities of
any such entities. Licensees, or affiliated entities of licensees, are subject
to sanctions for paying dividends or distributions to persons found unsuitable
by the Colorado Commission, or for recognizing voting rights of, or paying a
salary or any remuneration for services to, unsuitable persons. Licensees or
their affiliated entities also may be sanctioned for failing to pursue efforts
to require unsuitable persons to relinquish their interest. The Colorado
Commission may determine that anyone with a material relationship to, or
material involvement with, a licensee or an affiliated company must apply for a
finding of suitability or must apply for a key employee or associated person
licensee.
Alcoholic Beverage Licenses
The sale of alcoholic beverages in gaming establishments is subject to
strict licensing, control and regulation by state and local authorities and
requires a liquor license. Alcoholic beverage licenses are revocable and
nontransferable. State and local licensing authorities have full power to limit,
condition, suspend for as long as six months or revoke any such licenses.
Violation of state alcoholic beverage laws may constitute a criminal offense
resulting in incarceration or fines or both.
There are various classes of retail liquor licenses which may be issued
under the Colorado Liquor Code. A gaming licensee may sell malt, vinous or
spirituous liquors only by the individual drink for consumption on the premises.
Even though a retail gaming licensee may be issued various classes of retail
liquor licenses, such gaming licensee may only hold liquor licenses of the same
class. An application for an alcoholic beverage license in Colorado requires
notice, posting and a public hearing before the local liquor licensing authority
prior to approval of the same. The Colorado Department of Revenue's Liquor
Enforcement Division must also approve the application.
Riviera Black Hawk Licenses
Currently, no gaming or liquor licenses in Colorado have been granted in
connection with the Riviera Black Hawk, although an application for a restaurant
liquor license has been approved by the local licensing authority and is in the
process of being forwarded to the State Liquor Enforcement Division for
approval. The application for a retail gaming license is pending. Applications
for key employee gaming licenses have also been made. Associated Person License
applications have been submitted for the officers and directors of Riviera
Holdings as well as some of the affiliated companies as required by the Division
Director. Additional gaming Associated Person, Key Employee and support license
applications will have to be made and approved prior to the opening of the
casino.
Before our casino can obtain the final approval of the Colorado Commission,
stockholders of Riviera Holdings who own more than 5% of its common stock must
be found "suitable" or have the person(s) with investment power over the
investment licensed as associated persons by the Colorado Commission. Three of
Riviera Holdings' largest stockholders have submitted (and one will submit)
information to the Colorado Commission for the purpose of establishing
suitability for licensing or are seeking to have the person(s) with investment
power over the investment licensed as associated persons in Colorado. Based upon
our discussions with the staff of the Colorado Commission, we are optimistic
such stockholders will not present a problem with the Colorado Commission. See
"Risk Factors -- Gaming Licenses, Permits and Approvals."
37
MATERIAL AGREEMENTS
Construction Contract
We have entered into a construction contract for the construction of the
Riviera Black Hawk. The construction contract provides for the construction of a
casino, parking garage, associated site work and all floor coverings and food
service equipment at a price of $27.6 million, including a contingency allowance
of $0.5 million. The construction cost is fully supported by a payment and
performance bond obtained by the general contractor, Weitz, who is also required
to provide comprehensive public liability insurance, including contractual
liability coverage, in the amount of $2.0 million plus umbrella coverage in the
amount of $20.0 million. As required by the construction contract, we have
obtained builder's all risk insurance to insure against damage to the work in
place during construction. The price is subject to decrease if cost savings can
be achieved during construction, and is subject to material increase if: (1)
there are changes to the plans and specifications; (2) work is delayed due to
actions of the owner; or (3) "force majeure" events occur during construction.
Offsite improvements, permit fees and the cost of independent testing,
furnishings and finish work, and similar items, are excluded from the
construction contract and will be completed by us under separate contracts.
Work under the construction contract has commenced, and approximately $14.9
million, or 54% of the total budget, had been expended as of June 30, 1999. The
construction contract provides for substantial completion of the casino project
on or before January 15, 2000, subject to extensions due to adverse weather,
acts of God, or other causes outside of the general contractor's control as
provided in the construction contract. To discourage delays, liquidated damages
will be payable by the general contractor for each day that substantial
completion is delayed past the scheduled substantial completion date (as it may
be extended under the construction contract), as follows: (1) no penalties if
the casino project is substantially completed on or before January 31, 2000; (2)
$10,000 per day for each day from February 1, 2000, through February 15, 2000,
that the casino project is not substantially completed after January 31, 2000;
and (3) an additional $15,000 for each day from February 15, 2000, through March
31, 2000, that the casino project is not substantially completed. In addition,
to encourage early completion of the casino, incentive fees will be payable to
the general contractor. Specifically, the construction contract provides: (1) if
Weitz achieves substantial completion of the project on or after December 29,
1999, but prior to January 4, 2000, Weitz's lump sum fee shall be increased by
$10,000 for each day that the project is substantially complete prior to January
4, 2000; and (2) if Weitz achieves substantial completion of the project any
time before December 29, 1999, Weitz's lump sum fee shall be increased by
$15,000 for each day the project is substantially complete prior to December 29,
1999, and $10,000 for each day the project is substantially complete between
December 29, 1999, and January 4, 2000.
Architectural Contract
We have entered into an architectural contract with Melick Associates for
the provision of architectural and interior design and specifications for the
casino project at a fee of approximately $1.0 million. Pursuant to the
architectural contract, the architect will also provide structural and
engineering, food service design, water proofing consultants, elevator/escalator
consultants and landscape design. However, the architect is not responsible for
the work of independent electrical and mechanical design build subcontractors.
The architect will administer the construction contract and coordinate its work
with the construction subcontractors. The architect has provided professional
liability insurance in the amount of $1.0 million per occurrence, $2.0 million
aggregate with a $10,000 deductible, and damages under the architectural
contract have been limited to the amount of $1.0 million.
Management Agreement
We have entered into a management agreement with Riviera Gaming Management
of Colorado, Inc.(the "Manager") which will end after the tenth full year
audited financial statements are available after the opening of our casino. The
Manager will have the option of extending the term for up to four additional
terms of five years each by giving 180 days written notice.
The Manager will manage the Riviera Black Hawk in a manner reasonably
consistent with the standards and procedures exercised by other casino operators
in Black Hawk, Colorado. The Manager will supervise the hiring of all personnel
employed at the casino, who will be the employees of Riviera Black Hawk.
38
The Manager, at its expense, will supply the level of its own staffing that is
required to carry out the supervision of a full complement of executives
employed and paid by the Riviera Black Hawk.
The Manager may provide goods and services, including centralized computer
systems, service bureau payroll/personnel systems, advertising agency services,
centralized purchasing, licensed promotions, trademarks, service marks, legal
services and other similar services on a competitive price/fee basis.
The management fees will consist of a revenue fee and a performance fee.
The revenue fee will be based on 1% of net revenues (gross revenues less food
and beverage services furnished without charge to customers, but the retail
value of which is included in revenue and is then deducted as promotional
allowances) and is payable quarterly in arrears. The performance fee will be
based on the following percentages of EBITDA (earnings before interest, taxes,
depreciation and amortization, whose components are based on generally accepted
accounting principles): (1) 10% of EBITDA from $5 million to $10 million, (2)
15% of EBITDA from $10 million to $15 million and (3) 20% of EBITDA in excess of
$15 million. The performance fee will be paid based on the preceding quarter's
EBITDA in quarterly installments subject to year-end adjustment.
If there is any default under the management agreement, the Manager will
not be entitled to receive management fees, but the Manager will still be
entitled to payment for inter-company goods and services.
Intellectual Property License Agreement
We have entered into a royalty-free license agreement with Riviera
Operating Corporation, a subsidiary of Riviera Holdings, for the licensing of
the "Riviera" and other trademarks and trade names. The licensing agreement
terminates at the same time as the management agreement or earlier upon a change
in control of the Manager and, in either case, may be extended by the trustee up
to six months thereafter upon foreclosure of the notes.
Tax Sharing Agreement
Riviera Holdings is the parent of a group of companies which includes
ourselves (the "RHC Group") and files consolidated federal income returns.
Pursuant to the tax sharing agreement, we pay Riviera Holdings an amount equal
to our "separate tax liability." Our separate tax liability is that amount of
federal income tax that we would owe if we were to file a tax return independent
of the RHC Group. If the calculation of our separate tax liability for any year
results in a net operating loss, Riviera Holdings will credit the amount of such
loss against any amount which we might otherwise have to pay to Riviera Holdings
in any future tax year, provided that we remain a part of the RHC Group. Our
obligation to make tax payments pursuant to the tax sharing agreement continues
regardless of whether there has been a default in the payment of the notes.
39
MANAGEMENT
Executive Officers and Directors of the Company
Set forth below are the names, ages and position of each of our officers
and directors as of the date of this prospectus:
Name Age Position
William L. Westerman.... 67 Chairman of the Board of Directors and
Chief Executive Officer
Ronald P. Johnson....... 50 President and Director of the Company
Duane R. Krohn.......... 53 Chief Financial Officer, Secretary, Treasurer
and Director of the Company
The following information summarizes the business experience during at
least the past five years of each of our directors and executives:
William L. Westerman is our Chairman of the Board of Directors and Chief
Executive Officer and has held those positions since August 18, 1997. Mr.
Westerman has been the Chairman of the Board and Chief Executive Officer of
Riviera Holdings 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., on January 1, 1992. From 1973 to June 30,
1991, Mr. Westerman was President and Chief Executive Officer of Cellu-Craft
Inc., a manufacturer of flexible packaging primarily for food products.
Alusuisse, a multi-national aluminum and chemical company, acquired Cellu-Craft
on June 30, 1989. On January 1, 1990, Mr. Westerman was appointed President of
Alusuisse Flexible Packaging (Alusuisse's wholly-owned U.S. subsidiary engaged
in the manufacture of flexible packaging for food and pharmaceutical products).
Additionally, Mr. Westerman was named a member of the team responsible for all
of Alusuisse's multi-national packaging operations with annual sales volume in
excess of $1 billion. Mr. Westerman resigned from all his positions with
Alusuisse on June 30, 1991. Mr. Westerman has undergraduate and graduate degrees
in engineering from Lehigh University and from the University of Ohio,
respectively.
Ronald P. Johnson is our President and a Director and has held those
positions since February 1999. Mr. Johnson became Vice President of Gaming
Operations of Riviera Operating Corporation in September 1994, and Executive
Vice President of Gaming Operations of Riviera Operating Corporation on July 1,
1998. Mr. Johnson became Director of Slots of Riviera Operating Corporation 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. Prior to
joining Riviera, Inc., Mr. Johnson held slot management positions with Sands
Hotel & Casino (1989-1991) and Bally's Grand Las Vegas (1986-1989). In addition
to over 12 years of experience in casino operations, Mr. Johnson has 10 years of
experience, serving from 1976 to 1986, in various financial marketing and
administrative management positions in the slot manufacturing industry with
Bally Distributing, Co., International Game Technology and J&T, Inc.
Duane R. Krohn, CPA, is our Chief Financial Officer, Secretary, Treasurer
and a Director and has held those positions since February 1999. Mr. Krohn
assumed the position of Treasurer of Riviera Holdings and Riviera Operating
Corporation on June 30, 1993, and was elected Vice President of Finance of
Riviera Operating Corporation on April 26, 1994, and Executive Vice President of
Finance of Riviera Operating Corporation 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.
Management of the Riviera Black Hawk
We have entered into a management agreement with Riviera Gaming Management
of Colorado, Inc.(the "Manager"), under which the Manager will manage the daily
operations of Riviera Black Hawk. The Manager has hired Thomas Guth and James
Davey as the General Manager and Director of Slot Operations for Riviera Black
Hawk.
In addition, we have successfully recruited four other key executives for
the positions of Director of Finance, Director of Training and Compliance,
Facilities Director and Director of Security and Surveillance. Current
management represents a blend of seasoned management experience from both the
Black Hawk/Central City and Las Vegas markets. The following is a brief summary
of the business experience of Thomas Guth and James Davey:
40
Mr. Guth is our general manager. Under a letter agreement, dated January
15, 1999, Mr. Guth will be in charge of coordinating pre-opening functions and
will be the senior manager on site after the casino opens. Mr. Guth has over 20
years of casino marketing and casino operations experience. Mr. Guth most
recently was Director of Corporate Special Event Marketing for the Boyd Group
from September 1998 to March 1999. From July 1992 to May 1998, Mr. Guth was Vice
President, Director of Marketing for the Aladdin Hotel & Casino. From 1989 to
1992, Mr. Guth was Director of Special Events/Casino Programs for the Riviera
Hotel & Casino. Mr. Guth also has 11 years of experience in casino operations
with the Sahara Tahoe, Golden Nugget and Harrah's casinos.
James Davey is our director of slot operations and reports to Mr. Guth.
Under a letter agreement, dated January 9, 1999. Mr. Davey will be in charge of
gaming operations. Mr. Davey has over 19 years of experience in slot operations
management, having served in various management positions with the Tropicana,
Imperial Palace, the Riviera Hotel & Casino and the Four Queens in Las Vegas,
Nevada and the Splash casino in Tunica, Mississippi.
Neither of such agreements has a fixed term. Both Messrs. Guth and Davey
have been reimbursed for their relocation expenses and will participate in our
life insurance, medical, 401(K) and profit-sharing employee benefit plans at our
cost.
41
PRINCIPAL STOCKHOLDERS
We are an indirect wholly-owned subsidiary of Riviera Holdings. The common
stock of Riviera Holdings is traded on the American Stock Exchange. The table
below sets forth information regarding the beneficial ownership of the common
stock of Riviera Holdings as of June 30, 1999, by (1) each person who, to our
knowledge, beneficially owns more than 5% of such common stock, (2) the
directors and executive officers of our company and (3) all directors and
executive officers of Riviera Holdings and its subsidiary, Riviera Operating
Corporation. Each person listed below has sole voting and investment power for
the shares set forth opposite that person's name unless otherwise indicated.
Shares Beneficially Owned+
Name Number Percentage
- ---- ------------- ------------
William L. Westerman(1)(2)................. 504,200 9.5%
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 *
Robert R. Barengo(1)(7).................... 9,380 *
Richard L. Barovick(1)..................... 10,000 *
James N. Land, Jr.(1)...................... 1,500 *
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
(11 persons)(2)(3)(4)(5)(6)(7).............. 721,563 13.4
- ----------
+ Based on the number of outstanding shares of Riviera Holdings' common stock on
April 30, 1999 and the shares beneficially owned by such persons on June 30,
1999.
* Less than 1%.
(1) The address for each director and officer of our Company or Riviera
Holdings 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.
(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 is 125 High Street, Boston,
Massachusetts 02110. Stein Roe, an affiliate of Keyport, is Keyport's
investment advisor, and, as such, has the power and authority to direct the
disposition of the securities, and accordingly, could be deemed to be a
"beneficial" owner within the meaning of Rule 13d-3 of the Exchange Act.
Stein Roe, however, disclaims actual beneficial ownership of such
securities.
42
(9) The address for SunAmerica Life Insurance Company is One Sun America
Center, Century City, California 90067.
(10) The address of Morgens Waterfall is 10 East 50th Street, New York, New York
10022. Morgens Waterfall or its principals are either investment advisors
to, or trustees or general partners of, the eight entities listed in the
above table ("Morgens Entities") that are the owners of common stock of
Riviera Holdings. Morgens Waterfall or its principals have the power and
authority to direct this disposition of these securities and, accordingly,
could be deemed to be "beneficial" owners within the meaning of Rule 13d-3
of the Exchange Act. Each of Morgens Waterfall, its principals and the
Morgens Entities, however, disclaims beneficial ownership with respect to
any securities not actually beneficially owned by it.
(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 Benett
Offshore Restructuring Fund, Inc. The address for Mr. Bennett is c/o
Restructuring Capital Associates, L.P. is 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.
43
RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to the sale of the existing notes, Riviera Holdings had contributed
$30.1 million to us for (1) the purchase of the land on which the Riviera Black
Hawk is being constructed and (2) for construction costs under the construction
contract. Of the $30.1 million, Riviera Holdings has advanced $20.0 million in
cash equity contributions (excluding capitalized interest) and the remaining
$10.1 million was reimbursed to Riviera Holdings from the proceeds of the sale
of the existing notes.
We have entered into a management agreement with Riviera Gaming Management
of Colorado, Inc. Under this agreement, Riviera Gaming Management of Colorado,
Inc. will manage the operations of our casino. The terms of the management
agreement are described in the section "Material Agreements -- Management
Agreement."
We have entered into a license agreement with Riviera Operating
Corporation, a subsidiary of Riviera Holdings. Under this agreement, we have the
right to use the "Riviera" name and other trademarks, copyrights and trade names
in connection with our casino. The terms of the license agreement are described
in the section "Material Agreements -- Intellectual Property License Agreement."
We have entered into a tax sharing agreement with Riviera Holdings. Under
this agreement, Riviera Holdings will file consolidated federal income tax
returns for us as part of a group of companies and we have agreed to pay Riviera
Holdings for our portion of the group's tax liability. The terms of the tax
sharing agreement are described in the section "Material Agreements -- Tax
Sharing Agreement."
44
DESCRIPTION OF NOTES
We issued $45.0 million 13% First Mortgage Notes due 2005 With Contingent
Interest under an indenture with IBJ Whitehall Bank & Trust Company, as trustee.
The terms of the indenture apply to the existing notes and to the exchange notes
(the existing notes and the exchange notes being collectively referred to in
this section as the "notes"). The terms of the notes include those stated in the
indenture and those made part of the indenture by reference to the Trust
Indenture Act of 1939. The notes are secured obligations. The collateral
documents referred to under the caption "Security" define the terms of the
collateral that will secure the notes.
The following description is a summary of the selected provisions of the
indenture, the registration rights agreement and the collateral documents which
are deemed to be important to you. It does not restate any of those agreements
in their entirety. We urge you to read such documents because they, and not this
description, define your rights as holders of the notes. Copies of such
documents are available as set forth below under the caption "-- Additional
Information." See "The Exchange Notes" for a summary of the major note terms.
Principal, Maturity and Interest
The notes issued in this offering and any additional notes subsequently
issued under the indenture will be treated as a single class for all purposes
under the indenture, including, without limitation, waivers, amendments,
redemptions and offers to purchase. We will issue notes in denominations of
$1,000 and integral multiples of $1,000.
The notes will mature on May 1, 2005. Fixed interest on the notes will
accrue at the rate of 13% per annum and will be payable semi-annually in arrears
on May 1 and November 1, commencing on November 1, 1999. We will make each fixed
interest payment to the holders of record on the immediately preceding April 15
and October 15. Fixed interest will accrue from the date of original issuance,
or be computed on the basis of a 360-day year comprised of twelve 30-day months.
The notes will bear contingent interest after we begin operating.
Installments of accrued contingent interest will be payable semi-annually in
arrears on each interest payment date to the holders on the record date
applicable to the relevant interest payment date, unless all or a portion of the
installment is permitted to be deferred. We may defer payment of contingent
interest otherwise due and may continue to defer the payment of any installment
of contingent interest which has already been deferred if, and only to the
extent that: (1) the payment of that portion of contingent interest will cause
our adjusted fixed charge coverage ratio for the four consecutive fiscal
quarters ending immediately prior to the applicable record date to be less than
1.5 to 1.0 on a pro forma basis after giving effect to the assumed payment of
the contingent interest; and (2) the principal amount of the notes corresponding
to that contingent interest has not then matured and become due and payable,
whether at stated maturity, upon acceleration, upon redemption, upon maturity of
repurchase obligation or otherwise.
Contingent interest that is deferred will become due and payable upon the
earlier of: (1) the next succeeding interest payment date on which all or a
portion of that contingent interest is not permitted to be deferred; and (2) the
maturity of the corresponding principal amount of the notes, whether at stated
maturity, upon acceleration, upon redemption, upon maturity of repurchase
obligation or otherwise.
The amount of contingent interest payable for any period will be reduced
pro rata for reductions in the outstanding principal amount of the notes prior
to the immediately preceding record date. No interest will accrue on any
contingent interest that is deferred and which does not become due and payable.
Each installment of contingent interest will be calculated to accrue: (1)
from, but not including, the most recent semiannual period for which contingent
interest has been paid or through which contingent interest had been calculated
and deferred; or (2) if no installment of contingent interest has been paid or
deferred, from and including the date on which we become operating; to, and
including, the earlier of: (a) the last day of the semiannual period immediately
following the semiannual period referred to in clause (1) above if the
corresponding principal amount of the notes has not become due and payable; or
(b) the date of payment if the corresponding principal amount of the notes has
become due and payable, whether at stated maturity, upon acceleration, upon
redemption, upon maturity of repurchase obligation or otherwise.
45
Contingent interest will accrue daily on the principal amount of each note
outstanding: (1) for any portion of an accrual period which consists of all or
part of a semiannual period that ends during such accrual period, 1/180 of the
contingent interest with respect to such principal amount for such semiannual
period until fully accrued; and (2) for any other portion of an accrual period,
1/180 of the contingent interest with respect to such principal amount for the
semiannual period that began and last ended after the date on which we began
operating.
Methods of Receiving Payments on the Notes
If a holder has given wire transfer instructions to us, we will pay all
principal, interest, premium and liquidated damages, if any, on that holder's
notes in accordance with those instructions. All other payments on notes will be
made at the office or agency of the Paying Agent and Registrar within the City
and State of New York unless we elect to make interest payments by check mailed
to the holders at their addresses set forth in the register of holders.
Paying Agent and Registrar for the Notes
The trustee will initially act as paying agent and registrar. We may change
the paying agent or registrar without prior notice to the holders, and we may
act as paying agent or registrar.
Transfer and Exchange
A holder may transfer or exchange notes in accordance with the indenture.
We are not required to transfer or exchange any note selected for redemption.
Also, we are not required to transfer or exchange any note for a period of 15
days before a selection of notes to be redeemed.
Security
The notes are secured by a first priority lien on the collateral which,
subject to permitted liens, includes: (1) all funds and securities in the
construction disbursement account, the construction reserve account and the
interest reserve account; (2) all of the real property comprising the Riviera
Black Hawk; (3) all furniture, fixtures and equipment which are part of the
Riviera Black Hawk, other than furniture, fixtures and equipment acquired,
leased or refinanced through FF&E financing; (4) to the extent permitted by law,
the construction contract, the architect agreement, the completion capital
commitment, the keep-well agreement, the license agreement, the management
agreement and certain other agreements entered into us in connection with the
development, construction, ownership and operation of the Riviera Black Hawk;
(5) all licenses and permits relating to the Riviera Black Hawk, other than any
gaming license or liquor license; and (6) all of our accounts receivable,
general intangibles, inventory and other personal property, other than assets of
our future unrestricted subsidiaries.
The indenture contains a requirement that, after we are designated as a
restricted subsidiary (as that term is defined in the Riviera Holdings
Indenture) of Riviera Holdings, the stock of all our then current and future
subsidiaries and the assets of our current and future restricted subsidiaries
must be pledged to secure the debt evidenced by the Riviera Holdings indenture.
The security interests may be subordinate to mechanics' liens which may
have priority over the security interest on the real property comprising the
Riviera Black Hawk, including all additions, improvements and components related
to it. We have obtained title insurance on the property in favor of the trustee
which will insure against losses from the enforcement of mechanics' liens.
If an event of default occurs, the trustee may, in addition to any rights
and remedies available to it under the indenture and the collateral documents,
take such action as it deems advisable to protect and enforce its rights in the
collateral, including the institution of sale or foreclosure proceedings. The
proceeds received by the trustee from any sale or foreclosure will be applied
first to pay the expenses of the sale or foreclosure and fees or any other
amounts then payable to the trustee under the indenture, and thereafter to pay
amounts due and payable with respect to the notes.
The proceeds of any sale of collateral pursuant to the indenture and the
collateral documents following an event of default may not be sufficient to
satisfy payments due on the notes. In addition, the ability of the holders to
realize upon the collateral may be limited pursuant to gaming, bankruptcy and
other laws, all as described below.
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Gaming Law Limitations on Foreclosure
The trustee's ability to foreclose upon the collateral will be limited by
relevant Colorado gaming laws. Therefore, the practical value of realizing on
the collateral may, without the appropriate Colorado gaming approvals, be
limited.
Bankruptcy Limitations on Foreclosure
The right of the trustee to repossess and dispose of collateral upon the
occurrence of an event of default is likely to be significantly impaired by
applicable bankruptcy law if a bankruptcy proceeding were to be commenced by or
us prior to the trustee having repossessed and disposed of the collateral. Under
the Bankruptcy Code, a secured creditor such as the trustee is prohibited from
repossessing its security from a debtor in a bankruptcy case, or from disposing
of security repossessed from such debtor, without bankruptcy court approval. In
addition, the Bankruptcy Code permits the debtor to continue to retain and to
use collateral (and the proceeds, products, offspring, rents or profits of such
collateral) even though the debtor is in default under the applicable debt
instruments, provided that the secured creditor is given "adequate protection."
The meaning of the term "adequate protection" may vary according to
circumstances, but it is intended in general to protect the value of the secured
creditor's interest in the collateral and may include, if approved by the
bankruptcy court, cash payments or the granting of additional security for any
diminution in the value of the collateral as a result of the stay of
repossession or the disposition or any use of the collateral by the debtor
during the pendency of the bankruptcy case. The bankruptcy court has broad
discretionary powers in all these matters, including the valuation of the
collateral or any other collateral that may be substituted for it. In addition,
since the enforcement of the lien of the trustee in the collateral consisting of
cash, deposit accounts and cash equivalents may be limited in a bankruptcy
proceeding, the holders may not have any consent rights with respect to the use
of those funds by us during the pendency of the proceeding. In view of these
considerations, it is impossible to predict how long payments under the notes
could be delayed following commencement of a bankruptcy case, whether or when
the trustee could repossess or dispose of the collateral or whether or to what
extent holders would be compensated for any delay in payment or loss of value of
the collateral.
Completion Capital Commitment
Riviera Holdings has entered into a completion capital commitment in favor
of the trustee for the benefit of the holders providing that if: (1) there are
insufficient available funds (as defined in the indenture) to complete the
development, construction, equipping and opening of the Riviera Black Hawk so
that it is operating by May 31, 2000; (2) we have provided the trustee and the
independent construction consultant with a written notice that it is unlikely
that there will be sufficient available funds to complete the development,
construction, equipping and opening of the Riviera Black Hawk so that it is
operating by May 31, 2000; or (3) (a) the independent construction consultant
has provided the trustee and us with a written notice that it is unlikely that
there will be sufficient available funds (excluding any additional revenues (as
defined in the indenture)) to complete the development, construction, equipping
and opening of the Riviera Black Hawk so that it is operating by May 31, 2000
and (b) within 10 days of our receiving the notice, we have not provided
evidence satisfactory to the independent construction consultant that there will
be sufficient additional funds (including any additional revenues) to complete
the development, construction, equipping and opening of the Riviera Black Hawk
so that it is operating by May 31, 2000; then Riviera Holdings will pay into the
construction disbursement account cash in the amounts and at such times as
determined by the independent construction consultant to be necessary to remedy
the event; provided that the maximum aggregate amount of all such payments is
$10.0 million. The independent construction consultant will set forth in a
written notice to us its determination of the amounts required to be contributed
and the basis of its determination. In addition, if the Riviera Black Hawk is
not operating by May 31, 2000, Riviera Holdings will pay $10.0 million, less any
amounts paid into the construction disbursement account pursuant to the
provisions of the previous paragraph, in cash into the construction disbursement
account. Furthermore, Riviera Holdings will be required to pay $10.0 million,
less any amounts paid into the construction disbursement account pursuant to the
provisions of the previous paragraph, in cash into the construction disbursement
account upon (1) the commencement of a voluntary bankruptcy case by us on or
prior to May 31, 2000, (2) the commencement of an involuntary bankruptcy case
against us which is not dismissed, bonded or discharged on or prior to the
earlier of (A) 60 days after the commencement and (B) May 31, 2000, or (3) the
entry of an order for relief against us on or prior to May 31, 2000, under any
bankruptcy law in effect at any time. Riviera Holdings will not assert any
defenses or setoffs to the payment of those amounts.
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Deposit Account Agreement
Pursuant to a deposit account agreement, dated as of June 3, 1999, among
Bank of America as deposit bank, Riviera Holdings and First American Title
Insurance Company, Riviera Holdings has deposited $5.0 million to insure First
American against mechanics lien claims against our Black Hawk property. If no
mechanics liens are outstanding 30 days after our casino opens, such $5.0
million deposit will be returned to Riviera Holdings.
Keep-Well Agreement
Riviera Holdings has entered into a keep-well agreement in favor of the
trustee for the benefit of the holders. The keep-well agreement provides that:
(1) if, at any time prior to the end of the fourth operating period (as defined
therein), (a) there are not sufficient funds in the interest reserve account to
make a payment of fixed interest on the notes and (b) we do not have sufficient
funds to make the payment of fixed interest, Riviera Holdings will contribute
cash to us in an amount necessary to enable us to make such payment; provided
that the amount of any such contribution will be deducted from the amounts that
Riviera Holdings is required to contribute to us pursuant to clause (2) below
until the total amount of such contributions are deducted; and (2) if our
consolidated cash flow for an operating period is less than the $9.0 million
target consolidated cash flow for such period, Riviera Holdings will contribute
cash to us in an amount equal to the difference; provided that the amount
contributed with respect to any operating period pursuant to clauses (1) and (2)
above will not exceed the contribution limitation and the amounts contributed
with respect to all operating periods will not exceed $10.0 million in the
aggregate. "Contribution limitation" means the product of (1) $1.25 million and
(2) the number of fiscal quarters of Riviera Holdings contained in the relevant
operating period.
Optional Redemption
At any time prior to May 1, 2001, we may redeem up to 35% of the aggregate
principal amount of notes issued under the indenture at a redemption price of
113% of the principal amount thereof, plus accrued and unpaid interest and
liquidated damages, if any, to the redemption date, with the net cash proceeds
of a qualified public offering (as defined in the indenture); provided that: (1)
at least 65% of the aggregate principal amount of notes issued under the
indenture remains outstanding immediately after the occurrence of such
redemption (excluding notes held by us); and (2) the redemption must occur
within 45 days of the date of the closing of such qualified public offering.
On or after May 1, 2002, we may redeem all or a part of the notes upon not
less than 30 nor more than 60 days' notice, at the following redemption prices
(expressed as percentages of principal amount) plus accrued and unpaid interest
and liquidated damages, if any, thereon, to the applicable redemption date: if
redeemed during the twelve-month period beginning on May 1 2002 - 106.5%, the
twelve-month period beginning on May 1, 2003 - 103.25% and at any time after May
1, 2004-100%.
Gaming Redemption
If any gaming authority requires a holder or beneficial owner of notes to
be licensed, qualified or found suitable under any applicable gaming law and
such holder or beneficial owner fails to apply for a license, qualification or
finding of suitability within 30 days after being requested to do so (or such
lesser period as required by the gaming authority), or if such holder or
beneficial owner is notified by a gaming authority that it will not be licensed,
qualified or found suitable, we will have the right, at our option, to: (1)
require the holder or beneficial owner to dispose of such holder's or beneficial
owner's notes within 30 days (or such lesser period as required by the gaming
authority) of: (a) the termination of the period described above for the holder
or beneficial owner to apply for a license, qualification or finding of
suitability; or (b) receipt of the notice from the gaming authority that the
holder or beneficial owner will not be licensed, qualified or found suitable by
the gaming authority; or (2) redeem the notes of the holder or beneficial owner
at a redemption price equal to the lesser of the principal amount thereof or the
price at which the holder or beneficial owner acquired the notes, together with,
in either case, accrued and unpaid interest and liquidated damages, if any,
thereon to the earlier of the date of redemption or such earlier date as is
required by the gaming authority or the date of the finding of unsuitability by
the gaming authority, which may be less than 30 days following the notice of
redemption, if so ordered by the gaming authority. Immediately upon a
determination by a gaming authority that a holder or beneficial owner of notes
will not be licensed, qualified or found suitable, the holder or beneficial
owner will not have any further rights with respect to the notes to: (1)
exercise, directly or indirectly, through any person, any right conferred by the
notes; and (2) receive any interest or any other distribution or payment with
respect to the notes, or any remuneration in any form from us for services
rendered or otherwise, except the redemption price of the notes.
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We are not required to pay or reimburse any holder or beneficial owner of
notes who is required to apply for such license, qualification or finding of
suitability for the costs relating thereto. Those expenses will be the
obligation of the holder or beneficial owner.
Mandatory Redemption
We are not required to make mandatory redemption or sinking fund payments
with respect to the notes.
Repurchase at the Option of Holders
Change of Control
If a change of control occurs, each holder will have the right to require
us to repurchase all or any part (equal to $1,000 or an integral multiple
thereof) of that holder's notes pursuant to a change of control offer on the
terms set forth in the indenture. In the change of control offer, we will offer
a change of control payment in cash equal to 101% of the aggregate principal
amount of notes repurchased plus accrued and unpaid interest and liquidated
damages, if any, thereon, to the date of purchase. We must comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the notes as a result of a
change of control.
Change of control includes the direct or indirect sale, lease, transfer,
conveyance or other disposition of "all or substantially all" of our properties
or assets. Although there is a limited body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a holder of notes to require
us to repurchase such notes as a result of a sale, lease, transfer, conveyance
or other disposition of less than all of our assets may be uncertain. Change of
control also includes the consummation of any transaction the result of which is
that any person other than one or more of our existing significant stockholders
(Morgens Entities named in this prospectus, Sun America Life Insurance Company
and Keyport Life Insurance Company) and any of their affiliates, becomes the
beneficial owner, directly or indirectly, of (a) more than 35% of the
outstanding voting stock of the Riviera Holdings and (b) a greater percentage of
the outstanding voting stock of Riviera Holdings than is beneficially owned by
the existing significant holder holding the largest such percentage.
Asset Sales
We will not consummate an asset sale unless: (1) the Riviera Black Hawk is
operating; (2) we receive consideration at the time of such Asset Sale at least
equal to the fair market value of the assets or equity interests issued or sold
or otherwise disposed of; (3) such fair market value is determined by our board
and evidenced by a resolution of the board set forth in an officers' certificate
delivered to the trustee; and (4) at least 80% of the consideration therefor
received by us in the form of cash or cash equivalents which will include (a)
any liabilities (as shown on our most recent balance sheet, other than
contingent liabilities and liabilities that are by their terms subordinated to
the notes) that are assumed by the transferee of any such assets; and (b) any
securities, notes or other obligations received by us from such transferee that,
within 30 days of receipt, are converted by us into cash (to the extent of the
cash received in that conversion).
Within 180 days after the receipt of any net proceeds from an asset sale,
we may apply such net proceeds to make a capital expenditure, improve real
property or acquire long-term assets that are used or useful in a line of
business permitted by the covenant described below under the caption "--
Principal Covenants -- Line of Business"; provided that we grant to the trustee,
on behalf of the holders, a first priority perfected security interest on any
such property or assets acquired or constructed with the net proceeds of any
such asset sale.
Any such net proceeds that are not applied or invested as provided in the
preceding paragraph will constitute "excess proceeds." When the aggregate amount
of excess proceeds exceeds $5.0 million, we will make an asset sale offer to all
holders the maximum principal amount of notes that may be purchased out of the
excess proceeds. The offer price in any asset sale offer will be equal to 100%
of principal amount plus accrued and unpaid interest and liquidated damages, if
any, to the date of purchase, and will be payable in cash. If any excess
proceeds remain after consummation of an asset sale offer, the company may use
such excess proceeds for any purpose not otherwise prohibited by the indenture
and the collateral documents.
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We will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with each repurchase of notes
pursuant to an asset sale offer.
Finally, our ability to pay cash to the holders of notes upon a repurchase
may be limited by our existing financial resources.
Events of Loss
Within 360 days after any event of loss with respect to any collateral with
a fair market value (or replacement cost, if greater) in excess of $1.0 million,
we may apply the net loss proceeds from such event of loss to the rebuilding,
repair, replacement or construction of improvements to the Riviera Black Hawk,
with no concurrent obligation to make any purchase of any notes; provided that:
(1) we deliver to the trustee within 60 days of such event of loss a written
opinion from a reputable architect that the Riviera Black Hawk with at least the
minimum facilities (as defined in the indenture) can be rebuilt, repaired,
replaced or constructed and operating within 360 days of the event of loss; (2)
an officers' certificate certifying that we have available from net loss
proceeds or other sources sufficient funds to complete the rebuilding, repair,
replacement or construction described in clause (1) above; and (3) the net loss
proceeds are less than $20.0 million. If the net loss proceeds to be used for
rebuilding, repair, replacement or construction exceed $5.0 million, then the
net loss proceeds will be deposited in the construction disbursement account and
disbursed in accordance with the procedures set forth in the cash collateral and
disbursement agreement. Any Net Loss Proceeds that are not reinvested or not
permitted to be reinvested as provided in the first sentence of this paragraph
will be deemed "excess loss proceeds."
When the aggregate amount of excess loss proceeds exceeds $5.0 million, we
will make an offer to holders (an "event of loss offer") to purchase the maximum
principal amount of notes that may be purchased out of the excess loss proceeds,
at a purchase price in cash in an amount equal to 100% of the principal amount
thereof, plus accrued and unpaid interest and liquidated damages, if any,
thereon to the date of purchase. The date of purchase will not be less than 30
or more than 60 days from the date of the event of loss offer. If the aggregate
principal amount of notes tendered pursuant to an Event of Loss Offer exceeds
the excess loss proceeds, the trustee will select the notes to be purchased in
the manner described below under the caption "-- Selection and Notice." If the
aggregate amount of notes tendered pursuant to any event of loss offer is less
than the excess loss proceeds, we may, subject to the other provisions of the
indenture and the collateral documents, use any remaining excess loss proceeds
for general corporate purposes.
Pending any permitted rebuilding, repair, replacement or construction or
the completion of any event of loss offer, we will pledge to the trustee as
additional collateral any net loss proceeds or other cash on hand required for
such permitted rebuilding, repair, replacement or construction pursuant to the
terms of the collateral documents. These pledged funds will be released to us to
pay for or reimburse us for the actual cost of such permitted rebuilding,
repair, replacement or construction, or such event of loss offer, pursuant to
the terms of the collateral documents. Pending the final application of the net
loss proceeds, such proceeds will be invested in cash equivalents which will be
pledged to the trustee as security for the notes. We will grant to the trustee,
on behalf of the holders, a first priority lien, subject to permitted liens, on
any property or asset rebuilt, repaired, replaced or constructed with such net
loss proceeds on the terms set forth in the indenture and the collateral
documents.
The indenture also provides that with respect to any event of loss pursuant
to clause (4) of the definition of "event of loss" that has a fair market value
(or replacement cost, if greater) in excess of $5.0 million we will be required
to receive consideration at least (1) equal to the fair market value (evidenced
by a resolution of the board set forth in an officers' certificate delivered to
the trustee) of the assets subject to the event of loss and (2) at least 90% of
which is in the form of cash equivalents.
Excess Cash Purchase Offers
Within 120 days after each operating year, beginning with the first
operating year after the Riviera Black Hawk becomes operating, we will make an
offer to all holders (the "excess cash flow offer") to purchase the maximum
principal amount of notes that is an integral multiple of $1,000 that may be
purchased with 50% of excess cash flow in respect of the operating year then
ended (the "excess cash flow offer amount"), at a purchase price in cash equal
to 101% of the principal amount of the notes to be purchased, plus accrued and
unpaid interest and liquidated damages, if any, thereon to the date fixed for
the closing of the excess cash flow offer (the "excess cash flow purchase
price"), in accordance with the indenture. If the aggregate principal amount of
notes tendered pursuant to an excess cash flow offer exceeds the excess cash
flow offer amount with respect thereto, the trustee will select the notes to be
repurchased in the manner described below under "-- Selection and Notice." If
the aggregate amount of notes
50
tendered pursuant to any excess cash flow offer is less than the excess cash
flow offer amount, we may, subject to the other provisions of the indenture and
the collateral documents, use any remaining excess cash flow for general
corporate purposes.
Excess cash flow means, with respect to our company for any operating year,
the consolidated cash flow of our company and our subsidiaries for such
operating year, minus (1) fixed interest (including the portion of any payments
associated with capital lease obligations) of our company and our subsidiaries
that is paid during such operating year and, without duplication, contingent
interest of our company and our subsidiaries that is paid or deferred in
accordance with the provisions of the indenture during such operating year, but
only to the extent that such contingent interest was not deferred in any prior
operating year, minus (2) up to $4.0 million in capital expenditures of our
company and our subsidiaries paid to maintain or improve our casino that are
actually paid during such operating year (excluding any capital expenditures
made with the proceeds from the sale of the notes), minus (3) principal payments
on indebtedness permitted to be incurred pursuant to the covenant described
above under the caption "-- Incurrence of Indebtedness and Issuance of Preferred
Stock" and minus (4) amounts paid by us to Riviera Holdings pursuant to the tax
sharing agreement.
Selection and Notice
If less than all of the notes are to be redeemed at any time, the trustee
will select notes for redemption as follows: (1) if the notes are listed, in
compliance with the requirements of the principal national securities exchange
on which the notes are listed; or (2) if the notes are not so listed, on a pro
rata basis, by lot or by such method as the trustee shall deem fair and
appropriate.
No notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed at least 30 but not more than 60 days before the redemption date
to each holder of notes to be redeemed at its registered address. If any note is
to be redeemed in part only, the notice of redemption that relates to that note
shall state the portion of the principal amount thereof to be redeemed. A new
note in principal amount equal to the unredeemed portion of the original note
will be issued in the name of the holder thereof upon cancellation of the
original note. Notes called for redemption become due on the date fixed for
redemption. On and after the redemption date, interest ceases to accrue on notes
or portions of them called for redemption.
Restructure Covenants
Restricted Payments
We will not (1) declare or pay any dividend or make any other payment or
distribution on account of our equity interests (including, without limitation,
any payment in connection with any merger or consolidation or to the direct or
indirect holders of our equity interests in any capacity (other than dividends
or distributions payable in equity interests (other than disqualified stock) or
dividends or distributions payable to us); (2) purchase, redeem or otherwise
acquire or retire for value (including, without limitation, in connection with
any merger or consolidation involving us) any equity interests in us or any
direct or indirect parent of us; (3) make any payment on or with respect to, or
purchase, redeem, defease or otherwise acquire or retire for value any
indebtedness that is equal in right of payment preference with or subordinated
to the notes, except a payment of interest or principal at the stated maturity
thereof; or (4) make any restricted investment (all such payments and other
actions set forth in clauses (1) through (4) above being collectively referred
to as "restricted payments"), unless, at the time of and after giving effect to
such restricted payment: (1) we are operating; (2) no default or event of
default shall have occurred and be continuing or would occur as a consequence
thereof; (3) we would, at the time of such restricted payment and after giving
pro forma effect thereto as if such restricted payment had been made at the
beginning of the applicable four-quarter period, have been permitted to incur at
least $1.00 of additional indebtedness pursuant to the fixed charge coverage
ratio test set forth in the first paragraph of the covenant described below
under the caption "-- Incurrence of Indebtedness and Issuance of Preferred
Stock;" and (4) such restricted payment, together with the aggregate amount of
all other restricted payments made by us (excluding restricted payments
permitted by clauses (2) through (7) of the next succeeding paragraph), is less
than the sum, without duplication, of: (a) 50% of our consolidated net income
for the period (taken as one accounting period) from the beginning of the first
fiscal quarter commencing after the date of the indenture to the end of our most
recently ended fiscal quarter for which internal financial statements are
available at the time of such restricted payment (or, if such consolidated net
income for such period is a deficit, less 100% of such deficit), plus (b) 100%
of the aggregate net cash proceeds received by us as a contribution to its
common equity capital (other than pursuant to the completion capital commitment,
the keep-well and any contribution to us from Riviera Holdings of the net
proceeds of a qualified public offering which are used to repurchase notes) or
from the issue or sale of equity interests in us (other than disqualified stock)
or from the issue or sale of convertible or exchangeable disqualified stock or
51
convertible or exchangeable debt securities that have been converted into or
exchanged for such equity interests (other than equity interests (or
disqualified stock or debt securities) sold to a subsidiary), plus (c) to the
extent that any restricted investment that was made after the date of the
indenture is sold for cash or otherwise liquidated or repaid for cash, the
lesser of (i) the cash return of capital with respect to such restricted
investment (less the cost of disposition, if any) and (ii) the initial amount of
such restricted investment.
With respect to any payments made pursuant to clauses (1) through (7)
below, so long as no default has occurred and is continuing or would be caused
thereby and, with respect to any payments made pursuant to clause (8) below, no
event of default or default in the payment when due of any principal, interest,
premium or liquidated damages on the notes shall have occurred or be continuing
or would occur as a consequence thereof, the preceding provisions will not
prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at such date of declaration such payment would have
complied with the provisions of the indenture;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any pari passu or subordinated indebtedness or equity
interests of the company in exchange for, or out of the net cash proceeds of
the substantially concurrent sale (other than to one of our subsidiaries)
of, equity interests of the company (other than disqualified stock);
provided that the amount of any such net cash proceeds that are utilized for
any such redemption, repurchase, retirement, defeasance or other acquisition
shall be excluded from clause (4)(b) of the preceding paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of our
Indebtedness that is subordinate or equal in right of payment preference
with the notes with the net cash proceeds from an incurrence of permitted
refinancing indebtedness;
(4) the payment to Riviera Management of amounts owing to it (for
reimbursement of goods and services provided) and (for the payment of
management fees) of the management agreement subject to the terms of the
manager subordination agreement relating thereto between Riviera Management
and the trustee and subject to the requirement that all such payments are
made in compliance with the covenant described below under the caption
"Restriction on Payment of Management Fees;" provided, however, that
management may be made whether or not a default has occurred and is
continuing or would be caused thereby;
(5) any redemption required pursuant to the provisions of the indenture
described under the caption "-- Gaming Redemption" above;
(6) the repayment by us to Riviera Holdings of amounts that Riviera
Holdings had advanced to us prior to the consummation of the offering of the
notes;
(7) the payment by us to Riviera Holdings at any time after the Riviera
Black Hawk has been operating for 180 consecutive days equal to the amount
contained in the completion reserve account at the end of that period if our
fixed charge coverage ratio for our most recently ended four fiscal quarters
after the date on which we became operating for which internal financial
statements are available immediately preceding the date on which such
payment is to be made is at least 1.5 to 1; provided that if at the time of
such payment the Riviera Black Hawk has been operating for less than four
fiscal quarters, such fixed charge coverage ratio will be calculated with
respect to the number of full fiscal quarters (but in no event less than one
full fiscal quarter) for which internal financial statements are available
following the date the we first became operating; and
(8) the payment by us of amounts owing to Riviera Holdings pursuant to
the tax sharing agreement.
The amount of all restricted payments (other than cash) shall be the fair
market value on the date of the restricted payment of the assets or securities
proposed to be transferred or issued to or by us or such restricted subsidiary,
as the case may be, pursuant to the restricted payment. The fair market value of
any assets or securities that are required to be valued by this covenant shall
be determined by our board. Our board's determination must be based upon an
opinion or appraisal issued by an accounting, appraisal or investment banking
firm of national standing if the fair market value exceeds $5.0 million. Not
later than the date of making any restricted payment, we shall deliver to the
trustee an officers' certificate stating that such restricted payment is
52
permitted and setting forth the basis upon which the calculations required by
this "restricted payments" covenant were computed, together with a copy of any
fairness opinion or appraisal required by the indenture.
Incurrence of Indebtedness and Issuance of Preferred Stock
We will not, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, contingently or
otherwise, with respect to (collectively, "incur") any Indebtedness (including
acquired debt), and we will not issue any disqualified stock will not permit any
of our Subsidiaries to issue any shares of preferred stock; provided, however,
that, so long as no default or event of default has occurred and is continuing,
we may incur Indebtedness (including acquired debt) or issue disqualified stock,
if:
(1) we are operating;
(2) our fixed charge coverage ratio for our most recently ended four
full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional indebtedness is
incurred or such disqualified stock is issued would have been at least 2.0
to 1, determined on a pro forma basis (including a pro forma application of
the net proceeds therefrom), as if the additional indebtedness had been
incurred or the preferred stock or disqualified stock had been issued, as
the case may be, at the beginning of such four-quarter period; and
(3) the weighted average life to maturity of such indebtedness is
greater than the remaining weighted average life to maturity of the notes.
The first paragraph of this covenant will not prohibit the incurrence of
any of the following items of indebtedness so long as no default or event of
default has occurred and is continuing (collectively, "permitted debt"):
(1) the incurrence by us and our Subsidiaries of (a) indebtedness
represented by the notes to be issued on the date of the indenture and the
exchange notes to and (b) their respective obligations arising under the
collateral documents to the extent such obligations would represent
indebtedness;
(2) the incurrence by us of permitted refinancing indebtedness in
exchange for, or the net proceeds of which are used to refund, refinance or
replace Indebtedness (other than intercompany indebtedness) that was
permitted by the indenture to be incurred under the first paragraph of this
covenant or clauses (1), (2), (6), (8) or (10) of this paragraph;
(3) the incurrence by us of intercompany indebtedness between or among
us and any of our wholly owned restricted subsidiaries; provided, however,
that:
(a) such indebtedness must be expressly subordinated to the prior
payment in full in cash of all obligations with respect to the notes; and
(b) (i) any subsequent issuance or transfer of equity interests that
results in any such indebtedness being held by a person other than the
company or a wholly owned restricted subsidiary thereof, (ii) any sale or
other transfer of any such indebtedness to a person that is not either us
or a wholly owned restricted subsidiary thereof shall be deemed, in each
case, to constitute an incurrence of such indebtedness by the company or
such restricted subsidiary, as the case may be, that was not permitted by
this clause (3) and (iii) if any restricted subsidiary is the obligor on
such indebtedness, such indebtedness is represented by an intercompany
note that is pledged to the trustee as security for the notes;
(4) the incurrence by us of hedging obligations that are incurred for
the purpose of fixing or hedging interest rate risk with respect to any
floating rate indebtedness that is permitted by the terms of;
(5) the incurrence by us of indebtedness solely in respect of
performance or similar bonds or standby letters of credit; provided that any
such bond or standby letter of credit is incurred in the ordinary course of
our business in an aggregate amount not to exceed $2.0 million at any one
time outstanding; and provided, further, that any such bond or standby
letter of credit is incurred on terms customary for operations similar to
ours;
(6) the incurrence by us of FF&E financing; provided, however, that (a)
the principal amount of such Indebtedness does not exceed the cost
(including sales and excise taxes, installation and delivery charges and
53
other direct costs of, and other direct expenses paid or charged in
connection with, such purchase) of the FF&E purchased or leased with the
proceeds thereof, (b) no Indebtedness incurred under the notes is utilized
for the purchase or lease of such FF&E and (c) the aggregate principal
amount of such indebtedness, including all permitted refinancing
indebtedness incurred to refund, refinance or replace any indebtedness
incurred pursuant to this clause, does not exceed $15.0 million outstanding
at any time;
(7) bond or surety obligations posted by us in order to prevent the loss
or material impairment of or to obtain a gaming license or as otherwise
required by an order of any gaming authority to the extent required by
applicable law and consistent in character and amount with customary
industry practice so long as such Indebtedness does not result in, and is
not secured by, a lien on any of the collateral;
(8) the incurrence by us of indebtedness solely in respect of special
assessment bonds, including all permitted refinancing indebtedness incurred
to refund, refinance or replace any Indebtedness incurred pursuant to this
clause, and standby letters of credit or surety bonds required to be issued
in connection therewith, in an aggregate amount not to exceed $400,000;
(9) the guarantee by us of indebtedness permitted to be incurred by
another provision of this covenant;
(10) the incurrence by us of additional indebtedness in an aggregate
principal amount (or accreted value, as applicable) at any time outstanding,
including all permitted refinancing indebtedness incurred to refund,
refinance or replace any Indebtedness incurred pursuant to this clause, not
to exceed $2.0 million; and
(11) the incurrence by our unrestricted subsidiaries of non-recourse
debt; provided, however, that if any such indebtedness ceases to be
non-recourse debt, such event shall be deemed to be an incurrence of
indebtedness by our restricted subsidiary that was not permitted by this
clause (11).
We will not incur any indebtedness (including permitted debt) that is
contractually subordinated in right of payment to any other of our indebtedness
of unless such Indebtedness is also contractually subordinated in right of
payment to the notes on substantially identical terms; provided, however, that
no Indebtedness shall be deemed to be contractually subordinated in right of
payment to any other Indebtedness of such solely by virtue of being unsecured.
Liens
We will not, directly or indirectly, create, incur, assume or suffer to
exist any lien of any kind on any asset now owned or hereafter acquired, or any
proceeds, income or profits therefrom or assign or convey any right to receive
income therefrom, except permitted liens.
Dividend and Other Payment Restrictions Affecting Subsidiaries
We will not, and will not permit any of our restricted subsidiaries to,
directly or indirectly, create or permit to exist or become effective any
consensual encumbrance or restriction on the ability of such restricted
subsidiary to:
(1) pay dividends or make any other distributions on its capital stock
to our Subsidiaries, or with respect to any other interest or participation
in, or measured by, its profits, or pay any indebtedness owed to us;
(2) make loans or advances to us; or
(3) transfer any of its properties or assets to us.
Merger, Consolidation or Sale of Assets
We may not, directly or indirectly (i) consolidate or merge with or into
another person (whether or not we are the surviving corporation) or (ii) sell,
assign, transfer, convey or otherwise dispose of all or substantially all of the
properties or our assets to another person; unless:
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(1) either (a) we are the surviving corporation or (b) the person formed
by or surviving any such consolidation or merger (if other than us) or to
which such sale, assignment, transfer, conveyance or other disposition shall
have been made is a corporation organized or existing under the laws of the
United States, any state thereof or the District of Columbia;
(2) the person formed by or surviving any such consolidation or merger
(if other than us) or the person to which such sale, assignment, transfer,
conveyance or other disposition shall have been made assumes all our
obligations under the notes, the indenture and the collateral documents;
(3) immediately after such transaction no default or event of default
exists;
(4) such transaction would not result in the loss or suspension or
material impairment of any gaming license unless a comparable replacement
gaming license is effective prior to or simultaneously with such loss,
suspension or material impairment;
(5) we or the person formed by or surviving any such consolidation or
merger (if other than us), or to which such sale, assignment, transfer,
conveyance or other disposition shall have been made:
(a) will have consolidated net worth immediately after the
transaction equal to or greater than our consolidated net worth
immediately preceding the transaction; and
(b) will, on the date of such transaction after giving pro forma
effect thereto and any related financing transactions as if the same had
occurred at the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the fixed charge coverage ratio test set forth in the first paragraph of
the covenant described above under the caption "-- Incurrence of
Indebtedness and Issuance of Preferred Stock"; and
(6) such transaction would not require any holder or beneficial owner of
notes to obtain a gaming license or be qualified or found suitable under the
law of any applicable gaming jurisdiction; provided that such holder or
beneficial owner would not have been required to obtain a gaming license or
be qualified or found suitable under the laws of any applicable gaming
jurisdiction in the absence of such transaction.
In addition, we may not, directly or indirectly, lease all or substantially
all of its properties or assets, in one or more related transactions, to any
other person. This covenant will not apply to a sale, assignment, transfer,
conveyance or other disposition of assets between or among us and any of our
wholly owned subsidiaries.
Transactions with Affiliates
We will not make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any affiliate (each, an "affiliate transaction"), unless: (1) such affiliate
transaction is on terms that are no less favorable than those that would have
been obtained in a comparable transaction by restricted subsidiary with an
unrelated person; and (2) we deliver to the trustee: (a) with respect to any
affiliate transaction or series of related affiliate transactions involving
aggregate consideration in excess of $1.0 million, a resolution of our board set
forth in an officers' certificate certifying that such affiliate transaction
complies with this covenant and that such affiliate transaction has been
approved unanimously by the board; and (b) with respect to any affiliate
transaction or series of related affiliate transactions involving aggregate
consideration in excess of $5.0 million, an opinion as to the fairness to the
holders of such affiliate transaction from a financial point of view issued by
an accounting, appraisal or investment banking firm of national standing.
The following items shall not be deemed to be affiliate transactions and,
therefore, will not be subject to the provisions of the prior paragraph: (1)
payments made pursuant to the completion capital commitment, the keep-well
agreement, the management agreement, the license agreement and the tax sharing
agreement; (2) purchases of goods and services in the ordinary course of
business; (3) any employment agreement entered into by us in the ordinary course
of business on terms customary in the gaming industry; (4) transactions between
or among us and/or our restricted subsidiaries; (5) restricted payments that are
permitted by the provisions of the indenture described above under the caption
"-- Restricted Payments;" and (6) reasonable fees and compensation (including,
without limitation, bonuses, retirement plans and securities, stock options and
stock ownership plans) paid or issued to and indemnities provided on behalf of
our officers, directors, employees or consultants in the ordinary course of
business. Subject to
55
the clauses (1) through (6) in the immediately preceding paragraph, we will not
make any loans, advances or other payments to Riviera Holdings, except as
permitted pursuant to the provisions of the indenture, including covenant
described above under the caption "Restricted Payments."
Limitations on Use of Proceeds
We deposited $5.1 million of the net proceeds from the sale of the existing
notes into the interest reserve account, $31.9 million of the net proceeds from
the sale of the existing notes in the construction disbursement account and $5.0
million of the net proceeds from the sale of the existing notes in the
completion reserve account. The funds in the interest reserve account, the
construction disbursement account and the completion reserve account will be
invested solely in government securities. All funds in the cash collateral
accounts will be disbursed only in accordance with the cash collateral and
disbursement agreement.
Sale and Leaseback Transactions
We will not enter into any sale and leaseback transaction; provided that we
may enter into a sale and leaseback transaction if:
(1) we could have (a) incurred indebtedness in an amount equal to the
attributable debt relating to such sale and leaseback transaction under the
fixed charge ratio test in the first paragraph of the covenant described
above under the caption "-- Incurrence of Indebtedness and Issuance of
Preferred Stock" and (b) incurred a lien to secure such Indebtedness
pursuant to the covenant described above under the caption "-- Liens";
(2) the gross cash proceeds of such sale and leaseback transaction are
at least equal to the fair market value, as determined in good faith by the
board and set forth in an officers' certificate delivered to the trustee, of
the property that is the subject of such sale and leaseback transaction; and
(3) the transfer of assets in such sale and leaseback transaction is
permitted by, and we apply the proceeds of such transaction in compliance
with, the covenant described above under the caption "-- Repurchase at the
Option of Holders -- Asset Sales."
Additional Subsidiary Guarantees
If we create another subsidiary then any such restricted subsidiary must
become a guarantor and execute a supplemental indenture and deliver an opinion
of counsel to the trustee.
Designation of Restricted and Unrestricted Subsidiaries
The board may designate any restricted subsidiary to be an unrestricted
subsidiary if that designation would not cause a default. If a restricted
subsidiary is designated as an unrestricted subsidiary, all outstanding
investments owned by the in the subsidiary so designated will be deemed to be an
Investment made as of the time of such designation and will reduce the amount
available for restricted payments under the first paragraph of the covenant
described above under the caption "-- Restricted Payments" or permitted
investments, as applicable. All such outstanding investments will be valued at
their fair market value at the time of such designation. That designation will
only be permitted if such restricted payment would be permitted at that time and
if such restricted subsidiary otherwise meets the definition of an unrestricted
subsidiary. The board may redesignate any unrestricted subsidiary to be a
restricted subsidiary if the redesignation would not cause a default.
Line of Business
We will not, and will not permit any subsidiary to, engage in any business
or investment activities other than permitted business. We will not, and will
not permit any of our Subsidiaries to, engage in any business, development or
investment activity other than at or in conjunction with the Riviera Black Hawk
until we are operating.
Restriction on Payment of Management Fees
We will not, directly or indirectly, pay to Riviera Management or any of
its affiliates any management fees if at the time of payment: (1) a default or
an event of default shall have occurred and be continuing or shall occur as a
result thereof; or (2) our fixed charge coverage ratio for our most recently
ended four full fiscal quarters for which internal financial statements are
available
56
immediately preceding the date on which such management fee is proposed to be
paid would have been less than 1.5 to 1 (calculated on a pro forma basis after
deducting management fees to the extent paid in cash and not deferred and any
management fees deferred from a prior period proposed to be paid in cash during
such period, but excluding any management fees deferred or accrued and not paid
in cash during such period).
Any management fees not permitted to be paid pursuant to this covenant will
be deferred and will accrue and may be paid only at such time that they would
otherwise be permitted to be paid hereunder. The right to receive payment of the
management fee will be subordinate in right of payment to the right of the
holders to receive payments pursuant to the notes. We will not amend the
management agreement to increase amounts to be paid thereunder, or in any other
manner which would be adverse to us or the holders, including without
limitation, to amend the method of computing the management fee.
Reports
Whether or not required by the Commission, so long as any notes are
outstanding, we will furnish to the holders, within the time periods specified
in the Commission's rules and regulations:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and
10-K if we were required to file such Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and, with respect to the annual information only, a report on the annual
financial statements by our certified independent accountants; and
(2) all current reports that would be required to be filed with the
Commission on Form 8-K if we were required to file such reports.
If we have designated any of its subsidiaries as unrestricted subsidiaries,
then the quarterly and annual financial information required by the preceding
paragraph will include a reasonably detailed presentation, either on the face of
the financial statements or in the footnotes thereto, and in Management's
Discussion and Analysis of Financial Condition and Results of Operations, of our
financial condition, our results of operations and our restricted subsidiaries
separate from the financial condition and results of operations of our
unrestricted subsidiaries.
In addition, following the consummation of this exchange offer, whether or
not required by the Commission, we will file a copy of all of the information
and reports referred to in clauses (1) and (2) above with the Commission for
public availability within the time periods specified in the Commission's rules
and regulations (unless the Commission will not accept such a filing) and make
such information available to securities analysts and prospective investors upon
request. In addition, we have agreed that, for so long as any notes remain
outstanding, it will furnish to the holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
Cash Collateral and Disbursement Agreement
Pursuant to the cash collateral and disbursement agreement, $42.0 million
of the net proceeds from the sale of the existing notes were placed into the
cash collateral accounts and invested in government securities. All funds and
securities in the cash collateral accounts have been pledged as security for the
repayment of the notes. Funds in the cash collateral accounts will be disbursed
pursuant to the cash collateral and disbursement agreement.
Construction Disbursement Account
We deposited $31.9 million of the net proceeds from the sale of the existing
notes in the construction disbursement account, of which $10.1 million was used
to reimburse Riviera Holdings for amounts advanced to us to cover construction
and development costs. The disbursement agent will invest the remaining funds in
government securities which will be held in the construction reserve account
until the funds are needed from time to time to pay for the development,
construction and opening of the Riviera Black Hawk and our other operating
expenses. These funds will be disbursed in accordance with the cash collateral
and disbursement agreement. Subject to certain exceptions set forth in the cash
collateral and disbursement agreement, the disbursement agent will authorize the
disbursement of funds from the construction disbursement account only upon the
satisfaction of the disbursement conditions set forth in such agreement.
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Completion Reserve Account
We deposited $5.0 million of the net proceeds from the sale of the existing
notes into the completion reserve account. The disbursement agent invested these
funds in government securities which will be held in the completion reserve
account until the funds are needed from time to time to insure completion of
construction of the Riviera Black Hawk. The disbursement agent will authorize
the disbursement of funds from the completion reserve account to the
construction disbursement account only upon the satisfaction of the disbursement
conditions set forth in the cash collateral and disbursement agreement.
Interest Reserve Account
We deposited $5.1 million of the net proceeds from the sale of the existing
notes into the interest reserve account. These funds as set forth in an
officer's certificate, will provide for payment in full of the fixed interest on
the notes through May 1, 2000.
Excess Funds
If any funds remain in the construction disbursement account on the date
that the Riviera Black Hawk has been operating for at least 30 consecutive days
and (1) there is no ongoing construction (other than maintenance and repairs in
the ordinary course of business and other than construction associated with the
Riviera Black Hawk in an aggregate amount not to exceed $250,000) in connection
with the Riviera Black Hawk and (2) no default or event of default exists under
the indenture or the collateral documents, the disbursement agent will, upon our
direction, subject to certain exceptions set forth in the cash collateral and
disbursement agreement, disburse all remaining funds, if any, in the
construction disbursement account to any account or accounts specified by us.
If any funds remain in the completion reserve account on the date that the
Riviera Black Hawk has been operating for at least 180 consecutive days and (1)
there is no ongoing construction (other than maintenance and repairs in the
ordinary course of business) in connection with the Riviera Black Hawk and (2)
no default or event of default exists under the indenture or the collateral
documents, the disbursement agent will, upon our direction, subject to certain
exceptions set forth in the cash collateral and disbursement agreement, disburse
all remaining funds, if any, in the completion reserve account to any account or
accounts specified by us.
Events of Default - Cash Collateral and Disbursement Agreement
An event of default will exist under the cash collateral and disbursement
agreement if any of the following shall occur:
(1) a default or event of default occurs and is continuing under the
indenture;
(2) the disbursement agent, after appropriate consultation with us and
the independent construction consultant, does not approve a request for a
disbursement of over $50,000 or an amendment to the construction
disbursement budget where the aggregate amount that is the subject of the
amendment is over $50,000, and such failure continues for a period of 30
days;
(3) the independent construction consultant, in reviewing prior
disbursements, reports an exception in excess of $50,000 and such exception
continues for a period of ten days;
(4) if at any time the amount of available funds, together with any
funds contributed into the construction disbursement account pursuant to the
completion capital commitment, is less than the amount required in the
construction disbursement budget to cause the Riviera Black Hawk to be
operating on or before the operating deadline and such deficiency continues
for a period of 30 days from notice thereof;
(5) we fail to perform or observe any of its obligations regarding,
among other things, application of the proceeds of the notes (and such
failure continues for five days after notice thereof) or regarding, among
other things, substitution of accounts;
(6) we fail to deliver documents necessary to perfect the trustee's
security interest in the construction disbursement account, the completion
reserve account, the interest reserve account and the investments in each
and such failure continues for a period of five days;
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(7) we cease to own the property upon which the Riviera Black Hawk is to
be constructed, or we abandon the Riviera Black Hawk or otherwise ceases to
pursue the operations of the Riviera Black Hawk in accordance with standard
industry practice or sells or otherwise disposes of our interest in the
Riviera Black Hawk, except as permitted by the covenant in the indenture
described under the caption "-- Principal Covenants -- Merger, Consolidation
or Sale of Assets";
(8) any construction document relating to the Riviera Black Hawk with a
total contract amount of more than $100,000 is terminated, becomes invalid
or illegal, or otherwise ceases to be in full force and effect, provided
that with respect to any such construction document other than the
construction contract and the architect agreement, no event of default shall
be deemed to have occurred under the cash collateral and disbursement
agreement as a result of such termination if (a) we provide written notice
to the independent construction consultant immediately upon (but in no event
more than two business days after) we become aware of such construction
document ceasing to be in full force or effect that we intend to replace
such construction document (or that such replacement is not necessary) and
(b) in each case if in the reasonable judgment of the independent
construction consultant a replacement is necessary, (i) we obtain a
replacement obligor or obligors reasonably acceptable to the independent
construction consultant, and (ii) we enter into a replacement construction
document on terms no less beneficial to us and the trustee than then current
market terms within 60 days of such termination; or
(9) the independent construction consultant reasonably determines that
the Riviera Black Hawk is likely to become operating no earlier than 60 days
after the operating deadline.
If an event of default exists under the cash collateral and disbursement
agreement and the disbursement agent has received written notice thereof, the
disbursement agent will not be permitted to authorize the disbursement of funds
from the construction disbursement account or the completion reserve account,
provided that the disbursement agent may continue to disburse funds from the
construction reserve account or the completion reserve account (1) in an amount
up to $1.5 million (or such other amount as the trustee approves by written
notice to the disbursement agent) if necessary to prevent the condition of the
Riviera Black Hawk from deteriorating or to preserve work completed on the
Riviera Black Hawk, (2) to pay for work already completed or materials already
purchased, (3) to pay for retainage amounts if an event of default continues for
three consecutive months or more or (4) under certain conditions, to make
interest payments on the notes.
Events of Default and Remedies
Each of the following is an event of default under the indenture:
(1) default for 30 days in the payment when due of interest on, or
liquidated damages with respect to, the notes; provided that payments of
contingent interest that are permitted to be deferred as provided in the
indenture will not become due for this purpose until such payment is
required to be made pursuant to the terms of the indenture;
(2) default in payment when due of the principal of, or premium, if any,
on the notes;
(3) failure by us or any of our subsidiaries to comply with the
provisions described under the captions "-- Repurchase at the Option of
Holders -- Change of Control," "-- Repurchase at the Option of Holders --
Asset Sales," "-- Principal Covenants -- Incurrence of Indebtedness and
Issuance of Preferred Stock," "-- Principal Covenants -- Merger,
Consolidation or Sale of Assets" or "Limitation on Use of Proceeds;"
(4) failure by us or any of our restricted subsidiaries for 30 days
after notice thereof to comply with the provisions described under the
caption "-- Principal Covenants -- Restricted Payments" and any of the other
agreements in the indenture not set forth in clause (3) above;
(5) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by us or any of our restricted subsidiaries
(or the payment of which is guaranteed by us or any of our restricted
subsidiaries) whether such Indebtedness or guarantee now exists, or is
created after the date of the indenture, if that default:
(a) is caused by a failure to pay principal of, or interest or
premium, if any, on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such default (a
"payment default"); or
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(b) results in the acceleration of such indebtedness prior to its
express maturity,
and, in each case, the principal amount of any such Indebtedness, together with
the principal amount of any other such Indebtedness under which there has been a
payment default or the maturity of which has been so accelerated, aggregates
$5.0 million or more;
(6) failure by us or any of our restricted subsidiaries to pay final
judgments aggregating in excess of $5.0 million, which judgments are not
paid, discharged or stayed for a period of 60 days; and
(7) breach by us or any of our affiliates of any representation or
warranty in any material respect in the collateral documents or any
certificates delivered in connection therewith, failure by us or any of our
affiliates for 30 days (or such other period as specifically provided
therein) after notice thereof to comply with any covenant or agreement set
forth in the collateral documents, the repudiation by us of any of its
obligations under the collateral documents, the unenforceability of the
collateral documents against us or the loss of the perfection or priority of
the liens granted by us thereunder for any reason;
(8) certain events of bankruptcy or insolvency with respect us or any
of our restricted subsidiaries;
(9) revocation, termination, suspension or other cessation of
effectiveness for a period of more than 90 consecutive days of any gaming
license which results in the cessation or suspension of gaming operations at
any gaming facility;
(10) default by Riviera Holdings in the performance of its obligations
set forth in, or repudiation of its obligations under, the completion
capital commitment or the keep-well agreement; or
(11) failure of the Riviera Black Hawk to be operating by the operating
deadline or to remain operating thereafter, except (a) as the hours of
operation of the Riviera Black Hawk may be limited by any gaming authority
or gaming law or (b) for a period of time not to exceed 30 days during any
45-day period and not to exceed 60 days during any one-year period;
provided, however, that, in any event, there shall not be an event of
default under this clause if the failure to remain operating during such
period results from an event of loss pursuant to the terms of the indenture.
In the case of an event of default arising from certain events of
bankruptcy or insolvency with respect to us, any restricted subsidiary that is a
significant subsidiary or any group of restricted subsidiaries that, taken
together, would constitute a significant subsidiary, all outstanding notes will
become due and payable immediately without further action or notice. If any
other event of default occurs and is continuing, the trustee or the holders of
at least 25% in principal amount of the then outstanding notes may declare all
the notes to be due and payable immediately.
Holders may not enforce the indenture or the notes except as provided in
the indenture. Subject to certain limitations, holders of a majority in
principal amount of the then outstanding notes may direct the trustee in its
exercise of any trust or power. The trustee may withhold from holders notice of
any continuing default or event of default (except a default or event of default
relating to the payment of principal or interest or liquidated damages) if it
determines that withholding notice is in their interest.
The holders of a majority in aggregate principal amount of the notes then
outstanding by notice to the trustee may on behalf of the holders of all of the
notes waive any existing default or event of default and its consequences under
the indenture, except a continuing default or event of default in the payment of
interest or liquidated damages on, or the principal of, the notes.
In the case of any event of default occurring by reason of any willful
action or inaction taken or not taken by or on behalf of us with the intention
of avoiding payment of the premium that we would have had to pay if we then had
elected to redeem the notes pursuant to the optional redemption provisions of
the indenture, an equivalent premium shall also become and be immediately due
and payable to the extent permitted by law upon the acceleration of the notes.
If an event of default occurs prior to May 1, 2002, by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of us with the
intention of avoiding the prohibition on redemption of the notes prior to May 1,
2002, then the premium specified in the indenture shall also become immediately
due and payable to the extent permitted by law upon the acceleration of the
notes.
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We are required to deliver to the trustee annually a statement regarding
compliance with the indenture. Upon becoming aware of any default or event of
default, the company is required to deliver to the trustee a statement
specifying such default or event of default.
Remedies upon Default Under the Notes
The trustee will be required to initiate a foreclosure against the
collateral in order to enforce its rights under certain of the collateral
documents. A foreclosure against the collateral will be subject to certain
notice and other procedural limitations.
No Personal Liability of Directors, Officers, Employees and Stockholders
None of our directors, officers, employees, incorporators or stockholders,
as such, shall have any liability for any of our obligations under the notes,
the indenture, the collateral documents or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each holder by
accepting a note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the notes. The waiver may not be
effective to waive liabilities under the federal securities laws.
Legal Defeasance and Covenant Defeasance
We may, at our option and at any time, elect to have all of our obligations
discharged with respect to the outstanding notes ("legal defeasance") except
for: (1) the rights of holders of outstanding notes to receive payments in
respect of the principal of, or interest or premium and liquidated damages, if
any, on such notes when such payments are due from the trust referred to below;
(2) our obligations with respect to the notes concerning issuing temporary
notes, registration of notes, mutilated, destroyed, lost or stolen notes and the
maintenance of an office or agency for payment and money for security payments
held in trust; (3) the rights, powers, trusts, duties and immunities of the
trustee, and our obligations in connection therewith; and (4) the legal
defeasance provisions of the indenture.
In addition, we may, at our option and at any time, elect to have our
obligations released with respect to certain covenants that are described in the
indenture ("covenant defeasance") and thereafter any omission to comply with
those covenants shall not constitute a default or event of default with respect
to the notes. In the event covenant defeasance occurs, certain events (not
including non-payment, bankruptcy, receivership, rehabilitation and insolvency
events) described under "events of default" will no longer constitute an event
of default with respect to the notes. In addition, the liens securing the
collateral will be released upon covenant defeasance or legal defeasance.
In order to exercise either legal defeasance or covenant defeasance:
(1) we must irrevocably deposit with the trustee, in trust, for the
benefit of the holders, cash in u.s. dollars, non-callable government
securities, or a combination thereof, in such amounts as will be sufficient,
in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, and fixed interest, the maximum amount
payable as contingent interest and premium and liquidated damages, if any,
on the outstanding notes on the stated maturity or on the applicable
redemption date, as the case may be, and we must specify whether the notes
are being defeased to maturity or to a particular redemption date;
(2) in the case of legal defeasance, we must deliver to the trustee an
opinion of counsel reasonably acceptable to the trustee confirming that (a)
we have received from, or there has been published by, the Internal Revenue
Service a ruling or (b) since the date of the indenture, there has been a
change in the applicable federal income tax law, in either case to the
effect that, and based thereon such opinion of counsel shall confirm that,
the holders of the outstanding notes will not recognize income, gain or loss
for federal income tax purposes as a result of such legal defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such legal
defeasance had not occurred;
(3) in the case of covenant defeasance we shall have delivered to the
trustee an opinion of counsel reasonably acceptable to the trustee
confirming that the holders of the outstanding notes will not recognize
income, gain or loss for federal income tax purposes as a result of such
covenant defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such covenant defeasance had not occurred;
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(4) no default or event of default shall have occurred and be continuing
on the date of such deposit (other than a default or event of default
resulting from the borrowing of funds to be applied to such deposit);
(5) such legal defeasance or covenant defeasance will not result in a
breach or violation of, or constitute a default under any material agreement
or instrument (other than the indenture) to which we or any of our
restricted subsidiaries is a party or by which we or any of our restricted
subsidiaries is bound;
(6) we must deliver to the trustee an officers' certificate stating that
the deposit was not made by us with the intent of preferring the holders
over our other creditors with the intent of defeating, hindering, delaying
or defrauding creditors or others; and
(7) we must deliver to the trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent relating to
the legal defeasance or the covenant defeasance have been complied with.
Amendment, Supplement and Waiver
Except as provided in the next three succeeding paragraphs, the indenture
or the notes may be amended or supplemented with the consent of the holders of
at least a majority in principal amount of the notes then outstanding
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, notes), and any existing default or
compliance with any provision of the indenture or the notes may be waived with
the consent of the holders of a majority in principal amount of the then
outstanding notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, notes).
Without the consent of the holders of at least 66 2/3% in aggregate
principal amount of the notes then outstanding, an amendment or waiver may not
affect the liens in favor of the trustee and the holders created under the
collateral documents in a manner adverse to the holders or release all or
substantially all of the collateral, in each case, other than pursuant to the
release of collateral in accordance with the provisions of the indenture and of
the applicable collateral documents.
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any notes held by a non-consenting holder):
(1) reduce the principal amount of notes whose holders must consent to
an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any note or
alter the provisions with respect to the redemption of the notes (other than
provisions relating to the covenants described above under the caption "--
Repurchase at the Option of Holders");
(3) reduce the rate of or change the time for payment of interest on any
note;
(4) waive a default or event of default in the payment of principal of,
or interest or premium, or liquidated damages, if any, on the notes (except
a rescission of acceleration of the notes by the holders of at least a
majority in aggregate principal amount of the notes and a waiver of the
payment default that resulted from such acceleration);
(5) make any note payable in money other than that stated in the notes;
(6) make any change in the provisions of the indenture relating to
waivers of past defaults or the rights of holders of notes to receive
payments of principal of, or interest or premium or liquidated damages, if
any, on the notes; or
(7) waive a redemption payment with respect to any note (other than a
payment required by one of the covenants described above under the caption
"-- Repurchase at the Option of Holders").
Notwithstanding the preceding, without the consent of any holder of notes,
we and the trustee may amend or supplement the indenture or the notes:
62
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated notes in addition to or in place of
certificated notes;
(3) to provide for the assumption of the our obligations to holders of
notes in the case of a merger or consolidation or sale of all or
substantially all of our assets;
(4) to make any change that would provide any additional rights or
benefits to the holders of notes or that does not adversely affect the legal
rights under the indenture of any such holder; or
(5) to comply with requirements of the Commission in order to effect or
maintain the qualification of the indenture under the Trust indenture Act.
Concerning the Trustee
The holders of a majority in principal amount of the then outstanding notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. The indenture provides that in case an event of default
shall occur and be continuing, the trustee will be required, in the exercise of
its power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, the trustee will be under no obligation to
exercise any of its rights or powers under the indenture at the request of any
holder of notes, unless such holder shall have offered to the trustee security
and indemnity satisfactory to it against any loss, liability or expense.
Anyone who receives this prospectus may obtain a copy of the indenture,
each of the collateral documents and registration rights agreement without
charge by writing to Riviera Black Hawk, Inc., Riviera Hotel & Casino, 2901 Las
Vegas Boulevard South, Las Vegas, NV 89109, Attention: Executive Vice President
of Finance.
Registration Rights; Liquidated Damages
The following description is a summary of selected provisions of the
registration rights agreement deemed important to you. It does not restate that
agreement in its entirety. We urge you to read the proposed form of registration
rights agreement in its entirety because it, and not this description, defines
your registration rights as holders. See "Available Information."
The registration rights agreement provides:
(1) we will file an exchange offer Registration Statement with the
Commission on or prior to 45 days after the sale of the existing notes;
(2) we will use its best efforts to have the exchange offer Registration
Statement declared effective by the Commission on or prior to 150 days after
the sale of the existing notes;
(3) unless the exchange offer would not be permitted by applicable law
or Commission policy, we will
(a) commence the exchange offer; and
(b) use its best efforts to issue on or prior to 30 business days,
or longer, if required by the federal securities laws, after the date on
which the exchange offer Registration Statement was declared effective by
the Commission, exchange notes in exchange for all notes tendered prior
thereto in the exchange offer; and
(4) if obligated to file the shelf registration statement, we will use
its best efforts to file the shelf registration statement with the
Commission on or prior to 45 days after such filing obligation arises and to
cause the shelf registration to be declared effective by the Commission on
or prior to 150 days after such obligation arises.
63
If:
(1) we fail to file any of the registration statements required by the
registration rights agreement on or before the date specified for such
filing;
(2) any of such registration statements is not declared effective by the
Commission on or prior to the date specified for such effectiveness (the
"effectiveness target date");
(3) we fail to consummate the exchange offer within 45 business days of
the effectiveness target date with respect to the exchange offer
Registration Statement; or
(4) the exchange offer Registration Statement or the shelf registration
statement is declared effective but thereafter ceases to be effective or
usable in connection with resales of transfer restricted securities during
the periods specified in the registration rights agreement (each such event
referred to in clauses (1) through (4) above, a "registration default"),
then we will pay liquidated damages to each holder, with respect to the first
90-day period immediately following the occurrence of the first registration
default in an amount equal to $.05 per week per $1,000 principal amount of notes
held by such holder.
The amount of the liquidated damages will increase by an additional $.05
per week per $1,000 principal amount of notes with respect to each subsequent
90-day period until all registration defaults have been cured, up to a maximum
amount of liquidated damages for all registration defaults of $.50 per week per
$1,000 principal amount of notes.
All accrued liquidated damages will be paid by us on each interest payment
date.
Following the cure of all registration defaults, the accrual of liquidated
damages will cease.
Holders of notes will be required to make certain representations to us (as
described in the registration rights agreement) in order to participate in the
exchange offer and will be required to deliver certain information to be used in
connection with the shelf registration statement and to provide comments on the
shelf registration statement within the time periods set forth in the
registration rights agreement in order to have their notes included in the shelf
registration statement and benefit from the provisions regarding liquidated
damages set forth above. By acquiring transfer restricted securities, a holder
will be deemed to have agreed to indemnify us against certain losses arising out
of information furnished by such holder in writing for inclusion in any shelf
registration statement. Holders of notes will also be required to suspend their
use of the prospectus included in the shelf registration statement under certain
circumstances upon receipt of written notice to that effect from us.
64
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the material United States federal
income tax consequences of the exchange offer to a holder of existing notes that
is an individual citizen or resident of the United States or a United States
corporation that purchased the existing notes pursuant to their original issue
(a "holder"). It also summarizes the material United States income tax
consequences resulting from the ownership and disposition of the exchange notes.
This discussion is based on the Internal Revenue Code of 1986, as amended to the
date hereof (the "Code"), existing and proposed Treasury regulations, and
judicial and administrative determinations, all of which are subject to change
at any time, possibly on a retroactive basis. The following relates only to the
existing notes, and the exchange notes received in exchange for the existing
notes, that are held as "capital assets" within the meaning of Section 1221 of
the Code by holders. It does not discuss state, local or foreign tax
consequences, nor does it discuss tax consequences to subsequent purchasers
(persons who did not purchase the existing notes pursuant to their original
issue), or to categories of holders that are subject to special rules, such as
foreign persons, tax-exempt organizations, insurance companies, banks, dealers
in stocks and securities and persons holding the notes as part of a "straddle,"
"hedge," or "conversion transaction." Tax consequences may vary depending on the
particular status of an investor.
No rulings will be sought from the IRS with respect to the federal income
tax consequences of the exchange offer and the ownership and disposition of the
exchange noes. There can be no assurance that the IRS will not take positions
contrary to the federal income tax consequences discussed below. In particular,
we intend to treat the notes as indebtedness for federal income tax purposes.
However, this treatment is not binding on the IRS or any court and there can be
no assurance that the IRS will not successfully argue (or that a court will not
hold) that the notes should be treated as equity for federal income tax
purposes. If any portion of the notes is treated as equity rather than
indebtedness, we would not be able to deduct the interest on that portion of the
notes. This could have a material adverse effect on our after-tax cash flow. In
addition, the interest payments made on the portion of the notes that are
treated as equity will be taxable to the recipient as dividends to the extent of
our current and accumulated earnings and profits. This could adversely affect
the timing, character and amounts includible in the income of a holder of notes.
THIS SECTION DOES NOT PURPORT TO DEAL WITH ALL ASPECTS OF FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO AN INVESTOR'S DECISION TO EXCHANGE EXISTING
NOTES FOR EXCHANGE NOTES. EACH INVESTOR SHOULD CONSULT WITH ITS OWN TAX ADVISOR
CONCERNING THE APPLICATION OF THE FEDERAL INCOME TAX LAWS AND OTHER TAX LAWS TO
ITS PARTICULAR SITUATION BEFORE DETERMINING WHETHER TO EXCHANGE EXISTING NOTES
FOR EXCHANGE NOTES.
The Exchange Offer
The exchange of existing notes pursuant to the exchange offer should be
treated as a continuation of the corresponding existing notes because the terms
of the exchange notes are not materially different from the terms of the
existing notes. Accordingly, such exchange should not constitute a taxable event
to holders, and therefore:
- no gain or loss should be realized by holders upon receipt of an
exchange note;
- the holding period of an exchange note should include the holding
period of the existing note for which the exchange note was exchanged;
and
- the adjusted tax basis of the exchange note should be the same as the
adjusted tax basis of the existing note for which the exchange note
was exchanged immediately before the exchange.
Recognition of Interest Income
Certain Treasury Regulations (the "Contingent Payment Regulations") govern
the treatment of debt instruments issued on or after August 13, 1996 that
provide for one or more contingent payments. Because the notes provide for one
or more contingent payments of interest, the Contingent Payment Regulations will
apply to the notes while owned by a holder.. Under the Contingent Payment
Regulations, we must construct a projected payment schedule for the notes, and
holders generally must recognize all interest income with respect to a note on a
constant yield basis based on this projected payment schedule, subject to
adjustments if actual contingent payments differ from those projected. This
interest is treated as "original issue discount."
65
In particular, the projected payment schedule will be determined by
including all noncontingent payments and the "expected value" of all contingent
payments on the notes. The projected payment schedule must produce the
"comparable yield," which is the yield at which we would issue a fixed rate debt
instrument with terms and conditions similar to those of the notes. The amount
of interest that accrues each accrual period is the product of the "comparable
yield" and the note's "adjusted issue price" at the beginning of each accrual
period. The "adjusted issue price" of a note is equal to the initial offering
price paid by the holders for a substantial amount of the notes, increased by
interest previously accrued on the note (determined without adjustments for
differences between the projected payment schedule and the actual payments on
the notes), and decreased by the amount of any noncontingent payments and the
projected amount of any contingent payments previously made on the note. Except
for adjustments made for differences between actual and projected payments, the
amount of interest included in income by a holder of a note is the sum of the
"daily portions" of interest income with respect to the note for each day during
the taxable year (or portion thereof) on which the holder held such note. The
"daily portions" of interest income are determined by allocating to each day in
any accrual period a ratable portion of the interest income allocable to that
accrual period. If actual payments differ from projected payments, then holders
will generally be required in any given taxable year either to include
additional interest in gross income (in case the actual payments exceed
projected payments in such taxable year) or to reduce the amount of interest
income otherwise accounted (in case the actual payments are less than the
projected payments in such taxable year). If the negative adjustment exceeds the
interest for the taxable year that would otherwise have been accounted for on
the notes, the excess will be treated as ordinary loss. However, the amount
treated as an ordinary loss in any taxable year is limited to the amount by
which the holder's total interest inclusions on the notes exceed the total
amount of the net negative adjustments treated as ordinary loss in prior years.
Any remaining excess will be a negative adjustment carryforward and treated as a
negative adjustment in the succeeding year. If a note is sold, exchanged, or
retired, any negative adjustment carryforward from the prior year will reduce
the holder's amount realized on the sale, exchange or retirement.
Thus, under the rules described in the preceding paragraph, depending on
the "comparable yield" and "expected value" used to determine the projected
payment schedule, holders of notes may be required to include amounts in income
prior to the receipt of cash payments attributable to such income. We will
provide to holders the projected payment schedule for the notes. The projected
payment schedule for the notes will consist of all fixed interest payments, all
scheduled principal payments and a projected amount and time for each contingent
interest payment. The yield, timing and amounts set forth on the projected
payment schedule are for federal income tax purposes only and are not assurances
by us with respect to any aspect of the notes. Holders will generally be bound
by the projected payment schedule. However, the IRS will not respect a projected
payment schedule which it determines to be unreasonable. Holders are strongly
urged to consult their tax advisors with respect to the application of the
contingent payment rules described above to the notes.
It is possible that the notes may be subject to the provisions of the
Internal Revenue Code dealing with high yield discount obligations in which case
we may not be entitled to claim a deduction with respect to a certain portion of
the interest payments (the "Disqualified Portion"). This could reduce the amount
of cash available to us to meet our obligations under the notes.
Sale, Retirement or Other Taxable Disposition
A holder of a note will generally recognize gain or loss upon the sale,
redemption, retirement, or other taxable disposition of the note in an amount
equal to the difference between (1) the amount of cash and the fair market value
of property received in exchange therefor, except to the extent attributable to
the payment of accrued interest or original issue discount, which generally will
be taxable to the holder as ordinary income, reduced by any negative adjustment
carryforward (as described above) and (2) the holder's adjusted tax basis in the
note. A holder's adjusted tax basis in a note generally will be equal to the
price paid for the note, increased by the amount of original issue discount
previously accrued on the note (determined without adjustments), and decreased
by the amount of any noncontingent payments and the projected amount of any
contingent payments previously made on the note.
If a note is sold or otherwise disposed of when there are remaining
contingent payments under the projected payment schedule, then any gain
recognized under the sale or other disposition will be ordinary interest income.
Any loss recognized will be ordinary loss to the extent the holders' total
interest inclusions on a note exceed the total amount of ordinary loss the
holder took into account under the rules described above with respect to
differences between actual payments and projected payments, and any additional
loss will generally be a capital loss. If, however, a note is sold or otherwise
disposed of after there are no remaining contingent payments due on the note
under the projected payment schedule, the resulting gain or loss will generally
be capital gain or loss and will be long-term capital gain or loss if the note
has been held for more than one year.
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Liquidated Damages
We intend to take the position that the liquidated damages described above
under "Description of Notes -- Registration Rights; Liquidated Damages" will be
taxable to the holder as ordinary income in accordance with the holder's method
of accounting for federal income tax purposes. The IRS may take a different
position, however, which could affect the timing of both the holder's income and
our deduction with respect to the liquidated damages.
Backup Withholding
A holder of notes may be subject to backup withholding at the rate of 31%
with respect to interest paid on, original issue discount accrued on and gross
proceeds from a sale or other disposition of, the notes unless (1) the holder is
a corporation or comes within certain other exempt categories and, when
required, demonstrates this fact or (2) provides a correct taxpayer
identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with applicable requirements of the backup
withholding rules. A holder of notes who does not provide us with his or her
correct taxpayer identification number may be subject to penalties imposed by
the IRS.
We will report to the holders of the notes and the IRS the amount of any
"reportable payments," including any original issue discount accrued on the
notes and any amount withheld with respect to the notes during the calendar
year.
67
PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of exchange notes received in
exchange for existing notes where such existing notes were acquired as a result
of market-making activities or other trading activities. We have agreed that,
for a period of 180 days after the expiration date, it will make this
prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, until ___________, 1999 (90
days after the effective date of this Registration Statement), all dealers
effecting transactions in the exchange notes may be required to deliver a
prospectus.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange Noes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the exchange notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such exchange notes. Any broker-dealer
that resells exchange notes that were received by it for its own account
pursuant to the exchange offer and any broker or dealer that participates in a
distribution of such exchange notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any such resale of exchange
notes and any commission or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that, by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the expiration date the Company will
promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the exchange offer (including the expenses of one counsel for the
Holders of the Notes) other than commissions or concessions of any brokers or
dealers and will indemnify the Holders of the Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
Each broker-dealer that receives exchange notes are required to deliver a
prospectus in connection with any resale of such note.
Each broker-dealer that acquired existing notes as a result of market
making or other trading activities may use the exchange offer prospectus, as
supplemented or amended for resales of exchange notes.
Broker-dealers that acquired the existing notes directly from the Company
in the initial offering and not as a result of market making or trading
activities cannot use the prospectus for the exchange offer in connection with
resales of the exchange notes and, absent an exemption, must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with secondary resale of the exchange notes and cannot rely on the
position of the staff in Exxon Capital Holdings Corporation (avail. April 13,
1989).
68
LEGAL MATTERS
The validity of the exchange notes offered hereby will be passed upon for
the Company by Dechert Price & Rhoads, New York, New York. Certain legal matters
with respect to Colorado law will be passed upon by Holme, Roberts & Owen LLP,
Denver, Colorado and Verner, Liipfert, Bernhard, McPherson & Hand, Chartered,
Washington, D.C.
EXPERTS
The financial statements of Riviera Black Hawk, Inc. (a development stage
company) as of December 31, 1997 and 1998 and for the period from August 18,
1997 (date of inception) through December 31, 1997 and for the year ended
December 31, 1998, included in this prospectus, have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report included herein
(which report expresses an unqualified opinion and includes an explanatory
paragraph referring to the Company's status as a development stage entity) and
have been so included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The consolidated financial statements of Riviera Holdings Corporation and
Subsidiaries as of December 31, 1997 and 1998 and for each of the three years in
the period ended December 31, 1998 incorporated in this prospectus by reference
from the Annual Report on Form 10-K of Riviera Holdings Corporation and
Subsidiaries have been audited by Deloitte & Touche LLP, independent auditors,
as stated in their report which is incorporated herein by reference and have
been so incorporated in reliance upon the report of such firm given their
authority as experts in accounting and auditing.
The Statements as to matters of law and legal conclusions concerning
Colorado gaming law included under the captions "Risk Factors--Gaming licenses,
permits and approvals," "--Legislative issues" and "--State gaming tax issues"
and "Gaming and Liquor Regulatory Matters" have been prepared by Holme, Roberts
& Owen LLP, Denver, Colorado and Edward McGrath,,Verner, Liipfert, Bernhard,
McPherson & Hand, Chartered, Washington, D.C., gaming counsel for the Company.
AVAILABLE INFORMATION
We are not currently subject to the periodic reporting and other
informational requirements of the Securities and Exchange Act of 1934, as
amended (the "Exchange Act"). We have agreed that, whether or not required to do
so by the rules and regulations of the Securities and Exchange Commission, so
long as any notes remain outstanding, we will furnish to the trustee and deliver
or cause to be delivered to holders of the notes, beginning with respect to our
fiscal quarter ending June 30, 1999, (1) all consolidated quarterly and annual
financial information that would be required to be contained in a filing with
the Securities and Exchange Commission on Forms 10-Q and 10-K if we were
required to file such forms and, with respect to the annual information only, a
report thereon by our certified independent accountants and (2) all reports that
would be required to be filed with the Securities and Exchange Commission on
Form 8-K if we were required to file such reports. From and after the time a
registration statement with respect to the notes is declared effective by the
Securities and Exchange Commission, we will file such information with the
Securities and Exchange Commission, provided the Securities and Exchange
Commission will accept such filing.
We have filed with the SEC a registration statement on Form S-4 under the
Securities Act of 1933, covering the notes to be issued in the exchange offer.
This prospectus, which is a part of the registration statement, does not contain
all of the information included in the registration statement. Any statement
made in this prospectus concerning the contents of any contract, agreement or
other document is not necessarily complete. For further information with respect
to the Company and the notes to be issued in the exchange offer, please
reference the registration statement, including its exhibits. If we have filed
any contract, agreement or other document as an exhibit to the registration
statement, you should read the exhibit for a more complete understanding of the
documents or matter involved.
Copies of the registration statement, including all related exhibits and
schedules, may be inspected without charge at the public reference facilities
maintained by the SEC, or obtained at prescribed rates from the Public Reference
Section of the SEC at the address set forth above. In addition, you may request
a copy of any of these filings, at no cost, by writing or telephoning us at the
following address or phone number:
Riviera Black Hawk, Inc.
444 Main Street
Black Hawk, Colorado 80422
(303) 582-1000
69
RIVIERA BLACK HAWK, INC.
(A Development Stage Company)
- --------------------------------------------------------------------------------
Page
TABLE OF CONTENTS F-1
INDEPENDENT AUDITORS' REPORT F-2
FINANCIAL STATEMENTS:
Balance Sheets as of June 30, 1999 (Unaudited),
December 31, 1998 and 1997 F-3
Statements of Operations for the Six Months Ended June 30,
1999 (Unaudited)and cumulative from August 18, 1997
(Inception) through June 30, 1999 (Unaudited) F-4
Statements of Stockholder's Equity for the Six Months Ended
June 30, 1999 (Unaudited) and for the Year Ended
December 31, 1998 and for the Period from
August 18, 1997 (Inception) through December 31, 1997 F-5
Statements of Cash Flows for the Six Months Ended June 30, 1999
and 1998 (Unaudited), and for the Year Ended December 31,
1998 and for the Period from August 18, 1997 (Inception)
through December 31, 1997 and cumulative from August 18,
1997 (Inception) through June 30, 1999 (Unaudited) F-6
Notes to Financial Statements F-7-11
F-1
INDEPENDENT AUDITORS' REPORT
Riviera Black Hawk, Inc.
(A Development Stage Company):
We have audited the accompanying balance sheets of Riviera Black Hawk, Inc.
(a Development Stage Company) (the "Company") as of December 31, 1998 and 1997,
and the related statements of operations, stockholder's equity and of cash flows
for the period from August 18, 1997 (date of inception) through December 31,
1997, and for the year ended December 31, 1998. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1998 and
1997, and the results of its cash flows for the period from August 18, 1997
(date of inception) through December 31, 1997, and for the year ended December
31, 1998, in conformity with generally accepted accounting principles.
The Company is in the development stage at December 31, 1998. As discussed
in Note 1 to the financial statements, successful completion of the Company's
development program and, ultimately, the attainment of profitable operations is
dependent upon future events, including obtaining certain regulatory approvals
and achieving a level of sales adequate to support the Company's cost structure.
Deloitte & Touche LLP
Las Vegas, Nevada
February 19, 1999
F-2
RIVIERA BLACK HAWK, INC.
(A Development Stage Company)
BALANCE SHEETS
JUNE 30, 1999 (UNAUDITED) AND DECEMBER 31, 1998 AND 1997
(In thousands, except share amounts)
June December 31,
ASSETS 1999 1998 1997
---- ---- ----
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents...................... $ 809 $ 543 $ 49
Cash, restricted............................... 26,278
Short-term investments, restricted............. 5,119
Prepaid expenses............................... 30 73 _
----------- ----------- ---------
Total current assets....................... 32,236 616 49
PROPERTY AND EQUIPMENT.............................. 39,936 27,112 16,583
DEFERRED FINANCING COSTS............................ 3,114
OTHER ASSETS........................................ 94 3
CASH, RESTRICTED.................................... 407 407 _
----------- ----------- ---------
TOTAL...................................... $ 75,787 $ 28,138 $ 16,632
=========== =========== =========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities....... $ 5,897 $ 1,210 $ 7
Accrued interest expense....................... 455
Accrued expenses, other........................ 189 - -
----------- ----------- ---------
Total current liabilities...................... 6,541 1,210 7
----------- ----------- ---------
NONCURRENT LIABILITIES:
Due to Riviera Holdings Corporation............ 62 6,241
13% First Mortage Notes........................ 45,000
Special improvement district bonds, net of 784 687 -
----------- ----------- ---------
undisbursed funds of $780..................
Total noncurrent liabilities............... 45,846 6,928 -
----------- ----------- ---------
Total liabilities.......................... 52,387 8,138 7
----------- ----------- ---------
COMMITMENTS AND CONTINGENCIES STOCKHOLDER'S EQUITY:
Common stock, $.01 par value; 10,000 shares authorized;
1,000 shares issued and outstanding............
Additional paid-in capital..................... 23,459 20,000 16,625
Accumulated deficit............................ (59) - -
----------- ----------- ---------
Total stockholder's equity................. 23,400 20,000 16,625
----------- ----------- ---------
TOTAL ..................................... $ 75,787 $ 28,138 $ 16,632
=========== =========== =========
See notes to financialstatements.
F-3
RIVIERA BLACK HAWK, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999 AND PERIOD FROM AUGUST 18, 1997
(DATE OF INCEPTION) THROUGH JUNE 30, 1999 (UNAUDITED)
(In thousands)
Six Cumulative from
Months August 18, 1997
Ended (Date of
June 30, Inception) through
1999 June 30, 1999
--------- ------------------
Selling, general and administrative................. $ (75) $ (75)
OTHER INCOME (EXPENSE):
Interest expense.................................... (193) (193)
Interest income..................................... 115 115
Total other income (expense)................... (78) (78)
Loss before taxes................................... (153) (153)
Tax benefit......................................... 94 94
Net loss........................................... $ (59) $ (59)
See notes to financial statements.
F-4
RIVIERA BLACK HAWK, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDER'S EQUITY
PERIOD FROM AUGUST 18, 1997 (DATE OF
INCEPTION) THROUGH DECEMBER
31, 1997 AND YEAR ENDED
DECEMBER 31, 1998 AND FOR THE
SIX MONTHS ENDED JUNE 30, 1999
(Unaudited)
(In thousands, except share amounts)
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit Total
------ ------ --------- ----------- -----
BALANCE, AUGUST 18, 1997
(Date of Inception)................ - $ - $ - $ -
Common stock issued................ 1,000
Contributed capital................ - - 16,625 16,625
-------- ------ -------- --------- --------
BALANCE, DECEMBER 31, 1997.............. 1,000 16,625 16,625
Contributed capital................ - - 3,375 3,375
-------- ------ -------- --------- --------
BALANCE, DECEMBER 31, 1998.............. 1,000 20,000 20,000
Contributed capital (unaudited).... 3,459 3,459
Net loss (unaudited)............... - - - (59) (59)
-------- ------ -------- --------- --------
BALANCE, JUNE 30, 1999..................
(Unaudited)........................ 1,000 $ - $ 23,459 $ (59) $ 23,400
======== ====== ======== ========= ========
See notes to financial statements.
F-5
RIVIERA BLACK HAWK, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
PERIOD FROM AUGUST 18, 1997 (DATE OF INCEPTION) THROUGH
DECEMBER 31, 1997 AND YEAR ENDED DECEMBER 31, 1998 AND
SIX MONTHS ENDED JUNE 30, 1999 AND 1998 (UNAUDITED) AND CUMULATIVE FROM
AUGUST 18, 1997 (INCEPTION) THROUGH JUNE 30, 1999 (UNAUDITED) (In thousands)
Cumulative
August 18, from August
Six Six 1997 18, 1997
Months Months (Inception) (Date of
Ended Ended to Inception)
June 30, June 30, December through June
1999 1998 1998 31, 1997 30, 1999
---------- ---------- ---------- ---------- -----------
NET LOSS.................................... $ (59) $ $ $ $ (59)
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment....... (6,562) (2,040) (6,667) (15,923) (29,152)
Decrease (increase) in prepaid expenses.. 43 (73) (30)
Increase in cash - restricted............ (26,278) (26,278)
Purchase of short-term investments....... (5,119) (5,119)
Deferred financing costs................. (3,114) (3,114)
Increase in restricted cash.............. (407) (407)
Increase in other assets................. (91) (3) (94)
---------- ---------- ---------- ---------- -----------
Net cash used in investing activities (41,121) (2,040) (7,150) (15,923) (64,194)
---------- ---------- ---------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from (payments to) Riviera
Holding Corporation..................... (6,179) 343 6,241 62
Proceeds from long-term borrowings......... 45,000 45,000
Contribution of paid-in capital............ 2,625 2,117 1,403 15,972 20,000
---------- ---------- ---------- ---------- -----------
Net cash provided by financing 41,446 2,460 7,644 15,972 65,062
activities.........................
---------- ---------- ---------- ---------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS....... 266 420 494 49 809
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 543 49 49
---------- ---------- ---------- ---------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD....
$ 809 $ 469 $ 543 $ 49 $ 809
========== ========== ========== ========== ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH
INFORMATION:
Property and equipment purchased using
accounts payable.......................... $ 5,897 $ 1,203 $ 7 $ 5,897
========== ========== ========== ========== ===========
Property acquired using special improvement
district bonds............................ $ 97 $ 687 $ $ 784
========== ========== ========== ========== ===========
CAPITALIZED INTEREST CONTRIBUTED BY RIVIERA
HOLDINGS CORP............................. $ 834 $ 1,300 $ 1,972 $ 653 $ 3,459
========== ========== ========== ========== ===========
CAPITALIZED INTEREST, Other................. $ 644 $ $ $ $ 644
========== ========== ========== ========== ===========
See notes to financial statements.
F-6
RIVIERA BLACK HAWK, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
PERIOD FROM AUGUST 18, 1997 (DATE OF INCEPTION) THROUGH
DECEMBER 31, 1997 AND THE YEAR ENDED DECEMBER 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation - On August 18, 1997 (date of
inception), Riviera Black Hawk, Inc. (the "Company") was formed. The
Company is a wholly owned subsidiary of Riviera Holdings Corporation. The
Company is a development stage enterprise that has not commenced
operations and will not commence operations until acceptable financing is
obtained, the casino is constructed, and gaming licenses are obtained. The
principal purpose of the Company is to develop a casino and entertainment
complex in Black Hawk, Colorado, which is anticipated to open in the first
quarter of 2000. The Company has begun construction on this casino in
Black Hawk, Colorado, on a site that was purchased for $15.1 million in
August 1997.
Financial Statements at June 30, 1999 and for the Six Months Ended June
30, 1999 and 1998 - The financial information at June 30, 1999 and for the
six months ended June 30, 1999 and 1998 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 period. The results of operations for the
six months ended June 30, 1999 and 1998 are not necessarily indicative of
the results that will be achieved for the entire year.
Certain Significant Risks and Uncertainties:
Gaming Regulation Licensing - The Company's ability to conduct gaming
operations in the state of Colorado depends on the ability of the
Company and Riviera Holdings Corporation to obtain licensing from the
Colorado gaming authorities. Such licensing and qualifications will be
reviewed periodically by the gaming authorities in Colorado.
Competition - The Black Hawk/Central City, Colorado, market already
has many established casinos. The market is highly competitive, and
other development projects are currently being planned.
Construction Risks - Any construction project entails significant
construction risks, including, but not limited to, cost overruns,
delays in receipt of governmental approvals, shortages of materials or
skilled labor, labor disputes, unforeseen environmental or engineering
problems, work stoppages, fire and other natural disasters,
construction scheduling problems, and weather interferences, any of
which, if they occurred, could delay construction or result in a
substantial increase in costs to the Company.
Completion Capital Commitment - Riviera Holdings Corporation, will be
obligated to contribute to the Company up to $10.0 million of cash if at
any time there are insufficient funds available to enable the casino in
Black Hawk, Colorado to be operating by May 31, 2000. In addition, if the
casino is not operating by May 31, 2000, Riviera Holdings Corporation will
be obligated to contribute to the Company on that date $10.0 million in
cash less any amounts previously contributed under the Completion Capital
Commitment.
Keep-Well Agreement - The Company and Riviera Holdings Corporation will
enter into a Keep-Well Agreement wherein, if (1) the Company does not have
the necessary funds to make a payment of fixed interest on the notes
during our first three years of operations or (2) consolidated cash flow
is less than $9.0 million in any of our first three years of operations,
Riviera Holdings Corporation will be obligated to contribute cash to the
Company to make up those amounts (up to a maximum of $5.0 million for any
one operating year and $10.0 million in the aggregate).
F-7
Cash and Cash Equivalents - The Company considers cash and all highly
liquid investments with a maturity at the time of purchase of three months
or less to be cash equivalents. At December 31, 1998 and 1997, there were
no cash equivalents.
Property and Equipment - Property and equipment are stated at cost, and
capitalized lease assets are stated at the present value of future minimum
lease payments at the date of lease inception. Interest incurred during
construction of new facilities or major additions to facilities is
capitalized and amortized over the life of the asset. Depreciation will be
computed, upon the commencement of gaming operations, using the
straight-line method over the shorter of the estimated useful lives or
lease terms, if applicable, of the related assets. The costs of normal
maintenance and repairs will be charged to expense as incurred. Gains or
losses on disposals will be recognized as incurred.
Other Assets - The Company is in the development stage and is currently
incurring organizational costs, which are being capitalized until
operations of the casino commence, at which time such organizational costs
will be amortized over a five-year period. Organizational costs consist
primarily of legal fees associated with establishing the gaming licenses
for business.
Restricted Cash - At December 31, 1998, the Company had a deposit with a
commercial bank in the amount of $407,000, which is restricted as to use.
This amount is required by a construction bond.
Estimates and Assumptions - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual
results may differ from estimates.
Recently Issued Accounting Standards - The American Institute of Certified
Public Accountants' Accounting Standards Executive Committee issued
Statement of Position No. 98-5, Reporting on the Costs of Start-Up
Activities. This standard provides guidance on the financial reporting for
start-up costs and organization costs. This standard requires costs of
start-up activities and organization costs to be expensed as incurred, and
is effective for fiscal years beginning after December 15, 1998, although
earlier application is encouraged. Management does not expect that the
effect of adopting this standard will have a material impact on the
Company's financial statements.
Federal Income Taxes - Riviera Holdings Corporation allocated income tax
expense or benefit to the Company as if the Company were filing separate
tax returns pursuant to a tax sharing arrangement. The Company accounts
for income taxes in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes." The Company had
no results of operation through December 31, 1998 that would have created
taxable events. Accordingly, no provision is shown in these financial
statements through December 31, 1998.
F-8
2. RELATED-PARTY TRANSACTIONS
As of December 31, 1998, Riviera Holdings Corporation has contributed
$15.1 million to acquire land for the casino in Black Hawk and $4.9
million in cash for developing the land for the casino, for a total
capital contribution of $20 million.
At December 31, 1998, the Company owed approximately $6.2 million to
Riviera Holdings Corporation, representing advances made by Riviera
Holdings Corporation for costs related to the development of the Riviera
Black Hawk casino. The advances are bearing interest at 10.6 percent and
are due June 30, 2000.
The Company has entered into a management agreement in principle (the
"Management Agreement") with Riviera Gaming Management of Colorado, Inc.,
(the "Manager") a wholly owned subsidiary of Riviera Holdings Corporation,
which, in exchange for a fee, will manage the Company. The management fee
will consist of a revenue fee and a performance fee. The revenue fee will
be based on 1% of net revenues (gross revenues less complimentaries) and
is payable quarterly in arrears. The performance fee will be based on the
following percentages of EBITDA (earnings before interest, taxes,
depreciation and amortization, whose components are based on generally
accepted accounting principles): (1) 10% of EBITDA from $5 million to $10
million, (2) 15% of EBITDA from $10 million to $15 million and (3) 20% of
EBITDA in excess of $15 million. The performance fee will be based on the
preceding quarter's EBITDA, paid in quarterly installments subject to
year-end adjustment. The management fee will go into effect on the date of
the opening of the Riviera Black Hawk casino.
If there is any default under the management agreement, the manager will
not be entitled to receive management fees, but the manager will still be
entitled to inter-company service fees.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31 (amounts in
thousands):
1998 1997
Land and improvements $15,790 $15,100
Construction in progress 11,322 1,483
------- -------
Total property and equipment $27,112 $16,583
======= =======
In 1998 and 1997, $2.0 million and $.6 million, respectively, in interest
costs were capitalized on the construction project.
4. SPECIAL IMPROVEMENT DISTRICT BONDS
The City of Black Hawk, Colorado, issued Special Improvement District
bonds ("SID bonds") in the amount of $2.9 million in July 1998. The bond
proceeds will be used to finance surface, underground, and utility
improvements, widen and improve a bridge, and improve traffic signals and
other infrastructure projects that benefit the Riviera Black Hawk property
and an adjacent casino. The SID bonds contain a lien provision that
attaches to the property until the bonds are fully paid.
The Company is responsible to repay approximately 50% of the bonds. At
December 31, 1998, $1.4 million of the $2.9 million had been expended on
the designated projects. The remaining bond proceeds were in a controlled
disbursement account managed by the City of Black Hawk. The Company is
recording 50% of the costs of improvements to land improvements and a
corresponding amount to SID bonds payable. The bonds accrue interest at 5%
payable semiannually on June 1, and December 1 commencing December 1,
1998.
F-9
The Company's share of the debt on the SID bonds, when the project is
complete, is payable over ten years beginning in January 2000, as follows
(amounts in thousands):
1999 $ -
2000 112
2001 120
2002 127
2003 132
Thereafter 979
------
$1,470
======
5. COMMITMENTS AND CONTINGENCIES
The Company has entered into a guaranteed maximum price construction
contract for the construction of the Riviera Black Hawk at a guaranteed
maximum price of $27.6 million, including a contingency allowance of $0.5
million, for the construction of the casino, parking garage, associated
site work and all floor coverings and food service equipment. The
construction cost is fully supported by a payment and performance bond
obtained by the general contractor, Weitz, who is also required to provide
comprehensive public liability insurance, including contractual liability
coverage, in the amount of $2.0 million plus umbrella coverage in the
amount of $20.0 million. The Company has obtained builder's all risk
insurance to insure against damage to the work in place during
construction. The guaranteed maximum price is subject to decrease if there
are changes to the plans and specifications, if the work is delayed due to
actions of the owner or, due to customary contingencies that occur during
construction.
To discourage delays, liquidated damages will be payable by the general
contractor for each day that substantial completion is delayed past the
scheduled substantial completion date (as it may be extended under the
guaranteed maximum price construction contract), as follows: (1) no
penalties if the casino project is substantially completed on or before
January 31, 2000; (2) $10,000 per day each day from February 1, 2000
through February 14, 2000 that the casino project is not substantially
completed after January 31, 2000; and (3) an additional $15,000 for each
day from February 15, 2000 through June 30, 2000. In addition, to
encourage early completion of the casino, incentive fees will be payable
to the general contractor. Specifically, the guaranteed maximum price
construction contract provides: (1) if Weitz achieves substantial
completion of the project on or after December 29, 1999, but prior to
January 4, 2000, Weitz's lump sum fee shall be increased as incentive by
$10,000 for each day that the project is substantially complete prior to
January 4, 2000; and (2) if Weitz achieves substantial completion of the
project any time before December 29, 1999, Weitz's lump sum fee shall be
increased as incentive by $15,000 for each day the project is
substantially complete prior to December 29, 1999, plus the $10,000 for
each day the project is substantially complete between December 29, 1999
and January 4, 2000.
The Company has a contract for architect services for approximately $1.0
million. Substantially all expected services have been rendered and paid
on the contract at December 31, 1998.
6. SUBSEQUENT EVENTS (UNAUDITED)
During the 6 months ended June 30, 1999, Riviera Holdings Corporation
contributed another $3.5 million of additional paid in capital.
The Financial Accounting Standards Board recently issued FAS No. 137,
`Deferral of FAS 133 Accounting for Derivatives' which delays the
implementation of that pronouncement to June 15, 2000. The Company has not
determined what effect, if any, that FAS 133 may have on its results of
operations.
The impact of adopting SOP 98-5 has been to record general expenses of
$75,000 for the first six months of 1999 that the Company would otherwise
have deferred as a pre-opening cost.
F-10
On June 3, 1999, the Company closed a $45 million private placement of 13%
First Mortgage Notes. The net proceeds of the placement will be used to
fund the completion of RBH's casino project in Black Hawk, Colorado. The
Riviera Holdings Corporation has not guaranteed the $45 million RBH Notes,
but has agreed to a "Capital Completion Commitment" of up to $10 million
and a "Keep Well Agreement" of $5 million per year (or an aggregate
limited to $10 million) for the first 3 years of RBH operations to cover
if (i) the $5.85 million interest on such Notes is not paid by RBH and
(ii) the amount by which RBH cash flow is less than $7.5 million per year.
The notes were issued at a cost in the amount of $3.5 million. The
deferred financing costs are being amortized over the life of the notes on
a straight-line basis which approximates the effective interest method.
The 13% First Mortgage Note Indenture provides that, in certain
circumstances, the Company must offer to repurchase the 13% 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 13% First Mortgage 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 (v) enter into certain mergers and consolidations. As a result
of these restrictions, the ability of the Company 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 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. At June
30, 1999, the Company believes that it is in compliance with the
covenants.
Amounts related to the Riviera Black Hawk casino project in Black Hawk,
Colorado are restricted in use to that project or for the related 13%
First Mortgage Notes interest payments.
Pursuant to a deposit account agreement, dated as of June 3, 1999, among
Bank of America as deposit bank, Riviera Holdings Corporation and First
American Title Insurance Company, Riviera Holdings Corporation has
deposited $5.0 million to insure First American against mechanics lien
claims against the Black Hawk property. If no mechanics liens are
outstanding 30 days after the casino opens, such $5.0 million deposit will
be returned to Riviera Holdings Corporation.
The Company accounts for investment securities in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting
for Certain Investments in Debt and Equity Securities." SFAS No. 115
addresses the accounting and reporting for investments in equity
securities that have readily determinable fair values and for all
investments in debt securities, and requires such securities to be
classified as either held to maturity, trading, or available for sale.
Management determines the appropriate classification of its investment
securities at the time of purchase and re-evaluates such determination at
each balance sheet date. Held-to-maturity securities are carried at
amortized cost. At June 30, 1999, securities classified as held to
maturity comprised debt securities issued by the U.S. Treasury and other
U.S. government corporations and agencies, and repurchase agreements, with
an amortized cost of $5,119,000, maturing in three months or more.
******
F-11
ANNEX A
RIVIERA HOLDINGS CORPORATION
Riviera Holdings Corporation's consolidated financial statements are
incorporated by reference in this prospectus only to illustrate its ability to
service its obligations under the Completion Capital Commitment and the
Keep-Well Agreement. Neither Riviera Holdings Corporation nor any of its
affiliates will participate in servicing the principal, fixed interest,
contingent interest or other payments due on the notes. Neither Riviera Holdings
Corporation nor any of its affiliates has any obligation to make any payments of
any kind to the holders of the notes.
A-1
================================================================================
We have not authorized any dealer, salesperson or other person to give any
information or represent anything to you other than the information contained in
this prospectus. This prospectus does not offer to buy or sell any notes in any
jurisdiction where it is unlawful. You must not rely on unauthorized information
or representations. The information contained in this prospectus is current only
as of its date.
----------------
TABLE OF CONTENTS
Forward-Looking Statements.................................iii
Summary......................................................1
Risk Factors.................................................8
Use Of Proceeds.............................................15
Capitalization..............................................15
Selected Financial Information..............................16
Ratio Of Earnings To Fixed Charges..........................17
Management's Discussion And Analysis Of Financial Condition
And Results Of Operations..................................18
The Exchange Offer..........................................21
Business....................................................28
Gaming And Liquor Regulatory Matters........................33
Material Agreements.........................................37
Management..................................................39
Principal Stockholders......................................41
Relationships And Related Transactions......................43
Description Of Notes........................................44
United States Federal Income Tax Considerations.............64
Plan Of Distribution........................................67
Legal Matters...............................................68
Experts.....................................................68
Available Information.......................................68
Until _____ __, 1999 (90 days after the effective date of this Registration
Statement), all dealers effecting transactions in the exchange notes,
whether or not participating in the original distribution, may be required
to deliver a prospectus. This is in addition to the obligation of dealers
to deliver a prospectus when acting as underwriters and with respect to
their unsold allotments or subscriptions.
================================================================================
================================================================================
$45,000,000
[LOGO]
Riviera Black Hawk, Inc.
OFFER TO EXCHANGE
13% First Mortgage Notes
due 2005
With Contingent Interest
for all outstanding
13% First Mortgage Notes
due 2005
With Contingent Interest
-------------------------
PROSPECTUS
-------------------------
__________ __, 1999
================================================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Article 109 of the Colorado Business Corporation Act provides in relevant
part that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that such person is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
such person's conduct was unlawful.
In addition, Article 109 provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation.
Article 109 also provides that to the extent a director, officer, employee
or agent of a corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to above, or defense of any
claim issue or matter therein, he shall be indemnified against expenses
(including attorney's fees) actually and reasonably incurred by him in
connection therewith.
The Bylaws of the Company provide for the indemnification of any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (a "proceeding") by reason of the fact that such person is or
was a director or officer of the Company or a constituent corporation absorbed
in a consolidation or merger, or is or was serving at the request of the Company
or a constituent corporation absorbed in a consolidation or merger, as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise, or is or was a director or officer of the Company serving at
its request as an administrator, trustee or other fiduciary of one or more of
the employee benefit plans of the Company or other enterprise, against expenses
(including attorneys' fees), liability and loss actually and reasonably incurred
or suffered by such person in connection with such proceeding, whether or not
the indemnified liability arises or arose from any threatened, pending or
completed proceeding by or in the right of the Company, except to the extent
that such indemnification is prohibited by applicable law. The Bylaws of the
Company also provide that such indemnification shall not be deemed exclusive of
any other rights to which those indemnified may be entitled as a matter of law
or under any by-law, agreement, vote of stockholders or otherwise.
Section 7-108-402 of the Colorado Business Corporation Act provides that a
corporation may in its articles of incorporation eliminate or limit the personal
liability of a director to the corporation or its shareholders for monetary
damages for breach of fiduciary duty as a director except for liability: for any
breach of the director's duty of loyalty to the corporation or its shareholders;
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law; for acts specified in Section 7-108-403 of the
Colorado Business Corporation Act (pertaining to certain prohibited acts
including unlawful payments of dividends or unlawful purchases or redemptions of
the corporation's capital stock); or for any transaction from which the director
derived an improper personal benefit. The Articles of Incorporation of the
Company contains a provision so limiting the personal liability of directors of
the Company.
II-1
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits:
EXHIBIT INDEX
Exhibit No. Description
- ------------- ----------------------------------------------------------------
3.01 Articles of Amendment to the Articles of Incorporation of the
Company.+
3.02 Articles of Incorporation of the Company.+
3.03 Bylaws of the Company.+
4.01 Indenture, dated as of June 3, 1999, among the Company, Riviera
Holdings and the Initial Purchaser.++
4.02 Form of 13% First Mortgage Note due 2005 with Contingent
Interest (included in Exhibit 4.01).++
4.03 Purchase Agreement, dated as of May 27, 1999, by and among the
Company, Riviera Holdings and the Initial Purchaser.++
4.04 Registration Rights Agreement, dated as of June 3, 1999, by and
between the Company and the Initial Purchaser.++
5.01 Opinion of Dechert Price & Rhoads.++
10.01 The Completion Capital Commitment, dated as of June 3, 1999, by
and between the Company and Riviera Holdings.++
10.02 The Keep-Well Agreement, dated as of June 3, 1999, by and
between the Company and Riviera Holdings.++
10.03 The Tax-Sharing Agreement, dated as of June 3, 1999, by and
between the Company and Riviera Holdings.++
10.04 The Management Agreement, dated as of June 3, 1999, by and
between the Company and Riviera Gaming Management of Colorado,
Inc.++
10.05 The Trademark License Agreement, dated as of June 3, 1999, by
and between the Company and Riviera Operating Corporation.++
10.06 The Deed of Trust, dated as of June 3, 1999, made by the Company
to the Public Trustee of the County of Gilpin, Colorado, for the
benefit of the Trustee.++
10.07 The Assignment of Rents.++
10.08 The Environmental Indemnity, dated as of June 3, 1999, between
the Company and the Trustee.++
10.09 The Cash Collateral and Disbursement Agreement, dated as of June
3, 1999, among the Company, the Trustee and Crss Constructors,
Inc.++
10.10 The Account Agreement, dated as of June 3, 1999, among the
Company, the Trustee and IBJ Whitehall Bank and Trust Company.++
10.11 The Security Agreement, dated as of June 3, 1999, made by the
Company in favor of the Trustee.++
10.12 The Manager Subordination Agreement, dated as of June 3, 1999,
by Riviera Gaming Management of Colorado in favor of the
Trustee.++
10.13 The Collateral Assignment of Trademark, dated as of June 3,
1999, by and between the Company and the Trustee.++
10.14 The Collateral Assignment, dated as of June 3, 1999, by and
between the Company and the Trustee.++
10.15 The Pledge and Assignment Agreement, dated as of June 3, 1999,
by and between the Company and the Trustee.++
10.16 Deposit Account Agreement, dated as of June 1999, among Bank of
America, Riviera Holdings and First American Title Insurance
Company.+
10.17 Construction Contract, made as of December 29, 1997, among the
Company, Weitz-Cohen Construction Co. and Melick Associates,
Inc.+
23.01 Consent of Dechert Price & Rhoads (included in the opinion filed
as Exhibit 5.01).++
23.02 Consent of Deloitte & Touche LLP for Riviera Black Hawk, Inc.+
23.03 Consent of Deloitte & Touche LLP for Riviera Holdings
Corporation.+
23.04 Consent of Holme Roberts & Owen LLP.+++
23.05 Consent of Verner, Liipfert, Bernhard, McPherson & Hand,
Chartered.+++
99.01 Form of Letter of Transmittal.++
99.02 Form of Notice of Guaranteed Delivery.++
* Pursuant to Item 601(b)(2) of Regulation S-K, the schedules to this
Agreement are omitted. The Exhibit contains a list identifying the
contents of all schedules and the Registrants agree to furnish
supplementally copies of such schedules to the Commission upon request.
- --------------------
+ Filed herewith.
++ Previously filed.
+++ To be filed by amendment.
(b) Financial Statement Schedules:
Schedules not listed above are omitted because of the absence of the
conditions under which they are required or because the information required by
such omitted schedules is set forth in the financial statements or the notes
thereto.
Item 22. Undertakings
(a) Each of the undersigned registrants hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would
not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration
statement; and
(iii) to include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
each registrant pursuant to the foregoing provisions, or otherwise, each
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrants of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, each registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(c) Each of the undersigned registrants hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11 or 13 of this Form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
(d) Each of the undersigned registrants hereby undertakes to supply by means
of a post-effective amendment all information concerning a transaction, and the
corporation being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
below-named Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Las
Vegas, State of Nevada, on the 30th day of August 1999.
RIVIERA BLACK HAWK, INC.
By: /s/ William L. Westerman
----------------------------------------
William L. Westerman
Chief Executive Officer and Director
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities at the above-named Registrant on the 30th day of August, 1999.
By: /s/ Ronald P. Johnson
----------------------------------------
Ronald P. Johnson
President and Director
By: /s/ Duane R. Krohn
----------------------------------------
Duane R. Krohn
Secretary, Treasurer, Chief Financial Officer
and Director
EXHIBIT INDEX
Exhibit No. Description
3.01 Articles of Amendment to the Articles of Incorporation of the
Company.+
3.02 Articles of Incorporation of the Company.+
3.03 Bylaws of the Company.+
4.01 Indenture, dated as of June 3, 1999, among the Company, Riviera
Holdings and the Initial Purchaser.++
4.02 Form of 13% First Mortgage Note due 2005 with Contingent Interest
(included in Exhibit 4.01).++
4.03 Purchase Agreement, dated as of May 27, 1999, by and among the
Company, Riviera Holdings and the Initial Purchaser.++
4.04 Registration Rights Agreement, dated as of June 3, 1999, by and
between the Company and the Initial Purchaser.++
5.01 Opinion of Dechert Price & Rhoads.++
10.01 The Completion Capital Commitment, dated as of June 3, 1999, by
and between the Company and Riviera Holdings.++
10.02 The Keep-Well Agreement, dated as of June 3, 1999, by and between
the Company and Riviera Holdings.++
10.03 The Tax-Sharing Agreement, dated as of June 3, 1999, by and
between the Company and Riviera Holdings.++
10.04 The Management Agreement, dated as of June 3, 1999, by and between
the Company and Riviera Gaming Management of Colorado, Inc.++
10.05 The Trademark License Agreement, dated as of June 3, 1999, by and
between the Company and Riviera Operating Corporation.++
10.06 The Deed of Trust, dated as of June 3, 1999, made by the Company
to the Public Trustee of the County of Gilpin, Colorado, for the
benefit of the Trustee.++
10.07 The Assignment of Rents.++
10.08 The Environmental Indemnity, dated as of June 3, 1999, between the
Company and the Trustee.++
10.09 The Cash Collateral and Disbursement Agreement, dated as of June
3, 1999, among the Company, the Trustee and Crss Constructors,
Inc.++
10.10 The Account Agreement, dated as of June 3, 1999, among the
Company, the Trustee and IBJ Whitehall Bank and Trust Company.++
10.11 The Security Agreement, dated as of June 3, 1999, made by the
Company in favor of the Trustee.++
10.12 The Manager Subordination Agreement, dated as of June 3, 1999, by
Riviera Gaming Management of Colorado in favor of the Trustee.++
10.13 The Collateral Assignment of Trademark, dated as of June 3, 1999,
by and between the Company and the Trustee.++
10.14 The Collateral Assignment, dated as of June 3, 1999, by and
between the Company and the Trustee.++
10.15 The Pledge and Assignment Agreement, dated as of June 3, 1999, by
and between the Company and the Trustee.++
10.16 Deposit Account Agreement, dated as of June 1999, among Bank of
America, Riviera Holdings and First American Title Insurance
Company.+
10.17 Construction Contract, made as of December 29, 1987, among the
Company, Weitz-Cohen Construction Co. and Melick Associates, Inc.+
23.01 Consent of Dechert Price & Rhoads (included in the opinion filed
as Exhibit 5.01).++
23.02 Consent of Deloitte & Touche LLP for Riviera Black Hawk, Inc.+
23.03 Consent of Deloitte & Touche LLP for Riviera Holdings Corporation.+
23.04 Consent of Holme Roberts & Owen LLP.+++
23.05 Consent of Verner, Liipfert, Bernhard, McPherson & Hand,
Chartered.+++
99.01 Form of Letter of Transmittal.++
99.02 Form of Notice of Guaranteed Delivery.++
* Pursuant to Item 601(b)(2) of Regulation S-K, the schedules to this
Agreement are omitted. The Exhibit contains a list identifying the
contents of all schedules and the Registrants agree to furnish
supplementally copies of such schedules to the Commission upon request.
- -------------------
+ Filed herewith.
++ Previously filed.
+++ To be filed by amendment.