STOCK PLEDGE AND SECURITY AGREEMENT
THIS STOCK PLEDGE AND SECURITY AGREEMENT (the "Stock Pledge
Agreement"), dated as of July __, 2002, is executed and delivered by RIVIERA
OPERATING CORPORATION, a Nevada corporation ("Shareholder"), in favor of
FOOTHILL CAPITAL CORPORATION, as Agent under the below-defined Loan Agreement
("Agent") for the benefit of the below-defined Lender Group.
RECITALS
A. Shareholder owns 100% of the outstanding stock of each of
(i) Riviera Gaming Management, Inc., a Nevada corporation ("RGM"), and (ii)
Riviera Black Hawk, Inc. ("RBH").
B. Pursuant to that certain Loan and Security Agreement, dated
as of substantially even date herewith (as the same may be amended, restated,
supplemented, or otherwise modified from time to time, the "Loan Agreement"), by
and among, (i) Riviera Holding Corporation, Shareholder, and RBH, as the
"Borrower", (ii) RGM and Riviera Gaming Management of Colorado, Inc., as the
"Guarantor", (iii) the lenders identified therein as the "Lenders", and (iv)
Foothill Capital Corporation, as the "Agent", the below-defined Lender Group has
agreed to extend credit to Borrower in accordance with the terms and conditions
of the Loan Agreement, which credit is guarantied by Guarantor. As used herein,
the term "Lender Group" means, individually and collectively, the Lenders and
the Agent. Capitalized terms used herein and not otherwise defined herein have
the meanings ascribed to them in the Loan Agreement.
C. Each of Shareholder, the other Borrowers, and the
Guarantors, will derive substantial benefit from the extensions of credit by the
Lender Group.
D. It is a condition precedent to the Lender Group's
extensions of credit that Shareholder pledge 100% of its interest in each of RGM
and RBH to Agent, for the benefit of the Lender Group, as security for the
Obligations (as defined below).
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, Shareholder hereby agrees with Agent (for the benefit of
the Lender Group) as follows:
I. Definitions and Interpretation. When used in this Stock Pledge Agreement,
the following terms shall have the following respective meanings:
"Collateral" shall have the meaning given to that term in Section II
hereof.
"Obligations" shall mean (i) the payment by Shareholder to the Lender
Group or Agent of all "Obligations" (as such term is defined in the
Loan Agreement) now or hereafter owed to the Lender Group or Agent by
Shareholder in connection with the Loan Agreement, this Stock Pledge
Agreement, and the other Loan Documents (the "Riviera Financing"),
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whether at stated maturity, by acceleration or otherwise, (ii) the
performance by Shareholder of all other obligations and the discharge
of all other liabilities of Shareholder to Agent of every kind and
character arising from the Riviera Financing, whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, joint or several or joint and several, and whether
created under this Stock Pledge Agreement, the other Loan Documents or
any other agreement by Shareholder in favor of or for the benefit of
Agent or the Lender Group, (iii) any and all sums advanced by Agent in
order to preserve the Collateral or preserve Agent's security interest
in the Collateral (or the priority thereof) and (iv) the expenses of
retaking, holding, preparing for sale or lease, selling or otherwise
disposing of or realizing on the Collateral, of any proceeding for the
collection or enforcement of any indebtedness, obligations or
liabilities owing to Agent or the Lender Group referred to above, or of
any exercise by Agent (for the benefit of the Lender Group) of its
rights hereunder, together with reasonable attorneys' fees and
disbursements and court costs.
"RBH" means Riviera Black Hawk, Inc., a Colorado corporation.
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"RGM" means Riviera Gaming Management, Inc., a Nevada corporation.
---
"Stock" shall mean all shares, options, warrants, interests,
participations or other equivalents (regardless of how designated) of
or in RGM and RBH, whether voting or non-voting, including, without
limitation, common stock, preferred stock, or any other equity
ownership interest in RGM and RBH.
"UCC" shall mean the Uniform Commercial Code as the same may, from time
to time, be in effect in the State of Nevada.
Unless otherwise defined herein, all other capitalized terms used herein and
defined in the Loan Agreement shall have the respective meanings given to those
terms in the Loan Agreement, and all terms defined in the UCC shall have the
respective meanings given to those terms in the UCC. To the extent the meanings
given herein are inconsistent with those given in the UCC, the meanings given
herein shall govern.
II. Pledge.
As security for the payment and performance of the
Obligations, Shareholder hereby pledges, grants and assigns to Agent, for the
benefit of the Lender Group, a security interest in all right, title and
interests of Shareholder in and to the Stock, whether now owned or hereafter
acquired (collectively, the "Shareholder's Stock"), including without limitation
the Shareholder's Stock described in Exhibit A hereto, and all proceeds thereof,
including, without limitation, dividends and other property received and
receivable by Shareholder in connection with the Shareholder's Stock other than
dividends and other distributions made by RGM and RBH which are expressly
permitted by the Loan Agreement, if any (the Shareholder's Stock and such
proceeds to be referred to herein collectively as the "Collateral").
III. Representations and Warranties. Shareholder represents and warrants to
Agent, for the benefit of the Lender Group, that: (a) the execution, delivery
and performance by Shareholder of this Stock Pledge Agreement are within the
power of Shareholder and have been duly authorized by all necessary actions on
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the part of Shareholder; (b) this Stock Pledge Agreement has been duly executed
and delivered by Shareholder and constitutes a legal, valid and binding
obligation of Shareholder, enforceable against it in accordance with its terms,
except as limited by gaming, bankruptcy, insolvency or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and general principles of equity; (c) the execution, delivery and
performance of this Stock Pledge Agreement do not (i) violate any requirement of
law, regulation or statute, (ii) violate any provision of, or result in the
breach or the acceleration of or entitle any Person to accelerate (whether after
the giving of notice or lapse of time or both) any obligation under, any
indenture, mortgage, lien, lease, agreement, license, instrument, guaranty, or
other document to which Shareholder is a party or by which Shareholder or its
property is bound, or (iii) result in the creation or imposition of any lien
upon any property, asset or revenue of Shareholder (except such liens as may be
created in favor of Agent, for the benefit of the Lender Group, pursuant to this
Stock Pledge Agreement); (d) except as set forth herein, no consent, approval,
order or authorization of, or registration, declaration or filing with, any
governmental authority or other Person (including, without limitation, the
shareholders of any Person) is required in connection with the execution,
delivery and performance by the Shareholder of this Stock Pledge Agreement,
except such consents, approvals, orders, authorizations, registrations,
declarations and filings that are so required and which have been obtained and
are in full force and effect; (e) Shareholder is the sole beneficial record
owner of the Collateral (or, in the case of after-acquired Collateral, at the
time Shareholder acquires rights in the Collateral, will be the beneficial and,
in the case of capital stock, record owner thereof) and no other Person has (or,
in the case of after-acquired Collateral, at the time Shareholder acquires
rights therein, will have) any right, title, claim or interest (by way of lien
or otherwise) in, against or to the Collateral, other than applicable "Permitted
Liens" (as such term is defined in the Loan Agreement); (f) all of the
Collateral which are shares of capital stock are and such future Collateral will
be validly issued, fully paid and nonassessable securities of RGM and RBH; (g)
the Collateral includes all of the issued and outstanding shares of capital
stock of RGM and RBH; (h) except for the Collateral, there are no outstanding
options, warrants or other rights to subscribe for or purchase voting or
non-voting capital stock of RGM or RBH, nor any notes, bonds, debentures or
other evidences of indebtedness that (1) are at any time convertible into
capital stock of RGM or RBH, or (2) have or at any time would have voting rights
with respect to RGM or RBH; (i) upon transfer to Agent of all Collateral
consisting of securities and continuous maintenance of possession thereof, Agent
(on behalf of the Lender Group) will have a first priority perfected security
interest in such Collateral, and (or in the case of all other after-acquired
Collateral, at the time Shareholder acquires rights therein, will have) a first
priority perfected security interest in all other Collateral, subject in Lien
priority only to the Permitted Liens (if any) that are specifically entitled
pursuant to applicable law, or specifically acknowledged in writing by Agent, to
have priority over Agent's Liens; (j) all information heretofore, herein or
hereafter supplied in writing to Agent or the Lender Group, taken as a whole, by
or on behalf of Shareholder with respect to the Collateral does not contain and
will not contain any untrue statements of a material fact and does not omit and
will not omit to state any material fact necessary to make any information so
supplied, in light of the circumstances under which they were supplied, not
misleading; and (k) Shareholder's principal place of business is 0000 Xxx Xxxxx
Xxxxxxxxx Xxxxx, Xxx Xxxxx, Xxxxxx.
IV. Covenants. Shareholder hereby agrees: (a) to perform all acts requested by
Agent that are necessary to maintain, preserve, protect and perfect the
Collateral, the lien granted to Agent hereunder and the first priority of such
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lien, subject in Lien priority only to the Permitted Liens (if any) that are
specifically entitled pursuant to applicable law, or specifically acknowledged
in writing by Agent, to have priority over Agent's Liens; (b) to promptly
deliver to Agent all originals of certificates and other documents, instruments
and agreements evidencing the Collateral which are now held or hereafter
received by Shareholder, together with such blank stock powers executed by
Shareholder as Agent may request; (c) to procure, execute and deliver from time
to time any endorsements, assignments, financing statements and other documents,
instruments and agreements and take other actions deemed necessary, as Agent may
request, to perfect, maintain and protect its lien hereunder and the priority
thereof; (d) to defend its title to or Agent's interest in the Collateral; (e)
to keep the Collateral free of all liens except those created hereunder and the
Permitted Liens; (f) not to vote to enable, or take any other action to permit,
RGM or RBH to issue any Stock except for Stock permitted to be issued by both
the Loan Documents and the Indenture; (g) to pay, and to save Agent and the
Lender Group harmless from, any and all liabilities with respect to, or
resulting from any delay by Shareholder in paying, any and all stamps, excise,
sales or other similar taxes which may be payable or determined to be payable
with respect to any of the Collateral or in connection with any of the
transactions contemplated by this Stock Pledge Agreement; and (h) not to,
without the written consent of the Agent or the Lender Group, sell, dispose of
or transfer (directly or indirectly) or covenant to sell, dispose of or transfer
(directly or indirectly) the Collateral (unless and to the extent otherwise
expressly permitted by both the Loan Documents and the Indenture).
V. Dividends and Voting Rights Prior to Default. Until an Event of Default (as
defined in the Loan Agreement) shall have occurred and be continuing and Agent
shall have given notice to Shareholder of Agent's intent to exercise its rights
pursuant to Section VI.B. below, Shareholder shall be permitted (a) to receive
all dividends paid on Shareholder's Stock (other than dividends paid in
additional Stock unless such additional Stock is pledged to Agent, for the
benefit of the Lender Group, pursuant to this Stock Pledge Agreement) which are
permitted by both the Loan Documents and the Indenture, and (b) to exercise all
voting and corporate rights with respect to the Stock; provided, however, that
no vote shall be cast or corporate right exercised or other action taken which
would be reasonably likely to impair the Collateral or result in any violation
of any provision of the Loan Documents.
VI. Default and Remedies.
A. Event of Default. The occurrence of an Event of Default under the Loan
Agreement (subject to such cure rights as may be expressly set forth in such
Loan Agreement), whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body, shall constitute an "Event of
Default" hereunder.
B. Dividends and Voting Rights. Subject to the terms of the Loan Agreement and
the other Loan Documents, upon the occurrence and during the continuance of any
Event of Default hereunder, Agent may, upon notice to Shareholder, (i) notify
RGM and RBH to pay all dividends on Shareholder's Stock to Agent, for the
benefit of the Lender Group, receive and collect all such dividends and make
application thereof to the Obligations in the manner and order set forth in
Section 2.4 of the Loan Agreement, and (ii) register all of Shareholder's Stock
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in the name of Agent or its nominee, for the benefit of the Lender Group, and
Agent or its nominee may thereafter exercise (A) all voting, corporate and other
rights pertaining to Shareholder's Stock at any meeting of shareholders of RGM
and RBH or otherwise and (B) any and all rights of conversion, exchange,
subscription and any other rights, privileges or options pertaining to
Shareholder's Stock as if it were the absolute owner thereof (including, without
limitation, after Agent has commenced to exercise remedies (or such remedies are
deemed commenced) under the Loan Documents, the right to exchange at its
discretion any and all of Shareholder's Stock upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the corporate
structure of RGM or RBH, or upon the exercise by Shareholder or Agent of any
right, privilege or option pertaining to Shareholder's Stock, and in connection
therewith, the right to deposit and deliver any and all of Shareholder's Stock
with any committee, depositary, transfer agent, registrar or other designated
agency upon such terms and conditions as it may determine), all without
liability except to account for property actually received by it, but Agent
shall have no duty to Shareholder to exercise any such right, privilege or
option and shall not be responsible for any failure to do so or delay in so
doing. Promptly after the waiver or cure of the Event of Default giving rise to
Agent's election under this Section VI.B., Agent shall notify Shareholder, RGM
and RBH of such waiver or cure and for so long as no subsequent continuing Event
of Default exists, Shareholder shall have all rights as a shareholder it had
prior to the occurrence of such Event of Default, the Shareholder's Stock shall
(at the sole expense of Borrower) again be registered in the name of
Shareholder, and RGM and RBH shall again make all payments and distributions
with respect to Shareholder's Stock to Shareholder (subject to the express
limitations of this Stock Pledge Agreement and the other Loan Documents).
C. Additional Remedies. Subject to the terms of the Loan Agreement and the other
Collateral Documents, upon the occurrence and during the continuance of an Event
of Default, Agent may exercise, in addition to all other rights and remedies
granted in this Stock Pledge Agreement and in any other instrument or agreement
securing, evidencing or relating to the Obligations, any and all rights and
remedies at law, including, without limitation, all rights and remedies of a
secured party under the UCC. Without limiting the generality of the foregoing,
Agent may, without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind to or upon Shareholder, RGM, RBH or any
other Person (except notice of time and place of sale and any other notice
required by law and any notice expressly required herein or in any other Loan
Document), forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, assign, give option
or options to purchase or otherwise dispose of and deliver the Collateral or any
part thereof (or contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, in the over-the-counter market, at any
exchange, broker's board or office of Agent or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may deem
commercially reasonable, for cash or on credit or for future delivery without
assumption of any credit risk. The Lender Group shall have the right upon any
such public sale or sales, and, to the extent permitted by law, upon any such
private sale or sales, to purchase the whole or any part of the Collateral so
sold, free of any right or equity of redemption in Shareholder, which right or
equity is hereby waived and released. The Lender Group shall apply any proceeds
from time to time held by it and the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale, after deducting all
reasonable costs and expenses of every kind incurred in respect thereof or
incidental to the care or safekeeping of any of the Collateral or in any way
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relating to the Collateral or the rights of Agent hereunder, including, without
limitation, attorneys' fees and disbursements of counsel to Agent, to the
payment in whole or in part of the Obligations, in such order as specified by
the Loan Agreement, and only after such application and after the payment by
Agent of any other amount required by any provision of law, need Agent account
for the surplus, if any, to Shareholder. To the extent permitted by applicable
law, Shareholder waives all claims, damages and demands it may acquire against
any Indemnified Person (as such term is defined in Section 11.3 of the Loan
Agreement) arising out of the exercise by it of any rights hereunder except,
with respect to any Indemnified Person, to the extent such claims, damages and
demands are finally determined by a court of competent jurisdiction to have
resulted from the gross negligence or willful misconduct of such Indemnified
Person. If any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable and proper if
given at least 10 days before the earliest time of sale or disposition set forth
in the notice; no notice needs to be given prior to the sale or disposition of
any portion of the Collateral that is perishable or threatens to decline
speedily in value or that is of a type customarily sold on a recognized market.
VII. Limitation on Duties Regarding Collateral. Agent's sole duty with respect
to the custody, safekeeping and physical preservation of the Collateral in its
possession, under Section 109.9207 [PLEASE CONFIRM WHETHER IT IS SECTION
104.9207 OR SECTION 109.9207 IN NEVADA] of the UCC or otherwise, shall be to
deal with it in the same manner as Agent deals with similar securities and
property for its own account and as would be dealt by a prudent person in the
reasonable administration of its affairs. Neither Agent nor any of its
directors, officers, employees or agents shall be liable for failure to demand,
collect or realize upon any of the Collateral or for any delay in doing so or
shall be under any obligation to sell or otherwise dispose of any Collateral
upon the request of Shareholder or otherwise. Notwithstanding the foregoing,
nothing contained herein shall be deemed a waiver or release of the provisions
of Sections 11.2 and 16 of the Loan Agreement.
VIII. Termination. This Stock Pledge Agreement shall terminate upon the payment
in full in cash of all Obligations and the irrevocable termination of all
commitments of the Lender Group to extend credit to Borrower under the Loan
Documents, and, subject to the Intercreditor Agreement, Agent shall promptly
thereafter deliver the Stock certificates held by it hereunder to Shareholder
and, at Shareholder's expense, execute and deliver to Shareholder such documents
as Shareholder shall reasonably request to evidence such termination.
IX. Power of Attorney. Shareholder hereby appoints and constitutes Agent as
Shareholder's attorney-in-fact for purposes of, at any time while an Event of
Default exists, (a) collecting any Collateral, (b) conveying any item of
Collateral to any purchaser thereof, and (c) making any payments or taking any
acts under Section VI hereof. Agent's authority hereunder shall include, without
limitation, upon the occurrence and during the continuance of an Event of
Default, the authority to endorse and negotiate, for the Lender Group's own
account, any checks or instruments in the name of Agent, to execute or receipt
for any document, to transfer title to any item of Collateral, and to take any
other actions necessary or incident to the powers granted to Agent or the Lender
Group in this Stock Pledge Agreement. This power of attorney is coupled with an
interest and is irrevocable by Shareholder.
X. Miscellaneous.
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A. Notices. Except as otherwise provided herein, all notices, demands, and
requests that either party is required or elects to give to the other shall be
in writing and shall be governed by the provisions contained in the Loan
Agreement.
B. Nonwaiver. No failure or delay on Agent's or the Lender Group's part
in exercising any right hereunder shall operate as a waiver thereof or of any
other right nor shall any single or partial exercise of any such right preclude
any other further exercise thereof or of any other right.
C. Amendments and Waivers. This Stock Pledge Agreement may not be amended
or modified, nor may any of its terms be waived, except by written instruments
signed by the party or parties against which enforcement thereof is sought.
Each waiver or consent under any provision hereof shall be effective only in the
specific instances for the purpose for which given.
D. Assignment. This Stock Pledge Agreement shall be binding upon inure to the
benefit of Agent, the Lender Group, and Shareholder and their respective
successors and assigns; provided, however, that Shareholder may not assign its
rights or delegate its duties hereunder without the prior written consent of
Agent or the Lender Group. To the extent permitted in the Loan Agreement, Agent
may assign or otherwise transfer all or any part of its interest under this
Stock Pledge Agreement, upon notice to Shareholder. Agent may disclose this
Stock Pledge Agreement and any financial or other information relating to
Shareholder to any potential assignee or participant.
E. Cumulative Rights, etc. The rights, powers and remedies of Agent and the
Lender Group under this Stock Pledge Agreement shall be in addition to all
rights, powers and remedies given to Agent and the Lender Group by virtue of the
Loan Agreement or any other Loan Document, any applicable governmental rule or
regulation or any other agreement, all of which rights, powers, and remedies
shall be cumulative and may be exercised successively or concurrently without
impairing Agent's Lien in the Collateral. Shareholder waives any right to
require Agent or the Lender Group to proceed against any Person or to exhaust
any Collateral or to pursue any remedy in Agent's or the Lender Group's power.
F. Governing Law. This Stock Pledge Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto, shall be governed
by and construed in accordance with the laws of the State of CALIFORNIA, except
to the extent that the perfection and enforcement of the security interests
hereunder in respect of any particular collateral are governed by the laws of
another jurisdiction.
[Signature Page Follows]
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IN WITNESS WHEREOF, Shareholder has caused this Stock Pledge
and Security Agreement to be executed and delivered in favor of Agent (for the
benefit of the Lender Group) as of the day and year first above written.
SHAREHOLDER:
RIVIERA OPERATING CORPORATION, a Nevada corporation
By:
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Name:
------------------------------------------------
Title:
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Signature Page
ACKNOWLEDGMENT AND
CONSENT OF RGM
Riviera Gaming Management, Inc., a Nevada corporation ("RGM"),
hereby acknowledges receipt of a copy of the above Stock Pledge and Security
Agreement, agrees to be bound by and comply with the terms thereof, including,
without limitation, Paragraph 6 thereof and agrees to perform all covenants and
obligations therein which, by their terms are to be performed by RGM.
RIVIERA GAMING MANAGEMENT, INC., a Nevada
corporation
By:
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Name:
------------------------------------------------
Title:
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ACKNOWLEDGMENT AND
CONSENT OF RBH
Riviera Black Hawk, Inc., a Colorado corporation ("RBH"),
hereby acknowledges receipt of a copy of the above Stock Pledge and Security
Agreement, agrees to be bound by and comply with the terms thereof, including,
without limitation, Paragraph 6 thereof and agrees to perform all covenants and
obligations therein which, by their terms are to be performed by RBH.
RIVIERA BLACK HAWK, INC.,
a Colorado corporation
By:
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Name:
------------------------------------------------
Title:
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EXHIBIT "A"
DESCRIPTION OF SHAREHOLDER'S STOCK
Percentage of
Issuer Class of Stock Certificate No. No. of Shares Outstanding Shares
------ -------------- --------------- ------------- ------------------
Riviera Gaming Common 1 10,000 100%
Management,
Inc.
Riviera Black Common 1 1,000 100%
Hawk, Inc.
Exhibit A
