MANAGEMENT AGREEMENT (this "Agreement") dated as of June 1, 1999, by
and between Riviera Black Hawk, Inc., a Colorado corporation (the "Company") and
Riviera Gaming Management of Colorado Inc., a Colorado corporation ("Manager").
The Company is constructing a gaming casino and related facilities in
Black Hawk, Colorado and has requested that Manager manage the casino on the
terms hereinafter set forth.
In consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound, the parties to this Agreement hereby agree as
follows:
ARTICLE I. DEFINITIONS
The following defined terms are used in this Agreement:
"Affiliate" shall mean a person that directly or indirectly, or through
one or more intermediaries, controls, is controlled by, or is under common
control with the person in question and any stockholder or partner of any person
referred to in the preceding clause owning 10% or more of such entity.
"Audit Day" is defined in Section 3.7(a).
"Audited Statements" is defined in Section 3.7(a).
"Business Days" shall mean all weekdays except those that are official
holidays of the State of Colorado or the U.S. Government. Unless specifically
stated as "Business Days," a reference to "days" means calendar days.
"Capital Budget" is defined in Section 3.10.
"Casino" shall mean the Riviera(R) Black Hawk Casino in Black Hawk,
Colorado, including (i) those areas reserved for the operation of slot machines,
table games and any other legal forms of gaming permitted under applicable law,
and such additional ancillary service areas including reservations and
admissions, cage, vault, count room, surveillance room and any other room or
area or activities therein regulated or taxed by the Colorado Gaming Authorities
by reason of gaming operations and (ii) all necessary ancillary facilities to
the Casino, including, but not limited to, vehicular parking area, entertainment
facilities, hotel, restaurants, waiting areas, restrooms, administrative offices
for, but not limited to, accounting, purchasing, and management information
services (including offices for Manager management personnel) and other areas
utilized in support of the operations of the Casino.
"Casino Bankroll" shall mean an amount reasonably determined by Manager
as funding required to bankroll the Casino Gaming Activities but in no case less
than the amount required by Colorado gaming law or Colorado Gaming Authorities.
In no event shall such Casino Bankroll include any amount necessary to cover
Operating Expenses or Operating Capital. Casino Bankroll shall include the funds
located on the casino tables, in the gaming devices, cages, vault, counting
rooms, or in any other location in the Casino where funds may be found and funds
in a bank account identified by the Company for any additional amount required
by Colorado gaming law or Colorado Gaming Authorities or such other amount as is
reasonably determined by Manager and the Company.
"Casino Gaming Activities" shall mean the Casino cage, table games,
slot machines, video machines, and other forms of gaming managed by Manager in
the Casino.
"Casino Operating Expenses" shall mean expenses incurred in the
management of the Casino, including, but not limited to, gaming supplies,
maintenance of the Casino area, gaming marketing materials, uniforms,
complimentaries, Casino employee training, Casino employee compensation and
entitlements, and Gaming Taxes.
"Colorado Gaming Authorities" shall mean the Colorado Gaming
Commission, State Gaming Control Board and all other gaming regulatory bodies,
including, but not limited to, any municipality, political subdivision, board,
commission, agency or other public body now in existence or hereafter created to
regulate gaming in the State of Colorado.
"Company's Advances" is defined in Section 3.12.
"Covered Services" shall mean the services furnished by Manager or its
Affiliates pursuant to Section 3.3.
"Default" or "Event of Default" is defined in Section 5.1.
"EBITDA" shall mean revenues derived from the operation of the Casino,
less all costs of operating the Casino (including the Quarterly Fee) excluding
(i) any expenses of the Company over which Manager has no control and (ii) the
Performance Fee, all before (a) interest on indebtedness, (b) all taxes on
income other than Gaming Taxes, (c) depreciation of tangible assets and (d)
amortization of goodwill and other intangible assets, all as determined by the
independent certified public accountant of the Company in accordance with
generally accepted accounting principles applied on a consistent basis, subject,
however, to the dispute provisions of Section 3.7(b).
"Extended Term" is defined in Section 2.3.
"Extension Option" is defined in Section 2.3.
"Gaming Taxes" shall mean any tax imposed by the Colorado Gaming
Authorities on Gross Gaming Revenues.
"Governmental Authorities" shall mean the United States, the State of
Colorado and any court or political subdivision agency, commission, board or
instrumentality or officer thereof, whether federal, state or local, having or
exercising jurisdiction over the Company, Manager or the Casino.
"Gross Gaming Revenues" shall mean all of the revenue from the
operation of the Casino (which is taxed by the Colorado Gaming Authorities) from
all business conducted upon, related to or from the Casino in accordance with
generally accepted accounting principles and shall include, but not be limited
to, the net win from gaming activities, which is the difference between gaming
wins and losses before deducting Gaming Taxes, and plus or minus, as
appropriate, deposits made in respect of progressive slot machines and other
similar games.
"Gross Revenues" shall mean Gross Gaming Revenues, plus all other
revenues resulting from the operation of the Casino.
"Inter-Company Services" shall mean those services furnished by Manager
or its Affiliates to the Company on a cost reimbursement basis pursuant to
Section 3.4.
"Lender" shall mean the party or parties who shall have lent the
Company money pursuant to the Project Financing.
"Management Fee" shall mean the Quarterly Fee and the Performance Fee,
if any.
"Manager Conduct Standard" is defined in Section 3.1.
"Monthly Financial Statements" is defined in Section 3.8.
"Net Revenues" shall mean Gross Revenues minus complimentaries.
"Opening Date" shall mean the date the Casino opens for gaming by the
public.
"Operating Bank Accounts" is defined in Section 3.11.
"Operating Budget" is defined in Section 3.10.
"Operating Capital" shall mean such amount in the Operating Bank
Accounts as will be reasonably sufficient to assure the timely payment of all
current liabilities of the Casino, including the operations of the Casino,
during the term of this Agreement, and to permit Manager to perform its
management responsibilities and obligations hereunder, with reasonable reserves
for unanticipated contingencies and for short term business fluctuations
resulting from monthly variations from the Operating Budget.
"Operating Expenses" shall mean actual expenses incurred in operating
the Casino, including the Casino Operating Expenses, employee compensation and
entitlements, Operating Supplies, maintenance costs, fuel costs, utilities,
taxes and the Quarterly Fee.
"Operating Supplies" shall mean gaming supplies, paper supplies,
cleaning materials, marketing materials, maintenance supplies, uniforms and all
other materials used in the operation of the Casino.
"Performance Fee" is defined in Section 4.1(a).
"Performance Fee Statement" is defined in Section 3.7(a).
"Project Financing" shall mean the issuance of $45.0 million of First
Mortgage Notes pursuant to the Indenture date as of June 1, 1999, between the
Company and IBJ Whitehall Bank & Trust Company
"Quarterly Fee" is defined in Section 4.1(a).
"Selected Arbitrator" is defined in Section 8.1.
"Term" is defined in Section 2.2.
ARTICLE II: ENGAGEMENT OF MANAGER AND TERM OF AGREEMENT
Section 2.1 Engagement of Manager. The Company hereby engages and
employs Manager to act as its exclusive agent for the supervision and control of
the management of the Casino and to provide certain Covered Services and
Inter-Company Services to the Company as detailed in Sections 3.3 and 3.4 of
this Agreement in connection with the Casino, and Manager hereby accepts such
engagement and employment, on the terms and conditions hereinafter set forth.
Section 2.2 Term. Manager shall manage the Casino from the period (the
"Term") commencing on the date hereof and ending 60 days after the tenth full
year's audited results of the Company after the Opening Date are available,
subject to termination prior to the end of such period as hereinafter specified
or extension as hereinafter provided.
Section 2.3 Options to Extend Term. The Term may be extended at the
option (the "Extension Option") of Manager for up to four additional terms of
five years each (the "Extended Term")(or a total of up to 20 years of Extended
Term). Manager shall give written notice of its exercise of an Extension Option
no later than 180 days prior to the expiration of the Term or a prior five year
Extended Term.
ARTICLE III: RESPONSIBILITIES OF THE PARTIES.
Section 3.1 Standards. With respect to the operation of the Casino
pursuant to this Agreement, Manager shall manage and maintain the Casino in a
manner reasonably consistent with the average of standards and procedures
exercised by other casino/hotel operators in the management of other
casino/hotels of the same or similar type, class and quality as the Casino and
located in Black Hawk, Colorado ("Manager Conduct Standard").
Section 3.2 No Interference; Board Representation. In order for Manager
to meet its responsibilities under Section 3.1 of this Agreement in a
professional manner, and to comply with any legal requirements and the terms of
this Agreement, the Company hereby agrees that during the Term and Extended Term
(i) Manager shall have uninterrupted control of and responsibility for the
operation of the Casino and (ii) the Company will not interfere or be involved
with the operation of the Casino and that Manager may operate the Casino free of
molestation, eviction or disturbance by the Company or any third party claiming
by, through or under the Company. Notwithstanding the foregoing, during normal
business hours and upon reasonable notice to Manager, the Company's Board of
Directors and/or officers and their agents may visit the Casino and may ask the
Manager about various aspects of the Company's business, operations and
financial results. Examples of the matters which Manager shall determine from
time to time hereunder include, but are not limited to food and beverage menu
prices, gaming, commercial purposes (if applicable) and entertainment,
entertainment policies and specific entertainment obligations, the labor
policies of the Casino and the type and character of publicity and promotion.
Manager agrees, however, that it will in good faith use its best efforts to
perform its obligations and discharge its responsibilities in the control and
operation of the Casino. Nothing contained in this Section 3.2 shall prohibit
the Company's management from exercising its fiduciary duties if Manager shall
default in its obligations under this Agreement pursuant to Section 6.2 and such
default shall continue after any required notice and/or cure period.
Section 3.3 Covered Services. Manager covenants and agrees to
perform, or cause to be performed, the following services in connection with the
Casino at no additional charge to the Company:
(a) Permits. Manager, on behalf of and with the cooperation of
the Company, shall oversee obtaining and maintaining all necessary
licenses, findings of suitability, approvals and permits required by
any law, rule or regulation of the Colorado Gaming Authorities, as may
be required for the operation of the Casino, including, without
limitation, gaming, liquor, bar, restaurant, signage and hotel licenses
(if applicable). Manager shall comply with the rules, regulations and
orders of the Colorado Gaming Authorities and with any conditions set
out in any such licenses and permits issued by any such authorities
and, with the cooperation of the Company, shall provide any
information, report or access to records reasonably required by the
Colorado Gaming Authorities.
(b) Personnel. Manager shall maintain such level of staffing
as shall be required to carry out its duties hereunder.
(i) Except as otherwise expressly provided in paragraph (iv)
of this Section 3.3(b), all personnel employed at the Casino shall be
employees of the Company. Manager shall hire, terminate, advance,
demote, supervise, direct the work of and determine the compensation
and other benefits of all personnel working at the Casino, and the
Company shall not interfere with or give orders or instructions to
personnel employed at the Casino. The parties hereto agree that all
wages, bonuses, compensation and benefits (including, without
limitation, severance and termination pay) of personnel at the Casino
are the exclusive obligation of the Company.
(ii) All wages, salaries, benefits, compensation and
entitlements of the Casino employees, including the General Manager,
and any consultants and independent contractors approved by the Company
and Manager, shall be paid from the Operating Bank Accounts by Manager.
Notwithstanding the foregoing, Manager shall not be liable to any of
the Company's personnel for wages, compensation or other employee
benefit including without limitation to health care, insurance
benefits, worker's compensation, severance or termination pay.
(iii) Manager shall be responsible for the training of all
personnel and shall cooperate with all personnel in an effort to obtain
and maintain all required licenses issued by the Colorado Gaming
Authorities, and will hire only persons with valid employee licenses,
if under the rules and regulations of the Colorado Gaming Authorities,
such employee licenses are a condition of employment.
(iv) The employees necessary to discharge Manager's
obligations and responsibilities hereunder shall be employees of
Manager (or its Affiliates) and shall be hired, paid and discharged by
Manager in its sole and absolute discretion. Manager shall in good
faith determine the number of employees necessary to discharge
Manager's obligations and responsibilities hereunder, the salaries and
other compensation arrangements of such employees shall be the
responsibility of Manager and Manager shall not have any right of
reimbursement from the Company in respect thereof.
Section 3.4 Inter-Company Services. The parties agree that Affiliates
of the Manager will supply services to the Company on a cost reimbursement basis
(some of which are part of the budgeted costs for construction, equipment and
start-up of the Casino) including, but not limited to, the following:
(a) Benefits administration, including 401(K) plan, health
plan, workmen's compensation and profit-sharing.
(b) Computer systems, including (i) ▇▇ ▇▇▇▇▇▇▇, based on a
charge per terminal, (ii) InfoGenesis, (iii) casino system, and (iv)
special programs.
(c) Computer hardware, including (i) centralized buying, (ii)
initial installation, and (iii) phone support to on-site tech.
(d) Administration, including (i) Human Resources, (ii)
payroll, (iii) general ledger, and (iv) accounts payable.
(e) Purchase of Goods for (i) 40-for-20 and similar marketing
programs and (ii) gift shops.
(f) Insurance coverage under umbrella policy.
(g) Services and Payments pursuant to the Tax-Sharing
Agreement of even date herewith.
It is expressly understood that the Company shall continue to make
payment to the Manager for Inter-Company Services despite the occurrence and
continuation of any Default or Event of Default under the Project Financing,
including a failure to make any payment due thereunder.
Section 3.5 Sales and Promotions. Manager shall formulate, coordinate
and implement promotion, marketing and sales programs, and shall cause the
Casino to participate in promotional, marketing and sales campaigns and, as
appropriate, activities involving complimentary rooms (if applicable) and food
and beverages to bona fide travel agents, tourist officials and airlines
representatives, and to all other individuals and entities whatsoever which, in
the exercise of good management practice, is deemed to be beneficial to the
Casino.
Credit facilities shall be granted by Manager in its reasonable
discretion and in accordance with good management practices and Manager's and
its Affiliates standard procedures; provided that except for extending credit
for the purchase of goods, services, gaming or entertainment at the Casino and
except as otherwise permitted herein, Manager shall not be authorized to make
any loans or extensions of credit for or on behalf of the Company without the
prior approval of the Company's management.
Section 3.6 Books and Records. Manager shall maintain, or cause to be
maintained, a complete accounting system for and on behalf of the Company in
connection with Manager's management of the Casino. The books and records shall
be kept in accordance with generally accepted accounting principles consistently
applied and in accordance with the uniform system of accounts for casinos. Such
books and records shall be kept on the basis of a calendar year. Books and
accounts shall be maintained at the Casino or at the principal office of Manager
with a duplicate copy thereof at the Casino. The Company shall have the right
and privilege of examining and copying said books and records, including all
daily reports prepared by Manager for internal use at the Casino, during regular
business hours. Manager shall comply with all requirements with respect to
internal controls and accounting and shall prepare and provide all required
reports under the rules and regulations of the Colorado Gaming Authorities.
Section 3.7 Audits. Manager shall engage Deloitte & Touche LLP, unless
a different auditor is agreed upon by the Company and Manager ("Regular
Auditor"), to audit the operations of the Casino, (i) for the purpose of
calculating the Performance Fee ("Performance Fee Statements") and (ii) as of
and at the end of each year occurring after the Opening Date (the "Audited
Statements"). A sufficient number of copies of the Performance Fee Statements
and the Audited Statements shall be furnished to the Company and Manager as soon
as available, but in no event later than ninety (90) days following the end of
each year (such 90th day to be the "Audit Day").
Any cost of such statements shall be deemed an Operating Expense.
Section 3.8 Monthly and Quarterly Financial Statements. On or before
the 20th day of each month, Manager shall prepare an unaudited operating
statement for the preceding calendar month detailing the Gross Revenues, Net
Revenues, Gaming Taxes and expenses incurred in the Casino's operation (the
"Monthly Financial Statements"). The Monthly Financial Statements shall include
a statement detailing drop figure accounts on all Gross Gaming Revenues. On or
before the 45th day after the end of each quarter, Manager shall prepare an
unaudited report for the preceding quarter detailing the capitalized
expenditures and marketing expenses incurred in the Casino's operation.
Section 3.9 Expenses. All costs, expenses, funding or operating
deficits and Operating Capital, real property and personal property taxes,
insurance premiums and other liabilities incurred due to the gaming and
nongaming operations of the Casino shall be the sole and exclusive financial
responsibility of the Company.
Section 3.10 Budgets.
(a) Manager shall prepare and submit to the Company at least
60 days before the start of each new year for its approval a capital
budget for the expenditure of capital improvements ("Capital Budget").
To the extent practical, a reserve shall be established for this
purpose. The parties agree that any "material" expenditure not
contemplated by the Capital Budget shall require the consent of both
Manager and the Company. For the foregoing purposes, "material" shall
mean $20,000 in the case of any such individual item and an aggregate
of $250,000 in the case of all such items. Manager shall also prepare
and submit to the Company at least 60 days before the start of each new
year for its approval an operating budget projecting revenues, expenses
and EBITDA for the next year ("Operating Budget"). Manager shall have
the responsibility to manage the Casino in accordance with the
Operating Budget except for expenses necessitated by circumstances
beyond Manager's reasonable control. Any dispute as to the Capital
Budget or the Operating Budget shall be resolved solely by arbitration
pursuant to Article VIII.
(b) At least 30 days prior to the Opening Date Manager will
prepare a Capital Budget and an Operating Budget for the remainder of
the year after the Opening Date.
Section 3.11 Operating and Other Bank Accounts.
(a) Manager shall establish bank accounts that are necessary
for the operation of the Casino, including an account for the Casino
Bankroll, at various banking institutions chosen by Manager (such
accounts are hereinafter collectively referred to as the "Operating
Bank Accounts"). The Operating Bank Accounts shall be named in such a
manner as to identify the Casino and particular uses for the account as
the Company and Manager may determine. All instructions to and checks
drawn on the Operating Bank Accounts shall be signed only by
representatives of the Company or Manager who are covered by fidelity
insurance and designated the Company or Manager personnel may be the
only authorizing signing persons on checks drawn on the Operating Bank
Accounts. All checks shall be drawn only in accordance with established
normal and customary accounting policies and procedures. The Operating
Bank Accounts shall be interest bearing accounts if such accounts are
reasonably available and all interest thereon shall be credited to the
Operating Bank Accounts. All Gross Revenues (excluding noncash items)
shall be deposited in the Operating Bank Accounts, and Manager shall
pay out of the Operating Bank Accounts, to the extent of the funds
therein, from time to time, all Operating Expenses and other amounts
required by Manager to perform its obligations under this Agreement.
All funds in the Operating Bank Accounts shall be separate from any
other funds of any of Manager's Affiliates and the Company's Affiliates
and neither the Company nor Manager may commingle such funds in the
Operating Bank Accounts with the funds of any other bank accounts.
(b) Manager agrees that it will not use any Operating Bank
Accounts as compensating balances related to the extension of credit to
Manager or grant any right of set-off or bankers' lien on any such
accounts in respect of any amounts owed by Manager to such
depositories. Manager shall seek to obtain reasonable rates of interest
for the Operating Bank Accounts, with due regard to the financial
stability of and services offered by the depositories with which such
accounts are kept. The parties to this Agreement agree that all funds
held from time to time in the Operating Bank Accounts are solely the
property of the Company, and upon the expiration or Termination (as
defined below) of this Agreement for any reason, Manager shall cease to
withdraw funds from all Operating Bank Accounts and shall take such
steps as shall be necessary to (1) remove Manager's designees as
signatories to the Operating Bank Accounts and (2) authorize the
Company's designees to become the sole signatories to the Operating
Bank Accounts. This provision shall survive Termination. It is
understood and agreed that Manager may maintain ▇▇▇▇▇ cash funds at the
Casino and make payments therefrom as the same are customarily made in
the casino/hotel business.
(c) Any funds which are generated from the Casino and are not
required for the operation of the Casino or for reserves as Manager
shall reasonably determine are necessary to cover liabilities or
obligations of the Casino, will be transferred to such bank account as
the Company shall designate. Any dispute as to whether funds should be
so transferred will be resolved solely by arbitration pursuant to
Article VIII.
Section 3.12 Payment of Expenses.
(a) Manager shall pay from the Gross Revenues the following
items in the order of priority listed below, on or before their
applicable due date: (i) required payments to the Governmental
Authorities, including federal, state or local payroll taxes ("Payroll
Taxes"), (ii) Operating Expenses, including taxes (other than Payroll
Taxes) and the Management Fee, and (iii) emergency expenditures to
correct a condition of an emergency nature, including structural
repairs, which require immediate repairs to preserve and protect the
Casino. In the event that funds are not available for payment of the
Operating Expenses in their entirety, all Payroll Taxes or withholding
taxes shall be paid first from the available funds.
(b) During the Term of this Agreement, within five (5)
Business Days after receipt of written notice from Manager, the Company
shall fund the Operating Bank Accounts designated by Manager (the
"Company's Advances") in such a fashion so as to adequately insure that
the Operating Capital set forth in the Operating Budget as revised is
sufficient to support the uninterrupted and efficient ongoing operation
of the Casino. The written request for any additional Operating Capital
shall be submitted by Manager to the Company on a monthly basis based
on the interim statements and the Operating Budget, as revised.
Section 3.13 Cooperation of the Company and Manager. The Company and
Manager shall cooperate fully with each other during the Term and the Extended
Term to facilitate the performance by Manager of Manager's obligations and
responsibilities set forth in this Agreement.
Section 3.14 Financing Matters.
(a) In no event may either party represent that the other
party or any Affiliate of such party is or in any way may be liable for
the obligations of such party in connection with (i) any financing
agreement, or (ii) any public or private offering or sale of
securities. If the Company, or any Affiliate of the Company shall, at
any time, sell or offer to sell any securities issued by the Company or
any Affiliate of the Company through the medium of any prospectus or
otherwise and which relates to the Casino or its operation, it shall do
so only in compliance with all applicable laws, and shall clearly
disclose to all purchasers and offerees that (i) neither Manager nor
any of its Affiliates, officers, directors, agents or employees shall
in any way be deemed to be an issuer of such securities, and (ii)
Manager and its Affiliates, officers, directors, agents and employees
have not assumed and shall not have any liability arising out of or
related to the sale or offer of such securities, including without
limitation, any liability or responsibility for any financial
statements, projections or other information contained in any
prospectus or similar written or oral communication. Manager shall have
the right to approve any description of Manager or its Affiliates, or
any description of this Agreement or of the Company's relationship with
Manager hereunder, which may be contained in any prospectus or other
communications (unless such information is furnished to the Company by
Manager in writing), and the Company agrees to furnish copies of all
such materials to Manager for such purposes within a reasonable time
prior to the delivery thereof to any prospective purchaser or offeree.
The Company agrees to indemnify, defend or hold Manager and its
Affiliates, officers, directors, agents and employees, free and
harmless from any and all liabilities, costs, damages, claims or
expenses arising out of or related to the breach of the Company's
obligations under this Section 3.14. Manager agrees to reasonably
cooperate with the [Companies] in the preparation of such agreements
and offerings.
(b) Notwithstanding the above restrictions, subject to
Manager's right of review set forth in this Section 3.14, the Company
may represent that the Casino is managed by Manager and Manager may
represent that it manages the Casino and both may describe the terms of
this Agreement and the physical characteristics of the Casino in
regulatory filings and public or private offerings. Moreover, nothing
in this Section shall preclude the disclosure of (i) already public
information, or (ii) audited or unaudited financial statements from the
Casino required by the terms of this Agreement or (iii) any information
or documents required to be disclosed to or filed with the Colorado
Gaming Authorities. Both parties shall use their best efforts to
consult with the other concerning disclosures as to the Casino. The
Company and Manager shall cooperate with each other in providing
financial information concerning the Casino and Manager that may be
required by any lender or required by any Governmental Authority.
Section 3.15 Taxes and Insurance. Throughout the Term and the Extended
Term, the Company shall furnish Manager with copies of all tax statements and
insurance policies and all financing documents (including notes and mortgages)
relating to the Company. Manager shall cause all federal and state income and
sales tax returns of the Company to be prepared and shall cooperate with taxing
authorities in connection with any inquiries or audits that relate to the
Company. Manager will also assist the Company in procuring and maintaining
liability, property and such other insurance in at least such amounts and
covering such risks as is currently maintained with respect to the Company and
in such additional amounts and covering such additional risks, if any, as
Manager and the Company determine is necessary in connection with the operation
of the Company, with responsible and reputable insurance companies or
associations. All such insurance policies shall name Manager as an additional
insured and all insurers thereon shall be required to issue to Manager a
certificate of insurance providing that such insurer shall deliver to Manager
reasonable prior notice of termination of any such policy or the coverage
provided thereby and, if and to the extent the same shall be available without
adversely affecting the Company's coverage and without additional premiums or
charges, waiving the rights of such insurer, if any, of subrogation against
Manager. Without in any way diminishing the Company's responsibility hereunder,
Manager is hereby authorized and directed to pay from the Operating Bank
Accounts all taxes and insurance fees including, without limitation, withholding
taxes and insurance premiums, and all other items of expense relating to the
ownership or operation of the Company.
Section 3.16 Concessions.Manager shall consummate, if in Manager's
reasonable discretion it deems the same to be in the best interest of the
Casino, in the name of and for the benefit of the Company, reasonable
arms-length arrangements and leases with concessionaires, licensees, tenants and
other intended users of any facilities related to the Casino. Copies of all such
arrangements shall be furnished to the Company.
Section 3.17 Material Agreements. Manager, as exclusive agent for the
Company, is authorized to make and enter into any agreements (including, without
limitation, agreement with Manager's Affiliates, provided such agreements
represent the equivalent of reasonable arms, length negotiations) as are, in
Manager's opinion, necessary or desirable for the operation, supply and
maintenance of the Casino, as required by this Agreement. Manager shall be
required to obtain the prior written approval of the Company before entering
into any agreement not contemplated by the approved Annual Budget. Manager shall
not enter into any agreement involving the incurrence of debt obligations on
behalf of the Company, or for Manager's own account, with respect to the
operations of the Casino, over any amounts therefor set forth in the approved
Annual Budget.
Section 3.18 Trademarks. The Company acknowledges that its rights to
use the trademark and trade name Riviera(R) in reference to the Casino arise
solely out of the trademark license agreement between Riviera Holdings
Corporation and the Company.
ARTICLE IV: MANAGEMENT FEE
Section 4.1 Fees Payable to Manager.
(a) Subject to Section 4.3, Manager shall be paid a fee of 1%
of Net Revenues of the Casino, payable quarterly in arrears, promptly
following each quarter (or portion thereof) after the Opening Date
("Quarterly Fee").
(b) Manager shall be paid within 30 days following the receipt
of quarterly financial statements (subject to appropriate adjustment
upon receipt of the Audited Statements) a fee ("Performance Fee") equal
to the following percentages of EBITDA for the preceding year (subject
to annualization on a quarterly basis):
Percentage EBITDA
0% up to $5 million
10% from $5 million to $10 million
15% from $10 million to $15 million
20% more than $15 million
Section 4.2 Interest on Overdue Amounts; Collection Costs. If for any
reason the Management Fee (both the Quarterly Fee or Performance Fee) or any
other amount due to Manager under this Agreement is not paid on a timely basis,
such amount shall bear interest at the rate of 12% per annum until paid in full.
Manager shall also be entitled to reimbursement for the costs of collection,
including counsel fees and disbursements, with respect to amounts due to it
under this Agreement but which are unpaid.
Section 4.3 Deferred payment of Management Fee. Manager hereby agrees
that, after receipt from the Lender of notice that the Company has failed to pay
any amount due to the Lender under the Project Financing ("Payment Default") and
for so long as a Payment Default shall continue, Manager will not be entitled to
receive payment of either the Quarterly Fee or the Performance Fee but the same
will (i) accrue, (ii) bear interest as specified in Section 4.2, and (iii)
become payable when the Payment Default shall be cured.
ARTICLE V. DEFAULT
Section 5.1 Definition. The occurrence of any one or more of the events
described in the Sections 5.2, 5.3, 5.4 or 5.5 which is not cured within the
time permitted, shall constitute a default under this Agreement (hereinafter
referred to as a "Default" or an "Event of Default") as to the party failing in
the performance or effecting the breaching act.
Section 5.2 Manager's Defaults. If Manager shall (a) fail to perform or
materially comply with any of the covenants, agreements, terms or conditions
contained in this Agreement applicable to Manager and such failure shall
continue for a period of thirty (30) days after written notice thereof from the
Company to Manager specifying in detail the nature of such failure, or, in the
case such failure is of a nature that it cannot, with due diligence and good
faith, be cured within thirty (30) days, if Manager fails to proceed promptly
and with all due diligence and in good faith to cure the same and thereafter to
prosecute the curing of such failure to completion with all due diligence within
ninety (90) days thereafter, or (b) take or fail to take any action to the
extent required of Manager by the Colorado Gaming Authorities unless Manager
cures such default or breach prior to the expiration of applicable notice, grace
and cure periods, if any, provided, however, that Manager shall only be required
to cure any defaults with respect to which Manager has a duty hereunder.
Section 5.3 The Company's Default. If the Company shall (a) fail to
make any monetary payment required under this Agreement, including, but not
limited to, the Company's Advances, on or before the due date recited herein and
said failure continues for five (5) Business Days after written notice from
Manager specifying such failure, or (b) fail to perform or materially comply
with any of the other covenants, agreements, terms or conditions contained in
this Agreement applicable to the Company (other than monetary payments) and
which failure shall continue for a period of thirty (30) days after written
notice thereof from Manager to the Company specifying in detail the nature of
such failure, or, in the case such failure is of a nature that it cannot, with
due diligence and good faith, cure within thirty (30) days, if the Company fails
to proceed promptly and with all due diligence and in good faith to cure the
same and thereafter to prosecute the curing of such failure to completion with
all due diligence within ninety (90) days thereafter.
Section 5.4 Bankruptcy. If either party (a) applies for or consents to
the appointment of a receiver, trustee or liquidator of itself or any of its
property, (b) makes a general assignment for the benefit of creditors, (c) is
adjudicated a bankrupt or insolvent, or (d) files a voluntary petition in
bankruptcy or a petition or an answer seeking reorganization or an arrangement
with creditors, takes advantage of any bankruptcy, reorganization, insolvency,
readjustment of debt, dissolution or liquidation law, or admits the material
allegations of a petition filed against it in any proceedings under any such
law.
Section 5.5 Reorganization/Receiver. If an order, judgment or decree is
entered by any court of competent jurisdiction approving a petition seeking
reorganization of Manager or the Company, as the case may be, or appointing a
receiver, trustee or liquidator of Manager or the Company, as the case may be,
or of all or a substantial part of any of the assets of Manager or the Company,
as the case may be, and such order, judgment or decree continues unstayed and in
effect for a period of sixty (60) days from the date of entry thereof.
Section 5.6 Delays and Omissions. No delay or omission as to the
exercise of any right or power accruing upon any Event of Default shall impair
the non-defaulting party's exercise of any right or power or shall be construed
to be a waiver of any Event of Default or acquiescence therein.
Section 5.7 Disputes in Arbitration. Notwithstanding the provisions of
this Article V, any occurrence which would otherwise constitute an Event of
Default hereunder shall not constitute an Event of Default for so long as such
dispute is in arbitration pursuant to the arbitration provisions of Article
VIII.
ARTICLE VI. TERMINATION
Section 6.1 Termination Events. This Agreement may be terminated by the
non-defaulting party upon the occurrence of an Event of Default and the lapsing
of the time to cure.
Section 6.2 Notice of Termination. In the event of the occurrence and
continuation for the relevant cure period of an Event of Default, either Manager
or the Company, as appropriate, may terminate ("Termination") this Agreement by
giving ten (10) days written notice, and the Term or the Extended Term of this
Agreement shall expire by limitation at the expiration of said last day
specified in the notice as if said date was the date herein originally fixed for
the expiration of the Term or the Extended Term hereof.
Section 6.3 Payments Upon Termination. The Company shall pay to Manager
all accrued but unpaid Management Fees and expenses of Manager and any other sum
owed Manager pursuant to this Agreement.
Section 6.4 Post Termination. Upon a Termination:
(a) Manager shall promptly deliver to the Company any books,
records, instruments or other documentation relating to the Casino and
the Company in Manager's possession or under Manager's control;
(b) Manager and its Affiliates shall release and waive all
rights, claims, interests and relationships they may have to control,
retain, or discharge any matter of management with respect to the
Casino, or any other benefit thereunder or in connection therewith,
except as specified in Section 6.3 and for the provisions of Article
VII which shall survive Termination; and
(c) Manager shall peacefully vacate and surrender possession
to the Company, and shall fully cooperate in the prompt and efficient
transfer of the management of the Casino from Manager to the Company or
a person or entity designated by the Company. In connection with the
foregoing, Manager shall act in good faith to avoid any breach or
disruption of any contract involving the Casino or the lapse of any
insurance policy covering or pertaining to the Casino.
Section 6.5 Transfer of Permits and Gaming Licenses Upon Termination.
To the fullest extent permissible under applicable law, upon termination or
expiration of this Agreement, Manager shall cooperate in the transfer of any and
all permits, licenses or similar authorizations issued by any governmental body
(including, without limitation, the Colorado Gaming Authorities) relating to the
operation or management of any or all of the Casino to the new manager.
ARTICLE VII: EXCULPATION AND INDEMNIFICATION.
Section 7.1 Exculpation. Manager, its Affiliates and each of their
respective officers, partners, directors, employees and agents shall not be
liable to the Company or any person who has acquired an interest in the Company
for any losses sustained or liabilities incurred, including monetary damages, as
a result of any act or omission of Manager, its Affiliates or any of their
respective officers, partners, directors, employees or agents, if the conduct of
Manager or such other person did not constitute actual fraud, gross negligence
or willful or wanton misconduct ("Manager Conduct Standard"). The negative
disposition of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere, or its equivalent, shall not, of
itself, create a presumption that Manager, its Affiliates or any of their
respective officers, partners, directors, employees or agents acted in a manner
contrary to the Manager Conduct Standard. Nothing contained in this Agreement
shall exculpate or limit Manager's liability for unlawful misappropriation of
the Company's assets.
Section 7.2 Indemnification.
(a) Subject to the provisions of Section 7.2(b) hereof, the
Company shall indemnify and hold harmless Manager, its Affiliates and
any of their respective officers, partners, directors, employees and
agents (each individually, an "Indemnitee"), from and against any and
all losses, claims, damages, liabilities, expenses (including
reasonable legal fees and expenses), judgments, fines, settlements and
other amounts arising from any and all claims, demands, actions, suits
or proceedings, civil, criminal, administrative or investigative, in
which an Indemnitee may be involved, or threatened to be involved, as a
party or otherwise, which relates to, or arises out of, the performance
of any duties and services for or on behalf of the Company pursuant to
the terms and within the scope of this Agreement, regardless of whether
the liability or expense accrued at or relates to, in whole or in part,
any time before, on or after the date hereof. The negative disposition
of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere, or its equivalent, shall
not, of itself, create a presumption that an Indemnitee acted in a
manner contrary to the Manager Conduct Standard.
(b) An Indemnitee shall not be entitled to indemnification
under this Section 7.2 with respect to any claim, issue or matter in
which it has been finally adjudged in a nonappealable order that such
Indemnitee has breached the Manager Conduct Standard unless and only to
the extent that the court in which such action was brought, or another
court of competent jurisdiction, determines upon application that,
despite the adjudication of liability, in view of all of the
circumstances of the case, the Indemnitee is fairly and reasonably
entitled to indemnification for such liabilities and expenses as the
court may deem proper. In addition, notwithstanding anything to the
contrary contained in this Article VII, an Indemnitee shall not be
entitled to indemnification under this Section 7.2 against losses
sustained or liabilities incurred if such losses or liabilities are
finally determined by a court of competent jurisdiction to have been
the direct result of the Manager Conduct Standard.
(c) In the event that any legal proceedings shall be
instituted or any claim or demand shall be asserted by any person in
respect of which payment may be sought by an Indemnitee under the
provisions of this Section 7.2, the Indemnitee shall promptly cause
written notice of the assertion of any such proceeding or claim of
which it has actual knowledge to be forwarded to the Company. Upon
receipt of such notice, the Company shall have the right, at their
option and expense, to be represented by counsel of their choice, and
to defend against, negotiate, settle or otherwise deal with any
proceeding, claim or demand which relates to any loss, liability,
damage or deficiency indemnified against hereunder; provided, however,
that no settlement shall be made without prior written consent of the
Indemnitee which shall not be unreasonably withheld; and provided
further, that the Indemnitee may participate in any such proceeding
with counsel of its choice and at its expense. The Indemnitee and the
Company agrees to cooperate fully with each other in connection with
the defense, negotiation or settlement of any such legal proceeding,
claim or demand.
After any final judgment or award shall have been rendered by
a court, arbitration board or administrative agency of competent
jurisdiction and the expiration of the time in which to appeal
therefrom, or a settlement shall have been consummated, or the
Indemnitee and the Company shall have arrived at a mutually binding
agreement with respect to each separate matter indemnified by the
Company hereunder, the Indemnitee shall forward to the Company notice
of any sums due and owing by it pursuant to this Agreement with respect
to such matter and the Company shall be required to pay all of the sums
so owing to the Indemnitee in immediately available funds, thirty (30)
days after the date of such notice.
(d) The indemnification provided by this Section 7.2 shall be
in addition to any other rights to which an Indemnitee may be entitled
under any agreement, bylaw or vote of Managing Members of the Company,
or as a matter of law or otherwise, both as to action in the
Indemnitee's capacity as Manager, an Affiliate thereof or an officer,
partner, director, employee or agent of Manager or its Affiliates and
as to action in any other capacity, shall continue as to an Indemnitee
who has ceased to serve in such capacity and shall inure to the benefit
of the heirs, successors, assigns and administrators of an Indemnitee.
ARTICLE VIII: ARBITRATION
Section 8.1 Appointment of Arbitrators. All disputes arising out of or
connected with the subject matter of this Agreement are to be referred first to
a committee of four (4) persons who shall meet in an attempt to resolve said
dispute or open issue. The committee shall consist of two (2) persons appointed
by the Company and two (2) persons appointed by Manager. If an agreement cannot
be reached to resolve the dispute by the committee, the dispute or open issue
will be resolved by binding arbitration. Any award of the arbitrators may be
filed in a court of law as a final judgment. Any such arbitration shall be
conducted in Denver, Colorado in accordance with the rules and regulations
adopted by the American Arbitration Association. Either party may serve upon the
other party a written notice of the dispute to be resolved pursuant to this
Article VIII. Within thirty (30) days after the giving of such notice, each of
the parties hereto shall nominate and appoint an arbitrator and shall notify the
other party in writing of the name and address of the arbitrator so chosen. Upon
the appointment of the two (2) arbitrators as hereinabove provided, said two (2)
arbitrators shall forthwith, within fifteen (15) days after the appointment of
the second arbitrator, and before exchanging views as to the question at issue,
appoint in writing a third arbitrator who shall be experienced in the operation
of a gaming casino (the "Selected Arbitrator") and give written notice of such
appointment to each of the parties hereto. In the event that the two (2)
arbitrators shall fail to appoint or agree upon the Selected Arbitrator within
said fifteen (15) day period, the Selected Arbitrator shall be selected by the
parties themselves if they so agree upon such Selected Arbitrator within a
further period of ten (10) days. If a Selected Arbitrator shall not be appointed
or agreed upon within the time herein provided, then either party on behalf of
both may request such appointment by the American Arbitration Association (or
its successor or similar organization if the American Arbitration Association is
no longer in existence). Said arbitrators shall be sworn faithfully and fairly
to determine the question at issue. The arbitrators shall afford to the Company
and Manager a hearing and the right to submit evidence, with the privilege of
cross-examination, on the question at issue, and shall with all possible speed
make their determination in writing and shall give notice to the parties hereto
of such determination. The concurring determination of any two (2) of said three
(3) arbitrators shall be binding upon the parties, or, in case no two (2) of the
arbitrators shall render a concurring determination, then the determination of
the Selected Arbitrator shall be binding upon the parties hereto. Each party
shall pay the fees of the arbitrator appointed by it, and the fees of the
Selected Arbitrator shall be divided equally between the Company and Manager.
Section 8.2 Inability to Act. In the event that an arbitrator appointed
as aforesaid shall thereafter die or become unable or unwilling to act, his
successor shall be appointed in the same manner provided in this Article VIII
for the appointment of the arbitrator so dying or becoming unable or unwilling
to act.
ARTICLE IX: NOTICES
Notice given by a party under this Agreement shall be in writing and
shall be deemed duly given (i) when delivered by hand, (ii) when three (3) days
have elapsed after its transmittal by registered or certified mail, postage
prepaid, return receipt requested, or two (2) days have elapsed after its
transmittal by nationally recognized air courier service; or (iii) when
delivered by telephonic facsimile transmission (with a copy thereof so delivered
by hand, mail or air courier if recipient does not acknowledge receipt of the
transmission). Notices shall be sent to the addresses set forth below, or
another as to which that party has given notice, in each case with a copy
provided in the same manner and at the same time to the persons shown below
if to the Company to:
Riviera Black Hawk, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
if to Manager to:
Riviera Gaming Management of Colorado, Inc.
c/o ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may change the name and/or address by written notice given in
each instance to the other parties.
ARTICLE X: MISCELLANEOUS
Section 10.1 Colorado Gaming Control Act and Colorado Gaming
Authorities. Notwithstanding anything to the contrary contained in this
Agreement, this Agreement shall be deemed to include all provisions required by
the Colorado Gaming Control Act, as amended, and the regulations promulgated
thereunder (the "Act"), and shall be conditioned upon the approval of the
Colorado Gaming Authorities as required by the Act. To the extent that any term
or provision contained in this Agreement shall be inconsistent with the Act, the
provisions of the Act shall govern. All provisions of the Act, to the extent
required by law to be included in this Agreement, are incorporated herein by
reference as if fully restated in this Agreement.
Section 10.2 Entire Agreement. This Agreement contains the entire
understanding of the parties to this Agreement in respect of its subject matter
and supersedes all prior agreements and understandings between the parties with
respect to such subject matter.
Section 10.3 Amendment; Waiver. This Agreement may not be modified,
amended, supplemented, canceled or discharged, except by written instrument
executed by all of the parties to this Agreement. No failure to exercise, and no
delay in exercising, any right, power or privilege under this Agreement shall
operate as a waiver, nor shall any single or partial exercise of any right,
power or privilege hereunder preclude the exercise of any other right, power or
privilege. No waiver of any breach of any provision shall be deemed to be a
waiver of any preceding or succeeding breach of the same or any other provision,
nor shall any waiver be implied from any course of dealing between or among the
parties. No extension of time for performance of any obligations or other acts
hereunder or under any other agreement shall be deemed to be an extension of the
time for performance of any other obligations or any other acts.
Section 10.4 Binding Effect; Assignment. The rights and obligations of
this Agreement shall bind and inure to the benefit of the parties (including
their respective officers, directors, employees, agents and Affiliates) and
their respective heirs, executors, successors and assigns. No party to this
Agreement shall have the right to assign this Agreement and its respective
rights and obligations hereunder without the consent of each other party to this
Agreement.
Section 10.5 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original but all of which together
shall constitute one and the same instrument.
Section 10.6 Terminology. The headings contained in this Agreement are
for convenience of reference only and are not to be given any legal effect and
shall not affect the meaning or interpretation of this Agreement.
Section 10.7 Governing Law. This Agreement shall be construed in
accordance with and governed for all purposes by the laws and public policy of
the State of Colorado applicable to contracts executed and to be wholly
performed within such State.
Section 10.8 Severability. If any provision of this Agreement, or the
application of any such provision to any person or circumstance, is held to be
inconsistent with any present or future law, ruling, rule or regulation of any
court or governmental or regulatory authority having jurisdiction over the
subject matter of this Agreement, such provision shall be deemed to be modified
to the minimum extent necessary to comply with such law, ruling, rule or
regulation, and the remainder of this Agreement, or the application of such
provision to persons or circumstances other than those as to which it is held
inconsistent, shall not be affected. If any provision is determined to be
illegal, unenforceable, or void, which provision does not relate to any payments
made hereunder and the payments made hereunder shall not be affected by such
determination and this Agreement is capable of substantial performance, then
such void provision shall be deemed rescinded and each provision not so affected
shall be enforced to the extent permitted by law.
Section 10.9 No Third Party Benefits. This Agreement is for the benefit
of the parties hereto and their respective permitted successors and assigns. The
parties neither intend to confer any benefit hereunder on any person, firm or
corporation other than the parties hereto, nor shall any such third party have
any rights hereunder.
Section 10.10 Drafting Ambiguities. Each party to this Agreement and
its counsel have had an opportunity to review and revise this Agreement. The
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of this Agreement or of any amendments or exhibits to this Agreement.
Section 10.11 Attorneys' Fees. Should either party institute an
arbitration, action or proceeding to enforce any provisions hereof or for other
relief due to an alleged breach of any provision of this Agreement, the
prevailing party shall be entitled to receive from the other party all costs of
the action or proceeding and reasonable attorneys' fees.
Section 10.12 Limitations on Responsibilities of Manager. Manager shall
use its best efforts to render the services contemplated by this Agreement in
good faith to the Company, but notwithstanding anything to the contrary which
may be expressed or implied in this Agreement, Manager hereby explicitly
disclaims any and all warranties, express or implied, including but not limited
to the success or profitability of the Casino. In the performance of the
services contemplated by this Agreement, Manager shall not be liable to the
Company for any acts or omissions in connection therewith, except acts or
omissions which constitute a breach of the Manager Conduct Standard and then
only to the extent of the Management Fees actually received by Manager.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by an authorized representative thereof, all as of
the day and year first above written.
RIVIERA BLACK HAWK, INC.
By: ______________________________
Name:
Title:
MANAGER:
RIVIERA GAMING OF COLORADO, INC.
By: __________________________________
Name:
Title: