UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(Mark One)
[ X ] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1995
----------------------------------------------
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from to
-------------- ------------------
Commission file number 33-27399
ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-2469174
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Indiana Avenue & the Boardwalk, Atlantic City, New Jersey 08401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (609) 340-3400
------------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 and 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
All issued and outstanding partnership units of the Partnership have been
offered and sold in reliance on exemptions from the registration requirements of
the Securities Act of 1933 as amended. Therefore, there is no established
trading market for any class of partnership units of the Partnership. The
Partnership did, in 1989, jointly with the Claridge Hotel and Casino Corporation
("Corporation") and Del Webb Corporation ("Webb"), register certain Contingent
Payment Units. As stated in the Prospectus dated May 5, 1989, the Contingent
Payment Rights may or may not be securities. None of the Partnership, the
Corporation or Webb has admitted that the Contingent Payment Rights are
securities or that any of them is the issuer of any such securities.
Registrant's Partnership Units outstanding on December 31, 1995 was 450
units.
PART I
Item 1. Business.
General Development of the Business
Atlantic City Boardwalk Associates, L.P. ("Partnership") was formed on October
31, 1983 to acquire the buildings, parking facility and non-gaming depreciable,
tangible property ("Hotel Assets") of The Claridge Hotel and Casino ("Claridge")
located in Atlantic City, New Jersey; to hold a leasehold interest in the land
on which the Claridge is located; and to engage in activities related or
incidental thereto. On June 16, 1989, as part of a financial restructuring
("Restructuring Agreement"), the Partnership acquired all of the rights to the
land underlying the Hotel Assets, the air rights and related easement. The
Partnership's principal business is to lease the Hotel Assets, land and air
rights to The Claridge at Park Place, Incorporated ("New Claridge"), a
wholly-owned subsidiary of The Claridge Hotel and Casino Corporation
("Corporation"), under operating leases. All revenues of the Partnership, other
than immaterial investment income, are derived from those leases.
The Partnership maintains offices at The Claridge Hotel and Casino, Indiana
Avenue and the Boardwalk, Atlantic City, New Jersey 08401, telephone number
(609) 340-3400; and at 2880 West Meade Avenue, Suite 204, Las Vegas, Nevada
89102, telephone number (702) 253-7662.
New Claridge's Corporate Structure
In 1983, New Claridge acquired the Claridge's casino license and its gaming
equipment (collectively, "Casino Assets") from Del E. Webb New Jersey, Inc.
("DEWNJ"), a wholly-owned subsidiary of Del Webb Corporation ("Webb"); leased
the Hotel Assets and subleased the land on which the Claridge is located from
the Partnership; and assumed certain liabilities related to the acquired assets.
In connection with those transactions, the Partnership granted the Expandable
Wraparound Mortgage (defined below) to New Claridge. These transactions were
entered into in connection with the private placement of equity interests in the
Partnership and the Corporation. Following the 1983 transactions, Webb and its
affiliates retained significant interest in the Claridge. The common stock of
the Corporation and the limited partnership interests of the Partnership were
sold together in a private placement as units, and because there has been
relatively little trading in the stock or partnership interest, there is a
substantial similarity between the equity ownership of the Corporation and the
Partnership. Although the Partnership and the Corporation are independent
entities, approximately 93% of the Corporation's common stock is owned by
persons who also own limited partnership interests in the Partnership. The
Partnership does not currently engage in any significant business activities
other than those relating to the Claridge.
In October 1988, the Partnership, the Corporation and New Claridge entered into
the Restructuring Agreement. The restructuring, which was consummated in June
1989 (the "Closing"), resulted in (i) a reorganization of the ownership interest
in the Claridge; (ii) modifications of the rights and obligations of certain
lenders; (iii) satisfaction and termination of the obligations and commitments
of Webb and DEWNJ under the original structure; (iv) modifications of the lease
agreements between New Claridge and the Partnership; and (v) the forgiveness by
Webb of substantial indebtedness.
On January 31, 1994, the Corporation completed an offering of $85 million of
First Mortgage Notes ("Notes") due 2002, bearing interest at 11 3/4%. The Notes
are secured by (i) a non-recourse mortgage granted by the Partnership
representing a first lien on the Hotel Assets and the underlying land, (ii) a
pledge granted by the Corporation of all outstanding shares of capital stock of
New Claridge, and (iii) a guarantee by New Claridge. New Claridge's guarantee of
the Notes is secured by a collateral assignment of the second lien Expandable
Wraparound Mortgage (described below), and by a lien on the Claridge's gaming
and other assets, which lien will be subordinated to liens that may be placed on
those gaming and other assets to secure any future revolving credit line
arrangement. Interest on the Notes is payable semiannually on February 1 and
August 1 of each year, commencing August 1, 1994.
The net proceeds of the Notes, totaling $82.2 million net of fees and expenses,
were used or will be used as follows: (i) to repay in full on January 31, 1994,
the Corporation's outstanding debt under the Revolving Credit and Term Loan
Agreement ("Loan Agreement"), including the outstanding balance of the
Corporation's revolving credit line, which was secured by the First Mortgage;
(ii) to expand New Claridge's casino capacity by 12,000 square feet in 1994,
including the addition of approximately 500 slot machines and the relocation of
two restaurants and their related kitchens; (iii) to purchase property in 1995
and construct on that property a self-parking garage, which is expected to open
in mid-1996; (iv) the possible purchase of the Contingent Payment (described
below) granted in 1989 and now held in a trust for the Valley of the Sun United
Way; and (v) the potential expansion of the Corporation's activities into
emerging gaming markets.
The current relationships and agreements between the Partnership, the
Corporation and New Claridge are described below:
Property Ownership and Related Leases and Mortgage
The Casino Assets are owned by New Claridge. The Hotel Assets, land and air
rights are owned by the Partnership and leased by the Partnership to New
Claridge. The lease obligations are set forth in an operating lease
("Operating Lease"), originally entered into on October 31, 1983, and an
expansion operating lease ("Expansion Operating Lease"), covering additions
to the Claridge made in 1986.
Operating Lease
New Claridge leases from the Partnership the Hotel Assets and the land
on which the Claridge is located for an initial term of 15 years with
three 10-year renewal options. Basic annual rent during the initial
term of the Operating Lease in equal monthly installments was
$37,080,000 in 1993, $38,055,000 in 1994, $39,030,000 in 1995 and
escalates yearly thereafter up to $41,775,000 in 1997 and $32,531,000
for the nine month period ending September 30, 1998. If the terms of
the lease are extended, basic rent will be calculated pursuant to a
formula, with such rent not to be more than $29,500,000 nor less than
$24,000,000 in the lease year October 1, 1998 through September 30,
1999, and not to be greater than 10% more than the basic rent for the
preceding lease year in each lease year thereafter. Under the terms of
the Operating Lease, New Claridge has an option to purchase, on
September 30, 1998 and, if it renews the Operating Lease, on September
30, 2003, the Hotel Assets and the underlying land for their fair
market value at the time the option is exercised.
New Claridge is also required to pay, as additional rent, certain
taxes, insurance and other charges relating to the occupancy of the
land and Hotel Assets, certain expenses and debt service relating to
furniture, fixture and equipment replacements and building improvements
(collectively, "FF&E Replacements") and certain general and
administrative costs of the Partnership. The Partnership is required
during the entire term of the Operating Lease to provide New Claridge
with FF&E Replacements and, until September 30, 1998, is required to
provide facility maintenance and engineering services to New Claridge.
New Claridge is obligated to lend the Partnership any amounts necessary
to fund the cost of FF&E Replacements, and if the Partnership's cash
flow, after allowance for certain distributions, is insufficient to
provide the facility maintenance and engineering services required of
it, New Claridge is also required to lend the Partnership such
necessary funds (collectively, "FF&E Notes"). The FF&E Notes are
secured under the Expandable Wraparound Mortgage (see discussion
below), and are payable as follows. Generally, one half of the
principal is due in 48 months and the remainder is due 60 months from
the issue date of the individual notes, with the following exception.
As required by the offering of $85 million of Notes on January 31,
1994, $8 million was used to finance internal improvements at the
Claridge. In connection therewith, the Expandable Wraparound Mortgage
as well as the Operating Lease and the Expansion Operating Lease were
amended to provide that the $8 million principal on these additional
FF&E Notes will be payable on September 30, 2000, at final maturity of
the Expandable Wraparound Mortgage. All FF&E notes are secured under
the Wraparound Mortgage up to $25 million. New Claridge is obligated to
pay as additional rent to the Partnership the debt service on all FF&E
Notes.
The Operating Lease, together with the Expansion Operating Lease
(described below), was amended as part of the Restructuring Agreement
to provide for the deferral of $15,078,000 of rental payments during
the period July 1, 1988 through the beginning of 1992, and to provide
for the abatement of $38,820,000 of basic rent through 1998, thereby
reducing the Partnership's cash flow to an amount estimated to be
necessary only to meet the Partnership's cash requirements. During the
third quarter of 1991, the maximum deferral of rent was reached. On
August 1, 1991, the Operating Lease and the Expansion Operating Lease
were amended further to revise the abatement provisions so that,
commencing January 1, 1991, for each calendar year through 1998, the
lease abatements may not exceed $10 million in any one calendar year,
and $38,820,000 in the aggregate. Cumulative abated rents as of
December 31, 1995 total $28,759,000 leaving $10,061,000 still to be
abated in future years. Additional abatements of rent totaling $500,000
are available as a result of the acquisition of the option to purchase
the Contingent Payment, and further abatements will become available
upon exercising the Contingent Payment option (see Item 1. Business -
"Contingent Payment Rights").
Expansion Operating Lease
On March 17, 1986, New Claridge entered into a lease with the
Partnership whereby New Claridge leases from the Partnership the
Claridge expansion improvements for an initial term beginning March 17,
1986 and ending on September 30, 1998 with three 10-year renewal
options. Basic annual rent during the initial term of the Expansion
Operating Lease was $3,870,000 in 1986 (prorated based on the number of
days that the expansion improvements were open to the public) and was
based on the cost of the construction of the expansion improvements.
Annually thereafter the rental amount is adjusted based on the Consumer
Price Index with any increase not to exceed two percent per annum.
Basic annual rent for 1995, 1994 and 1993 amounted to $4,625,000,
$4,534,000, and $4,445,000, respectively. If the terms of the lease are
extended, basic rent will be calculated pursuant to a formula, with
such rent not to be more than $3 million nor less than $2.5 million in
the lease year October 1, 1998 through September 30, 1999, and not to
be greater than 10% more than the basic rent for the preceding lease
year in each lease year thereafter.
New Claridge is also required to pay as additional rent certain
expenses and debt service relating to furniture, fixture and equipment
replacements and building improvements (collectively, "Expansion FF&E
Replacements") for the expanded facility. The Partnership is required
during the entire term of the Expansion Operating Lease to provide New
Claridge with Expansion FF&E Replacements and, until September 30,
1998, is required to provide facility maintenance and engineering
services to New Claridge. New Claridge is obligated to lend to the
Partnership, in the form of FF&E Notes, any amounts necessary to fund
the Expansion FF&E Replacements. Any advances by New Claridge for the
foregoing will be secured under the Expandable Wraparound Mortgage (see
discussion below).
Expandable Wraparound Mortgage
On October 31, 1983, the Partnership executed and delivered to New
Claridge a mortgage on the Hotel Assets ("Expandable Wraparound
Mortgage") which was subordinate to an $80 million first mortgage
("First Mortgage") granted by the Partnership to a group of banks and a
$47 million purchase money second mortgage ("Purchase Money Second
Mortgage") granted by the Partnership to DEWNJ. The Purchase Money
Second Mortgage, which was due on September 30, 2000, was canceled upon
satisfaction of certain conditions set forth in an agreement entered
into at the time of the restructuring. In conjunction with the offering
of $85 million of Notes on January 31, 1994, the outstanding debt under
the Loan Agreement, which included the First Mortgage and a revolving
credit line, was satisfied in full.
By its terms, the Expandable Wraparound Mortgage may secure up to $25
million of additional borrowings by the Partnership from New Claridge
to finance FF&E Replacements and facility maintenance and engineering
shortfalls. The Expandable Wraparound Mortgage provides that, so long
as the Partnership is not in default on its obligations under the
Expandable Wraparound Mortgage, New Claridge is obligated to make
payments required under any senior mortgage indebtedness. The
indebtedness secured by the Expandable Wraparound Mortgage, which
matures on September 30, 2000, bears interest at an annual rate equal
to 14% with certain interest installments that accrued in 1983 through
1988 totaling $20 million being deferred until maturity. In addition,
the Partnership is required under the Expandable Wraparound Mortgage to
make payments of principal and interest in respect of any loans made to
finance FF&E Replacements or facility maintenance or engineering costs
as described above. To the extent those borrowings exceed $25 million
in the aggregate outstanding at any time, they will be secured under
separate security agreements and not by the lien of the Expandable
Wraparound Mortgage.
On March 17, 1986, the First Mortgage was amended and assumed by New
Claridge. The amount of the amended and assumed First Mortgage was
increased to secure up to $96.5 million to provide financing for the
Expansion Improvements. Indebtedness secured by the Expandable
Wraparound Mortgage was increased by an amount up to $17 million to
provide the Partnership with the necessary funding.
Effective August 28, 1986, the Partnership commenced making level
monthly payments of principal and interest so as to repay on September
30, 1998, in full, the principal balance of this $17 million increase
in the Expandable Wraparound Mortgage. The Expandable Wraparound
Mortgage was amended to require that the $127 million aggregate
principal amount secured by it would be repayable in installments
during the years 1988 through 1998 in escalating amounts totaling $80
million, with a balloon principal payment of $47 million and the $20
million of deferred interest due on September 30, 2000.
In connection with the offering of $85 million of the Notes on January
31, 1994, the Corporation agreed to use not less that $8 million from
the net proceeds of the offering to finance certain internal
improvements to the Claridge which were funded through additional FF&E
Notes. In connection therewith, the Expandable Wraparound Mortgage Loan
Agreement as well as the Operating Lease, and the Expansion Operating
Lease were amended to provide that the principal on these additional
FF&E Notes will be payable at final maturity of the Expandable
Wraparound Mortgage.
Note Receivable from New Claridge
Pursuant to the Restructuring Agreement the Partnership lent to New
Claridge $3.6 million representing, at the Closing, substantially all of
the Partnership's cash and cash equivalents in excess of amounts required
to pay Partnership expenses. The loan bears interest at 12% per annum and
is due and payable, along with the principal, upon (i) the sale or
refinancing of the Claridge; (ii) upon full or partial satisfaction of the
Expandable Wraparound Mortgage; and (iii) upon full satisfaction of any
first mortgage then in place.
Contingent Payment Rights
The Restructuring Agreement provided for Webb to retain an interest equal
to $20 million plus interest from December 1, 1988 accruing at the rate of
15% per annum compounded quarterly ("Contingent Payment") in any proceeds
ultimately recovered from the operations and/or the sale or refinancing of
the Claridge facility in excess of the First Mortgage loan and other
liabilities. To give effect to this Contingent Payment, the Corporation and
the Partnership agreed not to make any distributions to the holders of
their equity securities, whether derived from operations or from sale or
refinancing proceeds, until Webb had received the Contingent Payment.
In connection with the restructuring, Webb agreed to permit those
partners/investors in the Partnership and Corporation ("Releasing
Partners/Investors") from whom Webb had received written releases from all
liabilities, rights ("Contingent Payment Rights") to receive certain
amounts to the extent available for application to the Contingent Payment.
Approximately 84% in interest of the partners/investors provided releases
and became Releasing Partners/Investors. Payments to Releasing
Partners/Investors are to be made in accordance with a schedule of
priorities, as defined in the Restructuring Agreement.
On April 2, 1990, Webb transferred its interest in the Contingent Payment
to an irrevocable trust for the benefit of the Valley of the Sun United
Way, and upon such transfer Webb was no longer required to be qualified or
licensed by the Commission.
On February 23, 1996, the Corporation acquired an option to purchase, at a
discount from the carrying value, the Contingent Payment. The purchase
price of the option was $1 million, and the option may be exercised any
time prior to December 31, 1997. Upon exercise of the option, the purchase
price of the Contingent Payment would be $10 million, plus interest at 10%
per annum for the period from January 1, 1997 to the date of payment of the
purchase price if the purchase occurs after December 31, 1996. The purchase
price may also increase in an amount not to exceed $10 million if future
distributions to Releasing Partners/Investors exceed $20 million. It is
estimated that at December 31, 1995, the aggregate amount owing in respect
of the Contingent Payment was $56.8 million.
Upon exercise of the option, it is anticipated that the Contingent Payment
will be canceled so that neither the Corporation or the Partnership will
have any obligation to make any payment in respect of the Contingent
Payment before making a distribution to limited partners or shareholders.
Upon the purchase and cancellation, however, the Corporation and the
Partnership will remain obligated to make payments to the Releasing
Partners/Investors, in respect of the Contingent Payment Rights, before any
distribution may be made to limited partners or shareholders. These
payments would be required to be in the same amounts as if the Contingent
Payment had not been purchased and canceled. As a result, it is not likely
that limited partners or shareholders who are not Releasing
Partners/Investors will receive any distribution from the Partnership or
the Corporation. In the aggregate, Releasing Partners/Investors are
entitled to receive an amount equal to approximately 72% of the Contingent
Payment.
Under the terms of the option, upon purchase of the Contingent Payment, the
Partnership and/or the Corporation are required to make distributions in
excess of $7 million to the Releasing Partners/Investors. The Partnership
and the Corporation have agreed to cooperate in the purchase of the option
and the Contingent Payment, with each contributing one-half of the purchase
price of the option and each anticipated to contribute one-half of the
purchase price of the Contingent Payment. A portion of the Partnership's
contribution will be contributed through additional abatements of basic
rent payments due under the Operating Lease and the Expansion Operating
Lease.
Current Financial Condition of The Partnership
The ability of the Partnership to fulfill its obligations is dependent upon the
ability of New Claridge to pay rental payments when due. Accordingly, the
financial stability of the Partnership is dependent upon the financial condition
of New Claridge. The following discussion entitled "Current Financial Situation
of The Claridge Hotel and Casino Corporation" and the discussion concerning New
Claridge in Item 7, "Management's Discussion and Analysis of Financial Condition
and Results of Operations," are taken from the Annual Report on Form 10-K of the
Corporation, and the Partnership disclaims any responsibility for the content
thereof, except for the information also included in Item 8, "Financial
Statements and Supplementary Data."
Current Financial Situation of The Claridge Hotel and Casino Corporation
The Claridge
The Claridge, located in the Boardwalk casino section of Atlantic City, New
Jersey, is a 26-story building that contains the Corporation's casino and
hotel facilities. The Claridge's casino consists of approximately 56,000
square feet of casino space on three main levels with various adjacent
mezzanine levels. The casino currently contains approximately 1,875 slot
machines and sixty-four table games, including forty blackjack tables, ten
craps tables, five roulette tables, three Caribbean stud poker tables, one
baccarat table, one mini-baccarat table, and four other specialty games.
The hotel with related amenities consists of 501 guest rooms (including 66
two- and three-room suites, 26 specialty suites and four tower penthouse
suites), four restaurants, a buffet area, three lounges, a private player's
club, a 600-seat theater, limited meeting rooms, a gift shop, a beauty
salon and a health club with an indoor swimming pool. New Claridge is
currently constructing a self-parking garage facility connected to its
existing valet-parking garage. Construction of the garage is expected to be
completed in mid-1996. The combined garage facility will provide parking
for approximately 1,200 vehicles.
Built in 1929 as a hotel, the Claridge was remodeled at a cost of
approximately $138 million prior to its reopening as a casino hotel in
1981. The Claridge was further renovated and expanded in 1986 at a cost of
approximately $20 million, which provided approximately 10,000 square feet
of casino space together with a 3,600 square foot lounge ("Expansion
Improvements"). In 1994, approximately $12.7 million was expended to expand
the Claridge's casino square footage by approximately 12,000 feet.
New Claridge experiences a seasonal fluctuation in demand, which is typical
of casino-hotel operations in Atlantic City. Historically, peak demand has
occurred during the summer season. New Claridge's principal market is the
Mid-Atlantic area of the United States. Casino gaming in Atlantic City is
highly competitive and is strictly regulated under the New Jersey Casino
Control Act and regulations thereunder which affect virtually all aspects
of casino operations.
Results of Operations for the Year Ended December 31, 1995
as Compared to the Year Ended December 31, 1994
The Corporation had a net loss of $1,908,000 for the year ended December
31, 1995, as compared to a net loss of $6,901,000 for the year ended
December 31, 1994. Casino revenues were higher in 1995 than in 1994 because
of increased business volume due to better weather conditions and the
expanded casino facility (see the discussion below concerning the results
of operations in 1994). The net loss in 1995 was primarily due to decreased
hotel revenues and increased casino expenses. The average room rate
decreased to $55 in 1995 from $67 in 1994, in part as a result of a
reduction in the complimentary room rate recorded, resulting in decreased
hotel revenue. The increase in casino expenses was primarily due to the
increase in coin incentives to patrons arriving by bus. After three years
of decreases in the number of bus patrons visiting Atlantic City casinos,
in 1995 visitation increased by 10%, thereby intensifying the competition
for bus patrons. The increased competition took the form of higher coin
incentives, which New Claridge matched, thus increasing its per patron
average coin cost to $12.81 in 1995 from $10.99 in 1994.
The net loss in 1994 was primarily due to (i) the decline in business
volume in the first quarter of 1994 due to the severe snow and ice storms
throughout the Northeastern United States, (ii) a reduction in volume in
the second quarter of 1994 as a result of business disruption due to the
construction of New Claridge's expanded casino facility (which opened in
late June 1994, and resulted in the addition of approximately 500 slot
machines), (iii) increased marketing expenditures to promote the opening of
this expansion, and (iv) increased interest expense due to the completion
of the offering of $85 million of First Mortgage Notes on January 31, 1994.
Factors Which May Influence New Claridge's Future Operating Results
The continued expansion of casino gaming, lotteries, including video
lottery terminals ("VLT's"), and off-track betting in other nearby states,
particularly Pennsylvania, Delaware, Maryland, or New York, could have an
adverse effect on the Atlantic City market and on the Corporation's future
operating results. Prior to the November 1994 elections, it was believed
that the legalization of casino gaming in at least limited forms in
Philadelphia and other areas of Pennsylvania was a significant possibility.
However, Pennsylvania's governor, Tom Ridge, has indicated that he will
require a statewide vote on gaming, as well as local referendum; the
requirement for a statewide vote would make the legalization of casino
gaming in Pennsylvania a more difficult and expensive possibility than
previously anticipated. In the past year, legislation to put the issue
before Pennsylvania voters was introduced several times, but so far none
has succeeded. Management believes that, should casino gaming be legalized
in the future in Philadelphia, the effect on Atlantic City casinos and on
the Claridge would depend upon the form and scope of such gaming. In
December 1995, two racetracks in Delaware began offering slot machines at
their facilities, with a third racetrack in negotiations to build another
slot machine facility. The continued expansion of casino gaming, lotteries,
including VLT's, and off-track betting in other nearby states could also
have a negative effect on the Atlantic City market.
In addition to the expansion of casino gaming in other states, expansions
to existing casinos in Atlantic City, as well as the possible addition of
new casino properties, and the opening of the new convention center in 1997
could have an impact on the Atlantic City market and the Corporation's
future operations.
Current Licensing Status of the Partnership and New Claridge
The ownership and operation of casino-hotel facilities in Atlantic City are
subject to extensive state regulation under the Casino Control Act under the
direction of the New Jersey Casino Control Commission ("Commission"). The Casino
Control Act provides that various categories of entities must hold appropriate
casino licenses. The Partnership currently operates under a three-year casino
service industry license effective October 31, 1992, while New Claridge operates
under a four-year casino license effective September 30, 1995. The Partnership
has applied with the Commission for license renewal. The general partners do not
anticipate any problems renewing the Partnership's license.
Employees
The Partnership has one part-time employee who assists the General Partners with
investor-related matters. The General Partners are paid management fees pursuant
to the Partnership Agreement, as amended. See Items 10 and 11, "Directors and
Executive Officers of the Registrant" and "Executive Compensation."
Item 2. Properties.
The Claridge hotel was constructed in 1929 at the northeastern end of Absecon
Island, on which Atlantic City is located. After remodeling, modernization and
expansion at a cost of approximately $138 million, the Claridge opened as a
casino-hotel in July 1981. Located in the Boardwalk Casino section of Atlantic
City on Brighton Park, approximately 550 feet north of the Boardwalk, the
Claridge occupies three parcels of property. In October 1983 the Partnership
acquired the building, parking facility and non-gaming depreciable, tangible
property of the Claridge casino-hotel. On June 16, 1989, as part of the
Restructuring Agreement, the Partnership acquired all of the rights to the land
underlying the Hotel Assets, the air rights and related easement.
The casino-hotel, situated on the main parcel of land (41,408 square feet with
138 feet fronting the park and 300 feet deep), is a concrete steel frame
structure, 26 stories high at its highest point. The valet-parking garage,
situated on an adjacent parcel of land (21,840 square feet) west of the
casino-hotel site, is an eight-level reinforced concrete ramp structure, built
in 1981. Including the bus drive-through area, a bus patron waiting room and
electrical room, it totals an area of 197,100 square feet and provides parking
for approximately 475 automobiles. New Claridge is currently constructing a
self-parking garage, located on a parcel of land (29,120 square feet) connected
to its existing valet-parking garage. Construction of the garage is expected to
be completed in mid-1996. The combined garage facility will provide parking for
approximately 1,200 vehicles. The office building, situated on an adjacent
parcel of land (7,766 square feet), is a two-story reinforced concrete and brick
structure with a flat roof. Constructed over 50 years ago, its interior has been
modernized. The building is utilized as an administration facility, and totals
an area of 14,020 square feet. All of the existing facilities are owned by the
Partnership and are leased to New Claridge under the Operating Lease and the
Expansion Operating Lease. The self-parking garage and the property on which it
is located are owned by New Claridge.
Item 3. Legal Proceedings.
The Partnership is not involved in any material litigation.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no matters submitted to a vote of security holders during the fourth
quarter of 1995.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
No partnership interests in the Partnership have been registered under the
Securities Act of 1933, as amended ("Securities Act"). All outstanding
partnership interests have been offered and sold in reliance on exemptions from
the registration requirements of the Securities Act. Therefore, there is no
established trading market for any class of partnership interests of the
Partnership. Two partnership interests equal one partnership unit, and there are
approximately 480 holders of partnership interests.
The Contingent Payment Rights received by Releasing Partners/Investors may or
may not be securities. The Partnership, the Corporation and Webb filed a
registration statement under the Securities Act with respect to the Contingent
Payment Rights as if they were securities and each of the Corporation, the
Partnership and Webb were an issuer of such securities. However, by such
actions, none of the Partnership, the Corporation or Webb admitted that the
Contingent Payment Rights are securities or that any of them is the issuer of
any such securities. There is no market for the Contingent Payment Rights.
Item 6. Selected Financial Data.
Set forth below is selected financial data regarding the Partnership as of or
for each of the years in the five-year period ended December 31, 1995.
<TABLE>
<CAPTION>
As of or for the year ended December 31,
-------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(not covered by Independent Auditors' Report) (a)
(in thousands)
<S> <C> <C> <C> <C> <C>
Net income ...........................$ 2,723 1,782 309 512 2,370
Net income per limited
partnership unit (b)..................$ 5.95 3.90 0.68 1.12 5.18
Total assets ........................$ 135,175 140,309 138,524 143,410 148,252
Long term obligations,
net of current portion ...........$ 104,315 114,268 115,563 121,820 128,166
Partners' capital accounts (deficit) $ 14,135 11,412 9,630 9,321 8,809
</TABLE>
(a) The above selected financial data should be read in conjunction with the
consolidated financial statements and the related notes appearing
elsewhere in this annual report.
(b) 450 limited partnership units were outstanding at the end of each period.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Results of Operations for the Year Ended December 31, 1995
as Compared to the Year Ended December 31, 1994
Rental income for the year ended December 31, 1995 increased $1,281,000 as
compared to the year ended December 31, 1994. New Claridge pays as additional
rent, certain expenses and debt service relating to furniture, fixture and
equipment replacements and building improvements ("FF&E"). During 1994 the
Claridge expanded its casino. The expansion (as well as the related debt) was
occurring throughout 1994 and had been completed prior to the beginning of 1995.
This caused the Partnership's debt service relating to FF&E to be higher in 1995
when compared to 1994, resulting in increased rents in 1995.
Investment income earned on repurchase agreements for the year ended December
31, 1995 increased $47,000 as compared to the year ended December 31, 1994. This
increase reflects the increase in the interest rate offered for these
investments during 1995 as compared to 1994.
The Partnership has an agreement with New Claridge whereby New Claridge provides
facility and maintenance and engineering services for the Claridge. The
agreement calls for the reimbursement of the actual facilities and maintenance
costs incurred on the Partnership's behalf. The cost of maintaining and
repairing Hotel Assets increased $399,000 for the year ended December 31, 1995
as compared to 1994 due primarily to an increase in New Claridge's maintenance
and engineering salaries and wages and payroll related expenses.
For the year ended December 31, 1995, interest expense decreased $490,000 from
the prior year due to principal payments made during 1994 and 1995 that reduced
the average outstanding balance of the wraparound and expansion mortgages and
FF&E notes.
General and administrative expenses decreased $54,000 during the year ended
December 31, 1995 as compared to 1994. Insurance and professional fees increased
approximately $67,000 due to an increase in insurance premium as well as
professional fees incurred with regard to the Contingent Payment. The decrease
is primarily due to a $46,000 loss on the disposal of assets that was recognized
in 1995 compared to a similar loss of $170,000 in 1994. Both of these losses
were classified as a general and administrative expense.
During 1994, in connection with the Claridge's casino expansion project, a
significant amount of Hotel Assets were placed into service. A full year's
depreciation was taken on these assets during 1995. As a result, depreciation
and amortization for the year ended December 31, 1995 increased $532,000 as
compared to 1994.
Refer to the "Liquidity and Capital Resources" section below for further
discussion on the Partnership's operations.
Results of Operations for the Year Ended December 31, 1994
as Compared to the Year Ended December 31, 1993
Rental income for the year ended December 31, 1994 increased $1,805,000 as
compared to the year ended December 31, 1993. New Claridge pays as additional
rent, certain expenses and debt service relating to FF&E. FF&E notes payable as
of December 31, 1994 are approximately $8.6 million higher than as of the end of
the prior year. This increase is due to the casino expansion at the Claridge.
This caused the Partnership's debt service relating to FF&E to be higher in 1994
as compared to 1993, resulting in increased rents in 1994.
General and administrative expenses increased $153,000 during the year ended
December 31, 1994 as compared to 1993. This increase is primarily due to a
$170,000 loss on the disposal of assets that was recognized in 1994 and was
classified as a general and administrative expense.
During 1994, in connection with the Claridge's casino expansion project, a
significant amount of Hotel Assets were placed into service. As a result,
depreciation and amortization for the year ended December 31, 1994 increased
$353,000 as compared to 1993.
Liquidity and Capital Resources
Current lease payments from New Claridge are sufficient to pay the Partnership's
debt service and operating expenses. As part of the Restructuring Agreement,
rental payments in excess of monthly cash flow requirements are deferred or
abated so that excess cash does not currently accumulate in the Partnership. At
the Closing of the restructuring the Partnership loaned New Claridge $3.6
million. The note, including interest, along with those rentals deferred under
the amendment to the operating leases, are to be repaid to the Partnership upon
(i) the sale or refinancing of the Claridge; (ii) upon full or partial
satisfaction of the Expandable Wraparound Mortgage; and (iii) upon full
satisfaction of any first mortgage then in place.
The Operating Lease, together with the Expansion Operating Lease, was amended as
part of the Restructuring Agreement to provide for the deferral of $15,078,000
of rental payments during the period July 1, 1988 through the beginning of 1992,
and to provide for the abatement of $38,820,000 of basic rent through 1998,
thereby reducing the Partnership's cash flow to an amount estimated to be
necessary only to meet the Partnership's cash requirements. During the third
quarter of 1991, the maximum deferral of rent was reached. On August 1, 1991,
the Operating Lease and the Expansion Operating Lease were amended further to
revise the abatement provisions so that, commencing January 1, 1991, for each
calendar year through 1998, the lease abatements may not exceed $10 million in
any one calendar year, and $38,820,000 in the aggregate. Rents abated during the
years ended December 31, 1995 and 1994 amounted to $7,858,000 and $6,634,000,
respectively. Cumulative abated rents as of December 31, 1995 total $28,759,000
leaving $10,061,000 still to be abated in future years. The amount which will be
abated in the individual years cannot be determined until the Partnership incurs
expenses and debt service in those years. However, it is anticipated by the
general partners as well as the management of New Claridge that the remaining
abatement of $10,061,000 will be fully utilized by the first quarter of 1997.
Because the initial term of the Operating Lease continues through September 30,
1998, rental payments after the $38,820,000 abatement is fully utilized will
increase substantially to approximately $39.5 million in 1997, as compared to
$31.7 million (net of projected abatement) in 1996. Additional abatements of
rent totaling $500,000 are available as a result of the acquisition of the
option to purchase the Contingent Payment, and further abatements will become
available upon exercising the Contingent Payment option (see Item 1. Business -
"Contingent Payment Rights").
Under the terms of the option to purchase the Contingent Payment, upon purchase
of the Contingent Payment, the Partnership and/or the Corporation are required
to make distributions in excess of $7 million to the Releasing
Partners/Investors. The Partnership and the Corporation have agreed to cooperate
in the purchase of the option and the Contingent Payment, with each contributing
one-half of the purchase price of the option and each anticipated to contribute
one-half of the purchase price of the Contingent Payment. A portion or the
Partnership's contribution will be contributed through additional abatements of
basic rent payments due under the Operating Lease and the Expansion Operating
Lease (see Item 1. Business - "Contingent Payment Rights").
The Partnership funds the purchase of additional Hotel Assets by borrowing
funds, at a 14% interest rate, from New Claridge. The ensuing notes are secured
under the Expandable Wraparound Mortgage up to $25 million. Principal and
interest on these notes are then reimbursed to the Partnership through
additional rentals from New Claridge. Under the Operating Lease, New Claridge is
required to reimburse the Partnership for all taxes, assessments, insurance and
general and administrative costs of the Partnership.
The ability of the Partnership to continue to fulfill its obligations is
dependent upon the ability of New Claridge to continue to make rental payments
when due. On January 31, 1994, the Corporation completed an offering of $85
million of First Mortgage Notes due in 2002, bearing interest at 11 3/4%. A
portion of the net proceeds of $82.2 million, after deducting fees and expenses,
was used to repay in full the Corporation's outstanding debt under the Loan
Agreement, including the outstanding balance of the Corporation's revolving
credit line. The Notes come due on February 1, 2002. Interest on the Notes is
payable semiannually on February 1 and August 1 of each year, commencing August
1, 1994. In conjunction with the full satisfaction of the Loan Agreement, the
Corporation's revolving credit line arrangement was terminated. The Corporation
is currently seeking to obtain a new line of credit arrangement.
The Partnership had a working capital deficiency of approximately $14,352,000 as
of December 31, 1995 and $12,315,000 as of December 31, 1994. The working
capital deficiency primarily results from the consummation of the Restructuring
Agreement. As part of the restructuring, the Partnership's cash flow was reduced
to an amount no greater than what the Partnership needs to pay Partnership
expenses, including debt service. Thus, so long as the Claridge is financially
viable and New Claridge continues to make all payments under the operating
leases, the Partnership expects to be able to pay its current liabilities.
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of" ("SFAS No. 121"). SFAS No. 121 becomes effective for fiscal
years beginning after December 15, 1995. The Partnership is currently assessing
the impact of SFAS No. 121 on its financial statements.
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123
"Accounting for Stock-Based Compensation" ("SFAS No. 123"). SFAS No. 123 is
effective for transactions entered into in fiscal years beginning after December
15, 1995. The Partnership will not be adopting the recognition and measurement
criteria of SFAS No. 123 and thus, the impact of SFAS No. 123 on the
Partnership's financial statements will not be material.
Item 8. Financial Statements and Supplementary Data.
The Financial Statements and Financial Statement Schedules are set forth at
pages F-1 to F-18 of this report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Name Position Age
Anthony C. Atchley General Partner 54
Gerald C. Heetland General Partner 55
Mr. Atchley has served as General Partner since June 16, 1989. He served as
President and Chief Executive Officer of Consolidated Casinos Corp., a
subsidiary of Webb, and of the Del Webb Hotel Group from November 1985 to
September 1989. He served as Executive Vice President of Sahara Nevada
Corporation, a subsidiary of Webb, from October 1982 to November 1985 and as
President and General Manager of the High Sierra Casino and Hotel from October
1983 to November 1985. Mr. Atchley served as President and General Manager of
the Claridge from April 1982 to November 1982, as well as Vice Chairman and a
member of the Board of Directors of the Corporation from November 1986 to July
1989.
Mr. Heetland has served as General Partner since June 16, 1989. He served as
Vice President General Counsel and Secretary of Fitzgeralds Casino & Hotel in
Las Vegas, Nevada and Fitzgeralds Casino & Hotel, Harolds Club and Nevada Club
in Reno, Nevada from September 1990 to November 1995. He served as Vice
President, Secretary and General Counsel of Del Webb Hotels and all affiliated
hotel group subsidiaries from March 1986 to June 1989. He served as Vice
President, General Counsel-Casino/Hotels and Assistant Secretary of Webb and
Vice President and Secretary of all Webb hotel group subsidiaries from April
1985 to March 1986, as Vice President, Associate General Counsel and Assistant
Secretary of Webb from November 1983 to March 1985, and as Associate General
Counsel and Assistant Secretary of Webb from July 1981 to November 1983. He
served in similar capacities in all Webb hotel group subsidiaries during the
1981 to 1985 periods noted. From June 1984 through March 1986, Mr. Heetland was
the Secretary of the Corporation, and from March 1986 through May 1987 he was
Assistant Secretary of the Corporation.
Item 11. Executive Compensation.
The following table shows the general partners' management fee which is all of
the compensation paid by the Partnership to all of its executive officers for
the years ended December 31, 1995, 1994 and 1993.
Other Annual
Individual Capacity Year Compensation
___________ ________ ____ _____________
Anthony C. Atchley General Partner 1995 $65,000
1994 $65,000
1993 $65,000
Gerald C. Heetland General Partner 1995 $65,000
1994 $65,000
1993 $65,000
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
Security ownership of certain beneficial owners
Not applicable.
Security ownership of management
Per the terms of the Partnership agreement, the General Partners, as a group,
are entitled to a 1% general partnership interest in the Partnership as
described below:
Name and Address Amount and Nature
of Beneficial Owner of Beneficial Ownership
___________________ _______________________
Anthony C. Atchley
2880 W. Meade Avenue Suite 204
Las Vegas, NV 89102 0.5% Partnership Interest
Gerald C. Heetland
2880 W. Meade Avenue Suite 204
Las Vegas, NV 89102 0.5% Partnership Interest
Changes in Control
Not applicable.
Item 13. Certain Relationships and Related Transactions.
The Partnership does not currently engage in any significant business activities
other than those relating to the Claridge. New Claridge has a direct material
interest in the Expandable Wraparound Mortgage and Operating Leases. See Item 1.
Business - "Current Financial Condition of The Partnership."
The common stock of the Corporation and the limited partnership interests of the
Partnership were sold together in a private placement as units, and because
there has been relatively little trading in the stock or partnership interest,
there is a substantial similarity between the equity ownership of the
Corporation and the Partnership. Although the Partnership and the Corporation
are independent entities, approximately 93% of the Corporation's common stock is
owned by persons who also own limited partnership interests in the Partnership.
The Partnership has an agreement with New Claridge whereby New Claridge provides
facility and maintenance and engineering services for the Claridge. The
agreement calls for the reimbursement of the actual facilities and maintenance
costs incurred on the Partnership's behalf, as well as an annual fee equal to
10% of such facility and maintenance costs, but not to exceed $530,000 per
annum. The agreement expires on September 30, 1998.
Under the terms of the option to purchase the Contingent Payment, upon purchase
of the Contingent Payment, the Partnership and/or the Corporation are required
to make distributions in excess of $7 million to the Releasing
Partners/Investors. The Partnership and the Corporation have agreed to cooperate
in the purchase of the option and the Contingent Payment, with each contributing
one-half of the purchase price of the option and each anticipated to contribute
one-half of the purchase price of the Contingent Payment. A portion or the
Partnership's contribution will be contributed through additional abatements of
basic rent payments due under the Operating Lease and the Expansion Operating
Lease (see Item 1. Business - "Contingent Payment Rights").
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
(a) (1) and (2): The response to this portion of Item 14 is submitted as a
separate section of this report beginning on page F-1. All other schedules have
been omitted as inapplicable or not required because the required information is
included in the financial statements or notes thereto.
(a) (3) Exhibits
3 (a) Agreement of Limited Partnership of the Partnership, as amended*
10 (a) Form of Amended and Restated Loan Agreement*
10 (b) Form of Amendment to Operating Lease and Expansion Operating
Lease*
10 (c) Form of Amendment to Wraparound Mortgage Loan and Wraparound
Mortgage*
10 (d) Form of Note from New Claridge to the Partnership*
10 (e) Form of Restructuring Agreement*
10 (f) Form of Second Amendment to Operating Lease and Expansion
Operating Lease**
10 (g) Form of Third Amendment to Operating Lease and Expansion Operating
Lease**
10 (h) Form of Fourth Amendment to Operating Lease and Expansion
Operating Lease***
10 (i) Form of Mortgage, Assignment of Leases and Rents, Security
Agreement and Financing Statement***
10 (j) Form of Option Agreement
10 (k) Form of Side Agreement
10 (l) Form of First Amendment to the Option Agreement
10 (m) Form of First Amendment to the Side Agreement
*Exhibits are incorporated by reference to the Exhibits filed with a
Registration Statement filed with the Securities and Exchange Commission on
March 13, 1989 (Registration #33-27399)
**Exhibits are incorporated by reference to the Exhibits filed with Form 10-K
for the fiscal year ended December 31, 1991 filed with the Securities and
Exchange Commission on March 26, 1992.
***Exhibits are incorporated by reference to the Exhibits filed with Form
10-K for the fiscal year ended December 31, 1993 filed with the Securities
and Exchange Commission on March 30, 1994.
(b) Reports on Form 8-K
The Partnership filed no reports on Form 8-K during the last
quarter of the period covered by this report.
Supplemental Information
No proxy materials are being or have been sent to the Limited Partners.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Atlantic City Boardwalk Associates, L.P.
Registrant
Date: March 29, 1996 /s/ ANTHONY C. ATCHLEY
-------------- -----------------------------------------------------
by Anthony C. Atchley, General Partner
Date: March 29, 1996 /s/ GERALD C. HEETLAND
-------------- -----------------------------------------------------
by Gerald C. Heetland, General Partner
Date: March 29, 1996 /s/ ANTHONY C. ATCHLEY
-------------- -----------------------------------------------------
by AC Boardwalk Partners Corporation, General Partner
by Anthony C. Atchley, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Date: March 29, 1996 /s/ GERALD C. HEETLAND
-------------- -----------------------------------------------------
by Gerald C. Heetland, General Partner and
Chief Financial Officer
Date: March 29, 1996 /s/ ANTHONY C. ATCHLEY
-------------- -----------------------------------------------------
by Anthony C. Atchley, General Partner
<PAGE>
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
Page
Reference in
Report on
Form 10-K
Independent Auditors' Report.............................................F-2
Balance Sheets as of December 31, 1995 and 1994..........................F-3
Statements of Operations For the Years Ended
December 31, 1995, 1994 and 1993....................................F-4
Statements of Partners' Capital Accounts (Deficit)
For the Years Ended December 31, 1995, 1994 and 1993............... F-5
Statements of Cash Flows For the Years Ended
December 31, 1995, 1994 and 1993....................................F-6
Notes to Financial Statements For the Years Ended
December 31, 1995, 1994 and 1993....................................F-7
Financial Statement Schedule:
Schedule III - Real Estate and Accumulated Depreciation............F-18
All other schedules have been omitted as inapplicable or not required because
the required information is included in the financial statements or notes
thereto.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The General Partners
Atlantic City Boardwalk Associates, L.P.
We have audited the accompanying financial statements of Atlantic City
Boardwalk Associates, L.P. as listed in the accompanying index. In
connection with our audits of the financial statements, we also have
audited the financial statement schedule listed in the accompanying
index. These financial statements and the financial statement schedule
are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements
and the financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Atlantic
City Boardwalk Associates, L.P. as of December 31, 1995 and 1994, and
the results of its operations and its cash flows for each of the years
in the three-year period ended December 31, 1995, in conformity with
generally accepted accounting principles. Also in our opinion, the
related financial statement schedule, when considered in relation to
the basic financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
Las Vegas, Nevada
March 19, 1996
<PAGE>
<TABLE>
ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
Balance Sheets
December 31, 1995 and 1994
1995 1994
--------------- -------------
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,535,000 $ 1,664,000
Rent due from New Claridge 298,000 206,000
Interest receivable from partners 28,000 26,000
Prepaid expenses 313,000 248,000
Other assets 199,000 170,000
--------------- ---------------
Total current assets 2,373,000 2,314,000
--------------- ---------------
Hotel Assets (notes 4 and 5) 180,298,000 177,682,000
Less: Accumulated depreciation and amortization 94,057,000 87,541,000
--------------- ---------------
Net Hotel Assets 86,241,000 90,141,000
--------------- ---------------
Note receivable from New Claridge, including accrued interest of
$2,826,000 and $2,394,000 in 1995 and 1994, respectively 6,426,000 5,994,000
Deferred rent from New Claridge (notes 3 and 6) 39,856,000 41,454,000
Intangibles, net of accumulated amortization of
$3,526,000 and $3,399,000 in 1995 and 1994, respectively 279,000 406,000
--------------- ---------------
$ 135,175,000 140,309,000
=========== ===========
Liabilities and Partners' Capital Accounts
Current liabilities:
Accounts payable $ 1,400,000 1,190,000
Accrued interest due New Claridge 1,274,000 1,384,000
Current portion of long-term debt due principally to
New Claridge (note 5) 14,051,000 12,055,000
--------------- ---------------
Total current liabilities 16,725,000 14,629,000
--------------- ---------------
Long-term debt due principally to New Claridge, including
accrued interest of $20,000,000 in 1995 and 1994 (note 5) 104,315,000 114,268,000
Partners' capital accounts (deficit):
New general partners 57,000 30,000
Former general partners 144,000 127,000
Special limited partners (234,000) (261,000)
Investor limited partners 14,168,000 11,516,000
--------------- ---------------
Total partners' capital accounts (deficit) 14,135,000 11,412,000
Commitments and contingencies (notes 5, 6, 7 and 9)
___________ ___________
$ 135,175,000 140,309,000
=========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
Statements of Operations
For the Years Ended December 31, 1995, 1994, and 1993
1995 1994 1993
--------------- --------------- -------------
<S> <C> <C> <C>
Revenues:
Rent from New Claridge for the
lease of Hotel Assets (notes 3 and 6) $ 38,517,000 37,236,000 35,431,000
Interest from New Claridge 432,000 432,000 432,000
Interest from Special Limited Partners 36,000 36,000 36,000
Investment 130,000 83,000 65,000
--------------- ---------------- ----------------
39,115,000 37,787,000 35,964,000
--------------- --------------- ----------------
Expenses:
Cost of maintaining and repairing
Hotel Assets paid to New Claridge 11,716,000 11,317,000 11,213,000
Interest, principally on mortgages to
New Claridge (note 5) 17,239,000 17,729,000 17,989,000
General and administrative 630,000 684,000 531,000
General Partners' management fee 130,000 130,000 130,000
Depreciation and amortization 6,677,000 6,145,000 5,792,000
--------------- --------------- ---------------
36,392,000 36,005,000 35,655,000
--------------- --------------- ---------------
Net income $ 2,723,000 1,782,000 309,000
=============== =============== ===============
Net income per limited partnership unit
(450 units outstanding at the end of each year) $ 5,953 3,896 676
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
Statements of Partners' Capital Accounts (Deficit)
For the Years Ended December 31, 1995, 1994 and 1993
Class A Class B Class A Class B Total
New Former Special Special Investor Investor Partners'
General General Limited Limited Limited Limited Capital
Partners Partners Partners Partners Partners Partners Accounts
<S> <C> <C> <C> <C> <C> <C> <C>
Partners' Capital
Accounts (Deficit),
December 31, 1992 $ 9,000 114,000 (18,000) (263,000) 2,306,000 7,173,000 9,321,000
Net income 3,000 2,000 - 3,000 74,000 227,000 309,000
------- --------- ----------- --------- ----------- ------------ ------------
Partners' Capital
Accounts (Deficit),
December 31, 1993 12,000 116,000 (18,000) (260,000) 2,380,000 7,400,000 9,630,000
Net income 18,000 11,000 1,000 16,000 426,000 1,310,000 1,782,000
------ -------- ------- -------- ---------- ----------- -----------
Partners' Capital
Accounts (Deficit),
December 31, 1994 30,000 127,000 (17,000) (244,000) 2,806,000 8,710,000 11,412,000
Net income 27,000 17,000 2,000 25,000 651,000 2,001,000 2,723,000
------ -------- ------- -------- ---------- ----------- -----------
Partners' Capital
Accounts (Deficit),
December 31, 1995 $ 57,000 144,000 (15,000) (219,000) 3,457,000 10,711,000 14,135,000
====== ======= ====== ======= ========= ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
Statements of Cash Flows
For the Years Ended December 31, 1995, 1994, and 1993
1995 1994 1993
------------- ------------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 2,723,000 1,782,000 309,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 6,677,000 6,145,000 5,792,000
Accretion of discount on mortgage note 1,327,000 1,153,000 1,004,000
Loss on disposal of assets 46,000 170,000 -
Deferred rent 1,598,000 2,164,000 2,602,000
Deferred interest on receivable from New Claridge (432,000) (432,000) (432,000)
Changes in current assets and liabilities:
Increase in rent due from New Claridge,
interest receivable from partners,
prepaid expenses and other assets (188,000) (41,000) (199,000)
Increase (decrease) in accounts payable and
accrued interest due New Claridge 100,000 (212,000) 29,000
-------------- ------------- -------------
Net cash provided by operating activities 11,851,000 10,729,000 9,105,000
---------- ---------- -------------
Cash flows from investing activities:
Purchase of Hotel Assets (2,160,000) (9,620,000) (3,193,000)
Proceeds from sale of Hotel Assets 21,000 12,000 -
------------- ------------- -------------
Net cash used in investing activities (2,139,000) (9,608,000) (3,193,000)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds of borrowings from New Claridge 2,483,000 9,610,000 3,287,000
Principal payments of debt, principally to New Claridge (12,324,000) (10,548,000) (9,515,000)
----------- ----------- -----------
Net cash used in financing activities (9,841,000) (938,000) (6,228,000)
----------- ------------ -----------
Net (decrease) increase in cash and cash equivalents (129,000) 183,000 (316,000)
Cash and cash equivalents, beginning of period 1,664,000 1,481,000 1,797,000
----------- ----------- -----------
Cash and cash equivalents, end of period $ 1,535,000 1,664,000 1,481,000
=========== =========== ===========
Supplemental cash flow information:
Interest paid (net of amount capitalized) $ 16,022,000 16,570,000 17,062,000
========== ========== ==========
Supplemental noncash investing and financing activities:
Trade-in value on purchase of Hotel Assets $ 1,000 68,000 5,000
============== ============= ==============
Capital lease obligation incurred to acquire Hotel Assets $ 557,000 - -
============== ============= ==============
</TABLE>
See accompanying notes to financial statements.
(1) The Partnership
(a) General
Atlantic City Boardwalk Associates, L.P. ("Partnership") was formed on
October 31, 1983 to acquire the buildings, parking facility and
non-gaming depreciable, tangible property (collectively, "Hotel
Assets") of The Claridge Hotel and Casino ("Claridge") located in
Atlantic City, New Jersey; to hold a leasehold interest in the land on
which the Claridge is located ("Land"), which Land was subsequently
acquired by the Partnership as part of a financial restructuring
("Restructuring Agreement"); and to engage in activities related or
incidental thereto. The Partnership leases the Land and Hotel Assets to
The Claridge at Park Place, Incorporated ("New Claridge"), a
wholly-owned subsidiary of The Claridge Hotel and Casino Corporation
("Corporation"), under operating leases.
(b) Current Licensing Status
The ownership and operation of casino-hotel facilities in Atlantic City
are subject to extensive state regulation under the Casino Control Act
under the direction of the New Jersey Casino Control Commission
("Commission"). The Casino Control Act provides that various categories
of entities must hold appropriate casino licenses. The Partnership
currently operates under a three-year casino service industry license
effective October 31, 1992, while New Claridge operates under a
four-year casino license effective September 30, 1995. The Partnership
has applied with the Commission for license renewal. The general
partners do not anticipate any problems renewing the Partnership's
license.
(c) General Partners
The General Partners of the Partnership are Anthony C. Atchley, Gerald
C. Heetland and AC Boardwalk Partners Corporation, a New Jersey
corporation formed on August 26, 1983, all of whose shares of capital
stock are owned by Messrs. Atchley and Heetland. The General Partners
receive, in the aggregate, an annual compensation of $130,000 from the
Partnership as well as a 1% interest in the Partnership's income,
gains, losses and deductions for periods subsequent to the
restructuring. The Partnership maintains insurance to protect the
General Partners against certain liabilities arising from their actions
as General Partners. Del Webb Corporation ("Webb"), formerly affiliated
with the Claridge, has agreed to indemnify the General Partners for
claims and liabilities resulting from acts or omissions occurring as a
result of or prior to the restructuring.
The general partners prior to the Restructuring Agreement executed on
June 16, 1989 were Robert K. Swanson, Everett L. Mangam and T. Edward
Plant ("Former General Partners"). The Former General Partners were
entitled to receive, in the aggregate, a 1% interest in the
Partnership's income, gains, losses and deductions for the periods
prior to the restructuring, and now are entitled to receive a 0.6%
interest for periods subsequent to the restructuring, as limited
partners. The Partnership and Del E. Webb New Jersey, Inc. ("DEWNJ"), a
wholly-owned subsidiary of Webb, have agreed to indemnify the Former
General Partners against certain liabilities arising from their actions
as general partners.
(d) Special Limited Partners
Oppenheimer Holdings, Inc. and officers and employees of affiliated
Oppenheimer & Co., Inc. ("Special Limited Partners") committed to
contribute $400,000 by issuing 9% notes maturing in 1998. This
contribution entitles them to an aggregate of 1% interest in the
Partnership's income, gains, losses and deductions until the Limited
Partners, as described below, receive aggregate cash distributions
equal to their capital contributions. Thereafter, the Special Limited
Partners are entitled to an aggregate of 10% of each item. Upon receipt
of the cash, the Partnership will reflect this contribution in its
financial statements.
Subsequent to the Restructuring Agreement, the Special Limited Partners
were classified into two categories, those not consenting to the
restructuring ("Class A Special Limited Partners") and those consenting
to the restructuring ("Class B Special Limited Partners"). Class A
Special Limited Partners' interest after the restructuring is .065%, in
the aggregate, representing their same proportionate share as before
the restructuring. Class B Special Limited Partners' interest
subsequent to the restructuring was reduced by a portion of the 0.6%
interest issued to the Former General Partners, thereby entitling the
Class B Special Limited Partners to a .927% interest, in the aggregate.
(e) Investor Limited Partners
Investor Limited Partners contributed $37,151,000 in cash to the
Partnership for a 98% interest in the Partnership's income, gains,
losses and deductions, to be reduced to 89% upon receipt of cash
distributions equal to their capital contributions. Subsequent to the
restructuring the Investor Limited Partners were classified into two
categories, those not consenting to the restructuring ("Class A
Investor Limited Partners") and those consenting to the restructuring
("Class B Investor Limited Partners"). Class A Investor Limited
Partners' interest after the restructuring is 23.912%, in the
aggregate, representing their same proportionate share as before the
restructuring. Class B Investor Limited Partners' interest subsequent
to the restructuring was reduced by a portion of the 0.6% interest
issued to the Former General Partners, thereby entitling the Class B
Investor Limited Partners to a 73.496% interest, in the aggregate.
(2) Basis of Presentation and Summary of Significant Accounting Policies
The Partnership's policy is to maintain its books of records and
prepare its income tax returns on the accrual basis of accounting.
Certain items are recorded on a basis resulting in advantageous income
tax treatment ("Tax Basis"). The accompanying financial statements are
prepared in accordance with generally accepted accounting principles
("GAAP") and differ from Tax Basis as follows:
o Certain property and equipment are depreciated on a different
basis and over different lives for GAAP than those used for Tax
Basis;
o In 1994 the Claridge facilities were remodeled and expanded.
During the construction period interest was incurred on the debt
related to this project. This interest was capitalized for GAAP
and is being amortized on a straight-line basis over 10 years,
while for Tax Basis the interest was expensed in full in 1994;
o The Expandable Wraparound Mortgage was discounted for GAAP
as a result of the effect on the obligation of $20 million of
deferred interest;
o Tax Basis rental income is recognized according to the terms of
the Operating Lease, whereas for GAAP rental payments are
leveled so that each period reflects the same basic rent.
The significant accounting policies used to prepare the accompanying
GAAP financial statements are as follows:
a. Hotel Assets are stated at cost and are depreciated or amortized
on a straight-line basis over the following estimated useful
lives:
Building 40 years
Building improvements 10 years
Furniture, fixtures and equipment 7 years
b. Provision is made for impairment loss if estimated future
operating cash flows (undiscounted and without interest charges)
over a long-term holding period plus estimated disposition
proceeds (undiscounted) are less than current book value. At
December 31, 1995, 1994 and 1993, no provision for impairment
has been reflected in the accompanying financial statements.
c. Deferred financing costs and capitalized interest are being
amortized on a straight-line basis over 5 to 17 years.
d. The Expandable Wraparound Mortgage Note has been discounted
utilizing a 14% interest rate. The resulting discount is
reflected in the basis of the Hotel Assets.
e. The accompanying financial statements do not reflect federal
income tax expense or benefit since such liability or benefit is
that of the individual partners.
f. Cash equivalents are composed of investments in interest-bearing
repurchase agreements with initial or remaining maturities of
less than three months at the time the investment is made.
g. Due to the nature of the relationships between the Partnership
and New Claridge and the Partnership and the partners,
estimation of the fair value of the financial instruments due
from and due to these related parties is not practical as there
is no trading market for these financial instruments. See Notes
3 and 5 for a description of the terms of these instruments. All
other financial instruments are stated at their carrying value
which approximates their fair value. The carrying amount of cash
equivalents, receivables and current liabilites approximates
fair value because of the short-term maturity of these
instruments.
h. Management of the Partnership has made estimates and assumptions
relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these
financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those
estimates.
Following are the Partnership's assets and liabilities as determined in
accordance with GAAP and for federal income tax reporting purposes at
December 31:
1995 1994
--------------------- --------------------------
GAAP Tax GAAP Tax
Basis Basis Basis Basis
(in thousands)
Total assets $ 135,175 69,741 $ 140,309 78,505
Total liabilities $ 121,040 125,300 $ 128,897 134,053
(3) Restructuring Agreement
On October 27, 1988, the Partnership, the Corporation, New Claridge,
Webb and the mortgage lenders entered into the Restructuring Agreement.
On June 13, 1989 the required majority of the partners approved the
Restructuring Agreement and on June 16, 1989 the restructuring was
concluded (the "Closing"). The following paragraphs are an overview of
the events that took place as a result of the restructuring.
o Webb transferred all of its rights to the land underlying the
Hotel Assets, the air rights and the related easement to the
Partnership. The Partnership's book value of the Hotel Assets was
not affected due to the uncertainty of the incremental value, if
any, of the land.
o The operating and expansion operating leases were amended to add
the land and air rights, defer portions of rent through 1992
totaling $15,078,000 otherwise payable to the Partnership by New
Claridge, and to abate approximately $39,820,000 of future rents
commencing in 1992. In addition, the Partnership lent to New
Claridge $3.6 million representing, at the Closing, substantially
all of the Partnership's cash and cash equivalents in excess of
amounts required to pay Partnership expenses. The loan bears
interest at 12% per annum that becomes payable at the time the
principal is paid. The deferred rent and the $3,600,000 loan
become due upon (i) the sale or refinancing of the Claridge; (ii)
upon full or partial satisfaction of the Expandable Wraparound
Mortgage; and (iii) upon full satisfaction of any first mortgage
then in place. The Restructuring Agreement requires that the
Partnership maintain cash flows in amounts necessary to pay
Partnership expenses, including debt service, only, and prohibits
the Partnership from making distributions to partners for an
indefinite period of time.
o The Partnership (as successor in interest to DEWNJ) and New
Claridge terminated the Land Option Agreement which gave New
Claridge the option to purchase from the Partnership certain
parcels and tracts of land in Atlantic City, New Jersey. This
termination resulted in payment of $100,000 by the Partnership to
New Claridge.
o New General Partners were admitted to the Partnership. The Former
General Partners became limited partners with an aggregate limited
partnership interest of 0.6%. This limited partnership interest
was made available by reducing proportionately the limited
partnership interests of those limited partners consenting to the
restructuring. In addition, for nominal consideration, the Former
General Partners transferred to the General Partners all of the
outstanding shares of the common stock of AC Boardwalk Partners
Corporation, the corporate general partner of the Partnership.
(4) Hotel Assets
A summary of Hotel Assets at December 31, 1995 and 1994 is as follows:
Accumulated
Depreciation and Net
December 31, 1995 Cost Amortization Hotel Assets
----------------- --------------- ------------ ------------
Building $ 101,353,000 $ 30,828,000 $ 70,525,000
Building improvements 25,911,000 18,223,000 7,688,000
Furniture, fixtures
and equipment 51,881,000 44,432,000 7,449,000
Capital lease asset 1,153,000 574,000 579,000
----------- ---------- ------------
$ 180,298,000 $ 94,057,000 $ 86,241,000
=========== ========== ==========
Accumulated
Depreciation and Net
December 31, 1994 Cost Amortization Hotel Assets
----------------- --------------- ------------ ------------
Building $ 101,353,000 $ 28,295,000 $ 73,058,000
Building improvements 25,651,000 15,902,000 9,749,000
Furniture, fixtures
and equipment 50,115,000 42,884,000 7,231,000
Capital lease asset 563,000 460,000 103,000
------------- ------------ ------------
$ 177,682,000 $ 87,541,000 $ 90,141,000
=========== ========== ==========
(5) Long-term Debt
At December 31, 1995 and 1994, long-term debt consisted of the
following:
1995 1994
---- ----
14% Wraparound mortgage, net of $ 93,185,000 $ 100,858,000
unaccreted discount of $9,815,000
and $11,142,000, respectively
14% Expansion mortgage 6,522,000 8,285,000
14% FF&E notes 18,346,000 17,114,000
Capital lease obligations 313,000 66,000
-------------- ---------------
118,366,000 126,323,000
Less: Current portion of long-term debt 14,051,000 12,055,000
------------ ------------
$ 104,315,000 $ 114,268,000
=========== ===========
The wraparound and expansion mortgages are non-recourse obligations as
neither the Partnership nor its partners are personally liable to New
Claridge for non-payment of any principal of, or interest on, the
notes. Various restrictions are placed upon the Partnership's ability
to sell assets and incur additional obligations. Included in the
wraparound mortgage is $20 million of accrued interest, discounted at
14%, which accrued from 1983 to 1988 and has been deferred without
interest until maturity. Monthly principal and interest payments
continue through 1998 with interest only payments from January 1999
until October 2000 at which time a balloon principal payment of $47
million and the $20 million of deferred interest is due. The expansion
mortgage has principal and interest payments of $234,000 due monthly
through September 30, 1998.
The Partnership funds the purchase of additional furniture, fixtures
and equipment ("FF&E") by borrowing from New Claridge at a 14% interest
rate. In addition, during the term of the Expansion Operating Lease,
the Partnership is required to provide New Claridge with expansion FF&E
replacements under the same borrowing arrangement. Generally, one half
of the principal is due in 48 months and the remainder is due 60 months
from the issue date of the individual notes, with the following
exception. As required by the terms of the Claridge's $85 million debt
offering, $8 million was used to finance internal improvements at the
Claridge. The $8 million principal on these notes will come due on
September 30, 2000. All FF&E notes are secured under the wraparound
mortgage up to $25 million.
During 1995 the Partnership financed the purchase of some computer
equipment through a 6.5% capital lease. This thirty-six month lease
required the final six month's payments be made at its inception and
that principal and interest payments of approximately $17,000 be made
monthly until its maturity in July 1997. During 1991 the Partnership
financed the purchase of a Hotel Asset through a 14% capital lease.
This five year lease requires monthly principal and interest payments
of approximately $4,000 until its maturity in June 1996.
Aggregate maturities of debt for each of the next five years are as
follows:
1996 $ 14,051,000
1997 17,227,000
1998 18,615,000
1999 2,046,000
2000 76,242,000
___________
128,181,000
Less: Discount 9,815,000
___________
$ 118,366,000
===========
(6) Leases
The Partnership leases the Land and the Hotel Assets, excluding the
FF&E, to New Claridge under an operating lease expiring during 1998,
with three 10-year renewal options. The Partnership also leases the
FF&E to New Claridge for an amount sufficient to fund payment of
principal and interest on the FF&E notes. The operating leases provide
that New Claridge will have the option to purchase the Hotel Assets and
the leasehold interest in the land and air rights at their fair market
value on September 30, 1998.
Minimum future rental payments due for each of the next five years
under leases to New Claridge are as follows:
1996 $ 48,884,000
1997 51,402,000
1998 40,269,000
1999 3,483,000
2000 9,888,000
____________
153,926,000
Less: Future rent abatements 10,061,000
___________
Minimum future rentals $ 143,865,000
===========
Future Partnership activities including anticipated purchases of Hotel
Assets and payments of related debt may cause actual future rentals to
differ from those presented above. Rents are used to fund debt service,
facilities and maintenance costs and fees, general partners' management
fees and general and administrative expenses of the Partnership. The
Restructuring Agreement requires that the Partnership maintain cash
flows in amounts necessary to pay Partnership expenses including debt
service, only, and is prohibited from making distributions to partners
for an indefinite period of time. Any rents not required for the cash
flow needs of the Partnership are to be deferred up to $15,078,000. As
of December 31, 1991, $15,078,000 in rents had been deferred, and
excess rents are now being abated, as described below. The deferred
rent becomes payable upon (i) the sale or refinancing of the Claridge;
(ii) upon full or partial satisfaction of the Expandable Wraparound
Mortgage; and (iii) upon full satisfaction of any first mortgage then
in place.
Per the terms of an amendment to the Operating Lease Agreement executed
as of August 1, 1991, during the years 1991 to 1998 contractual rents
in excess of debt service and Partnership expenses can be abated up to
$38,820,000 in the aggregate but not in excess of $10,000,000 in any
one calendar year. Prior to this amendment, scheduled rents totaling
$39,820,000 were to be abated beginning in 1992 through the end of
1999. Rents abated during the years ended December 31, 1995 and 1994
amounted to $7,858,000 and $6,634,000, respectively. Cumulative abated
rents as of December 31, 1995 total $28,759,000, leaving $10,061,000
still to be abated in future years. The amount which will be abated in
the individual years cannot be determined until the Partnership incurs
expenses and debt service in those years. However, it is anticipated by
the general partners as well as the management of New Claridge that the
remaining abatement of $10,061,000 will be fully utilized by the first
quarter of 1997. Additional abatements of rent totaling $500,000 are
available as a result of the acquisition of the option to purchase the
Contingent Payment, and further abatements will become available upon
exercising the Contingent Payment option (see Note 9, "Contingencies").
The Partnership accounts for leases in accordance with the Financial
Accounting Standards Board's Statement of Financial Accounting
Standards No. 13, Accounting for Leases, whereby rental income is
recognized on a straight-line basis over the life of the lease. As of
December 31, 1995 and December 31, 1994, deferred rent from New
Claridge included rental income of $24,778,000 and $26,376,000,
respectively, that was earned in excess of actual rent receipts.
(7) Financial Condition of New Claridge
The ability of the Partnership to fulfill its obligations is dependent
upon the ability of New Claridge to pay rental payments when due.
Accordingly, the financial stability of the Partnership is dependent
upon the financial condition of New Claridge.
The Corporation had a net loss of $1,908,000 for the year ended
December 31, 1995, as compared to a net loss of $6,901,000 for the year
ended December 31, 1994. Casino revenues were higher in 1995 than in
1994 because of increased business volume due to better weather
conditions and the expanded casino facility (see the discussion below
concerning the results of operations in 1994). The net loss in 1995 was
primarily due to decreased hotel revenues and increased casino
expenses. The average room rate decreased to $55 in 1995 from $67 in
1994, in part as a result of a reduction in the complimentary room rate
recorded, resulting in decreased hotel revenue. The increase in casino
expenses was primarily due to the increase in coin incentives to
patrons arriving by bus. After three years of decreases in the number
of bus patrons visiting Atlantic City casinos, in 1995 visitation
increased by 10%, thereby intensifying the competition for bus patrons.
The increased competition took the form of higher coin incentives,
which New Claridge matched, thus increasing its per patron average coin
cost to $12.81 in 1995 from $10.99 in 1994.
The net loss in 1994 was primarily due to (i) the decline in business
volume in the first quarter of 1994 due to the severe snow and ice
storms throughout the Northeastern United States, (ii) a reduction in
volume in the second quarter of 1994 as a result of business disruption
due to the construction of New Claridge's expanded casino facility
(which opened in late June 1994, and resulted in the addition of
approximately 500 slot machines), (iii) increased marketing
expenditures to promote the opening of this expansion, and (iv)
increased interest expense due to the completion of the offering of $85
million of First Mortgage Notes on January 31, 1994.
(8) Related Party Transactions
The common stock of the Corporation and the limited partnership
interests of the Partnership were sold together in a private placement
as units, and because there has been relatively little trading in the
stock or partnership interests, there is a substantial similarity
between the equity ownership of the Corporation and the Partnership.
Although the Partnership and the Corporation are independent entities,
approximately 93% of the Corporation's common stock is owned by persons
who also own limited partnership interests in the Partnership.
The Partnership has an agreement with New Claridge whereby New Claridge
provides facility and maintenance and engineering services for the
Claridge. The agreement calls for the reimbursement of the actual
facilities and maintenance costs incurred on the Partnership's behalf,
as well as an annual fee equal to 10% of such facility and maintenance
costs not to exceed $530,000 per annum. The agreement expires on
September 30, 1998.
Under the terms of the option to purchase the Contingent Payment, upon
purchase of the Contingent Payment, the Partnership and/or the
Corporation are required to make distributions in excess of $7 million
to the Releasing Partners/Investors. The Partnership and the
Corporation have agreed to cooperate in the purchase of the option and
the Contingent Payment, with each contributing one-half of the purchase
price of the option and each anticipated to contribute one-half of the
purchase price of the Contingent Payment. A portion or the
Partnership's contribution will be contributed through additional
abatements of basic rent payments due under the Operating Lease and the
Expansion Operating Lease (see Note 9, "Contingencies").
(9) Contingencies
The Restructuring Agreement provided for Webb to retain an interest
equal to $20 million plus interest from December 1, 1988 accruing at
the rate of 15% per annum compounded quarterly ("Contingent Payment")
in any proceeds ultimately recovered from the operations and/or the
sale or refinancing of the Claridge facility in excess of the First
Mortgage loan and other liabilities. To give effect to this Contingent
Payment, the Corporation and the Partnership agreed not to make any
distributions to the holders of their equity securities, whether
derived from operations or from sale or refinancing proceeds, until
Webb had received the Contingent Payment.
In connection with the restructuring, Webb agreed to permit those
partners/investors in the Partnership and Corporation ("Releasing
Partners/Investors") from whom Webb had received written releases from
all liabilities, rights ("Contingent Payment Rights") to receive
certain amounts to the extent available for application to the
Contingent Payment. Approximately 84% in interest of the
partners/investors provided releases and became Releasing
Partners/Investors. Payments to Releasing Partners/Investors are to be
made in accordance with a schedule of priorities, as defined in the
Restructuring Agreement.
On April 2, 1990, Webb transferred its interest in the Contingent
Payment to an irrevocable trust for the benefit of the Valley of the
Sun United Way, and upon such transfer Webb was no longer required to
be qualified or licensed by the Commission.
On February 23, 1996, the Corporation acquired an option to purchase,
at a discount from the carrying value, the Contingent Payment. The
purchase price of the option was $1 million, and the option may be
exercised any time prior to December 31, 1997. Upon exercise of the
option, the purchase price of the Contingent Payment would be $10
million, plus interest at 10% per annum for the period from January 1,
1997 to the date of payment of the purchase price if the purchase
occurs after December 31, 1996. The purchase price may also increase in
an amount not to exceed $10 million if future distributions to
Releasing Partners/Investors exceed $20 million. It is estimated that
at December 31, 1995, the aggregate amount owing in respect of the
Contingent Payment was $56.8 million.
Upon exercise of the option, it is anticipated that the Contingent
Payment will be canceled so that neither the Corporation or the
Partnership will have any obligation to make any payment in respect of
the Contingent Payment before making a distribution to limited partners
or shareholders. Upon the purchase and cancellation, however, the
Corporation and the Partnership will remain obligated to make payments
to the Releasing Partners/Investors, in respect of the Contingent
Payment Rights, before any distribution may be made to limited partners
or shareholders. These payments would be required to be in the same
amounts as if the Contingent Payment had not been purchased and
canceled. As a result, it is not likely that limited partners or
shareholders who are not Releasing Partners/Investors will receive any
distribution from the Partnership or the Corporation. In the aggregate,
Releasing Partners/Investors are entitled to receive an amount equal to
approximately 72% of the Contingent Payment.
Under the terms of the option, upon purchase of the Contingent Payment,
the Partnership and/or the Corporation are required to make
distributions in excess of $7 million to the Releasing
Partners/Investors. The Partnership and the Corporation have agreed to
cooperate in the purchase of the option and the Contingent Payment,
with each contributing one-half of the purchase price of the option and
each anticipated to contribute one-half of the purchase price of the
Contingent Payment. A portion of the Partnership's contribution will be
contributed through additional abatements of basic rent payments due
under the Operating Lease and the Expansion Operating Lease.
<TABLE>
SCHEDULE III
<C>
ATLANTIC CITY BOARDWALK ASSOCIATES, L.P. Life
Real Estate and Accumulated Depreciation on
which
Years Ended December 31, 1995, 1994 and 1993 Deprec.
<C> in
<C> Date latest
<S> <C> <C> <C> Gross Amount of Statement of
Initial Cost Cost Capitalized at which Accumu- Con Operations
to Partnership Subsequent to Carried at Close lated struc- Date is
Description Encumbrances(A) Land(B) Building Acquisition of Period (C)(D) Deprec.(E) tion Acq. Computed
- -----------------------------------------------------------------------------------------------------------------------------------
Initial
112,500,000 Cost
Less:
Original Building 101,353,000 N/A 10/31/83 40 yrs
Discount Bldg. Bldg. 1983-
on Impr. 25,911,000 Impr. 25,911,000 1994 N/A 10 yrs
(11,147,000) Mortgage FF&E 53,034,000 FF&E 53,034,000 N/A 1983-1994 7 yrs
------------ ---------- -----------
Hotel &
Casino
Atlantic
City, NJ 118,366,000 - 101,353,000 78,945,000 180,298,000 94,057,000
----------- ------- ----------- ---------- ----------- ----------
</TABLE>
NOTES:
(A) Encumbrances represents the amount owed at December 31, 1995
on the Wraparound Mortgage, Expansion Mortgage, FF&E Notes and
Capital lease obligations.
(B) The land under the building was acquired from DEWNJ, at no
cost to the Partnership, as part of the 1989 Restructuring.
(C) The aggregate cost of real estate owned at December 31, 1995
for Federal income tax purposes is $192,950,000.
(D) Reconciliation of Real Estate Carrying Costs:
<TABLE>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year 177,682,000 168,303,000 165,113,000
Building improvements 259,000 6,299,000 669,000
Furniture, fixtures and
equipment (FF&E) acquired 2,459,000 4,384,000 1,536,000
FF&E retired (102,000) (311,000) (8,000)
Construction in progress - - 993,000
Construction completed - (993,000) -
--------------- --------------- ----------------
Balance at end of year 180,298,000 177,682,000 168,303,000
=============== =============== ================
(E) Reconciliation of Accumulated Depreciation:
1995 1994 1993
---- ---- ----
Balance at beginning of year 87,541,000 81,583,000 76,031,000
Provision for depreciation 6,550,000 6,017,000 5,554,000
Accumulated depreciation
of FF&E retired (34,000) (59,000) (2,000)
--------------- --------------- ----------------
Balance at end of year 94,057,000 87,541,000 81,583,000
=============== =============== ================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND> This schedule contains summary financial information
extracted from Atlantic City Boardwalk Associates, L.P.'s
form 10-K for the year ended December 31, 1995 and is
qualified in it's entirety by reference to such
financial statements
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> DEC-31-1995
<PERIOD-TYPE> YEAR
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 326,000
<ASSETS-OTHER> 512,000
<OTHER-ITEMS-ASSETS> 134,337,000
<TOTAL-ASSETS> 135,175,000
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 104,315,000
<OTHER-ITEMS-LIABILITIES> 16,725,000
<TOTAL-LIABILITIES> 121,040,000
<SENIOR-EQUITY> 450
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 31,411
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 598,000
<OTHER-INCOME> 38,517,000
<EXPENSES-NET> 35,632,000
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2,723,000
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 2,723,000
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 130,000
<INTEREST-EXPENSE> 17,239,000
<GROSS-EXPENSE> 36,392,000
<AVERAGE-NET-ASSETS> 12,774,000
<PER-SHARE-NAV-BEGIN> 25,360
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 31,411
<EXPENSE-RATIO> 2.85
<AVG-DEBT-OUTSTANDING> 122,345,000
<AVG-DEBT-PER-SHARE> 271,878
</TABLE>
OPTION AGREEMENT
This Agreement (the "Agreement") is made as of the 29th day of
November, 1995 by and among The Claridge Hotel and Casino Corporation, a New
York corporation (the "Buyer"), The Claridge at Park Place, Incorporated, a New
Jersey corporation and a wholly-owned subsidiary of Buyer ("CPPI"), Philip J.
Dion, as Trustee (the "Seller") for Valley of the Sun United Way (the "United
Way") under an Irrevocable Trust, dated April 2, 1990 (the "Trust Instrument"),
and Atlantic City Boardwalk Associates, L.P., a New Jersey limited partnership
(the "Partnership"). As used below, the term the "Claridge Entities" means
Buyer, CPPI and the Partnership.
WHEREAS, as more particularly described in Section 6 of the
Restructuring Agreement, dated October 27, 1988 (the "Restructuring Agreement"),
among the Claridge Entities, Del Webb Corporation ("Webb") and certain other
parties, Webb had an interest equal to $20 million plus interest from December
1, 1988 at the rate of 15% per annum compounded quarterly (the "Webb Payment");
and
WHEREAS, on April 2, 1990, Webb transferred the Webb Payment to the
Seller; and
WHEREAS, upon the terms and subject to the conditions set forth herein,
the Buyer desires to have the option to purchase and accept from the Seller, and
the Seller desires to grant to Buyer such option and, upon the exercise thereof
and the Purchase Closing (defined below) and the other matters provided for
below, to sell, assign and transfer to the Buyer, all of its right, title and
interest in and to the Webb Payment.
NOW THEREFORE, in consideration of the foregoing and the
representations, warranties and covenants set forth herein and other good and
valuable consideration, the parties hereto agree as follows:
ARTICLE I
THE OPTION
1.1 The Option. The Seller hereby grants to the Buyer an option (the
"Option"), to purchase the Webb Payment on the terms and conditions set forth in
this Agreement, which Option may be exercised by the Buyer's delivering notice
to the Seller, in the form of Exhibit 1.1 hereto, any time after the Option
Closing (as hereinafter defined) and prior to December 31, 1997.
1.2 Option Closing. The closing of the Option (the "Option Closing")
shall occur at 10:00 A.M. on the date which is five Business Days after the
later of (a) the date on which Buyer gives Seller written notice that the
conditions set forth in Section 1.3(a) hereof have been satisfied or waived, and
(b) the date on which Seller gives Buyer written notice that the conditions set
forth in Section 1.3(b) hereof have been satisfied or waived, or such other date
as the parties may agree (the "Option Closing Date"), at the offices of Rogers &
Wells, 200 Park Avenue, New York, New York 10166. At the Option Closing, the
Seller and the Buyer shall deliver to each other confirmation of the
effectiveness of the Option in the form of Exhibit 1.2 hereto and the Buyer
shall deliver to the Seller the option price (the "Option Price") in the amount
of ONE MILLION DOLLARS ($1,000,000), payable by certified or official bank
check.
1.3 Conditions to Option Closing.
(a) The Option Closing shall not occur unless the Buyer, in its sole
discretion, is satisfied that each of the following conditions has been
fulfilled (or waived by Buyer):
(i) Representations and Warranties. The representations and
warranties contained in Article IV of this Agreement shall be true and correct
in all material respects on and as of the Option Closing with the same force and
effect as if they had been made on the date of the Option Closing.
(ii) Performance. The Seller shall have performed and complied
fully with all agreements and conditions contained in this Agreement to be
performed or complied with by it at or before the Option Closing.
(iii) Consent of Parties to Restructuring Agreement. The
parties to the Restructuring Agreement, other than Robert K. Swanson, Everett L.
Mangam, T. Edward Plant and First Fidelity Bank, National Association, New
Jersey, shall have consented to the sale of the Webb Payment by the Seller to
the Buyer pursuant to this Agreement, pursuant to a consent in the form of
Exhibit 1.3A hereto (and each party to the Restructuring Agreement that is also
a party to this Agreement hereby so consents).
(iv) Opinions of Counsel. Buyer shall have received opinions
of Levine, Staller, Sklar, Chan, Brodsky & Donnolly, P.A., New Jersey counsel to
the Seller, Gibson, Dunn & Crutcher, New York counsel to the Seller and of
Arizona counsel to the Seller each in form and substance satisfactory to the
Buyer in its sole discretion.
(v) Webb Assurance. The Buyer shall have received from Webb a
duly executed assurance from Webb in the form of Exhibit 1.3C that Webb does not
have any claim to the Webb Payment.
(b) The Option Closing shall not occur unless the Seller, in Seller's
sole discretion, is satisfied that each of the following conditions has been
satisfied (or waived by Seller):
(i) Representations and Warranties. The representations and
warranties contained in Articles V and V-A of this Agreement shall be true and
correct in all material respects on and as of the Option Closing with the same
force and effect as if they had been made on the date of the Option Closing.
(ii) Performance. The Buyer shall have performed and complied
fully with all agreements and conditions contained in this Agreement to be
performed or complied with by it at or before the Option Closing.
(iii) Certification. The Buyer shall have provided the Seller
with a certificate confirming the matters set forth in clauses (i) and (ii) of
this subsection (b) in the form of Exhibit 1.3D.
(iv) Consents and Approvals. All permits, consents,
authorizations and approvals of, registrations, qualifications, designations,
declarations or filings with, or notices to, and all licenses and permits of
(each an "Approval"), any person or entity or any federal or state governmental
authority (including, without limitation, the New Jersey Casino Control
Commission ("CCC") and the Division of Gaming Enforcement) that Seller
determines are necessary or appropriate to be obtained, made or submitted by or
on behalf of the Seller in connection with the execution, delivery or
performance of this Agreement and the sale, assignment and transfer of the Webb
Payment to the Buyer and the other transactions contemplated hereby shall have
been duly obtained, made or submitted and, if required, shall be effective on
and as of the Option Closing.
(v) Approval by United Way; Fairness Opinions. The Seller
shall have received from the United Way such approval of, indemnification with
respect to and opinions of counsel with respect to this Agreement and the
transactions contemplated hereby as the Seller believes are necessary,
appropriate or desirable. The Seller or the United Way shall have received such
fairness opinions, if any, as each believes are necessary, appropriate or
desirable in connection with this Agreement and the transactions contemplated
hereby.
(vi) Regulatory Approval and Other Action. The Seller shall
have received from the CCC and any other New Jersey gaming authorities as may be
appropriate such Approvals of the distribution by the Seller, upon receipt, of
the proceeds to be received by the Seller from the payment of the Option Price
and the sale of the Webb Payment (including payments under Section 3.2(c)
hereof) pursuant to this Agreement to the United Way as the Seller may deem
necessary or appropriate. The Trust Instrument shall have been reformed, or the
Seller shall have otherwise received such Approvals as the Seller feels are
appropriate to permit the Seller to distribute to the United Way, upon receipt,
the proceeds of the payment of the Option Price and the sale of the Webb Payment
to the Buyer (including payments under Section 3.2(c) hereof) pursuant to this
Agreement (i) including by appropriately licensing the United Way or (ii)
notwithstanding that the United Way is not licensed by the CCC.
(vii) Opinions of Counsel. Seller shall have received opinions
of Rogers & Wells and Frank Bellis, Esq., counsel to the Buyer, in the forms
attached in Exhibit 1.3E and Exhibit 1.3F, respectively.
(viii) Financial Statements and Comfort. Seller shall have
received (A) audited financial statements of Buyer as of Buyer's most recently
completed fiscal year and (B) any publicly available unaudited financial
statements of Buyer for any period subsequent to the period covered by such
audited financial statements, in each case showing that Buyer has shareholders'
equity of at least $2,000,000, together with a letter from KPMG Peat Marwick LLP
("Peat Marwick") covering the matters set forth in Exhibit 1.3G. If any portion
of the funds used to pay the Option Price is being directly or indirectly
provided by the Partnership (including, without limitation, through abatement of
lease payments), Seller shall also have received (A) audited financial
statements of the Partnership as of the Partnership's most recently completed
fiscal year and (B) any unaudited financial statements of the Partnership for
any period subsequent to the period covered by such audited financial statements
that have been provided by the Partnership to its limited partners, in each case
showing that the Partnership has a partners' equity of at least $2,000,000,
together with a letter from Peat Marwick covering the matters set forth in
Exhibit 1.3G(2). At the time of the Option Closing, Buyer shall be deemed to
represent, without any further documents being required to be delivered by
Buyer, that, immediately prior to payment of the Option Price, (i) it has a
shareholders' equity of at least $2,000,000 determined in accordance with
generally accepted accounting principles ("GAAP") consistently applied, (ii) it
is not insolvent, (iii) after the payment of the Option Price or the
transactions to be effected in connection therewith, it will not be rendered so
insolvent, (iv) it is not then engaged in a business or transaction (or about to
engage a business or transaction ) for which its capital remaining after payment
of the Option Price and completion of the transaction to be effected in
connection therewith will be unreasonably small and (v) it does not intend to
incur, or believe it will incur, debts beyond its ability to pay as the debts
mature.
(c) "Business Day". For purposes of this Agreement, "Business
Day" means a day upon which banks are open for business in New York city.
ARTICLE II
PURCHASE TERMS
2.1 Sale, Assignment and Transfer of Webb Payment. At the Purchase
Closing described in Section 2.3, the Seller will deliver to the Escrow Agent
(as hereinafter defined) an instrument of assignment in the form of Exhibit 2.1
hereto providing for the sale, assignment and transfer to the Buyer (or its
assignee) of all of Seller's rights, title, and interest in and to the Webb
Payment (the "Assignment Instrument"), and the Buyer (or its assignee) will
deliver to the Escrow Agent a certified or official bank check in the amount of
the Purchase Price set forth in Section 2.2 hereof (as to Section 2.2(z), only
to the extent due at the time of the Purchase Closing). Notwithstanding such
delivery of the Assignment Instrument and check to the Escrow Agent, the sale,
assignment and transfer of the Webb Payment to the Buyer shall not be deemed to
occur unless and until the Escrow Agent makes delivery of such instrument and
the Purchase Price pursuant to Section 4(a) of the Escrow Agreement (as
hereinafter defined). It is understood and agreed that if such delivery of the
Assignment Instrument by the Escrow Agent referred to below is to occur, (i)
within 15 days after the Purchase Closing, Buyer and/or the Partnership shall
pay to the Distributing Trust (as such term is defined in the Restructuring
Agreement) the amount required by Section 4(a) of the Escrow Agreement (defined
below); (ii) based on the Purchase Price being $10,000,000 and, as the Seller
and Buyer believe, 83.89644% in interest of investors being Releasing Investors,
the amount to be so paid to the Distributing Trust for payment to Releasing
Investors would be $7,226,001; and (iii) the amount to be so paid to
Distributing Trust will increase if interest is owed by Buyer on the Purchase
Price under Section 2.2(y) hereof, with the increase being an amount equal to
72.26001% of the interest. If for any reason the amounts to be paid to the
Distributing Trust are not so paid, the sale, assignment and transfer of the
Webb Payment to Buyer shall not be deemed to have occurred and Seller will not
have released or waived any rights in and to the Webb Payment.
2.2 Purchase Price. The purchase price (the "Purchase Price") to be
paid by the Buyer at the Purchase Closing for the Webb Payment will be TEN
MILLION DOLLARS ($10,000,000), plus any additional amounts as may then be owing
pursuant to Section 3.2(c) hereof, in each case payable by certified or official
bank check; provided, however, that, if the Purchase Price is being paid after
December 31, 1996, the Purchase Price shall be the sum of (x) TEN MILLION
DOLLARS ($10,000,000) plus (y) an amount equal to interest on TEN MILLION
DOLLARS ($10,000,000) at the annual rate of 10% for the period from January 1,
1997 to the date of Payment of the Purchase Price to Seller by the Escrow Agent
plus (z) any additional amount then payable pursuant to Section 3.2(c) hereof.
2.3 The Purchase Closing. The Purchase Closing (the "Purchase Closing")
of the purchase and sale of the Webb Payment will take place at the offices of
Rogers & Wells, 200 Park Avenue, New York, New York 10166, at 10:00 A.M., New
York City time, on the date which is ten Business Days after the Buyer gives the
Seller notice of the exercise of the Option pursuant to Section 1.1 hereof, or
such other date as the parties hereto may agree in writing (the "Closing Date").
Exercise of the Option will be irrevocable and will obligate Buyer to deliver
the Purchase Price to the Escrow Agent as provided in Section 2.1.
2.4 Escrow Agent. The Buyer and Seller hereby appoint IBJ Schroder Bank
and Trust Company to act as escrow agent (the "Escrow Agent") pursuant to an
Escrow Agreement in the form of Exhibit 2.4 hereto (the "Escrow Agreement") with
respect to the deliveries to be made pursuant to Section 2.1 hereof.
ARTICLE III
RELEASE BY SELLER; FURTHER PAYMENTS TO SELLER
3.1 Release and Waiver of Rights. The Seller in his capacity as Trustee
with respect to the Trust, agrees that, upon the occurrence of all of (i) the
Purchase Closing, (ii) the payment to the Distributing Trust of the amount
contemplated to be paid to it by the third sentence of Section 2.1 of this
Agreement and Section 4(a) of the Escrow Agreement and (iii) delivery of the
Purchase Price (except, as to the portion of the Purchase Price referred to in
Section 2.2(z), to the extent not then due) to Seller by the Escrow Agent, it
will have irrevocably released and waived any and all rights in and to the Webb
Payment.
3.2 Further Payments to Seller. If the Purchase Closing occurs:
(a) The Buyer and CPPI agree for the benefit of the Seller and
the United Way that neither the Buyer nor, except for distributions and payments
to Buyer, CPPI shall make any distributions or payment to any of its
shareholders as such until those persons who are Releasing Investors (as that
term is defined in the Restructuring Agreement) have received from the
Distributing Trust referred to below an amount equal to that amount that
Releasing Investors would have received had the Buyer not purchased the Webb
Payment. The parties agree that, as of October 31, 1995, the amount that would
have been required to be received by Releasing Investors to satisfy the
preceding sentence is approximately $40,000,000, and that such amount will
increase thereafter until paid. The parties recognize that, under the "provided"
clause of the first sentence of Section 6(a) of the Restructuring Agreement the
Buyer and CPPI are permitted to engage in certain transactions (being a sale by
Buyer of the stock of CPPI or a sale by CPPI of substantially all of its assets)
that may result in the Releasing Investors receiving in the aggregate an amount
that is less than the amount referred to in the preceding sentence (including
interest compounded quarterly on that amount) without the Buyer or CPPI having
any further obligation to make any payment to Releasing Investors.
(b) The Partnership agrees for the benefit of the Seller and
the United Way that the Partnership will not make any distributions or payment
to any of its limited partners as such until those persons who are Releasing
Investors have received from the Distributing Trust an amount equal to that
amount that Releasing Investors would have received had the Buyer not purchased
the Webb Payment. The parties recognize that, under the "provided" clause of the
first sentence of Section 6(a) of the Restructuring Agreement, the Partnership
is permitted to engage in a sale of substantially all of its assets that may
result in the Releasing Investors receiving in the aggregate an amount that is
less than the approximately $40,000,000 amount referred to in Section 3.2(a)
(including interest compounded quarterly on that amount) without the Partnership
having any further obligation to make any payment to Releasing Investors.
(c) If amounts received or required to be received by the
Distributing Trust for distribution to Releasing Investors (including the amount
provided for in Section 4(a) of the Escrow Agreement) equals or exceeds
$20,000,000, as additional consideration for the purchase of the Webb Payment,
the Claridge Entity making the distribution (the Buyer and CPPI jointly and
severally if one of them is making or is required to make the distribution)
shall pay to the Seller, at the same time that the Distributing Trust receives
or should have received an amount which, when aggregated with amounts previously
received or required to have been paid to the Distributing Trust for
distribution to Releasing Investors, exceeds $20,000,000, as to the excess and
at each time thereafter that the Distributing Trust receives or should have
received amounts for distribution to Releasing Investors, an amount equal to
17.65% times such portion of such amount received by or so required to have been
paid to the Distributing Trust as, when aggregated with prior such amounts
received by or so required to have been paid to the Distributing Trust, exceeds
$20,000,000; provided, however, that the total amount to be paid to the Seller
under this Section 3.2 shall not exceed $10,000,000.
(d) For purposes of Section 3.2(c) hereof, if any amount
received or required to be received by the Distributing Trust for distribution
to Releasing Investors is in a form other than cash, such amount shall be valued
in the following manner:
(i) if any such amount consists of marketable
securities, then such amount shall be valued based on the average price at which
such security traded on the first Business Day after the day upon which any
Releasing Investor received such security from the Distributing Trust; or
(ii) if such amount consists or is expected to
consist of something other than marketable securities, then such amount shall be
valued either (A) at such value as is placed on such amount by mutual agreement
of the Buyer and the Seller, or (B) if no such agreement is reached within 20
Business Days prior to the date such amount is expected to be distributed, at
such value as is determined by the Designated Investment Banking Firm described
below, one-half of the reasonable fees of which shall be paid by each of the
Claridge Entity making the distribution (the "Relevant Claridge Entity") and the
Seller. If it is anticipated that the Distributing Trust will make a
distribution of an amount which consists of something other than marketable
securities, the Claridge Entity that expects to make such distribution shall so
notify the Seller of the date of such expected distribution at least 30 business
days prior thereto. If the Relevant Claridge Entity and the Seller are unable to
reach agreement on the value of the amount to be so distributed within 20
Business Days prior to the expected distribution date, the Relevant Claridge
Entity shall send to the Seller notice of the Relevant Claridge Entity's
investment banking firm. Within 5 business days after such notice, the Seller
shall notify the Relevant Claridge Entity of the Seller's investment banking
firm. The Relevant Claridge Entity's investment banking firm and, if the Seller
has so designated its investment banking firm, its investment banking firm shall
jointly designate a third investment banking firm, which shall determine the
value of the amount to be so distributed (the "Designated Investment Banking
Firm"). The Designated Investment Banking Firm shall make its determination
regarding the valuation of such amount within 5 business days after its
designation, and its decision shall be conclusive.
(e) Within 120 days of the end of each 12-month period ended
December 31, commencing December 31, 1995, each Claridge Entity will deliver to
the Seller and the United Way (i) such financial statements for the 12 months
ended such December 31, certified by the independent public accountants for such
Claridge Entity (provided that this requirement shall be satisfied as to CPPI,
as long as CCPI is wholly-owned by Buyer, by delivery of such financial
statements of the Buyer), (ii) a certification signed by the Chief Executive
Officer and Chief Financial Officer (or comparable officers or the general
partners, if applicable) of each Claridge Entity, in the form of Exhibit 3.2(e),
as to the distributions made and required to be made to the Distributing Trust
during such 12-month period and (iii) to the extent not then prohibited by the
American Institute of Certified Public Accountants, a letter from the
independent public accountants that certified each such financial statement to
the effect that, during the course of their audit and otherwise, nothing came to
their attention to indicate that the statements in the certificates referred to
in clause (ii) of this Section 3.2(e) are inaccurate in any respect or, if they
are inaccurate, specifying each inaccuracy.
(f) If (i) any amount required to be paid to the Seller by a
Claridge Entity pursuant to Section 3.2(c) is not paid when due and is not paid,
with interest at 15% per annum (but not in excess of the maximum amount
permitted by applicable law) from the date due, by 125 days after the 12 months
ended December 31 in which payment was due and (ii) there is no bona fide
dispute regarding the amount, if any, due, between the Seller and the Claridge
Entity which the Seller believes is required to pay such amount, then the entire
amount due on the Webb Payment, as if it had not been acquired by Buyer, and the
corresponding amount due to Releasing Investors, will be immediately due and
payable to Seller and the Releasing Investors. For the purpose of Section
3.2(f), a dispute by a Claridge Entity will not be deemed bona fide unless it
has substantial basis in fact and (i) to the extent the dispute is based on
legal interpretation or a question of law, at the outset of the dispute the then
primary outside counsel to the Claridge Entity renders an opinion to the Seller
that the position of the Claridge Entity is based on significant legal authority
and (ii) to the extent the dispute is based on a question of accounting or
calculation, at the outset of the dispute the then independent public
accountants for the Claridge Entity delivers to the Seller a letter to the
effect that the calculation of the Claridge Entity is correct and, if a question
of accounting is involved, that the accounting treatment is in accordance with
generally accepted accounting principles consistently applied by such Claridge
Entity.
(g) If, in addition to the Option Price, any amounts would be
due on the Webb Payment prior to the Purchase Closing, those amounts shall be
paid and shall not reduce the amounts otherwise payable to Seller under this
Agreement.
3.3 Releases. If the Buyer solicits from its shareholders, or the
Partnership solicits from its limited partners, any release, consent, waiver or
other acknowledgment with respect to the transactions contemplated by this
Agreement, the Buyer and/or Partnership, as the case may be, agrees that such
release, consent, waiver or other acknowledgment shall, by its terms, also be
for the benefit of the Seller and the United Way.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Buyer as follows, except as
listed in Exhibit 4.1:
4.1 Authorization. The Seller has all the power and authority necessary
to enable it to execute and deliver this Agreement, and to carry out the
transactions contemplated by this Agreement. The Seller has taken all actions,
if any, necessary to authorize the execution, delivery and performance by Seller
of this Agreement.
4.2 Binding Agreement. This Agreement is the legal, valid and binding
agreement of the Seller, enforceable against the Seller in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency or
other similar laws of general application affecting the enforcement of
creditors' rights or by general principles of equity limiting the availability
of equitable remedies.
4.3 Title to the Webb Payment. The Seller has not transferred or
conveyed any of its right, title and interest in and to the Webb Payment, and,
assuming that the transfer of the Webb Payment from Webb to the Seller is legal,
valid and enforceable, holds the Webb Payment free and clear of any and all
security interests, liens, charges, encumbrances or adverse interests
whatsoever. Assuming that the transfer of the Webb Payment from Webb to the
Seller is legal, valid and enforceable, when the Buyer acquires the Webb Payment
as contemplated by this Agreement, the Buyer will receive the Webb Payment and
all rights, title and interest in and to the Webb Payment free and clear of any
security interests, liens, charges, encumbrances or claims of other persons,
other than those resulting from acts of the Buyer.
4.4 Compliance with Instruments and Law. Upon receipt of the consents
or taking of the actions contemplated by Sections 1.3(b)(iv), (v) and (vi)
hereof, neither the execution and delivery of this Agreement by the Seller nor
the consummation of the transactions contemplated by this Agreement will (i)
violate any provision of the Trust Instrument or (ii) violate, result in a
breach of, or constitute a default under or conflict with any provision of any
agreement or instrument to which the Seller is a party or by which the Seller is
bound, or any provision of any applicable local, state or federal law or any
order, judgment, writ, decree, statute, rule or regulation of any court or
governmental agency having jurisdiction over the Seller.
4.5 Consents and Approvals. Upon receipt of the consents or taking of
the actions contemplated by Sections 1.3(b)(iv), (v) and (vi) hereof, no
permits, consents, approvals or authorizations of, registrations,
qualifications, designations, declarations or filings with, or notices to any
person or entity or any federal or state governmental authority are required to
be obtained, made or submitted by or on behalf of the Seller in connection with
the execution, delivery or performance of this Agreement, or the consummation of
the transactions contemplated hereby.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND CPPI
The Buyer and CPPI jointly and severally represent and warrant to and,
as to Section 5.6, agree with the Seller as follows:
5.1 Authorization. The Buyer and CPPI each have all the power and
authority necessary to enable each of them to execute and deliver this Agreement
and to carry out the transactions contemplated by this Agreement. The Buyer and
CPPI have each taken all corporate and other actions necessary to authorize the
execution, delivery and performance of this Agreement.
5.2 Corporate Status. The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York.
CPPI is a corporation duly organized, validly existing and in good standing
under the laws of the State of New Jersey. CPPI is a wholly-owned subsidiary of
the Buyer.
5.3 Binding Agreement. This Agreement is a legal, valid and binding
agreement of the Buyer and CPPI, enforceable against each of the Buyer and CPPI
in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency or other similar laws of general application affecting
the enforcement of creditors' rights or by general principles of equity limiting
the availability of equitable remedies.
5.4 Compliance with Instruments and Law. Neither the execution and
delivery of this Agreement by the Buyer or CPPI nor the consummation of the
transactions contemplated by this Agreement will (i) violate any provision of
their respective certificates or articles of incorporation, bylaws or other
charter or organizational documents, or (ii) violate, result in a breach of, or
constitute a default under or conflict with any provision of any agreement or
instrument to which the Buyer or CPPI is a party or by which the Buyer or CPPI
(or any of their respective assets) is bound, or any provision of any applicable
local, state or federal law or any order, judgment, writ, decree, statute, rule
or regulation of any court or governmental agency having jurisdiction over the
Buyer or CPPI (or any of their respective assets).
5.5 Consents and Approvals. No permits, consents, approvals and
authorizations of, registrations, qualifications, designations, declarations or
filings with, or notices to any person or entity or any federal or state
governmental authority (other than the CCC or the New Jersey Division of Gaming
Enforcement) are required to be obtained, made or submitted by or on behalf of
the Buyer in connection with the execution, delivery or performance of this
Agreement, or the consummation of the transactions contemplated hereby.
5.6 No Effect on Rights of Releasing Investors. Neither the purchase of
the Webb Payment by the Buyer, nor any action taken by the Buyer with respect to
the Webb Payment following such purchase will result in the Releasing Investors
receiving less, in their capacities as Releasing Investors, than they would have
received had such purchase not occurred or such action not been taken, except to
the extent that payment of the Option Price will diminish the assets of the
Buyer.
5.7 Pending Transactions. Except as set forth in Exhibit 5.7, as of the
date hereof, neither the Buyer nor CPPI has entered into any contract,
agreement, letter of intent or other written understanding or arrangement
regarding any transaction that would result in one or more of the Claridge
Entities making or being required to make any distribution to the Distributing
Trust.
ARTICLE V-A
REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP
The Partnership represents and warrants to and, as to Section 5A.6,
agrees with the Seller as follows:
5A.1 Authorization. The Partnership has all the power and authority
necessary to enable it to execute and deliver this Agreement, and to carry out
the transactions contemplated by this Agreement. The Partnership has taken all
partnership actions necessary to authorize the execution, delivery and
performance by it of this Agreement.
5A.2 Status. The Partnership is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of New Jersey.
5A.3 Binding Agreement. This Agreement is a legal, valid and binding
agreement of the Partnership, enforceable against the Partnership in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency or other similar laws of general application affecting the
enforcement of creditors' rights or by general principles of equity limiting the
availability of equitable remedies.
5A.4 Compliance with Instruments and Law. Neither the execution and
delivery of this Agreement by the Partnership nor the consummation of the
transactions contemplated by this Agreement will (i) violate any provision of
its Agreement of Limited Partnership or other organizational documents of the
Partnership, or (ii) violate, result in a breach of, or constitute a default
under or conflict with any provision of any agreement or instrument to which the
Partnership is a party or by which the Partnership (or any of its assets) is
bound, or any provision of any applicable local, state or federal law or any
order, judgment, writ, decree, statute, rule or regulation of any court or
governmental agency having jurisdiction over the Partnership (or any of its
assets).
5A.5 Consents and Approvals. No permits, consents, approvals and
authorizations of, registrations, qualifications, designations, declarations or
filings with, or notices to any person or entity or any federal or state
governmental authority (other than the CCC and the Division of Gaming
Enforcement) are required to be obtained, made or submitted by or on behalf of
the Partnership in connection with the execution, delivery or performance of
this Agreement, or the consummation of the transactions contemplated hereby.
5A.6 No Effect on Rights of Releasing Investors. No action taken by the
Partnership with respect to the Webb Payment following the purchase of the Webb
Payment by the Buyer will result in the Releasing Investors receiving less, in
their capacities as Releasing Investors, than they would have received had such
purchase not occurred or such action not been taken, except to the extent that
payment of the Option Price will diminish the assets of the Buyer.
5A.7 Pending Transactions. Except as set forth in Exhibit 5.7, as of
the date hereof, the Partnership has not entered into any contract, agreement,
letter of intent or other written understanding or arrangement regarding any
transaction that would result in one or more of the Claridge Entities making or
being required to make any distribution to the Distributing Trust.
ARTICLE VI
CONDITIONS OF SELLER'S OBLIGATIONS AT PURCHASE CLOSING
The obligation of the Seller to deliver the Assignment Instrument to
the Escrow Agent pursuant to Section 2.1 hereof and to thereupon or thereafter
sell, assign and transfer the Webb Payment to the Buyer is subject to the
fulfillment to its satisfaction prior to or at the Purchase Closing of each of
the following conditions:
6.1 Opinions of Counsel. Seller shall have received opinions of Rogers
& Wells and Frank Bellis, Esq., counsel to the Buyer, in the forms attached
hereto as Exhibits 6.1A and 6.1B.
6.2 Financial Statements and Comfort. Seller shall have received (i)
audited financial statements of Buyer as of Buyer's most recent completed fiscal
year and unaudited financial statements of Buyer for and at the end of the last
quarter end for which financial information as to Buyer is publicly available,
each showing that Buyer has shareholders' equity greater than $2,000,000, (ii)
pro forma balance sheets of Buyer at such year end and quarter end giving effect
to the purchase of the Webb Payment, the concomitant payment to Releasing
Investors and the transactions to be effected in connection with both, all using
the accounting treatment proposed to be used by Buyer for financial reporting
purposes and each showing a shareholders' equity of Buyer, after giving effect
to the foregoing transactions, greater than $2,000,000, and (iii) letters from
Peat Marwick (including a letter with respect to such pro forma balance sheet)
covering the matters set forth in Exhibit 6.2 and consistent with the greater
than $2,000,000 number in clauses (i) and (ii) of this sentence. If any portion
of the funds used to pay the portion of the Purchase Price being paid at the
Purchase Closing or to make the concomitant payment to Releasing Investors is
being directly or indirectly provided by the Partnership (including, without
limitation, through abatement of lease payments), Seller shall also have
received (i) audited financial statements of the Partnership as of the
Partnership's most recently completed fiscal year and unaudited financial
statements of the Partnership for and at the end of the last quarter end for
which financial information as to the Partnership has been made available to its
limited partners, each showing that the Partnership has a partners' equity
greater than $2,000,000, (ii) pro forma balance sheets of the Partnership at
such year end and quarter end giving effect to the purchase of the Webb Payment,
the concomitant payment to Releasing Investors and the transactions to be
effected in connection with both, in each case as to the Partnership and with
respect to the funds being directly or indirectly so provided by the
Partnership, all using the accounting treatment proposed to be used by the
Partnership for financial reporting purposes and showing a partners' equity of
the Partnership, after giving effect to the foregoing transactions, greater than
$2,000,000, and (iii) letters from Peat Marwick (including a letter with respect
to such pro forma balance sheet) covering the matters set forth in Exhibit
6.2(2) and consistent with the greater than $2,000,000 number in clauses (i) and
(ii) of this sentence. The Buyer and the Partnership will each use their best
efforts to cause Peat Marwick to deliver the comfort letter that is Exhibit 6.2,
with Procedure C and Item 5 furnished as a part thereof; if any portion of the
funds used to pay the portion of the Purchase Price being paid at the Purchase
Closing or to make the concomitant payment to Releasing Investors is being
directly or indirectly provided by the Partnership (including, without
limitation, through abatement of lease payments), the Buyer and the Partnership
will use their best efforts to cause Peat Marwick to deliver the comfort letter
that is provided for in Exhibit 6.2(2), with the comparable Procedure and Item
furnished; and the Buyer and the Partnership will make available to Seller and
his representatives all information Seller reasonably requests so that Seller
can deliver to Peat Marwick the request for a comfort letter referred to in the
Note in Exhibit 6.2 and, if applicable, Exhibit 6.2(2). At the time of the
Purchase Closing and the purchase of the Webb Payment, Buyer shall be deemed to
represent, without any further documents being required to be delivered by
Buyer, that: (A) immediately prior to payment of the Purchase Price to Seller
and completion of the transactions to be effected in connection with the
purchase by Buyer of the Webb Payment (including, without limitation, making
required payments to Releasing Investors), (i) it has a shareholders' equity of
at least $2,000,000 determined in accordance with the generally accepted
accounting principles ("GAAP"), consistently applied, (ii) it is not insolvent,
(iii) after the payment of the Purchase Price, the purchase by Buyer of the Webb
Payment and completion of the transactions to be effected in connection
therewith (including, without limitation, making required payments to Releasing
Investors), it will not be rendered so insolvent, (iv) it is not engaged in a
business or transaction (or about to engage a business or transaction) for which
its capital remaining after payment of the Purchase Price, the purchase by Buyer
of the Webb Payment and completion of the transactions to be effected in
connection therewith (including, without limitation, making required payments to
Releasing Investors) will be unreasonably small and (v) it does not intend to
incur, or believe it will incur, debts beyond its ability to pay as the debts
mature; and (B) immediately after payment of the Purchase Price, the purchase by
Buyer of the Webb Payment and completion of the transactions to be effected in
connection therewith (including, without limitation, making required payments to
Releasing Investors), it will have a shareholders' equity or partners' equity,
as the case may be, of at least $2,000,000.
6.3 Certification. Seller shall have received a certificate from
Buyer and in the form attached hereto as Exhibit 6.3.
6.4 Expense Reimbursement. Buyer shall have delivered to Seller
a certified or bank check in payment of the expense reimbursement provided for
in Section 9.5 hereof.
6.5 Escrow Agreement. The Escrow Agreement shall have been executed and
delivered by the parties thereto and Buyer shall have deposited in the Escrow
Account the Purchase Price or portion thereof required to be deposited in the
Escrow Account by Section 2.1 of this Agreement and in the form it is so
required to be deposited.
ARTICLE VII
TERMINATION
7.1 Termination.
(a) This Agreement may be terminated at any time prior to the
Option Closing:
(i) by mutual written consent of the Seller and
the Buyer; or
(ii) by the Buyer or the Seller by written notice
to the other if, without fault of the
terminating party, the Option Closing shall
not have occurred on or before January 31,
1996; or
(b) This Agreement shall terminate automatically, as to
matters occurring after December 31, 1997, without the need for either party to
take any action, if the Option Closing shall have occurred, but the notice of
exercise of the Option is not given pursuant to Section 1.1 hereof on or before
December 31, 1997, no matter what the reason for such notice not having been
given on or before such date.
7.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 7.1, this Agreement shall forthwith become null
and void as to matters occurring thereafter and no party hereto (or any of their
respective shareholders, partners, beneficiaries, directors, officers or
employers) shall have any liability or further obligation to any other party
hereto as to matters occurring thereafter, except as provided in Article VIII.
Nothing contained in this Section shall relieve any party from liability for any
breach of this Agreement.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnity by the Seller. The Seller agrees to indemnify the Buyer,
the general partners of the Partnership and the Partnership on demand against,
and hold each such party harmless from, all losses, judgments, amounts paid in
settlement of actions or claims, liabilities, taxes, costs, damages and expenses
(including, but not limited to, reasonable attorneys' fees and disbursements) as
incurred, accruing from or resulting by reason of any inaccuracies of any of the
representations or warranties of the Seller in this Agreement or the breach or
non-performance by the Seller of any of the covenants or agreements made or to
be performed by the Seller pursuant to this Agreement or any claim by a third
party that, if sustained, would constitute such a breach or non-performance.
8.2 Indemnity by the Buyer. The Buyer and CPPI jointly and severally
agree to indemnify the Seller, the United Way, each director, officer and
employee of the United Way and each of the Released Parties (as such term is
defined in the Release and Settlement Agreement executed by Releasing
Investors), including but not limited to Del Webb Corporation and Del E. Webb
New Jersey, Inc., but other than the Claridge Entities (each person so entitled
to indemnification, a "Seller Indemnified Party"), on demand, against, and hold
each Seller Indemnified Party harmless from, all losses, judgments, amounts paid
in settlement of actions or claims, liabilities, taxes, cost, damages and
expenses (including but not limited to reasonable attorneys' fees and
disbursements) as incurred, (i) accruing from or resulting by reason of any
inaccuracy of any of the representations or warranties of the Buyer or CPPI in
this Agreement or the breach or non-performance by the Buyer or CPPI of any of
the covenants or agreements made or to be performed by the Buyer or CPPI
pursuant to this Agreement or any claim by a third party that, if sustained,
would constitute such a breach or non-performance, or (ii) arising from any
action or proceeding challenging the validity of this Agreement or claiming
damages arising from this Agreement commenced by any person in that person's
capacity as a Releasing Investor.
8.3 Indemnity by the Partnership. The Partnership agrees to indemnify
each of the Seller Indemnified Parties, on demand, against, and hold the Seller
Indemnified Party harmless from, all losses, judgments, amounts paid in
settlement of actions or claims, liabilities, taxes, cost, damages and expenses
(including but not limited to reasonable attorneys' fees and disbursements) as
incurred, (i) accruing from or resulting by reason of any inaccuracy of any of
the representations or warranties of the Partnership in this Agreement or the
breach or non-performance by the Partnership of any of the covenants or
agreements made or to be performed by the Partnership pursuant to this Agreement
or any claim by a third party that, if sustained, would constitute such an
accuracy breach or non-performance, or (ii) arising from any action or
proceeding challenging the validity of this Agreement or claiming damages
arising from this Agreement commenced by any person in that person's capacity as
a Releasing Investor.
8.4 Procedure for Indemnification. Promptly after receipt by any of
Buyer, the Partnership or a Seller Indemnified Party (each being an "indemnified
party") under Section 8.1, Section 8.2 or Section 8.3 above of notice of
commencement of any action, such indemnified party shall, if a claim in respect
thereof is to be made against the indemnifying party under such Section, within
10 days of obtaining actual knowledge thereof, notify the indemnifying party in
writing of the commencement thereof, enclosing a copy of all papers served, but
the omission so to notify the indemnifying party shall not relieve it from any
liability that it may have to any indemnified party otherwise than under such
Section or do so if and to the extent the indemnifying party is not prejudiced
by such omission to so notify. In case any such action shall be brought against
any indemnified party, and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
in, and, to the extent that it shall wish, by delivering written notice to the
indemnified party promptly after receiving notice of the commencement of the
action from the indemnified party, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party (who shall not, except with the consent
of the indemnified party, be counsel to the indemnifying party), and, after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not, except as
provided below, be liable to such indemnified party under such Section for any
legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation. The indemnified party will have the right to employ its own
counsel in any such action, but the fees and expenses of such counsel will be at
the expense of such indemnified party unless (1) the employment of counsel by
the indemnified party has been authorized in writing by the indemnifying party,
(2) the indemnified party has been advised by counsel that there are legal
defenses available to it or other indemnified parties that are different from or
in addition to those available to the indemnifying party and which could result
in a conflict in defending the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (3) the indemnifying party
has not in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, in
each of which cases the reasonable fees and expenses of such counsel will be at
the expense of the indemnifying party or parties. All such fees and expenses
will be reimbursed promptly as they are incurred. An indemnifying party will not
be liable for any settlement of any action or claim effected without its written
consent (which consent will not be unreasonably withheld) or, in connection with
any proceeding or related proceeding in the same jurisdiction and except as
provided in the second preceding sentence, for the fees and expenses of more
than one separate counsel for all indemnified parties.
8.5 Survival. The indemnification provided for in this Article VIII
will survive the Option Closing, the Purchase Closing, the completion of the
sale of the Webb Payment to the Buyer, the payment in full of the Purchase Price
and any investigation made by any party hereto.
ARTICLE IX
MISCELLANEOUS
9.1 Entire Agreement. This Agreement, including the exhibits hereto,
constitutes the entire agreement between the parties hereto with respect to the
matters covered hereby, and no party shall be liable or bound to the other under
this Agreement in any manner by any warranties, representations or covenants
except as specifically set forth herein.
9.2 Assignment. The terms and conditions of this Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
successors, however such succession is effected and whether or not such
succession is permitted by this Agreement (including any succession that may
occur by sale of securities or assets, assignment, merger, reverse merger,
consolidation, operation of law or, without limitation, otherwise), provided
that no such succession will relieve any party of its obligations under this
Agreement. Neither this Agreement, nor any of the rights or obligations
hereunder, may be assigned by any party to this Agreement without the written
consent of the other parties hereto (other than CPPI). Nothing in this Section
9.2 shall preclude the distribution or payment of amounts received by the Seller
hereunder, including to the United Way.
9.3 Titles and Subtitles. The titles and subtitles used in this
Agreement are for convenience only and are not to be considered in construing
this Agreement.
9.4 Notices and Other Communications. Any notice or other communication
required or permitted to be given under this Agreement must be in writing and
will be deemed effective when delivered in person or sent by facsimile, cable,
telegram or telex, or by overnight delivery service or by registered or
certified mail, postage prepaid, return receipt requested, to the following
addresses:
If to the Buyer or CPPI, to:
The Claridge Hotel and Casino Corporation
Boardwalk & Park Place
Atlantic City, New Jersey 08401
Attention: Frank A. Bellis, Jr., Esq.
Telephone: (609) 340-3400
Telecopier: (609) 340-3589
With a copy to:
Rogers & Wells
200 Park Avenue
New York, New York 10166
Attention: Leonard B. Mackey, Jr., Esq.
Telephone: (212) 878-8489
Telecopier: (212) 878-8375
If to the Seller to Seller:
c/o Del Webb Corporation
6001 N. 24th Street
Phoenix, Arizona 85016
Attention: Philip J. Dion
Telephone: (602) 808-8000
Telecopier: (602) 808-8097
With copies to:
Robertson C. Jones, Esq.
Del Webb Corporation
6001 N. 24th Street
Phoenix, Arizona 85016
Telephone: (602) 808-8009
Telecopier: (602) 808-8097
Gibson, Dunn & Crutcher
33 South Grand Avenue
Los Angeles, California 90071
Attention: Steven A. Meiers, Esq.
Telephone: (213) 229-7356
Telecopier: (213) 229-7520
Levine, Staller, Sklar, Chan,
Brodsky & Donnolly, P.A.
3030 Atlantic Avenue
Atlantic City, New Jersey 08401-6380
Attention: John M. Donnolly, P.C.
Telephone: (609) 347-1300
Telecopier: (609) 345-2473
If to the Partnership:
Atlantic City Boardwalk Associates, L.P.
2880 W. Meade Avenue
Suite 204
Las Vegas, Nevada 89102
Attention: Anthony C. Atchley
Telephone: (702) 253-7662
Telecopier: (702) 253-7663
With a copy to:
Lowenstein, Sandler, Kohl, Fisher & Boylan, P.A.
65 Livingston Avenue
Roseland, New Jersey 07068
Attention: Peter H. Ehrenberg
Telephone: (201) 992-8700
Telecopier: (201) 992-5820
The parties to this Agreement may change the address to which notices or other
communications are to be sent by a notice to the other given as provided in this
Section 9.4.
9.5 Expenses. Each party to this Agreement shall bear its own expenses
incurred in connection with the negotiation, preparation, execution and
consummation of this Agreement, including the fees, expenses and disbursements
of its respective legal counsel incurred in connection herewith; provided,
however, that the Buyer shall, upon presentation of appropriate invoices
therefor, reimburse the Seller, at the time of the Purchase Closing, for any
reasonable expense incurred by the Seller, up to an aggregate of $125,000, for
legal, investment banking or other services provided to the Seller by third
parties in connection with the Seller's negotiating the terms of and entering
into this Agreement since January 1, 1993. However, if the purchase of the Webb
Payment by Buyer occurs, then Buyer will pay all amounts Webb would be obligated
to pay under the Restructuring Agreement as fees and expenses of the trustee
under the Distributing Trust.
If any proceeding is brought for the enforcement of this
Agreement or because of an alleged dispute, breach or default in connection with
any of the provisions of this Agreement, the successful or prevailing party or
parties shall be entitled to recover from the unsuccessful party or parties all
costs and expenses, including reasonable attorneys' fees and disbursements,
incurred in connection with such proceeding, in addition to any other relief to
which it or they may be entitled.
9.6 Forum. Except as otherwise provided in Section 3.2(d)(ii), the sole
forum for resolving disputes under or relating to this Agreement will be New
York state courts and federal courts located in New York City and related
appellate courts. The parties agree to the jurisdiction of those courts and to
such venue for the purposes of this Agreement.
9.7 Survival of Representations and Warranties. The representations,
warranties, covenants and agreements of the Buyer, CPPI, the Seller and the
Partnership contained in or made pursuant to this Agreement shall survive the
Option Closing, the Purchase Closing, the completion of the sale of the Webb
Payment to the Buyer, the payment in full of the Purchase Price and any
investigation made by any party.
9.8 Amendment and Waiver. Any provision of this Agreement may be
amended and the observance of any term hereof may be waived (either
prospectively or retroactively and either generally or in a particular instance)
only by a document in writing signed by the parties to this Agreement who are
entitled to the benefit thereof.
9.9 Governing Law. This Agreement will be governed by, and construed
under, the laws of the State of New York.
9.10 Counterparts. Except as provided in Section 9.11, this Agreement
may be executed in two or more counterparts, each of which will be deemed an
original, but all of which together will constitute one and the same agreement.
9.11 New Jersey Casino Control Act. Notwithstanding anything to the
contrary contained in this Agreement, this Agreement shall be deemed to include
all provisions required by the New Jersey Casino Control Act (the "Act"), and
shall be conditioned upon the approval of the CCC. To the extent that anything
in this Agreement is inconsistent with the Act, the provisions of the Act shall
govern. All provisions of the Act, to the extent required by law to be included
in this Agreement, are incorporated by reference as if fully restated in this
Agreement.
9.12 No Personal Liability. Each of the parties hereto hereby
acknowledges that (i) none of the General Partners of the Partnership shall have
any personal liability or other obligation with respect to any agreement or
obligation of the Partnership under this Agreement, any such liability or
obligation being payable solely out of any assets the Partnership may from time
to time have available therefor, and (ii) Philip J. Dion shall have no personal
liability or other obligation with respect to any agreement or obligation of the
Seller under this Agreement, any such liability or obligation being payable
solely out of any assets the Seller (e.g., the Trust created by the Trust
Instrument) may from time to time have available therefor, it being understood
that payments received by Seller pursuant to this Agreement are intended to be
paid promptly by Seller to the United Way.
9.13 Time of the Essence. Time is of the essence in this Agreement
and each of its provisions.
9.14 Third Party Beneficiaries. The only third party beneficiaries
of this Agreement are the United Way, the Seller Indemnified Parties, including
in their capacities as such and, as applicable, otherwise, Philip J. Dion,
Anthony Atchley and Gerald C. Heetland.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the date first above written.
THE CLARIDGE HOTEL AND CASINO CORPORATION
By: _____________________________
Name:
Title:
THE CLARIDGE AT PARK PLACE, INCORPORATED
By:_____________________________
Name:
Title:
---------------------------------
PHILIP J. DION, as Trustee for
VALLEY OF THE SUN UNITED WAY
ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
By: _____________________________
Name: Anthony C. Atchley
Title: General Partner
By: _____________________________
Name: Gerald C. Heetland
Title: General Partner
AMENDMENT NO. 1
Dated as of January 30, 1996
to the
OPTION AGREEMENT
Amendment No. 1 dated as of January 30, 1996 to the Option Agreement
(the "Amendment") by and among The Claridge Hotel and Casino Corporation, a New
York corporation (the "Buyer"), The Claridge at Park Place, Incorporated, a New
Jersey corporation and a wholly-owned subsidiary of Buyer ("CPPI"), Philip J.
Dion, as Trustee (the "Seller") for Valley of the Sun United Way (the "United
Way") under an Irrevocable Trust, dated April 2, 1990 (the "Trust Instrument"),
and Atlantic City Boardwalk Associates, L.P., a New Jersey limited partnership
(the "Partnership").
W I T N E S S E T H :
WHEREAS, Buyer, CPPI, Seller and the Partnership have heretofore
entered into an Option Agreement dated as of November 29, 1995 (the "Option
Agreement"); and
WHEREAS, Buyer, CPPI, Seller and the Partnership wish to amend the
Option Agreement as set forth herein;
NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties hereto agree as follows:
1. Article VII, Section 7.1(a)(ii) of the Option Agreement is hereby
amended to delete the present language thereof in its entirety and to insert in
its place the following:
"(ii) by the Buyer or the Seller by written notice
to the other if, without fault of the
terminating party, the Option Closing shall
not have occurred on or before February 25,
1996; or"
2. The parties hereto agree not to appeal Resolution No. 96-2-4 of the
New Jersey Casino Control Commission, obtained by the Seller in connection with
the transactions contemplated by the Option Agreement.
3. This Amendment will be governed by, and construed under, the laws of
the State of New York.
4. Except as provided herein, all provisions, terms and conditions of
the Option Agreement shall remain in full force and effect. As amended hereby,
the Option Agreement is ratified and confirmed in all respects.
5. This Amendment may be executed in two or more counterparts, each of
which will be deemed an original, but all of which together will constitute one
and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered as of the date first above written.
THE CLARIDGE HOTEL AND CASINO CORPORATION
By: _____________________________
Name:
Title:
THE CLARIDGE AT PARK PLACE, INCORPORATED
By:_____________________________
Name:
Title:
---------------------------------
PHILIP J. DION, as Trustee for
VALLEY OF THE SUN UNITED WAY
ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
By: _____________________________
Name: Anthony C. Atchley
Title: General Partner
By: _____________________________
Name: Gerald C. Heetland
Title: General Partner
AGREEMENT
AGREEMENT, dated as of November 29, 1995, among THE CLARIDGE
HOTEL AND CASINO CORPORATION, a New York corporation ("CHCC"), ATLANTIC CITY
BOARDWALK ASSOCIATES, L.P., a New Jersey limited partnership (the
"Partnership"), and THE CLARIDGE AT PARK PLACE, INCORPORATED, a New Jersey
corporation ("CPPI").
WHEREAS, it is proposed that CHCC, the Partnership, The
Claridge of Park Place, Incorporated ("CPPI") and Philip J. Dion, as Trustee for
the Valley of the Sun United Way (the "Seller"), enter into an Option Agreement
(the "Option Agreement"), dated as of November 29, 1995, providing for the
purchase by CHCC from the Seller of the Webb Payment (terms not defined herein
shall have the meanings given to them in the Option Agreement); and
WHEREAS, CPPI is a wholly owned subsidiary of CHCC; and
WHEREAS, CHCC desires to enter into the Option Agreement and,
upon exercise of the Option provided for therein, purchase the Webb Payment.
WHEREAS, CHCC has advised the Partnership that CHCC cannot and
will not take such actions unless the Partnership participates in such
transaction in accordance with the terms described herein.
WHEREAS, the Partnership is willing to provide such assurances
to CHCC as are provided herein.
NOW, THEREFORE, in consideration of the foregoing and the
covenants set forth herein and other good and valuable consideration, the
parties hereto agree as follows:
1. As an inducement for CHCC and CPPI to enter into the Option
Agreement, and, upon the terms and conditions set forth in the Option Agreement,
to purchase the Option granted thereby and, upon exercise of the Option in
accordance with the provisions set forth herein, to purchase the Webb Payment,
the Partnership agrees as follows:
(a) Upon payment by CHCC of the Option Price and upon
receipt of all necessary approvals, paragraph (ii) under Section 1(b) of the
Third Amendment to Operating Lease and Expansion Operating Lease, dated as of
August 1, 1991 (the "Third Amendment"), between the Partnership and CPPI shall
be amended to read in its entirety as follows:
(ii) the aggregate Abatement shall not exceed
$39,320,000 for the period commencing on January 1,
1991 and ending on December 31, 1998; and
(b) If CHCC notifies the Partnership in writing of CHCC's
intention to exercise the Option before the date upon which the Option is
exercised (and if the Partnership does not object to such exercise pursuant to
Section 3 hereof), the Partnership shall (i) pay to CHCC or at the direction of
CHCC, as the portion of the Purchase Price of the Option being paid by the
Partnership, at least one day before the Purchase Price is to be paid to the
Escrow Agent pursuant to Section 2.3 of the Option Agreement, an amount equal to
the lesser of (x) $2,000,000 and (y) such portion of the cash that the
Partnership then has on hand as is not required by the Partnership to pay its
current operating expenses (together with a reasonable reserve therefor), and
(ii) no later than 14 days after payment of the Purchase Price to the Escrow
Agent pursuant to Section 2.3 of the Option Agreement, deposit in the
Distributing Trust such portion of the cash that the Partnership then has on
hand (after making the payment provided for in clause (i) of this sentence) as
is not required by the Partnership to pay its current operating expenses
(together with a reasonable reserve therefor) and does not exceed the amount to
be deposited (the "Required Amount") in the Distributing Trust pursuant to
Section 4(a) of the Escrow Agreement (the aggregate amounts so paid by the
Partnership pursuant to clauses (i) and (ii) of this sentence being referred to
as the "Contribution"); provided, however, that, if the amount to be deposited
by the Partnership pursuant to clause (ii) of this sentence is less than the
Required Amount, then the Partnership shall have no obligation to make such
deposit unless it has received from CHCC a written certification that CHCC or
CPPI has deposited with the Distributing Trust an amount equal to the excess of
the Required Amount over the amount to be deposited by the Partnership pursuant
to clause (ii) (and the Partnership and CHCC shall consult with each other to
assure that their respective deposits under this proviso are made in the
appropriate amounts and on a timely basis).
(c) If CHCC gives the Partnership the notice contemplated
by Section 1(b) and if the Escrow Agent delivers the Assignment Instrument to
CHCC pursuant to Section 4(a) of the Escrow Agreement, then paragraph (ii) under
Section 1(b) of the Third Amendment shall, upon receipt of all necessary
approvals, be amended to change the dollar amount therein, as amended as
provided in Section 1(a) hereof, from $39,320,000 to an amount equal to the sum
of (x) $39,320,000 plus (y) the excess, if any, of (i) the quotient of (A) the
sum of (1) the Purchase Price, plus (2) the Required Amount divided by (B) two
over (ii) the Contribution.
(d) If the Escrow Agent returns to CHCC any amount
supplied by the Partnership for deposit with the Escrow Agent pursuant to
Section 1(b) hereof, CHCC shall promptly return such amount to the Partnership.
2. As an inducement for the Partnership to execute the Option
Agreement, it is agreed that if the Escrow Agent delivers the Assignment
Instrument to CHCC pursuant to Section 4(a) of the Escrow Agreement, then CHCC
shall take such action as is appropriate to cancel the Webb Payment so that if
and when, after the Escrow Agent makes the delivery of the Assignment Instrument
pursuant to Section 4(a) of the Escrow Agreement, the Partnership, CHCC or CPPI
deposits any amount in the Distributing Trust, no portion of the amount so
deposited will be paid to CHCC, in its capacity as holder of the Webb Payment.
3. As an inducement for the Partnership to execute the Option
Agreement, it is agreed that, if CHCC gives the Partnership the notice
contemplated by Section 1(b) hereof, CHCC shall not exercise the Option unless
at least thirty days before the date on which CHCC intends to exercise the
Option, CHCC gives written notice of such intent to the Partnership and the
Partnership does not, within such thirty-day period, notify CHCC in writing of
its objection to such exercise.
4. As an inducement for the Partnership to execute the Option
Agreement, it is agreed that on or before December 31, 1999, CHCC and the
Partnership will engage in good faith negotiations with a view to reaching a
mutually satisfactory agreement regarding payment of the amounts due, or
extension of the time for payment of the amounts due, under the [expandable
wraparound mortgage due 2000].
5. CHCC agrees to indemnify the General Partners of the
Partnership on demand against, and hold each such person harmless from, all
losses, judgments, amounts paid in settlement of actions, all claims,
liabilities, taxes, cost, damages and expenses (including but not limited to
reasonable attorneys' fees and disbursements) as incurred, accruing from or
resulting by reason of any action, proceeding or claim arising out of the
execution and delivery of the Option Agreement or this Agreement or any
transaction contemplated by the Option Agreement or this Agreement. CPPI,
acknowledging that it is a creditor of the Partnership, consents to the payments
to be made by the Partnership hereunder.
6. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter
hereof, and no party shall be liable or bound to the other in any manner by any
warranties, representations or covenants except as specifically set forth
herein.
7. Assignment. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors, however such succession is effected and whether or not
such succession is permitted by this Agreement (including any succession that
may occur by sale of securities or assets, assignment, merger, reverse merger,
consolidation, operation of law or, without limitation, otherwise), provided
that no such succession will relieve any party of its obligations under this
Agreement. Neither this Agreement, nor any of the rights or obligations
hereunder, may be assigned by either party to this Agreement without the written
consent of the other party hereto.
8. Notices and Other Communications. Any notice or other
communication required or permitted to be given under this Agreement must be in
writing and will be deemed effective when delivered in person or sent by
facsimile, cable, telegram or telex, or by overnight delivery service or by
registered or certified mail, postage prepaid, return receipt requested, to the
following addresses:
If to the Buyer to:
The Claridge Hotel and Casino Corporation
Boardwalk & Park Place
Atlantic City, New Jersey 08401
Attention: Frank A. Bellis, Jr., Esq.
Telephone: (609) 340-3400
Telecopier: (609) 340-3589
With a copy to:
Rogers & Wells
200 Park Avenue
New York, New York 10166
Attention: Leonard B. Mackey, Jr., Esq.
Telephone: (212) 878-8489
Telecopier: (212) 878-8375
If to the Partnership:
Atlantic City Boardwalk Associates, L.P.
2880 W. Meade Avenue
Suite 204
Las Vegas, Nevada 89102
Attention: Anthony C. Atchley
Telephone: (702) 253-7662
Telecopier: (702) 253-7663
With a copy to:
Lowenstein, Sandler, Kohl, Fisher & Boylan, P.A.
65 Livingston Avenue
Roseland, New Jersey 07068
Attention: Peter H. Ehrenberg
Telephone: (201) 992-8700
Telecopier: (201) 992-5820
The parties to this Agreement may change the address to which notices or other
communications are to be sent by a notice to the other given as provided in this
Section 8.
9. Amendment and Waiver. Any provision of this Agreement may
be amended and the observance of any term hereof may be waived (either
prospectively or retroactively and either generally or in a particular instance)
only by a document in writing signed by the parties to this Agreement who are
entitled to the benefit thereof.
10. Governing Law. This Agreement will be governed by, and
construed under, the laws of the State of New York.
11. Counterparts. This Agreement may be executed in two or
more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same agreement.
12. New Jersey Casino Control Act. Notwithstanding anything to
the contrary contained in this Agreement, this Agreement shall be deemed to
include all provisions required by the New Jersey Casino Control Act (the
"Act"), and shall be conditioned upon the approval of the CCC. To the extent
that anything in this Agreement is inconsistent with the Act, the provisions of
the Act shall govern. All provisions of the Act, to the extent required by law
to be included in this Agreement, are incorporated by reference as if fully
restated in this Agreement.
13. No Personal Liability. Each of the parties hereto hereby
acknowledges that none of the General Partners of the Partnership shall have any
personal liability or other obligation with respect to any agreement or
obligation of the Partnership under this Agreement, any such liability or
obligation being payable solely out of any assets the Partnership may from time
to time have available therefor.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
THE CLARIDGE HOTEL AND CASINO CORPORATION
By: _____________________________________
Name:
Title:
ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
By: ____________________________________
Name: Anthony Atchley
Title: General Partner
By: ____________________________________
Name: Gerald C. Heetland
Title: General Partner
THE CLARIDGE AT PARK PLACE, INCORPORATED
By:_____________________________________
Name:
Title:
AMENDMENT
AMENDMENT, dated as of February 21, 1996, to Agreement, dated as of
November 29, 1995 (the "Agreement"), among THE CLARIDGE HOTEL AND CASINO
CORPORATION, a New York corporation ("CHCC"), ATLANTIC CITY BOARDWALK
ASSOCIATES, L.P., a New Jersey limited partnership (the "Partnership"), and THE
CLARIDGE AT PARK PLACE, INCORPORATED, a New Jersey corporation ("CPPI").
WHEREAS, the parties to the Agreement desire to amend the Agreement to
reflect more accurately their intent in entering to the Agreement.
NOW, THEREFORE, in consideration of the foregoing and the covenants set
forth herein and other good and valuable consideration, the parties hereto agree
as follows:
1. The Agreement is hereby amended in the following respects:
(a) Paragraphs (b) and (c) of Section 1 of the Agreement
are hereby amended to read in their entirety as follows:
(b) If CHCC notifies the Partnership in writing of
CHCC's intention to exercise the Option before the
date upon which the Option is exercised (and if
the Partnership does not object to such exercise
pursuant to Section 3 hereof), the Partnership
shall (i) pay to CHCC or at the direction of CHCC,
as the portion of the Purchase Price of the Option
being paid by the Partnership, at least one day
before the Purchase Price is to be paid to the
Escrow Agent pursuant to Section 2.3 of the Option
Agreement, an amount equal to the lesser of (x)
$2,000,000 and (y) such portion of the cash that
the Partnership then has on hand as is not
required by the Partnership to pay its current
operating expenses (together with a reasonable
reserve therefor) (the amount so paid by the
Partnership pursuant to clause (i) of this
sentence being referred to as the "Contribution"),
and (ii) no later than 14 days after payment of
the Purchase Price to the Escrow Agent pursuant to
Section 2.3 of the Option Agreement, deposit in
the Distributing Trust such portion of the cash
that the Partnership then has on hand (after
making the payment provided for in clause (i) of
this sentence) as is not required by the
Partnership to pay its current operating expenses
(together with a reasonable reserve therefor) and
does not exceed the amount to be deposited (the
"Required Amount") in the Distributing Trust
pursuant to Section 4(a) of the Escrow Agreement;
provided, however, that, if the amount to be
deposited by the Partnership pursuant to clause
(ii) of this sentence is less than the Required
Amount, then the Partnership shall have no
obligation to make such deposit unless it has
received from CHCC a written certification that
CHCC or CPPI has deposited with the Distributing
Trust an amount equal to the excess of the
Required Amount over the amount to be deposited by
the Partnership pursuant to clause (ii) (and the
Partnership and CHCC shall consult with each other
to assure that their respective deposits under
this proviso are made in the appropriate amounts
and on a timely basis).
(c) If CHCC gives the Partnership the notice
contemplated by Section 1(b) and if the Escrow
Agent delivers the Assignment Instrument to CHCC
pursuant to Section 4(a) of the Escrow Agreement,
then paragraph (ii) under Section 1(b) of the
Third Amendment shall, upon receipt of all
necessary approvals, be amended to change the
dollar amount therein, as amended as provided in
Section 1(a) hereof, from $39,320,000 to an amount
equal to the sum of (x) $39,320,000 plus (y) the
excess, if any, of (i) the quotient of (A) the
Purchase Price divided by (B) two over (ii) the
Contribution.
(b) Section 3 of the Agreement is hereby amended to read in
its entirety as follows:
3. As an inducement for the Partnership to execute
the Option Agreement, it is agreed that CHCC shall
not exercise the Option unless, at least 30 days
before the date on which CHCC intends to exercise
the Option, CHCC gives written notice of such
intent to the Partnership and the Partnership does
not, within such 30-day period, notify CHCC in
writing of its objection to such exercise.
2. This Amendment shall be governed by, and construed under, the laws
of the State of New York.
3. Except as provided herein, all provisions, terms and conditions of
the Agreement shall remain in full force and effect. As amended hereby, the
Agreement is ratified and confirmed in all respects.
4. This Amendment may be executed in two or more counterparts, each of
which will be deemed an original, but all of which together will constitute one
and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered as of the date first above written.
THE CLARIDGE HOTEL AND CASINO
CORPORATION
By: _____________________________________
Name:
Title:
ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
By: ____________________________________
Name: Anthony Atchley
Title: General Partner
By: ____________________________________
Name: Gerald C. Heetland
Title: General Partner
THE CLARIDGE AT PARK PLACE, INCORPORATED
By:_____________________________________
Name:
Title:
