RIVIERA HOLDINGS CORPORATION
2901 Las Vegas Boulevard South
Las Vegas, Nevada 89109
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on May 15, 2007
TO THE STOCKHOLDERS OF
RIVIERA HOLDINGS CORPORATION
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of Riviera Holdings Corporation, a Nevada corporation, will be
held at the Riviera Hotel and Casino, 2901 Las Vegas Boulevard South, Las Vegas,
Nevada 89109 on May 15, 2007, at 11:00 a.m., Las Vegas time, for the following
purposes:
1. To elect our Board of Directors; and
2. To consider and act upon such other matters as may properly come before the
Annual Meeting or any re-convenings thereof.
We have fixed April 3, 2007 as the record date for determination of
stockholders entitled to notice of, and to vote at, the Annual Meeting
(including any re-convenings thereof). Only holders of record of our common
stock at the close of business on that date are entitled to vote at the Annual
Meeting. A complete list of those stockholders can be examined by any such
stockholder for any purpose germane to the Annual Meeting, during ordinary
business hours, at our offices located at 2901 Las Vegas Boulevard South, Las
Vegas, Nevada 89109.
Our Annual Report for the year ended December 31, 2006, which includes
a copy of our annual report on Form 10-K as filed with the Securities and
Exchange Commission for the year ended December 31, 2006, is enclosed.
By Order of the Board of Directors,
William L. Westerman
Chairman of the Board
Dated: April 12, 2007
YOU ARE URGED TO COMPLETE, SIGN, DATE AND MAIL THE ENCLOSED PROXY AS SOON AS
POSSIBLE. IF YOU ATTEND THE ANNUAL MEETING AND VOTE IN PERSON, THE PROXY WILL
NOT BE USED. IF THE PROXY IS MAILED IN THE UNITED STATES IN THE ENCLOSED
ENVELOPE, NO POSTAGE IS REQUIRED.
1
ANNUAL MEETING OF STOCKHOLDERS OF
RIVIERA HOLDINGS CORPORATION
May 15, 2007
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
Please detach along perforated line and mail in the envelope provided.
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The Board of Directors recommends a vote FOR the nominees for directors
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR
BLACK INK AS SHOWN HERE [X]
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1.Election of the following Five Nominees as 2.In their discretion, the proxies are authorized
Directors of the Company. to vote upon such other matters as may properly
NOMINEES: come before the Annual Meeting.
[ ]FOR ALL NOMINEES O William L. Westerman
O Jeffrey A. Silver IF THIS PROXY IS PROPERLY EXECUTED, THE SHARES OF
[ ]WITHHOLD AUTHORITY O Paul A. Harvey COMMON STOCK COVERED HEREBY WILL BE VOTED AS
FOR ALL NOMINEES O Vincent L. DiVito SPECIFIED HEREIN. IF NO SPECIFICATION IS MADE,
O James N. Land Jr. SUCH SHARES WILL BE VOTED "FOR" THE NOMINEES
[ ]FOR ALL EXCEPT FOR DIRECTOR, AND AS THE PROXIES DEEM ADVISABLE
(See instructions below) ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE
THE ANNUAL MEETING.
The undersigned hereby revoke(s) all previous
INSTRUCTION: To withhold authority to vote Proxies and acknowledge(s) receipt of the copy
for any individual nominee(s), mark "FOR ALL of the Notice of Annual Meeting dated April 12,
EXCEPT" and fill in the circle next to each 2007, the Proxy Statement attached thereto and the
nominee you wish to withhold, as shown here: Annual Report of the Company the address for the
-------------------------------------------- fiscal year ended December 31, 2006 forwarded
therewith.
PLEASE MARK, SIGN AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE.
--------------------------------------------
To change the address on your account, please
check the box at right and indicate your new
address in the space above. Please note that
changes to the registered name(s) on the
account may not be submitted via this
method.[ ]
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Signature of Stockholder_____________ Date:_____ Signature of Stockholder______________ Date:_____
Note: Please sign exactly as your name or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as such.
If the signer is a corporation, please sign full corporate name by duly
authorized officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized person.
RIVIERA HOLDINGS CORPORATION
2901 Las Vegas Boulevard South,
Las Vegas, Nevada 89109
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS ON
May 15, 2007
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitute(s) and appoint(s) William L. Westerman and
Tullio J. Marchionne, and each of them, as proxies, with full power of
substitution, to vote all shares of Common Stock of Riviera Holdings Corporation
(the "Company") which the undersigned is (are) entitled to vote at the Annual
Meeting of Stockholders of the Company to be held at the Riviera Hotel & Casino,
2901 Las Vegas Boulevard South, Las Vegas, NV 89109, on Tuesday, May 15, 2007,
at 11:00 a.m., Las Vegas time, and at any adjournment(s) or postponement(s)
thereof (the "Annual Meeting"), on all matters that may come before such Annual
Meeting. Said proxies are instructed to vote on the following matters in the
manner herein specified.
(Continued and to be signed on reverse side)
RIVIERA HOLDINGS CORPORATION
2901 Las Vegas Boulevard South
Las Vegas, Nevada 89109
PROXY STATEMENT
for Annual Meeting of Stockholders
to be held on May 15, 2007
April 12, 2007
TO THE STOCKHOLDERS:
Our Board of Directors is soliciting proxies for our 2007 Annual
Meeting of Stockholders. This Proxy Statement contains important information for
you to consider when deciding how to vote on the matters brought before the
meeting. Please read it carefully.
In this Proxy Statement:
o "We," "Us," "Our" and the "Company" refers to Riviera Holdings Corporation
(a Nevada corporation);
o "Annual Meeting" means our 2007 Annual Meeting of Stockholders that will be
held on Tuesday, May 15, 2007, at 11:00 a.m. Las Vegas time, at the Riviera
Hotel and Casino, 2901 Las Vegas Boulevard South, Las Vegas, Nevada 89109;
o "Common Stock" means our common stock, par value $.001 per share; and
o "Stockholders" means holders of record of our Common Stock as of the close of
business on April 3, 2007.
Our principal executive offices are located in the Riviera Hotel and
Casino at 2901 Las Vegas Boulevard South, Las Vegas, Nevada 89109. Our 2006
Annual Report, this Proxy Statement and the accompanying proxy card are first
being sent to stockholders on or about April 12, 2007.
Stockholders are entitled to one vote at the Annual Meeting for each
outstanding share of our Common Stock that they hold as of April 3, 2007 (the
"Record Date"). At the close of business on March 29, 2007, 12,463,755 shares of
our Common Stock were outstanding.
We request each Stockholder to execute and return the enclosed proxy as
soon as possible. The person who signs the proxy must be either (1) the
registered holder of such shares of our Common Stock or (2) a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
business entity, or any other person acting in a fiduciary or representative
capacity on behalf of such registered holder. You can revoke your proxy at any
time before it is voted, if so desired, by filing with the Secretary of the
Company an instrument revoking the proxy or by returning a duly executed proxy
bearing a later date, or by attending the Annual Meeting and voting in person.
Any proxy revocation should be sent to Riviera Holdings Corporation, 2901 Las
Vegas Boulevard South, Las Vegas, Nevada 89109, Attention: Secretary. Your
attendance at the Annual Meeting will not by itself constitute revocation of
your proxy.
2
We are paying all costs of the solicitation of proxies, including the
expenses of printing and mailing to Stockholders this Proxy Statement, the
accompanying Notice of Annual Meeting of Stockholders, the enclosed proxy card
and the Annual Report. We will also reimburse brokerage houses and other
custodians, nominees and fiduciaries for their expenses, in accordance with the
regulations of the Securities and Exchange Commission (the "SEC"), in sending
proxies and proxy materials to the beneficial owners of our Common Stock. Our
directors, officers and employees may also solicit proxies in person, or by
mail, e-mail or telephone, but such persons will receive no compensation for
that work, other than their normal compensation.
PURPOSE OF THE ANNUAL MEETING
At the Annual Meeting, the Stockholders will consider and vote on:
1. the election of five directors to hold office until our next
annual meeting of stockholders and until their respective
successors have been elected and qualified, or until
resignation or removal; and
2. such other matters as may properly come before the Annual
Meeting.
VOTE REQUIRED; PROXIES
The presence in person or by proxy of holders of a majority of the
shares of our Common Stock outstanding and entitled to vote as of the Record
Date is required for a quorum at the Annual Meeting. If a quorum is present, the
five director nominees who receive the highest number of votes will be elected
to our Board of Directors.
For any other matters submitted to Stockholders at the Annual Meeting,
if a quorum is present, the affirmative vote of a majority of the shares
represented and entitled to vote at the Annual Meeting will be required for
approval. Consequently, abstentions and "non-voted" shares, as described below
in this section, will have the same effect as a vote against any such other
matters submitted at the Annual Meeting.
Shares of our Common Stock represented by properly executed proxies
that have not been revoked will be voted in accordance with the instructions in
such proxies. If no contrary instructions are given, such shares will be voted:
(1) FOR the election of all nominees for director named in this Proxy Statement;
and (2) in the discretion of the persons named as proxy holders as to any other
matters that may properly come before the Annual Meeting.
It is possible that our shares held in the names of brokers or other
Stockholder nominees could be voted on certain matters but not others. This
would occur, for example, when the broker or nominee does not have discretionary
authority to vote the shares and is instructed by the beneficial owner to vote
on a particular matter but is not instructed on other matters. These are known
as "non-voted" shares. Non-voted shares will be counted for determining whether
a quorum is present, but will not be voted on matters as to which the beneficial
owner has given no voting instructions.
3
Shares of Common Stock may be voted under certain circumstances if they
are held in the name of a brokerage firm or nominee. Brokerage firms and
nominees that are members of the American Stock Exchange ("AMEX") have authority
under AMEX's rules to vote their customers' shares on certain "routine" matters
if the customers have not furnished voting instructions within a specified
period prior to the stockholders' meeting. Under these rules, the election of
directors is considered to be a "routine" matter.
PROPOSAL NO. 1
Election of Directors
(Item 1 on Proxy Card)
Our Board of Directors consists of five members, all of whom have been
nominated for election at the Annual Meeting. If elected, they will hold office
until the next annual meeting of our Stockholders and until their respective
successors have been elected and qualified, or until resignation or removal.
Directors
The following table presents information as of March 29, 2007 regarding
the five nominees for director:
Name Age Position
William L. Westerman 75 Our Chairman of the Board, Chief Executive
Officer ("CEO") and President; Chairman of
the Board and CEO of Riviera Operating
Corporation ("ROC"), our wholly-owned subsidiary
Jeffrey A. Silver 61 Our and ROC's director
Paul A. Harvey 69 Our and ROC's director
Vincent L. DiVito 47 Our and ROC's director
James N. Land, Jr. 77 Our and ROC's director
The following is a summary description of the business experience of
each of our current directors:
4
William L. Westerman has been our Chairman of the Board and CEO since
February 1993. Mr. Westerman was a consultant to Riviera, Inc. (our predecessor
company) from July 1, 1991 until he was appointed Chairman of the Board and CEO
of Riviera, Inc. on January 1, 1992. From 1973 to June 30, 1991, Mr. Westerman
was President and CEO of Cellu-Craft Inc., a manufacturer of flexible packaging
primarily for food products, and then had several positions with Alusuisse, a
multi-national aluminum and chemical company, following its acquisition of
Cellu-Craft in 1989.
Jeffrey A. Silver has been one of our and ROC's directors since
February 26, 2001. Mr. Silver is a shareholder with the law firm of Gordon &
Silver, Ltd., in Las Vegas, Nevada. Mr. Silver served as the Chief Deputy
District Attorney, Clark County, Nevada from 1972 to 1975 and was a Board Member
with the Nevada Gaming Control Board from 1975 to 1978 before engaging in the
private practice of law from 1979 to 1981 and 1984 to the present. Mr. Silver
was the Chief Operating Officer ("COO") and General Counsel of the Landmark
Hotel & Casino from 1981 to 1983, CEO of Riviera, Inc. from 1983 to 1984 and
Senior Vice President of Caesars Palace in 1984. Mr. Silver served on the Board
of the Las Vegas Convention and Visitors Authority from 1989 to 1992 as
Secretary/Treasurer and also served as trustee. He was a member of the Board of
Directors of the Greater Las Vegas Chamber of Commerce from 1988 to 1995 and in
1988 was its Chairman. Mr. Silver served for four years as a member of the
United States Travel and Tourism Advisory Board. He was President of the
International Association of Gaming Attorneys from 1992 to 1994 and Chairman of
the American Bar Association Section of Gaming Law from 1994 to 1996.
Major General Paul A. Harvey, USAF (Ret.) has been one of our and ROC's
directors since May 18, 2001. General Harvey is a consultant to the gaming,
hotel and resort industry. General Harvey spent 32 years on active duty in the
United States Air Force where he held numerous command positions throughout the
United States, Europe, Africa and the Middle East. He flew 160 combat missions
in Vietnam and Southeast Asia before retiring in 1991 as a command pilot with
over 5,000 flying hours. Following retirement, he was an Executive in Residence
and Assistant to the President of William Carey College and taught MBA studies
in management and leadership. General Harvey was the Executive Director of the
Mississippi Gaming Commission from 1993 through 1998 before becoming President
and CEO of Signature Works, Inc., the largest employer of blind and visually
impaired people in the world. In 2000 Signature Works, Inc. merged with LCI,
Inc. His present company, PDH Associates, Inc., provides consulting service to
the gaming, hotel and resort industry. Since 1996, General Harvey has served on
the board of directors of the National Center for Responsible Gaming. He also
serves on the board of directors of Vending Data Corporation which is
headquartered in Las Vegas, Nevada and is an AMEX-listed company, and on the
board of directors of Progressive Gaming International Corporation (formerly
known as Mikohn Gaming Corporation), also headquartered in Las Vegas, Nevada and
a publicly reporting company under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). General Harvey is also a Commissioner on the
Mississippi Band of Choctaw Indians Athletic and Boxing Commission.
5
Vincent L. DiVito was appointed as one of our and ROC's Directors
effective June 14, 2002. Mr. DiVito is Vice President, Chief Financial Officer
("CFO") and Treasurer of Lonza, Inc., a global specialties chemical business
headquartered in Allendale, New Jersey. Lonza, Inc. is part of Lonza Group,
whose stock is traded on the Swiss Stock Exchange. Prior to September 2000, Mr.
DiVito was Vice President and CFO of Algroup Wheaton, a global pharmaceutical
and cosmetics packaging company, after having served as the Director of Business
Development. From 1984 to 1990 Mr. DiVito was Vice President of Miracle
Adhesives Corp. (a division of Pratt & Lambert, an AMEX-listed manufacturer of
paints, coatings and adhesives). He also serves on the board of directors of
Vending Data Corporation, which is headquartered in Las Vegas, Nevada and is an
AMEX-listed company. Prior to 1984, Mr. DiVito spent two years on an audit team
at Ernst & Whinney (now Ernst & Young). Mr. DiVito is a certified public
accountant and certified management accountant.
James N. Land, Jr., is a corporate consultant and was appointed as one
of our and ROC's directors on April 12, 2004. Mr. Land was first elected as one
of our and ROC's directors on January 21, 1999 and served in that capacity until
May 31, 2002. From 1956 to 1976, Mr. Land was employed by The First Boston
Corporation in various capacities, including Director, Senior Vice President,
Co-Head of Corporate Finance, and head of International Operations. From 1971
through 1999, he served as a director of various companies, including Kaiser
Industries Corporation, Marathon Oil Company, Castle & Cooke, Inc., Manville
Corporation, Northwest Airlines Corporation, and Raytheon Company.
Executive Officers
The following table presents information as of March 29, 2007 regarding
our and ROC's executive officers:
Name Age Position
William L. Westerman 75 Our Chairman of the Board, CEO and President;
Chairman of the Board and CEO of ROC
Mark B. Lefever 42 Our and ROC's Treasurer and CFO; Executive Vice
President - Finance of ROC
Tullio J. Marchionne 52 Our and ROC's Secretary and General Counsel;
Executive Vice President of ROC
Robert A.Vannucci 59 President and COO of ROC
For a description of the business experience of William L. Westerman,
see "Directors" above.
Mark Lefever became our and ROC's CFO and Treasurer and ROC's Executive
Vice President-Finance on May 22, 2006. From May 2004 to April 2006, Mr. Lefever
was Senior Vice President and CFO of Resorts International Hotel & Casino, Inc.,
located in Atlantic City, New Jersey. From 2001 until December 2003, Mr. Lefever
was General Manager and Vice President of 29 Palms Enterprises, an operating
company for the former Trump 29 Casino, a California Native American casino
located in the greater Palm Springs area. Prior to that, Mr. Lefever served
initially as Vice President and CFO and later as COO of the Desert Inn Resort &
Casino from 1997 through 2000. Mr. Lefever's gaming career began in Tunica,
Mississippi as the Vice President and CFO of Sheraton Casino from 1996 through
1997. Prior to his gaming positions, Mr. Lefever spent 10 years in the audit and
business advisory practice with Arthur Andersen LLC. He is a member of the New
Jersey Society of Certified Public Accountants.
6
Tullio J. Marchionne became our General Counsel on January 10, 2000,
was appointed as our and ROC's Secretary on February 17, 2000 and was elected
Vice President of ROC on February 26, 2001 and Executive Vice President in June
of 2005. Mr. Marchionne was initially employed by Riviera, Inc., in June 1986 as
a casino dealer and served in various capacities including Pit Manager, General
Counsel and Director of Gaming Administration until September 1996, when he was
transferred to the Four Queens Hotel and Casino as Director of Casino Operations
pursuant to the management agreement our subsidiary had with the Four Queens. He
served in that position until May 1997. Mr. Marchionne served as the General
Manager of the Regency Casino Thessaloniki, located in Thessaloniki, Greece,
from June 1997 until December 1997. Mr. Marchionne served as a Casino Supervisor
with Bally's Las Vegas from February 1998 until June 1998, Director of Casino
Operations at the Maxim Hotel and Casino in Las Vegas from June 1998 until
November 1998 and Director of Table Games at the Resort At Summerlin from
November 1998 until December 1999.
Robert A. Vannucci was elected Vice President of Marketing and
Entertainment of ROC on April 26, 1994, Executive Vice President of Marketing
and Entertainment on July 1, 1998 and President of ROC on October 1, 2000. Mr.
Vannucci had been Director of Marketing of ROC since July 19, 1993. Mr. Vannucci
was Senior Vice President of Marketing and Operations at the Sands Casino Hotel
in Las Vegas from April 1991 to February 1993. He was Vice President and General
Manager of Fitzgerald's Las Vegas (a casino/hotel) from 1988 to January 1991.
Our and ROC's officers serve at the discretion of our and ROC's
respective Boards of Directors, and they are also subject to the licensing
requirements of the Nevada Gaming Commission.
Transactions with Related Persons
Jeffrey A. Silver, a director and Chairman of our Compensation
Committee, is a shareholder in the law firm of Gordon & Silver, Ltd., which we
retained for various legal matters during our last fiscal year and which we have
retained in our current fiscal year. During 2006, we paid $551,000 to Gordon &
Silver, Ltd. for legal fees and related expenses.
Because our shareholders disapproved the merger agreement with RAH at
a time when a competing proposal to acquire us had been announced and had not
been withdrawn, we could be liable to RAH for a Topping Fee of approximately
$7.9 million if, within 12 months after the August 29, 2006 termination date of
the merger agreement, we enter into a definitive agreement with a third party
with respect to the consummation of a Takeover Proposal or a Takeover Proposal
is consummated. A Takeover Proposal includes a proposal for the acquisition of
30% or more of our assets or more than 30% of our outstanding Common Stock or
the stock of any of our subsidiaries or for the acquisition of us or any of our
subsidiaries through a merger or other business combination.
7
Please see the "Stock Ownership of Certain Beneficial Owners and
Management" section of this proxy statement for information concerning the
beneficial ownership of Common Stock as of March 29, 2006 by RAH's owners and
their affiliates. We have identified them in that section as the Flag Parties,
the Torino Parties, the Sternlicht/Starwood Parties and the High
Desert/Bluhm/Carlin Parties.
Other than as noted above, there were no reportable relationships or
transactions for 2006.
Although not in writing, our Board of Directors engages in discussions
regarding related party transactions reflecting our Board's understanding of
policies and procedures which gives our Board the power to approve or disapprove
potential related party transactions of our directors and executive officers,
their immediate family members and entities where they hold a 5% or greater
beneficial ownership interest. Our Board is charged with reviewing all relevant
facts and circumstances of a related party transaction, including if the
transaction is on terms comparable to those that could be obtained in arm's
length dealings with an unrelated third party and the extent of the related
party's interest in the transaction.
When our Board of Directors deliberated over the merger proposal by RAH
which was rejected by our shareholders at the re-convening of our 2006 Annual
Meeting, RAH being a 5% shareholder, our Board did not apply any policies or
procedures in its review of the RAH proposal that it would not have applied if
the merger was proposed by a shareholder who did not hold a 5% or greater
beneficial ownership interest.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors and executive
officers and persons who beneficially own more than 10% of our Common Stock
("10% Shareholders") to file with the SEC certain reports regarding Common Stock
ownership. Such persons are required to furnish us with copies of all such
reports they file. Based solely on our review of such reports that were
furnished to us and written representations made to us by reporting persons in
connection with certain of these reporting requirements, we believe that all of
the reporting persons met their Section 16(a) reporting obligations on a timely
basis during 2006, except as reported below.
BCB Consultants, LLC and Brian C. Black made a late filing of Form 3 to
report their status as 10% Shareholders. Each of Lamb Partners, LLC; Lamb
Investors, Inc.; LAMB, LLC; Neil Bluhm; ONIROT Living Trust dated 6/20/2000;
Brett Torino; Flag Luxury Properties, LCC; MJX Flag Associates, LLC; Flag
Leisure Group, LLC; Sillerman Real Estate Ventures, LLC; LMN 134 Family Company
LLC; Robert Sillerman; and Paul Kanavos, in their status as 10% Shareholders,
made a late filing of a Form 4 to report one Common Stock transaction.
Director Independence
We have adopted Corporate Governance Guidelines and a Code of Conduct
applicable to each of our directors, officers and employees. Our Corporate
Governance Guidelines and Code of Conduct are posted on our Internet website at
www.rivierahotel.com under the "Investor Relations" link on our home page. The
non-management members of our Board of Directors regularly meet in executive
sessions in conjunction with each regularly scheduled meeting of the Board.
8
A majority of our directors are independent directors, based on AMEX's
standards that apply to us. Our Board of Directors determines whether a director
is independent through a broad consideration of all relevant facts and
circumstances, including an assessment of the materiality of any relationship
between the Company and a director not merely from the director's standpoint,
but also from the standpoint of persons or organizations with which the director
has an affiliation. In making its determination, our Board of Directors adheres
to the standards of the SEC and AMEX.
Using these standards, and based upon information requested from and
provided by each director concerning his background, employment and
affiliations, including family relationships, our Board of Directors has
affirmatively determined that Messrs. Harvey, DiVito and Land do not have a
material relationship with the Company (either directly or as a partner,
shareholder or officer of an organization that has a relationship with the
Company) and therefore they each qualify as independent directors. Mr.
Westerman, an executive officer of the Company, and Mr. Silver, due to his
position with Gordon & Silver, Ltd., have not been determined to be independent.
Our Board of Directors committees include standing Audit and Compensation
Committees.
Our Audit Committee is comprised of three members, each whom we have
determined to be independent, based on AMEX's standards that apply to us. Our
Board of Directors has determined that Mr. DiVito, Chairman of the Audit
Committee, is an "audit committee financial expert" as defined by the rules and
regulations of the SEC.
Our Compensation Committee is comprised of three members. Of those
three members, we have determined that Messrs. Harvey and DiVito meet AMEX's
independence standards that apply to directors and Mr. Silver does not.
As discussed below, our entire Board of Directors serves as our
nominating committee. As explained above, three of our directors meet AMEX's
independence standards and two do not.
Board of Directors and Committee Meetings and Attendance
We have a separately-designated standing Audit Committee, established
in accordance with section 3(a)(58)(A) of the Exchange Act. Our Audit Committee
is composed of Messrs. DiVito, Harvey and Land. Our Audit Committee recommends
to our Board of Directors the selection of an auditor, reviews the plan and
scope of our audits, reviews the auditors' critique of management and internal
controls and management's response to such critique and reviews the results of
our audit. In 2006 our Audit Committee met eight times.
9
We have a Compensation Committee composed of Messrs. Silver, Harvey and
DiVito. Our Compensation Committee is responsible for recommending executive
compensation programs to our Board of Directors and for approving all
compensation decisions with respect to our CEO and his compensation
recommendations for our other executive officers. In 2006 our Compensation
Committee met four times.
Our full Board of Directors serves as our nominating committee. See
"Nominating Committee" below for further information.
In 2006, our Board of Directors held 24 meetings. No member of our
Board of Directors attended in 2006 less than 75% of the aggregate of (1) the
number of meetings of our Board of Directors and (2) the total number of
meetings held by all committees on which he served.
We strongly encourage members of our Board of Directors to attend all
of our annual meetings of stockholders. All of the members of our Board of
Directors were in attendance in person at our 2006 annual meeting of
stockholders held on August 8, 2006 and in attendance either in person or via
telephone hook-up at the reconvening of the 2006 annual meeting on August 29,
2006.
Nominating Committee
Our entire Board of Directors serves as our nominating committee.
Director nominations are decided upon by our Board of Directors after it
receives the recommendations of a majority of our directors who meet the AMEX
independence requirements that apply to us for the director nomination process.
Three of our five directors who are standing for re-election meet those AMEX
independence requirements. We do not have a charter governing the recommendation
or nomination process, nor do we have a policy regarding director candidates
recommended by our stockholders. That is because historically, we have rarely
been contacted by outside stockholders who have expressed an interest in serving
on our Board of Directors or in recommending candidates to serve in that
capacity. Given this lack of activity, we have seen no need to adopt any
specific policies on this subject, nor have we established specific standards
for evaluating director candidates recommended by our stockholders, as compared
with our standards for evaluating director candidates recommended by other
persons.
In order for us to nominate a candidate for our Board of Directors, the
candidate must have a strong business background and display a sense of
leadership. We believe that each member of our Board of Directors should possess
certain skills that complement the skills of the other members, so as to achieve
our overall goal of having a well-rounded Board of Directors. Qualities and
skills necessary for consideration are a financial, legal or business background
or demonstrated leadership abilities.
Audit Committee
In accordance with its written charter adopted by our Board of
Directors, our Audit Committee assists our Board of Directors in fulfilling its
responsibility for oversight of the quality and integrity of our accounting,
auditing and financial reporting practices. Our Audit Committee charter is
posted on our Internet website at www.rivierahotel.com under the "Investor
Relations" link on our home page.
10
During our fiscal year ended December 31, 2006, our Audit Committee met
eight times, and our Audit Committee chairman, as representative of the Audit
Committee, discussed the interim financial information contained in each of our
quarterly earnings announcements with our CFO and independent auditors prior to
public release.
In discharging its oversight responsibility as to the audit process,
our Audit Committee obtained from our independent auditors a formal written
statement describing all relationships between the auditors and us that might
bear on the auditors' independence, consistent with Independence Standards Board
Standard No. 1, "Independence Discussions with Audit Committees," discussed with
the auditors any relationships that may impact their objectivity and
independence, and satisfied itself as to the auditors' independence. Our Audit
Committee specifically addressed, discussed and concluded that our independent
auditors' provision of non-audit services was compatible with maintaining the
auditors' independence. Our Audit Committee also discussed with our management,
our internal auditors and our independent auditors the quality and adequacy of
our internal controls and our internal audit function's organization,
responsibilities, budget and staffing. Our Audit Committee reviewed with both
the independent auditors and our internal auditors their audit plans, audit
scope, and identification of audit risks.
Our Audit Committee discussed and reviewed with our independent
auditors all communications required by generally accepted auditing standards,
including those described in Statement on Auditing Standards No. 61, as amended
(Codification of Statements on Auditing Standards, AU Section 380), and with and
without our management present, discussed and reviewed the results of the
independent auditors' examination of our financial statements. Our Audit
Committee also discussed with our full Board of Directors the results of the
internal audit examinations.
Our Audit Committee reviewed our audited financial statements as of and
for the year ended December 31, 2006, with our management and with our
independent auditors. Our management has the responsibility for the preparation
of our financial statements and the independent auditors have the responsibility
for the examination of those statements.
Based on the above-mentioned review and discussions with our management
and with the independent auditors, our Audit Committee recommended to our Board
of Directors that our audited financial statements be included in our Annual
Report on Form 10-K for the year ended December 31, 2006, for filing with the
SEC. Our Audit Committee also recommended the engagement Deloitte & Touche, our
independent auditors, to prepare our 2006 tax returns and our Board of Directors
accepted our Audit Committee's recommendation.
Date: April 11, 2007 Vincent L. DiVito Chairman
Paul A. Harvey Member
James N. Land, Jr. Member
11
Compensation Committee
Although we do not have a Compensation Committee charter, our
Compensation Committee endeavors to ensure that the compensation program for our
executive officers is effective in attracting and retaining key executives
responsible for our success and is tailored to promote our and our stockholders'
long-term interests. The 2006 executive officer compensation program was
principally comprised of base salary, the Incentive Compensation Program, a
401(k) plan, and the Restricted Stock Plan.
We do not provide any executive officer or director with a gross-up or
other reimbursement for tax amounts he might pay under Section 280G or Section
409A of the Internal Revenue Code. Section 280G and related Internal Revenue
Code sections provide that executive officers, directors who hold significant
stockholder interests and certain other service providers could be subject to
significant additional taxes if they receive payments or benefits in connection
with a change in control of the Company that exceeds certain limits, and that
the Company or our successor could lose a tax deduction on the amounts subject
to the additional tax. Section 409A also imposes additional significant taxes in
the event that an executive officer, director or service provider receives
"deferred compensation" that does not meet the requirements of Section 409A. To
assist in the avoidance of additional tax under Section 409A, we structured our
Deferred Compensation Plan and equity awards in a manner intended to comply with
the applicable Section 409A requirements.
In determining which elements of compensation are to be paid, and how
they are weighted, we take into account whether a particular form of
compensation will be considered "performance-based" compensation for purposes of
Section 162(m) of the Internal Revenue Code. Under Section 162(m), we generally
receive a tax deduction for compensation paid to any of our executive officers
only if the compensation is less than $1 million during any fiscal year or is
"performance-based" under Section 162(m). Both our 2005 Incentive Stock Option
Plan (the "Employee Plan") and Incentive Compensation Program permit us to pay
compensation that is "performance-based" and thus fully tax-deductible. Our
Compensation Committee intends to continue seeking a tax deduction for all of
our executive compensation, to the extent we determine it is in our best
interests to do so. All of the stock options granted to our executive officers
qualify under Section 162(m) as performance-based compensation. Some of the
restricted stock and performance shares granted to our executive officers do not
qualify as performance-based compensation, but the options we may grant to
executives are intended to qualify as performance-based compensation under
Section 162(m).
Our Compensation Committee reviews all principal aspects of executive
compensation, including base salaries and short-term and long-term incentives.
Our Compensation Committee occasionally meets with our President and CEO, Mr.
Westerman, or other executives to obtain recommendations with respect to our
compensation programs, practices and compensation packages. Our Compensation
Committee considers, but is not bound to and does not always accept,
management's recommendations with respect to executive compensation. Our
Compensation Committee has changed several of management's proposals in recent
years, including fiscal 2007 proposals.
12
Our Compensation Committee has the ultimate authority to determine
compensation of our executive officers, but may, in its discretion, delegate any
of its responsibilities. Our Compensation Committee also has authorized Mr.
Westerman to make salary adjustments and bonus decisions for all employees other
than executive officers under guidelines established by our Compensation
Committee. Our Compensation Committee has not delegated any of its authority
with respect to compensation of executive officers.
Our Compensation Committee takes into account various qualitative and
quantitative indicators of corporate and individual performance in determining
the level and composition of compensation for our CEO and his recommendations
regarding the other executive officers. In particular, our Compensation
Committee considers several financial performance measures, including revenue
growth and net income. However, our Compensation Committee does not apply any
specific quantitative formula in making compensation decisions. Our Compensation
Committee also considers achievements that, while difficult to quantify, are
important to our long-term success. Our Compensation Committee seeks to create a
mutuality of interest between our officers and stockholders by increasing the
executive officers' ownership of Common Stock through our Employee Stock
Ownership Plan (the "ESOP"), Deferred Compensation Plan (the "DCP") and
Restricted Stock Plan. On March 10, 2005, due to the expiration of our 1993
Employee Stock Option Plan (the "1993 Plan"), our Compensation Committee
approved the Employee Plan, which was approved by our stockholders on May 17,
2005 at our 2005 annual meeting. 1,000,000 shares of our Common Stock have been
allocated for the Employee Plan.
Salary levels for our executive officers are significantly influenced
by the need to attract and retain management employees with high levels of
expertise. In each case, we consider personal factors, such as the individual's
experience, responsibilities and work performance, and external factors, such as
salaries paid by comparable companies in the gaming industry. With regard to the
latter, because of the opening of new properties and expansion of existing
properties on the Las Vegas Strip coupled with the growth of riverboat and
dockside gaming, Native American gaming operations and the proliferation of
jurisdictions in which gaming is permitted, we compete with numerous other
companies for a limited pool of experienced and skilled personnel. Therefore, it
is critical that we provide base salaries that are competitive in the casino
industry. With respect to the personal factors, our Compensation Committee makes
salary decisions in an annual review based in part on the recommendations of our
CEO. This annual review considers the decision-making responsibilities of each
position as well as the experience and work performance of each executive. Our
CEO views work performance as the single most important measurement factor.
The compensation of Mr. Westerman for our last completed fiscal year
was set pursuant to his employment agreement described below in "Employment
Agreements."
Security Holder Communications
Our security holders may send communications to our Board of Directors
by directing such communications to our Treasurer and CFO, Mark Lefever.
Communications may be sent to Mr. Lefever via mail at our corporate offices
located at 2901 Las Vegas Boulevard South, Las Vegas, NV 89109; via telephone or
fax at (800) 362-1460 or (702) 794-9442, respectively; or via e-mail at
mlefever@theriviera.com. Mr. Lefever will direct all relevant communications, as
determined by Mr. Lefever and by our Secretary and General Counsel, to the
appropriate director(s).
13
Our Board of Directors unanimously recommends that you vote "FOR" each
of the five Director nominees named above.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
Compensation Discussion and Analysis
Overview of Compensation Program and Philosophy
------------------------------------------------
Our executive compensation program is intended to meet three principal
objectives: (1) attract, reward and retain executive officers and other key
employees; (2) motivate these individuals to achieve short-term and long-term
corporate goals that enhance stockholder value; and (3) support our core values
and culture by promoting internal equity and external competitiveness. To meet
these objectives, we have adopted the following overriding policies:
o Pay compensation that is competitive with the practices of other mid-cap
gaming companies; and
o Pay for performance by:
o establishing challenging performance goals for our
executive officers and providing short-term
incentives through an Incentive Compensation Program
that is based upon achievement of these goals; and
o providing long-term, significant incentives in the
form of restricted stock, or stock options or both in
order to retain individuals with the leadership
abilities necessary for increasing long-term
stockholder value while at the same time aligning the
interests of our officers with those of our
stockholders.
These policies guide our Compensation Committee (the "Committee") in
assessing the proper allocation among long-term compensation, current cash
compensation and short-term bonus compensation. Other compensation
considerations include our business objectives, fiduciary and corporate
responsibilities, competitive practices and trends and regulatory requirements.
In determining the particular elements of compensation that will be
used to implement our overall compensation policies, the Committee takes into
consideration a number of factors related to performance, such as our EBITDA (as
calculated below), earnings per share, profitability, the specific operational
and financial performances of our two properties (Riviera Las Vegas and Riviera
Black Hawk), competitive practices among our Peer Group (as defined below) and
the effects of prior years' long-term incentives, mainly stock options which
were last awarded to executives in 2002. We calculate EBITDA as follows:
earnings before interest, income taxes, depreciation, amortization, equity-based
compensation, asset impairment, Sarbanes-Oxley Act expenses and mergers,
acquisitions and development costs, net.
14
Our executive compensation program, excluding the granting of stock
options, is overseen and administered by the Committee. The granting of stock
options to executives is within the purview of our Stock Option Committee. Two
of the three members of the Committee meet AMEX's independence standards that
apply to our directors. Our Stock Option Committee is comprised of the two
Committee members who meet those independence standards.
The Committee reviews all principal aspects of executive compensation,
including base salaries and short-term and long-term incentives. The Committee
occasionally meets with our President and CEO, Mr. Westerman, or other
executives to obtain recommendations with respect to our compensation programs,
practices and compensation packages. The Committee considers, but is not bound
to and does not always accept, our management's recommendations with respect to
executive compensation. The Committee has changed several of our management's
proposals in recent years, including fiscal 2007 proposals.
The Committee has the ultimate authority to determine the compensation
of our executive officers, except for compensation in the form of stock options,
which is determined by our Stock Option Committee. The Committee may, in its
discretion, delegate some or all of its authority. The Committee, though, has
not delegated any such authority in recent years. The Committee has authorized
Mr. Westerman to make salary adjustments and bonus decisions for all employees
other than executive officers under guidelines established by the Committee.
Elements of Compensation
-------------------------
There are six major elements that comprise our executive compensation
program: (1) base salary; (2) annual incentive opportunities, including bonuses;
(3) long-term incentives such as equity-based awards; (4) retirement benefits
under our 401(k) plan; (5) severance agreements in the event of a change in
control of the Company, and (6) executive perquisites and generally available
benefit programs. We have selected these elements because we consider them to be
useful or necessary to meet one or more of the principal objectives of our
compensation policy. For instance, we establish base salary and annual target
incentives with the goal of attracting qualified executives and other key
employees and adequately compensating and rewarding them for day-to-day
performance. Our equity-based programs provide an incentive and reward for the
achievement of long-term business objectives and retention of key executives. We
believe these elements of compensation are and will continue to be effective in
achieving the objectives of our compensation program. In an effort to retain key
employees, the Committee has annually renewed change of control protections for
certain executive officers and other key employees. Those protections would only
be triggered by a change in control of the Company.
15
The Committee reviews our compensation program annually, taking into
account any decisions made by our Stock Option Committee regarding grants of
stock options, to ensure that benefit levels remain competitive within our
market. In setting compensation levels for particular executives, the Committee
considers the proposed compensation package as a whole as well as each element
of the compensation package. In addition, the Committee considers our stock
ownership guidelines and each executive's past and expected future contributions
to our business. With the exception of Messrs. Westerman and Vannucci, we do not
have employment agreements with executive officers or employees. The employment
agreements with Messrs. Westerman and Vannucci are discussed below under
"Further Information Concerning Summary Compensation and Grants of Plan-Based
Awards Tables - Employment Agreements."
Base Salary and Annual Incentive Opportunities
Base salary and short-term incentive awards currently make up the
significant portion of our executive compensation package. We pay awards in
order to motivate executives to achieve our business goals. The Committee
determines each executive's target total annual cash compensation (salary and
incentive awards) after considering many factors, including executive
compensation information from a group of ten similar companies we consider to be
within our peer group ("Peer Group"). This review usually occurs in the first
quarter of each year. The Peer Group typically includes a range of companies in
the small-and mid-cap gaming industry with whom we compete for executives. For
2006, the Peer Group was comprised of companies of at least a similar size and
scope of operations as we have, as measured by market capitalization, revenue,
EBITDA and enterprise value. The Committee intends to use the same Peer Group
for fiscal 2007. The Peer Group consists of the following companies:
MTR Gaming Group, Inc. Trump Entertainment Resorts, Inc.
Monarch Casino & Resort, Inc. Isle of Capri Casinos, Inc.
Archon Corp. Colony LVH Acquisitions Inc.
d/b/a Las Vegas Hilton
Century Casinos, Inc. Dover Downs Gaming & Entertainment, Inc.
Resorts International Hotel & Empire Resorts, Inc.
Casino
We gather data concerning compensation practices of the Peer Group
generally through searches of publicly available information. Because publicly
available information does not typically include information regarding target
cash compensation, we rely upon compensation surveys to benchmark our target
cash compensation levels versus the Peer Group. We gather Peer Group data with
respect to base salary, award targets and all equity-based awards (including
stock options, restricted stock and long-term cash-based awards). The Peer Group
data do not include deferred compensation benefits or general, more commonly
available benefits such as 401(k) plans and health care coverage.
16
Our goal is to target base pay at the mid-level and total cash
compensation at the upper level of the Peer Group. When determining base salary,
the Committee also considers factors such as job performance, skill sets, prior
experience, each executive's time in his or her position, internal consistency
regarding pay levels for similar positions or skill sets, and external pressures
to attract and retain executives under current market conditions. Positioning
the base pay at the mid-level of our Peer Group aids us in controlling fixed
costs and attracting key executives. Targeting total short-term compensation at
the upper level of the Peer Group provides higher incentive compensation
opportunity, rewards goal achievement and allows total short-term compensation
to be more competitive as a whole. We analyze base pay and targeted short
term-cash compensation to determine variances with our compensation targets,
using the combination of publicly available information and survey data as
described above. We have not awarded stock options to executives since 2002 and
given the recent accounting ramifications and the retirement of certain
executives in 2006, such options will only be granted on a selective basis going
forward. Mr. Westerman does not participate in our performance-based incentive
compensation programs and, therefore, his recommendations regarding performance
targets are unbiased and a significant and useful tool for the Committee.
The Committee did not change the base salary for Mr. Westerman in 2006.
There were changes, however, to the compensation of Messrs. Vannucci and
Marchionne during 2006. Mr. Vannucci's contract was amended from an annual
$100,000 bonus in cash or restricted stock plus a matching bonus in cash or
restricted stock equal to his Incentive Compensation Program award. Instead, his
salary was increased by $100,000 and his eligibility for an Incentive
Compensation Program award was increased from $100,000 to $200,000. Mr.
Marchionne's responsibilities increased with the departure of certain executives
during 2006, and Mr. Westerman recommended to the Committee a salary increase
based on Mr. Marchionne's increased responsibilities. The Committee accepted Mr.
Westerman's recommendation and determined that the increase was appropriate.
Mark Lefever, our Treasurer and CFO, was hired in May of 2006.
Incentive Compensation Program
We maintain an annual Incentive Compensation Program for executives and
key employees to encourage and reward achievement of our business goals and to
assist in attracting and retaining key personnel. Based on the objectives
described above, the Committee annually develops and approves specific
performance targets for the following year under our Incentive Compensation
Program, in which Messrs. Vannucci, Lefever and Marchionne participate along
with approximately 80 other key employees.
We pay cash awards under this program only when the performance goals
that the Committee established prior to the applicable fiscal year are achieved.
The award formula is based on the anticipated difficulty and relative importance
of achieving the performance goals. A major component of the formula is EBITDA
of each of our two properties (Riviera Las Vegas and Riviera Black Hawk) for
property-specific personnel and combined EBITDA for corporate personnel.
Accordingly, any awards paid for any given fiscal year will vary depending on
actual performance. Each executive must remain an employee through the end of
the year in order to be eligible for the award. The Committee has discretion to
increase or decrease awards when performance goals are achieved, and to make
discretionary awards when performance goals are not achieved.
17
In November 2006, the Committee established the Incentive Compensation
Program award formula and performance goals that will be used to determine
awards in 2007. The major factor in determining whether an award will be paid
will be our actual performance during 2007 versus the predetermined goals. The
established goals for 2007 are based on property-level and Company EBITDA and
the participant's employment position with us. Under the approved formula, the
2007 award range for Mr. Vannucci is zero to $400,000, with a target of $200,000
if the EBITDA target is achieved. For each executive officer other than Mr.
Westerman and Mr. Vannucci, the range is zero to $200,000 with a target of
$100,000 if the EBITDA target is achieved. All participants in our Incentive
Compensation Program will have their respective awards calculated in accordance
with the formula approved by the Committee.
Long-Term Incentive Compensation
We provide long-term, equity-based incentive compensation through
awards of stock options and restricted stock that generally vest over multiple
years. This form of compensation is intended to align the interests of our
executives with those of our stockholders by creating an incentive for our
executives to maximize stockholder value. Our equity-based compensation is also
designed to encourage our executives to remain employed with us despite a very
competitive labor market. Because of various reasons including accounting costs
associated with awarding stock options, we target the value of our equity-based
awards to be in the lower percentiles of the Peer Group.
Although we have not granted employee stock options since 2002, we are
authorized to do so under our stockholder-approved Employee Plan. Option grants
approved during scheduled Stock Option Committee meetings become effective and
are priced as of the date of approval or a predetermined future date. Grants
approved by unanimous written consent become effective and are priced as of the
date the last Stock Option Committee member's signature is obtained or as of a
predetermined future date as established in the written consent. Neither the
Committee nor the Stock Option Committee grants equity-based awards in
anticipation of the release of material nonpublic information such as a
significant earnings announcement that is likely to affect the price of our
stock. Similarly, neither the Committee nor the Stock Option Committee times the
release of material nonpublic information based on anticipated equity-based
awards. Also, because equity-based compensation awards typically vest over a
period of time, the value to recipients of any immediate increase in the price
of our stock following a grant is attenuated.
18
The Committee regularly monitors the environment in which we operate
and makes changes to our equity-based compensation program to help us meet our
goals, including achieving long-term stockholder value. In order to continue to
attract and retain highly skilled executives, the Committee approved changes to
our equity-based compensation program in prior years that were designed to
reward our employees for hard work and long-term commitment to our success and
growth. During 2006, neither stock options nor restricted shares were granted to
executives or other employees. Nevertheless, we believe stock options can be an
effective tool for meeting our goal of increasing long-term stockholder value by
tying the value of the stock options to our performance in the future. Employees
are able to profit from stock options only if our stock price increases in value
over the term of the option period. Due to the recent land value escalation in
Las Vegas, we believe the price of our stock is more closely tied to land values
than operating performance. However, we do believe that stock option awards
could help us to retain certain key executives and, therefore, stock options may
be awarded on a selected basis in the future.
The amount of options or restricted stock that we grant to each
executive officer or key employee and the vesting schedule for each grant is
determined by a variety of factors, including the range of equity-based awards
granted by the Peer Group and our goal of having our equity-based awards fall
within the lower percentiles of the Peer Group, as well as the performance
rating each executive receives from Mr. Westerman, who considers a number of
factors in his reviews of the performance of each executive. These include
individual accomplishments, how effectively the executive reflects our values,
and the feedback regarding the executive from other employees who have an
interest in or are affected by the executive's job performance.
Executive Compensation
The following table presents a summary of the compensation we paid in
the years ended December 31, 2006, 2005 and 2004 to our and ROC's CEO and
executive officers, including two executive officers who left our employment in
2006 (collectively, the "Named Executive Officers").
19
SUMMARY COMPENSATION TABLE
--------------------- ------ -------------- ------ ------------ ------ ------------ ------------ ------------ -------------
Name and Principal Year Salary Bonus Stock Option Non-Equity Change in All Other Total
Position Awards Awards Incentive Pension Compen-sation2,
($) ($) Plan Value and (3) ($)
($) ($) Compen-sation Non-qualified
Deferred ($)
($) Compen-sation
Earnings(4)
($)
--------------------- ------ -------------- ------ ------------ ----- ------------ ------------ ------------ ---------------
William L. 2006 $1,000,000 - - - - $215,110 $29,253 $1,244,363
Westerman 2005 $1,000,000 - - - - $290,793 $30,370 $1,321,163
Our Chairman of the 2004 $1,000,000 - - - - $442,178 $29,870 $1,472,048
Board, President
and CEO; Chairman
of the Board and
CEO of ROC
--------------------- ------ -------------- ------ ------------ ----- ------------ ------------ ------------ ---------------
Robert A. Vannucci 2006 $423,265(5) - $163,000(6) - $92,500 - $10,307 $689,072
President and COO 2005 $400,000(5) - $132,186(6) - - - $10,923 $543,109
of ROC 2004 $410,000(5) - - - $114,000 - $9,923 $533,923
--------------------- ------ -------------- ------ ------------ ----- ------------ ------------ ------------ ---------------
Mark B. Lefever 2006 $149,039 - - - $73,000 - $11,000 $233,039
Our Treasurer and 2005 - - - - - - -
CFO; Executive Vice 2004 - - - - - - - -
President-Finance; -
CFO and Treasurer
of ROC
--------------------- ------ -------------- ------ ------------ ----- ------------ ------------ ------------ ---------------
Tullio J. 2006 $205,769 - $42,975(6) - $73,000 - $10,768 $332,512
Marchionne(8) 2005 $188,215 - $34,851(6) - $54,000 - $11,885 $288,951
Our Secretary and 2004 - - - - - - - -
General Counsel;
Secretary, General
Counsel and
Executive Vice
President of ROC
--------------------- ------ -------------- ------ ------------ ----- ------------ ------------ ------------ ---------------
Duane R. Krohn 2006 $120,830 - $81,500(6) - - - $6,563 $208,893
Former Treasurer 2005 $250,000 - $66,093(7) - $54,000 - $12,313 $382,406
and CFO; Former 2004 $250,000 - - - $57,000 - $11,813 $318,813
Treasurer, CFO and
Executive Vice
President-Finance
of ROC (retired,
5/2/06)
--------------------- ------ -------------- ------ ------------ ----- ------------ ------------ ------------ ---------------
Ronald P. Johnson 2006 $122,753 - $81,500(6) - - - $5,885 $210,138
Former Executive 2005 $250,000 - $66,093(7) - $54,000 - $12,929 $383,022
Vice President of 2004 $250,000 - - - $90,500 - $12,429 $352,929
Gaming Operations
of ROC (resigned,
5/19/06)
--------------------- ------ -------------- ------ ------------ ------ ------------ ------------ ------------ ---------------
(1) The reported amounts are awards paid under our Incentive Compensation
Program for achievements of our performance targets for the reported year.
(2) Includes amounts contributed under our 401(k) plan.
(3) Includes premiums we paid for auto allowance, long-term health care,
maintaining a suite for Mr. Westerman at our Las Vegas property associated
with his duties as CEO and moving expenses to Mr. Lefever associated with his
acceptance of our offer of employment.
(4) Includes the portion of the interest earned on Mr. Westerman's retirement
account that exceeds the interest, which would have been earned if the
interest rate had been 120% of the applicable federal long-term rate, with
compounding, prescribed under Section 1274(d) of the Internal Revenue Code.
Additional interest earned on Mr. Westerman's retirement account that is not
reported in the above table amounted to $198,158 in 2006, $238,632 in 2005
and $195,977 in 2004.
(5) Includes quarterly awards to Mr. Vannucci under his former employment
agreement. Under that agreement, Mr. Vannucci had the choice of $25,000 in
cash or in restricted Common Stock per quarter. Mr. Vannucci entered into a
new employment agreement effective September 1, 2006, under which he no
longer receives the quarterly awards.
(6) Includes shares granted on April 6, 2005 under our Restricted Stock Plan in
substitution for stock options that we had attempted to grant but were unable
to, due to expiration of the 1993 Plan. Mr. Vannucci received 60,000 shares;
Mr. Krohn and Mr. Johnson each received 30,000 shares; and Mr. Marchionne
received 19,500 shares. The dollar amounts reported in the table for 2005 and
2006 are the amounts that we recognized for financial reporting purposes with
respect to each of those years in accordance with Statement of Financial
Accounting Standards No. 123R("FAS"). We included those amounts in the
"Equity compensation" line item in our Consolidated Statements of Operations
for the years ended December 31, 2006 and 2005, which are included in our
financial statements in our Form 10-K for the year ended December 31, 2006.
Please refer also to notes 1 and 13 to those financial statements for further
information regarding our calculation of these amounts. Those amounts are
based on the reported closing price of the Common Stock on AMEX on the date
we granted those shares, which was $12.37 per share.
(7) Upon the retirement of Mr. Krohn on May 2, 2006 and resignation of Mr.
Johnson on May 19, 2006, they each forfeited 24,000 of the restricted shares
that we granted to them on April 6, 2005, as explained in note 6, above.
Based on the reported closing price of the Common Stock on AMEX on the date
of the grants, the forfeited shares for each of them had a value of $325,999.
The forfeited amounts are not included in the table above.
(8) Under the SEC's executive compensation disclosure rules, Mr. Marchionne did
not become a Named Executive Officer until 2005.
In 2006 the only plan-based awards that we granted were under our
Incentive Compensation Program, as reported below.
In 2006, we fixed our 2007 performance targets for the Incentive
Compensation Program and the ESOP. To the extent that we achieve those
respective targets in 2007, our Incentive Compensation Program participants will
be entitled to cash awards and our ESOP participants will be entitled to
contributions to their ESOP accounts. Those awards and contributions will then
be reported for 2007 in next year's Summary Compensation Table in the Non-Equity
Incentive Plan Compensation column.
21
GRANTS OF PLAN-BASED AWARDS
---------- ----------- ---------------------------------- ------------------------------- ----------- ------------- ---------
Name Grant Estimated Future Payouts Under Estimated Future Payouts Under All Other All Other Exercise
Date Non-Equity Incentive Plan Awards Equity Incentive Plan Awards Stock Option or Base
Awards: Awards: Price of
Number of Number of Option
Shares of Securities Awards
Stock or Under-lying ($/Sh)
Units Options
(#) (#)
---------- ----------- ---------------------------------- -------------------------------- -------- --------------- ----------
Thres- Target Maximum Thres- Target Maximum
hold hold
($) ($) ($) (#) (#) (#)
---------- ----------- -------- ------------ ------------ --------- ---------- ----------- ----------- ------------- ---------
William L. 11/13/06(1) $0 $10,000 $40,000 - - - - - -
Westerman
---------- ----------- -------- ------------ ------------ --------- ---------- ----------- ----------- ------------- ---------
Mark B. 11/13/06(1) $0 $2,500 $10,000 - - - - - -
Lefever 11/13/06(2) $0 $100,000 $200,000
---------- ----------- -------- ------------ ------------ --------- ---------- ----------- ----------- ------------- ---------
Robert A. 11/13/06(1) $0 $4,000 $16,000 - - - - - -
Vannucci 11/13/06(2) $0 $200,000 $400,000
---------- ----------- -------- ------------ ------------ --------- ---------- ----------- ----------- ------------- ---------
Tullio J. 11/13/06(1) $0 $2,500 $10,000 - - - - - -
Marchionne 11/13/06(2) $0 $100,000 $200,000
---------- ----------- -------- ------------ ------------ --------- ---------- ----------- ----------- ------------- ---------
Duane R.
Krohn - - - - - - - - - -
---------- ----------- -------- ------------ ------------ --------- ---------- ----------- ----------- ------------- ---------
Ronald P. - - - - - - - - - -
Johnson
---------- ----------- -------- ------------ ------------ --------- ---------- ----------- ----------- ------------- ---------
(1)This line item represents our ESOP plan-based award, which
may be paid in 2008 for performance in 2007.
(2)This line item represents our Incentive Compensation Program plan-based
award, which may be paid in 2008 for performance in 2007.
Further Information Concerning Summary Compensation
and Grants of Plan-Based Awards Tables
The following descriptions of our compensation agreements, plans and
programs are intended to assist in your reading and understanding of the
information reported in the Summary Compensation and Grants of Plan-Based Awards
tables above and the related footnotes.
22
Employment Agreements
Mr. Westerman serves as our Chairman of the Board, President and CEO,
as Chairman of the Board and CEO of ROC, and as President of Riviera Black Hawk,
Inc.
Under Mr. Westerman's employment agreement, which was last amended on
July 15, 2003, he is employed for an indefinite period, subject to termination
by Mr. Westerman upon at least 180 days written notice or by us upon at least 90
days written notice. Mr. Westerman's base annual compensation is $1,000,000.
Under his employment agreement, Mr. Westerman is not entitled to participate in
our Incentive Compensation Program or any other executive bonus plan.
Mr. Westerman's employment agreement required us to fund a retirement
account for him. We no longer make principal contributions to the retirement
account, but the account continues to accrue interest. The retirement account
had a balance, including accrued interest, of $3,094,000 as of December 31,
2006.
We credit Mr. Westerman's retirement account quarterly with interest on
the first day of each succeeding calendar quarter in an amount equal to the
product of (1) our average borrowing cost for the immediately preceding fiscal
year, as determined by our CFO, and (2) the average outstanding balance in the
retirement account during the preceding calendar quarter. At the recommendation
of the Committee, in order to reduce the amount that would be payable
immediately upon Mr. Westerman's separation from employment with us, Mr.
Westerman and we agreed that the following cash payments would be made to him
commencing April 1, 2003, and continuing on the first day of each quarter
thereafter: (1) a distribution of $250,000 from the principal balance of his
retirement account; and (2) the quarterly interest credited to his retirement
account one quarter in arrears. Total interest accrued to Mr. Westerman's
account in 2006 was $400,000, $518,000 in 2005 and $638,000 in 2004. The
quarterly distributions of principal from Mr. Westerman's retirement account in
2006 are reported in the Pension Benefits table below but are not reported in
the Summary Compensation Table above.
We retain beneficial ownership of Mr. Westerman's retirement account,
which is earmarked to pay his retirement benefits. However, upon (1) the vote of
a majority of the outstanding shares of Common Stock approving a "Change of
Control" (as discussed directly below), (2) the occurrence of a Change of
Control of the Company without Mr. Westerman's consent, (3) a breach by us of a
material term of the employment agreement or (4) the expiration or earlier
termination of the employment agreement for any reason other than cause, Mr.
Westerman has the right to require us to establish a Rabbi Trust for his benefit
and to require us to fund it with cash equal to the amount then credited to his
retirement account, including any amount to be credited to his retirement
account upon a Change of Control.
On February 5, 1998, Stockholders approved a merger agreement that
constituted a Change of Control under Mr. Westerman's employment agreement.
(That agreement was later terminated without consummation of the merger.) On
March 5, 1998, Mr. Westerman exercised his right to require us to establish and
fund a Rabbi Trust for his benefit. On March 20, 1998, Mr. Westerman waived his
right to have us fund the Rabbi Trust in exchange for our agreement to fund it
within five business days after notice from him.
23
If Mr. Westerman ceases to be employed by us (except for termination
for cause, in which case Mr. Westerman would forfeit all rights to monies in the
retirement account), he will be entitled to receive the amount in the retirement
account (principal and interest) in 20 equal quarterly installments commencing
as of the date he ceases to be employed. In the event that Mr. Westerman's Rabbi
Trust has not yet been funded, the entire balance of principal and interest of
the retirement account shall be paid directly to Mr. Westerman upon his
retirement or termination (except for cause) upon a Change of Control.
Mr. Westerman's agreement also provides that for 24 months following
termination of employment for any reason except cause, he shall not engage in
any activity, which is in competition with us within a 75-mile radius from the
location of any hotel or casino then operated by us. As consideration for not
competing, we will pay Mr. Westerman a total of $500,000 in two equal annual
installments of $250,000. The first installment will be payable within five
business days of termination of employment, with the second installment payable
on the first anniversary of termination.
Robert A. Vannucci serves as President and COO of ROC. We entered into
a new employment agreement with Mr. Vannucci effective September 1, 2006. The
agreement is for a one-year term and automatically renews for successive
one-year terms unless either party provides 30 days' notice prior to the
termination of the then-current term. Mr. Vannucci's base compensation is
$400,000. His employment agreement also provides for an Incentive Compensation
Program award of $200,000 if we fully achieve our financial targets at Riviera
Las Vegas in 2007 (or a prorated award, if we partially achieve those targets).
Mr. Vannucci or we may terminate the agreement at any time upon 30 days' prior
written notice, but if we terminate it without cause, then Mr. Vannucci will be
entitled to one year's salary, a prorated award under our Incentive Compensation
Program, two years of health insurance benefits and a one-year automobile
allowance of $6,000, plus reimbursement of all reasonable automobile expenses
(excluding lease or loan payments).
Incentive Compensation Program
Approximately 85 executives and other significant employees participate
in our Incentive Compensation Program. Participants are eligible to receive an
annual cash award based on our achievement of predetermined financial targets at
Riviera Las Vegas or Riviera Black Hawk, as applicable, or at both locations
combined for our corporate employees.
The employment position held by a participant determines the award
level for which that participant would qualify if the predetermined financial
targets are achieved. Our Chairman of the Board and CEO has discretion to change
the award level assigned to any non-executive officer position.
Before the beginning of each fiscal year, we determine the financial
targets for that year, as described above. By the time we do so, the Named
Executive Officers and other persons who will participate in the Incentive
Compensation Program for that year and their eligible award levels have already
been determined (or are determined at that same time). Therefore, we view the
date in 2006 on which we set the 2007 financial targets as the date on which we
granted the Incentive Compensation Program awards that can be earned in 2007.
Those awards are reported in the Grants of Plan-Based Awards table above and
will be reported next year (to the extent that the awards are actually earned in
2007) in the Non-Equity Incentive Plan Compensation column of the Summary
Compensation Table.
24
The Incentive Compensation Program awards that we reported for 2006 in
the Summary Compensation Table above represent amounts that the Named Executive
Officers earned as a result of our achievement of 2006 financial targets,
pursuant to awards that we granted to them in 2005 (when we determined the 2006
financial targets).
We recorded accrued awards of $581,000; $555,000; and $1,085,000 under
the Incentive Compensation Program for 2006, 2005 and 2004, respectively.
Profit-Sharing and 401(k) Plans
We have profit-sharing and 401(k) plans for employees who are at least
21 years of age and are not covered by a collective bargaining agreement after
one year of service.
We may contribute to the 401(k) plan an amount not to exceed 25% of the
first 8% of each participant's compensation. We made contributions of $276,000,
$290,000 and $303,000 for the years ended December 31, 2006, 2005 and 2004,
respectively. We also pay administrative costs of the plan, which are not
material.
Prior to 2003, we suspended contributions to the profit-sharing plan,
and substituted contributions to the ESOP.
Our contributions to the 401(k) plan for the Named Executive Officers
are included in the All Other Compensation column of the Summary Compensation
Table.
The ESOP
We established the ESOP, effective January 1, 2000, to replace our
contributions to the profit-sharing plan. The ESOP provides that all employees
in the plan year who completed a minimum of 1,000 hours of service in the plan
year, were employed through December 31 of that plan year, were at least 21
years of age and were not covered by a collective bargaining agreement are
eligible to participate. We make contributions to the ESOP for participants at
Riviera Las Vegas and Riviera Black Hawk relative to the economic performance of
each property. The ESOP contributions are made in cash, which the ESOP trustee
uses primarily to buy Common Stock. For Riviera Las Vegas employees, we make a
contribution equal to 1% of each eligible employee's annual compensation if a
prescribed annual operating results target at Riviera Las Vegas is attained and
an additional 1% thereof for each $2 million by which that target is exceeded,
up to a maximum of 4% for 2006. For Riviera Black Hawk employees, we make a
contribution equal to 1% of each eligible employee's annual compensation if a
prescribed annual operating results target at Riviera Black Hawk is attained, an
additional 1% thereof for the next $1.5 million by which that target is
exceeded, and an additional 1% thereof for each additional $2 million by which
that target is exceeded, up to a maximum of 4% for 2006. For our corporate
employees, we make a contribution equal to 1% of each eligible employee's annual
compensation if a prescribed annual operating earnings target is attained for
the Company and an additional 1% for each $2 million by which that target is
exceeded, up to a maximum of 2%. We made no contribution to the ESOP for 2006
and contributed $126,000 and $899,000 for 2005 and 2004, respectively. Our
contributions to the ESOP for the Named Executive Officers are included in the
Non-Equity Incentive Plan column of the Summary Compensation Table.
25
As with our Incentive Compensation Program awards discussed above, we
establish operating results targets for the ESOP prior to commencement of the
applicable year, at which time the participating Named Executive Officers and
the potential minimum and maximum contribution amounts are already known to us.
Therefore, we reported the establishment in 2006 of the ESOP's 2007 operating
results targets in the Grants of Plan-Based Awards table above. If those targets
are met or exceeded in 2007 and we make the resulting ESOP contributions, we
will report them next year in the All Other Compensation column of the Summary
Compensation Table.
DCP
Our DCP gives eligible employees the opportunity to defer cash
compensation. Participation in the DCP is limited to employees who receive
annual compensation of at least $100,000. The deferred funds that are
contributed to the DCP, but not the appreciation in the value of Common Stock
that the DCP purchases with the deferred funds, are maintained on our books as
liabilities. All elections to defer the receipt of compensation must be made by
December 1st preceding the plan year to which the election relates and are
irrevocable for the duration of such year.
Mr. Vannucci and the two Named Executive Officers who left our
employment in 2006 have remaining balances in their DCP accounts, as reported in
the Nonqualified Deferred Compensation table below, but they made no
contributions to the DCP through deferrals of cash compensation in 2006, 2005 or
2004. In 2006 we distributed to those individuals part of the balances in their
respective DCP accounts. Those distributions are not reported in the Summary
Compensation Table because they consist of deferred compensation from years
prior to 2004 and appreciation in the value of Common Stock that the DCP
purchased with those deferred compensation payments.
Restricted Stock Plan
We have a Restricted Stock Plan to attract and retain highly competent
persons as officers and key employees. Participants consist of such officers and
key employees as the Committee determines are significantly responsible for our
success and future growth and profitability. Awards of restricted stock are
subject to such terms and conditions as we determine are appropriate at the time
of the awards, including restrictions on the sale or other disposition of such
stock, a vesting schedule under which the restrictions lapse, and provisions for
the forfeiture of non-vested (i.e. restricted) stock upon termination of the
participant's employment within specified periods or under certain conditions.
26
Restricted Stock Plan grants are reported in the Stock Awards column of
the Summary Compensation Table. The amount we report for a specified year is the
amount we recognized for financial statement reporting purposes for that year in
accordance with FAS 123R, which amount was based on the reported closing price
of the Common Stock on AMEX on the date of the grant and the number of
restricted shares that became vested in the specified year.
Stock Option Plans and Stock Grants
None of the Named Executive Officers were granted stock options in
2006.
The share amounts reported in the paragraph below and in the footnotes
to the Summary Compensation Table are adjusted to give effect to the March 11,
2005 three-for-one Common Stock split.
In July 2003, we attempted to grant options for 385,500 shares of
Common Stock under our 1993 Plan. Subsequently, it was determined that the 1993
Plan had expired prior to those grants, which rendered them null and void. Two
executives to whom we attempted to grant options for a total of 48,000 shares
thereafter left our employment. On April 6, 2005, we granted to 19 remaining
executives a total of 337,500 shares under our Restricted Stock Plan in
substitution for the 1993 Plan stock options that we had attempted to grant to
them. Those shares are subject to a five-year vesting schedule, vesting 20% each
March 10, commencing in 2006. The shares completely vest upon death, disability,
retirement at or after age 62, termination of employment by us other than for
cause, events of hardship as approved by the Committee or in the event of a
change in control of the Company.
Although the 1993 Plan has expired, some options granted under the 1993
Plan are still outstanding.
Effective May 17, 2005, we implemented the Employee Plan. One million
shares of Common Stock are allocated to the Employee Plan, in which our
executive officers and key employees are eligible to participate. The Stock
Option Committee has discretion as to whom Employee Plan options will be granted
and the number of shares allocated to each option grant. The option exercise
price will be the closing market price of the Common Stock (110% of the closing
market value in the case of an incentive option granted to an owner of more than
10% of the Common Stock) on the date of the option grant. The options will vest
over four years, with 20% vesting on the date of grant, and an additional 20% on
each anniversary of the grant, subject to accelerated vesting upon the
occurrence of certain events including a change in Control of the Company.
We have not yet granted options under the Employee Plan. Therefore, no
amounts are reported in the tables above.
Additional Benefits
We offer a number of other benefits to executive officers pursuant to
benefit programs that provide for broad-based employee participation. These
programs include long-term and short-term disability insurance, life and
accidental death and dismemberment insurance, employee assistance and certain
other benefits.
27
Our 401(k) plan and other generally available benefit programs allow us
to remain competitive for employee talent, and we believe that the availability
of the benefit programs generally enhances employee productivity and loyalty.
The main objectives of our benefit programs are to give our employees access to
quality health care, financial protection from unforeseen events, assistance in
achieving retirement financial goals, enhanced health and productivity, in
compliance with applicable legal requirements. These generally available
benefits typically do not specifically factor into our calculation or evaluation
of an individual executive's total compensation or equity award-based package.
Outstanding Equity-Based Awards
The following table provides information as of December 31, 2006
concerning Named Executive Officers' unexercised stock options and restricted
Common Stock that was not vested.
OUTSTANDING EQUITY AWARDS AS OF DECEMBER 31, 2006
--------------------------------------------------------------------------- -------------------------------------------------
Option Awards Stock Awards
---------- ------------ --------------- ------------ ---------- ----------- ------------ ------------ ------------ ----------
Name Number of Number of Equity Option Option Number of Market Equity Equity
Securities Securities Incentive Exercise Expiration Shares or Value of Incentive Incentive
Underlying Underlying Plan Price Date Units of Shares or Plan Plan
Unexercised Unexercised Awards: ($) Stock That Units of Awards: Awards:
Options Options Number of Have Not Stock That Number of Market or
(#) (#) Securities Vested Have Not Unearned Payout
Exercisable Unexercisable Underlying (#) Vested Shares, Value of
Unexercised ($) Units or Unearned
Unearned Other Shares,
Options Rights Units or
(#) That Have Other
Not Vested Rights
(#) That Have
Not Vested
($)
---------- ------------ --------------- ------------ ---------- ----------- ------------ ------------ ------------ ----------
William L. - - - - - - - - -
Westerman
---------- ------------ --------------- ------------ ---------- ----------- ------------ ------------ ------------ ----------
Mark B. - - - - - - - - -
Lefever
---------- ------------ --------------- ------------ ---------- ----------- ------------ ------------ ------------ ----------
Robert A. 120,000 - - $2.45(1) 6/11/08(2) 48,000(4) $1,159,687(5) - -
Vannucci 4/25/10
5/14/12
---------- ------------ --------------- ------------ ---------- ----------- ------------ ------------ ------------ ----------
Tullio J. 36,000 - - $2.34(1) 4/25/10(3) 15,600(4) $376,896(5) - -
Marchionne 8/7/11
5/14/12
---------- ------------ --------------- ------------ ---------- ----------- ------------ ------------ ------------ ----------
Duane R. - - - - - - - - -
Krohn(6)
---------- ------------ --------------- ------------ ---------- ----------- ------------ ------------ ------------ ----------
Ronald P. - - - - - - - - -
Johnson(7)
---------- ------------ --------------- ------------ ---------- ----------- ------------ ------------ ------------ ----------
(1) The reported Option Exercise Price is the average exercise price of all
unexercised options.
28
(2) Mr. Vannucci was awarded 30,000 options on each of June 11, 1998 and April
25, 2000 and 60,000 options on May 14, 2002. The options expire on the ten-year
anniversary of the date of grant.
(3) Mr. Marchionne was awarded 12,000 options on each of April 25, 2000, August
7, 2001, and May 14, 2002. The options expire on the ten-year anniversary of the
date of grant.
(4) The reported number represents the non-vested portions of the April 6, 2005
Restricted Stock Plan awards of 60,000 shares and 19,500 shares to Messrs.
Vannucci and Marchionne, respectively (See "Stock Option Plans and Stock
Grants").
(5) The December 31, 2006 reported closing price of our Common Stock on AMEX was
$24.16 per share.
(6) Mr. Krohn exercised all his remaining stock options for 7,500 shares prior
to his retirement on May 2, 2006.
(7) Mr. Johnson exercised all his remaining stock options for 30,000 shares
subsequent to his May 16, 2006 resignation and prior to December 31, 2006.
Stock Option Exercises and Stock Vesting
The following table provides information regarding exercises of options
and vesting of restricted stock held by the Named Executive Officers during
2006.
OPTION EXERCISES AND STOCK VESTED
-------------------------------------------- --------------------------------
Option Awards Stock Awards
------------- ------------------ ----------- ------------------ -------------
Name Number of Value Number of Shares Value
Shares Realized Acquired Realized
Acquired on on on
on Exercise Vesting Vesting
Exercise ($) (#) ($)
(#)
------------- ------------------ ----------- ------------------ -------------
William L.
Westerman - - - -
------------- ------------------ ----------- ------------------ -------------
Mark B.
Lefever - - - -
------------- ------------------ ----------- ------------------ -------------
Robert A.
Vannucci - - 12,000(1) $171,120(2)
------------- ------------------ ----------- ------------------ -------------
Tullio J.
Marchionne - - 3,900(1) $55,614(2)
------------- ------------------ ----------- ------------------ -------------
Duane R.
Krohn(3) 7,500 $104,925 - -
------------- ------------------ ----------- ------------------ -------------
Ronald P.
Johnson(4) 30,000 $566,400 - -
------------- ------------------ ----------- ------------------ -------------
29
(1) Vesting of restricted stock awarded on April 6, 2005 (See "Stock Option
Plans and Stock Grants").
(2) As determined by the reported closing price of $14.26 per share of the
Common Stock on AMEX on the vesting date of March 10, 2006.
(3) Mr. Krohn retired on May 2, 2006 and exercised all his remaining options on
January 3, 2006.
(4) Mr. Johnson resigned on May 16, 2006 and exercised all his remaining options
on May 30, 2006.
Pension Benefits
The following table provides information regarding Mr. Westerman's
retirement account. No other Named Executive Officers have a retirement account
or pension plan with us.
For further information regarding Mr. Westerman's retirement account,
see "Further Information Concerning Summary Compensation Table and Grants of
Plan-Based Awards Tables-Employment Agreements" above.
PENSION BENEFITS
----------- ------------------ -------- ---------------- ----------------------
Name Plan Number Present Payments
Name of Years Value of During
Credited Accumulated Last
Service Benefit Fiscal
(#) ($) Year
($)
----------- ------------------ --------- ---------------- ---------------------
William L. CEO Retirement
Westerman Account 14 $3,003,273 $1,429,402(1)
----------- ------------------ --------- ---------------- ---------------------
Mark B.
Lefever - - - -
----------- ------------------ --------- ---------------- ---------------------
Robert A.
Vannucci - - - -
----------- ------------------ --------- ---------------- ---------------------
Tullio J.
Marchionne - - - -
----------- ------------------ --------- ---------------- ---------------------
Duane R.
Krohn - - - -
----------- ------------------ --------- ---------------- ---------------------
Ronald P.
Johnson - - - -
----------- ------------------ --------- ---------------- ---------------------
(1) In order to gradually reduce our obligation to Mr. Westerman, we and Mr.
Westerman agreed that the following cash payments would be made to him
commencing April 1, 2003, and continuing on the first day of each quarter
thereafter: (1) a distribution of $250,000 from the principal balance of his
retirement account; and (2) the quarterly interest credited to his retirement
account one quarter in arrears.
30
Nonqualified Deferred Compensation
The following table provides information concerning the DCP for 2006
with respect to the Named Executive Officers.
Messrs. Vannucci, Krohn and Johnson are the only individuals who have
DCP balances. Messrs. Krohn and Johnson have left our employment and are no
longer eligible to contribute to the DCP. All of the Named Executive Officers'
contributions of deferred compensation to the DCP were made before 2004. We make
no contributions to the DCP on behalf of participants.
DCP accounts are held in a Rabbi Trust and the funds in those accounts
are invested in Common Stock. Shares of Common Stock that are held through the
DCP (the "DCP Shares") are fully vested when purchased.
We reported no earnings on the DCP account balances in 2006 because
those balances are invested in Common Stock on which we paid no dividends. The
aggregate balances reported in the table below represent the value of the DCP
Shares, based on the December 29, 2006 $24.16 per share reported closing price
of the Common Stock on AMEX.
NONQUALIFIED DEFERRED COMPENSATION
----------- -------------- ------------- --------- --------------- -------------
Name Executive Registrant Aggregate Aggregate Aggregate
Contributions Contributions Earnings Withdrawals/ Balance
in Last FY in Last FY in Last Distributions At Last
($) ($) FY ($) FYE
($) ($)
----------- -------------- ------------- --------- --------------- -------------
William L.
Westerman - - - - -
----------- -------------- ------------- --------- --------------- -------------
Mark B.
Lefever - - - - -
----------- -------------- ------------- --------- --------------- -------------
Robert A.
Vannucci - - - $338,723(1) $91,403(2)
----------- -------------- ------------- --------- --------------- -------------
Tullio J.
Marchionne - - - - -
----------- -------------- ------------- --------- --------------- -------------
Duane R.
Krohn(3) - - - $1,117,397(1) $134,325(2)
----------- -------------- ------------- --------- --------------- -------------
Ronald P.
Johnson(3) - - - $0 $1,992,479(2)
----------- -------------- ------------- --------- --------------- -------------
31
(1) The distributions consisted of DCP Shares purchased with deferred
compensation that Messrs. Vannucci and Krohn earned prior to 2004 and
elected to contribute to the DCP. The distributions were made in
January 2006 and are valued at the $16.39 per share reported closing
price of the Common Stock on AMEX on December 31, 2005. The
distributions are not reported in the Summary Compensation Table
because they do not consist of compensation or interest at an
above-market or preferential rate earned by either individual during
the reported years.
(2) The balances in the DCP accounts consist substantially of the
appreciation in value of the DCP Shares since they were purchased with
deferred compensation funds prior to 2004.
(3) Mr. Krohn retired on May 2, 2006 and Mr. Johnson resigned on May 16,
2006. Salary Continuation Agreements
We have salary continuation agreements, effective through December 31,
2007, with Messrs. Lefever and Marchionne (as well as with approximately 65
other key employees and officers excluding Messrs. Westerman and Vannucci). The
salary continuation agreements with Messrs. Lefever and Marchionne, entitle them
to 12 months of base salary, payable in bi-weekly installments, and 24 months of
health insurance benefits if we terminate their employment without cause within
24 months of a change in control of the Company, as defined in those agreements.
These payment obligations would not be subject to a duty on the part of Mr.
Lefever or Mr. Marchionne to mitigate by obtaining other employment. If these
payment obligations were triggered, they would each be entitled to payments and
benefits from us of approximately $280,000. During the period that Mr. Lefever
or Mr. Marchionne receives the base salary payments, they must not hire or
solicit for employment any of our then-current employees.
Compensation of Chief Executive Officer
Mr. Westerman is party to an employment agreement with us and in 2006
received a salary of $1,000,000. Mr. Westerman is not included in the Company's
bonus program. In setting Mr. Westerman's salary, the Committee relied on
market-competitive pay data and the strong belief that the Chief Executive
Officer significantly and directly influences Riviera's overall performance. The
Committee also took into consideration the overall compensation policies
discussed above.
Compensation of Directors
Messrs. Silver, Harvey and Land are each paid an annual fee of $50,000
for services as a director of the Company. Mr. DiVito is paid an annual fee of
$75,000 for services as a director and as Chairman of our Audit Committee. They
are also reimbursed for expenses incurred in connection with attendance at
meetings of our Board of Directors.
Mr. Westerman is our only director who is also employed by us, and he
receives no extra compensation for serving as a director. We have reported for
Mr. Westerman's compensation as a Named Executive Officer in the Summary
Compensation Table.
32
In 1996, we adopted a Nonqualified Stock Option Plan for Non Employee
Directors (the "1996 Plan"), which expired in 2003. Under the 1996 Plan, each
individual elected, re-elected or continuing as a non-employee director would
automatically receive options for 6,000 shares of Common Stock (as adjusted for
the 2005 stock split), with an exercise price equal to the fair market value of
the Common Stock on the date of grant. In 2004, before it was determined that
the 1996 Plan had expired, we attempted to grant options to non-employee
directors for a total of 30,000 shares. Because of the prior expiration of the
1996 Plan, though, those options were null and void. At our 2005 annual meeting,
Stockholders approved the issuance of 30,000 shares of Common Stock to the
non-employee directors as substitute compensation for those options. Messrs
Silver, Harvey and DiVito each received 6,000 shares and Mr. Land received
12,000 shares. Those shares are subject to restrictions on resales, assignments,
pledges, encumbrances or other transfers prior to vesting. The shares vest at
the rate of 20% per year on each anniversary of the grant date. However,
accelerated vesting of all of the shares will occur upon death, disability, a
change in control of the Company or under any other termination of directorship
status, except resignation prior to reaching age 62 or declining to stand for
reelection prior to reaching age 62 (which would result in forfeiture of the
non-vested shares).
Also at the 2005 annual meeting, Stockholders approved our 2005 Stock
Option Plan for Non-Employee Directors (the "Director Plan"). The Director Plan
provides that on each anniversary of the effective date of the Director Plan,
each individual elected, re-elected or continuing as a non-employee director
will receive a nonqualified stock option for 6,000 shares with an exercise price
equal to the fair market value of the Common Stock on the date of grant. These
options vest at the rate of 20% per year commencing on the first anniversary of
the grant.
Upon becoming a director, Mr. Silver was granted options to purchase
6,000 shares at $2.35 per share on February 26, 2001. Mr. Silver was
subsequently granted options to purchase 6,000 shares at $2.18 per share on May
10, 2001, options to purchase 6,000 shares at $2.58 per share on May 10, 2002,
options to purchase 6,000 shares at $1.87 per share on May 12, 2003 and options
to purchase 6,000 shares at $21.60 per share on May 22, 2006.
Upon becoming a director, Mr. Harvey was granted options to purchase
6,000 shares at $2.20 per share on May 18, 2001. Mr. Harvey was subsequently
granted options to purchase 6,000 shares at $2.58 per share on May 10, 2002,
options to purchase 6,000 shares at $1.87 per share on May 12, 2003 and options
to purchase 6,000 shares at $21.60 per share on May 22, 2006.
Upon becoming a director, Mr. DiVito was granted options to purchase
6,000 shares at $1.87 per share on July 12, 2002. Mr. DiVito was subsequently
granted options to purchase 6,000 shares at $1.87 per share on May 12, 2003 and
options to purchase 6,000 shares at $21.60 per share on May 22, 2006.
Mr. Land was granted options to purchase 6,000 shares at $21.60 per
share on May 22, 2006.
On December 30, 2005, in order to avoid expensing of unvested portions
of option grants under FAS 123R, which became effective January 1, 2006, we
accelerated the vesting of options granted under the 1996 Plan, allowing all
such options to become fully vested effective December 30, 2005. In order to
prevent unintended personal benefits to the directors affected by this
acceleration, we imposed a condition that each affected director agree not to
exercise any options subject to the acceleration until such time that those
options would have become vested under the prior vesting schedule.
33
We have a Stock Compensation Plan, under which directors who are
members of the Committee have the right to receive all or part of their annual
fees in the form of Common Stock having a fair market value equal to the amount
of their fees. Of the 50,000 shares that are allocated to this plan, 46,020
remain available for issuance and none were issued in 2006.
DIRECTOR COMPENSATION
----------------- ------------- ----------- ------------ --------------- ------------------ -------------- ----------
Name Fees Earned Stock Option Non-Equity Change in Pension All Other Total
or Paid in Awards Awards Incentive Plan Value and Compensation ($)
Cash ($) ($) Compensation Nonqualified ($)
($) ($) Deferred
Compensation
Earnings
----------------- ------------- ----------- ------------ --------------- ------------------ -------------- ----------
Jeffrey A. Silver $50,000 $25,380(1) $17,902(2,3) - - - $93,292
----------------- ------------- ----------- ------------ --------------- ------------------ -------------- ----------
Paul A. Harvey $50,000 $25,380(1) $17,902(2,3) - - - $93,282
----------------- ------------- ----------- ------------ --------------- ------------------ -------------- ----------
Vincent L. DiVito $75,000 $25,380(1) $17,902(2,3) - - - $118,282
----------------- ------------- ----------- ------------ --------------- ------------------ -------------- ----------
James N.Land, Jr. $50,000 $50,760(1) $17,902(2,3) - - - $118,662
----------------- ------------- ----------- ------------ --------------- ------------------ -------------- ----------
(1) The reported amounts are what we recognized for financial statement
reporting purposes with respect to 2006, in accordance with FAS 123R, for the
restricted shares that we granted in 2005 in substitution for stock options,
as explained above. We included these amounts in the "Equity compensation"
line item in our Consolidated Statement of Operations for the year ended
December 31, 2006, which is included in the financial statements of our Form
10-K for the year ended December 31, 2006. Please refer to notes 1 and 13 to
those financial statements for further information regarding our calculation
of these amounts. Our calculations were based on the $21.15 per reported
closing price of the Common Stock on AMEX on May 27, 2006, the date when 20%
of those restricted shares became vested. 1,200 of the restricted shares
became vested for each of Messrs. Silver, Harvey and DiVito and 2,400 shares
became vested for Mr. Land.
(2) The reported amounts are what we recognized for financial statement
reporting purposes with respect to 2006, in accordance with FAS 123R, for
stock options that we granted. We included these amounts in the "Equity
compensation" line item in our Consolidated Statement of Operations for the
year ended December 31, 2006, which is included in the financial statements
of our Form 10-K for the year ended December 31, 2006. Please refer to notes
1 and 13 to those financial statements for further information regarding our
calculation of these amounts. Ours calculations were based on the
Black-Scholes method of options valuation.
(3) The May 22, 2006 fair value of the options for 6,000 shares that we granted
to each director on that date, calculated in accordance with FAS 123R, was
$64,440. This calculation was based on the Black-Scholes method of options
valuation.
34
Compensation Committee Interlocks and Insider Participation
Jeffrey A. Silver, a director and Chairman of the Compensation
Committee, is a shareholder in the law firm of Gordon & Silver, Ltd., which
we retained for various legal matters during our last fiscal year and which
we have retained in our current fiscal year. During 2006, we paid $551,000 to
Gordon & Silver, Ltd. for legal fees and related expenses.
Compensation Committee Report
The following report of the Compensation Committee shall not be deemed
"soliciting material" or "filed" with the SEC, nor shall the information in the
report be incorporated by reference into any future filings under the Securities
Act of 1933, as amended, or the Exchange Act, except to the extent that we
specifically incorporate it by reference in a filing.
The Compensation Committee has reviewed and discussed with management
the Compensation Discussion and Analysis contained in this proxy statement.
Based on such review and discussions, the Compensation Committee recommended to
the Board of Directors that the Compensation Discussion and Analysis be included
in this proxy statement.
Date: April 11, 2007 Jeffrey A. Silver Chairman
Paul A. Harvey Member
Vincent L. DiVito Member
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table contains information regarding the beneficial
ownership of Common Stock, as of March 30, 2007, by (i) each of our directors
and each of our Named Executive Officers (including such persons who retired or
resigned in 2006), (ii) all of our directors and executive officers as a group
and (iii) each person who, to our knowledge, beneficially owns more than 5% of
the outstanding Common Stock (based on reports filed with the SEC under section
13(d) or 13(g) of the Exchange Act or information furnished to us). The
percentage of outstanding Common Stock represented by each named person's stock
ownership assumes the exercise by such person of all of his stock options that
are exercisable within 60 days of the April 3, 2007 record date (the "Record
Date"), but does not assume the exercise of stock options by any other persons.
The percentage of outstanding Common Stock represented by the stock ownership of
all of our directors and executive officers as a group assumes the exercise by
all members of that group of their respective stock options that are exercisable
within 60 days of the Record Date, but does not assume the exercise of options
by any persons outside of that group. Except as indicated in the footnotes to
the table, each person listed below has sole voting and investment power with
respect to the shares set forth opposite such person's name.
35
Shares Beneficially Owned
Name Number Percentage
Directors and Executive Officers:
William L. Westerman(1)(2) 4,796 *
Jeffrey A. Silver (1)(3) 46,200 *
Paul A. Harvey(1)(4) 25,200 *
Vincent L. DiVito(1)(5) 20,200 *
James N. Land, Jr. (1)(6) 17,200 *
Robert A. Vannucci (1)(7) 290,547 2.3%
Mark B. Lefever(8) 39 *
Tullio J. Marchionne(1)(9) 60,320 *
Duane R. Krohn(10) # #
Ronald P. Johnson(10) # #
All directors and executive officers as a group(11) 464,758 3.7%
Beneficial Owners of More Than 5% of Common Stock
(other than Mr.Westerman):
D.E. Shaw & Co., L.P. and related parties(12) 1,219,400 9.8%
Plainfield Special Situations Master Fund Limited and
related parties(13) 1,100,000 8.8%
Desert Rock Enterprises LLC, the Derek J. Stevens Trust
and the Gregory J. Stevens Trust(14) 1,051,100 8.4%
Riviera Holdings Corporation Employee Stock Ownership
Plan (the ESOP)(15) 714,856 5.7%
Triple Five Investco LLC, Dominion Financial LLC and
Syd Ghermezian(16) (19) 1,184,050 9.5%
Flag Luxury Properties, LLC, Paul Kanavos, Robert
Sillerman and related parties (collectively, the
"Flag Parties")(17) (19) 836,588(17) 6.7%(17)
Brett Torino and related parties (collectively, the
"Torino Parties")(17) 418,294(17) 3.4%(17)
Barry Sternlicht and related parties (collectively,
the "Sternlicht/Starwood Parties")(17) 750,642 6.0%
High Desert Gaming, LLC, Neil Bluhm, Gregory Carlin
and related parties (collectively, the "High
Desert/Bluhm/Carlin Parties")(17) 702,741 5.6%
------- ----
Total for the Flag Parties, the Torino Parties, the
Sternlicht/Starwood Parties and the High
Desert/Bluhm/Carlin Parties(19) 2,289,971(18) 18.4%(18)
-------------------------------
* Less than 1%.
# Less than 5%.
(1) The address for each director and executive officer is c/o Riviera Holdings
Corporation, 2901 Las Vegas Boulevard South, Las Vegas, Nevada 89109.
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(2) Includes 4,273 shares held through the ESOP.
(3) Includes 25,200 shares which may be acquired within 60 days of the Record
Date upon the exercise of outstanding options.
(4) Includes 19,200 shares which may be acquired within 60 days of the Record
Date upon the exercise of outstanding options.
(5) Includes 13,200 shares which may be acquired within 60 days of the Record
Date upon the exercise of outstanding options.
(6) Includes 1,200 shares which may be acquired within 60 days of the Record
Date upon the exercise of outstanding options.
(7) Includes 120,000 shares which may be acquired within 60 days of the Record
Date upon the exercise of outstanding options and 5,326 shares held through
the ESOP.
(8) 39 shares held through the ESOP.
(9) Includes 36,000 shares which may be acquired within 60 days of the Record
Date upon the exercise of outstanding options and 3,020 shares held through
the ESOP.
(10) Mr. Krohn retired on May 2, 2006 and Mr. Johnson resigned on May 19, 2006.
We have no knowledge of the beneficial ownership of Common Stock by Messrs.
Krohn and Johnson as of March 30, 2007, except that they have made no filings
with the SEC that would be required if they own more than 5% of our Common
Stock.
(11) Includes a total of 214,800 shares which may be acquired by directors and
executive officers as a group within 60 days of the Record Date upon the
exercise of outstanding options and 12,899 shares held through the ESOP.
(12) D. E. Shaw & Co, Inc. is the general partner of D. E. Shaw & Co., L.P.
("DESCO LP"), which in turn is the managing member and investment adviser of
D. E. Shaw Valence Portfolios, L.L.C. ("Valence") and the investment adviser
of D. E. Shaw Laminar Portfolios, L.L.C. ("Laminar"). David E. Shaw is
President and sole shareholder of D. E. Shaw & Co. II, Inc., which is the
managing member of D. E. Shaw & Co., L.L.C. ("DESCO LLC"), which in turn is
the managing member of Laminar. The stock ownership reported in the table is
comprised of 1,194,500 shares held in the name of Laminar and 24,900 shares
held in the name of Valence. Laminar and DESCO LLC have shared voting and
investment power over 1,194,500 of the shares reported in the table. DESCO
and Mr. Shaw have shared voting and investment power over all of the shares
reported in the table. The address of Laminar, DESCO LLC, DESCO LP and Mr.
Shaw is 120 W. 54th Street, Tower 45, 39th Floor, New York, NY 10036. This
information is based on information reported by Laminar, DESCO LP, DESCO LLC
and Mr. Shaw in a Schedule 13G amendment filed with the SEC on February 14,
2007.
(13) Plainfield Asset Management LLC ("Asset Management") is the Manager of
Plainfield Special Situations Master Fund Limited ("Master Fund"), which
holds 1,100,000 shares. Max Holmes is the chief investment officer of Asset
Management. Each of Mr. Holmes, Asset Management and Master Fund beneficially
owns all of the shares reported in the table. The address of Master Fund,
Asset Management and Mr. Holmes is 55 Railroad Avenue, Greenwich, CT 06830.
This information is based on information reported by the above parties in a
Schedule 13G filed with the SEC on March 15, 2006 and an amendment filed on
February 2, 2007.
37
(14) The stock ownership reported in the table is comprised of 797,100 shares
held by Desert Rock Enterprises, LLC ("Desert Rock"); 164,000 shares held by
the Derek J. Stevens Trust under agreement dated July 16, 1993 (the "DJS
Trust"); and 90,000 shares held by the Gregory J. Stevens Trust under
agreement dated September 20, 1995 (the "GJS Trust"). The DJS Trust and the
GJS Trust are members of Desert Rock. Derek J. Stevens is the Manager of
Desert Rock and trustee of the DJS Trust, and he may be deemed to have shared
voting and investment power over the shares held by Desert Rock or the DJS
Trust. Gregory J. Stevens is trustee of the GJS Trust and he may be deemed to
have shared voting and investment power over the shares held by Desert Rock
or the GJS Trust. The address of Desert Rock is 3960 Howard Hughes Parkway,
Suite 562, Las Vegas, NV 89109. The address of Derek J. Stevens, the DJS
Trust, Gregory J. Stevens and the GJS Trust is 21777 Hoover Road, Warren, MI
48089. This information is based on information reported by the above parties
in a Schedule 13D amendment filed with the SEC on February 14, 2007.
(15) The trustee of the ESOP (the "Trustee") and its address are Marshall &
Ilsley Trust Company N.A., 1000 North Water Street, Suite 1200, Milwaukee,
Wisconsin 53202. All of the shares held by the ESOP are voted on each
proposal in proportion to the voting instructions received by the Trustee
from all ESOP participants who submit voting instructions. For example, if
(1) the ESOP holds 1,000 shares of Common Stock, (2) the Trustee receives
voting instructions from participants on whose behalf the ESOP holds only 500
shares, and (3) those participants, in the aggregate, instruct the Trustee to
vote 300 shares in favor of a proposal and 200 shares against it, then 600
shares held by the ESOP will be voted for the proposal and 400 shares will be
voted against it. Common Stock held by the ESOP on behalf of our executive
officers is reported in the ESOP's Common Stock ownership listing as well as
in the respective Common Stock ownership listings for the Named Executive
Officers and for executive officers and directors as a group.
(16) Triple Five Investco LLC holds 1,138,600 shares and Dominion Financial LLC
holds 45,450 shares. Syd Ghermezian is the sole manager of these entities, in
which capacity he has voting and investment power over the shares held by
these entities. The address of Triple Five Investco LLC, Dominion Financial
LLC and Syd Ghermezian is 9440 West Sahara, Suite 240, Las Vegas, NV 89117.
This information is based on information reported by the above parties in a
Schedule 13G filed with the SEC on May 1, 2006.
(17) The following is based on information reported in a Schedule 13D and
amendments thereto filed with the SEC, through March 30, 2007, jointly by the
Flag Parties, the Torino Parties, the Sternlicht/Starwood Parties and the
High Desert/Bluhm/Carlin Parties (collectively, the "Joint Filing Parties").
The Flag Parties consist of Flag Luxury Riv, LLC ("Flag Riv"); Flag Luxury
Properties, LLC; MJX Flag Associates, LLC; LMN 134 Family Company LLC
("LMN"); Flag Leisure Group, LLC; Sillerman Real Estate Ventures, LLC;
Mitchell Nelson; Robert Sillerman; and Paul Kanavos. Each of the Flag Parties
is a beneficial owner of 836,588 shares except for Flag Riv, which
beneficially owns 418,294 shares. Voting and investment power over the shares
is shared among the Flag Parties and, except as to the 418,294 shares owned
by Flag Riv, such power is also shared with the Torino Parties. (See note 15
below.) The address of the Flag Parties except LMN is 650 Madison Ave., New
York, NY 10022. The address of LMN is 134 East 80th St., New York, NY 10021.
The Torino Parties consist of RH1, LLC; Metro Investment, LLC ("Metro");
FC208, LLC; TTERB Living Trust dated 6/20/2000; and Brett Torino. Each of the
Torino Parties is a beneficial owner of 418,294 shares. Voting and investment
power over the shares is shared among the Torino Parties and is also shared
with the Flag Parties. (See note 15 below.) The address of each of the Torino
Parties except Metro is 4445 Wagon Trail Ave., Las Vegas, NV 89118. The
address of Metro is 650 Madison Ave., New York, NY 10022.
38
The Sternlicht/Starwood Parties consist of Rivacq LLC; SOF U.S. Hotel
Co-Invest Holdings, L.L.C.; SOF-VII U.S. Hotel Holdings, L.L.C.; I-1/I-2 U.S.
Holdings, L.L.C.; Starwood Global Opportunity Fund VII-A, L.P.; Starwood
Global Opportunity Fund VII-B, L.P.; Starwood U.S. Opportunity Fund VII-D,
L.P.; Starwood U.S. Opportunity Fund VII-D2, L.P.; Starwood Capital
Hospitality Fund I-1, L.P.; Starwood Capital Hospitality Fund I-2, L.P.;
SOF-VII Management, L.L.C.; SCG Hotel Management, L.L.C.; Starwood Capital
Group Global, LLC; and Barry Sternlicht. Each of the Sternlicht/Starwood
Parties is a beneficial owner of 627,442 shares except for Barry Sternlicht,
who beneficially owns 750,642 shares. Voting and investment power over
627,442 of the shares is shared among the Sternlicht/Starwood Parties. Voting
and investment power over 123,200 of the shares is held solely by Barry
Sternlicht. The address of the Sternlicht/Starwood Parties except Rivacq LLC
is 591 W. Putnam Ave., Greenwich, CT 06830. The address of Rivacq LLC is One
World Financial Center, New York, NY 10281.
The High Desert/Bluhm/Carlin Parties consist of High Desert Gaming, LLC
("High Desert"); LAMB Partners; LAMB Investors, Inc.; LAMB, LLC; ISLE
Investors, LLC ("ISLE"); Gregory Carlin; Neil Bluhm; BCB Consultants, LLC
("BCB"); and Brian Black. Each of the High Desert/Bluhm/Carlin Parties,
except High Desert, ISLE, BCB and Brian Black, is a beneficial owner of
702,741 shares. High Desert beneficially owns 627,441 shares. Each of ISLE,
BCB and Brian Black beneficially owns 75,300 shares. Voting and investment
power over the shares is shared among the High Desert/Bluhm/Carlin Parties.
The address of the High Desert/Bluhm/Carlin Parties except LAMB, LLC is 900
North Michigan Ave., Suite 1900, Chicago, IL 60611. The address of LAMB, LLC
is P.O. Box 2147, Aspen, CO 81612-2147.
(18)The Flag Parties and the Torino Parties are each deemed the beneficial
owners of the same 418,294 shares due to certain relationships among them, and
those shares are therefore included in both of their respective listings in
the table above. In order to avoid the double counting of those shares in the
total beneficial ownership reported for all of the Joint Filing Parties, the
total beneficial ownership of shares reported for all of the Joint Filing
Parties is 418,294 less than the sum of the shares reported as beneficially
owned by each of the Joint Filing Parties.
(19)The following is based on information reported in a Schedule 13D amendment
filed with the SEC on March 23, 2007 by the Joint Filing Parties.
On March 21, 2007, Riv Acquisition Holdings Inc. ("RAH"), a related party of
the Joint Filing Parties, entered into an agreement with Triple Five Investco
LLC and Dominion Financial LLC (collectively, the "T5 Parties") under which
RAH is granted an option to purchase 1,147,550 shares of Common Stock held by
the T5 Parties, effective upon our granting of approvals or waivers under
Nevada's corporate takeover laws and the defensive provisions of our articles
of incorporation (collectively, "Approvals") (which Approvals we have not
granted). The term of the agreement is 90 days, subject to RAH's right to
extend the term for up to three additional 30-day periods. The option will be
nullified if RAH does not exercise it immediately upon the earliest of (i)
our granting of the Approvals (if we grant them), (ii) the closing of a
tender offer for the Common Stock by RAH or (iii) an acquisition of Common
Stock by RAH or any of the Joint Filing Parties that results in RAH's and the
Joint Filing Parties' collective holding of 20% or more of the outstanding
Common Stock. During the term of the agreement, the T5 Parties are restricted
from transferring their shares to anyone else and they must oppose any
acquisition of control of the Company by anyone other than RAH or its
affiliates. These 1,147,550 shares are included in the stock ownership of the
T5 Parties and Syd Ghermezian in the table above.
INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
We have not yet appointed our independent registered public accountant
firm for the year ending December 31, 2007. We typically decide on this
appointment in May of each fiscal year. Deloitte & Touche LLP served as our
independent registered public accountant firm for the year ending December 31,
2006. We expect representatives of Deloitte & Touche LLP to be present at the
Annual Meeting. Those representatives will have the opportunity to make a
statement if they so desire. They are expected to be available to respond to
appropriate questions.
39
Audit Fees
We were billed by our principal accountants, namely Deloitte & Touche
LLP, the member firms of Deloitte Touche, Tohmatsu and their respective
affiliates (collectively "Deloitte"), a total of $634,000 and $748,500 for
fiscal years 2006 and 2005, respectively, for their audit of our annual
consolidated financial statements, their review of our consolidated financial
statements in our quarterly reports on Form 10-Q and Sarbanes-Oxley Act
compliance. The 2006 amount includes $248,000 for audit of our annual
consolidated financial statements and reviews of our quarterly reports on Form
10-Q, and $386,000 for Sarbanes-Oxley Act compliance and the 2005 amount
includes $221,500 for audit of our annual consolidated financial statements and
reviews of our quarterly reports on Form 10-Q, and $527,000 for Sarbanes-Oxley
Act compliance.
Audit-Related Fees
We were not billed by Deloitte in 2006 or 2005 for audit-related fees
that are not reported above in "Audit Fees."
Tax Fees
We were billed by Deloitte $124,374 and $0 in 2006 and 2005,
respectively for tax advice or tax planning services.
All Other Fees
We were not billed by Deloitte for other professional services in
fiscal years 2006 or 2005.
Audit Committee's Pre-Approval of Engagement
Our policy is that before we engage our independent public accountants
annually to render audit or non-audit services, the engagement is reviewed and
approved by our Audit Committee. All of our independent public accountants'
services for which we paid audit fees or tax fees for 2005 or 2006, as described
above, were within the scope of the engagement that our Audit Committee approved
before we entered into the engagement.
OTHER MATTERS
We know of no other matters which are to be brought before the Annual
Meeting. If any other matters are presented for proper action, it is the
intention of the persons named in the proxy to vote in accordance with their
discretion pursuant to the terms of the proxy.
40
PROPOSALS OF STOCKHOLDERS
The rules of the SEC permit stockholders of a company, after timely
notice to the company, to present proposals for stockholder action in the
company's proxy statement where such proposals are consistent with applicable
law, pertain to matters appropriate for stockholder action and are not properly
omitted by company action in accordance with the proxy rules. Stockholder
proposals intended to be presented at our 2008 annual meeting of stockholders
must be received at our executive offices in writing not later than December 21,
2007 to be eligible for inclusion in our proxy statement with respect to that
meeting. Stockholders who intend to present a proposal at our 2008 annual
meeting but who do not seek to have it included in our proxy statement must
notify us of the proposal by not later than March 7, 2008. Otherwise, the
proposal will be deemed untimely. These deadlines are based on a projected 2008
annual meeting date of May 13, 2008. All proposals should be submitted in
writing to Riviera Holdings Corporation, 2901 Las Vegas Boulevard South, Las
Vegas, Nevada 89109, Attention: Corporate Secretary.
HOUSEHOLDING INFORMATION
The SEC permits companies and intermediaries (such as brokers and
banks) to satisfy delivery requirements for proxy statements and annual reports
with respect to two or more stockholders sharing the same address by delivering
a single proxy statement and annual report to those stockholders. This process,
which is commonly referred to as "householding," is intended to reduce the
volume of duplicate information stockholders receive and also reduce expenses
for companies. While we do not utilize householding, some intermediaries may be
"householding" our proxy materials and annual report. Once you have received
notice from your broker or another intermediary that they will be householding
materials to your address, householding will continue until you are notified
otherwise or until you revoke your consent. If you hold your shares through an
intermediary that sent a single proxy statement and annual report to multiple
stockholders in your household, we will promptly deliver a separate copy of each
of these documents to you if you send a written request to Riviera Holdings
Corporation, 2901 Las Vegas Boulevard South, Las Vegas, Nevada 89109, Attention:
Corporate Secretary or call us at (702) 794-9504. If you hold your shares
through an intermediary that is utilizing householding and you want to receive
separate copies of our proxy statement and annual report in the future, you
should contract your bank, broker or other nominee record holder.
RIVIERA HOLDINGS CORPORATION
By: William L. Westerman
President, Chief Executive Officer and
Chairman of the Board of Directors
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. REGARDLESS OF WHETHER YOU
EXPECT TO ATTEND THE MEETING, WE URGE YOU TO COMPLETE, SIGN, DATE AND RETURN THE
ENCLOSED PROXY AS SOON AS POSSIBLE.
41