MANAGER SUBORDINATION AGREEMENT
This MANAGER SUBORDINATION AGREEMENT (as amended, supplemented or
otherwise modified from time to time, this "Agreement") is made as of June 3,
1999, by and among IBJ WHITEHALL BANK & TRUST COMPANY, a New York banking
association, having an office at Xxx Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx
Xxxx 00000, as trustee (in such capacity, together with its successors and
assigns, the "Trustee"), for the benefit of itself and the holders of the Notes
(as defined below), Riviera Gaming Management of Colorado, Inc., a Colorado
corporation (the "Manager"), and Riviera Black Hawk Inc., a Colorado corporation
(the "Company").
Recitals
A. The Company shall issue its 13% First Mortgage Notes due 2005 With
Contingent Interest (the "Original Notes" and together with any new notes issued
in replacement of and exchange therefor, the "Notes"), in the aggregate
principal amount of $45,000,000, pursuant to that certain Indenture dated as of
even date herewith (as amended, supplemented or otherwise modified from time to
time, the "Indenture"), by and between the Company and the Trustee. All terms
used and not otherwise defined herein shall have the meanings given in the
Indenture.
B. The Manager and the Company are parties to that certain Management
Agreement dated as of June 3, 1999 (as amended, supplemented or otherwise
modified from time to time, the "Management Agreement"), pursuant to which the
Company shall pay the Manager a management fee in consideration of the Manager's
services relating to the management and operation of the Riviera Black Hawk and
reimburse the Manager for services supplied to the Company on a cost
reimbursement basis.
C. As a condition to the purchase of the Notes, the parties have
agreed to enter into this Agreement.
Agreement
NOW, THEREFORE, in consideration of the foregoing recitals and the
provisions set forth herein and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Trustee, the
Manager and the Company agree as follows:
1. Subordination to Senior Debt. Notwithstanding any other provision
of the Management Agreement, all payment obligations of the Company to the
Manager arising under the Management Agreement, now existing or hereafter
arising (other than reimbursement of expenses permitted thereunder)
(collectively, the "Subordinated Obligations") are and shall be subordinate and
junior in right of payment, to the extent and in the manner hereinafter set
forth, to the prior indefeasible payment in full of all Senior Debt (as defined
below).
"Senior Debt" means (a) all indebtedness, liabilities and obligations
of every kind or nature, absolute or contingent, now existing or hereafter
arising, of the Company, its successors and assigns, under the Indenture, the
Notes, any Collateral Documents or any other documents, instruments or
agreements executed in connection with any of the foregoing (the foregoing,
collectively, the "Transaction Documents"), to the Trustee or any holder of
Notes and their successors and assigns and any Person who extends credit to the
Company for the purpose of refunding any such indebtedness, liabilities or
obligations, including without limitation the principal of, and interest on
(including any interest accruing after the commencement of any bankruptcy,
insolvency or similar proceeding with respect to the Company and any interest
which would have accrued but for the commencement of any such proceeding whether
or not allowed as a claim in that proceeding), and all premiums, fees, charges,
expenses and indemnities arising under or in connection with the Indenture, the
Notes or any other Transaction Document; and (b) any modifications, amendments,
refundings, renewals or extensions of any indebtedness or obligation described
in clause (a) above. Except as and to the extent provided hereinafter, the
Manager will not ask, demand, xxx for, take or receive from the Company, by
set-off or in any other manner, direct or indirect payment (whether in cash or
property), of the whole or any part of the Subordinated Obligations, or any
transfer of any property in payment of or as security therefor, so long as there
exists an Event of Default under the Indenture.
2. Distributions in Liquidation and Bankruptcy. In the event of any
distribution, division or application, partial or complete, voluntary or
involuntary, by operation of law or otherwise, of all or any part of the assets
of the Company or the proceeds thereof (including any assets now or hereafter
securing any Subordinated Obligations) to creditors of the Company or upon any
indebtedness of the Company, by reason of the liquidation, dissolution or other
winding up, partial or complete, of the Company, or any receivership, insolvency
or bankruptcy proceeding, or assignment for the benefit of creditors or
marshalling of assets, or any proceeding by or against the Company for any
relief under any bankruptcy or insolvency law or laws relating to the relief of
debtors, readjustment of indebtedness, arrangements, reorganizations,
compositions or extensions, or sale of all or substantially all of the assets of
Borrower, then and in any such event:
(a) The holders of Senior Debt shall be entitled to receive
payment in full in cash of all Senior Debt before the Manager shall be
entitled to receive any payment or other distributions on, or with
respect to, the Subordinated Obligations;
(b) Any payment or distribution of any kind or character,
whether in cash, securities or other property, which but for these
provisions would be payable or deliverable upon or with respect to the
Subordinated Obligations shall instead be paid or delivered directly
to the Trustee for the benefit of the holders of the Senior Debt for
application on the Senior Debt, whether then due or not due, until the
Senior Debt shall have first been fully and indefeasibly paid in cash;
(c) The Manager hereby irrevocably authorizes and empowers
the Trustee, and appoints the Trustee as attorney-in-fact, to demand,
xxx for, collect and receive every such payment or distribution and
give acquittance therefor, and to file and vote claims (in bankruptcy
proceedings or otherwise) and take such other actions, in the
2
Trustee's own name or otherwise, as the Trustee may deem necessary or
advisable for the enforcement of these provisions. The Manager shall
duly and promptly take such action as may be reasonably requested by
the Trustee to assist in the collection of the Subordinated
Obligations for the account of any holder of the Senior Debt, and to
file appropriate proofs of claim with respect to the Subordinated
Obligations and to vote the same, and to execute and deliver to the
Trustee on demand such powers of attorney, proofs of claim,
assignments of claim or other instruments as may be reasonably
requested by the Trustee to enable the Trustee or any other holder of
the Senior Debt to enforce any and all claims upon or with respect to
the Subordinated Obligations and to collect and receive any and all
payments or distributions which may be payable or deliverable at any
time upon or with respect to the Subordinated Obligations. In
addition, the Manager shall take no action (whether oral, written or
otherwise) in contravention of any action of the Trustee duly taken
and permitted hereunder. Such appointment as attorney-in-fact pursuant
to this Section 2(c) is irrevocable and coupled with an interest until
payment in full and complete performance of all the Senior Debt. The
Trustee may appoint a substitute attorney-in-fact. The Manager
ratifies all actions taken by the attorney-in-fact but, nevertheless,
if the Trustee requests, the Manager will specifically ratify any
action taken by the attorney-in-fact by executing and delivering to
the attorney-in-fact or to any entity designated by the
attorney-in-fact all documents necessary to effect such ratification;
(d) Should any direct or indirect payment be made to the
Manager upon or with respect to the Subordinated Obligations prior to
the payment in full of the Senior Debt in accordance with these
provisions, the Manager will forthwith deliver the same to the Trustee
in precisely the form received (except for the endorsement or
assignment of the Manager where necessary) for application on the
Senior Debt, whether then due or not due. Until so delivered, the
payment or distribution shall be held in trust by the Manager as
property of the holders of the Senior Debt. In the event of the
failure of the Manager to make any such endorsement or assignment, the
Trustee, or any of its officers or employees, are hereby irrevocably
authorized to make the same; and
(e) Each of the parties hereby agrees that it shall be bound
by the terms and provisions hereof, notwithstanding the confirmation
of a plan of reorganization of the Company under Section 1129(b) of
the Bankruptcy Code.
3. Permitted Payments. Subject to the provisions of Paragraphs 2 and 4
of this Agreement, the Company may pay to and the Manager may accept payment of
amounts due under the Management Agreement, a true and correct copy of which is
attached hereto as Exhibit A. Except as otherwise expressly provided in the
Indenture, the Company and the Manager shall not change, alter, amend, waive or
otherwise modify the Management Agreement without the Trustee's prior written
consent.
4. Default on Senior Debt. In the event that any Default or Event of
Default shall occur and be continuing with respect to any Senior Debt, or if any
payment of Subordinated Obligations would create a Default or Event of Default,
unless and until all Senior Debt shall have been indefeasibly paid in full in
cash, the right of the Manager to receive any payments or other
3
distributions with respect to Subordinated Obligations shall be suspended during
the continuance of such Default or Event of Default; provided, that payments may
be made pursuant to Section 3.4 of the Management Agreement whether or not a
Default has occurred and is continuing or would be caused thereby. If,
notwithstanding the foregoing, the Manager shall receive any payment or
distribution of any kind with respect to Subordinated Obligations (whether from
any collateral securing such obligations or otherwise), such payment or
distribution shall be received in trust for, and shall be delivered to the
Trustee promptly in precisely the form received (except for the endorsement or
assignment of the Manager where necessary) for application on the Senior Debt,
whether then due or not due. Until so delivered, the payment or distribution
shall be held in trust by the Manager as property of the holders of Senior Debt.
5. No Acceleration or Exercise of Remedies. So long as any Senior Debt
remains unpaid, the Manager will not (a) cause any portion of the Subordinated
Obligations to become due prior to the due date for such Subordinated
Obligations as set forth in the Management Agreement; (b) accept any payment,
prepayment or defeasance of any portion of the Subordinated Obligations prior to
the due date for such Subordinated Obligations as set forth in the Management
Agreement or in violation of this Agreement; (c) modify or alter in any way the
provisions of the Management Agreement if the effect of such is to accelerate
the payments of Subordinated Obligations due thereon; or (d) exercise any
remedies with respect to the Subordinated Obligations or any collateral at any
time securing payment or performance thereof unless and until, in each such
case, all of the Senior Debt shall have indefeasibly paid in full in cash, or
the Trustee shall have otherwise consented in writing.
6. Bankruptcy. Until the Senior Debt shall have been indefeasibly paid
in full in cash, the Manager will not, without the prior consent of the Trustee,
commence, or join with any other person in commencing, any proceeding against
any Person with respect to the Subordinated Obligations under any bankruptcy,
reorganization, readjustment of debt, dissolution, receivership, liquidation or
insolvency law or statute now or hereafter in effect in any jurisdiction.
7. Continuing Subordination. The subordination effected by these
provisions is a continuing subordination and may not be modified or terminated
by the Manager or any other holder of any Subordinated Obligations until all of
the Senior Debt shall have been indefeasibly paid in full in cash. At any time
and from time to time, without consent of or notice to the Manager or any other
holder of Subordinated Obligations, and without impairing or affecting the
obligations of any of them hereunder:
(a) The time for the Company's performance of, or compliance
with, any of its agreements contained in the Indenture, the Notes or
the other Transaction Documents, or any other agreement, instrument or
document relating to the Senior Debt, may be modified or extended or
such performance or compliance may be waived;
(b) The Trustee may exercise or refrain from exercising any
rights under the Indenture, the Notes or the other Transaction
Documents, or any other agreement, instrument or document relating to
the Senior Debt;
(c) The Indenture, the Notes or the other Transaction
Documents, or
4
any other agreement, instrument or document relating to the Senior
Debt, may be revised, amended or otherwise modified for the purpose of
adding or changing any provisions thereof (including, but not limited
to, an increase in the interest charges), or changing in any manner
the rights of the Trustee or the Company;
(d) Payment of the Senior Debt or any portion thereof may be
extended or refunded or any notes evidencing such Senior Debt may be
renewed in whole or in part;
(e) The maturity of the Senior Debt may be accelerated, and
any collateral security therefor or any other rights of the Trustee
may be exchanged, sold, surrendered, released or otherwise dealt with
in accordance with the terms of any present or future agreement with
the Company and any other agreement of subordination (and the debt
covered thereby) may be surrendered, released or discharged, or the
terms thereof modified or otherwise dealt with in any manner;
(f) Any person liable in any manner for payment of the
Senior Debt may be released by holders of Senior Debt; and
(g) Notwithstanding the occurrence of any of the foregoing,
these subordination provisions shall remain in full force and effect
with respect to the Senior Debt, as the same shall have been extended,
renewed, modified or refunded.
8. Waivers. The Manager hereby waives, and agrees not to assert (a)
any right, now or hereafter existing, to require the Trustee to proceed against
or exhaust any collateral at any time securing the Senior Debt, or to marshal
any assets in favor of the Manager or any other holder of any Subordinated
Obligations; (b) any notice of the incurrence of Senior Debt, it being
understood advances may be made under the Indenture, or any other agreement,
document or instrument now or hereafter relating to the Senior Debt, without
notice to or authorization of the Manager in reliance upon these subordination
provisions.
It is not the intent of this Agreement to cause the Manager to become
a surety. However, in the event this Agreement may cause the Manager to be
deemed a surety, the following provisions apply; provided, however, that nothing
contained herein shall be deemed to be a guarantee by the Obligor of any
obligations for the payment of principal and interest of the Issuers under the
Notes. The Manager hereby waives and relinquishes all rights and remedies
accorded by applicable law to sureties or guarantors and agrees not to assert or
take advantage of any such rights or remedies, including, without limitation,
(a) any right to require the Trustee or any of the Holders (each a "Benefitted
Party") to proceed against the Company or any other Person or to proceed against
or exhaust any security held by a Benefitted Party at any time or to pursue any
other remedy in the power of a Benefitted Party before proceeding against the
Manager with respect to the Subordinated Obligations or other Person, (b) the
defense of the statute of limitations in any action with respect to the
Subordinated Obligations hereunder or in any action for the collection or
performance of the Senior Obligations, (c) any defense that may arise by reason
of the incapacity, lack of authority, death or disability of any Person or the
failure of a Benefitted Party to file or enforce a claim against the estate (in
administration, bankruptcy or any other proceeding) of any Person, (d)
appraisal, valuation, stay, extension, marshalling of
5
assets, redemption, exemption, demand, presentment, protest and notice of any
kind, including, without limitation, notice of the existence, creation or
incurring of any new or additional indebtedness or obligation or of any action
or non-action on the part of a Benefitted Party, the Company, any endorser,
guarantor or creditor of the Company or on the part of any Person under this or
any other instrument or document in connection with any Obligation or evidence
of Indebtedness held by a Benefitted Party as collateral or in connection with
the Note Obligations, (e) any defense based upon an election of remedies by a
Benefitted Party, including, without limitation, an election to proceed by
non-judicial rather than judicial foreclosure, which destroys or otherwise
impairs the subrogation rights of the Manager, the right of the Manager to
proceed against the Company or any other Person for reimbursement, or both, (f)
any defense based upon any statute or rule of law which provides that the
obligation of a surety must be neither larger in amount nor in other respects
more burdensome than that of the principal, (g) any duty on the part of a
Benefitted Party to disclose to the Manager any facts a Benefitted Party may now
or hereafter know about the Company or any other Person, regardless of whether a
Benefitted Party has reason to believe that any such facts materially increase
the risk beyond that which the Manager intends to assume, or has reason to
believe that such facts are unknown to the Manager, or has a reasonable
opportunity to communicate such facts to the Manager, because the Manager
acknowledges that the Manager is fully responsible for being and keeping
informed of the financial condition of the Company of any other Person and of
all circumstances bearing on the risk of non-payment of any Senior Obligations,
(h) any defense arising because of the election of a Benefitted Party, in any
proceeding instituted under the Federal Bankruptcy Code, of the application of
Section 1111(b)(2) of the Federal Bankruptcy Code, (i) any defense based upon
any borrowing or grant of a security interest under Section 364 of the Federal
Bankruptcy Code, (j) any claim or other rights which it may now or hereafter
acquire against the Company or any other Person that arises from the existence
of performance obligations under the Indenture, the Notes or any Collateral
Document, including, without limitation, any right of subrogation,
reimbursement. Notwithstanding the foregoing, nothing in this Section 8 shall be
deemed to impair the rights otherwise expressly given to the Manager in any of
the Loan Documents. No failure or delay on the Trustee's part in exercising any
power, right or privilege under this Agreement shall impair or waive any such
power, right or privilege. The Manager acknowledges and agrees that any
nonrecourse or exculpation provided for in the Indenture, the Notes or any
Collateral Document, or any other provision of this Indenture, the Notes or any
Collateral Document, limiting the Benefitted Parties' recourse to specific
collateral, or limiting the Benefitted Parties' right to enforce a deficiency
judgment against the Company, shall have absolutely no application to the
Manager's or the Company's liability under the Indenture, the Notes or any
Collateral Documents.
9. Lien Subordination. Any Lien, security interest, encumbrance,
charge or claim of the Manager on any assets or property of the Company or any
proceeds or revenues therefrom which the Manager may have at any time as
security for any Subordinated Obligations shall be, and hereby is, subordinated
to all Liens, security interests, or encumbrances now or hereafter granted to
the Trustee by the Company or by law, notwithstanding the date or order of
attachment or perfection of any such Lien, security interest, encumbrance or
claim or charge or the provision of any applicable law. Until all holders of
Senior Debt have received payment in full in cash of the Senior Debt, the
Manager agrees that the Manager will not assert or seek to enforce
6
against the Company the Subordinated Obligations or any interest of the Manager
in any collateral for any portion of the Subordinated Obligations and that the
Trustee may dispose of any or all of the collateral for the Senior Debt free of
any and all Liens, including, but not limited to, Liens created in favor of the
Manager, through judicial or non-judicial proceedings, in accordance with
applicable law including taking title, after five (5) days written notice to the
Manager. The Manager hereby acknowledges that such notice if given five (5) days
prior to such disposition of any of all of the collateral for the Senior Debt is
sufficient and commercially reasonable. The Manager hereby agrees that any such
sale or other disposition of so much of the collateral for the Senior Debt as is
necessary to satisfy in full in cash all of the Senior Debt shall be free and
clear of any security interest granted to the Manager; provided that the entire
proceeds (after deducting reasonable expenses of sale) are applied in reduction
of the Senior Debt. Upon the Trustee's request, the Manager shall execute and
deliver any releases or other documents and agreements that the Trustee in its
reasonable discretion deems necessary to dispose of the collateral for the
Senior Debt free of the Manager's interest in same. The Manager retains all of
its rights as a junior secured creditor with respect to the surplus, if any,
arising from any such disposition of the collateral for the Senior Debt.
10. Subrogation. The Manager hereby subordinates all rights of
subrogation to the rights of the holders of Senior Debt to receive payments or
distributions, and any rights of subrogation to any collateral for the Senior
Debt, until the Senior Debt shall have been indefeasibly paid in full in cash.
Upon such payment in full, the Manager shall be subrogated to all rights of the
holders of Senior Debt.
11. Subordination Not Impaired by the Company. No right of any holder
of Senior Debt to enforce the subordination of the Subordinated Obligations
shall be impaired by any act or failure to act by the Company or by its failure
to comply with these provisions.
12. No Third Party Beneficiaries. This Agreement is not intended to
give or confer any rights to any Person other than the holders of the Senior
Debt. No other party, including the Company, is intended to be a third party
beneficiary of this Agreement.
13. Legend on Note. If any portion of the Subordinated Obligations is
evidenced by a promissory note, stock certificate or other instrument, the
Manager agrees to promptly add a legend thereto stating that the rights of any
holder thereof are subject to this Agreement.
14. Representations and Warranties. The Manager hereby represents and
warrants that (a) the execution and delivery of this Agreement and the
performance by the Manager of its obligations hereunder have received all
necessary approvals and do not and will not contravene or conflict with any
provision of law or of any indenture, instrument or other agreement to which the
Manager is a party or by which it or its property may be bound or affected or
result in or require the creation or imposition of any mortgage, Lien, pledge,
security interest, charge or other encumbrance in, upon or of any of its
properties or assets under any such indenture, instrument or other agreement,
(b) the Manager has full power, authority and legal right to make and perform
this Agreement, (c) the Manager has not assigned or transferred any indebtedness
owing by the Company or any of the collateral for the Subordinated Obligations
and
7
that the Manager will not assign or transfer same, (d) this Agreement is the
legal, valid and binding obligation of the Manager, enforceable against the
Manager in accordance with its terms, and (e) the Subordinated Obligations are
not subject to any other subordination agreement.
15. No Waiver. No failure on the part of the Trustee to exercise, no
delay in exercising, and no course of dealing with respect to, any right or
remedy hereunder will operate as a waiver thereof; nor will any single or
partial exercise of any right or remedy hereunder preclude any other or further
exercise thereof or the exercise of any other right or remedy. This Agreement
may not be amended or modified except by written agreement of the Trustee, the
Manager, and the Company, and no consent or waiver hereunder shall be valid
unless in writing and signed by the Trustee.
16. Successors and Assigns. This Agreement, and the terms, covenants
and conditions hereof, shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and assigns.
17. GOVERNING LAW. THIS AGREEMENT WILL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE INTERNAL LAW OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO
CHOICE OF LAW PRINCIPLES.
18. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
19. Severability. The invalidity, illegality or unenforceability in
any jurisdiction of any provision in or obligation under this Agreement shall
not affect or impair the validity, legality or enforceability of the remaining
provisions or obligations under this Agreement or of such provision or
obligation in any other jurisdiction.
8
IN WITNESS WHEREOF, this Manager Subordination Agreement has been duly
executed as of the day and year first above written.
RIVIERA GAMING MANAGEMENT
OF COLORADO, INC.,
a Colorado corporation
By:_________________________________
Name:
Title:
IBJ WHITEHALL BANK & TRUST COMPANY,
a New York banking association
By:_________________________________
Name:
Title:
RIVIERA BLACK HAWK, INC.,
a Colorado corporation
By:_________________________________
Name:
Title:
[Signature Page to Manager Subordination Agreement]
MANAGER SUBORDINATION AGREEMENT
Exhibit A
Management Agreement
See attached.
A-1
