<PAGE>
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
-------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from___________to___________
Commission File Number 0-11268
THE CLARIDGE HOTEL AND CASINO CORPORATION
(Exact name of registrant as specified in its charter)
New York 22-2469172
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Indiana Avenue and the Boardwalk
Atlantic City, New Jersey 08401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (609) 340-3400
__________________
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 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
------ ------
The number of shares outstanding of each class of the Registrant's
Stock is as follows:
Number of Shares Outstanding
August 1, 1994
--------------
Class A Stock 5,054,282
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THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Index to Form 10-Q
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Introductory Notes to Consolidated
Financial Statements 3
Consolidated Balance Sheets at
June 30, 1994 and 1993 and
December 31, 1993 4
Consolidated Statements of Operations
for the three months ended June 30,
1994 and 1993 5
Consolidated Statements of Operations
for the six months ended June 30,
1994 and 1993 6
Consolidated Statements of Cash Flows
for the six months ended June 30,
1994 and 1993 7
Notes to Consolidated Financial
Statements 9
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 21
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THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Introductory Notes to Consolidated Financial Statements
- - -------------------------------------------------------
The accompanying consolidated financial statements have been
prepared by The Claridge Hotel and Casino Corporation ("Corporation")
without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. In the opinion of management, these
financial statements contain all adjustments necessary to present
fairly the consolidated financial position of The Claridge Hotel and
Casino Corporation and its wholly-owned subsidiaries, The Claridge at
Park Place, Incorporated ("New Claridge") and Claridge Gaming
Incorporated at June 30, 1994 and 1993 and December 31, 1993, and the
results of its operations for the three and six months ended June 30,
1994 and 1993 and its cash flows for the six months ended June 30,
1994 and 1993. All adjustments made are of a normal recurring nature.
Although management believes that the disclosures included herein
are adequate to make the information contained herein not misleading,
certain information and footnote disclosure normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. It is suggested that these
financial statements be read in conjunction with the financial
statements and the related disclosures contained in the Corporation's
Annual Report on Form 10-K for the year ended December 31, 1993 filed
with the Securities and Exchange Commission.
The results of operations for the three and six months ended June
30, 1994 and 1993 are not necessarily indicative of the operating
results to be expected for the full year. Historically, the gaming
industry in Atlantic City, New Jersey has been seasonal in nature with
peak demand months occurring during the summer season.
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THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31, June 30,
1994 1993 1993
-------- ------------ --------
<S> <C> <C> <C>
ASSETS
- - ------
Current Assets:
Cash and cash equivalents $ 41,826 5,193 5,490
Receivables, net (including
$12,793 and $11,445 at June 30,
1994 and 1993, respectively
and $12,176 at December 31,
1993, due from the Partnership) 13,782 13,339 12,807
Other current assets 7,074 4,204 4,038
-------- ------- -------
Total current assets 62,682 22,736 22,335
-------- ------- -------
Gaming equipment, net 8,750 4,225 4,363
Long-term receivables due from the
Partnership (note 3) 117,573 115,494 118,068
Intangible assets and deferred charges 3,691 651 249
Other assets 4,516 3,232 2,552
-------- ------- -------
$197,212 146,338 147,567
======== ======= =======
LIABILITIES & STOCKHOLDERS' EQUITY
- - ----------------------------------
Current Liabilities:
Revolving credit line borrowings (note 4) $ -0- -0- -0-
Current installments of long-term
debt (note 7) -0- -0- 3,000
Accounts payable 6,232 2,509 3,509
Loan from the Partnership (note 5) 3,600 3,600 3,600
Other current liabilities (note 6) 31,710 28,161 27,723
-------- ------- -------
41,542 34,270 37,832
-------- ------- -------
Long-term debt (note 7) 85,000 35,259 35,096
Deferred rent due to the Partnership 34,721 36,342 38,199
Deferred income taxes (note 9) 6,764 6,103 5,285
Other noncurrent liabilities (note 8) 20,000 20,000 20,000
Stockholders' equity:
Common stock 5 5 5
Additional paid in capital 5,048 5,048 5,048
Accumulated earnings 4,132 9,311 6,102
Treasury stock, 8,218 and 73,963 Class A
shares at $-0- cost at June 30, 1994
and December 31, 1993, respectively -0- -0- -0-
-------- ------- -------
Total stockholders' equity 9,185 14,364 11,155
-------- ------- -------
$197,212 146,338 147,567
======== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
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THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
For the Three Months Ended June 30, 1994 and 1993
(in thousands except per share data)
1994 1993
-------- --------
Revenue:
Casino $39,407 42,625
Hotel 2,675 2,820
Food and beverage 4,433 4,906
Interest from the Partnership 4,493 4,516
Interest, other 431 43
Other 676 732
------- ------
52,115 55,642
Less promotional allowances (note 2) (3,956) (3,986)
------- ------
Net revenues 48,159 51,656
------- ------
Costs and expenses:
Casino 22,891 21,777
Hotel 861 902
Food and beverage 2,615 2,851
Other 965 1,025
Rent expense to the Partnership 9,058 8,760
Rent expense, other 384 429
General and administrative 8,108 7,663
Gaming taxes 3,143 3,401
Reinvestment obligation expense 165 183
Provision for uncollectible accounts 128 154
Depreciation and amortization 535 360
Interest expense 2,553 1,161
------- ------
Total costs and expenses 51,406 48,666
------- ------
Income (loss) before income taxes (3,247) 2,990
Income tax expense (credit) (1,300) 1,196
------- ------
Net income (loss) $(1,947) 1,794
======= ======
Net income (loss) per share (based on 5,045,251 and
5,062,500 weighted average shares outstanding
for the three months ended June 30, 1994
and 1993, respectively) $ (.39) .35
======= ======
See accompanying notes to consolidated financial statements.
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THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
For the Six Months Ended June 30, 1994 and 1993
(in thousands except per share data)
1994 1993
----------- -----------
Revenue:
Casino $69,519 77,235
Hotel 4,834 5,126
Food and beverage 8,191 9,147
Interest from the Partnership 8,895 9,088
Interest, other 684 78
Other 1,294 1,463
------- -------
93,417 102,137
Less promotional allowances (note 2) (7,466) (7,598)
------- -------
Net revenues 85,951 94,539
------- -------
Costs and expenses:
Casino 41,523 40,501
Hotel 1,588 1,666
Food and beverage 4,816 5,432
Other 1,849 2,005
Rent expense to the Partnership 17,790 17,375
Rent expense, other 765 858
General and administrative 14,474 13,933
Gaming taxes 5,545 6,161
Reinvestment obligation expense 295 333
Provision for uncollectible accounts 228 291
Depreciation and amortization 972 694
Interest expense 4,739 2,085
------- -------
Total costs and expenses 94,584 91,334
------- -------
Income (loss) before income taxes (8,633) 3,205
Income tax expense (credit) (3,454) 1,282
------- -------
Net income (loss) $(5,179) 1,923
======= =======
Net income (loss) per share (based on 5,017,051
and 5,062,500 weighted average shares
outstanding for the six months ended
June 30, 1994 and 1993, respectively) $ (1.03) .38
======= =======
See accompanying notes to consolidated financial statements.
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<PAGE> 7
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 1994 and 1993
(in thousands)
1994 1993
--------- --------
Cash flows from operating activities:
Net income (loss) $ (5,179) 1,923
Adjustments to reconcile net income
to net cash provided by (used in) operating
activities:
Depreciation and amortization 972 694
Deferred rent to the Partnership (1,621) (1,326)
Deferred interest receivable and
discount from the Partnership (557) (485)
Reinvestment obligation expenses 295 333
(Gain)/loss on disposal of assets 53 (41)
Deferred income taxes 661 336
Change in assets and liabilities:
Receivables, net, excluding
current portion of long-term
receivables 321 (48)
Other current assets (2,870) (688)
Accounts payable 3,723 1,660
Other current liabilities 3,549 1,074
-------- -------
Net cash flows provided by (used in) operating
activities (653) 3,432
-------- -------
Cash flows from investment activities:
Increase in intangible assets and
deferred charges (3,317) (44)
Additions to gaming equipment, net (5,303) (1,005)
Additions to other assets (1,578) (933)
Proceeds from disposition of property 29 42
Increase in long-term receivables (7,559) (1,144)
Receipt of long-term receivables 5,273 4,789
-------- -------
Net cash flows provided by (used in)
investment activities (12,455) 1,705
-------- -------
(Continued)
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<PAGE> 8
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 1994 and 1993
(in thousands)
1994 1993
--------- --------
Cash flows from financing activities:
Increase in long-term debt 85,000 -0-
Payment of long-term debt (33,559) (3,405)
Increase in revolving credit line borrowings 7,625 15,600
Payment of revolving credit line borrowings (9,325) (16,600)
-------- -------
Net cash provided by (used in)
financing activities 49,741 (4,405)
-------- -------
Increase in cash and cash equivalents 36,633 732
Cash and cash equivalents at beginning of period 5,193 4,758
-------- -------
Cash and cash equivalents at end of period $ 41,826 5,490
======== =======
See accompanying notes to consolidated financial statements.
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<PAGE> 9
Notes to Consolidated Financial Statements
1. Basis of Presentation
---------------------
The financial statements are prepared in accordance with
generally accepted accounting principles. The consolidated
financial statements include the accounts of the Corporation and
its wholly-owned subsidiaries, New Claridge and Claridge Gaming
Incorporated. All material intercompany accounts and
transactions have been eliminated in consolidation.
Claridge Gaming Incorporated was formed on March 16, 1994 for the
purpose of exploring and developing gaming opportunities in other
jurisdictions.
2. Promotional Allowances
----------------------
The retail value of complimentary rooms, food and beverages and
other complimentaries furnished to patrons is included in gross
revenues and then deducted as promotional allowances. The
estimated cost of providing such promotional allowances to casino
patrons for the three and six months ended June 30, 1994 and 1993
has been allocated to casino operating expenses as follows (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Hotel $ 600 502 1,201 1,024
Food and beverage 2,502 2,230 4,841 4,565
Other (Entertainment) 201 191 369 347
------ ----- ----- -----
Total costs allocated to
casino operating expenses $3,303 2,923 6,411 5,936
====== ===== ===== =====
</TABLE>
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<PAGE> 10
Notes to Consolidated Financial Statements
3. Long-Term Receivables
---------------------
Long-term receivables consist of the following amounts due from
Atlantic City Boardwalk Associates, L.P. (the "Partnership"):
<TABLE>
<CAPTION>
June 30, December 31, June 30,
1994 1993 1993
------- ------------- --------
(in thousands)
<S> <C> <C> <C>
Expandable Wraparound Mortgage 14%,
maturities through September 30, 2002
(net of $11,738,000 discount and
$12,814,000 discount at June 30, 1994
and 1993 respectively, and $12,295,000
discount at December 31, 1993) $ 75,762 79,705 83,186
Deferred Expandable Wraparound
Mortgage interest receivable, due
September 30, 2000 20,000 20,000 20,000
FF&E promissory notes, 14% 14,377 7,504 5,803
Expansion/Construction promissory
note, 14% 7,434 8,285 9,079
-------- ------- -------
$117,573 115,494 118,068
======== ======= =======
</TABLE>
4. Working Capital Loans
---------------------
Pursuant to the terms of the Revolving Credit and Term Loan
Agreement (the "Loan Agreement"), First Fidelity Bank, N.A., New
Jersey (the "Bank") established a revolving working capital
facility, which, prior to the full satisfaction of the Loan
Agreement on January 31, 1994, was in the amount of $7.5 million.
Interest on the working capital facility borrowings, which was
payable monthly in arrears, accrued at a rate equal to the prime
rate plus four percent, as amended effective April 1, 1993 (see
Note 7, Long-Term Debt). New Claridge was also required to pay
quarterly a commitment fee equal to .5% per annum of the unused
portion of the revolving working capital facility.
On January 31, 1994, the Corporation completed an offering of $85
million of First Mortgage Notes (the "Notes") due 2002, bearing
interest at 11 3/4% (see Note 7, Long-Term Debt). 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, which was secured by
the first mortgage. In conjunction with the full satisfaction of
the Loan Agreement, the Corporation's revolving credit line
arrangement was terminated.
New Claridge's outstanding borrowings on the revolving working
capital facility at December 31, 1993 were $1,700,000.
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<PAGE> 11
Notes to Consolidated Financial Statements
The amount outstanding on the revolving working capital facility
at December 31, 1993 is classified as long-term debt, due to the
repayment in full on January 31, 1994, in conjunction with the
full satisfaction of the Loan Agreement.
5. Loan from the Partnership
-------------------------
In accordance with the terms of the Restructuring Agreement, on
June 16, 1989 the Partnership loaned to New Claridge $3.6
million, which represented substantially all cash and cash
equivalents remaining in the Partnership other than funds needed
to pay expenses incurred through the closing of the
Restructuring. This loan is evidenced by an unsecured promissory
note and is not due and payable until such time as the full or
partial satisfaction of the Wraparound Mortgage and the first
mortgage has been made in connection with a refinancing or sale
of all or a partial interest in New Claridge.
Interest, which accrues at 12% per annum, is payable in full upon
maturity. As of June 30, 1994, such interest, which is included
in other current liabilities, amounted to $2,178,000.
6. Other Current Liabilities
-------------------------
Other current liabilities consist of the following:
June 30, December 31, June 30,
1994 1993 1993
-------- ------------ ---------
(in thousands)
Deferred rent, current $15,078 15,078 15,078
Accrued payroll and
related benefits 6,313 6,245 6,233
Accrued interest, First
Mortgage Notes 4,189 -0- -0-
Accrued interest due to
Partnership 2,178 1,962 1,746
Auto and general
liability reserves 1,249 1,404 1,245
Other current liabilities 2,703 3,472 3,421
------- ------ ------
$31,710 28,161 27,723
======= ====== ======
The amount of deferred rent as of June 30, 1994 of $15,078,000
represents the maximum deferral allowed in accordance with the
Operating Lease Agreement and Expansion Operating Lease
Agreement, as amended. The deferred rent will become payable (i)
upon a sale or refinancing of the Claridge; (ii) upon full or
partial satisfaction of the Wraparound Mortgage; and (iii) upon
full satisfaction of any first mortgage then in place.
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<PAGE> 12
Notes to Consolidated Financial Statements
7. Long-Term Debt
--------------
Long-term debt consists of the following:
June 30, December 31, June 30,
1994 1993 1993
-------- ------------ ---------
(in thousands)
11 3/4% First Mortgage
Notes, due 2002 $85,000 -0- -0-
First Mortgage Note,
prime plus 4%,
effective April 1, 1993 -0- 33,559 38,096
Revolving line of credit -0- 1,700 -0-
------- ------- -------
85,000 35,259 38,096
Less current installments -0- -0- 3,000
------- ------- -------
$85,000 35,259 35,096
======= ======= =======
On January 31, 1994, the Corporation completed an offering of $85
million of Notes due 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, which was secured by the First Mortgage. In
conjunction with the full satisfaction of the Loan Agreement,
the Corporation's revolving credit line arrangement was
terminated. Interest on the Notes is payable semiannually on
February 1 and August 1 of each year, commencing August 1, 1994.
On October 7, 1991, New Claridge was issued a two year license by
the Commission for the period commencing October 31, 1991. In
conjunction with the relicensing, New Claridge was required to
submit to the Commission by April 30, 1993 a plan to satisfy the
balloon payment due on the term loan on January 1, 1994, pursuant
to the terms of the Loan Agreement, with implementation of the
plan by June 30, 1993. The third amendment to the Loan Agreement
was executed, effective April 1, 1993. The modifications
resulting from this amendment included (i) the extension of the
maturity date of the first mortgage loan from January 1, 1994 to
December 31, 1996; (ii) an increase in the interest rate to the
prime rate of Marine Midland Bank, N.A. plus four percent (from
the previous prime rate plus one and one-half percent); (iii) an
increase in the mandatory principal payments from $1.2 million to
$3 million annually, payable in equal monthly installments; (iv)
an increase in the maximum annual capital expenditure limitation
from $3.5 million per year to $5 million per year; and (v) an
increase in the co-agent's fee to $70,000 per year. Prior to
this amendment, New Claridge was required to pay a co-agent's fee
equal to one-fortieth of one percent of the average daily
outstanding balance of the first mortgage loan. In addition, New
Claridge paid an extension fee of $200,000 upon the execution of
this amendment to the Loan Agreement.
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<PAGE> 13
Notes to Consolidated Financial Statements
In addition to the mandatory principal payments, New Claridge was
also required to pay quarterly, to the Bank, for permanent
application to the outstanding principal balance of the first
mortgage loan, any excess cash flow as defined in the Loan
Agreement.
The total principal balance outstanding on the first mortgage
loan at December 31, 1993 has been classified as long-term debt,
due to the repayment in full of the first mortgage on January 31,
1994, in conjunction with the full satisfaction of the Loan
Agreement.
8. Other Non-Current Liabilities
-----------------------------
Pursuant to the Restructuring Agreement, Del Webb Corporation
retained an interest, which was assigned to a trustee for the
benefit of the United Way of Arizona on April 2, 1990, equal to
$20 million plus interest at a rate of 15% per annum, compounded
quarterly, commencing December 1, 1988, in any proceeds
ultimately recovered from operations and/or the sale or
refinancing of the Claridge facility in excess of the first
mortgage loan ("Contingent Payment"), which amount is payable
under certain circumstances. Consequently, New Claridge has
deferred the recognition of $20 million of forgiveness income
with respect to the Contingent Payment obligation. Interest on
the Contingent Payment has not been recorded in the accompanying
financial statements since the likelihood of paying such amount
is not considered probable at this time. As of June 30, 1994,
accrued interest would have amounted to approximately $25.5
million.
9. Income Taxes
------------
Effective January 1, 1993, the Corporation adopted Statement No.
109 on a prospective basis. There was no effect on the
Corporation's statement of operations for the six month period
ended June 30, 1993 as a result of the adoption of Statement No.
109.
Under the asset and liability method, deferred tax assets and
liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax basis.
The Corporation recorded an income tax credit of $3,454,000 for
the six months ended June 30, 1994 which represents the tax
benefit of losses which the Corporation believes will more likely
than not be recognized. As of June 30, 1994, the current portion
of the income tax credit of approximately $2.8 million is
included in other current assets.
<PAGE>
<PAGE> 14
Notes to Consolidated Financial Statements
10. Claridge License Renewal
------------------------
On September 22, 1993, New Claridge was issued a two-year casino
license by the New Jersey Casino Control Commission (the
"Commission") for the period commencing September 30, 1993.
11. Related Party Transactions
--------------------------
In February 1992, the Corporation's Board of Directors adopted a
Long-Term Incentive Plan (the "Plan") in which certain key
employees of the Corporation and/or New Claridge participate.
The Plan provides for the grant of the 273,938 shares of the
Corporation's Class A stock, which were held as treasury shares
of the Corporation, and for the issuance of 100 Equity Units.
The aggregate value of the 100 Equity Units is equal to 5.41
percent of certain amounts as further defined in the Plan.
Specified portions of the awarded treasury shares and Equity
Units held by participants vest upon the attainment of specific
goals as described in the Plan. The treasury shares and Equity
Units fully vest upon a further restructuring or a change in
control as defined in the Plan. Payment with respect to the
Equity Units will only be made (a) upon the occurrence of a
transaction in which substantially all of the assets and business
operations of the Claridge entities are transferred to one or
more entities in a merger, sale of assets or other acquisition-
type transaction, (b) upon termination of employment of any
participant in the Plan within one year after any change in
control of the Corporation occurs, as defined in the Plan, or (c)
if the Corporation pays dividends to its stockholders, if the
Partnership makes distributions to its partners, or if the
Corporation or the Partnership makes certain distributions under
the Restructuring Agreement. On April 15, 1992, the Casino
Control Commission approved the Plan and the treasury shares were
delivered to the participants. Upon the issuance of the Notes
and the repayment in full of the Corporation's outstanding debt
under the Loan Agreement, 25% of the shares and Equity Units
awarded under the Plan vested. A participant is entitled to vote
all awarded shares whether or not vested in such shares.
On July 25, 1993, Shannon Bybee, resigned his position as
Chairman and Chief Executive Officer of the Corporation,
resulting in the return to the Corporation of 73,963 shares of
the Corporation's Class A stock, which had previously been
awarded under the Plan. In addition, the Equity Units held by
Mr. Bybee were returned to the Corporation upon his resignation.
Mr. Bybee continues to serve as a member of the Board of Directors of the
Corporation. On April 16, 1994, the shares of Class A Stock and
Equity Units which had been returned by Mr. Bybee were awarded to
certain officers of the Corporation and/or New Claridge.
<PAGE>
<PAGE> 15
Notes to Consolidated Financial Statements
12. Legal Proceedings
-----------------
In the second quarter of 1994, the Corporation entered into an
out of court settlement of a claim incidental to its business.
Although the terms of such settlement are subject to
confidentiality, in accordance with the terms of the agreement,
the Corporation believes that such settlement is in the best
interest of the Corporation and was reached on a basis which was
not material to the Corporation's financial position. The
settlement will be paid in three installments over three years
beginning in 1994.
<PAGE>
<PAGE> 16
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations for the Three Months Ended June 30, 1994 and 1993
- - -----------------------------------------------------------------------
The Corporation had a net loss of $1,947,000, for the three
months ended June 30, 1994, compared to net income of $1,794,000 for
the same period in 1993.
Casino revenue, which is the difference between amounts wagered
by and paid to casino patrons, for the second quarter of 1994 totalled
$39,407,000, a decrease of 7.5% from casino revenues earned in the
second quarter of 1993. Casino revenues earned by all Atlantic City
properties for the three months ended June 30, 1994 were 2.3% higher
than revenues earned during the same period of 1993. The increase in
citywide revenues is due in part to the approval of several new gaming
options, including simulcasting (which commenced in May 1993), poker
(which commenced in June 1993), and keno (which commenced in June
1994); excluding the revenues earned from these new games, citywide
revenues for the second quarter of 1994 would have increased only
slightly over revenues earned in the same period of 1993. New
Claridge commenced offering these new gaming options in late June
1994, and earned $7,000 in simulcasting and keno in the second quarter
of 1994. The decrease in New Claridge's casino revenues, as compared
to the increase experienced by other Atlantic City casinos, was also
due to increased marketing expenditures by competing operators to
increase business levels which had been depressed due to the harsh
weather during the first quarter of 1994, combined with business
disruption due to New Claridge's internal expansion construction.
Claridge table games revenue for the three months ended June 30,
1994 was $9,721,000, (including poker revenue of $16,000); this
represents a decrease of 10.0% from table games revenue earned during
the same period of 1993. Citywide table games revenue (including
poker) increased slightly over 1993 levels for the second quarter;
however, excluding poker revenues, citywide table games revenues for
the second quarter of 1994 decreased 3.6% from the same period of
1993. The decrease in Claridge table games revenue resulted from a
5.5% decrease in table games drop (the amount of gaming chips
purchased by patrons) from 1993 levels, combined with a decline in the
"hold" percentage (win to drop percentage) to 14.0% in the second
quarter of 1994, compared to 14.7% in the same period of 1993.
Slot machine revenue earned by the Claridge in the second quarter
of 1994 was $29,679,000, a decrease of 6.8% from revenues earned in
the second quarter of 1993. Citywide slot machine revenues increased
2.6% in the three months ended June 30, 1994 as compared to the same
period of 1993. The decrease in Claridge slot revenues was due in
part to a reduction in the number of slot machines available to
patrons during June 1994, as a result of the movement of these
machines into the newly-constructed expansion of the casino floor
space. The expanded casino, including these slot machines and
approximately 500 additional machines, became fully operational on
June 30, 1994. New Claridge offers promotional incentives through its
direct marketing program to its customers based on their casino play,
as well as to prospective customers based on demographic models;
<PAGE>
<PAGE> 17
during the three months ended June 30, 1994, coin issued through this
program decreased to $2,814,000 from $3,524,000 during the second
quarter of 1993. In addition, New Claridge offers coin incentives to
patrons arriving by bus. During the second quarter of 1994, 239,000
bus patrons arrived at the Claridge and were issued $2,882,000 in coin
incentives, compared to 253,000 passengers and $2,380,000 in coin
incentives in the same period of 1993. The increase in the coin
incentive per bus passenger in the second quarter of 1994 compared to
the same period of 1993 resulted from efforts to maintain a
competitive position with other Atlantic City casino operators, who
increased the incentives offered in order to increase business levels
which had been depressed due to the severe weather experienced during
the first quarter of 1994.
Hotel revenues for the second quarter of 1994 of $2,675,000 were
5.1% lower than hotel revenues for the second quarter of 1993,
resulting from a decrease in the number of rooms sold (42,500 in 1994
compared to 43,900 in 1993), combined with a lower average room rate
($63 in 1994 compared to $64 in 1993). Food and beverage revenues for
the second quarter of 1994 of $4,433,000 were 1.8% lower than the
second quarter of 1993, due to a decrease in total covers (meals
served) to 423,000 in 1994 compared to 476,000 in 1993; the average
price per cover for the second quarter of 1994 was $7.08, in line with
the average price per cover in the second quarter of 1993.
Total costs and expenses for the three months ended June 30, 1994
of $51,406,000 were 5.6% higher than second quarter 1993 expenses
primarily due to increased interest expense resulting from a higher
long-term debt balance resulting from the completion of the offering
of $85 million of Notes on January 31, 1994. In addition, casino
operating expenses for the second quarter of 1994 increased 5.1% over
the second quarter of 1993 expenses, resulting from increased costs
associated with the direct marketing programs reflecting efforts to
promote the newly-expanded casino and increase patron volume, as well
as an increase in the costs of providing promotional allowances to
casino patrons. General and administrative costs for the second
quarter of 1994 increased 5.8% over the same period of 1993, primarily
resulting from an out of court settlement of a claim incidental to
business.
The Corporation recorded an income tax credit of $1,300,000 for
the three months ended June 30, 1994 which represents the tax benefit
of losses which the Corporation believes will more likely than not be
recognized. The Corporation recorded income tax expense of $1,196,000
as a result of the income earned for the second quarter of 1993.
<PAGE>
<PAGE> 18
Results of Operations for the Six Months Ended June 30, 1994 and 1993
- - ---------------------------------------------------------------------
The Corporation had a net loss of $5,179,000, for the six months
ended June 30, 1994, compared to net income of $1,923,000 for the same
period in 1993.
Casino revenue for the first six months of 1994 was $69,519,000
(including poker, simulcasting and keno revenues), a decrease of 10.0%
from casino revenues earned in the same period of 1993. Casino
revenues earned by all Atlantic City properties for the six months
ended June 30, 1994, including poker, simulcasting, and keno revenues,
increased slightly in comparison to the same period of 1993. Citywide
revenues were adversely affected by severe snow and ice storms
throughout the Northeastern United States in the first quarter of
1994. New Claridge experienced a greater decline in business volume
in the first quarter of 1994 compared to other Atlantic City casinos
due to its dependency on customers arriving by bus, its focus on the
New York and Northern New Jersey markets and its lack of a covered
self-parking facility, as well as the disruption in business volume
resulting from the construction of its casino expansion in the second
quarter of 1994.
Table games revenue (including poker revenue) earned by New
Claridge in the six months ended June 30, 1994 was $18,279,000, a
10.1% decrease from table games revenue earned in the same period of
1993. This decrease resulted from a 7.3% decline in table games drop,
combined with a decline in the hold percentage, to 14.4% during the
first six months of 1994, from 14.9% in the first six months of 1993.
Citywide table games revenue for the first six months of 1994
increased slightly over the same period of 1993; however, excluding
poker revenue (which was not an approved gaming option until June
1993), citywide table games revenue reflected a 3.6% decline from the
six months ended June 30, 1993.
Claridge slot machine revenue for the six months ended June 30,
1994 were $51,233,000, a 10.0% decrease from the same period of 1993.
Citywide slot machine revenues for the first two quarters of 1994
decreased slightly from the same period of 1993. During the six
months ended June 30, 1994, New Claridge issued $4,849,000 in coin
incentives through its direct mail program, compared to $5,834,000 of
coin incentives issued in the same period of 1993. In addition,
$3,900,000 of coin incentives were issued to 342,000 bus passengers
during the first six months of 1994, as compared to $3,887,000 of coin
incentives issued to 405,000 passengers in the same period of 1993.
Hotel revenues for the six months ended June 30, 1994 of
$4,834,000 were 5.7% lower than in the same period of 1993, due to a
lower occupancy rate (90.5% in 1994 compared to 91.8% in 1993),
combined with a lower average room rate ($61 in 1994 compared to $62
in 1993). Food and beverage revenues for the first six months of 1994
were $8,191,000, reflecting a 10.5% decrease from the same period of
1993, resulting from a decline in the number of covers served, to
738,000 in 1994 from 865,000 in 1993.
<PAGE>
<PAGE> 19
Total costs and expenses for the six months ended June 30, 1994
of $94,584,000 were 3.6% higher than expenses during the same period
of 1993, resulting primarily from increased interest expense due to
the completion of the offering of $85 million of First Mortgage Notes
on January 31, 1994. In addition, casino operating expenses for the
first six months of 1994 were 2.5% higher than in the same period of
1993, resulting from increased marketing efforts during the second
quarter of 1994 to increase business volume and promote the opening of
the expanded casino. General and administrative expenses of
$14,474,000 increased 3.9% over the six months ended June 30, 1993,
resulting from an out of court settlement of a claim incidental to New
Claridge's business. Hotel and food and beverage operating expenses
for the six months ended June 30, 1994 decreased 9.8% from the same
period of 1993, resulting from the decline in business volume in those
operations.
The Corporation recorded an income tax credit of $3,454,000 for
the six months ended June 30, 1994, which represents the tax benefit
of losses which the Corporation believes will more likely than not be
recognized. The Corporation recorded income tax expense of $1,282,000
as a result of the income earned for the first six months of 1993.
Liquidity and Capital Resources
- - -------------------------------
On January 31, 1994, the Corporation completed an offering of $85
million of Notes, due 2002, bearing interest at 11 3/4%. The Notes
are secured by a non-recourse mortgage granted by the Partnership
representing a first lien on the Hotel Assets, and by a pledge granted
by the Corporation of all outstanding shares of capital stock of New
Claridge. New Claridge's guarantee of the Notes is secured by a
collateral assignment of the second lien Wraparound Mortgage, 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.
A portion of the net proceeds of $82.2 million, after deducting
fees and expenses, was used as follows:
(i) to repay in full the Corporation's outstanding debt under
the Loan Agreement, including the outstanding balance of
the Corporation's revolving credit line, which was
secured by the First Mortgage. 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; however, the
Corporation believes that its current resources are
adequate to fund future obligations as they become due;
and
(ii) to fund internal improvements which expanded New
Claridge's casino capacity and resulted in the addition
of approximately 500 slot machines, as well as a poker,
simulcast and keno area. Through June 30, 1994,
approximately $8.9 million has been used to fund the
costs of this internal expansion, which became fully
operational on June 30, 1994.
<PAGE>
<PAGE> 20
The balance of the net proceeds from the offering of the Notes
will be used as follows:
(i) the possible acquisition of an adjacent parcel of land
and construction on that land of a self-parking facility.
In March 1994, New Claridge acquired options to purchase
two parcels of property adjacent to its existing valet-
parking facility. On June 6, 1994, New Claridge
exercised these options, and deposited $400,000 with the
Title Company of Jersey, to be held in escrow until
settlement, which is anticipated to be held in October
1994;
(ii) the possible purchase of the Contingent Payment (see Note
8, Other Non-Current Liabilities) granted in 1989 and now
held in a trust for the benefit of the United Way of
Arizona. The Corporation is currently negotiating to
purchase the Contingent Payment, for less than face
value, from the trustee for the United Way of Arizona.
The Corporation previously offered to purchase the
Contingent Payment for $10 million, but that offer was
not accepted. Negotiations between the trustee for the
United Way of Arizona and the Corporation are continuing;
and
(iii) the potential expansion of the Corporation's activities
into emerging gaming markets. On March 16, 1994,
Claridge Gaming Incorporated was formed as a wholly-owned
subsidiary of the Corporation for the purpose of
exploring and developing gaming opportunities in other
jurisdictions.
At June 30, 1994, the Corporation had a working capital surplus
of $21,140,000 as compared to a working capital deficit of $11,534,000
at December 31, 1993. This increase in working capital is
attributable to an increase in cash of $36,633,000 and an increase in
other current assets of $2,870,000, offset by an increase in accounts
payable of $3,723,000 and an increase in interest payable of
$4,405,000. The working capital deficiency at June 30, 1993 was
$15,497,000. Current liabilities at June 30, 1994 and December 31,
1993 included deferred rental payments of $15,078,000, and a $3.6
million loan from the Partnership plus accrued interest thereon of
$2,178,000 at June 30, 1994 and $1,962,000 at December 31, 1993.
These amounts will only be payable upon (i) a sale or refinancing of
the Claridge; (ii) full or partial satisfaction of the Wraparound
Mortgage; and (iii) full satisfaction of any first mortgage then in
place. If these amounts were not included in current liabilities, the
Corporation's working capital surplus at June 30, 1994 and December
31, 1993 would have been $41,996,000 and $9,106,000, respectively.
<PAGE>
<PAGE> 21
The Hotel Assets are owned by the Partnership and leased by the
Partnership to New Claridge under the terms of the Operating Lease
originally entered into on October 31, 1983, and the Expansion
Operating Lease, which covered the expansion improvements made to the
Claridge in 1986. The initial terms of both leases are scheduled to
expire on September 30, 1998 and each lease provides for three 10-year
renewal options at the election of New Claridge. The Operating Lease
requires basic rental payments to be made in equal monthly
installments escalating annually up to $41,775,000 in 1997, and
$32,531,000 for the remainder of the initial lease term. Prior to the
Corporation's 1989 restructuring, basic rent expense (recognized on a
leveled basis in accordance with Statement of Financial Accounting
Standards No. 13), was $31,902,000 per year. Therefore, in the early
years of the lease term, required cash payments under the Operating
Lease (not including the Expansion Operating Lease) were significantly
lower than the related expense recognized for financial reporting
purposes. Rental payments under the Expansion Operating Lease are
adjusted annually based on a Consumer Price Index with any increase
not to exceed two percent per year. Pursuant to the Restructuring
Agreement, the Operating Lease and the Expansion Operating Lease were
amended to provide for the abatement of $38.8 million of basic rent
payable through 1998 and the deferral of $15.1 million of rental
payments, thereby reducing the Partnership's cash flow to an amount
estimated to be necessary only to meet the Partnership's cash
requirements. Effective on completion of the 1989 restructuring,
lease expense recognized on a level basis was reduced prospectively,
based on a revised schedule of rent leveling based on the agreed
rental abatements. At June 30, 1994, the Corporation had accrued the
maximum amount of $15.1 million of deferred rent liability under the
lease arrangements. The deferred rent liability will become payable
(i) upon a sale or refinancing of the Claridge; (ii) upon full or
partial satisfaction of the Wraparound Mortgage; and (iii) upon full
satisfaction of any first mortgage then in place. Also as of June 30,
1994, $17.8 million of basic rent had been abated. The remaining
$21.0 million of available abatement is expected to be fully utilized
by the fourth quarter of 1996. Because the initial term of the
Operating Lease continues through September 30, 1998, rental payments
after the $38.8 million abatement is fully utilized will increase
substantially to approximately $41.8 million in 1997, as compared to
$31.2 million (net of projected abatement) in 1996. However, if New
Claridge exercises its option to extend the term of the Operating
Lease, basic rent during the renewal term will be calculated pursuant
to a formula with annual basic rent not to be more than $29.5 million
or less than $24 million for the twelve months commencing October 1,
1998, and subsequently, not to be greater than 10% more than the basic
rent for the immediately preceding lease year in each lease year
thereafter. If New Claridge exercises its option to extend the term
of the Expansion Operating Lease, basic rent also will be calculated
pursuant to a formula with annual basic rent not to be more than $3
million or less than $2.5 million for the twelve months commencing
October 1, 1998, and subsequently, not to be greater than 10% more
than the basic rent for the immediately preceding lease year in each
lease year thereafter. If the term of both leases is extended under
their renewal options, the aggregate basic rent payable during the
initial years of renewal term will be significantly below the 1997
level.
<PAGE>
<PAGE> 22
New Claridge is obligated under its Operating Lease with the
Partnership to lend the Partnership, at an annual interest rate of
14%, any amounts necessary to fund the cost of furniture, fixtures and
equipment replacements. The Wraparound Mortgage, granted by the
Partnership to New Claridge, by its terms may secure up to $25 million
of additional borrowings by the Partnership from New Claridge to
finance the replacements of furniture, fixtures and equipment and
facility maintenance and engineering shortfalls. The advances to the
Partnership are in the form of FF&E Promissory Notes and are secured
by the Hotel Assets. One half of the principal is due on the 48th
month following the advance, with the remaining balance due on the
60th month following the date of issuance. In connection with the
offering of $85 million of the Notes on January 31, 1994, the
Corporation agreed to use not less than $8 million from the net
proceeds of the offering to finance certain internal improvements to
the Claridge which will be funded through additional FF&E Loans. In
connection therewith, the 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 Loans will be
payable at final maturity of the Wraparound Mortgage. New Claridge is
obligated to pay as additional rent to the Partnership the debt
service on the FF&E Promissory Notes.
The Wraparound Mortgage requires monthly principal payments to be
made by the Partnership to New Claridge, commencing in the year 1988
and continuing through the year 1998, in escalating amounts totalling
$80 million. The Wraparound Mortgage, which will mature on September
30, 2000, bears interest at an annual rate equal to 14% with the
deferral until maturity of $20 million of certain interest payments
which accrued between 1983 and 1988. In addition, in 1986 the
principal amount secured by the Wraparound Mortgage was increased to
provide the Partnership with funding for the construction of an
expansion improvement, which resulted in approximately 10,000 square
feet of additional casino space and a 3,600 square foot lounge.
Effective August 28, 1986, the Partnership commenced making level
monthly payments of principal and interest calculated to provide for
the repayment in full of the principal balance of this increase in the
Wraparound Mortgage by September 30, 1998. Under the terms of the
Wraparound Mortgage, New Claridge is not permitted to foreclose on the
Wraparound Mortgage and take ownership of the Hotel Assets so long as
a senior mortgage is outstanding. The face amount outstanding of the
Wraparound Mortgage at June 30, 1994 (including the outstanding FF&E
Loans and the $20 million of deferred interest) was $140.6 million.
If the Partnership should fail to make any payment due under the
Wraparound Mortgage, New Claridge may exercise a right of offset
against rent or other payments due under the Operating Lease and
Expansion Operating Lease to the extent of any such deficiency.
<PAGE>
<PAGE> 23
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits filed as a part of the report.
10(aw) Copy of Employment Agreement between James W. O'Brien and
The Claridge at Park Place, Incorporated dated June 27,
1994.
(b) The Corporation filed no reports on Form 8-K during the
quarter ended June 30, 1994.
<PAGE>
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
The Claridge Hotel and Casino Corporation
- - -----------------------------------------
(Registrant)
By: /s/ Raymond A. Spera
-------------------------------------
Raymond A. Spera
Executive Vice President of Finance/
Chief Financial Officer
(Authorized Officer and
Principal Financial Officer)
Dated: August 12, 1994
<PAGE>
<PAGE>
<PAGE> 1 EXHIBIT INDEX
INDEX TO EXHIBITS
Exhibit
-------
EX10(aw) Copy of Employment Agreement between James W. O'Brien
and The Claridge at Park Place, Incorporated dated
June 27, 1994.
<PAGE>
<PAGE>
<PAGE> 1 EXHIBIT 10(aw)
EXHIBIT 10(aw)
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT made as of the 27 day of June, 1994, between The
Claridge at Park Place, Incorporated, a New Jersey corporation having
its principle place of business of Indiana Avenue and the Boardwalk,
Atlantic City, New Jersey, 08401 (hereinafter referred to as the
"Company"), and James W. O'Brien, and individual residing at 9600
Atlantic Avenue, Unit 907, Margate, New Jersey, 08402 (hereinafter
referred to as the "Executive").
WITNESSETH
WHEREAS, the Company desires to employ the Executive and the
Executive has agreed to accept such employment, on the terms and
conditions provided in this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements
hereinafter set forth, the parties hereby agree as follows:
ARTICLE I - EMPLOYMENT
----------------------
1.1 The Company hereby employs the Executive as its
President/Chief Operating Officer. In such capacity he shall perform
such executive duties as are commonly attendant upon these offices
including but not limited to those specified in the Company's internal
controls, and such further executive duties as may be specified from
time to time by the Chief Executive Officer.
ARTICLE II - TERM
-----------------
2.1 The term of this Agreement shall commence on the date first
above written and terminate on June 30, 1995, subject to the
occurrence of any of the events set for in Articles V or VII.
Thereafter, this Agreement may be renewed and extended for consecutive
one (1) year renewal terms, upon either party sending to the other
party a notice of renewal at least ninety (90) days prior to the
expiration of the initial term or any renewal term.
ARTICLE III - COMPENSATION
--------------------------
3.1 The Company shall pay the Executive a base annual salary of
TWO HUNDRED THOUSAND DOLLARS ($200,000.00 dollars) payable in weekly
installments in accordance with the Company's regular payroll
practice. The Board of Directors may, from time to time, in their
sole discretion, increase the base annual salary.
3.2 Until termination of the Agreement, the Executive shall
continue to receive full compensation and be entitled to all the
benefits of this Agreement. Upon termination, the Executive shall not
be entitled to receive any compensation or benefits except as may be
set forth herein or otherwise agreed between the parties.
<PAGE>
<PAGE> 2 EXHIBIT 10(aw)
3.3 The Executive shall be entitled to vacation time in accordance
with the Company's vacation plan, and shall be entitled to participate
in any bonus plan, incentive compensation plan, qualified pension
plan, qualified profit sharing plan, medical and/or dental
reimbursement plan, group term life insurance plan, and any other
employee benefit plan that may be established by the Company or its
operating subsidiaries, such participation to be in accordance with
the terms of any such plan, and such participation shall be available
only upon the Company or its operating subsidiaries having or
establishing such a plan.
3.4 In the event the Executive is directed to move to New Jersey,
he shall be compensated for all costs related to his relocation
consistent with Claridge's Relocation Policy as stated in the
Company's Policy and Procedures Manual.
ARTICLE IV - CASINO CONTROL COMMISSION
--------------------------------------
4.1 The Executive represents to the Company that he possesses the
casino key employee license required by the New Jersey Casino Control
Commission in connection with his employment. The Executive will
maintain this license in good standing during his employment with the
Company, provided that the Company shall pay all attorneys' fees and
other costs that the Executive may incur in connection with any
investigation or proceeding against him or in which he may be involved
(other than with respect to any act defined as "cause" for termination
(see subparagraph 5.1.2 below) or relating to any criminal charges
filed against him), by the Division of Gaming Enforcement of the
Office of the New Jersey Attorney General or by the New Jersey Casino
Control Commission.
ARTICLE V - TERMINATION
-----------------------
5.1 Notwithstanding anything contained herein to the contrary, the
Executive's employment may be terminated upon the occurrence of any of
the following events:
5.1.1 Upon revocation, suspension, or termination of the
Executive's casino key employee license or failure to
comply, within a reasonable time, with any conditions
imposed upon the casino key employee license;
5.1.2 Upon an act committed by the Executive constituting
"cause", which is defined to mean an act by the
Executive constituting a breach of any of the
provisions of this Agreement; the indictment and/or
conviction of any criminal offense; the deliberate
refusal by the Executive (except by reason of
disability) to perform his duties hereunder; or if the
Executive:
5.1.2.1 Files a petition in bankruptcy court or is
adjudicated a bankrupt;
5.1.2.2 Institutes or suffers to be instituted any
procedure in bankruptcy court for
reorganization or rearrangement of his
financial affairs;
<PAGE>
<PAGE> 3 EXHIBIT 10(aw)
5.1.2.3 Has a receiver of his assets or property
appointed because of insolvency; or
5.1.2.4 Makes a general assignment for the benefit of
creditors;
5.1.3 Upon the death or permanent disability of the
Executive;
5.1.4 Upon written notice by the Company terminating the
Executive's employment without cause;
5.1.5 Upon the voluntary resignation by the Executive;
5.1.6 Upon the Executive failing to establish residency in
New Jersey within six (6) months after a Board
Resolution directing him to do so; provided that no
such resolution shall be adopted so long as;
5.1.6.1 a sale of the Claridge is an option being
considered by the Board of Directors; or
5.1.6.2 the Company's audited financial statements
are expected to contain a "going concern"
qualification in the Independent Auditors
Report.
5.2 If the Executive's employment should be terminated under
subparagraphs 5.1.4 above, 5.6 below, Article VII, or if the Company
elects not to renew this Agreement pursuant to Article II above, then
the Company shall make a lump sum payment to the Executive equal to
his base annual salary determined pursuant to Article III. Upon the
making of such payment, the Company shall have no further liability or
obligation to the Executive under this Agreement.
5.3 If the Executive's employment should be terminated under
subparagraph 5.1.5 above, and the Executive shall give notice of
termination at least twelve (12) weeks prior to terminating his
employment, then the Company shall continue to pay the Executive his
weekly compensation for a period of twelve (12) weeks after the date
of termination. If notice to the Company is given less than twelve
(12) weeks prior to termination, the Company shall have no obligation
to pay the Executive beyond the date of termination. Upon expiration
of the additional twelve (12) week period, the Company shall have no
further liability or obligation to the Executive under this Agreement.
5.4 Upon termination of this Agreement under subparagraph 5.1.4,
if the Company has a then existing stock option plan, the Executive
shall receive stock options in the Company, if any, in an amount equal
to those that could be exercised within one (1) year from the date of
termination; provided, however, that such stock options must be
exercised by the Executive within 90 days after termination, or such
options shall expire.
5.5 If the Executive's employment should be terminated under
subparagraphs 5.1.1, 5.1.2 or 5.1.3 above, the Company shall have no
further liability or obligation to continue salary payments to the
Executive, or his estate (as the case may be), after the date upon
which the Executive is no longer employed by the Company.
<PAGE>
<PAGE> 4 EXHIBIT 10(aw)
5.6 If the Executive's title, responsibilities, duties or status
within the Company should be materially diminished, the Executive may
resign and terminate this Agreement. The Executive shall be entitled
to a lump sum payment in accordance with subparagraph 5.2 and his
resignation shall not be deemed or considered a "voluntary
resignation" under subparagraph 5.1.5.
ARTICLE VI - NON-COMPETITION AND NON-DISCLOSURE
-----------------------------------------------
6.1 During the term of this Agreement, the Executive shall not,
without the written consent of the Company, alone or with others,
directly or indirectly, participate, engage or become interested in
(as owner, stockholder, partner, lender or other investor, director,
officer, employee, consultant or otherwise) any business activity that
is in competition with the Company's business then being carried on.
6.2 Notwithstanding any other provision herein, nothing in this
Agreement shall prohibit the Executive from acquiring or owning
without disclosure to the Company less than one (1%) percent of the
outstanding securities of any class of any corporation listed on a
national securities exchange or traded in the over-the-counter market.
6.3 During the term of this Agreement, and following termination
of this Agreement, the Executive covenants and agrees that he shall
keep strictly confidential all information which he may obtain during
the course of his employment hereunder with respect to the business
practices, finances, developments, customers, affairs, and trade secrets
of the Company not generally known to the public, and shall not disclose
the same to any other person, firm or corporation, except solely in the
course of business on behalf of the Company pursuant to this Agreement.
The Executive further agrees that upon the termination of employment
(irrespective of the time, manner or cause of termination), the Executive
will surrender and deliver to the Company all lists, books, written records
and data of every kind relating to or in connection with the Company's
customers and business.
6.4
6.4.1 Subject to the provisions of subparagraph 6.4.2 below,
if the Agreement is terminated pursuant to subparagraph 5.1.5 above,
the Executive covenants and agrees that for a period of one (1) year
thereafter he shall not compete with the Company, or engage in the
casino business in Atlantic City, New Jersey, as an officer, director,
stockholder, employee, representative, agent, or consultant.
6.4.2 In the event the Company, its shareholders, or persons
having voting control enter into an agreement to sell, acquire, merge
or consolidate the assets or stock of the Company with the
anticipated result that a change of control of the Company or the
Company's business as presently constituted would occur upon the
closing of such agreement, the Executive may terminate this Agreement
pursuant to subparagraph 5.1.5 above and shall not be precluded from
immediately competing with the Company, or engaging in the casino
business in Atlantic City, New Jersey, as an officer, director,
stockholder, employee, representative, agent or consultant. In
addition, the Executive shall be entitled to the benefits provided for
in subparagraph 5.3 above provided proper notice of termination is
given to the Company.
<PAGE>
<PAGE> 5 EXHIBIT 10(aw)
6.5 From and after the termination of this Agreement and for a
period of one (1) year thereafter, the Executive shall not, alone or
with others, directly or indirectly:
6.5.1 solicit for the Executive's benefit or the benefit of
any person or organization other than the Company, the
employment or other services of any employee or
consultant of the Company or its subsidiaries and
companies affiliated or associated with the Company;
or
6.5.2 solicit for the Executive's benefit or the benefit of
any person or organization other than the Company, the
employment of any employee or any customer of the
Company.
6.6 As additional consideration for the covenant contained in
subparagraphs 6.4 and 6.5, the Executive shall be entitled to a lump
sum payment equal to twenty-five percent (25%) of the sum of his then
base annual salary as determined pursuant to Article III. The
Executive shall make such demand within ten (10) days following
termination of his employment by giving notice to the Company in
accordance with Article XI. Within ten (10) days following receipt of
this notice, the Company shall send the Executive either (i) the lump
sum payment described in this subparagraph 6.6, or (ii) a notice that
the Company has waived the Executive's obligations under subparagraph
6.4 and 6.5, in which event the Executive shall be released from his
obligations under subparagraphs 6.4 and 6.5 and the Company shall be
released from its obligation to pay the Executive any additional
consideration under this subparagraph 6.6. Notwithstanding anything
contained in this subparagraph 6.6, all payments made pursuant to this
subparagraph 6.6 shall be in addition to, and not in lieu of, any
payments to which the Executive may be entitled under Article V.
ARTICLE VII - SALE OF THE COMPANY
---------------------------------
7.1 The Company shall make its best efforts to have any successor
corporation or business entity assume the obligations under this
Agreement. If this Agreement is not assumed by a successor
corporation or business entity, the obligations of the Company to the
Executive hereunder shall continue in full force and effect, subject
to the right of the Company, in its sole discretion, to terminate the
Executive pursuant to Article V. If during the term of this
Agreement, the Company, its shareholders, or persons having voting
control sell stock or assets or merge with another entity and as a
result of which there occurs a change in control of the Company or the
Company's business as presently constituted or, if by any other
transaction this Agreement is assigned to an entity not controlled by
the Board of Directors of the Company as presently constituted, then
the Executive, in the Executive's sole discretion, may, within six
months after such a change of control occurs or this Agreement is
assigned, terminate this Agreement and be entitled to receive the
severance benefits provided for in subparagraph 5.2 of this Agreement
and shall not be precluded from immediately competing with the Company
or any assignee of this Agreement, or engaging in the casino business
in Atlantic City, New Jersey, as an officer, director, stockholder,
employee, representative, agent or consultant.
<PAGE>
<PAGE> 6 EXHIBIT 10(aw)
ARTICLE VIII - PARTICIPATION
----------------------------
8.1 The Executive shall devote at least 75% of his working time,
attention and best efforts to the business of the Company, and shall
not during the term of this Agreement be engaged directly or
indirectly in any other business activity whether or not such business
activity is pursued for gain, profit or other pecuniary advantage; but
this shall not be construed as preventing the Executive from investing
his assets in such form and manner which will not require any services
on the part of the Executive in the operation of the affairs of the
companies in which such investments are made or involvement in any
civic or charitable organizations whether or not requested by the
Company or affiliated with the Company.
ARTICLE IX - ARBITRATION
------------------------
9.1 Any controversy or claim arising out of or relating to this
Agreement or breach thereof, shall be settled by Arbitration in New
Jersey pursuant to New Jersey law in accordance with the rules of the
American Arbitration Association, and judgment upon an award rendered
pursuant to such arbitration may be entered in any court within the
State of New Jersey having jurisdiction thereof. In the event of
conflict between the rules of the American Arbitration Association and
any statute of the State of New Jersey, the parties agree to be bound
by the laws of New Jersey.
ARTICLE X - INJUNCTIVE RELIEF
-----------------------------
10.1 The parties acknowledge that in the event of a breach or a
threatened breach by the Executive of any of his obligations under
this Agreement, the Company will not have an adequate remedy at law.
Accordingly, in the event of any breach or threatened breach by the
Executive, the Company shall be entitled to such equitable and
injunctive relief as may be available to restrain the Executive and
any business, firm, partnership, individual, corporation or entity
participating in the breach or threatened breach from the violation of
the provisions of the Agreement. Nothing in this Agreement shall be
construed as prohibiting the Company from pursuing any other remedies
available at law or in equity for such breach or threatened breach,
including the recovery of damages and the immediate termination of the
employment of the Executive under this Agreement.
<PAGE>
<PAGE> 7 EXHIBIT 10(aw)
ARTICLE XI - NOTICES
--------------------
11.1 All notices shall be in writing and shall be delivered by
certified or registered mail, return receipt requested, to the parties
as follows:
If to the Company: Claridge Casino Hotel
Indiana Avenue and The Boardwalk
Atlantic City, New Jersey 08401
Attn: Chief Executive Officer
If to the Executive: James W. O'Brien
9600 Atlantic Avenue
Unit 907
Margate, New Jersey 08402
Either party may change the address to which notices are to be
transmitted by notice given in accordance with this paragraph.
ARTICLE XII - MISCELLANEOUS
---------------------------
12.1 The Executive represents to the Company that there are no
restrictions or agreements to which he is a party which would be
violated by his execution of this Agreement and his employment
hereunder.
12.2 This Agreement and all questions relating to its validity,
interpretation, performance and enforcement shall be governed by and
construed in accordance with the laws of the State of New Jersey.
12.3 No amendment or waiver or any provision of this Agreement
shall be effective unless in writing signed by both parties.
12.4 If any provision of this Agreement is held to be invalid or
unenforceable, such provision shall be deemed limited or modified to
the extent necessary to make it valid and enforceable, and in no event
shall this Agreement or any of the provisions of this Agreement be
rendered void or unenforceable.
12.5 The headings to the paragraphs of this Agreement are for
convenience of reference only and shall not be given any effect in the
construction or enforcement of this Agreement.
12.6 No waiver by the Company or any breach by the Executive of any
provision or condition of this Agreement by the Executive to be
performed shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same or any prior or subsequent time.
12.7 This Agreement shall inure to the benefit of and be binding
upon the successors and assigns of the Company, but no interest in
this Agreement shall be transferable in any manner by the Executive.
<PAGE>
<PAGE> 8 EXHIBIT 10(aw)
ARTICLE XIII - ENTIRE AGREEMENT
-------------------------------
13.1 This instrument contains the entire Agreement of the parties.
It may not be changed orally but only by an Agreement in writing
signed by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed on its behalf by its officer thereunto duly authorized, and
the Executive has hereunto set his hands as of the date first above
written.
WITNESS: EXECUTIVE
BY: /s/ James W. O'Brien
------------------------
JAMES W. O'BRIEN
WITNESS: THE CLARIDGE AT PARK PLACE, INCORPORATED
BY: /s/ Robert Renneisen
------------------------
ROBERT RENNEISEN
CHIEF EXECUTIVE OFFICER
<PAGE>
