<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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
------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
First Mortgage Notes, due 2002 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Class A Stock, $.001 par value
(Title of Class)
<PAGE>
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 _____
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 shares of the Corporation 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 shares of the Corporation. The Corporation did, in 1989, jointly
with Atlantic City Boardwalk Associates, L.P. ("Partnership") and Del Webb
Corporation ("Webb"), register certain Contingent Payment Rights. As stated in
the Prospectus dated May 5, 1989, Contingent Payment Rights may or may not be
securities. None of the Corporation, the Partnership, or Webb has admitted that
the Contingent Payment Rights are securities or that any of them is the issuer
of any such securities.
Indicate the number of shares outstanding of each class of the Registrant's
Stock, as of the latest practicable date:
Number of Shares Outstanding
March 28, 1995
Class A Stock 5,054,282 (After deducting 8,218 shares of
Treasury Stock)
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT FORM 10-K PART
Portions of the definitive Proxy Statement with III
respect to the Annual Meeting of Shareholders
scheduled to be held on June 5, 1995 (hereinafter
referred to as the "Proxy Statement"), but
specifically excluding the section entitled "Report
on Executive Compensation" which shall not be
deemed to be incorporated by reference herein
<PAGE>
PART I
Item 1. BUSINESS
General Development of the Business
The Claridge Hotel and Casino Corporation (the "Corporation"), a New York
corporation was formed on August 26, 1983, and qualified to engage in business
in New Jersey as a foreign corporation in September 1983. The Corporation holds
all of the shares of capital stock of The Claridge at Park Place, Incorporated,
a New Jersey corporation ("New Claridge"), which was formed on August 29, 1983.
On October 31, 1983, New Claridge acquired certain assets of The Claridge Hotel
and Casino ("Claridge"), including gaming equipment ("Casino Assets"), from Del
E. Webb New Jersey, Inc. ("DEWNJ") a wholly-owned subsidiary of Del Webb
Corporation ("Webb"); leased certain other of the Claridge's assets, including
the buildings, parking facility and non-gaming, depreciable, tangible property
of the Claridge ("Hotel Assets"), from Atlantic City Boardwalk Associates, L.P.,
a New Jersey limited partnership ("Partnership"); subleased the land on which
the Claridge is located from the Partnership; assumed certain liabilities
related to the acquired assets; and undertook to carry on the business of the
Claridge.
These transactions were entered into in connection with the private
placement of equity interests in the Corporation and the Partnership. The
offering was structured to furnish the investors with certain tax benefits
available under the federal tax law then in effect. Following the 1983
transactions, Webb and its affiliates retained significant interests in the
Claridge. The common stock of the Corporation and the limited partnership
interests of the Partnership were sold together in the 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 Corporation and
the Partnership 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 Corporation and New Claridge entered into an
agreement to restructure the financial obligations of the Corporation and New
Claridge (the "Restructuring Agreement"). The restructuring, which was
consummated in June 1989, resulted in (i) a reorganization of the ownership
interests 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 (see Item 1. Business - "1989
Restructuring").
In October 1983, the Partnership granted to New Claridge the Expandable
Wraparound Mortgage which was inclusive of and subordinate to an $80 million
first mortgage (the "First Mortgage") granted by the Partnership to a group of
banks and a $47 million purchase money second mortgage (the "Purchase Money
Second Mortgage") granted by the Partnership to DEWNJ. The Purchase Money Second
Mortgage was subsequently cancelled upon satisfaction of certain conditions
agreed to in the Restructuring Agreement. (see Item 1. Business -"1989
Restructuring" and "Certain Transactions and Agreements").
1
<PAGE>
The Casino Assets are owned by New Claridge. The Hotel Assets and
underlying land are owned by the Partnership and leased by the Partnership to
New Claridge. The lease obligations are set forth in a lease (the "Operating
Lease"), originally entered into on October 31, 1983, and an expansion operating
lease (the "Expansion Operating Lease"), covering additions to the Claridge made
in 1986. Pursuant to the Restructuring Agreement, the Operating Lease and
Expansion Operating Lease were amended to provide for the deferral by the
Partnership of $15.1 million of rental payments and the abatement by the
Partnership of $38.8 million of basic rent payable through 1998 (see Item 1.
Business - "Certain Transaction and Agreements").
The Corporation maintains its executive and administrative offices at
Indiana Avenue and the Boardwalk, Atlantic City, New Jersey 08401, telephone
number (609) 340-3400.
Recent Business Developments
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%. The
Notes are secured by (i) a non-recourse mortgage granted by the Partnership
representing a first lien on the Hotel Assets, (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, 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 was used as follows:
(i) to repay in full the Corporation's outstanding debt under the Revolving
Credit and Term Loan Agreement (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;
(ii) to fund the cost of a 12,000 square foot expansion of New Claridge's
casino capacity, the addition of approximately 500 slot machines, and
the relocation of two restaurants and their related kitchen areas. The
total cost of this expansion, which became fully operational on June 30,
1994, was approximately $12.7 million; and
(iii) the acquisition of an adjacent parcel of land, to be used for the
construction of a self-parking facility. In March 1994, New Claridge
acquired options to purchase for $7,500,000 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. In an effort
to ensure that site preparation and construction of the self- parking
facility could commence as soon as possible, New Claridge purchased an
assignment of National Westminster Bank NJ's first mortgage interest in
the property on November 3, 1994 for $2,040,000. These acquisitions gave
New Claridge control of the property as of November 16, 1994. The first
mortgage interest was satisfied by the mortgagor at settlement, which
occurred on January 5, 1995.
2
<PAGE>
The balance of the net proceeds from the offering of the Notes are
expected to be used as follows:
(i) the construction of the self-parking facility;
(ii) the possible purchase of the Contingent Payment (see Item 1.
Business-"1989 Restructuring") 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
substantially 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 ("CGI")
was formed as a wholly-owned subsidiary of the Corporation for the
purpose of developing gaming opportunities in other jurisdictions.
On November 8, 1994, a casino management agreement (the "Casino Management
Agreement") was executed between CGI and St. Petersburg Kennel Club, Inc.
("SPKC"), which owns a greyhound racetrack located in St. Petersburg, Florida.
Pursuant to the Casino Management Agreement, which expires on December 31, 1997,
CGI would receive fees for managing any casino entertainment facility authorized
at SPKC's site. In November 1994, Florida voters rejected a ballot question
which would have authorized up to 47 casinos in the state of Florida, including
one at SPKC's St. Petersburg greyhound race track.
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. 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 renovated and expanded in 1986 at a cost of approximately $20
million, which provided approximately 10,000 additional 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. Since 1991, the Claridge's
exterior, lobby, and other public areas have been refurbished. The Claridge is
currently in the process of redecorating all of its guest rooms, and has
completed the redecoration of approximately 250 rooms, with the remainder
scheduled for completion by the end of 1995.
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 1,890 slot machines and seventy-six
table games, including forty-five blackjack tables, ten craps tables, eight
poker tables, six roulette tables, two Caribbean stud poker tables, one
mini-baccarat table, one big six wheel, one red dog table, one sic bo table, and
one pai gow poker table, as well as a keno operation. 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 players 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 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
3
<PAGE>
highly competitive and is strictly regulated under the New Jersey Casino Control
Act (the "Act") and regulations thereunder which affect virtually all aspects of
casino operations. (See Item 1. Business - "Competition" and "Gaming Regulation
and Licensing").
1989 Restructuring
On October 27, 1988, the parties with an economic interest in the
Corporation and New Claridge, including the banks holding the First Mortgage
(the "First Mortgage Lenders"), executed the Restructuring Agreement with
respect to the restructuring of the financial obligations of the Corporation and
New Claridge. Had the Corporation not entered into the Restructuring Agreement,
New Claridge probably would not have been relicensed by the New Jersey Casino
Control Commission (the "Commission") for the license period beginning October
31, 1988 and ending October 31, 1989, and would have had to consider filing for
bankruptcy protection. The Restructuring Agreement by its terms was subject to
approval by at least two-thirds in interest of the limited partners of the
Partnership and the holders of at least two-thirds of the Class A Stock of the
Corporation. These approvals were received, and the restructuring was
consummated in June 1989. The restructuring resulted in (i) a reorganization of
the ownership interest in the Corporation; (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. As a result of the
restructuring, an aggregate of $132 million of indebtedness was forgiven. The
principal amount secured by the First Mortgage was reduced by approximately $15
million to approximately $74.5 million outstanding at June 16, 1989, and the
Purchase Money Second Mortgage was subsequently cancelled upon satisfaction of
certain conditions agreed to in the Restructuring Agreement.
DEWNJ assigned to the First Mortgage Lenders all right, title and interest
of DEWNJ in, to and under the Purchase Money Second Mortgage previously executed
and delivered by the Partnership. New Claridge retained the right to require the
First Mortgage Lenders to cancel and release the Purchase Money Second Mortgage
and the obligations secured thereunder upon the occurrence of one or more
specified conditions. New Claridge met one of these conditions, and accordingly,
the First Mortgage Lenders cancelled the Purchase Money Second Mortgage,
including interest which accrued at 14%, and released the obligations secured
thereunder.
At the closing of the restructuring on June 16, 1989, Webb transferred all
of its right, title, and interest to its Claridge land, easements, and air
rights to the Partnership, which had the effect of eliminating the land lease
between Webb and the Partnership and of subjecting that land to a direct lease
(rather than a sublease) from the Partnership to New Claridge.
Pursuant to amendments to the Operating Lease and Expansion Operating
Lease, the Partnership agreed to deferrals and abatement of basic rent (see Item
1. Business - "Certain Transactions and Agreements").
In addition, the Partnership loaned $3.6 million to New Claridge. That
amount represented substantially all the cash and cash equivalents remaining in
the Partnership as of June 16, 1989 other than funds needed to pay expenses
incurred through the closing of the restructuring. The Partnership paid to New
Claridge $100,000 for the cancellation of an option agreement relating to the
land underlying the Claridge.
4
<PAGE>
The Restructuring Agreement provided that Webb would retain an interest
equal to $20 million plus interest from December 1, 1988 at the rate of 15% per
annum compounded quarterly (the "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 grant those investors
in the Corporation and the Partnership ("Releasing 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 81% in interest of the investors provided
releases and became Releasing Investors. Payments to Releasing Investors are to
be made in accordance with the following schedule of priorities:
(i) Releasing Investors would receive 81% of the first $10 million of any
net proceeds from operations or a sale or a refinancing of the Claridge
facility pursuant to an agreement executed within five years ("Five-Year
Payments") after the restructuring (i.e., the sum obtained by
multiplying the lesser of $10 million of, or the total of, any Five-Year
Payments by 81%, with the balance of any such funds to be applied
against the Contingent Payment), and
(ii) All distributions of funds other than Five-Year Payments, or of
Five-Year Payments in excess of the $10 million, would be shared by Webb
and Releasing Investors in the following proportions: Releasing
Investors will receive 40.5% (one-half of 81%) of any such excess
proceeds, with the balance of any such funds to be applied against the
Contingent Payment, until the Contingent Payment is paid in full ($20
million plus accrued interest.)
On April 2, 1990, Webb transferred its interest in the Contingent Payment
to an irrevocable trust for the benefit of the United Way of Arizona, and upon
such transfer Webb was no longer required to be qualified or licensed by the
Commission.
As previously noted, the Corporation is continuing its negotiations with
the Trustee for the United Way of Arizona in an attempt to purchase the
Contingent Payment. (See Item 1. Business - "Recent Business Developments").
Certain Transactions and Agreements
On October 31, 1983, the Corporation and/or New Claridge completed the
following transactions and entered into the following agreements. On March 17,
1986, certain of these agreements were amended and certain new agreements were
entered into relating to the construction and financing of the Expansion
Improvements. On June 16, 1989, with the closing of the restructuring, certain
of these agreements were further amended.
a. Closing of Offering of Class A Stock. The Corporation sold 4,500,000
shares of Class A Stock through a private offering, with net proceeds to the
Corporation after payment of selling commissions and fees (but before payment of
other expenses of the offering) of $5,051,000.
b. Asset Purchase Agreement. Pursuant to an asset purchase agreement (the
"Asset Purchase Agreement"), New Claridge purchased the Casino Assets from
DEWNJ, as successor to Claridge Limited ("Old Claridge") and assumed related
5
<PAGE>
liabilities and paid approximately $5 million. New Claridge assumed the
collective bargaining contracts and employment contracts of employees of Old
Claridge employed in connection with the operation of the Claridge other than
those providing maintenance and engineering services, which employees were
employed by DEWNJ.
c. Operating Lease/Expansion Operating Lease. New Claridge leased from the
Partnership the Hotel Assets and subleased from the Partnership the land on
which the Claridge is located for an initial term of 15 years with three 10-year
renewal options. Basic annual rent payable during the initial term of the
Operating Lease in equal monthly installments was $36,055,000 in 1992,
$37,080,000 in 1993, $38,055,000 in 1994 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 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 such rent not to be more than $29,500,000 nor less than
$24,000,000 for the lease year commencing October 1, 1998 through September 30,
1999, and, subsequently, not to be greater than 10% more than the basic rent for
the immediately preceding lease year in each lease year thereafter. New Claridge
is also required to pay as additional rent amounts including 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 the general and administrative costs of the Partnership. The
Partnership will be required during the entire term of the Operating Lease to
provide FF&E Replacements to New Claridge and until September 30, 1998 will be
required to provide facility maintenance and engineering services to New
Claridge.
Under the Operating Lease, New Claridge is required to lend the
Partnership any amounts ("FF&E Loans") 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 the funds required to provide those services. Any advances by New
Claridge for either of the foregoing will be secured. 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.
On March 17, 1986, New Claridge entered into the Expansion Operating Lease
Agreement with the Partnership under which New Claridge leased the 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 payable
during the initial term of the Expansion Operating Lease was $3,870,000 in 1986
(prorated based on the day that the Expansion Improvements opened to the public)
and determined based on the cost of the construction of the Expansion
Improvements. Annually thereafter the rental amount will be adjusted based on
the Consumer Price Index with any increase not to exceed two percent per annum.
Basic annual rent for 1994 was $4,534,000. If New Claridge exercises its option
to extend the term of the Expansion Operating Lease, basic rent during the
renewal term will be calculated pursuant to a formula, with annual basic rent
not to be more than $3 million nor less than $2.5 million and, subsequently, not
to be greater than 10% more than the basic annual rent for the immediately
preceding lease year in each lease year thereafter.
New Claridge also is required under the Expansion Operating Lease to pay
as additional rent amounts equal to certain expenses and the debt service
relating to furniture, fixture and equipment replacements and building
improvements (collectively "Expansion FF&E Replacements") for the Expansion
Improvements. The Partnership will be required during the entire term of the
Expansion Operating Lease to provide New Claridge with Expansion FF&E
6
<PAGE>
Replacements and until September 30, 1998, will be required to provide facility
maintenance and engineering services to New Claridge. New Claridge will be
obligated to lend the Partnership any amounts necessary to fund the cost of
Expansion FF&E Replacements. Any advances by New Claridge for the foregoing will
be secured under the Expandable Wraparound Mortgage.
Effective with the consummation of the restructuring in June 1989, the
Operating Lease and the Expansion Operating Lease were amended to provide for
the deferral of up to $15.1 million of rental payments during the period July 1,
1988 through the beginning of 1992, and to provide for the abatement of $38.8
million 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 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.
If the Partnership should fail to make any payment due under the
Expandable 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.
d. Expandable Wraparound Mortgage. On October 31, 1983, the Partnership
executed and delivered to New Claridge the Expandable Wraparound Mortgage, which
was subordinate to the First Mortgage and the Purchase Money Second Mortgage.
The Purchase Money Second Mortgage, which was due on September 30, 2000, was
cancelled 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 the revolving credit line, was
satisfied in full (see Item 1. Business- "Recent Business Developments"). 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 will mature on
September 30, 2000, bears interest at an annual rate equal to 14% with certain
interest installments that accrued in 1983 through 1988 totalling $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
7
<PAGE>
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 totalling $80 million, with a balloon 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 than $8 million from the net
proceeds of the offering to finance certain internal improvements to the
Claridge which were funded through additional FF&E Loans. 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 Loans will be payable at final maturity
of the Expandable Wraparound Mortgage.
Competition
Competition in the Atlantic City casino-hotel market is intense. At the
present time, twelve casino-hotels are operating in Atlantic City. The most
recent property to open in Atlantic City was the Taj Mahal Casino Hotel, which
opened April 2, 1990 with a 120,000 square foot casino, the largest in the
Atlantic City marketplace. The opening of the Taj Mahal, together with various
casino expansions which have opened in the last two years, further heightened
the intense competition for casino patrons. For the years ended December 31,
1994 and 1993, citywide gaming revenues, as reported, increased 3.9% and 2.7%,
respectively, over prior year levels.
The primary markets for Atlantic City casino patrons are Philadelphia, New
Jersey and New York City, together with the secondary markets of central
Pennsylvania, Delaware, Baltimore and Washington, D.C. Casinos offer cash
incentives, in the form of coins to play slot machines, to their drive-in
customers based on their casino play. In recent years competition for, and
incentives offered to, drive-in customers have increased significantly. Although
New Claridge offers similar promotional coin incentives to attract drive-in
customers, it is at a distinct disadvantage since it remains the only casino
without a public self-parking facility. Many Atlantic City casino patrons also
arrive by bus and stay for approximately six hours. Competitive factors in
Atlantic City require the payment of cash incentives and coupons for use toward
the price of meals to patrons arriving under bus programs sponsored by the
casino operators. During 1994, 8.0 million casino patrons arrived in Atlantic
City by bus, a 4.4% decrease from 1993 figures.
All casinos in Atlantic City are part of hotels which offer dining,
entertainment and other guest facilities. Competition among casino facilities is
based primarily on such factors as promotional allowances and incentives; the
attractiveness of the casino area; advertising; service, quality and price of
rooms, food and beverage; restaurant, parking and convention facilities; and
entertainment. The Atlantic City business is seasonal with the highest level of
activity occurring during the summer months and the lowest level of activity
during the winter months.
The Claridge has positioned itself as the "smaller, friendlier"
alternative to the other Atlantic City casinos. This strategy, implemented in
1989, is designed to capitalize on the Claridge's unique physical facility,
which the Corporation believes retains an atmosphere of Atlantic City's former
grandeur, and on the Claridge's size relative to the larger Atlantic City
casinos. By emphasizing an environment that is intimate, friendly and
service-oriented, the Claridge targets a market niche different than that of a
majority of its competitors. The Claridge seeks to attract and retain as
customers the player whose wagering, while significant, is below the
high-wagering of patrons targeted by several of the other larger Atlantic City
casinos. The Claridge's typical patron wagers less on credit and warrants fewer
8
<PAGE>
complimentaries than the higher wagering player. The majority of the Claridge's
casino revenue is generated by slot machine play. In 1994, 75% of the Claridge's
casino revenue came from slot play as compared to 67% reported for all Atlantic
City properties.
The Claridge's positioning statement "Because Smaller is Friendlier"
conveys its operating and marketing strategy. All Claridge employees are
required to attend extensive in-house training programs, which emphasize
courteous, customized service.
In common with other Atlantic City casinos, the Claridge operates a direct
marketing program. Through this program, customer loyalty is encouraged with
incentives including gifts, coupons for coins and services, and complimentaries.
A sophisticated computer database marketing system is utilized to track
customers who meet the Corporation's target profile, analyze the effectiveness
of promotional activities, and identify prospective customers. Information for
this database is compiled through a customer's use of a Compcard Gold rating
card provided by the Claridge. All Claridge customers are encouraged to request
a Compcard Gold rating card and to use it when playing at table games and slot
machines. Use of the Compcard Gold rating card provides the Claridge with data
on the level, style and duration of casino play of its customers.
The database derived from use of the Compcard Gold rating card furnishes
the Corporation with a powerful marketing tool. This database allows the
Claridge to target identified players with incentives. Incentives are tailored
to the identified player's potential for future play, thus assuring that direct
marketing expenditures are effective. Additionally, through analysis of
demographic and other information contained in the Compcard Gold database, the
value of customers with certain characteristics can be assessed and used as a
basis for identifying prospective customers.
The Claridge, as do all other Atlantic City casinos, maintains a bus
program. Customers arriving by bus generally stay in Atlantic City six to eight
hours before returning home. Bus customers are given coupons for coins and/or
other services. The Corporation continually monitors the incentives offered to
bus customers by other Atlantic City casinos to assure that the Claridge's
offerings are attractive.
Competition in Atlantic City also extends to the employment market. The
Commission has promulgated regulations which require staffing levels at Atlantic
City casinos which are sharply higher than those for casino-hotels in Nevada. In
addition, although the January 1995 amendments to the Act (see Item 1. Business
- "Gaming Regulation and Licensing") have eased the licensing requirements for
some employees, all of New Claridge's casino employees must be licensed. Prior
to these amendments, casino employees applying for a license had to meet
applicable standards pertaining to such matters as financial responsibility,
good character, ability, casino training and experience; as a result of these
amendments, the Commission will focus their investigation on the integrity of
the person. Partly as a result of the licensing requirements, there has been
intense competition for experienced casino employees in Atlantic City.
Difficulties in hiring personnel licensed by the Commission have elevated labor
costs, and licensed personnel frequently leave their current positions for
higher paying jobs in other casinos. In addition, the expansion of casino gaming
into other jurisdictions has increased the competition for experienced casino
management personnel.
Beginning in the fall of 1988, three events occurred that accelerated the
presence of casino gaming in the United States: (i) a statewide ballot issue in
South Dakota approved limited-stakes gaming in Deadwood; (ii) the state
legislature approved riverboat gaming in Iowa in early 1989; and (iii) Congress
passed the Indian Gaming Regulatory Act of 1988, which permits unrestricted
gaming on Indian land in any state that already allows similar gaming (for
9
<PAGE>
example, if the state allows charitable gaming for non-profit organizations,
then Indians can run similar operations on their land for profit). Since these
events occurred, the gaming industry rapidly expanded, and casino gaming of some
form is now available in approximately twenty-two states. Indian gaming is
currently authorized in twenty-one states including New York, Michigan,
Minnesota, California, and most notably, Connecticut. In February 1992, the
Foxwoods High Stakes Casino and Bingo Hall ("Foxwoods"), operated by the
Mashantucket Pequot Indian tribe in Ledyard, Connecticut commenced operations,
offering the table games found in Atlantic City as well as bingo rooms. In
January 1993, approval was granted by the Connecticut government for Foxwoods to
offer slot machines; as of December 31, 1994, over 3,800 slot machines were
reported to be operational at Foxwoods.
Until recently, 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. Currently, a bill for riverboat gaming is awaiting
action in the Pennsylvania House Finance Committee. However, newly- elected
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. Management believes that,
should casino gaming be legalized in the future in Philadelphia, the effects on
Atlantic City casinos and on the Claridge would depend upon the form and scope
of such gaming. The continued expansion of casino gaming, lotteries, including
video lottery terminals (VLT's), and offtrack betting in other nearby states
could also have a negative effect on the Atlantic City market.
Gaming Regulation and Licensing
a. The New Jersey Casino Control Commission and Division of Gaming
Enforcement. The ownership and operation of casino-hotel facilities in Atlantic
City are subject to extensive state regulation under the Act. No casino-hotel
may operate in Atlantic City unless necessary corporate and individual officer,
director and employee licenses are obtained from the Commission. The Commission
is authorized under the Act to adopt regulations covering a broad spectrum of
gaming-related activities.
The Act also establishes a Division of Gaming Enforcement (the "Division")
to investigate all applications for licenses, enforce the provisions of the Act
and the regulations thereunder, and prosecute before the Commission all
proceedings for violations of the Act or any regulations thereunder. The
Division conducts audits and continually reviews casino operations, maintains
information with respect to any changes in ownership of the casino-hotel and
conducts investigations of casino owners and investors when appropriate.
In January 1995, significant amendments to the Act were signed into law,
which are intended to reduce regulation of the Atlantic City casino industry.
These amendments include changes regarding (i) the authority and
responsibilities of the Commission and the Division; (ii) the licensing
requirements of employees, casinos, and employees of industries which service
the casinos; (iii) the operation of the casinos; and (iv) the operation of the
Casino Reinvestment Development Authority (the "CRDA"). The most significant
changes resulting from these amendments include:
(i) The elimination of the requirement for hotel employees to register with
the Commission, and the creation of a new classification of employee,
the "Casino Service Employee", broadly defined as an employee who
performs duties in the casino but is not categorized as a casino
employee, a casino key employee, or casino security employee; the Casino
Service Employee will not have to hold a casino license, but will merely
have to register with the Commission. In addition, the Commission will
10
<PAGE>
no longer have the responsibility for determining whether an applicant
for a casino license or casino key license has sufficient business
ability and experience, but rather will focus the license investigation
on the integrity of the applicant;
(ii) The standardization of the renewal period of all casino licenses for
periods of four years, at a fee of $200,000 for a four year license;
(iii) The elimination of the limitation that prohibited entities from holding
more than three casino licenses, provided that the granting of
additional licenses would not create undue economic concentration in
Atlantic City casino operations, as determined by the Commission;
(iv) An increase in the amount of casino space permitted, to 60,000 square
feet, for a casino hotel with 500 hotel rooms (from the previous maximum
allowed of 50,000 square feet);
(v) The elimination or easing of requirements for Commission or Division
approvals needed to implement or change individual casino's internal
operating procedures; and
(vi) The creation of a fund, known as the "Atlantic City Fund", which will
provide for the reinvestment of savings expected to be realized by the
reduction in regulation created by these amendments, as well as a
reallocation of CRDA funds which would have gone to North Jersey over
the next five years, in Atlantic City. This Atlantic City Fund will be
administered by the CRDA.
b. Licensing Requirements. The Act provides that various categories of
persons or entities must hold casino licenses. The Act also provides that each
officer, director and person who directly or indirectly holds any beneficial
interest or ownership in a casino licensee; or any person who, in the opinion of
the Commission, has the ability to control a casino licensee or elect a majority
of the board of directors; or each principal employee or any other employee of a
casino licensee (and any lender to or underwriter, agent or employee of the
licensee) whom the Commission may consider appropriate for approval or
qualification, be qualified for approval pursuant to the provisions of the Act.
In addition, all contracts and leases entered into by the licensee may, upon
request of the Commission, have to be submitted to the Commission, are subject
to its review, and, if found unacceptable, are voidable. All enterprises which
provide gaming-related services to the licensee must be licensed. All other
enterprises dealing with the licensee must register with the Commission, which
may require that they be licensed if they do $75,000 or more per year in
business with a single licensee, and $225,000 or more per year if with more than
one licensee.
New Claridge holds a casino license because it carries on the casino
business of the Claridge and owns the Casino Assets. As a result, New Claridge's
officers and directors are subject to Commission qualification. The Corporation,
as the sole owner of the stock of New Claridge, is also required to be
qualified. As a part of its determination of the Corporation's qualification,
the Commission will require the qualification of each officer, each director,
and each person who directly or indirectly holds any beneficial interest or
ownership in the Corporation, and who the Commission requires to be qualified,
or any person who, in the opinion of the Commission, has the ability to control
the Corporation or elect a majority of its Board of Directors; or each principal
employee or any other employee whom the Commission may consider appropriate for
approval or qualification. The Commission has determined that no stockholder of
the Corporation owning less than 5% of its stock will be required to be
qualified unless the Commission determines that such stockholder has the ability
to control the Corporation or elect a majority of its Board of Directors. Prior
to June 16, 1989, Webb was the only stockholder in this category. The names and
11
<PAGE>
addresses of all stockholders have been supplied to the Commission and any
changes are reported when they occur.
c. Licensing Status. The Commission issues casino licenses, which, prior
to the January 1995 amendments to the Act, were renewable every two years,
subject to a series of requirements including a requirement of demonstrating
financial viability. In 1989, and again in 1991, the First Mortgage Lenders
agreed to modify the schedule of principal payments under the Loan Agreement, in
order in part to allow New Claridge to demonstrate financial viability to the
Commission. In connection with the 1993 relicensing, for the period ending in
1995, the First Mortgage Lenders agreed for the first time to modify the
schedule of principal payments required under the Loan Agreement to beyond the
two-year licensing period. On September 22, 1993, New Claridge was issued a two
year casino license by the Commission for the period commencing September 30,
1993. The relicensing approval was based in part on the execution of this
amendment to the Loan Agreement.
d. Investigations and Disqualifications. The Commission may find any
holder of any amount of securities of the Corporation not qualified to own
securities of the Corporation. Further, as required by New Jersey, the charter
and the by-laws of the Corporation and New Claridge provide that securities of
the Corporation and New Claridge are held subject to the condition that if a
holder is found to be disqualified by the Commission the holder must dispose of
the securities of the Corporation or New Claridge, as the case may be. The
Corporation will periodically report the names and addresses of owners of record
of Class A Stock to the Commission as is required for all publicly traded
holding companies that have wholly-owned subsidiaries holding casino licenses.
e. Casino Fees and Taxes. The Act provides for a casino license issue fee
of not less than $200,000, based upon the cost of the investigation and
consideration of the license application, and renewal fee of not less than
$200,000, as amended in January 1995, based upon the cost of maintaining control
and regulatory activities. In addition, a licensee is subject to (i) a tax of
eight percent (8%) of gaming revenues, less the provision for uncollectible
accounts, (ii) an annual license fee of $500 on each slot machine, and (iii) an
alcoholic beverage fee computed on the basis of the cost of investigatory time
spent monitoring each beverage outlet.
The Act as amended in December 1984 further provides for the imposition of
an investment obligation pursuant to criteria set forth in the Act or the
payment of an alternative tax. The investment obligation is 1.25% of the total
gaming revenues for each calendar year. Gaming revenues are the total revenues
derived from gaming operations less the provision for uncollectible accounts. If
the casino licensee opts not to make an investment, it is assessed an
alternative tax of 2.5% of total gaming revenues less the provision for
uncollectible accounts. The licensee has two options in satisfying its
investment obligation; it can make a direct investment in a project approved by
the CRDA, which is the agency responsible for administering this portion of the
Act, or it can buy bonds issued by the CRDA which will, if tax exempt, bear
interest at the rate of 66 and 2/3% of the average rate of the Bond Buyer Weekly
25 Revenue Bond Index for the 26 weeks preceding the issue of the bonds. If the
bonds are not tax exempt they will bear interest at the rate of 66 and 2/3% of
the average rate of Moody's A Rated Utility Index for the 26 weeks preceding the
issue of the CRDA bonds. The investment obligation must be paid on the 15th day
of the first, fourth, seventh, and tenth months of each year based on the
estimated gaming revenues for the three month period immediately preceding the
first day of those months. The alternative tax must be paid not later than April
30 of the following year.
New laws and regulations as well as amendments to existing laws and
regulations relating to gaming activities in Atlantic City are periodically
12
<PAGE>
adopted. Effective July 1, 1993, the New Jersey state legislature passed a law
requiring the payment of parking fees by casinos in New Jersey in the amount of
$2.00 per day for each motor vehicle parked in a casino parking space. In 1992
the New Jersey state legislature passed a law requiring the payment of a tourism
marketing fee of $2.00 per occupied room by casino hotels in Atlantic City.
While the Corporation believes that these fees have not had a significant impact
on its operations, there is no assurance that future laws or changes in existing
laws will not have an adverse effect.
Employees
As of December 31, 1994, New Claridge employed approximately 2,500
persons, of whom approximately 800 are represented by labor unions.
Approximately 700 of the 800 are represented by the Hotel, Restaurant Employees
and Bartender International Union, AFL-CIO, Local 54. In September 1994, the
Corporation's collective bargaining agreement covering the employees represented
by Local 54 was renewed, together with the collective bargaining agreements of
all Atlantic City casinos with respect to Local 54, for a period of five years.
During the past two years, local unions have been active in their efforts to
organize non-union employees in Atlantic City.
The management of the Claridge believes that its employee relations are
generally satisfactory. All of the employees represented by labor unions are
covered by collective bargaining agreements which prohibit work stoppages during
their terms.
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.
The casino-hotel, situated on the main parcel (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 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 an electrical room, it totals
an area of 197,100 square feet and provides parking for approximately 475
automobiles. 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 about 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 these facilities are owned by the Partnership and are leased
to New Claridge under the Operating Lease and the Expansion Operating Lease.
Item 3. LEGAL PROCEEDINGS
The Corporation and its subsidiaries are not parties to any material
litigation other than ordinary routine litigation which is incidental to its
business.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
13
<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
All issued and outstanding shares of the Corporation have been offered and
sold in reliance on exemptions from the registration requirements of the
Securities Act of 1933 as amended (the "Securities Act"). Therefore, there is no
established trading market for any class of shares of the Corporation. In
October 1983, 562,500 shares of Class A Stock were sold to Oppenheimer Holdings,
Inc., and certain officers and employees of Oppenheimer & Co., Inc., (placement
agent for the Partnership and the Corporation) at their par value, $.001 per
share, and 4,500,000 shares of Class A Stock were privately offered and sold at
$1.2336306 per share. At the same time, 562,500 shares of Class B Stock were
sold to Webb at their par value, $.001 per share. On March 24, 1989, Oppenheimer
Holdings, Inc. returned to the Corporation all of its shares (273,938) of the
Corporation's Class A Stock. On June 16, 1989, all of the outstanding shares of
the Corporation's Class B Stock, all of which was owned by Webb, was returned to
the Corporation and cancelled. As of March 1, 1995, there were approximately 450
holders of record of the Class A Stock. The Contingent Payment Rights (see Item
1. Business - "1989 Restructuring") received by Releasing Investors may or may
not be securities. The Corporation, the Partnership 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 action
none of the Corporation, the Partnership 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.
The indenture governing the Notes (the "Indenture") restricts the
declaration or payment of dividends or distributions on redemptions of capital
stock by the Corporation and its subsidiaries, other than (i) dividends or
distributions payable in equity interests of the Corporation or such
subsidiaries, (ii) dividends or distributions payable to the Corporation or any
wholly-owned subsidiary, or (iii) dividends by a subsidiary on its common stock
if such dividends are paid pro-rata to all holders of such common stock.
In addition, the Corporation and the Partnership have agreed not to make
any distributions to the holders of their equity securities, whether derived
from operations or from sale or refinancing proceeds, until the Contingent
Payment has been satisfied (see Item 1. Business - "1989 Restructuring").
14
<PAGE>
Item 6. SELECTED FINANCIAL DATA
The following table summarizes certain selected consolidated financial
data for the years ended December 31, 1994, 1993, 1992, 1991 and 1990.
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(in thousands except per share data)
Income Statement Data
<S> <C> <C> <C> <C> <C>
Net revenues ................................ $ 190,755 189,672 182,204 172,961 175,043
Income (loss) before
extraordinary items ........................ $ (6,901) 5,132 6,048 2,181 (1,825)
Extraordinary income,
net of income taxes ........................ $ -- -- -- -- 39,480
Net income (loss) ........................... $ (6,901) 5,132 6,048 2,181 37,655
Income (loss) before extra-
ordinary items, per share .................. $ (1.37) 1.02 1.21 .46 (.38)
Net income (loss) per share ................. $ (1.37) 1.02 1.21 .46 7.86
Balance Sheet Data at Year End
Total assets ................................ $ 190,798 146,338 148,305 154,355 161,972
Current assets .............................. $ 62,281 22,736 20,383 21,077 22,006
Current liabilities ......................... $ 37,003 34,270 34,298 34,285 31,727
Long-term debt, net of
note payable and
current installments
of long-term debt .......................... $ 85,000 35,259 40,301 50,867 59,971
Stockholders' equity ........................ $ 7,463 14,364 9,232 3,184 1,003
</TABLE>
15
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations for the Year Ended December 31, 1994
The Corporation had a net loss of $6,901,000 for the year ended December
31, 1994, as compared to net income of $5,132,000 for the year ended December
31, 1993.
For the year ended December 31, 1994, the Corporation's "Adjusted
EBITDA" was $11,224,000, compared to $20,131,000 for the year ended December 31,
1993. "EBITDA" represents earnings before interest expense, income taxes,
depreciation, amortization, and other non-cash items. "Adjusted EBITDA" is equal
to EBITDA plus rent expense to the Partnership less interest income from the
Partnership less "Net Partnership Payments," which represent the Corporation's
net cash outflow to the Partnership, and is used by the Corporation to evaluate
its financial performance in comparison to other gaming companies with more
traditional financial structures. Adjusted EBITDA may be used as one measure of
the Corporation's historical ability to service its debt, but should not be
considered as an alternative to, or more meaningful than, operating income or
cash flow. The decrease in Adjusted EBITDA from 1993 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 the Claridge's expanded casino facility (which opened in
late June 1994, and resulted in the addition of approximately 500 slot
machines), and (iii) increased marketing expenditures to promote the opening of
the expanded facility.
Casino revenue, which is the difference between amounts wagered by and
paid to casino patrons, was $156,159,000 (including poker, simulcasting, and
keno revenue) for the year ended December 31, 1994, a 1.0% increase over 1993
casino revenue of $154,615,000, and 6.7% higher than 1992 casino revenue of
$146,357,000. Casino revenue earned by all Atlantic City casinos for 1994, as
reported, including poker, simulcasting, and keno revenue, increased 3.9% over
1993 revenue. Although all Atlantic City casinos experienced a decline in
business volume in the first quarter of 1994 as a result of the severe weather
conditions, New Claridge experienced a greater decline in business as 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.
Table games revenue (including poker revenue) earned by New Claridge
during the year ended December 31, 1994 was $38,824,000, a 5.2% decrease from
1993 table games revenue of $40,959,000. The decrease in table games revenue
resulted from a 1.9% decline in table games drop (the amount of gaming chips
purchased by patrons), combined with a decline in the hold percentage (the ratio
of win to drop) to 14.0% in 1994, compared to 14.7% in 1993. Citywide table
games drop and revenue for 1994, as reported, increased 0.3% and 1.7%,
respectively, over 1993 levels.
Claridge slot machine revenue for the year ended December 31, 1994 was
$116,909,000, a 2.9% increase over 1993 slot machine revenue. Citywide slot
machine revenue as reported for 1994 increased 3.7% over 1993 revenue. The
expansion in June 1994 of the Claridge's casino floor space and the addition of
approximately 500 slot machines resulted in a 20.7% increase in Claridge's
average number of slot machines during 1994 as compared to 1993. Expansions at
several other Atlantic City casinos during 1994 contributed to the 8.4% increase
reported in the average number of slot machines at all Atlantic City properties
during 1994 as compared to 1993.
New Claridge offers promotional incentives through its direct marketing
program to its customers based on their casino play, as well as to prospective
16
<PAGE>
customers based on demographic models. During the year ended December 31, 1994,
cash incentives offered through this program totalled $11,595,000, compared to
$10,912,000 for the year ended December 31, 1993. In addition, New Claridge
offers coin incentives to patrons arriving by bus; during 1994, $9,179,000 in
coin incentives were issued to 835,000 bus passengers arriving at the Claridge,
compared to $7,772,000 of coin incentives issued to 829,000 bus passengers in
1993. The increase in coin incentives per passenger in 1994 as compared to 1993
resulted from efforts to maintain a competitive position with other Atlantic
City casino operators, which, starting in the second quarter of 1994, 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 year ended December 31, 1994 of $10,962,000 were
4.0% lower than 1993 revenues of $11,416,000 due to a slightly lower occupancy
rate (92% in 1994 compared to 93% in 1993), combined with a lower average room
rate ($67 in 1994 compared to $68 in 1993). Food and beverage revenues earned in
1994 totalled $18,346,000, a slight decline from revenues earned in 1993 of
$18,597,000; this decrease was due primarily to a decline in the number of
covers (meals served), to 1,715,000 in 1994 from 1,724,000 in 1993. Other
revenues for the year ended December 31, 1994 of $2,547,000 were lower than 1993
revenues of $2,913,000, primarily resulting from the contracting out of the
Claridge gift shop operation commencing in October 1994.
Total costs and expenses for the year ended December 31, 1994 were
$200,049,000, an increase of 10.5% over 1993 expenses of $181,118,000, resulting
in part from increased interest expense due to the completion of the offering of
$85 million of First Mortgage Notes on January 31, 1994. Casino and general and
administrative expenses were higher in 1994 as compared to 1993, resulting from
marketing and advertising efforts to increase business volume, promote the
opening of the expanded casino, and remain competitive with other Atlantic City
casino operators, as well as increased payroll costs due to higher staffing
levels necessary as a result of the increased casino floor space. In addition,
New Claridge recorded $1,972,000 of expense during 1994 relating to its
investment obligation to the CRDA, as compared to $665,000 of expense recorded
in 1993. This increase in expense resulted from the donation of funds, totalling
approximately $3.8 million, representing amounts previously deposited with the
CRDA, during the third quarter of 1994. In exchange for the donations, New
Claridge received credits equal to fifty-one percent of the donations, to be
applied to its obligations commencing after the dates of the donations. New
Claridge recorded expense during 1994 to write-down the book value of the
donated amounts to the amount of the credits received.
The Corporation recorded an income tax benefit of $2,393,000 for the
year ended December 31, 1994 which represents the tax refund expected from the
carryback of Federal net operating losses net of increased deferred tax credits.
The Corporation recorded income tax expense of $3,422,000 as a result of the
income earned during the year ended December 31, 1993.
Results of Operations for the Year Ended December 31, 1993
The Corporation had net income of $5,132,000 for the year ended December
31, 1993, as compared to net income of $6,048,000 for the year ended December
31, 1992. Net income in 1992 was favorably impacted by the reversal of
progressive slot liability of $2,437,000, as further discussed below.
Casino revenue was $154,615,000 for the year ended December 31, 1993, a
5.6% increase over 1992 casino revenue of $146,357,000, and a 14.2% increase
over 1991 casino revenues of $135,406,000. Citywide casino revenue, as reported
for 1993, increased 2.7% over 1992 revenues. These favorable comparisons can be
attributed to the first full year of unlimited twenty-four hour gaming in 1993,
as well as, improved economic conditions in the Northeastern United States. In
17
<PAGE>
addition, the passage of live poker and simulcast wagering in 1993 and other
Commission policy changes (i.e. extended hours of operation) have had a positive
impact on casino revenues. Citywide casino revenues in early 1993 were adversely
affected by poor weather conditions, most notably the March 13, 1993 storm,
which covered portions of the Northeastern United States with over a foot of
snow.
For the year ended December 31, 1993, Claridge table games revenue was
$40,959,000, a slight increase over 1992 table games revenue of $40,758,000.
Table games drop for 1993 increased 1.0% over 1992 levels. The 1993 hold
percentage was 14.7%, compared to a hold percentage of 14.8% in 1992. Citywide
table games revenue and drop, as reported, decreased 1.4% and 3.1%,
respectively, as compared to 1992 figures. This decrease is attributed in part
to the industry's continued shift in focus from table games to slots. During
1993, citywide slot machine units reportedly increased 10.4% over 1992, while
citywide table game units, excluding the addition of poker games, decreased 6.1%
from 1992.
Claridge slot machine revenue for the year ended December 31, 1993 was
$113,656,000, a 7.6% increase over 1992 slot machine revenue. Citywide slot
machine revenue reportedly increased 4.8% over 1992 revenue. Coin incentives
issued through New Claridge's direct marketing programs totalled $10,912,000 and
$6,959,000 for the years ended December 31, 1993 and 1992, respectively. In
addition during 1993, 829,000 bus passengers were brought to the Claridge, and
were issued $7,772,000 in coin incentives; in 1992, $8,816,000 in coin
incentives was issued to 854,000 bus passengers. The increase in direct
marketing coin incentive costs over 1992 reflects an increased focus on
attracting the more profitable drive-in patrons.
Hotel, food and beverage revenues for the year ended December 31, 1993
were $30,013,000, a slight decrease from 1992 revenues of $30,092,000. Net of
promotional allowances, hotel, food and beverage revenues in 1993 increased 3.1%
over 1992 net revenues. Promotional allowances for the year ended December 31,
1993 decreased as a result of eliminating food coupons from the bus program
incentive packages. The total number of covers served in 1993 were 1,724,000, a
15.2% increase over the number of covers in 1992 as a result of offering a $4.75
buffet in 1993 compared to a $9.95 buffet in 1992. Hotel occupancy for the years
ended December 31, 1993 and 1992 was 93% and 87%, respectively, while the
average room rate was $68 in 1993 compared to $71 in 1992. Other revenues for
the year ended December 31, 1993 decreased from the prior year due primarily to
revisions to New Claridge's entertainment policy, from the presentation of daily
Broadway-style shows in 1992 to a headliner performance approximately one
weekend per month in 1993.
Total costs and expenses for the year ended December 31, 1993 were
$181,118,000, a 5.3% increase over 1992 expenses of $172,081,000. The increase
is primarily evident in the casino operating expenses, due to the reversal of
progressive slot liability in 1992 of $2,437,000, resulting from the removal of
certain progressive slot machines as approved by the Commission, as well as
higher labor costs resulting from increased levels of business and the extended
gaming hours, and higher coin redemption and other marketing costs. In addition,
general and administrative expenses increased as a result of higher payroll
costs. Other costs decreased as a result of the reduced entertainment schedule
as previously discussed.
As a result of the income earned for the year ended December 31, 1993,
income tax expense of $3,422,000 was recorded.
Liquidity and Capital Resources
On January 31, 1994, the Corporation completed an offering of $85
million of Notes (see Item 1. "Recent Business Developments"). The Notes are
18
<PAGE>
secured by (i) a non-recourse mortgage granted by the Partnership representing a
first lien on the Hotel Assets, (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, 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 was used as follows:
(i) to repay in full the Corporation's outstanding debt under the Revolving
Credit and Term Loan Agreement (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;
(ii) to fund the cost of a 12,000 square foot expansion of New Claridge's
casino capacity, the addition of approximately 500 slot machines, and
the relocation of two restaurants and their related kitchen areas. The
total cost of this expansion, which became fully operational on June 30,
1994, was approximately $12.7 million; and
(iii) the acquisition of an adjacent parcel of land, to be used for the
construction of a self-parking facility. In March 1994, New Claridge
acquired options to purchase for $7,500,000 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. In an effort
to ensure that site preparation and construction of the self-parking
facility could commence as soon as possible, New Claridge purchased an
assignment of National Westminster Bank NJ's first mortgage interest in
the property on November 3, 1994 for $2,040,000. These acquisitions
gave New Claridge control of the property as of November 16, 1994. The
first mortgage interest was satisfied by the mortgagor at settlement,
which occurred on January 5, 1995.
The balance of the net proceeds from the offering of the Notes are
expected to be used as follows:
(i) the construction of the self-parking facility;
(ii) the possible purchase of the Contingent Payment (see Item 1.
Business-"1989 Restructuring") 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
substantially 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, CGI was formed as a wholly-owned
subsidiary of the Corporation for the purpose of developing gaming
opportunities in other jurisdictions.
Beginning in 1995, and annually thereafter, the Corporation will be
required to make an offer ("Excess Cash Offer") to all holders of Notes, to
purchase at 100% of par (plus accrued and unpaid interest, if any, to the
19
<PAGE>
purchase date), the maximum amount of Notes that may be purchased with 50% of
the Corporation's "Excess Cash" (as defined in the Indenture), from the
preceding year. If less than $5 million is available to make such payments (i.e.
if Excess Cash is less than $10 million), no such offer needs to be made. The
commencement date of any required Excess Cash Offer must be not later than 30
days after the publication of the Corporation's audited financial statements for
the immediately preceding fiscal year. For the year ended December 31, 1994, the
Corporation's Excess Cash was less than $10 million, and therefore the
Corporation is not required to make an Excess Cash Offer in 1995.
In addition, if construction for the self-parking garage or equivalent
facility has not commenced by December 31, 1995, the Corporation is required
under the terms of the Indenture to make an offer, (the "Parking Garage Funds
Offer") within 30 days of such date, to all holders of Notes to purchase the
maximum principal amount of Notes that may be purchased with $24 million, at an
offer price in cash equal to 101% of the principal amount thereof plus accrued
and unpaid interest, if any, to the date of purchase. Pursuant to the terms of
the Indenture, construction shall be deemed to have commenced when (i) all
necessary approvals to commence the construction have been obtained, and (ii)
demolition or other physical work below street grade for the project shall have
commenced. In March 1995, the Corporation received final site approval for the
proposed garage from the Atlantic City Zoning Board; no other approvals are
required to complete the garage project. In addition, demolition of the
structure previously located on the site is substantially complete. As a result,
the Corporation believes it will not be required to make an offer to purchase
Notes pursuant to the Parking Garage Funds Offer.
At December 31, 1994, the Corporation had working capital of
$25,278,000, as compared to a working capital deficiency of $11,534,000 at
December 31, 1993. The increase in working capital is principally attributable
to increases in cash and cash equivalents of $32,051,000, in receivables of
$3,549,000, in prepaid expenses and other current assets of $4,044,000,
decreases in accrued payroll and related benefits of $620,000 and other current
liabilities of $1,258,000, offset by increases in interest payable of
$4,593,000. The increase in cash and cash equivalents is attributable to the net
proceeds from the offering of Notes on January 31, 1994, a portion of which was
used to repay the Corporation's outstanding debt under the Loan Agreement.
Current liabilities at December 31, 1994 and 1993 included deferred rental
payments of $15,078,000, and the $3.6 million loan from the Partnership plus
accrued interest thereon of $2,394,000 and $1,962,000 at December 31, 1994 and
1993, respectively. The deferred rental payments and $3.6 million loan will only
be payable upon (i) a sale or refinancing of the Claridge; (ii) full or partial
satisfaction of the Expandable 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 at December 31, 1994 and
1993 would have been $46,350,000 and $9,106,000, respectively.
New Claridge is obligated under the Operating Lease 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 Expandable
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,
facility maintenance, and engineering shortfalls. The advances to the
Partnership are in the form of FF&E Loans and are secured by the Hotel Assets.
One half of the principal is due on the 48th month following advance, with the
remaining balance due on the 60th month following the date of issuance. In
connection with the offering of $85 million of First Mortgage Notes on January
31, 1994, the Corporation agreed to use not less than $8 million from the net
proceeds of the offering to finance internal improvements to the Claridge, which
were funded through additional FF&E Loans. 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 Loans will be payable at final maturity of the Expandable
Wraparound Mortgage. New Claridge is obligated to pay as additional rent to the
Partnership the debt service on the FF&E Loans.
20
<PAGE>
The Expandable 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 Expandable 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 Expandable 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 Expandable Wraparound Mortgage by
September 30, 1998. Under the terms of the Expandable Wraparound Mortgage, New
Claridge is not permitted to foreclose on the Expandable Wraparound Mortgage and
take ownership of the Hotel Assets so long as a senior mortgage is outstanding.
The face amount outstanding of the Expandable Wraparound Mortgage at December
31, 1994 (including the outstanding FF&E Loans and the $20 million of deferred
interest) was $137.4 million.
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
December 31, 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 Expandable Wraparound
Mortgage; and (iii) upon full satisfaction of any first mortgage then in place.
Also as of December 31, 1994, $20.9 million of basic rent had been abated. The
remaining $17.9 million of available abatement is expected to 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 $38.8 million
abatement is fully utilized will increase substantially to approximately $40.1
million in 1997, as compared to $31.4 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
21
<PAGE>
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 the renewal term
will be significantly below the 1997 level.
If the Partnership should fail to make any payment due under the
Expandable 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.
In February 1992, the Financial Accounting Standards Board issued
Statement No. 109, "Accounting for Income Taxes". Statement No. 109 requires a
change from the deferred method of accounting for income taxes to the asset and
liability method of accounting for income taxes. 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.
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 year ended December 31, 1993 as a result of the adoption of
Statement No. 109.
A valuation allowance of $422,000 has been provided against deferred tax
assets as of December 31, 1994. No valuation allowance was provided on deferred
tax assets as of December 31, 1993 since management believed that it was more
likely than not that such assets would be realized through the reversal of
existing deferred tax liabilities and future taxable income.
The effective tax rate decreased from 40% for the year ended December
31, 1993 to (26%) for the year ended December 31, 1994. The decrease in the
benefit recognized is due to (i) a change in tax laws which resulted in an
increase in non-deductible expenses, (ii) other nondeductible expenses which
were incurred in 1994 which were not incurred in 1993, and (iii) the
establishment of a valuation reserve. The components of income tax expense did
not change significantly from the prior year except for the nondeductible items
discussed in the change in the effective tax rate.
Factors Which May Influence the Corporation's Future Operating Results
The continued expansion of casino gaming, lotteries, including video
lottery terminals (VLT's), and offtrack 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. Until recently, 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. Currently, a bill for riverboat
gaming is awaiting action in the Pennsylvania House Finance Committee. However,
newly-elected 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. Management
believes that, should casino gaming be legalized in the future in Philadelphia,
the effects on Atlantic City casinos and on the Claridge would depend upon the
form and scope of such gaming. In addition, in July 1994, Delaware enacted
legislation authorizing the installation of VLT's at horse tracks. Although
regulations governing the use of VLT's in Delaware are currently being
finalized, the machines could be operational by the summer of 1995.
22
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements and Financial Statement Schedules are set forth
at pages F-1 to F-27 of the report.
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
23
<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THIS REGISTRANT
Name Office Age
---- ------ ---
David W. Brenner Chairman, Director 59
Robert M. Renneisen President, Director 48
James W. O'Brien Executive Vice President, Director 59
A. Bruce Crawley Director 49
Mark H. Sayers Director 45
Shannon L. Bybee Director 57
James M. Montgomery Director 55
Jean I. Abbott Vice President 39
Gloria E. Soto Vice President, Assistant Secretary 46
Raymond A. Spera Executive Vice President, Treasurer 38
Albert T. Britton Executive Vice President 38
Peter F. Tiano Executive Vice President 59
Glenn S. Lillie Vice President 46
Frank A. Bellis, Jr Senior Vice President, Secretary 41
Business Experience
Mr. Brenner has served as a member of the Board of Directors of the
Corporation since February 1991, and became Chairman of the Board of Directors
in August 1993. He served as President of the Philadelphia Sports Congress from
January 1987 through June 1994. Mr. Brenner served as Chairman of the Hospital
and Higher Education Facilities Authority of Philadelphia from January 1986 to
June 1992, and as Director of Commerce of the City of Philadelphia from January
1984 to September 1986. He was with the accounting firm of Arthur Young &
Company from 1957 to September 1983. He was managing partner of the Philadelphia
office of Arthur Young from November 1969 until March 1980.
Mr. Renneisen has served as President of the Corporation since June
1992, as Chief Executive Officer of the Corporation and New Claridge since July
1993, and as Vice Chairman of New Claridge since June 1994. Mr. Renneisen was
Executive Vice President of the Corporation from June 1991 to June 1992. He has
served as President of New Claridge since January 1991. He was Chief Operating
Officer of New Claridge from January 1991 to July 1993. Mr. Renneisen was
Executive Vice President of New Claridge, responsible for marketing and later
casino operations from February 1988 to January 1991. Prior to joining New
Claridge, Mr. Renneisen served from January 1987 to December 1987 as Vice
President of Marketing of Treasure Island Hotel and Casino in St. Maarten. From
June 1986 to May 1987, he served as President of Renneisen, Kincade &
Associates, Inc. of Las Vegas, Nevada, a marketing consulting firm. He was
Senior Vice President of Marketing of the Tropicana Hotel and Casino in Atlantic
City from May 1982 to August 1984.
Mr. O'Brien has served as a member of the Board of Directors of the
Corporation since June 1988, and as Executive Vice President of the Corporation
since June 1994. Mr. O'Brien has also served as President and Chief Operating
Officer of New Claridge since June 1994. Mr. O'Brien was the Corporation's
Acting Chairman of the Board from October 20, 1988 to November 22, 1988. Mr.
O'Brien served as Vice President of Human Resources of Genesco, Inc. of
Nashville, Tennessee from July 1987 to August 1993. He was Vice President of
24
<PAGE>
Human Resources of Southwest Forest Industries of Phoenix, Arizona from February
1986 to May 1987. He was President of Del E. Webb Hotel Group from April 1982 to
January 1986 and as Chief Executive Officer and a Director of the Corporation
from October 1983 to January 1986.
Mr. Crawley has served as a member of the Board of Directors of the
Corporation since February 1995. He currently serves as President and Director
of Public Relations and Marketing Services for Crawley, Haskins & Rodgers, a
Philadelphia based public relations and advertising firm. Prior to establishing
his own firm in May 1989, Mr. Crawley was employed at First Pennsylvania Bank
and First Pennsylvania Corporation, where he served as Senior Vice President and
Director of Public and Investor Relations. He also served, from 1976 to 1979, as
Vice President and Director of Advertising for First Pennsylvania Bank and First
Pennsylvania Corporation.
Mr. Sayers has served as a member of the Board of Directors of the
Corporation since February 1990. Mr. Sayers has served as Vice President of EMES
Management Corporation, a real estate management and development company, of New
York, New York, since February 1976.
Mr. Bybee has served as a member of the Board of Directors of the
Corporation since July 1988. He currently is Associate Professor for Gaming
Management, Law & Regulation, at University of Nevada Las Vegas, where he
occupies the Michael D. Rose Distinguished Chair in Gaming, a position he has
held since August 1994. From July 1993 to August 1994 Mr. Bybee served as
President and Chief Operating Officer for United Gaming, Inc. Mr. Bybee was the
Corporation's Chairman of the Board from November 1988 to July 1993, and from
August 1988 to October 1988. In June 1989, Mr. Bybee was appointed to serve as
the Chief Executive Officer of the Corporation and New Claridge, a position he
held through July 1993. From 1983 to 1987, he was Senior Vice President of
Golden Nugget, Incorporated which operated the Golden Nugget Casino Hotel in
Atlantic City. From 1981 to 1983, Mr. Bybee was President of GNAC Corporation,
which operated the Golden Nugget Casino Hotel in Atlantic City.
Mr. Montgomery has served as a member of the Board of Directors of the
Corporation since March 1995. Since 1978, he has served as President of Houze,
Shourds, and Montgomery, Inc., a management consulting firm located in Long
Beach, California. Prior to 1978, Mr. Montgomery held various managerial
positions with Rohr Industries, Inc. and Rockwell International.
Ms. Abbott served as a member of the Board of Directors of the
Corporation from August 1989 to June 1994, and served as a consultant to the
Corporation until March 26, 1994, at which time she became a Vice President of
New Claridge. From October 1992 to July 1993, Ms. Abbott was Finance Director
for the United Way of Atlantic County. She was Assistant Professor at Stockton
State College from September 1989 to June 1991. She served as Senior Vice
President, Treasurer of the Corporation and Senior Vice President, Controller of
New Claridge from May 1987 to September 1989. She was Vice President, Controller
of New Claridge from October 1985 to May 1987 and she was Director of Finance of
New Claridge from April 1984 to October 1985. From October 1980 through April
1984, Ms. Abbott held various executive positions with New Claridge and Old
Claridge.
Ms. Soto has served as Vice President of the Corporation since February
1987, and as Assistant Secretary of the Corporation since August 1993. She
served as Secretary of the Corporation from February 1987 to August 1993. Ms.
Soto has served as Vice President, Legal and Governmental Affairs of New
Claridge since December 1991. She was Vice President of Compliance and Legal
Affairs from November 1986 to December 1991 and Director of Regulatory Affairs
from August 1985 to November 1986. Prior to joining New Claridge, Ms. Soto
served as Associate General Counsel for Harrah's in Atlantic City. In 1980,
former Governor Byrne appointed Ms. Soto to the New Jersey State Parole Board,
where she served as a member until 1983.
25
<PAGE>
Mr. Spera has served as Executive Vice President of the Corporation
since August 1993. He served as Vice President of the Corporation from December
1989 to August 1993, and as Assistant Secretary of the Corporation since
December 1991. He also has served as Executive Vice President of Finance and
Corporate Development of New Claridge since December 1992. Mr. Spera was Senior
Vice President of Finance and Corporate Development of New Claridge from
December 1991 to December 1992 and Vice President of Finance of New Claridge
from December 1989 to December 1991. From April 1982 through November 1989, Mr.
Spera has held various accounting positions with New Claridge and Old Claridge.
Prior to joining New Claridge, he spent three years with the accounting firm of
KPMG Peat Marwick LLP.
Mr. Britton has served as Executive Vice President of the Corporation
since June 1994, and as Executive Vice President and General Manager of New
Claridge since February 1994. He served as a Vice President of the Corporation
from June 1992 to June 1994, and as Executive Vice President of Operations of
New Claridge from December 1992 to February 1994. He was Senior Vice President
of Operations of New Claridge from December 1991 to December 1992, and Vice
President of Casino Operations from June 1990 to November 1991. From July 1981
through June 1990, Mr. Britton has held various positions in both accounting and
casino operations with New Claridge and Old Claridge.
Mr. Tiano has served as Executive Vice President of the Corporation
since June 1994, and as Executive Vice President of Operations of New Claridge
since February 1994. He served as a Vice President of the Corporation from June
1992 to June 1994. Mr. Tiano was Executive Vice President of Administration of
New Claridge from December 1992 to February 1994, Senior Vice President of
Administration of New Claridge from December 1991 to December 1992, Vice
President of Administration from September 1986 to December 1991, and Director
of Human Resources from June 1984 to September 1986. Prior to joining New
Claridge, he was Assistant Director of Human Resources for the Institute of
Scientific Information of Philadelphia, Pennsylvania from 1972 to 1984.
Mr. Lillie has served as Vice President of the Corporation since June
1992, and as Vice President of Public Affairs of New Claridge since February
1990. He was Vice President of Marketing Communications of New Claridge from
April 1985 to February 1990, Director of Public Relations from March 1982 to
January 1983, and Training Manager from November 1980 to February 1982. From
February 1983 to April 1985, Mr. Lillie was employed as the Director of Public
Relations of the Tropicana Hotel and Casino in Atlantic City.
Mr. Bellis has served as Vice President, General Counsel and Secretary
to the Corporation since August 1993. He also has served as Senior Vice
President and General Counsel of New Claridge since February 1994, as Vice
President and General Counsel of New Claridge from September 1992 to February
1994, and as Secretary of New Claridge since August 1993. Previously, from May
1985 to August 1992, Mr. Bellis was Corporate Counsel and Secretary to
Inductotherm Industries, Inc., Rancocas, New Jersey. During 1984 and 1985, Mr.
Bellis was Associate General Counsel for New Claridge. Prior to joining New
Claridge, he was a Deputy Attorney General in the New Jersey Division of
Criminal Justice in the State Attorney General's office.
Further information regarding the directors and certain executive
officers of the Corporation and/or New Claridge is incorporated by reference to
the information contained under the caption "Voting" in the Corporation's Proxy
Statement for the Annual Meeting of Shareholders to be held on June 5, 1995.
26
<PAGE>
Item 11. EXECUTIVE COMPENSATION
Information contained under the caption "Executive Compensation" in the
Corporation's Proxy Statement for the Annual Meeting of Shareholders to be held
on June 5, 1995 is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
On March 24, 1989, Oppenheimer Holdings, Inc. returned to the
Corporation all of its shares (273,938) of the Corporation's Class A Common
Stock.
On June 16, 1989, in accordance with the terms of the Restructuring
Agreement, all of the outstanding shares of the Corporation's Class B Stock, all
of which was owned by Webb, was returned to the Corporation and cancelled.
As of December 31, 1994 there were no beneficial owners of more than 5%
of the Corporation's Class A Stock.
On February 12, 1992, the Corporation's Board of Directors approved a
Long Term Incentive Plan which provided for the grant to certain key officers of
the Corporation and/or New Claridge of the 273,938 shares which were held as
treasury shares by the Corporation. These shares were issued to the key
employees upon approval by the Commission on April 15, 1992, and upon receipt
the transfer of, and right to continue to hold the shares, are subject to
certain vesting restrictions.
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. 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.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Partnership has a direct material interest in the Expandable
Wraparound Mortgage Loan Agreement, the Operating Lease and the Expansion
Operating Lease together with amendments thereto. See Item 1. Business - "1989
Restructuring" and "Certain Transactions and Agreements."
27
<PAGE>
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, or because the required information is included in
the Consolidated Financial Statements or notes thereto.
(a)(3) Exhibits. The exhibits required to be filed as part of this
annual report on Form 10-K are listed in the attached Index
to Exhibits.
(b) Reports on Form 8-K. The Corporation filed no reports on Form
8-K during the last quarter of the period covered by this
report.
(c) Index to Exhibits and Exhibits filed as a part of this
report.
3(a) Copy of Certificate of Incorporation of the
Corporation. Incorporated by reference to Exhibit
3.1 to Form 8 Amendment No. 1 to Form 10 dated
February 21, 1984.
3(b) Copy of By-Laws of the Corporation as amended.
Incorporated by reference to Exhibit 3(b) to Form
10-K for the period August 26, 1983 to December 31,
1983.
3(c) Copy of Certificate of Amendment of The Certificate
of Incorporation of the Corporation dated June 15,
1989, incorporated by reference to Exhibit 3(c) to
Form 10-K for the year ended December 31, 1990.
3(d) Copy of Certificate of Amendment of The Certificate
of Incorporation dated June 26, 1991. Incorporated
by reference to Exhibit 3(d) to Form 10-K for the
year ended December 31, 1991.
4(a) Form of Indenture (including the Guarantee of The
Claridge at Park Place, Incorporated). Incorporated
by reference to Exhibit 4.1 to Pre-Effective
Amendment No. 2 to Form S-1 Registration Statement
(file number 33-71550) dated January 18, 1994.
4(b) Form of 11 3/4% First Mortgage Note due 2002
certificate. Incorporated by reference to Exhibit
4.2 to Pre-Effective Amendment No. 2 to Form S-1
Registration Statement (file number 33-71550) dated
January 18, 1994.
10(a) Copy of Operating Lease Agreement between New
Claridge and Atlantic City Boardwalk Associates,
L.P. Incorporated by reference to Exhibit 2.2 to
Form 8 Amendment No. 1 to Form 10 dated February 21,
1984.
10(b) Copy of Expandable Wraparound Mortgage and Security
Agreement between New Claridge and Atlantic City
Boardwalk Associates, L.P. Incorporated by reference
to Exhibit 10(b) to Form 10-K for the period August
26, 1983 to December 31, 1983.
28
<PAGE>
10(c) Copy of Expandable Wraparound Mortgage Loan
Agreement between New Claridge and Atlantic City
Boardwalk Associates, L.P. Incorporated by reference
to Exhibit 10(c) for Form 10-K for the period August
26, 1983 to December 31, 1983.
10(h) Copy of Expansion Operating Lease Agreement between
New Claridge and Atlantic City Boardwalk Associates,
L.P. Incorporated by reference to Exhibit 10(h) to
Form 10-K for the year ended December 31, 1985.
10(i) Copy of First Supplemental Amendment to Expandable
Wraparound Mortgage and Security Agreement between
New Claridge and Atlantic City Boardwalk Associates,
L.P. Incorporated by reference to Exhibit 10(i) to
Form 10-K for the year ended December 31, 1985.
10(j) Copy of First Supplemental Amendment to Expandable
Wraparound Mortgage Loan Agreement between New
Claridge and Atlantic City Boardwalk Associates,
L.P. Incorporated by reference to Exhibit 10(j) to
Form 10-K for the year ended December 31, 1985.
10(n) Copy of the Restructuring Agreement, among The
Claridge Hotel and Casino Corporation, The Claridge
at Park Place, Incorporated, Del Webb Corporation,
Del E. Webb New Jersey, Inc., Atlantic City
Boardwalk Associates, L.P. and First Fidelity Bank,
National Association, New Jersey, dated October 27,
1988. Incorporated by reference to Exhibit 10(n) to
Form 10-Q for the quarter ended September 30, 1988.
10(x) Copy of Long Term Management Incentive Plan of The
Claridge Hotel and Casino Corporation effective
January 1, 1992. Incorporated by reference to
Exhibit 10(x) to Form 10-K for the year ended
December 31, 1991.
10(ab) Amendment to Operating Lease Agreement and Expansion
Operating Lease Agreement between New Claridge and
Atlantic City Boardwalk Associates, L.P., dated June
15, 1989. Incorporated by reference to Exhibit 10.5
to Form S-1 Registration Statement (file number
33-71550) dated November 12, 1993.
10(ac) Second Amendment to Operating Lease Agreement and
Expansion Operating Lease Agreement between New
Claridge and Atlantic City Boardwalk Associates,
L.P., dated March 27, 1990. Incorporated by
reference to Exhibit 10.6 to Form S-1 Registration
Statement (file number 33-71550) dated November 12,
1993.
10(ad) Third Amendment to Operating Lease Agreement and
Expansion Operating Lease Agreement between New
Claridge and Atlantic City Boardwalk Associates,
L.P., dated August 1, 1991. Incorporated by
reference to Exhibit 10.7 to Form S-1 Registration
Statement (file number 33-71550) dated November 12,
1993.
10(ae) First Amendment to Expandable Wraparound Mortgage
Loan Agreement between New Claridge and Atlantic
City Boardwalk Associates, L.P., dated March 17,
1986. Incorporated by reference to Exhibit 10.8 to
Form S-1 Registration Statement (file number
33-71550) dated November 12, 1993.
29
<PAGE>
10(af) Second Amendment to Expandable Wraparound Mortgage
Loan Agreement between New Claridge and Atlantic
City Boardwalk Associates, L.P., dated June 15,
1989. Incorporated by reference to Exhibit 10.9 to
Form S-1 Registration Statement (file number
33-71550) dated November 12, 1993.
10(ag) Second Amendment to Expandable Wraparound Mortgage
and Security Agreement between New Claridge and
Atlantic City Boardwalk Associates, L.P., dated June
15, 1989. Incorporated by reference to Exhibit 10.11
to Form S-1 Registration Statement (file number
33-71550) dated November 12, 1993.
10(ah) The 1992 Claridge Management Incentive Plan.
Incorporated by reference to Exhibit 10.18 to Form
S-1 Registration Statement (file number 33-71550)
dated November 12, 1993.
10(ai) The 1993 Claridge Management Incentive Plan.
Incorporated by reference to Exhibit 10.19 to Form
S-1 Registration Statement (file number 33-71550)
dated November 12, 1993.
10(aj) Form of Mortgage, Assignment of Leases and Rents,
Security Agreement and Financing Statement.
Incorporated by reference to Exhibit 4.3 to
Pre-Effective Amendment No. 2 to Form S-1
Registration Statement (file number 33-71550) dated
January 18, 1994.
10(ak) Form of Collateral Trust Agreement among the
Corporation, New Claridge, the Partnership and the
Collateral Trustee. Incorporated by reference to
Exhibit 4.4 to Pre-Effective Amendment No. 2 to Form
S-1 Registration Statement (file number 33- 71550)
dated January 18, 1994.
10(al) Form of Corporation Pledge Agreement between the
Corporation and the Collateral Trustee. Incorporated
by reference to Exhibit 4.5 to Pre-Effective
Amendment No. 2 to Form S-1 Registration Statement
(file number 33-71550) dated January 18, 1994.
10(am) Form of New Claridge Pledge Agreement between New
Claridge and the Collateral Trustee. Incorporated by
reference to Exhibit 4.6 to Pre-Effective Amendment
No. 2 to Form S-1 Registration Statement (file
number 33-71550) dated January 18, 1994.
10(an) Form of New Claridge Cash Collateral Pledge
Agreement between New Claridge and the Collateral
Trustee. Incorporated by reference to Exhibit 4.7 to
Pre-Effective Amendment No. 2 to Form S-1
Registration Statement (file number 33-71550) dated
January 18, 1994.
10(ao) Form of New Claridge Security Agreement between New
Claridge and the Collateral Trustee. Incorporated by
reference to Exhibit 4.8 to Pre-Effective Amendment
No. 2 to Form S-1 Registration Statement (file
number 33-71550) dated January 18, 1994.
10(ap) Form of New Claridge Trademark Security Agreement
between New Claridge and the Collateral Trustee.
Incorporated by reference to Exhibit 4.9 to
Pre-Effective Amendment No. 2 to Form S-1
Registration Statement (file number 33-71550) dated
January 18, 1994.
30
<PAGE>
10(aq) Form of Collateral Assignment of Expandable
Wraparound Mortgage and Security Agreement.
Incorporated by reference to Exhibit 4.10 to
Pre-Effective Amendment No. 2 to Form S-1
Registration Statement (file number 33-71550) dated
January 18, 1994.
10(ar) Form of Collateral Assignment of Lessor's Interest
in Operating Leases. Incorporated by reference to
Exhibit 4.13 to Pre-Effective Amendment No. 2 to
Form S-1 Registration Statement (file number
33-71550) dated January 18, 1994.
10(as) Form of Subordination Agreement among the
Partnership, New Claridge and the Collateral
Trustee. Incorporated by reference to Exhibit 4.14
to Pre-Effective Amendment No. 2 to Form S-1
Registration Statement (file number 33-71550) dated
January 18, 1994.
10(at) Form of Assignment of Leases and Rents and Other
Contract Rights. Incorporated by reference to
Exhibit 4.15 to Pre-Effective Amendment No. 2 to
Form S-1 Registration Statement (file number
33-71550) dated January 18, 1994.
10(au) Copy of Land Option Agreement between The Claridge
at Park Place, Incorporated and Robert Schiff dated
March 21, 1994. Incorporated by reference to Exhibit
10(au) to Form 10-Q for the quarter ended March 31,
1994.
10(av) Copy of Land Option Agreement between The Claridge
at Park Place, Incorporated and Abraham Schiff and
Robert Schiff, t/a Schiff Enterprises dated March
21, 1994. Incorporated by reference to Exhibit
10(av) to Form 10-Q for the quarter ended March 31,
1994.
10(aw) Copy of Employment Agreement between James W.
O'Brien and The Claridge at Park Place, Incorporated
dated June 27, 1994. Incorporated by reference to
Exhibit 10(aw) to Form 10-Q for the quarter ended
June 30, 1994.
10(ax) Copy of Amended Employment Agreement between Robert
M. Renneisen and The Claridge at Park Place,
Incorporated dated February 6, 1995.
10(ay) Copy of Amended Employment Agreement between Albert
T. Britton and The Claridge at Park Place,
Incorporated dated February 6, 1995.
10(az) Copy of Amended Employment Agreement between Peter
F. Tiano and The Claridge at Park Place,
Incorporated dated February 6, 1995.
10(ba) Copy of Amended Employment Agreement between Raymond
A. Spera and The Claridge at Park Place,
Incorporated dated February 6, 1995.
10(bb) Copy of Supplemental Executive Retirement Plan of
The Claridge at Park Place, Incorporated effective
January 1, 1994.
12(a) Statement of Computation of Ratio of Earnings to
Fixed Charges. Incorporated by reference to Exhibit
12.1 to Form S-1 Registration Statement (file number
33-71550) dated November 12, 1993.
31
<PAGE>
22(a) Subsidiaries of the Corporation. Incorporated by
reference to Exhibit 22.1 Form 8 Amendment No. 1 to
Form 10 dated February 21, 1984.
32
<PAGE>
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.
CLARIDGE HOTEL AND CASINO CORPORATION
Dated: March 28, 1995 By:/s/ ROBERT M. RENNEISEN
---------------------- --------------------------
Robert M. Renneisen
Chief Executive Officer
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.
<TABLE>
<CAPTION>
Signature Capacity Date
---------- -------- -----
<S> <C> <C>
/s/ DAVID W. BRENNER Chairman, Director March 28, 1995
---------------------
David W. Brenner
/s/ ROBERT M. RENNEISEN President, Director March 28, 1995
------------------------ (Chief Executive Officer)
Robert M. Renneisen
/s/ JAMES W. O'BRIEN Director March 28, 1995
---------------------
James W. O'Brien
/s/ A. BRUCE CRAWLEY Director March 28, 1995
---------------------
A. Bruce Crawley
/s/ MARK H. SAYERS Director March 28, 1995
-------------------
Mark H. Sayers
/s/ SHANNON L. BYBEE Director March 28, 1995
---------------------
Shannon L. Bybee
/s/ JAMES M. MONTGOMERY Director March 28, 1995
------------------------
James M. Montgomery
/s/ RAYMOND A. SPERA Executive Vice President March 28, 1995
--------------------- (Chief Financial Officer/
Raymond A. Spera Treasurer)
</TABLE>
33
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
Page
Reference In
Report on
Form 10-K
-------------
Independent Auditors' Report ................................. F-2
Consolidated Balance Sheets at December 31, 1994 and 1993 .... F-3
Consolidated Statements of Operations and Accumulated Earnings
(Deficit) for the Years Ended December 31, 1994, 1993 and
1992 ....................................................... F-4
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, 1993 and 1992 ........................... F-5
Notes to Consolidated Financial Statements ................... F-7
Financial Statement Schedule:
Schedule VIII - Valuation and Qualifying Accounts ... F-27
All other schedules for which provision is made in the applicable
accounting regulations promulgated by the Securities and Exchange
Commission are not required under the related instructions or are
inapplicable and therefore have been omitted.
F-1
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
The Claridge Hotel and Casino Corporation:
We have audited the consolidated financial statements of The Claridge Hotel and
Casino Corporation and subsidiaries as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedule as listed in the accompanying
index. These consolidated financial statements and financial statement schedule
are the responsibility of the Corporation's management. Our responsibility is to
express an opinion on these consolidated financial statements and 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Claridge Hotel
and Casino Corporation and subsidiaries at December 31, 1994 and 1993, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1994 in conformity with generally accepted
accounting principles. Also in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material respects, the
information set forth therein.
KPMG Peat Marwick LLP
Short Hills, New Jersey
March 3, 1995
F-2
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1994 and 1993
(dollars in thousands)
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents .............................................. $ 37,244 5,193
Receivables, net (including $13,656 and $12,176 in 1994
and 1993, respectively, due from Partnership) (note 3) ............... 16,888 13,339
Inventories ............................................................ 324 423
Prepaid expenses and other current assets .............................. 7,825 3,781
--------- ---------
Total current assets ............................................ 62,281 22,736
--------- ---------
Gaming equipment ............................................................... 19,852 14,436
Less accumulated depreciation .......................................... (11,189) (10,211)
--------- ---------
Net gaming equipment ............................................ 8,663 4,225
--------- ---------
Long-term receivables due from Partnership (note 3) ............................ 114,244 115,494
Deferred charges at cost, less accumulated amortization ........................ 4,140 651
Other assets (note 4) .......................................................... 1,470 3,232
--------- ---------
$ 190,798 146,338
========= =========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable ....................................................... $ 2,782 2,509
Loan from the Partnership (note 6) ..................................... 3,600 3,600
Other current liabilities (note 7) ..................................... 30,621 28,161
--------- ---------
Total current liabilities ....................................... 37,003 34,270
--------- ---------
Long-term debt (note 8) ........................................................ 85,000 35,259
Deferred rent due to Partnership (note 12) ..................................... 33,133 36,342
Deferred income taxes (note 11) ................................................ 8,199 6,103
Other noncurrent liabilities (note 9) .......................................... 20,000 20,000
Commitments and contingent liabilities (notes 12 and 13)
Stockholders' equity (notes 15 and 16):
Common stock
Class A, par value $.001, authorized and
issued 5,062,500 shares ............................................ 5 5
Additional paid-in capital ............................................. 5,048 5,048
Accumulated earnings ................................................... 2,410 9,311
Treasury stock, 8,218 and 73,963 Class A shares at
cost in 1994 and 1993, respectively .................................. -0- -0-
Total stockholders' equity ...................................... --------- ---------
7,463 14,364
--------- ---------
$ 190,798 146,338
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations and Accumulated Earnings (Deficit)
For the Years Ended December 31, 1994, 1993 and 1992
(in thousands except per share data)
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Revenue:
Casino ...................................... $ 156,159 154,615 146,357
Hotel ....................................... 10,962 11,416 11,121
Food and beverage ........................... 18,346 18,597 18,971
Interest from the Partnership ............... 17,906 17,974 18,774
Interest, other ............................. 1,519 168 157
Other ....................................... 2,547 2,913 3,625
--------- --------- ---------
207,439 205,683 199,005
Less promotional allowances (note 10) ....... 16,684 16,011 16,801
--------- --------- ---------
Net revenues ............................ 190,755 189,672 182,204
--------- --------- ---------
Costs and expenses:
Casino ...................................... 89,077 81,657 74,348
Hotel ....................................... 3,141 3,228 3,162
Food and beverage ........................... 10,352 10,284 9,244
Other ....................................... 3,615 3,923 5,106
Rent expense to the Partnership (note 12) ... 36,219 34,580 34,658
Rent expense, other (note 12) ............... 1,531 1,645 1,776
General and administrative .................. 28,807 26,951 25,026
Gaming taxes ................................ 12,443 12,360 11,669
Reinvestment obligation expenses (note 4) ... 1,972 665 977
Provision for uncollectible accounts ........ 492 207 554
Depreciation and amortization ............... 2,444 1,445 1,321
Interest expense, other ..................... 9,956 4,173 4,240
--------- --------- ---------
Total costs and expenses ................ 200,049 181,118 172,081
--------- --------- ---------
Income (loss) before income taxes ................... (9,294) 8,554 10,123
Income tax expense (benefit) (note 11) .............. (2,393) 3,422 4,075
--------- --------- ---------
Net income (loss) ................................... (6,901) 5,132 6,048
--------- --------- ---------
Accumulated earnings (deficit) at beginning of period 9,311 4,179 (1,869)
--------- --------- ---------
Accumulated earnings at end of period ............... $ 2,410 9,311 4,179
========= ========= =========
Net income (loss) per share (note 2(h)) ............. $ (1.37) 1.02 1.21
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1994, 1993 and 1992
(in thousands)
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) ........................ $ (6,901) 5,132 6,048
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization .......... 2,444 1,445 1,321
Deferred rent to the Partnership ....... (3,209) (3,183) (2,884)
Deferred interest receivable and
discount from the Partnership ........ (1,154) (1,004) (873)
Reinvestment obligation expenses ....... 1,972 665 977
(Gain) loss on disposal of assets ...... 87 (52) (18)
Deferred income taxes - noncurrent ..... 2,096 1,154 1,339
Change in assets and liabilities:
Receivables, net, excluding
current portion of long-term
receivables ......................... (2,044) (36) 1,036
Inventories .......................... 99 (131) (7)
Prepaid expenses and other
current assets excluding current
portion of reinvestment obligation
credit .............................. (3,129) (722) 124
Accounts payable ..................... 273 659 248
Other current liabilities ............ 2,460 1,513 (1,235)
-------- -------- --------
Net cash flows provided by (used in)
operating activities ..................... (7,006) 5,440 6,076
-------- -------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
Continued
F-5
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Cont'd.)
For the Years Ended December 31, 1994, 1993 and 1992
(in thousands)
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Cash Flows from Investing Activities:
Increase in deferred charges .................... $ (4,069) (529) (230)
Additions to gaming equipment ................... (6,464) (1,535) (1,281)
Additions to other assets, net .................. (1,125) (1,946) (1,296)
Proceeds from disposition of property ........... 75 53 87
Increase in long-term receivables ............... (9,610) (3,287) (2,295)
Receipt of long-term receivables ................ 10,509 9,481 8,625
-------- -------- --------
Net cash flows provided by (used in) investing activities (10,684) 2,237 3,610
-------- -------- --------
Cash Flows from Financing Activities:
Proceeds from issuance of long-term debt ........ 85,000 -0- -0-
Payment of long-term debt ....................... (33,559) (7,942) (10,566)
Payment of revolving credit line
borrowings ................................... (9,325) (21,900) (6,000)
Increase in revolving credit line
borrowings ................................... 7,625 22,600 7,000
-------- -------- --------
Net cash flows provided by (used in) financing activities 49,741 (7,242) (9,566)
-------- -------- --------
Increase in cash and cash equivalents ................... 32,051 435 120
Cash and cash equivalents at beginning
of period ............................................. 5,193 4,758 4,638
-------- -------- --------
Cash and cash equivalents at end of period .............. $ 37,244 5,193 4,758
======== ======== ========
Supplemental cash flow disclosures:
Interest paid ................................... $ 5,365 3,741 3,808
======== ======== ========
Income taxes paid ............................... $ 181 1,393 2,841
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. THE CORPORATION
a) Organization
The Claridge Hotel and Casino Corporation (the "Corporation"), was
formed on August 26, 1983 to hold all of the shares of capital stock of
The Claridge at Park Place, Incorporated ("New Claridge"), which was
formed on August 29, 1983. On October 31, 1983, New Claridge acquired
certain assets of The Claridge Hotel and Casino (the "Claridge"),
including gaming equipment (the "Casino Assets"), from Del E. Webb New
Jersey, Inc. ("DEWNJ"), a wholly-owned subsidiary of Del Webb
Corporation ("Webb"); leased certain other of the Claridge's assets,
including the buildings, parking facility and non-gaming, depreciable,
tangible property of the Claridge (the "Hotel Assets"), from Atlantic
City Boardwalk Associates, L.P. (the "Partnership"); subleased the land
on which the Claridge is located from the Partnership; assumed certain
liabilities related to the acquired assets; and undertook to carry on
the business of the Claridge Casino Hotel, a facility operating in
Atlantic City, New Jersey.
b) Recent Business Developments
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%. The Notes are secured by (i) a non-recourse mortgage granted
by the Partnership representing a first lien on the Hotel Assets, (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, 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 was used as follows:
(i) to repay in full the Corporation's outstanding debt under the
Revolving Credit and Term Loan Agreement (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;
(ii) to fund the cost of a 12,000 square foot expansion of New Claridge's
casino capacity, the addition of approximately 500 slot machines,
and the relocation of two restaurants and their related kitchen
areas. The total cost of this expansion, which became fully
operational on June 30, 1994, was approximately $12.7 million; and
F-7
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Cont'd.)
b) Recent Business Developments (cont'd)
(iii) the acquisition of an adjacent parcel of land, to be used for the
construction of a self- parking facility. In March 1994, New
Claridge acquired options to purchase for $7,500,000 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. In an effort to ensure that site preparation and
construction of the self-parking facility could commence as soon as
possible, New Claridge purchased an assignment of National
Westminster Bank NJ's first mortgage interest in the property on
November 3, 1994 for $2,040,000, which is included in other
receivables at December 31, 1994. These acquisitions gave New
Claridge control of the property as of November 16, 1994. The first
mortgage interest was satisfied by the Mortgagor at settlement,
which occurred on January 5, 1995.
The balance of the net proceeds from the offering of the Notes are
expected to be used as follows:
(i) the construction of the self-parking facility;
(ii) the possible purchase of the Contingent Payment (see Note 9, 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
substantially 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 ("CGI") was formed as a wholly-owned subsidiary of the
Corporation for the purpose of developing gaming opportunities in
other jurisdictions.
c) 1989 Restructuring
On October 27, 1988, the parties with an economic interest in the
Corporation and New Claridge, including the banks holding the First
Mortgage (the "First Mortgage Lenders"), entered into an agreement to
restructure the financial obligations of the Corporation and New
Claridge (the "Restructuring Agreement"). Had the Corporation not
entered into the Restructuring Agreement, New Claridge probably would
not have been relicensed by the New Jersey Casino Control Commission
(the "Commission") for the license period beginning October 31, 1988 and
ending October 31, 1989, and would have had to consider filing for
bankruptcy protection. The Restructuring Agreement by its terms was
subject to approval by at least two-thirds in interest of the limited
partners of the Partnership and the holders of at least two-thirds of
the Class A Stock of the Corporation. These approvals were received, and
the restructuring was consummated in June 1989. The restructuring
resulted in (i) a reorganization of the ownership interest in the
F-8
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Cont'd.)
c) 1989 Restructuring (cont'd.)
Corporation; (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.
At the closing of the restructuring on June 16, 1989, Webb transferred
all of its right, title, and interest to its Claridge land, easements,
and air rights to the Partnership, which had the effect of eliminating
the land lease between Webb and the Partnership and of subjecting that
land to a direct lease (rather than a sublease) from the Partnership to
New Claridge.
Pursuant to amendments to the Operating Lease and Expansion Operating
Lease, the Partnership agreed to deferrals of basic rent (see Note 12,
"Operating Lease").
In addition, the Partnership loaned $3.6 million to New Claridge. That
amount represented substantially all the cash and cash equivalents
remaining in the Partnership as of June 16, 1989 other than funds needed
to pay expenses incurred through the closing of the restructuring. The
Partnership paid to New Claridge $100,000 for the cancellation of an
option agreement relating to the land underlying the Claridge.
The Restructuring Agreement provided that Webb would retain an interest
equal to $20 million plus interest from December 1, 1988 at the rate of
15% per annum compounded quarterly (the "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 grant those
investors in the Corporation and the Partnership ("Releasing 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 81%
in interest of the investors provided releases and became Releasing
Investors. Payments to Releasing Investors are to be made in accordance
with the following schedule of priorities:
(i) Releasing Investors would receive 81% of the first $10 million of
any net proceeds from operations or a sale or a refinancing of the
Claridge facility pursuant to an agreement executed within five
years ("Five-Year Payments") after the restructuring (i.e., the sum
obtained by multiplying the lesser of $10 million of, or the total
of, any Five-Year Payments by 81%, with the balance of any such
funds to be applied against the Contingent Payment), and
F-9
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Cont'd.)
c) 1989 Restructuring (cont'd)
(ii) All distributions of funds other than Five-Year Payments, or of
Five-Year Payments in excess of the $10 million, will be shared by
Webb and Releasing Investors in the following proportions: Releasing
Investors will receive 40.5% (one-half of 81%) of any such excess
proceeds, with the balance of any such funds to be applied against
the Contingent Payment, until the Contingent Payment is paid in full
($20 million plus accrued interest.)
On April 2, 1990, Webb transferred its interest in the Contingent
Payment to an irrevocable trust for the benefit of the United Way of
Arizona, and upon such transfer Webb was no longer required to be
qualified or licensed by the Commission.
The Corporation has recently offered to purchase the Contingent Payment
from the United Way of Arizona for the amount of $10 million; this offer
was not accepted. The Corporation is continuing its negotiations with
the Trustee for the United Way of Arizona in an attempt to purchase the
Contingent Payment. (See Note 1(b) "Recent Business Developments").
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Presentation
The consolidated 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 CGI. All material
intercompany accounts and transactions have been eliminated in
consolidation.
The separate financial statements of New Claridge, which is a
guarantor of the Notes, are not included because the aggregate
assets, liabilities, earnings and equity of New Claridge are
substantially equivalent to the assets, liabilities, earnings and
equity of the Corporation on a consolidated basis, and because the
separate financial statements and other disclosures concerning New
Claridge are not deemed material to holders of Notes. There are no
separate financial statements for CGI, which is the only other
subsidiary of the Corporation and is not a guarantor of the Notes.
b) Cash and Cash Equivalents
Cash and cash equivalents includes investments in interest bearing
repurchase agreements in government securities with maturities of
three months or less when purchased. Interest income is recorded as
earned.
c) Casino Receivables and Revenues
Credit is issued to certain casino customers and the Corporation
records all unpaid credit as casino receivables on the date the
F-10
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Cont'd.)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)
credit was issued. Allowances for estimated uncollectible casino
receivables are provided to reduce these receivables to amounts
anticipated to be collected. The Corporation recognizes as casino
revenue, the net win (which is the difference between amounts
wagered and amounts paid to winning patrons) from gaming activity.
d) Inventories
Inventories are stated at the lower of cost or market, cost being
determined principally on a first-in, first-out basis.
e) Gaming Equipment
Gaming equipment is stated at cost. Depreciation is provided over
the estimated useful lives (5 years) of the respective assets using
the straight line method.
f) Deferred Charges
Deferred charges primarily relate to the January 31, 1994 issuance
of the Notes. These charges, which totalled approximately $3.7
million, are being amortized over the term of the Notes. Accumulated
amortization of these charges as of December 31, 1994 was $428,000.
g) Income Taxes
Deferred income taxes are provided for temporary differences between
financial statement reporting and income tax reporting for rent
levelling provisions, asset basis differences, and various other
expenses recorded for financial statement purposes.
h) Earnings Per Share
Earnings per share is calculated based on the weighted average
shares outstanding (5,035,819 for the year ended December 31, 1994,
5,030,078 for the year ended December 31, 1993, and 4,983,696 for
the year ended December 31, 1992).
F-11
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Cont'd.)
3. RECEIVABLES
Receivables at December 31, 1994 and 1993 consist of the following:
<TABLE>
<CAPTION>
Current Receivables 1994 1993
------------------ ---- ----
(in thousands)
<S> <C> <C>
Casino, less allowance for uncollectible accounts
of $1,411,000 and $1,243,000 at
December 31, 1994 and 1993, respectively $ 394 707
Hotel, less allowance for uncollectible accounts
of $20,000 and $26,000 at December 31,
1994 and 1993, respectively 112 263
Interest receivable due from the Partnership 1,448 1,444
Current portion Expandable Wraparound
Mortgage due from the Partnership 9,000 8,000
Current portion of FF&E Promissory notes 1,251 975
Current portion of Expansion/Construction
promissory note 1,763 1,534
Other, less allowance for uncollectible accounts
of $14,000 and $13,000 at December 31, 1994
and 1993, respectively 2,920 416
-------- -------
$ 16,888 13,339
======== =======
</TABLE>
At December 31, 1994, other receivables includes approximately $2.5
million representing the escrow deposit and first mortgage interest in
the adjacent parcel of land which will be used to construct a
self-parking facility (see Note 1 (b), "Recent Business Developments").
<TABLE>
<CAPTION>
Long-Term Receivables 1994 1993
--------------------- ---- ----
(in thousands)
<S> <C> <C>
$127,000,000 Expandable Wraparound Mortgage 14%, maturities
through September 30, 2000 (net of $11,141,000 discount and
$12,295,000 discount at
December 31, 1994 and 1993, respectively) $ 71,859 79,705
Deferred interest receivable, due
September 30, 2000 20,000 20,000
FF&E promissory notes, 14% 15,863 7,504
Expansion/Construction promissory note, 14% 6,522 8,285
-------- -------
$114,244 115,494
======== =======
</TABLE>
The Expandable Wraparound Mortgage Loan Agreement ("Expandable
Wraparound Mortgage") was executed and delivered by the Partnership to
New Claridge and is secured by all property of the Partnership. As part
of the agreement, New Claridge will service the
F-12
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Cont'd.)
3. RECEIVABLES (cont'd.)
First Mortgage and the Partnership's debt under the Purchase Money
Second Mortgage indebtedness (note 8). $20 million in interest was
deferred between 1983 and 1988 and will be due upon maturity. Principal
payments required under the Expandable Wraparound Mortgage commenced in
1988.
The Expandable Wraparound Mortgage also includes a provision whereby
New Claridge will loan the Partnership up to $25 million in the form of
FF&E promissory notes, secured under the Expandable Wraparound
Mortgage, for the purchase of property and equipment. One half of the
principal is due in 48 months and the remaining balance is due 60
months from the date of the respective FF&E promissory note. During the
year ended December 31, 1995, $1,251,000 of principal payments will
become due. In connection with the offering of $85 million of 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 were funded through
additional FF&E Loans. 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 Loans will be payable at final
maturity of the Expandable Wraparound Mortgage.
In 1986, the Expandable Wraparound Mortgage was increased up to $17
million to provide the Partnership with funding for the construction of
an expansion. Effective on the date that the expansion opened to the
public (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 increase in the
Expandable Wraparound Mortgage. The Expandable Wraparound Mortgage was
amended to require, in addition to the above, principal payments (in
equal monthly installments) due during the years 1988 through 1998 in
escalating amounts totalling $80 million and on September 30, 2000 a
balloon payment of $67 million which includes $20 million of deferred
interest.
4. OTHER ASSETS
The Casino Control Act (the "Act") provides for the imposition of an
investment obligation, calculated at 1.25% of the total revenues from
gaming operations, less the provision for uncollectible accounts. If a
casino licensee opts not to make the investment as required, it is
assessed an alternative tax of 2.5% of total gaming revenues less the
provision for uncollectible accounts. The licensee can satisfy its
obligation by making a direct investment in a project approved by the
Casino Reinvestment Development Authority ("CRDA"), the agency
responsible for administering this portion of the Act, or it can buy
bonds issued by the CRDA. These bonds bear interest at two-thirds of
market rates, as set forth in the Act.
New Claridge has opted to deposit its reinvestment obligation funds
with the State Treasurer. Through December 31, 1994, the Corporation
has deposited $13,920,000 of which $2,277,000 has been used to purchase
bonds issued by the CRDA. Since interest on these
F-13
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Cont'd.)
4. OTHER ASSETS (cont'd.)
bonds and funds deposited is paid at a discounted rate, New Claridge
records a valuation allowance of approximately one-third of the
reinvestment obligation. In addition, in January 1990, it was
determined that certain bonds issued by the CRDA had become impaired,
and that the payment of principal and interest was uncertain. As a
result, New Claridge has recorded a valuation allowance for the full
amount of its investment in these bonds, totalling $1,654,000.
In the third quarter of 1994, New Claridge made donations to the CRDA
of funds, totalling $3,831,000 which had previously been deposited with
the State Treasurer. In exchange for these donations, New Claridge
received credits from the CRDA equal to 51% of the donations, to be
applied to satisfy portions of the reinvestment obligations commencing
after the date of the donations. As of December 31, 1994, $915,000 of
these credits remained available, and are included in other current
assets.
5. WORKING CAPITAL LOANS
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.
Pursuant to the terms of the Loan Agreement, First Fidelity Bank, N.A.,
New Jersey ("Bank") established a revolving working capital facility,
which as of December 31, 1993 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 8, 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.
New Claridge's outstanding borrowings on the revolving working capital
facility at December 31, 1993 were $1,700,000. The amount outstanding
on the revolving working capital facility at December 31, 1993 has been
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.
6. 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
F-14
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Cont'd.)
6. LOAN FROM THE PARTNERSHIP (cont'd.)
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 Expandable
Wraparound Mortgage and the First Mortgage has been made in connection
with a refinancing or sale of all or a partial interest in the
Claridge.
Interest which accrues at 12% per annum is payable in full upon
maturity. As of December 31, 1994, such interest, which is included in
other current liabilities, amounted to $2,394,000.
7. OTHER CURRENT LIABILITIES
Other current liabilities at December 31, 1994 and 1993 consist of the
following:
<TABLE>
<CAPTION>
1994 1993
---- ----
(in thousands)
<S> <C> <C>
Deferred rent, current $15,078 15,078
Accrued payroll and related benefits 5,625 6,245
Accrued interest, Notes 4,161 -0-
Auto/General insurance reserves 1,149 1,404
Accrued interest due to Partnership 2,394 1,962
Other current liabilities 2,214 3,472
------- ------
$30,621 28,161
======= ======
</TABLE>
The amount of deferred rent as of December 31, 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 liability will become payable (i) upon a
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.
F-15
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Cont'd.)
8. LONG-TERM DEBT
Long-term debt at December 31, 1994 and 1993 consists of the following:
1994 1993
---- ----
(in thousands)
11 3/4% Notes, due 2002 $85,000 -0-
First Mortgage Note, prime plus 4%,
effective April 1, 1993 -0- 33,559
Revolving line of credit -0- 1,700
------- ------
$85,000 35,259
======= ======
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 (i) a non-recourse mortgage granted by the Partnership
representing a first lien on the Hotel Assets, (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, 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 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.
Beginning in 1995, and annually thereafter, the Corporation will be
required to make an offer ("Excess Cash Offer"), to all holders of
Notes, to purchase at 100% of par (plus accrued and unpaid interest, if
any, to the purchase date), the maximum amount of Notes that may be
purchased with 50% of the Corporation's "Excess Cash" (as defined in
the indenture governing the Notes (the "Indenture")), from the
preceding year. If less than $5 million is available to make such
purchases (i.e., if Excess Cash is less than $10 million), no such
offer needs to be made. The commencement date of any required Excess
Cash Offer must be not later than 30 days after the publication of the
Corporation's audited financial statements for the immediately
preceding fiscal year. For the year ended December 31, 1994, the
Corporation's Excess Cash was less than $10 million, and therefore the
Corporation is not required to make an Excess Cash Offer in 1995.
In addition, if construction for the self-parking garage or equivalent
facility has not commenced by December 31, 1995, the Corporation is
required under the terms of the Indenture to make an offer (the
"Parking Garage Funds Offer") within 30 days of such date to all
holders of Notes to purchase the maximum principal amount of Notes that
F-16
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Cont'd.)
8. LONG-TERM DEBT (cont'd.)
may be purchased with $24 million, at an offer price in cash equal to
101% of the principal amount thereof plus accrued and unpaid interest,
if any, to the date of purchase. Pursuant to the terms of the
Indenture, construction shall be deemed to have commenced when (i) all
necessary approvals to commence the construction have been obtained,
and (ii) demolition or other physical work below street grade for the
project shall have commenced. In March 1995, the Corporation received
final site approval for the proposed garage from the Atlantic City
Zoning Board; no other approvals are required to complete the garage
project. In addition, demolition of the structure previously located on
the site is substantially complete. As a result, the Corporation
believes it will not be required to make an offer to purchase Notes
pursuant to the Parking Garage Funds Offer.
On October 7, 1991, New Claridge was issued a two year license by the
Commission for the period commencing October 31, 1991. The relicensing
approval was based in part on the execution of the second amendment to
the Loan Agreement on April 23, 1991. In addition, 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.
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.
9. OTHER NONCURRENT LIABILITIES
Pursuant to the Restructuring Agreement, Webb retained an interest,
which was assigned to 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
F-17
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Cont'd.)
9. OTHER NONCURRENT LIABILITIES (cont'd.)
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 consolidated financial statements since the likelihood
of paying such amount is not considered probable at this time. As of
December 31, 1994, accrued interest would have amounted to
approximately $29 million.
10. PROMOTIONAL ALLOWANCES
The retail value of complimentary rooms, food and beverages and other
complimentaries furnished to patrons is included in gross revenue and
then deducted as promotional allowances. The estimated cost of
providing such promotional allowances for the years ended December 31,
1994, 1993 and 1992 has been allocated to casino expenses as follows
(in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Hotel $ 2,570 2,251 1,972
Food and beverage 9,864 9,650 9,936
Entertainment 737 667 981
------- ------ ------
Total $13,171 12,568 12,889
======= ====== ======
</TABLE>
11. INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued
Statement No. 109, "Accounting for Income Taxes". Statement No. 109
requires a change from the deferred method of accounting for income
taxes to the asset and liability method of accounting for income taxes.
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.
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 year ended December 31, 1993 as a result of the
adoption of Statement No. 109.
F-18
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Cont'd.)
11. INCOME TAXES (cont'd.)
The provision for income taxes is comprised of the following (in
thousands):
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $(4,175) 1,928 2,325
State (314) 340 411
Deferred 2,096 1,154 1,339
------ ----- -----
$(2,393) 3,422 4,075
======= ===== =====
</TABLE>
The provision for income taxes differs from the amount computed at the
statutory rate as follows (in thousands):
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Computed "expected" tax expense $(3,160) 2,908 3,442
Increase (reduction) in income taxes
resulting from:
Change in the valuation allowance 422 -0- -0-
State income tax, net of federal
income tax benefit (558) 514 633
Meals and entertainment 579 -0- -0-
Other permanent differences 324 -0- -0-
------ ------ ------
$(2,393) 3,422 4,075
====== ===== =====
</TABLE>
F-19
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Cont'd.)
11. INCOME TAXES (cont'd.)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1994 and 1993 are presented below (in thousands):
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Deferred tax assets:
State net operating loss $ 422 -0-
Rent leveling 12,717 14,015
Accrued expenses 1,491 1,373
Other 233 606
--------- ---------
Total gross deferred tax assets 14,863 15,994
Less valuation allowance (422) -0-
--------- ---------
Net deferred tax assets 14,441 15,994
--------- ---------
Deferred tax liabilities:
Gaming equipment, due to differences in
depreciation (907) (699)
Difference between book and tax basis of
Expandable Wraparound Mortgage receivable (20,007) (19,574)
Difference between book and tax basis of
receivables (1,705) (1,772)
Other (21) (52)
--------- ---------
Total gross deferred tax liabilities (22,640) (22,097)
--------- ---------
Net deferred tax liability $ (8,199) (6,103)
========= =========
</TABLE>
The net change in the valuation allowance for the year ended December
31, 1994 was an increase of $422,000. No valuation allowance was
provided on deferred tax assets as of December 31, 1993 since
management believed that it was more likely than not that such assets
would be realized through the reversal of existing deferred tax
liabilities and future taxable income.
The Corporation recorded an income tax benefit of $2,393,000 for the
year ended December 31, 1994 which represents the tax refund expected
from the carryback of Federal net operating losses net of increased
deferred tax credits. As of December 31, 1994, the current portion of
the income tax benefit of approximately $4.2 million is included in
other current assets.
The principal items comprising the deferred tax provision in 1994
included rent levelling of $1,280,000, Expandable Wraparound Mortgage
discount expense of $460,000, bad debt expense of ($80,000) and
depreciation expense of $200,000.
The principal items comprising the deferred tax provision in 1993
included rent levelling of $1,270,000, Expandable Wraparound Mortgage
F-20
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Cont'd.)
11. INCOME TAXES (cont'd.)
discount expense of $402,000, bad debt expense of $42,000, and income
related to debt forgiveness of ($520,000).
The principal items comprising the deferred tax provision in 1992
included rent levelling of $1,150,000, Expandable Wraparound Mortgage
discount expense of $350,000, reversal of progressive jackpot liability
of $615,000, bad debt expense of ($66,000), and income related to debt
forgiveness of ($678,000).
As a result of the restructuring in 1989, the amount of debt forgiven
resulted in the loss or reduction of various tax attributes including
tax operating loss carryforwards of $30,400,000, unused tax credits of
$1,041,000 and reduction in tax basis of assets by $89,178,000. As a
result of the reduction in tax basis of assets, cash payments for
income taxes will significantly exceed income tax expense for financial
statement purposes in future years. The above amounts have been
adjusted to reflect settlements of the Internal Revenue Service ("IRS")
audits of the years 1983 through 1987. The IRS is currently conducting
an audit of the Corporation's federal income tax returns for the years
1990 and 1991. The Corporation believes the results of the audit will
not have a material adverse effect on the consolidated financial
statements.
12. OPERATING LEASE
New Claridge leases the Hotel Assets and the land on which the Claridge
is located from the Partnership under an Operating Lease for an initial
lease term of 15 years with three 10- year renewal options. 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 such rent not to be more than $29,500,000 nor less
than $24,000,000 for the lease year commencing October 1, 1998 through
September 30, 1999 and, subsequently, not to be greater than 10% more
than the basic rent for the immediately preceding lease year in each
lease year thereafter. New Claridge is also required to pay as
additional rent amounts including 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, and the general and
administrative costs of the Partnership. 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.
F-21
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Cont'd.)
12. OPERATING LEASE (cont'd.)
Minimum future basic lease payments under the initial term of the
Operating Lease, as amended, as of December 31, 1994 (net of expected
abatements, as discussed below) are as follows (in thousands):
1995 $ 31,693
1996 31,420
1997 40,077
1998 32,531
---------
Total Minimum $135,721
=========
Also, additional rent payments are required based upon fixed assets
purchased by the Partnership (the FF&E Replacements, Note 3) and then
leased to New Claridge. For the years ended December 31, 1994, 1993 and
1992, expense resulting from the Operating Lease amounted to
$36,219,000, $34,580,000 and $34,658,000, respectively, of which
($3,209,000), ($3,183,000) and ($2,884,000) of rental expense is
attributable to the requirement under Statement of Financial Accounting
Standards No. 13 to provide a level rent expense for those leases with
escalating payments. Under terms of the Operating Lease, the
Partnership is responsible for taxes, assessments, insurance,
maintenance and repairs and other costs related to use and occupancy of
the Hotel Assets.
New Claridge entered into an Expansion Operating Lease Agreement with
the Partnership whereby New Claridge leased the expansion facility for
an initial term beginning March 17, 1986 and ending on September 30,
1998 with three 10-year renewal options. Basic annual rent payable
during the initial term of the Expansion Operating Lease was $3,870,000
in 1986 (prorated based on the day that the Expansion Improvements
opened to the public) and determined based on the cost of the
construction of the Expansion Improvements. Annually thereafter the
rental amount is adjusted based on the Consumer Price Index but any
increase may not exceed two percent per annum. Basic annual rent for
1994, 1993, and 1992 amounted to $4,534,000, $4,445,000, and
$4,358,000, respectively. If the term of the Expansion Operating Lease
is extended, basic annual rent will be calculated pursuant to a
formula, with such rent not to be more than $3,000,000 nor less than
$2,500,000 and not to be greater than 10% more than the basic annual
rent for the immediately preceding lease year in each lease year
thereafter.
New Claridge is also required to pay as additional rent certain
expenses and the debt service relating to Furniture, Fixture and
Equipment Replacements and building improvements (collectively
"Expansion FF&E Replacements") for the expanded facility. The
Partnership will be required during the entire term of the Expansion
Operating Lease to provide New Claridge with Expansion FF&E
Replacements and until September 30, 1998, will be required to provide
facility maintenance and engineering services to New Claridge. New
Claridge will be obligated to lend the Partnership any amounts
necessary to fund the cost of Expansion FF&E Replacements. Any advances
by New Claridge for the foregoing will be secured under the Expandable
F-22
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Cont'd.)
12. OPERATING LEASE (cont'd.)
Wraparound Mortgage. New Claridge will have the option to purchase, on
September 30, 1998 and, if it renews the Expansion Operating Lease, on
September 30, 2003, the expansion facility (including air rights) for
their fair market value at the time the option is exercised.
Effective with the consummation of the restructuring in June 1989, the
Operating Lease Agreement and the Expansion Operating Lease Agreement
were amended 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 $38.8 million of basic rent payable
through 1998, thereby reducing the Partnership's cash flow to an amount
estimated to be necessary to meet the Partnership's cash requirements.
During the third quarter of 1991, the maximum deferral of basic rent
allowable under the Operating Lease of $15,078,000 was reached. On
August 1, 1991, the Operating Lease Agreement and Expansion Operating
Lease Agreement were further amended to revise the abatement provisions
so that, commencing January 1, 1991, for each calendar year through
1998, the lease abatements not exceed $10 million in any one calendar
year, and $38,820,000 in the aggregate. As of December 31, 1994, $20.9
million of basic rent had been abated.
Effective with the closing of the Restructuring on June 16, 1989, lease
expense recognized on a level basis is reduced prospectively, from the
use of a revised schedule of rent levelling relative to the abatement
of certain rents beginning in 1992.
If the Partnership should fail to make any payment due under the
Expandable 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.
New Claridge also leases supplemental office, warehouse, and surface
parking spaces in nearby lots. For the years ended December 31, 1994,
1993, and 1992, operating lease expense for these facilities amounted
to $1,531,000, $1,645,000 and $1,776,000, respectively. The minimum
future lease payments due under these leases total $1,297,000 in 1995,
$784,000 in 1996, $756,000 in 1997, $736,000 in 1998, and $739,000 in
1999.
On March 8, 1991, New Claridge entered into an operating lease
agreement to lease certain computer equipment. For the years ended
December 31, 1994, 1993 and 1992, operating lease expense for the
computer equipment amounted to $77,000, $308,000, and $308,000,
respectively. New Claridge had an option to acquire the equipment at
the end of the lease term at the then fair market value of the
equipment. This option was exercised on February 28, 1994.
F-23
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Cont'd.)
13. CONTINGENCIES
a) Licensing
On September 22, 1993, New Claridge was issued a two-year
casino license by the Commission for the period commencing
September 30, 1993. The relicensing approval was based in part
on the execution of the third amendment to the Loan Agreement
on April 1, 1993 (as discussed in Note 8, Long-Term Debt).
b) Legal Proceedings
The Corporation and New Claridge are defendants in various
legal proceedings arising in the normal course of business. In
the opinion of management, it is not reasonably likely that
any such matters individually or collectively would result in
an outcome having a material adverse effect on the
consolidated financial statements.
14. OTHER EVENTS
On November 8, 1994, a casino management agreement (the "Casino
Management Agreement") was executed between CGI and St. Petersburg
Kennel Club, Inc. ("SPKC"), which owns a greyhound racetrack located in
St. Petersburg, Florida. Pursuant to the Casino Management Agreement,
which expires on December 31, 1997, CGI would receive fees for managing
any casino entertainment facility authorized at SPKC's site. In
November 1994, Florida voters rejected a ballot question which would
have authorized up to 47 casinos in the state of Florida, including one
at SPKC's St. Petersburg greyhound race track.
15. RELATED PARTY TRANSACTIONS
a. The Restructuring Agreement provided for Webb to retain an
interest, which was assigned to 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 in the sale or refinancing of the Claridge facility in
excess of the first mortgage loan. Webb was also entitled to
retain a seat on the Board of Directors of the Corporation and
New Claridge (a right it subsequently relinquished). Effective
with the closing of the Restructuring on June 16, 1989, all or
substantially all of the financial, contractual, ownership,
guarantee and other relationships of the Corporation and New
Claridge with Webb were terminated.
b. The Partnership has a direct material interest in the
Expandable Wraparound Mortgage Loan Agreement, the Operating
Lease and the Expansion Operating Lease together with the
amendments thereto as described in the preceding notes. The
F-24
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Cont'd.)
15. RELATED PARTY TRANSACTIONS (cont'd.)
ownership interests in the Partnership which have a
relationship to the Corporation are currently as follows:
- Limited Partners representing approximately 98%
interest in the Partnership own approximately 4,500,000
shares of the Corporation's Class A Stock; and
- Special Limited Partners (Oppenheimer Holdings, Inc.
and certain officers and employees of Oppenheimer &
Co., Inc.) represent approximately 1% interest in the
Partnership and prior to March 24, 1989 owned the
remaining 562,500 shares of Class A Stock. On March 24,
1989, Oppenheimer Holdings, Inc. returned to the
Corporation all of its shares (273,938) of the
Corporation's Class A Stock.
See footnote 1.c, "1989 Restructuring", for a summary of the
transactions consummated pursuant to the terms of the
Restructuring Agreement.
c. 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 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 treasury shares
whether or not vested in such shares.
F-25
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Cont'd.)
15. RELATED PARTY TRANSACTIONS (cont'd.)
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.
16. PARENT COMPANY INFORMATION
The Corporation owns all of the outstanding common stock of New
Claridge, which it purchased for $5,000,000. The balance sheet accounts
of the Corporation as of December 31, 1994 and 1993 include the
following:
1994 1993
---- ----
(in thousands)
Cash $ 2 -0-
Investment in New Claridge 87,206 5,000
Other assets 7,219 457
-------- --------
Total assets $ 94,427 5,457
======== ========
Long-term debt $ 85,000 -0-
Other liabilities 17,517 6,030
Stockholders' deficiency (8,090) (573)
-------- --------
Total liabilities and
stockholders' deficiency $ 94,427 5,457
======== ========
The Corporation's expenses for the years ended December 31, 1994, 1993
and 1992 amounted to $7,518,000, $599,000, and $611,000, respectively,
including income tax benefit of $3,908,000, $-0-, and $-0-,
respectively. These amounts represent the net loss of the Corporation
for the respective periods before equity in the results of New
Claridge. For the year ended December 31, 1994, New Claridge had net
income of $617,000, as compared to net income of $5,731,000 and
$6,659,000 for the years ended December 31, 1993 and 1992,
respectively.
F-26
<PAGE>
SCHEDULE VIII
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years Ended December 31, 1994, 1993 and 1992
(in thousands)
<TABLE>
<CAPTION>
Balance Charged to Charged to Balance
Beginning Costs and Other at End of
Description of Period Expenses Accounts Deductions Period
----------- ---------- --------- --------- ----------- --------
<S> <C> <C> <C> <C> <C>
Year ended
December 31, 1994
Allowance for
Uncollectible Accounts $1,282 492 -0- 329 (a) 1,445
Year ended
December 31, 1993
Allowance for
Uncollectible Accounts $1,444 207 -0- 369 (a) 1,282
Year ended
December 31, 1992
Allowance for
Uncollectible Accounts $1,278 554 -0- 388 (a) 1,444
</TABLE>
(a) Accounts written-off.
F-27
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
--------
<S> <C>
EX10(ax) Copy of Amended Employment Agreement between Robert M. Renneisen and The
Claridge at Park Place, Incorporated dated February 6, 1995.
EX10(ay) Copy of Amended Employment Agreement between Albert T. Britton and The Claridge
at Park Place, Incorporated dated February 6, 1995.
EX10(az) Copy of Amended Employment Agreement between Peter F. Tiano and The Claridge at
Park Place, Incorporated dated February 6, 1995.
EX10(ba) Copy of Amended Employment Agreement between Raymond A. Spera and The Claridge
at Park Place, Incorporated dated February 6, 1995.
EX10(bb) Copy of the Supplemental Executive Retirement Plan of
The Claridge at Park Place, Incorporated effective
January 1, 1994.
EX27 Financial Data Schedule
</TABLE>
<PAGE>
Exhibit 10(ax)
AMENDED EMPLOYMENT AGREEMENT
----------------------------
THIS AGREEMENT made this 6 day of February, 1995, between The Claridge
at Park Place, Incorporated, a New Jersey corporation having its principal place
of business at Indiana Avenue and the Boardwalk, Atlantic City, New Jersey,
08401 (hereinafter referred to as the "Company"), and Robert M. Renneisen, an
individual residing at 802 Blue Teal Drive, Absecon, New Jersey, 08201
(hereinafter referred to as the "Executive").
W I T N E S S E T H
-------------------
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;
WHEREAS, the Company desires to implement a Supplemental Executive
Retirement Plan (SERP) and make certain changes to the Executive's previous
Employment Agreement;
WHEREAS, the Executive acknowledges the receipt and sufficiency of
participation in the SERP as consideration for the changes in the Executive's
previous Employment Agreement resulting in this Amended Employment Agreement.
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
set forth, the parties hereby agree as follows:
1. EMPLOYMENT. The Company hereby employs the Executive as its
Vice Chairman/Chief Executive 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 Chairman of the
Board and the Chief Executive Officer. In addition, the Executive may be asked
to serve as a member of the Company's Board of Directors but shall not be paid
any additional compensation for these services.
2. TERM. This Agreement shall commence on January 1, 1994 and
continue for three (3) years subject to the occurrence of any of the events set
forth in paragraphs 5 or 7. Thereafter, this Agreement is for one (1) year or
until renewed by the Board and may be renewed and extended for consecutive one
(1) year renewal terms upon specific action by the Board.
3. COMPENSATION. (a) As of February 6, 1995, the Company shall pay
the Executive a base annual salary of THREE HUNDRED THOUSAND DOLLARS ($300,000),
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.
(b) 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.
(c) 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
<PAGE>
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.
4. CASINO CONTROL COMMISSION. 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(a)(ii) 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.
5. TERMINATION. (a) Notwithstanding anything contained herein to
the contrary, the Executive's employment may be terminated upon the occurrence
of any of the following events:
(i) 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;
(ii) 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:
(1) Files a petition in bankruptcy court or is
adjudicated a bankrupt;
(2) Institutes or suffers to be instituted any procedure
in bankruptcy court for reorganization or
rearrangement of his financial affairs;
(3) Has a receiver of his assets or property appointed
because of insolvency; or
(4) Makes a general assignment for the benefit of
creditors;
(iii) Upon the death or permanent disability of the Executive;
(iv) Upon written notice by the Company terminating the
Executive's employment without cause;
(v) Upon the voluntary resignation by the Executive;
(vi) 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; (i) a sale of the Claridge
is an option being considered by the Board of Directors;
or (ii) the Company's audited financial statements are
expected to ontain a "going concern" qualification in
the Independent Auditors Report.
<PAGE>
(b) If the Executive's employment should be terminated under
subparagraphs 5(a)(iv) above, 5(f) below, paragraph 7, or if the Company elects
not to renew this Agreement pursuant to paragraph 2 above, then the Company
shall make a lump sum payment to the Executive equal to one hundred and twenty
five percent (125%) of his base annual salary determined pursuant to paragraph
3. Upon the making of such payment, the Company shall have no further liability
or obligation to the Executive under this Agreement.
(c) If the Executive's employment should be terminated under
subparagraph 5(a)(v) 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 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.
(d) Upon termination of this Agreement under subparagraph
5(a)(iv), 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.
(e) If the Executive's employment should be terminated under
subparagraphs 5(a)(i), (a)(ii) or (a)(iii) 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.
(f) 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(b) and his resignation shall not be deemed or
considered a "voluntary resignation" under subparagraph 5(a)(v).
6. NON-COMPETITION AND NON-DISCLOSURE.(a) 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.
(b) 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.
(c) 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
<PAGE>
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.
(d)(i) Subject to the provisions of subparagraph 6(d)(ii) below,
if the Agreement is terminated pursuant to subparagraph 5(a)(v) 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.
(ii) 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(a)(v) 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(c) above provided proper
notice of termination is given to the Company.
(e) 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:
(i) solicit for the Executive's benefit or the benefit or 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
(ii) solicit for the Executive's benefit or the benefit of any
person or organization other Company, the employment of
any employee of any customer of the Company.
(f) As additional consideration for the covenant contained in
subparagraphs 6(d), 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 paragraph 3. The Executive shall make such demand within
ten (10) days following termination of his employment by giving notice to the
Company in accordance with paragraph 11. 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 (f), or (ii) a notice that the Company
has waived the Executive's obligations under subparagraph 6(d), in which event
the Executive shall be released from his obligations under subparagraph 6(d) and
the Company shall be released from its obligation to pay the Executive any
additional consideration under this subparagraph (f). Notwithstanding anything
contained in this subparagraph (f), all payments made pursuant to this
subparagraph (f) shall be in addition to, and not in lieu of, any payments to
which the Executive may be entitled under paragraph 5.
7. SALE OF THE COMPANY. 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 paragraph 5. If during
the term of this Agreement, the Company, its shareholders, or persons having
<PAGE>
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(b) 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.
8. PARTICIPATION. The Executive shall devote all 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.
9. ARBITRATION. 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.
10. INJUNCTIVE RELIEF. 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.
11. NOTICES. 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:
------------------ c/o Claridge Casino Hotel
Indiana Avenue and The Boardwalk
Atlantic City, New Jersey 08401
Attn: Chair of Human Resources
Committee
If to the Executive:
-------------------- Robert M. Renneisen
802 Blue Teal Drive
Absecon, New Jersey, 08201
Either party may change the address to which notices are to be
transmitted by notice given in accordance with this paragraph.
<PAGE>
12. MISCELLANEOUS. (a) 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.
(b) 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.
(c) No amendment or waiver or any provision of this Agreement
shall be effective unless in writing signed by both parties.
(d) 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.
(e) 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.
(f) No waiver by the Company of 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.
(g) 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.
13. ENTIRE AGREEMENT. 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 in 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 hand as of the date first above written.
ATTEST:
__________________________ BY: /s/ Robert M. Renneisen
------------------------
ROBERT M. RENNEISEN
VICE CHAIRMAN/CHIEF
EXECUTIVE OFFICER
ATTEST: THE CLARIDGE AT PARK PLACE,
INCORPORATED
__________________________ BY: /s/ David W. Brenner
---------------------
DAVID W. BRENNER
CHAIR OF HUMAN
RESOURCES COMMITTEE
<PAGE>
Exhibit 10(ay)
AMENDED EMPLOYMENT AGREEMENT
----------------------------
THIS AGREEMENT made this 6 day of February, 1995, between The Claridge
at Park Place, Incorporated, a New Jersey corporation having its principal place
of business at Indiana Avenue and the Boardwalk, Atlantic City, New Jersey,
08401 (hereinafter referred to as the "Company"), and Albert T. Britton, an
individual residing at 8 Arcadian Drive, Sicklerville, New Jersey, 08081
(hereinafter referred to as the "Executive").
W I T N E S S E T H
-------------------
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;
WHEREAS, the Company desires to implement a Supplemental Executive
Retirement Plan (SERP) and make certain changes to the Executive's previous
Employment Agreement;
WHEREAS, the Executive acknowledges the receipt and sufficiency of
participation in the SERP as consideration for the changes in the Executive's
previous Employment Agreement resulting in this Amended Employment Agreement.
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
set forth, the parties hereby agree as follows:
1. EMPLOYMENT. The Company hereby employs the Executive as its
Executive Vice President and General Manager. 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 Chairman
of the Board and the Chief Executive Officer. In addition, the Executive may be
asked to serve as a member of the Company's Board of Directors but shall not be
paid any additional compensation for these services.
2. TERM. This Agreement shall commence on January 1, 1994 and
continue for three (3) years subject to the occurrence of any of the events set
forth in paragraphs 5 or 7. Thereafter, this Agreement is for one (1) year or
until renewed by the Board and may be renewed and extended for consecutive one
(1) year renewal terms upon specific action by the Board.
3. COMPENSATION. (a) As of February 6, 1995, the Company shall
pay the Executive a base annual salary of ONE HUNDRED SEVENTY ONE THOUSAND, SIX
HUNDRED DOLLARS ($171,600), 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.
(b) 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.
(c) 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
<PAGE>
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.
4. CASINO CONTROL COMMISSION. 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(a)(ii) 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.
5. TERMINATION. (a) Notwithstanding anything contained herein to
the contrary, the Executive's employment may be terminated upon the occurrence
of any of the following events:
(i) 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;
(ii) 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:
(1) Files a petition in bankruptcy court or is
adjudicated a bankrupt;
(2) Institutes or suffers to be instituted any procedure
in bankruptcy court for reorganization or
rearrangement of his financial affairs;
(3) Has a receiver of his assets or property appointed
because of insolvency; or
(4) Makes a general assignment for the benefit of
creditors;
(iii) Upon the death or permanent disability of the Executive;
(iv) Upon written notice by the Company terminating the
Executive's employment without cause;
(v) Upon the voluntary resignation by the Executive;
(vi) 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; (i) a sale of the Claridge is
an option being considered by the Board of Directors; or
(ii) the Company's audited financial statements are
expected to contain a "going concern" qualification in the
Independent Auditors Report.
<PAGE>
(b) If the Executive's employment should be terminated under
subparagraphs 5(a)(iv) above, 5(f) below, paragraph 7, or if the Company elects
not to renew this Agreement pursuant to paragraph 2 above, then the Company
shall make a lump sum payment to the Executive equal to one hundred and twenty
five percent (125%) of his base annual salary determined pursuant to paragraph
3. Upon the making of such payment, the Company shall have no further liability
or obligation to the Executive under this Agreement.
(c) If the Executive's employment should be terminated under
subparagraph 5(a)(v) 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 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.
(d) Upon termination of this Agreement under subparagraph 5(a)(iv), 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.
(e) If the Executive's employment should be terminated under
subparagraphs 5(a)(i), (a)(ii) or (a)(iii) 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.
(f) 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(b) and his resignation shall not be deemed or
considered a "voluntary resignation" under subparagraph 5(a)(v).
6. NON-COMPETITION AND NON-DISCLOSURE.(a) 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.
(b) 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.
(c) 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
<PAGE>
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.
(d)(i) Subject to the provisions of subparagraph 6(d)(ii) below, if the
Agreement is terminated pursuant to subparagraph 5(a)(v) 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.
(ii) 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(a)(v) 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(c) above provided proper
notice of termination is given to the Company.
(e) 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:
(i) solicit for the Executive's benefit or the benefit or 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
(ii) solicit for the Executive's benefit or the benefit of any
person or organization other Company, the employment of
any employee of any customer of the Company.
(f) As additional consideration for the covenant contained in
subparagraphs 6(d), 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 paragraph 3. The Executive shall make such demand within
ten (10) days following termination of his employment by giving notice to the
Company in accordance with paragraph 11. 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 (f), or (ii) a notice that the Company
has waived the Executive's obligations under subparagraph 6(d), in which event
the Executive shall be released from his obligations under subparagraph 6(d) and
the Company shall be released from its obligation to pay the Executive any
additional consideration under this subparagraph (f). Notwithstanding anything
contained in this subparagraph (f), all payments made pursuant to this
subparagraph (f) shall be in addition to, and not in lieu of, any payments to
which the Executive may be entitled under paragraph 5.
7. SALE OF THE COMPANY. 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 paragraph 5. 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
<PAGE>
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(b) 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.
8. PARTICIPATION. The Executive shall devote all 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.
9. ARBITRATION. 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.
10. INJUNCTIVE RELIEF. 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.
11. NOTICES. 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:
------------------ c/o Claridge Casino Hotel
Indiana Avenue and The Boardwalk
Atlantic City, New Jersey 08401
Attn: Chair of Human Resources
Committee
If to the Executive:
-------------------- Albert T. Britton
8 Arcadian Drive
Sicklerville, New Jersey, 08081
Either party may change the address to which notices are to be
transmitted by notice given in accordance with this paragraph.
<PAGE>
12. MISCELLANEOUS. (a) 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.
(b) 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.
(c) No amendment or waiver or any provision of this Agreement shall be
effective unless in writing signed by both parties.
(d) 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.
(e) 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.
(f) No waiver by the Company of 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.
(g) 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.
13. ENTIRE AGREEMENT. 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 in 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 hand as of the date first above written.
ATTEST:
__________________________ BY: /s/ Albert T. Britton
----------------------
ALBERT T. BRITTON
EXECUTIVE VICE PRESIDENT
AND GENERAL MANAGER
ATTEST: THE CLARIDGE AT PARK PLACE,
INCORPORATED
__________________________ BY: /s/ Robert M. Renneisen
------------------------
ROBERT M. RENNEISEN
VICE CHAIRMAN/CHIEF
EXECUTIVE OFFICER
<PAGE>
Exhibit 10(az)
AMENDED EMPLOYMENT AGREEMENT
----------------------------
THIS AGREEMENT made this 6 day of February, 1995, between The Claridge
at Park Place, Incorporated, a New Jersey corporation having its principal place
of business at Indiana Avenue and the Boardwalk, Atlantic City, New Jersey,
08401 (hereinafter referred to as the "Company"), and Peter F. Tiano, an
individual residing at 7502 Winchester Avenue, Margate, New Jersey, 08402
(hereinafter referred to as the "Executive").
W I T N E S S E T H
-------------------
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;
WHEREAS, the Company desires to implement a Supplemental Executive
Retirement Plan (SERP) and make certain changes to the Executive's previous
Employment Agreement;
WHEREAS, the Executive acknowledges the receipt and sufficiency of
participation in the SERP as consideration for the changes in the Executive's
previous Employment Agreement resulting in this Amended Employment Agreement.
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
set forth, the parties hereby agree as follows:
1. EMPLOYMENT. The Company hereby employs the Executive as its
Executive Vice President of Operations. 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 Chairman of the
Board and the Chief Executive Officer. In addition, the Executive may be asked
to serve as a member of the Company's Board of Directors but shall not be paid
any additional compensation for these services.
2. TERM. This Agreement shall commence on January 1, 1994 and continue
for three (3) years subject to the occurrence of any of the events set forth in
paragraphs 5 or 7. Thereafter, this Agreement is for one (1) year or until
renewed by the Board and may be renewed and extended for consecutive one (1)
year renewal terms upon specific action by the Board.
3. COMPENSATION. (a) As of February 6, 1995, the Company shall pay the
Executive a base annual salary of ONE HUNDRED SIXTY SIX THOUSAND, FOUR HUNDRED
DOLLARS ($166,400), 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.
(b) 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.
(c) 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
<PAGE>
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.
4. CASINO CONTROL COMMISSION. 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(a)(ii) 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.
5. TERMINATION. (a) Notwithstanding anything contained herein to the
contrary, the Executive's employment may be terminated upon the occurrence of
any of the following events:
(i) 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;
(ii) 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:
(1) Files a petition in bankruptcy court or is
adjudicated a bankrupt;
(2) Institutes or suffers to be instituted any procedure
in bankruptcy court for reorganization or
rearrangement of his financial affairs;
(3) Has a receiver of his assets or property appointed
because of insolvency; or
(4) Makes a general assignment for the benefit of
creditors;
(iii) Upon the death or permanent disability of the Executive;
(iv) Upon written notice by the Company terminating the
Executive's employment without cause;
(v) Upon the voluntary resignation by the Executive;
(vi) 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; (i) a sale of the Claridge is
an option being considered by the Board of Directors; or
(ii) the Company's audited financial statements are
expected to contain a "going concern" qualification in the
Independent Auditors Report.
<PAGE>
(b) If the Executive's employment should be terminated under
subparagraphs 5(a)(iv) above, 5(f) below, paragraph 7, or if the Company elects
not to renew this Agreement pursuant to paragraph 2 above, then the Company
shall make a lump sum payment to the Executive equal to one hundred and twenty
five percent (125%) of his base annual salary determined pursuant to paragraph
3. Upon the making of such payment, the Company shall have no further liability
or obligation to the Executive under this Agreement.
(c) If the Executive's employment should be terminated under
subparagraph 5(a)(v) 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 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.
(d) Upon termination of this Agreement under subparagraph 5(a)(iv), 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.
(e) If the Executive's employment should be terminated under
subparagraphs 5(a)(i), (a)(ii) or (a)(iii) 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.
(f) 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(b) and his resignation shall not be deemed or
considered a "voluntary resignation" under subparagraph 5(a)(v).
6. NON-COMPETITION AND NON-DISCLOSURE.(a) 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.
(b) 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.
(c) 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
<PAGE>
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.
(d)(i) Subject to the provisions of subparagraph 6(d)(ii) below, if the
Agreement is terminated pursuant to subparagraph 5(a)(v) 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.
(ii) 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(a)(v) 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(c) above provided proper
notice of termination is given to the Company.
(e) 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:
(i) solicit for the Executive's benefit or the benefit or 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
(ii) solicit for the Executive's benefit or the benefit of any
person or organization other Company, the employment of any
employee of any customer of the Company.
(f) As additional consideration for the covenant contained in
subparagraphs 6(d), 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 paragraph 3. The Executive shall make such demand within
ten (10) days following termination of his employment by giving notice to the
Company in accordance with paragraph 11. 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 (f), or (ii) a notice that the Company
has waived the Executive's obligations under subparagraph 6(d), in which event
the Executive shall be released from his obligations under subparagraph 6(d) and
the Company shall be released from its obligation to pay the Executive any
additional consideration under this subparagraph (f). Notwithstanding anything
contained in this subparagraph (f), all payments made pursuant to this
subparagraph (f) shall be in addition to, and not in lieu of, any payments to
which the Executive may be entitled under paragraph 5.
7. SALE OF THE COMPANY. 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 paragraph 5. 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
<PAGE>
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(b) 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.
8. PARTICIPATION. The Executive shall devote all 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.
9. ARBITRATION. 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.
10. INJUNCTIVE RELIEF. 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.
11. NOTICES. 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:
------------------ c/o Claridge Casino Hotel
Indiana Avenue and The Boardwalk
Atlantic City, New Jersey 08401
Attn: Chair of Human Resources
Committee
If to the Executive:
-------------------- Peter F. Tiano
7502 Winchester Avenue
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.
<PAGE>
12. MISCELLANEOUS. (a) 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.
(b) 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.
(c) No amendment or waiver or any provision of this Agreement shall be
effective unless in writing signed by both parties.
(d) 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.
(e) 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.
(f) No waiver by the Company of 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.
(g) 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.
13. ENTIRE AGREEMENT. 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 in 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 hand as of the date first above written.
ATTEST:
__________________________ BY: /s/ Peter F. Tiano
-------------------
PETER F. TIANO
EXECUTIVE VICE PRESIDENT
OF OPERATIONS
ATTEST: THE CLARIDGE AT PARK PLACE,
INCORPORATED
__________________________ BY: /s/ Robert M. Renneisen
------------------------
ROBERT M. RENNEISEN
VICE CHAIRMAN/CHIEF
EXECUTIVE OFFICER
<PAGE>
Exhibit 10(ba)
AMENDED EMPLOYMENT AGREEMENT
----------------------------
THIS AGREEMENT made this 6 day of February, 1995, between The Claridge
at Park Place, Incorporated, a New Jersey corporation having its principal place
of business at Indiana Avenue and the Boardwalk, Atlantic City, New Jersey,
08401 (hereinafter referred to as the "Company"), and Raymond A. Spera, an
individual residing at 101 Flyatt Road, Vincentown, New Jersey, 08088
(hereinafter referred to as the "Executive").
W I T N E S S E T H
-------------------
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;
WHEREAS, the Company desires to implement a Supplemental Executive
Retirement Plan (SERP) and make certain changes to the Executive's previous
Employment Agreement;
WHEREAS, the Executive acknowledges the receipt and sufficiency of
participation in the SERP as consideration for the changes in the Executive's
previous Employment Agreement resulting in this Amended Employment Agreement.
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
set forth, the parties hereby agree as follows:
1. EMPLOYMENT. The Company hereby employs the Executive as its
Executive Vice President of Finance and Corporate Development. 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 Chairman of the Board and the Chief Executive Officer. In addition,
the Executive may be asked to serve as a member of the Company's Board of
Directors but shall not be paid any additional compensation for these services.
2. TERM. This Agreement shall commence on January 1, 1994 and continue
for three (3) years subject to the occurrence of any of the events set forth in
paragraphs 5 or 7. Thereafter, this Agreement is for one (1) year or until
renewed by the Board and may be renewed and extended for consecutive one (1)
year renewal terms upon specific action by the Board.
3. COMPENSATION. (a) As of February 6, 1995, the Company shall pay the
Executive a base annual salary of ONE HUNDRED SIXTY SIX THOUSAND, FOUR HUNDRED
DOLLARS ($166,400), 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.
(b) 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.
(c) 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
<PAGE>
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.
4. CASINO CONTROL COMMISSION. 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(a)(ii) 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.
5. TERMINATION. (a) Notwithstanding anything contained herein to the
contrary, the Executive's employment may be terminated upon the occurrence of
any of the following events:
(i) 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;
(ii) 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:
(1) Files a petition in bankruptcy court or is
adjudicated a bankrupt;
(2) Institutes or suffers to be instituted any procedure
in bankruptcy court for reorganization or
rearrangement of his financial affairs;
(3) Has a receiver of his assets or property appointed
because of insolvency; or
(4) Makes a general assignment for the benefit of
creditors;
(iii) Upon the death or permanent disability of the Executive;
(iv) Upon written notice by the Company terminating the
Executive's employment without cause;
(v) Upon the voluntary resignation by the Executive;
(vi) 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; (i) a sale of the Claridge is
an option being considered by the Board of Directors; or
(ii) the Company's audited financial statements are
expected to contain a "going concern" qualification in the
Independent Auditors Report.
<PAGE>
(b) If the Executive's employment should be terminated under
subparagraphs 5(a)(iv) above, 5(f) below, paragraph 7, or if the Company elects
not to renew this Agreement pursuant to paragraph 2 above, then the Company
shall make a lump sum payment to the Executive equal to one hundred and twenty
five percent (125%) of his base annual salary determined pursuant to paragraph
3. Upon the making of such payment, the Company shall have no further liability
or obligation to the Executive under this Agreement.
(c) If the Executive's employment should be terminated under
subparagraph 5(a)(v) 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 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.
(d) Upon termination of this Agreement under subparagraph 5(a)(iv), 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.
(e) If the Executive's employment should be terminated under
subparagraphs 5(a)(i), (a)(ii) or (a)(iii) 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.
(f) 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(b) and his resignation shall not be deemed or
considered a "voluntary resignation" under subparagraph 5(a)(v).
6. NON-COMPETITION AND NON-DISCLOSURE.(a) 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.
(b) 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.
(c) 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
<PAGE>
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.
(d)(i) Subject to the provisions of subparagraph 6(d)(ii) below, if the
Agreement is terminated pursuant to subparagraph 5(a)(v) 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.
(ii) 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(a)(v) 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(c) above provided proper
notice of termination is given to the Company.
(e) 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:
(i) solicit for the Executive's benefit or the benefit or 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
(ii) solicit for the Executive's benefit or the benefit of any
person or organization other Company, the employment of any
employee of any customer of the Company.
(f) As additional consideration for the covenant contained in
subparagraphs 6(d), 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 paragraph 3. The Executive shall make such demand within
ten (10) days following termination of his employment by giving notice to the
Company in accordance with paragraph 11. 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 (f), or (ii) a notice that the Company
has waived the Executive's obligations under subparagraph 6(d), in which event
the Executive shall be released from his obligations under subparagraph 6(d) and
the Company shall be released from its obligation to pay the Executive any
additional consideration under this subparagraph (f). Notwithstanding anything
contained in this subparagraph (f), all payments made pursuant to this
subparagraph (f) shall be in addition to, and not in lieu of, any payments to
which the Executive may be entitled under paragraph 5.
7. SALE OF THE COMPANY. 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 paragraph 5. 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
<PAGE>
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(b) 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.
8. PARTICIPATION. The Executive shall devote all 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.
9. ARBITRATION. 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.
10. INJUNCTIVE RELIEF. 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.
11. NOTICES. 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: c/o Claridge Casino Hotel
------------------ Indiana Avenue and The Boardwalk
Atlantic City, New Jersey 08401
Attn: Chair of Human Resources
Committee
If to the Executive: Raymond A. Spera
-------------------- 101 Flyatt Drive
Vincentown, New Jersey, 08088
Either party may change the address to which notices are to be
transmitted by notice given in accordance with this paragraph.
<PAGE>
12. MISCELLANEOUS. (a) 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.
(b) 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.
(c) No amendment or waiver or any provision of this Agreement shall be
effective unless in writing signed by both parties.
(d) 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.
(e) 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.
(f) No waiver by the Company of 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.
(g) 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.
13. ENTIRE AGREEMENT. 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 in 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 hand as of the date first above written.
ATTEST:
__________________________ BY: /s/ Raymond A. Spera
--------------------
RAYMOND A. SPERA
EXECUTIVE VICE PRESIDENT
OF FINANCE AND CORPORATE
DEVELOPMENT
ATTEST: THE CLARIDGE AT PARK PLACE,
INCORPORATED
__________________________ BY: /s/ Robert M. Renneisen
------------------------
ROBERT M. RENNEISEN
VICE CHAIRMAN/CHIEF
EXECUTIVE OFFICER
<PAGE>
Exhibit 10(bb)
THE CLARIDGE AT PARK PLACE, INCORPORATED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
----------------------------------------
The Claridge at Park Place, Incorporated's Supplemental
Executive Retirement Plan (the "Plan") is intended to be an unfunded
supplemental retirement plan providing certain executives of The Claridge at
Park Place, Incorporated (the "Company"), as identified on Schedule A attached
hereto (which is hereby incorporated into the Plan by reference), with extra and
additional retirement income security benefits as an inducement for outstanding
future services. It is intended that the Plan be considered under ERISA as "a
plan which is unfunded and is maintained by an employer primarily for the
purpose of providing deferred compensation for a select group of management or
highly compensated employees."
I. Definitions.
A. "Beneficiary" or "Beneficiaries" shall mean, with respect to each
Participant, such beneficiary or beneficiaries as last indicated
by the Participant in writing on a form provided by the
Committee. Such designation shall not be effective unless
submitted to the Committee. If no valid designation is in effect
at the time of the death of the Participant, "Beneficiary" shall
mean the Participant's estate.
B. "Benefit" shall mean benefits payable, subject to the other terms
of the Plan, in accordance with Section II.B.
C. "Benefit Service" shall mean the total number of years (including
any fractional years) of employment by the Company after January
1, 1994. For purposes of determining Benefit Service, a year
shall mean each 12-month period beginning on January 1, 1994,
and each anniversary thereof.
D. "Board" shall mean the Board of Directors of the Company.
E. "Change of Control" shall mean, with respect to each Participant:
(i) a change of control for purposes of the most recent version
of the employment agreement between the Company and the
Participant to contain a provision relating to change of control;
or (ii) if the applicable employment agreement has never
contained such a provision or there has never been an employment
agreement between the Company and the Participant, the Company,
its shareholders, or persons having voting control entering 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 Company's business as presently
constituted would occur upon the closing of such agreement.
F. "Code" shall mean the Internal Revenue Code of 1986, as amended.
G. "Committee" shall mean the Human Resources and Compensation
Committee of the Board.
<PAGE>
H. "Disability" shall mean, with respect to each Participant: (i)
permanent disability for purposes of the most recent version of
the employment agreement between the Company and the Participant
to contain a provision relating to permanent disability; or (ii)
if the applicable employment agreement has never contained such a
provision or there has never been an employment agreement between
the Company and the Participant, the Participant's inability to
perform his duties, on account of a disability, for 180
consecutive days or any 180 days during a period of 360
consecutive days.
I. "Disability Benefit" shall mean those benefits payable, subject
to the other terms of the Plan, in accordance with Section II.C.
J. "Early Retirement Date" shall mean, with respect to each
Participant, the date on which the Participant retires after
reaching the age set forth on Schedule A.
K. "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
L. "Normal Retirement Date" shall mean, with respect to each
Participant, the date on which the Participant attains age 65.
M. "Participant" shall mean any executive of the Company selected
for participation in the Plan, as set forth in Schedule A. No
other employee or person shall have any claim or right to
participate in the Plan, except as may expressly be set forth
herein with respect to Beneficiaries.
N. "Survivor Benefit" shall mean benefits payable, subject to the
other terms of the Plan, in accordance with Section II.D.
II. Benefits.
A. Benefits, Disability Benefits and Survivor Benefits
shall be payable as provided in this Section II, subject to the
other terms of the Plan.
B. The Benefit payable each year during the applicable benefit
payment period (as set forth below in this Section II.B) to each
Participant, where Section II.C and Section II.D do not apply,
shall be:
i) The Participant's Unit Value as set forth on Schedule A,
multiplied by
ii) the Participant's years of Benefit Service as of the date
of termination.
Except as may otherwise be provided herein, an amount equal to
the Participant's Benefit shall be payable each year for a
period of 15 years commencing on the first day of the month
following the later of: (i) the Participant's termination from
service; or (ii) his Early Retirement Date.
<PAGE>
C. In the event a Participant terminates service on account of
Disability, the Disability Benefit payable each year during the
applicable benefit payment period (as set forth below in this
Section II.C) to each Participant shall be:
i) the Participant's Unit Value (as set forth on Schedule
A), multiplied by
ii) the Participant's years of Benefit Service as of the date
of his termination due to a Disability.
Except as may otherwise be provided herein, an amount equal to
the Participant's Disability Benefit shall be payable each year
for a period of 15 years commencing on the first day of the month
following the Participant's termination from service.
D. Survivor Benefits shall be determined as follows:
1. If a Participant's death shall occur prior to the
commencement date for his benefits hereunder, the Survivor
Benefit payable to the Participant's Beneficiaries, in the
aggregate, shall be equal to the annual amount that would
have been payable to him had he terminated service on the
date of his death. Except as may otherwise be provided
herein, this amount shall be payable without reduction for
each year a period of 15 years commencing on the first day
of the next month following the Participant's death.
2. If a Participant's death shall occur on or after the
commencement date for his benefits hereunder, then, except
as may otherwise be provided herein, the Survivor Benefit
payable to the Participant's Beneficiaries, in the
aggregate, shall be equal to the Benefit that the
Participant was eligible to receive at the time of his
death and shall be payable, as of the same annual payment
date on which the Participant had been receiving his
Benefit, for the number of years remaining in the
Participant's fifteen-year payment period, in accordance
with Section II.B hereof.
3. If Survivor Benefits are payable in accordance with the
foregoing, then, notwithstanding Sections II.B and C, no
further Benefits or Disability Benefits shall be payable
hereunder.
<PAGE>
III. Forfeiture.
A. If a Participant: (i) at any time fails to comply with any
non-competition and non-disclosure provisions as may be set forth
in his employment agreement with the Company as in effect from
time to time; or (ii) assumes a position within the gaming
industry in Atlantic City, New Jersey, then such Participant's
benefits hereunder shall be forfeited immediately, and no amounts
shall be payable hereunder to or with respect to the Participant
or any of the Participant's Beneficiaries.
B. If a Participant voluntarily terminates his or her employment
before the completion of five years of service (with years of
service being as determined under the Company's tax-qualified
pension plan), such Participant's benefits hereunder shall be
forfeited immediately, and no amounts shall be payable hereunder
to or with respect to the Participant or any of the Participant's
Beneficiaries, unless the Participant's termination is on or
after the Participant's Early Retirement Date or on account of
death or Disability.
C. If a Participant is terminated for "cause," as defined in his
employment agreement with the Company as in effect from time to
time, or, if no such employment agreement is in effect at an
applicable time, the Participant's employment agreement with the
Company last in effect, or fails to comply with a New Jersey
residency requirement contained in his employment agreement as in
effect from time to time, such Participant's benefits hereunder
shall be forfeited immediately, and no amounts shall be payable
hereunder to or with respect to the Participant or any of the
Participant's Beneficiaries. If no employment agreement is in
effect at an applicable time or the employment agreement has no
definition of cause, "cause" hereunder shall mean: (i) the
indictment and/or conviction of any criminal offense; (ii) the
deliberate refusal by the Participant (except by reason of
Disability) to perform his duties; or (iii) the Participant's (A)
filing of a petition in bankruptcy court or is adjudicated
bankrupt, (B) instituting or suffering to be instituted any
procedure in bankruptcy court for reorganization or rearrangement
of his financial affairs, (C) having a receiver of his assets or
property appointed because of insolvency, or (D) making a general
assignment for the benefit of creditors.
D. Except as otherwise provided above in this Section III, each
Participant shall have a nonforfeitable right to any and all
benefits accrued by such Participant hereunder. However, where a
Participant voluntarily terminates employment after five years of
service, the participant's benefit will be paid in a lump sum net
present value within 30 days.
<PAGE>
IV. Funding
Participants have the status of general unsecured creditors of the
Company, and the Plan constitutes a mere promise by the Company to make payments
under the Plan in the future. The Plan is not intended to be a funded plan for
purposes of the Code or ERISA, and shall be construed consistently with this
intent. Any payments hereunder shall be made out of the general assets of the
Company; provided that the Company may establish a trust or other funding
vehicles (including without limitation the purchase of life insurance) that
would not cause the Plan to be considered to be funded for Code or ERISA
purposes.
V. Change of Control.
Upon a Change of Control, notwithstanding any provision of the Plan to
the contrary, the Participant shall receive within five business days the
greater of (i) the present value (calculated using the average of three
then-current operating prime rates of interest as published by three major
national banks, with such calculation (including the selection of the interest
rate) to be approved by the Committee as constituted prior to the Change of
Control) of his Benefit (to the extent not otherwise already forfeited hereunder
immediately before the Change of Control) earned as of the time of such Change
of Control and otherwise payable if he retired on his Early Retirement Date (or,
if later, the date of the Change of Control) and (ii) the cash value of any
"key-man" life insurance owned by the Company at such time with respect to the
Participant; provided that a Participant may waive the application of this
Section V within 30 days of commencement of participation in the Plan or at such
later date as is approved by the Committee on such terms and conditions as may
be acceptable to the Committee.
VI. Amendment and Termination.
The Board shall have the right at any time to amend the Plan in any
respect or to terminate the Plan; provided that Schedule A may be amended by the
Committee with the prior, concurrent or subsequent consent of the Board.
Notwithstanding the above or Section II: (i) the Plan may not be amended or
terminated so as to reduce the Benefit of a Participant accrued as of the time
of such amendment or termination; and (ii) upon and after a Change of Control,
the Plan may not be amended or terminated in any respect to a Participant
without the consent of the Participant, except to cause service after the Change
of Control not to be taken into account as Benefit Service hereunder.
VII. Administration.
The Committee shall be charged with the administration of the Plan. The
Committee shall have the full authority to interpret the Plan, and to establish
rules and regulations relating to the Plan, and to employ and rely on such legal
counsel, actuaries and accountants (which may also be those of the Company), and
other agents, designees and delegatees, as it may deem advisable to assist in
the administration of the Plan. The Committee's decision in all matters
involving the interpretation and administration of the Plan shall be final and
binding and accorded the maximum deference permitted by law. Notwithstanding
the above, no member of the Committee shall be entitled to act on or decide any
matter relating solely to himself or any of his rights under the Plan. The
Company indemnifies each member of the Committee for any liability or expense
relating to the administration of the Plan, to the maximum extent permitted by
law, unless such member's actions or omissions constitute gross negligence or
wilful misconduct.
<PAGE>
VIII. Claims Procedure.
A Participant, or his Beneficiary or authorized representative, may
file a claim for Benefits under the Plan by written communication to the
Committee or its designee. A claim is not considered filed until such
communication is actually received. Within 90 days (or, if special circumstances
require an extension of time for processing, 180 days, in which case notice of
such special circumstances should be provided within the initial 90-day period)
after the filing of the claim, the Committee will either:
i) approve the claim and take appropriate steps for satisfaction of
the claim; or
ii) if the claim is wholly or partially denied, advise the claimant
of such denial by furnishing to him a written notice of such
denial setting forth: (a) the specific reason or reasons for the
denial; (b) specific reference to pertinent provisions of the
Plan on which the denial is based and, if the denial is based in
whole or in part on any rule of construction or interpretation
adopted by the Committee, a reference to such rule, a copy of
which shall be provided to the claimant; (c) a description of any
additional material or information necessary for the claimant to
perfect the claim and an explanation of the reasons why such
material or information is necessary; and (d) a reference to
Section VIII of the Plan which sets forth the claim procedure
under the Plan.
The claimant may request a review of any denial of his claim by written
application to the Committee within 60 days after receipt of the notice of
denial of such claim. Within 60 days (or, if special circumstances require an
extension of time for processing, 120 days, in which case notice of such special
circumstances should be provided within the initial 60 day period) after receipt
of written application for review, the Committee will provide the claimant with
its decision in writing, including, if the claimant's claim is not approved,
specific reasons for the decision and specific references to the Plan provisions
on which the decision is based.
IX. Nontransferability
Benefits payable under the Plan shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment, charge, garnishment, execution, or levy of any kind, either
voluntary or involuntary, prior to actually being received by the person
entitled to the benefit under the terms of the Plan; and any attempt to
anticipate, alienate, sell, transfer, assign, pledge, encumber, attach, charge
or otherwise dispose of any right to benefits payable hereunder shall be void.
<PAGE>
X. Miscellaneous
A. The establishment of the Plan shall not be construed as
conferring any legal rights upon any employee or other person for
a continuation of employment, nor shall it interfere with the
rights of the Company to discharge any employee and to treat him
without regard to the effect which such treatment might have upon
him as a Participant.
B. The Company shall have the right to deduct from each payment to
be made under the Plan any required withholding taxes.
C. The Plan and the Company's obligations thereunder shall be
assumed by and otherwise be binding upon any successor to the
Company; provided that the Company shall also remain liable for
all such obligations except to the extent otherwise consented to
in writing by a Participant or Beneficiary, as applicable.
D. The Plan shall be construed, administered and enforced according
to the laws of the State of New Jersey, without regard to
principles of conflicts of law except to the extent preempted by
federal law.
E. The effective date of the Plan is January 1, 1994.
<PAGE>
SCHEDULE A
----------
<TABLE>
<CAPTION>
===============================================================================
Name of Participant Unit Value Early Retirement Age
-------------------------------------------------------------------------------
<S> <C> <C>
Robert Renneisen $10,000 55
-------------------------------------------------------------------------------
Albert Britton $ 6,000 55
-------------------------------------------------------------------------------
Raymond Spera $ 6,000 55
-------------------------------------------------------------------------------
Peter Tiano $ 6,000 63
===============================================================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Item 601(c) of Regulation S-K
Commercial and Industrial Companies
Article 5 of Regulation S-X
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CLARIDGE
HOTEL AND CASINO CORPORATION'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1994
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000730409
<NAME> Claridge Hotel and Casino Corporation
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1
<CASH> 37,244,000
<SECURITIES> 0
<RECEIVABLES> 18,333,000
<ALLOWANCES> 1,445,000
<INVENTORY> 324,000
<CURRENT-ASSETS> 62,281,000
<PP&E> 19,852,000
<DEPRECIATION> 11,189,000
<TOTAL-ASSETS> 190,798,000
<CURRENT-LIABILITIES> 37,003,000
<BONDS> 85,000,000
<COMMON> 5,000
0
0
<OTHER-SE> 7,458,000
<TOTAL-LIABILITY-AND-EQUITY> 190,798,000
<SALES> 0
<TOTAL-REVENUES> 190,755,000
<CGS> 0
<TOTAL-COSTS> 106,185,000
<OTHER-EXPENSES> 83,416,000
<LOSS-PROVISION> 492,000
<INTEREST-EXPENSE> 9,956,000
<INCOME-PRETAX> (9,294,000)
<INCOME-TAX> (2,393,000)
<INCOME-CONTINUING> (6,901,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,901,000)
<EPS-PRIMARY> (1.37)
<EPS-DILUTED> 0
</TABLE>
