<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, 1995
[ ] 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, 1996
----------------------------
Class A Stock 5,046,064 (After deducting 16,436 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 4, 1996 (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
The Claridge Hotel and Casino Corporation (the "Corporation"), through its
wholly-owned subsidiary, The Claridge at Park Place, Incorporated ("New
Claridge"), operates The Claridge Hotel and Casino ("Claridge") in Atlantic
City, New Jersey. The Corporation was formed as a New York corporation on August
26, 1983, and qualified to engage in business in New Jersey as a foreign
corporation in September 1983. New Claridge was formed as a New Jersey
corporation on August 29, 1983.
The Corporation maintains its executive and administrative offices at
Indiana Avenue and the Boardwalk, Atlantic City, New Jersey 08401, telephone
number (609) 340-3400.
Corporate Structure
On October 31, 1983, New Claridge acquired certain assets of the 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. In connection
with these transactions, the Partnership granted the Expandable Wraparound
Mortgage (described below) to New 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. 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.
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
1
<PAGE>
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.
The net proceeds of the Notes, totaling $82.2 million net of fees and
expenses, were used or will be used as follows: (i) to repay in full on January
31, 1994, the Corporation's outstanding debt under the Revolving Credit and Term
Loan Agreement (the "Loan Agreement"), including the outstanding balance of the
Corporation's revolving credit line, which was secured by the First Mortgage;
(ii) to expand New Claridge's casino capacity by 12,000 square feet in 1994,
including the addition of approximately 500 slot machines and the relocation of
two restaurants and their related kitchens; (iii) to purchase property in 1995
and construct on that property a self-parking garage, which is expected to open
in mid-1996; (iv) the possible purchase of the Contingent Payment (see Item 1.
Business - "Contingent Payment") granted in 1989 and now held in a trust for the
Valley of the Sun United Way; and (v) the potential expansion of the
Corporation's activities into other gaming markets.
The current relationships and agreements between the Corporation, New
Claridge and the Partnership are described below:
Operating Lease/Expansion Operating Lease. 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.
The Operating Lease has 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 $37,080,000 in 1993,
$38,055,000 in 1994, $39,030,000 in 1995 and escalates yearly thereafter
up to $41,775,000 in 1997 and $32,531,000 for the nine month period ending
September 30, 1998. If 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. Under the terms of the Operating
Lease, New Claridge has an option to purchase, on September 30, 1998 and,
if it renews the Operating Lease, on September 30, 2003, the Hotel Assets
and the underlying land for their fair market value at the time the option
is exercised
New Claridge is also required to pay as additional rent 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 is 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. 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.
2
<PAGE>
On March 17, 1986, New Claridge entered into the Expansion Operating Lease
Agreement with the Partnership under which New Claridge leased certain
improvements (the "Expansion Improvements") made to the Claridge in 1986,
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 1995 was $4,625,000. 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 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.
Additional abatements of rent totaling $500,000 are available as a result
of the acquisition of the option to purchase the Contingent Payment, and
further abatements will become available upon exercising the Contingent
Payment option. (See Item 1. Business - "Contingent Payment").
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.
Expandable Wraparound Mortgage. On October 31, 1983, the Partnership
executed and delivered to New Claridge the Expandable Wraparound Mortgage,
which was subordinate to an $80 million first mortgage granted by the
Partnership to a group of banks, and a $47 million purchase money second
mortgage ("Purchase Money Second Mortgage"), granted by the Partnership to
DEWNJ. The Purchase Money Second Mortgage, which was due on September 30,
2000, was canceled upon satisfaction of certain conditions set forth in an
agreement entered into at the time of the restructuring. In conjunction
with the offering of $85 million of Notes on January 31, 1994, the
outstanding debt under the Loan Agreement, which included the First
Mortgage and the revolving credit line, was satisfied in full. By its
3
<PAGE>
terms, the Expandable Wraparound Mortgage may secure up to $25 million of
additional loans to 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 totaling $20 million being deferred
until maturity. In addition, the Partnership is required under the
Expandable Wraparound Mortgage to make payments of principal and interest
in respect of any FF&E Loans made to finance FF&E Replacements or facility
maintenance or engineering costs as described above. To the extent these
FF&E Loans exceed $25 million in the aggregate outstanding at any time,
they will be secured under separate security agreements and not by the
lien of the Expandable Wraparound Mortgage.
On March 17, 1986, the First Mortgage was amended and assumed by New
Claridge. The amount of the amended and assumed First Mortgage was
increased to secure up to $96.5 million to provide financing for the
Expansion Improvements. Indebtedness secured by the Expandable Wraparound
Mortgage was increased by an amount up to $17 million to provide the
Partnership with the necessary funding.
Effective August 28, 1986, the Partnership commenced making level monthly
payments of principal and interest so as to repay on September 30, 1998,
in full, the principal balance of this $17 million increase in the
Expandable Wraparound Mortgage. The Expandable Wraparound Mortgage was
amended to require that the $127 million aggregate principal amount
secured by it would be repayable in installments during the years 1988
through 1998 in escalating amounts totaling $80 million, with a balloon
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.
Contingent Payment
Following the 1983 transactions, Webb and its affiliates retained
significant interests in the Claridge. Effective with the closing of the
restructuring in June 1989, all or substantially all of the financial,
contractual, ownership, guarantee and other relationships of the Corporation and
New Claridge with Webb were terminated. 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
4
<PAGE>
Rights") to receive certain amounts to the extent available for application to
the Contingent Payment. Approximately 84% in interest of the investors provided
releases and became Releasing Investors. Payments to Releasing Investors are to
be made in accordance with a schedule of priorities, as defined in the
Restructuring Agreement.
On April 2, 1990, Webb transferred its interest in the Contingent Payment
to an irrevocable trust for the benefit of the Valley of the Sun United Way, and
upon such transfer Webb was no longer required to be qualified or licensed by
the Commission.
On February 23, 1996, the Corporation acquired an option to purchase, at a
discount from the carrying value, the Contingent Payment. The purchase price of
the option was $1 million, and the option may be exercised any time prior to
December 31, 1997. Upon exercise of the option, the purchase price of the
Contingent Payment would be $10 million, plus interest at 10% per annum for the
period from January 1, 1997 to the date of payment of the purchase price if the
purchase occurs after December 31, 1996. The purchase price may also increase in
an amount not to exceed $10 million if future distributions to Releasing
Investors exceed $20 million. It is estimated that at December 31, 1995, the
aggregate amount owing in respect of the Contingent Payment was $56.8 million.
Upon exercise of the option, it is anticipated that the Contingent Payment
will be canceled so that neither the Corporation or the Partnership will have
any obligation to make any payment in respect of the Contingent Payment before
making a distribution to shareholders or limited partners. Upon the purchase and
cancellation, however, the Corporation and the Partnership will remain obligated
to make payments to the Releasing Investors, in respect of the Contingent
Payment Rights, before any distribution may be made to shareholders or limited
partners. These payments would be required to be in the same amounts as if the
Contingent Payment had not been purchased and canceled. As a result, it is not
likely that shareholders or limited partners who are not Releasing Investors
will receive any distribution from the Corporation or the Partnership. In the
aggregate, Releasing Investors are entitled to receive an amount equal to
approximately 72% of the Contingent Payment.
Under the terms of the option, upon purchase of the Contingent Payment,
the Corporation and/or the Partnership are required to make distributions in
excess of $7 million to the Releasing Investors. The Corporation and the
Partnership have agreed to cooperate in the purchase of the option and the
Contingent Payment, with each contributing one-half of the purchase price of the
option and each anticipated to contribute one-half of the purchase price of the
Contingent Payment. A portion of the Partnership's contribution will be
contributed through additional abatements of basic rent payments due under the
Operating Lease and Expansion Operating Lease.
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 Expansion Improvements, which were completed in 1986 at a cost of
approximately $20 million, provided approximately 10,000 additional square feet
of casino space, together with a 3,600 square foot lounge. In 1994,
approximately $12.7 million was expended to expand the Claridge's casino square
footage by approximately 12,000 feet.
The Claridge's casino consists of approximately 56,000 square feet of
casino space on three main levels with various adjacent mezzanine levels. The
casino currently contains approximately 1,875 slot machines and sixty-four
5
<PAGE>
table games, including forty blackjack tables, ten craps tables, five roulette
tables, three Caribbean stud poker tables, one baccarat table, one mini-baccarat
table, and four other specialty games. The hotel with related amenities consists
of 501 guest rooms (including 66 two- and three-room suites, 26 specialty suites
and four tower penthouse suites), four restaurants, a buffet area, three
lounges, a private 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 is currently constructing a self-parking garage facility connected to
its existing valet-parking garage. Construction of the garage is expected to be
completed in mid-1996. The combined garage facility will provide parking for
approximately 1,200 vehicles.
New Claridge experiences a seasonal fluctuation in demand, which is
typical of casino-hotel operations in Atlantic City. Historically, peak demand
has occurred during the summer season. New Claridge's principal market is the
Mid-Atlantic area of the United States. Casino gaming in Atlantic City is highly
competitive and is strictly regulated under the New Jersey Casino Control Act
(the "Act") and regulations thereunder which affect virtually all aspects of
casino operations. (See Item 1. Business - "Competition" and "Gaming Regulation
and Licensing").
Competition
Competition in the Atlantic City casino-hotel market is intense. As of
December 31, 1995, the twelve existing casino facilities offered approximately
960,000 square feet of gaming space, a slight increase over the casino square
footage as of December 31, 1994. Further expansions of gaming space are expected
to occur in 1996, such as the opening of Trump Plaza Casino Hotel's expansion
including the re-opening of the Trump Regency as a casino, scheduled for the
spring of 1996. In addition, several major gaming companies, including Mirage
Resorts Inc. and Circus Circus Enterprises Inc. have recently shown interest in
Atlantic City. For the years ended December 31, 1995 and 1994, citywide gaming
revenues, as reported, increased 9.5% and 3.9%, respectively, over prior year
levels.
All casinos in Atlantic City are part of hotels which offer dining,
entertainment, and other guest facilities. As the size of the gaming facilities
continue to grow, the need for additional hotel rooms has become evident.
Several existing Atlantic City casinos have plans to increase their hotel space
in 1996, with more rooms scheduled to be completed in 1997. In addition, a
500-room non-casino hotel is expected to be constructed adjacent to the new
convention center, which is scheduled to open in early 1997. Competition among
the existing casino-hotels is based on factors such as promotional allowances
and incentives; the attractiveness of the casino area; advertising; customer
service; the availability, quality, and price of rooms, food, and beverage; ease
and availability of parking and accessing the facility; 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 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 incentives, in the form of cash and complimentaries for rooms,
food and beverages, to their customers based on their casino play. In recent
years, competition for, and as a result, incentives offered to, customers has
increased significantly. Many Atlantic City casino patrons arrive by bus and
stay for approximately six hours. Competitive factors in Atlantic City require
the payment of cash incentives and coupons for use towards the price of meals to
patrons arriving under bus programs sponsored by the casino operators.
Competition for bus patrons intensified in 1995. During 1995, 8.8 million casino
patrons arrived in Atlantic City by bus, a 10% increase over 1994 levels; the
increase in 1995 bus patron activity followed three years of decreases in bus
patron levels. The increased competition took the form of higher coin
incentives, which New Claridge matched, thus increasing its per patron average
6
<PAGE>
coin cost to $12.81 in 1995 from $10.99 in 1994. Due to the lack of a
self-parking facility, New Claridge has relied heavily on attracting patrons who
travel to Atlantic City by bus, and has therefore had to remain competitive with
other casino operators in regards to the incentives offered. Even when New
Claridge's 1,200-space parking facility opens, it will continue to rely on its
bus customers as a significant source of business.
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
complimentaries than the higher wagering player. The majority of the Claridge's
casino revenue is generated by slot machine play. In 1995, 77% of the Claridge's
casino revenue came from slot play as compared to 68% 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 addition to its bus program, and 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, chips 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.
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 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. 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.
7
<PAGE>
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 river boat 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
example, if the state allows charitable gaming for non-profit organizations,
then federally-recognized Indians can run similar operations on their land).
Since these events occurred, the gaming industry rapidly expanded; during 1995,
however, the expansion of gaming slowed somewhat, and few additional
jurisdictions approved casino gaming. Indian gaming is currently authorized in
many 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, 1995, over 3,800 slot machines were reported to be operational at Foxwoods.
In October 1996, the Mohegan Sun Resort is expected to open in Uncasville,
Connecticut, near the Foxwoods operation. This facility, owned by the Mohegan
Indians, is expected to have 150,000 square feet of gaming space, with 3,000
slot machines and 180 table games.
Prior to the November 1994 elections, it was believed that the
legalization of casino gaming in at least limited forms in Philadelphia and
other areas of Pennsylvania was a significant possibility. However, the
Pennsylvania 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. Legislation to
put the issue before Pennsylvania voters was introduced several times, but none
has so far succeeded. 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
December 1995, two racetracks in Delaware began offering slot machines at their
facilities, with a third racetrack in negotiations to build another slot machine
facility. The continued expansion of casino gaming, lotteries, including video
lottery terminals (VLTs), 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.
Since 1991, changes to the Act have been enacted which have reduced
regulation of the casino industry; such changes have included the implementation
of 24-hour gaming, the introduction of new types of games, and the introduction
of simulcast wagering. In January 1995, significant amendments to the Act
8
<PAGE>
were signed into law, which were intended to further reduce the regulation of
the Atlantic City casino industry. These amendments included 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 notable changes resulting from the 1995 amendments included:
(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 does not have to hold a casino license, but merely
has to register with the Commission. In addition, the
Commission no longer has 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
9
<PAGE>
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
addresses of all stockholders have been supplied to the Commission and any
changes known to the Corporation are reported when they occur.
c. Licensing Status. The Commission issues casino licenses, which, as
amended January 1995, are renewable every four years, subject to a series of
requirements including a requirement of demonstrating financial viability. On
September 22, 1995, New Claridge was issued a four-year casino license by the
Commission for the period commencing September 30, 1995.
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 (which are defined as the total revenues derived from gaming
operations less the provision for uncollectible accounts) for each calendar
year. 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 fifteenth
day of the first, fourth, seventh, and tenth months of each year based on the
10
<PAGE>
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
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, 1995, New Claridge employed approximately 2,300
persons, of whom approximately 860 are represented by labor unions.
Approximately 700 of the 860 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 three 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 valet-parking garage, situated on an
adjacent parcel of land (21,840 square feet) west of the casino-hotel site, is
an eight-level reinforced concrete ramp structure, built in 1981. Including the
bus drive-through area, a bus patron waiting room and an electrical room, it
totals an area of 197,100 square feet and provides parking for approximately 475
vehicles. New Claridge is currently constructing a self-parking garage, located
on a parcel of land (29,120 square feet) connected to the existing valet-parking
garage. Construction of the garage is expected to be completed in mid-1996. The
combined garage facility will provide parking for approximately 1,200 vehicles.
The office building, situated on an adjacent parcel of land (7,766 square feet),
is a two-story reinforced concrete and brick structure with a flat roof.
Constructed 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 the existing facilities are owned by the Partnership and are leased
to New Claridge under the Operating Lease and the Expansion Operating Lease. The
self-parking garage and the property on which it is located are owned by New
Claridge.
11
<PAGE>
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.
12
<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 canceled. As of March 28, 1995, there were approximately 450
holders of record of the Class A Stock. The Contingent Payment Rights (see Item
1. Business - "Contingent Payment") 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 - "Contingent Payment").
13
<PAGE>
Item 6. SELECTED FINANCIAL DATA
The following table summarizes certain selected consolidated financial
data for the years ended December 31, 1995, 1994, 1993, 1992 and 1991.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
----- ---- ---- ---- ----
(in thousands except per share data)
<S> <C> <C> <C> <C> <C>
Income Statement Data
Net revenues $ 203,348 190,755 189,672 182,204 172,961
Net income (loss) $ (1,908) (6,901) 5,132 6,048 2,181
Net income (loss) per share $ (.38) (1.37) 1.02 1.21 .46
Balance Sheet Data at Year End
Total assets $189,074 190,484 146,338 148,305 154,355
Current assets $ 55,542 59,426 22,736 20,383 21,077
Current liabilities $ 40,420 37,003 34,270 34,298 34,285
Long-term debt, net of
note payable and
current installments
of long-term debt $ 85,000 85,000 35,259 40,301 50,867
Stockholders' equity $ 5,555 7,463 14,364 9,232 3,184
</TABLE>
14
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations for the Year Ended December 31, 1995
The Corporation had a loss of $2,278,000 before an income tax benefit of
$370,000 for the year ended December 31, 1995, as compared to a loss of
$9,294,000 before an income tax benefit of $2,393,000 for the year ended
December 31, 1994.
For the year ended December 31, 1995, casino revenue, which is the
difference between amounts wagered by and paid to casino patrons, was
$169,607,000 (including poker, simulcasting, and keno revenue), an increase of
8.6% over 1994 casino revenue of $156,159,000, and 9.7% higher than 1993 casino
revenue. In the first half of 1995, New Claridge discontinued its poker,
simulcasting, and keno operations, in order to utilize the gaming space for more
profitable slot operations. Casino revenues reportedly earned by all Atlantic
City casinos during the year ended December 31, 1995 increased 9.5% over 1994
casino revenue.
New Claridge earned table games revenue of $39,239,000 during the year
ended December 31, 1995, a slight increase over 1994 table games revenue. The
increase in table games revenue resulted from an increase in the hold percentage
(the ratio of win to drop) to 15.3% in 1995, from 14.2% in 1994, offset by a
6.8% decline in table games drop (the amount of gaming chips purchased by
patrons). Citywide, table games drop and revenue, as reported, increased 4.3%
and 4.4% respectively, over 1994 levels. The average number of table games
available at the Claridge during 1995 decreased 5.4% as a result of the
discontinuation of the poker and keno operations; citywide, the average number
of table games available in 1995 increased 2.1% from 1994 averages.
Slot machine revenue earned by New Claridge for the year ended December
31, 1995 totaled $130,353,000, an increase of 11.5% over slot machine revenue
earned in 1994. The expansion of New Claridge's casino floor space, with the
addition of approximately 500 slot machines, in mid-1994, was reflected in the
14.5% increase in New Claridge's average number of slot machines available in
1995 over 1994 averages. Citywide, the average number of slot machines available
in 1995 increased 10.0% over 1994 averages, contributing to the 12.0% increase
in citywide slot machine revenues, as reported, for the year ended December 31,
1995 over the prior year.
New Claridge offers promotional incentives to its customers through its
direct marketing program based on their casino play, as well as to prospective
customers based on demographic models. For the year ended December 31, 1995,
$12,667,000 in cash incentives were issued to patrons through these programs,
compared to $11,595,000 issued during the year ended December 31, 1994. In
addition, New Claridge offers coin incentives to patrons arriving by bus; during
1995, $12,502,000 of coin incentives were issued to 976,000 bus patrons arriving
at the Claridge, compared to $9,179,000 of incentives issued to 835,000 bus
passengers in 1994. Competition for bus patrons intensified in 1995. After three
years of decreases in the number of bus patrons visiting Atlantic City casinos,
in 1995 visitation increased by 10%. The increased competition took the form of
higher coin incentives, which New Claridge matched, thus increasing its per
patron average coin cost to $12.81 in 1995 from $10.99 in 1994.
For the year ended December 31, 1995, New Claridge earned hotel revenues
of $9,195,000, a 16.1% decrease from 1994 hotel revenues. This decrease was due
to a decline in the average room rate, to $55 in 1995 from $67 in 1994, in part
as a result of a reduction in the complimentary room rate recorded. Rooms
occupancy in 1995 was 92%, in line with the 1994 occupancy. Food and beverage
revenues earned in 1995 were $19,769,000, an increase of 7.8% over 1994
revenues. The increase in food and beverage revenues over last year was due to
15
<PAGE>
a 3.5% increase in the number of covers (meals served), to 1,775,000 in 1995
from 1,715,000, combined with an increase in the average price per cover to
$7.40 in 1995 from $7.14 in 1994. In addition, complimentary revenues earned
from beverages served on the casino floor increased 8.7%, as a result of the
increase in business volumes in the casino. Other revenues for the year ended
December 31, 1995 of $2,136,000 decreased from revenues for the year ended
December 31, 1994 of $2,547,000, due to the assumption, in October 1994, of the
Claridge's gift shop operation by an outside vendor.
Total costs and expenses for the year ended December 31, 1995 of
$205,626,000 were 2.8% higher than 1994 expenses of $200,049,000, primarily due
to the increase in cash incentives issued to casino patrons, which are included
in casino expenses. In addition, food and beverage costs for 1995 increased
13.8% over 1994 costs, primarily due to the increase in business volumes. Other
expenses for 1995 of $2,961,000 decreased from 1994 levels as a result of the
change in the operation of the Claridge's gift shop, as discussed above.
The Corporation recorded an income tax benefit of $370,000 for the year
ended December 31, 1995, which represents the tax refund likely to be realized
as a result of the carry forward of Federal net operating losses, net of
increased deferred tax credits. For the year ended December 31, 1994, the
Corporation recorded an income tax benefit of $2,393,000, which represented the
tax refund expected from the carry back of Federal net operating losses net of
increased deferred tax credits.
Results of Operations for the Year Ended December 31, 1994
The Corporation had a loss of $9,294,000 before an income tax benefit of
$2,393,000 for the year ended December 31, 1994, as compared to income of
$8,554,000 before income tax expense of $3,422,000 for the year ended December
31, 1993.
Casino revenue 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 and keno revenue) earned by New
Claridge during the year ended December 31, 1994 was $39,069,000, a 4.6%
decrease from 1993 table games revenue of $40,959,000. The decrease in table
games revenue resulted from a 1.6% decline in table games drop, combined with a
decline in the hold percentage to 14.2% in 1994, compared to 14.7% in 1993.
Citywide table games drop and revenue for 1994, as reported, increased 0.3% and
3.6%, 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.
During the year ended December 31, 1994, cash incentives offered through
16
<PAGE>
New Claridge's direct marketing program totaled $11,595,000, compared to
$10,912,000 for the year ended December 31, 1993. In addition, during 1994,
$9,179,000 of 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 to $10.99 in
1994 as compared to $9.38 in 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 totaled $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, 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, totaling
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
carry back 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.
Liquidity and Capital Resources
On January 31, 1994, the Corporation completed an offering of $85
million of Notes (see Item 1. Business - "Corporate Structure"). 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, after deducting fees and
expenses, 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"),
17
<PAGE>
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 $7.5 million 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 land, at a cost of $7.5 million, adjacent to
New Claridge's existing valet-parking facility, which is being
used for the construction of a self-parking facility.
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, which commenced in
the second quarter of 1995. The total cost of the self-parking
facility is estimated to be approximately $20 million, in
addition to the cost of the land;
(ii) the possible purchase of the Contingent Payment (see Item 1.
Business - "Contingent Payment") granted in 1989 and now held in
a trust for the benefit of the Valley of the Sun United Way. On
February 23, 1996, the Corporation acquired an option to
purchase, at a discount from the carrying value, the Contingent
Payment. The purchase price of the option was $1 million, and the
option may be exercised any time prior to December 31, 1997. Upon
exercise of the option, the purchase price of the Contingent
Payment would be $10 million, plus interest at 10% per annum for
the period from January 1, 1997 to the date of the payment of the
purchase price, if the purchase occurs after December 31, 1996.
The purchase price may also increase if future distributions to
Releasing Investors exceed certain amounts; and
(iii) the potential expansion of the Corporation's activities into
other gaming markets. On March 16, 1994, Claridge Gaming
Incorporated 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 is 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), 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, 1995, the Corporation's Excess Cash
was less than $10 million, and therefore the Corporation is not required to make
an Excess Cash Offer in 1996.
At December 31, 1995, the Corporation had working capital of
$15,122,000, as compared to working capital of $22,423,000 at December 31, 1994.
The decrease in working capital is principally attributable to decreases in cash
and cash equivalents of $1,497,000, in prepaid expenses and other current assets
of $4,803,000, an increase in accounts payable of $1,098,000, an increase in
accrued payroll and related benefits of $1,654,000, and an increase in accrued
interest due to the Partnership of $432,000, partially offset by an increase in
receivables of $2,461,000. Current liabilities at December 31, 1995 and 1994
included deferred rental payments of $15,078,000, and the $3.6 million loan from
the Partnership plus accrued interest thereon of $2,826,000 and $2,394,000 at
18
<PAGE>
December 31, 1995 and 1994, 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, 1995 and 1994 would have been $36,626,000 and
$43,495,000, respectively.
For the year ended December 31, 1995, cash flows provided by operating
activities were $4,892,000, compared to cash flows used in operating activities
of $4,465,000 for the year ended December 31, 1994. The increase in cash flows
from operating activities was primarily due to improved operating results, as
well as a $4 million income tax refund received in the second quarter of 1995;
the income tax benefit was included in other current assets at December 31,
1994. Cash flows used in investment activities for the years ended December 31,
1995 and 1994 were $6,389,000 and $9,885,000, respectively. Cash flows used in
investment activities for 1995 for additions to property and equipment
(including loans to the Partnership for the purchase of furniture, fixtures and
equipment replacements, which are reflected in the increase in long-term
receivables), included expenditures for the acquisition of land and the
construction of the self-parking facility; in 1994, these items included the
cost of the expansion of New Claridge's casino capacity and relocation of two
restaurants.
For the year ended December 31, 1995, the Corporation's "Adjusted
EBITDA" was $19,897,000, compared to $11,224,000 for the year ended December 31,
1994. "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. Adjusted EBITDA 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 operating income (as determined in
accordance with generally accepted accounting principles) as an indicator of
operating performance, or to cash flows from operating activities (as determined
in accordance with generally accepted accounting principles) as a measure of
liquidity, or to other consolidated income or cash flow statement data, as are
determined in accordance with generally accepted accounting principles.
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 loans to 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 FF&E Loan principal is due in the 48th month following the
advance, with the remaining balance due in 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.
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 totaling $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
19
<PAGE>
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, 1995 (including the outstanding FF&E Loans
and the $20 million of deferred interest) was $127.9 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, 1995, 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, 1995, $28.8 million of basic rent had been abated. The
remaining $10 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 $39.5
million in 1997, as compared to $31.7 million (net of projected abatement) in
1996. Additional abatements of rent totaling $500,000 are available as a result
of the acquisition of the option to purchase the Contingent Payment, and further
abatements will become available upon exercising the Contingent Payment option
(see Item 1. Business - "Contingent Payment").
If New Claridge exercises its option to extend the term of the Operating
Lease, basic rent during the renewal term will be calculated pursuant to a
formula with annual basic rent not to be more than $29.5 million or less than
$24 million for the twelve months commencing October 1, 1998, and subsequently,
not to be greater than 10% more than the basic rent for the immediately
preceding lease year in each lease year thereafter. If New Claridge exercises
its option to extend the term of the Expansion Operating Lease, basic rent also
will be calculated pursuant to a formula with annual basic rent not to be more
than $3 million or less than $2.5 million for the twelve months commencing
October 1, 1998, and subsequently, not to be greater than 10% more than the
basic rent for the immediately preceding lease year in each lease year
thereafter. If the term of both leases is extended under their renewal options,
the aggregate basic rent payable during the initial years of the renewal
term will be significantly below the 1997 level.
20
<PAGE>
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.
The effective tax rate was (16%) for the year ended December 31, 1995
compared to (26%) for the year ended December 31, 1994. The components of income
tax expense did not change significantly from the prior year except for the
establishment of a valuation allowance of $422,000 which was provided against
deferred tax assets as of December 31, 1994. There was no change in the
valuation allowance for the year ended December 31, 1995.
Recently Issued Accounting Pronouncements
In the first quarter of 1996, the Corporation will adopt Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of". Statement No.
121 requires a review for impairment be performed whenever events or changes in
circumstances indicate that the carrying amount of long-lived assets may not be
recoverable. In performing the review for recoverability, the company should
evaluate the future undiscounted cash flows expected to result from the use of
the asset and its eventual disposition. Management believes that the adoption of
Statement No. 121 will not have a significant impact on its consolidated
financial position or results of operations.
The Financial Accounting Standards Board also issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" which requires either a change in accounting or additional
disclosures for stock-based compensation plans. Management intends to adopt the
disclosure election of the Standard.
Factors Which May Influence the Corporation's Future Operating Results
The continued expansion of casino gaming, lotteries, including video
lottery terminals (VLTs), 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. Prior to the November 1994 elections, it was believed that
the legalization of casino gaming in at least limited forms in Philadelphia and
other areas of Pennsylvania was a significant possibility. However, the
Pennsylvania 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. Legislation to
put the issue before Pennsylvania voters was introduced several times, but none
has so far succeeded. 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
December 1995, two racetracks in Delaware began offering slot machines at their
facilities, with a third racetrack in negotiations to build another slot machine
facility. In October 1996, the Mohegan Sun Resort is expected to open in
Uncasville, Connecticut, near the Foxwoods operation. This facility, owned by
the Mohegan Indians, is expected to have 150,000 square feet of gaming space,
with 3,000 slot machines and 180 table games. The continued expansion of casino
gaming, lotteries, including VLTs, and offtrack betting in other nearby states
could also have a negative effect on the Atlantic City market. In addition to
the expansion of casino gaming in other states, expansions to existing casinos
in Atlantic City, as well as the possible addition of new casino properties, and
the opening of the new convention center in 1997 could have an impact on the
Atlantic City market and the Corporation's future operations.
21
<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.
22
<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THIS REGISTRANT
Name Office Age
---- ------ ---
David W. Brenner Chairman, Director 60
Robert M. Renneisen President, Director 49
Shannon L. Bybee Director 58
A. Bruce Crawley Director 50
Ned P. DeWitt Director 56
Donald G. Drapkin Director 48
James M. Montgomery Director 56
James W. O'Brien Director 60
Mark H. Sayers Director 46
Jean I. Abbott Vice President 40
Frank A. Bellis, Jr. Senior Vice President, Secretary 42
Albert T. Britton Executive Vice President 39
Glenn S. Lillie Vice President 47
Gloria E. Soto Vice President, Assistant Secretary 47
Raymond A. Spera Executive Vice President, Treasurer 39
Peter F. Tiano Executive Vice President 60
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, as Director of Commerce of the City of Philadelphia from January 1984
to September 1986, and as Director of Finance from April 1991 through December
1991. 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. 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
23
<PAGE>
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. 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. DeWitt has served as a member of the Board of Directors of the
Corporation since May 1995. Mr. DeWitt has served as President, Chief Executive
Officer, and a member of the Board of Directors of LBE Technologies,
Incorporated, in Saratoga, California, since November 1994. From November 1993,
to August 1994, he served as President of SEGA Enterprises, (USA) in Redwood
City, California. Mr. DeWitt also served as President of the Entertainment Group
of Madison Square Garden from July 1990, to August 1991, and as President of
Source Service Group of Irving, Texas, from December 1986 to April 1989. He also
served, from 1973 through 1982, as President and Chief Executive Officer of Six
Flags Corporation.
Mr. Drapkin has served as a member of the Board of Directors of the
Corporation since October 1995. He has been Vice Chairman of McAndrews & Forbes
Holdings, Incorporated, since March 1987. From 1979 to 1987, Mr. Drapkin was a
partner with the law firm of Skadden, Arps, Slate, Meagher & Flom.
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.
Mr. O'Brien has served as a member of the Board of Directors of the
Corporation since June 1988, and was Executive Vice President of the Corporation
from June 1994 to December 1995. Mr. O'Brien also served as President and Chief
Operating Officer of New Claridge from June 1994 to December 1995. 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 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. 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.
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. Currently, Ms. Abbott serves as Executive Vice President of
24
<PAGE>
Marketing and Casino Operations of New Claridge; a position she has held since
July 1995. 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.
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.
Mr. Britton has served as Executive Vice President of the Corporation
since June 1994 and as President and Chief Operating Officer of New Claridge
since January 1996. He served as Executive Vice President and General Manager of
New Claridge from February 1994 through July 1995, and as Executive Vice
President from August 1995 through December 1995. 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. Lillie has served as Vice President of the Corporation from June
1992 and as Vice President of Marketing Communications of New Claridge since
December 1995. He served as Vice President of Public Affairs of New Claridge
from February 1990 to December 1995. 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.
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.
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 from December
1991 to August 1993. 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.
25
<PAGE>
Prior to joining New Claridge, he spent three years with the accounting firm of
KPMG Peat Marwick LLP.
Mr. Tiano has served as Executive Vice President of the Corporation
since June 1994 and as Executive Vice President and General Manager of New
Claridge since July 1995. He served as Executive Vice President of Operations of
New Claridge from February 1994 through June 1995. 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.
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 4, 1996.
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 4, 1996 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 canceled.
As of December 31, 1995, 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.
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 - "Corporate Structure."
26
<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.
3(b) Copy of By-Laws of the Corporation as amended.
3(c) Copy of Certificate of Amendment of The Certificate
of Incorporation of the Corporation dated June 15,
1989.
3(d) Copy of Certificate of Amendment of The Certificate
of Incorporation dated June 26, 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.
10(b) Copy of Expandable Wraparound Mortgage and Security
Agreement between New Claridge and Atlantic City
Boardwalk Associates, L.P.
10(c) Copy of Expandable Wraparound Mortgage Loan Agreement
between New Claridge and Atlantic City Boardwalk
Associates, L.P.
10(h) Copy of Expansion Operating Lease Agreement between
New Claridge and Atlantic City Boardwalk Associates,
L.P.
27
<PAGE>
10(i) Copy of First Supplemental Amendment to Expandable
Wraparound Mortgage and Security Agreement between
New Claridge and Atlantic City Boardwalk Associates,
L.P.
10(j) Copy of First Supplemental Amendment to Expandable
Wraparound Mortgage Loan Agreement between New
Claridge and Atlantic City Boardwalk Associates, L.P.
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.
10(x) Copy of Long Term Management Incentive Plan of The
Claridge Hotel and Casino Corporation effective
January 1, 1992.
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.
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.
28
<PAGE>
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.
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.
29
<PAGE>
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(ax) Copy of Amended Employment Agreement between Robert
M. Renneisen and The Claridge at Park Place,
Incorporated dated February 6, 1995. Incorporated by
reference to Exhibit 10(ax) to Form 10-K for the year
ended December 31, 1994.
10(ay) Copy of Amended Employment Agreement between Albert
T. Britton and The Claridge at Park Place,
Incorporated dated February 6, 1995. Incorporated by
reference to Exhibit 10(ay) to Form 10-K for the year
ended December 31, 1994.
10(az) Copy of Amended Employment Agreement between Peter F.
Tiano and The Claridge at Park Place, Incorporated
dated February 6, 1995. Incorporated by reference to
Exhibit 10(az) to Form 10-K for the year ended
December 31, 1994.
10(ba) Copy of Amended Employment Agreement between Raymond
A. Spera and The Claridge at Park Place, Incorporated
dated February 6, 1995. Incorporated by reference to
Exhibit 10(ba) to Form 10-K for the year ended
December 31, 1994.
10(bb) Copy of Supplemental Executive Retirement Plan of The
Claridge at Park Place, Incorporated effective
January 1, 1994. Incorporated by reference to Exhibit
10(bb) to Form 10-K for the year ended December 31,
1994.
10(bc) Amendment to Long-Term Management Incentive Plan of
The Claridge Hotel and Casino Corporation effective
June 5, 1995.
10(bd) Option Agreement between The Claridge Hotel and
Casino Corporation, Philip J. Dion, as Trustee for
the Valley of the Sun United Way, and Atlantic City
Boardwalk Associates, L.P., dated November 29, 1995.
10(be) Escrow Agreement between The Claridge Hotel and
Casino Corporation, Philip J. Dion, as Trustee for
the Valley of the Sun United Way, and IBJ Schroder
Bank & Trust Company dated November 29, 1995.
10(bf) Side Agreement between The Claridge Hotel and Casino
Corporation, The Claridge at Park Place,
Incorporated, and Atlantic City Boardwalk Associates,
L.P. dated November 29, 1995.
10(bg) First Amendment to the Option Agreement between The
Claridge Hotel and Casino Corporation, Philip J.
Dion, as Trustee for the Valley of the Sun United
Way, and Atlantic City Boardwalk Associates, L.P.
dated January 30, 1996.
10(bh) First Amendment to the Side Agreement between The
Claridge Hotel and Casino Corporation, The Claridge
at Park Place, Incorporated, and Atlantic City
Boardwalk Associates, L.P. dated February 21, 1996.
30
<PAGE>
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.
22(a) Subsidiaries of the Corporation.
31
<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, 1996 By:/s/ ROBERT M. RENNEISEN By:/s/ RAYMOND A. SPERA
- ---------------------- -------------------------- -----------------------
Robert M. Renneisen Raymond A. Spera
Chief Executive Officer Chief Financial 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.
Signature Capacity Date
--------- -------- ----
/s/ DAVID W. BRENNER Chairman, Director March 28, 1996
- ---------------------
David W. Brenner
/s/ ROBERT M. RENNEISEN President, Director March 28, 1996
- ------------------------ (Chief Executive Officer)
Robert M. Renneisen
/s/ SHANNON L. BYBEE Director March 28, 1996
- --------------------
Shannon L. Bybee
/s/ A. BRUCE CRAWLEY Director March 28, 1996
- ---------------------
A. Bruce Crawley
/s/ NED P. DEWITT Director March 28, 1996
- -----------------
Ned P. DeWitt
/s/ DONALD G. DRAPKIN Director March 28, 1996
- ---------------------
Donald G. Drapkin
/s/ JAMES M. MONTGOMERY Director March 28, 1996
- ------------------------
James M. Montgomery
/s/ JAMES W. O'BRIEN Director March 28, 1996
- ---------------------
James W. O'Brien
/s/ MARK H. SAYERS Director March 28, 1996
- -------------------
Mark H. Sayers
/s/ RAYMOND A. SPERA Executive Vice President March 28, 1996
- -------------------- (Chief Financial Officer/
Raymond A. Spera Treasurer)
32
<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, 1995 and 1994......... F-3
Consolidated Statements of Operations and Accumulated Earnings
for the Years Ended December 31, 1995, 1994 and 1993............. F-4
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993................................ F-5
Notes to Consolidated Financial Statements........................ F-7
Financial Statement Schedule:
Schedule II - 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, 1995 and 1994, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995 in conformity with generally accepted
accounting principles. Also in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
KPMG Peat Marwick LLP
Short Hills, New Jersey
March 6, 1996
F-2
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1995 and 1994
(dollars in thousands)
<TABLE>
<CAPTION>
1995 1994
--------- ------
<S> <C> <C>
Assets
- ------
Current Assets:
Cash and cash equivalents $ 35,747 37,244
Receivables, net (including $15,391 and $13,656 in 1995
and 1994, respectively, due from Partnership) (note 3) 16,808 14,347
Inventories 279 324
Prepaid expenses and other current assets 2,708 7,511
-------- --------
Total current assets 55,542 59,426
-------- --------
Property and equipment (note 4) 36,848 20,504
Less accumulated depreciation and amortization (12,380) (11,189)
-------- --------
Net property and equipment 24,468 9,315
-------- --------
Long-term receivables due from Partnership (note 3) 104,207 114,244
Deferred charges at cost, less accumulated amortization 2,930 3,488
Other assets (note 5) 1,927 4,011
-------- --------
$189,074 190,484
======== ========
Liabilities and Stockholders' Equity
- ------------------------------------
Current Liabilities:
Accounts payable $ 3,880 2,782
Loan from the Partnership (note 6) 3,600 3,600
Other current liabilities (note 7) 32,940 30,621
-------- --------
Total current liabilities 40,420 37,003
-------- --------
Long-term debt (note 8) 85,000 85,000
Deferred rent due to Partnership (note 12) 30,747 33,133
Deferred income taxes (note 11) 7,123 7,885
Other noncurrent liabilities (note 9) 20,229 20,000
Commitments and contingent liabilities (notes 12 and 14)
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 502 2,410
Treasury stock, 16,436 and 8,218 Class A shares at
cost in 1995 and 1994, respectively -0- -0-
-------- --------
Total stockholders' equity 5,555 7,463
-------- --------
$189,074 190,484
======== ========
</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
For the Years Ended December 31, 1995, 1994 and 1993
(in thousands except per share data)
<TABLE>
<CAPTION>
1995 1994 1993
--------- -------- ------
<S> <C> <C> <C>
Revenue:
Casino $169,607 156,159 154,615
Hotel 9,195 10,962 11,416
Food and beverage 19,769 18,346 18,597
Interest from the Partnership 17,195 17,906 17,974
Interest, other 1,772 1,519 168
Other 2,136 2,547 2,913
-------- -------- ---------
219,674 207,439 205,683
Less promotional allowances (note 10) 16,326 16,684 16,011
-------- -------- ---------
Net revenues 203,348 190,755 189,672
-------- -------- --------
Costs and expenses:
Casino 92,571 89,077 81,657
Hotel 3,224 3,141 3,228
Food and beverage 11,783 10,352 10,284
Other 2,961 3,615 3,923
Rent expense to the Partnership (note 12) 37,638 36,219 34,580
Rent expense, other (note 12) 1,512 1,531 1,645
General and administrative 28,641 28,807 26,951
Gaming taxes 13,583 12,443 12,360
Reinvestment obligation expenses (note 5) 1,442 1,972 665
Provision for uncollectible accounts (160) 492 207
Depreciation and amortization 2,915 2,444 1,445
Interest expense, other 9,516 9,956 4,173
-------- -------- --------
Total costs and expenses 205,626 200,049 181,118
-------- -------- --------
Income (loss) before income taxes (2,278) (9,294) 8,554
Income tax expense (benefit) (note 11) (370) (2,393) 3,422
-------- -------- --------
Net income (loss) (1,908) (6,901) 5,132
-------- -------- --------
Accumulated earnings at beginning of period 2,410 9,311 4,179
-------- -------- --------
Accumulated earnings at end of period $ 502 2,410 9,311
======== ======== ========
Net income (loss) per share (note 2(i)) $ (.38) (1.37) 1.02
======== ======== ========
</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, 1995, 1994 and 1993
(in thousands)
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- ------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $(1,908) (6,901) 5,132
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 2,915 2,444 1,445
Deferred rent to the Partnership (2,386) (3,209) (3,183)
Deferred interest receivable and
discount from the Partnership (1,326) (1,154) (1,004)
Reinvestment obligation expenses 1,442 1,972 665
(Gain) loss on disposal of assets (33) 87 (52)
Deferred income taxes - noncurrent (762) 1,782 1,154
Change in assets and liabilities:
Receivables, net, excluding
current portion of long-term
receivables (629) 497 (36)
Inventories 45 99 (131)
Prepaid expenses and other
current assets excluding current
portion of reinvestment obligation
credit 3,888 (2,815) (722)
Accounts payable 1,098 273 659
Other current liabilities 2,319 2,460 1,513
Other noncurrent liabilities 229 -0- -0-
-------- --------- ---------
Net cash flows provided by (used in)
operating activities 4,892 (4,465) 5,440
-------- --------- ---------
</TABLE>
(Continued)
See accompanying notes to consolidated financial statements
F-5
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Cont'd.)
For the Years Ended December 31, 1995, 1994 and 1993
(in thousands)
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- ------
<S> <C> <C> <C>
Cash flows from investment activities:
Increase in deferred charges $ (59) (77) (129)
Additions to property and equipment, net (17,493) (7,116) (1,535)
Additions to other assets 1,557 (3,666) (1,946)
Proceeds from disposition of property 75 75 53
Increase in long-term receivables (2,483) (9,610) (3,287)
Receipt of long-term receivables 12,014 10,509 9,481
---------- ------- -------
Net cash flows provided by (used in) investment activities (6,389) (9,885) 2,637
---------- ------- -------
Cash flows from financing activities:
Proceeds from issuance of long-term debt -0- 85,000 -0-
Payment of long-term debt -0- (33,559) (7,942)
Increase in deferred charges related to issuance
of long term debt -0- (3,340) (400)
Payment of revolving credit line
borrowings -0- (9,325) (21,900)
Increase in revolving credit line
borrowings -0- 7,625 22,600
----------- -------- --------
Net cash flows provided by (used in) financing activities -0- 46,401 (7,642)
----------- -------- --------
Increase (decrease) in cash and cash equivalents (1,497) 32,051 435
Cash and cash equivalents at beginning
of period 37,244 5,193 4,758
----------- -------- --------
Cash and cash equivalents at end of period $ 35,747 37,244 5,193
=========== ======== ========
Supplemental cash flow disclosures:
Interest paid, net of amounts capitalized $ 9,084 5,365 3,741
=========== ======== ========
Income taxes paid $ 677 181 1,393
=========== ======== ========
</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
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.
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.
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. (See Note 8, "Long-Term Debt".)
The net proceeds of the Notes, totaling $82.2 million net of fees and
expenses, were used or will be used as follows: (i) to repay in full on
January 31, 1994, the Corporation's outstanding debt under the Revolving
Credit and Term Loan Agreement (the "Loan Agreement"), including the
outstanding balance of the Corporation's revolving credit line, which
was secured by the First Mortgage; (ii) to expand New Claridge's casino
capacity by 12,000 square feet in 1994, including the addition of
approximately 500 slot machines and the relocation of two restaurants
and their related kitchens; (iii) to purchase property in 1995 and
construct on that property a self-parking garage, which is expected to
open in mid-1996; (iv) the possible purchase of the Contingent Payment
(see Note 9, "Other Noncurrent Liabilities" and Note 17, "Subsequent
Events") granted in 1989 and now held in a trust for the Valley of the
Sun United Way; and (v) the potential expansion of the Corporation's
activities into other gaming markets.
F-7
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
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 Claridge Gaming
Incorporated ("CGI"), which was formed in March 1994 for the purpose
of developing gaming opportunities in other jurisdictions. 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, operations and equity of New Claridge are
substantially equivalent to the assets, liabilities, operations 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.
Certain reclassifications have been made to the 1994 and 1993
consolidated financial statements to conform to the 1995
presentation.
b) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
c) Cash and Cash Equivalents
Cash and cash equivalents includes investments in interest bearing
repurchase agreements in government securities and other investments
as permitted in accordance with the terms of the indenture governing
the Notes, with maturities of three months or less when purchased.
Interest income is recorded as earned.
d) 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
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.
F-8
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd.)
e) Inventories
Inventories are stated at the lower of cost or market, cost being
determined principally on a first-in, first-out basis.
f) Property and Equipment
Property and equipment are recorded at cost, and are depreciated
using the straight-line method over the following estimated useful
lives:
Buildings and improvements 39 years
Gaming equipment 5 years
Interest costs related to the construction of the garage facility
are being capitalized, and will be amortized over the estimated
useful life of the garage. Total interest capitalized in 1995 was
$1,138,000; no interest was capitalized in 1994.
g) Deferred Charges
Deferred charges primarily relate to the January 31, 1994 issuance
of the Notes. These charges, which totaled approximately $3.7
million, are being amortized over the term of the Notes. Accumulated
amortization of these charges as of December 31, 1995 and 1994 was
$896,000 and $428,000, respectively.
h) Income Taxes
Deferred income taxes are provided for temporary differences between
financial statement reporting and income tax reporting for rent
leveling provisions, asset basis differences, and various other
expenses recorded for financial statement purposes.
i) Earnings Per Share
Earnings per share is calculated based on the weighted average
shares outstanding (5,050,792 for the year ended December 31, 1995,
5,035,819 for the year ended December 31, 1994, and 5,030,078 for
the year ended December 31, 1993).
F-9
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
3. RECEIVABLES
Receivables at December 31, 1995 and 1994 consist of the following:
<TABLE>
<CAPTION>
Current Receivables 1995 1994
------------------- ------ ------
(in thousands)
<S> <C> <C>
Casino, less allowance for uncollectible accounts
of $932,000 and $1,411,000 at
December 31, 1995 and 1994, respectively $ 821 394
Hotel, less allowance for uncollectible accounts
of $41,000 and $20,000 at December 31,
1995 and 1994, respectively 81 112
Interest receivable due from the Partnership 1,337 1,448
Current portion Expandable Wraparound
Mortgage due from the Partnership 10,000 9,000
Current portion of FF&E Promissory notes 1,819 1,251
Current portion of Expansion/Construction
promissory note 2,026 1,763
Other, less allowance for uncollectible accounts
of $14,000 at December 31, 1995 and 1994 724 379
-------- -------
$ 16,808 14,347
======== =======
Long-Term Receivables
---------------------
$127,000,000 Expandable Wraparound Mortgage 14%, maturities
through September 30, 2000 (net of $9,815,000 discount and
$11,141,000 discount at
December 31, 1995 and 1994 respectively) $ 63,185 71,859
Deferred interest receivable, due
September 30, 2000 20,000 20,000
FF&E promissory notes, 14% 16,527 15,863
Expansion/Construction promissory note, 14% 4,495 6,522
-------- -------
$104,207 114,244
======== =======
</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 is obligated to make payments required
under any senior mortgage indebtedness, so long as the Partnership is
not in default on its obligations under the Expandable Wraparound
Mortgage. $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.
F-10
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
3. RECEIVABLES (cont'd.)
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 ("FF&E Loans"), secured under the Expandable
Wraparound Mortgage, for the purchase of property and equipment ("FF&E
Replacements"). One half of the FF&E Loan principal is due in 48 months
and the remaining balance is due 60 months from the date of issuance of
the respective FF&E Loan. During the year ended December 31, 1996,
$1,819,000 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 totaling $80 million and on September 30, 2000 a
balloon payment of $67 million which includes $20 million of deferred
interest.
F-11
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements(Cont'd.)
4. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1995 and 1994 consist of the
following:
1995 1994
-------- ------
(in thousands)
Gaming equipment $19,186 18,140
Land and land improvements 8,100 -0-
Construction in progress 8,204 652
Leasehold improvements 745 745
Capital lease asset 613 967
--------- -------
36,848 20,504
Less accumulated depreciation and amortization 12,380 11,189
--------- -------
Net property and equipment $24,468 9,315
========= =======
Construction in progress includes all costs associated with the
construction of New Claridge's self-parking garage facility. The total
cost of this facility, including construction costs, architectural,
engineering, and legal fees, is expected to be approximately $20
million.
5. 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, 1995, the Corporation
has deposited $14,575,000 of which $2,418,000 has been used to purchase
bonds issued by the CRDA. Since interest on these 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, totaling $1,654,000.
In the third quarter of 1994, New Claridge made donations to the CRDA
of funds, totaling $3,831,000 which had previously been deposited with
the State Treasurer. In exchange for these donations, New Claridge
F-12
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
5. OTHER ASSETS (cont'd.)
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, 1995, all of these
credits had been used.
At December 31, 1994, other assets also includes approximately $2.5
million representing an escrow deposit and first mortgage interest in
the parcel of land which is being used to construct New Claridge's
self-parking facility. This first mortgage interest was satisfied on
January 5, 1995 when New Claridge purchased the parcel of land from the
mortgagor.
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 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, 1995, such interest, which is included in
other current liabilities, amounted to $2,826,000.
7. OTHER CURRENT LIABILITIES
Other current liabilities at December 31, 1995 and 1994 consist of the
following:
1995 1994
---- -----
(in thousands)
Deferred rent, current $15,078 15,078
Accrued payroll and related benefits 7,279 5,625
Accrued interest, Notes 4,161 4,161
Auto/General insurance reserves 1,037 1,149
Accrued interest due to Partnership 2,826 2,394
Other current liabilities 2,559 2,214
------- ------
$32,940 30,621
======= ======
The amount of deferred rent as of December 31, 1995 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-13
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
8. LONG-TERM DEBT
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 $7.5 million revolving credit line
arrangement was terminated.
Beginning in 1995, and annually thereafter, the Corporation is 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, 1995, the Corporation's Excess Cash was
less than $10 million, and therefore the Corporation is not required to
make an Excess Cash Offer in 1996.
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.
9. OTHER NONCURRENT LIABILITIES
Pursuant to the Restructuring Agreement, Webb retained an interest,
which was assigned to the Valley of the Sun United Way on April 2,
1990, equal to $20 million plus interest at a rate of 15% per annum,
compounded quarterly, commencing December 1, 1988, in any proceeds
ultimately recovered from operations and/or the sale or refinancing of
the Claridge facility in excess of the first mortgage loan and other
liabilities ("Contingent Payment"). Consequently, New Claridge has
deferred the recognition of $20 million of forgiveness income with
F-14
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
9. OTHER NONCURRENT LIABILITIES (cont'd.)
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,
1995, accrued interest would have amounted to approximately
$36.8 million.
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 84% in interest of the investors provided
releases and became Releasing Investors. Payments to Releasing
Investors are to be made in accordance with a schedule of priorities,
as defined in the Restructuring Agreement.
On February 23, 1996, the Corporation acquired an option to purchase,
at a discount from the carrying value, the Contingent Payment (See Note
17, "Subsequent Events"). The purchase price of the option was $1
million, and the option may be exercised any time prior to December 31,
1997. Upon exercise of the option, the purchase price of the Contingent
Payment would be $10 million, plus interest at 10% per annum for the
period from January 1, 1997 to the date of payment of the purchase
price if the purchase occurs after December 31, 1996. As a result, if
the option is exercised, any obligation to pay the accrued interest, as
discussed above, would be eliminated, except in respect of the
obligation to the Releasing Investors.
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,
1995, 1994 and 1993 has been allocated to casino expenses as follows
(in thousands):
1995 1994 1993
---- ---- ----
Hotel $ 2,944 2,570 2,251
Food and beverage 9,655 9,864 9,650
Entertainment 784 737 667
------- ------ ------
Total $13,383 13,171 12,568
======= ====== ======
11. INCOME TAXES
The Corporation accounts for income taxes in accordance with Statement
of Financial Accounting Standards No. 109, "Accounting for Income
Taxes". Under the asset and liability method of Statement No. 109,
deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to temporary differences between
F-15
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
11. INCOME TAXES (cont'd.)
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.
The (benefit) provision for income taxes is comprised of the following
(in thousands):
1995 1994 1993
---- ---- ----
Current:
Federal $ (285) (4,175) 1,928
State -0- -0- 340
Deferred (85) 1,782 1,154
-------- ----- -----
$ (370) (2,393) 3,422
======= ======= =====
The (benefit) provision for income taxes differs from the amount
computed at the statutory rate as follows (in thousands):
1995 1994 1993
---- ---- ----
Computed "expected" tax expense $ (775) (3,160) 2,908
Increase (reduction) in income taxes
resulting from:
Change in the valuation allowance -0- 422 -0-
State income tax, net of federal
income tax benefit (137) (558) 514
Meals and entertainment 550 579 -0-
Other (8) 324 -0-
-------- ------ ------
$( 370) (2,393) 3,422
======= ======= =====
F-16
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
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, 1995 and 1994 are presented below (in thousands):
1995 1994
---- ----
Deferred tax assets:
Net operating loss $ 2,384 736
Rent leveling 13,074 12,717
Accrued expenses 1,573 1,491
Other 517 233
------- -------
Total gross deferred tax assets 17,548 15,177
Less valuation allowance (422) (422)
------- --------
Net deferred tax assets 17,126 14,755
------- -------
Deferred tax liabilities:
Gaming equipment, due to differences in
depreciation (1,175) (907)
Difference between book and tax basis of
Expandable Wraparound Mortgage receivable (21,320) (20,007)
Difference between book and tax basis of
receivables (1,740) (1,705)
Other (14) (21)
------- -------
Total gross deferred tax liabilities (24,249) (22,640)
-------- -------
Net deferred tax liability $(7,123) (7,885)
======= =======
There was no change in the valuation allowance for the year ended
December 31, 1995.
The Corporation recorded an income tax benefit of $370,000 and
$2,393,000 for the years ended December 31, 1995 and 1994,
respectively, which represents the tax refund expected from the carry
back of Federal net operating losses net of increased deferred tax
credits. As of December 31, 1995 and 1994, the current portion of the
income tax benefit of approximately $285,000 and $4,200,000,
respectively, was included in other current assets.
The principal items comprising the deferred tax provision in 1995
included rent leveling of ($350,000), Expandable Wraparound Mortgage
discount expense of $1,300,000, depreciation expense of $270,000 and
net operating loss carry forwards of ($1,600,000).
The principal items comprising the deferred tax provision in 1994
included rent leveling 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 leveling of $1,270,000, Expandable Wraparound Mortgage
discount expense of $402,000, bad debt expense of $42,000, and income
related to debt forgiveness of ($520,000).
F-17
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
11. INCOME TAXES (cont'd.)
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 carry forwards 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. During 1995 the Corporation
received notice from the IRS asserting deficiencies in Federal
corporate income taxes for the Corporation's 1990 and 1991 taxable
years. Many of the proposed adjustments to the Corporation's tax
returns have been settled with no adverse impact to the Corporation's
consolidated financial statements. There is a remaining IRS asserted
deficiency for the 1990 and 1991 taxable years. The Corporation has
filed a petition to appeal the entire amount of this asserted
deficiency. The Corporation believes the ultimate resolution of the
case will not result in a material impact on the Corporation's
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.
Minimum future basic lease payments under the initial term of the
Operating Lease, as amended, as of December 31, 1995 (net of expected
abatements, as discussed below) are as follows (in thousands):
1996 $ 31,682
1997 39,501
1998 (through September 30, 1998) 32,531
---------
Total Minimum $103,714
=========
Also, additional rent payments are required based upon fixed assets
F-18
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
12. OPERATING LEASE (cont'd.)
purchased by the Partnership (the FF&E Replacements, Note 3) and then
leased to New Claridge. For the years ended December 31, 1995, 1994 and
1993, expense resulting from the Operating Lease amounted to
$37,638,000, $36,219,000 and $34,580,000, respectively, of which
($2,386,000), ($3,209,000) and ($3,183,000) 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
1995, 1994 and 1993 amounted to $4,625,000, $4,534,000, and $4,445,000,
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
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
F-19
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
12. OPERATING LEASE (cont'd.)
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 may not exceed $10 million in any one
calendar year, and $38,820,000 in the aggregate. As of December 31,
1995, $28.8 million of basic rent had been abated. Additional
abatements of rent totaling $500,000 are available as a result of the
acquisition of the option to purchase the Contingent Payment and
further abatements will become available upon exercising the Contingent
Payment option (see Note 17, "Subsequent Events").
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 leveling 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, 1995,
1994, and 1993, operating lease expense for these facilities amounted
to $1,512,000, $1,531,000 and $1,645,000, respectively. The minimum
future lease payments due under these leases total $783,000 in 1996,
$755,000 in 1997, $735,000 in 1998, $736,000 in 1999, and $739,000 in
2000.
On March 8, 1991, New Claridge entered into an operating lease
agreement to lease certain computer equipment. For the years ended
December 31, 1994 and 1993 operating lease expense for the computer
equipment amounted to $77,000, 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.
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 ("SFAS No. 107"),
"Disclosures about Fair Value of Financial Instruments" requires the
Corporation to disclose estimated fair value for its financial
instruments. The Corporation adopted SFAS No. 107 for the year ended
December 31, 1995. The estimates of fair value are subjective in nature
and involve uncertainties and matters of significant judgement, and
therefore cannot be determined with precision; changes in these
assumptions could significantly affect the estimates.
F-20
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
13. FAIR VALUE OF FINANCIAL INSTRUMENTS (cont'd.)
The carrying amounts and estimated fair values of the Corporation's
financial instruments as of December 31, 1995 are as follows (in
thousands):
Carrying Fair
Amount Value
-------- -----
Financial Assets:
Cash and cash equivalents $ 35,747 35,747
Long-term receivables
due from the Partnership (including
current portion) 118,052 n/a
Reinvestment obligation funds 1,479 1,479
Financial Liabilities:
Loan from the Partnership 3,600 n/a
Long term debt 85,000 71,613
Deferred rent due to the Partnership 30,747 n/a
Contingent payment 20,000 n/a
The following assumptions were used to estimate the fair value of each
class of financial instruments:
Cash and cash equivalents
The carrying amounts reflected on the Corporation's Consolidated
Balance Sheet approximate the fair value because of the short maturity
(90 days or less) of these instruments.
Reinvestment obligation funds
The reinvestment obligation funds, which are included in Other assets
on the Corporation's Consolidated Balance Sheet, consist of required
investments imposed by the Casino Control Act. The reinvestment
obligation funds are stated net of a valuation allowance reflecting the
below market interest rates associated with the investments. As a
result, the carrying values of these investments approximate their fair
values.
Long-term debt
The fair value of the Corporation's long-term debt is estimated based
on the quoted market price of the Notes as of December 31, 1995.
Long-term receivables due from Partnership, Loan from the Partnership,
Deferred rent due to the Partnership
Due to the nature of the relationship between the Corporation and the
Partnership, estimation of the fair value of the financial instruments
F-21
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
13. FAIR VALUE OF FINANCIAL INSTRUMENTS (cont'd.)
due to and due from the Partnership is not practical as there is no
trading market for these financial instruments. (See Note 3,
"Receivables", Note 6, "Loan from the Partnership" and Note 12,
"Operating Lease", for a description of the terms of these
instruments.)
Contingent Payment
There is no market for the Contingent Payment; therefore, estimation of
the fair value of the Contingent Payment is not practical. (See Note 9,
"Other Noncurrent Liabilities" and Note 17, "Subsequent Events" for a
description of the Contingent Payment and the option to purchase the
Contingent Payment.)
14. CONTINGENCIES
a) Licensing
On September 22, 1995, New Claridge was issued a four-year
casino license by the Commission for the period commencing
September 30, 1995.
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.
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.
F-22
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
15. RELATED PARTY TRANSACTIONS (cont'd.)
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
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.
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.
On June 5, 1995, the Corporation's Board of Directors amended
the Plan by creating 100 Additional Equity Units to be issued
to certain key employees and 100 Director Equity Units to be
issued to the individual members of the Board of Directors
(the "Directors"). The aggregate value of the Additional
Equity Units is 5.59 percent and the aggregate value of the
Director Equity Units is 4 percent of certain amounts as
F-23
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
15. RELATED PARTY TRANSACTIONS (cont'd.)
further defined in the Plan. Vesting of the Additional Equity
Units occurs if a Transaction results in the Claimholders of
the Claridge receiving cash or marketable securities having a
certain value all as further defined and described in the
Plan. Vesting of the Director Equity Units occurs according to
a vesting schedule stated in the Plan and also is tied to the
occurrence of a Transaction having a certain value.
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, 1995 and 1994 include the
following:
1995 1994
---- ----
(in thousands)
Cash $ -0- 2
Investment in New Claridge 87,206 87,206
Other assets 8,217 7,219
------- -------
Total assets $ 95,423 94,427
======= =======
Long-term debt $ 85,000 85,000
Other liabilities 9,729 17,517
Stockholders' equity (deficiency) 694 (8,090)
-------- -------
Total liabilities and
stockholders' equity (deficiency) $ 95,423 94,427
======= =======
For the year ended December 31, 1995, the Corporation recorded income
of $15,009,000, representing dividends received from New Claridge to
fund the payment of interest on the Notes; this income is eliminated in
the consolidation with the financial statements of New Claridge. No
income was recorded for the years ended December 31, 1994 and 1993.The
Corporation's expenses for the years ended December 31, 1995, 1994 and
1993 amounted to $6,225,000, $7,518,000, and $599,000, respectively,
including income tax benefit of $4,235,000, $3,908,000, and $-0-,
respectively. These amounts represent the results of operations of the
Corporation for the respective periods before equity in the results of
New Claridge. For the year ended December 31, 1995, New Claridge had
net income of $4,317,000, as compared to net income of $617,000 and
$5,731,000 for the years ended December 31, 1994 and 1993,
respectively.
F-24
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
16. PARENT COMPANY INFORMATION (cont'd.)
Changes in the Corporation's financial position for the years ended
December 31, 1995, 1994 and 1993 were as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- ------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 8,784 (7,518) (599)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Amortization 468 428 -0-
Change in assets and liabilities:
Other assets (1,466) (3,849) (57)
Other liabilities (7,788) 11,487 1,056
-------- ------ -----
Net cash flows provided by (used in) operating activities (2) 548 400
-------- ------ -----
Cash flows from financing activities:
Proceeds from issuance of long-term debt -0- 85,000 -0-
Increase in deferred charges related to issuance
of long term debt -0- (3,340) (400)
Equity contribution to New Claridge -0- (82,206) -0-
--------- ------- -----
Net cash flows provided by financing activities -0- (546) (400)
--------- ------- -----
Increase (decrease) in cash and cash equivalents (2) 2 -0-
Cash and cash equivalents at beginning of period 2 -0- -0-
--------- -------- -----
Cash and cash equivalents at end of period $ -0- 2 -0-
========= ========= ======
Supplemental cash flow disclosures:
Interest paid, net of amounts capitalized $ 8,850 5,021 -0-
========= ========= ======
Income taxes paid $ -0- -0- -0-
========= ========= ======
</TABLE>
F-25
<PAGE>
THE CLARIDGE HOTEL AND CASINO CORPORATION
Notes to Consolidated Financial Statements (Cont'd.)
17. SUBSEQUENT EVENTS
On February 23, 1996, the Corporation acquired an option to purchase, at
a discount from the carrying value, the Contingent Payment (see Note 9,
"Other Noncurrent Liabilities"). The purchase price of the option was $1
million, and the option may be exercised any time prior to December 31,
1997. Upon exercise of the option, the purchase price of the Contingent
Payment would be $10 million, plus interest at 10% per annum for the
period from January 1, 1997 to the date of payment of the purchase price
if the purchase occurs after December 31, 1996. The purchase price may
also increase in an amount not to exceed $10 million if future
distributions to Releasing Investors exceed $20 million.
Upon exercise of the option, it is anticipated that the Contingent
Payment will be canceled so that neither the Corporation nor the
Partnership will have any obligation to make any payment in respect of
the Contingent Payment before making a distribution to shareholders or
limited partners. Upon the purchase and cancellation, however, the
Corporation and the Partnership will remain obligated to make payments
to the Releasing Investors, in respect of the Contingent Payment Rights,
before any distribution may be made to shareholders or limited partners.
These payments would be required to be in the same amounts as if the
Contingent Payment had not been purchased and canceled. As a result, it
is not likely that shareholders or limited partners who are not
Releasing Investors will receive any distribution from the Corporation
or the Partnership. In the aggregate, Releasing Investors are entitled
to receive an amount equal to approximately 72% of the Contingent
Payment.
Under the terms of the option, upon purchase of the Contingent Payment,
the Corporation and/or the Partnership are required to make
distributions in excess of $7 million to the Releasing Investors. The
Corporation and the Partnership have agreed to cooperate in the purchase
of the option and the Contingent Payment, with each contributing
one-half of the purchase price of the option and each anticipated to
contribute one-half of the purchase price of the Contingent Payment. A
portion of the Partnership's contribution will be contributed through
additional abatements of basic rent payments due under the Operating
Lease and Expansion Operating Lease.
F-26
<PAGE>
SCHEDULE II
THE CLARIDGE HOTEL AND CASINO CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years Ended December 31, 1995, 1994 and 1993
(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, 1995
Allowance for
Uncollectible Accounts $1,445 (160) -0- 298 (a) 987
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
</TABLE>
(a) Accounts written-off.
F-27
<PAGE>
INDEX TO EXHIBITS
Exhibit
EX3(a) Copy of Certificate of Incorporation of the Corporation.
EX3(b) Copy of By-Laws of the Corporation as amended.
EX3(c) Copy of Certificate of Amendment of The Certificate of
Incorporation of the Corporation dated June 15, 1989.
EX3(d) Copy of Certificate of Amendment of The Certificate of
Incorporation dated June 26, 1991.
EX10(a) Copy of Operating Lease Agreement between New Claridge and
Atlantic City Boardwalk Associates, L.P.
EX10(b) Copy of Expandable Wraparound Mortgage and Security Agreement
between New Claridge and Atlantic City Boardwalk Associates,
L.P.
EX10(c) Copy of Expandable Wraparound Mortgage Loan Agreement between
New Claridge and Atlantic City Boardwalk Associates, L.P.
EX10(h) Copy of Expansion Operating Lease Agreement between New
Claridge and Atlantic City Boardwalk Associates, L.P.
EX10(i) Copy of First Supplemental Amendment to Expandable Wraparound
Mortgage and Security Agreement between New Claridge and
Atlantic City Boardwalk Associates, L.P.
EX10(j) Copy of First Supplemental Amendment to Expandable Wraparound
Mortgage Loan Agreement between New Claridge and Atlantic City
Boardwalk Associates, L.P.
EX10(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.
EX10(x) Copy of Long Term Management Incentive Plan of The Claridge
Hotel and Casino Corporation effective January 1, 1992.
EX10(bc) Amendment to Long-Term Management Incentive Plan of The
Claridge Hotel and Casino Corporation effective June 5, 1995.
EX10(bd) Option Agreement between The Claridge Hotel and Casino
Corporation, Philip J. Dion, as Trustee for the Valley of the
Sun United Way, and Atlantic City Boardwalk Associates, L.P.,
dated November 29, 1995.
<PAGE>
INDEX TO EXHIBITS (Cont'd.)
Exhibit
EX10(be) Escrow Agreement between The Claridge Hotel and Casino
Corporation, Philip J. Dion, as Trustee for the Valley of the
Sun United Way, and IBJ Schroder Bank & Trust Company dated
November 29, 1995.
EX10(bf) Side Agreement between The Claridge Hotel and Casino
Corporation, The Claridge at Park Place, Incorporated, and
Atlantic City Boardwalk Associates, L.P. dated November 29,
1995.
EX10(bg) First Amendment to the Option Agreement between The Claridge
Hotel and Casino Corporation, Philip J. Dion, as Trustee for
the Valley of the Sun United Way, and Atlantic City Boardwalk
Associates, L.P. dated January 30, 1996.
EX10(bh) First Amendment to the Side Agreement between The Claridge
Hotel and Casino Corporation, The Claridge at Park Place,
Incorporated, and Atlantic City Boardwalk Associates, L.P.
dated February 21, 1996.
EX22(a) Subsidiaries of the Corporation.
<PAGE>
EXHIBIT 3(a)
CERTIFICATE OF INCORPORATION
OF
THE CLARIDGE HOTEL AND CASINO CORPORATION
UNDER SECTION 402 of the Business Corporation Law
THE UNDERSIGNED, a natural person of the age of eighteen years or over,
for the purpose of forming a corporation pursuant to the provisions of Section
402 of the New York Business Corporation Law, hereby certifies as follows:
FIRST: The name of the corporation is THE CLARIDGE HOTEL AND CASINO
CORPORATION (the "Corporation").
SECOND: The purpose for which this Corporation is formed is to
purchase, hold, sell and otherwise deal with the stock of The Claridge at Park
Place, Incorporated and to take all actions incidental thereto.
THIRD: The office of this Corporation is to be located in the City
of New York, County of New York, State of New York.
FOURTH: The aggregate number of shares of stock which the
Corporation shall have authority to issue is 5,625,000 shares of capital stock
which are to be divided into classes as follows:
5,062,500 shares of Class A Stock having a par value of $.001 per
share;
562,500 shares of Class B Stock having a par value of $.001 per share;
Class A Stock and Class B Stock will be alike in all respects and will
vote together as a single class with each share of Class A Stock and each share
of Class B Stock having one vote, subject to the following exceptions:
A. The holders of the Class B Stock will always have the right to elect
one director.
B. Prior to April 1, 1989, Class A Stock shall have no right to vote
except as required by law and except as set forth in paragraphs C and D of this
Article Fourth.
C. Prior to April 1, 1984, the Class A and B Stock will vote together
as a single class (i) as to the approval of an option granted to Del E. Webb
<PAGE>
Corporation ("Webb") pursuant to a certain Cross Option Agreement between Webb
and the Corporation (the "Cross Option Agreement") to acquire all of the issued
and outstanding shares of The Claridge at Park Place, Incorporated, (ii) the
sale of all or substantially all of the assets of the Corporation (other than
the sale of the Corporation's assets pursuant to the Cross Option Agreement),
and (iii) the dissolution or liquidation of the Corporation.
D. Any amendment to this Article Fourth will acquire a majority vote of
each of the Class A and the Class B Stock voting separately as a class.
Notwithstanding any of the foregoing, if the abovementioned option is
exercised by Webb, only the Class A Stock shall have the right to vote on any
plan of liquidation of the Corporation and the proceeds of such liquidation
shall be distributed solely to the holders of the Class A Stock. Otherwise, the
holders of Class A Stock and the holders of Class B Stock shall share equally in
dividends and distributions declared by the Corporation. If at any time there
are no shares of Class B Stock outstanding, the Class A Stock will become the
sole class of stock of the Corporation.
FIFTH: At all times from and including the date on which more than
20% of the authorized shares of Class A Stock shall be outstanding there shall
be at least one director of the Corporation who is not a holder of more than 1%
in value of debt, or debt or equity securities, a director, officer, employee,
consultant of Webb or a subsidiary of Webb, or a person who has any agreement,
arrangement or understanding with Webb to become any of the foregoing at any
time after becoming a director of the Corporation. For purposes of this
paragraph, an affiliate shall mean a person that directly, or indirectly through
one or more intermediaries, controls or is controlled by, or is under common
control with Webb.
SIXTH: The Board of Directors shall have the power to adopt, and to
the extent described in the By-Laws of the Corporation, amend, and repeal the
By-Laws of the Corporation.
SEVENTH: Any securities, shares or other interests of this Corporation
are held subject to the condition that if a holder thereof is found to be
disqualified by the New Jersey Casino Control Commission pursuant to the
provisions of the Casino Control Act of New Jersey, Public Law 1977, Chapter
110, as amended or as may hereinafter be amended, such holder shall dispose
<PAGE>
of his interest in the Corporation. Every security, share or other interest
issued by the Corporation shall bear, on both sides of the certificate
evidencing such, a statement of restrictions imposed by N.J.S.A. 5:12-105.
EIGHTH: This Certificate of Incorporation includes and incorporates
by reference all provisions required by the Casino Control Act as it may be
amended from time to time.
NINTH: The Secretary of State of the State of New York is hereby
designated the agent of the Corporation upon whom process against the
Corporation may be served. The post office address to which the Secretary of
State shall mail a copy of any process against the Corporation served upon him
is
c/o CT Corporation System
1633 Broadway
New York, New York 10019
TENTH: The corporation designates
CT Corporation System
1633 Broadway
New York, New York 10019
as its registered agent upon whom process against it may be served.
IN WITNESS WHEREOF, I hereunto sign my name and affirm that the
statements made herein are true under the penalties of perjury, this 25th day of
August, 1983.
/s/ Lisa A. Clark
--------------------------
Lisa A. Clark
One Chase Manhattan Plaza
New York, NY 10005
<PAGE>
EXHIBIT 3(b)
BY-LAWS
OF
THE CLARIDGE HOTEL AND CASINO CORPORATION
A New York Corporation
Adopted September 2, 1983
ARTICLE I
OFFICES
SECTION 1. Office. The office of the Corporation shall be in the City
of New York, County of New York, State of New York.
SECTION 2. Other Offices. The Corporation may also have offices at such
other places, within or without the State of New York, as the Board of Directors
may from time to time determine or the business of the Corporation may require.
ARTICLE II
SHAREHOLDERS MEETINGS
SECTION 1. Place of Meetings. All meetings of shareholders shall be
held at the office of the Corporation, or at such other place within or without
the State of New York as may be fixed from time to time by the Board of
Directors.
SECTION 2. Annual Meeting. Commencing with the year 1984, annual
meetings of shareholders shall be held on the 25th day of May, if not a legal
holiday, and if a legal holiday, then on the next following business day not a
legal holiday, at 11:00 a.m. or at such other date and time as may be fixed by
the Board of Directors. At such annual meeting of shareholders, the shareholders
shall elect directors and may transact such other business as may properly be
brought before the meeting.
SECTION 3. Notice of Annual Meetings. Written notice of each annual
meeting of shareholders, stating the place, date and hour of the meeting, shall
be given in the manner set forth in Article VI of these By-Laws not less than
ten nor more than fifty days before the date of the meeting, either personally
or by mail, by or at the direction of the President, the Secretary or the
officer or persons calling the meeting of each shareholder of record entitled to
vote at the meeting.
SECTION 4. Special Meetings. Special meetings of shareholders may be
called at such time or place either within or without the State of New York for
any purpose or purposes, by the Board of Directors, or by the President or the
Chairman of the Board and shall be called by the Chairman of the Board,
President, or the Secretary upon the written request of a majority of the
directors. Such written request shall state the time, place and purpose or
<PAGE>
purposes of the proposed meeting. A special meeting of shareholders called by
the Board of Directors or the President may be canceled by the Board of
Directors at any time not less than 24 hours before the scheduled commencement
of the meeting. The business transacted at any special meeting of shareholders
shall be limited to the purposes stated in the notice.
SECTION 5. Notice of Special Meeting. Written notice of each special
meeting of shareholders shall be given in the manner set forth in Article VI of
these By-Laws not less than ten nor more than fifty days before the date of the
meeting, either personally or by mail, to each shareholder entitled to vote at
the meeting. Each such notice shall state the place, date and hour of the
meeting and the purpose or purposes for which the meeting is called.
SECTION 6. Quorum. Except as otherwise required by law or the
Certificate of Incorporation, the presence in person or by proxy of the holders
of record of one-third of the shares entitled to vote shall be necessary, and
shall constitute a quorum, for the transaction of business at such meeting. If a
quorum is not present or represented by proxy at any meeting of shareholders,
the holders of a majority of shares entitled to vote at the meeting who are
present in person or represented by proxy may adjourn the meeting from time to
time until a quorum is present or represented by proxy. An adjourned meeting may
be held later without notice other than announcement at the meeting at which the
adjournment is taken, except that if the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, notice of the adjourned meeting shall be given in the manner set forth
in Article VI of these By-Laws to each shareholder of record entitled to vote at
the adjourned meeting. At the adjourned meeting the Corporation may transact any
business which might have been transacted at the original meeting.
SECTION 7. Qualification of voters. The only persons entitled to notice
of or to vote at any meeting of shareholders shall be the persons shown as
shareholders of the Corporation on the stock transfer records of the Cor
poration on the record date fixed by the Board of Directors, not more than fifty
nor less than ten days before the date of such meeting, or, in the absence
thereof, at the close of business on the date notice of the meeting is given.
SECTION 8. Voting. At any meeting of shareholders each shareholder
having the right to vote shall be entitled to vote in person or by proxy. Except
as otherwise provided by law or in the Certificate of Incorporation, each
shareholder shall be entitled to one vote for each share of stock entitled to
vote standing in his name on the books of the Corporation. All elections of
directors shall be determined by plurality votes. Except as otherwise provided
by law or in the Certificate of Incorporation or By-Laws, any other matter shall
be determined by the vote of the holders of a majority of the shares voting on
it.
SECTION 9. Action Without a Meeting. Whenever the vote of shareholders
at a meeting is required or permitted in connection with any corporate action,
such action may be taken without a meeting on the written consent, setting forth
the action so taken, signed by the holders of all outstanding shares entitled to
vote thereon.
<PAGE>
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. Function. The business of the Corporation shall be managed
under the direction of the Board of Directors, except as otherwise provided by
law, the Certificate of Incorporation or these By-Laws.
SECTION 2. Number. The number of directors which shall constitute the
entire Board of Directors shall be such number, not less than five, as shall be
determined by resolution of the majority of the entire Board of Directors from
time to time. Until further action by the Board of Directors, the number of
directors which shall constitute the entire Board of Directors shall be five. As
used in these By-Laws, the term "entire Board of Directors" means the total
number of directors which the Corporation would have if there were no vacancies.
SECTION 3. Term of Office. Except as provided in Section 5 of this
Article, the directors shall be elected at the annual meeting of shareholders.
Except as otherwise provided by law, the Certificate of Incorporation, or these
By-Laws, each director elected, including a director elected to fill a vacancy
or a newly created directorship, shall serve until the next succeeding annual
meeting of shareholders and until his successor is elected and qualified.
SECTION 4. Removal of Directors. Except as otherwise provided by law or
the Certificate of Incorporation, any of the directors may be removed, with or
without cause, at any time by vote of the shareholders at a special meeting
called for that purpose. Any director may be removed for cause by the action of
the directors at a special meeting called for that purpose. If the director
being removed was elected by the holders of the shares of any class or series he
cannot be removed by the directors and may be removed only by the applicable
vote of the holders of shares of that class or series, voting as a class.
SECTION 5. Vacancies. Newly created directorships resulting from an
increase in the authorized number of directors and vacancies occurring in the
Board of Directors, including vacancies caused by removal without cause, may be
filled by the vote of a majority of the directors then in office, even if less
than a quorum exists.
SECTION 6. Resignation. Any director may resign at any time by giving
written notice to the Board of Directors or to the Chairman of the Board, if
any, or to the President or the Secretary. Such resignation shall take effect at
the time specified therein or, if no time is specified therein, at the time of
receipt thereof, and the acceptance of such resignation shall not be necessary
to make it effective.
SECTION 7. Compensation. The Board of Directors, by the affirmative
vote of a majority of the directors then in office, and irrespective of any
personal interest of any of its members, may establish reasonable compensation
of any or all directors for services to the Corporation as directors or officers
or otherwise, except that no director at the time serving as an officer or
director of Del E. Webb Corporation shall receive any fee or compensation for
services to the Corporation as director.
SECTION 8. Books of the Corporation. The books of the Corporation,
except such as are required by law to be kept within the State of New York, may
be kept at such place or places within or without the State of New York as the
Board of Directors may from time to time determine.
<PAGE>
ARTICLE IV
MEETINGS OF THE BOARD OF DIRECTORS
SECTION 1. First Meeting. The first meeting of each newly elected Board
of Directors shall be held immediately following the annual meeting of
shareholders. If the meeting is held at the place of the meeting of
shareholders, no notice of the meeting need be given to the newly elected
directors. If the first meeting is not so held, it shall be held at a time and
place specified in a notice given in the manner provided for notice of special
meetings of the Board of Directors.
SECTION 2. Regular Meetings. Regular meetings of the Board of Directors
may be held upon such notice, or without notice, at such times and at such
places within or outside the State of New York, as shall from time to time be
determined by the Board. If any day fixed for a regular meeting shall be a legal
holiday at the place where the meeting is to be held, then the meeting will be
held at that place at the same hour on the next business day which is not a
legal holiday.
SECTION 3. Special Meetings. Special meetings of the Board of Directors
may be held within or outside the State of New York and may be called by the
President or the Chairman of the Board on at least two days' notice to each
director and shall be called by the President, the Chairman of the Board or the
Secretary on like notice at the written request of any two directors.
SECTION 4. Notice of a Meeting. Whenever notice of a meeting of the
Board of Directors is required, the notice shall be given in the manner set
forth in Article VI of these By-Laws and shall state the place, date and hour of
the meeting. Each as provided by law, the Certificate of Incorporation, or other
provisions of these By-Laws, neither the business to be transacted at, nor the
purpose of any regular or special meeting of the Board of Directors need be
specified in the notice of waiver thereof. Directors not receiving notice of a
special meeting in accordance with this Section shall be deemed to have waived
notice if they are present at the meeting or may waive notice by a writing
executed before or after the meeting.
SECTION 5. Quorum. Except as otherwise required by law or the
Certificate of Incorporation or other provisions of these By-Laws, one-third of
the entire Board shall constitute a quorum for the transaction of business, and
the vote of a majority of the directors present at any meeting at which a quorum
is present shall be the act of the Board of Directors. If a quorum is not
present at any meeting of directors, a majority of the directors present at the
meeting or, if no director is present, the Secretary, may adjourn the meeting
from time to time, without notice of the adjourned meeting other than
announcement at the meeting.
SECTION 6. Participation by Telephone. To the extent permitted by law,
the members of the Board of Directors of the Corporation, or any committee
designated by such Board, may participate in a meeting of such Board or
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other.
Participation in a meeting pursuant to this section shall constitute presence in
person at such meeting.
<PAGE>
SECTION 7. Action Without a Meeting. Any action of the Board of
Directors or any committee designated by such Board may be taken without a
meeting if written consent to the action signed by all members of the Board of
Directors is filed with the minutes of the Board of Directors.
ARTICLE V
COMMITTEES
SECTION 1. Powers. The Board of Directors may designate from among its
members an Executive Committee and other committees, each consisting of three or
more directors, and may also designate one or more of its members to serve as
alternates on these committees, who may replace any absent or disqualified
member at any meeting of the committee. To the extent permitted by law, the
Executive Committee shall have all the authority of the Board of Directors,
except as the Board otherwise provides, and the other committees shall have such
authority as the Board grants them; but no such committee shall have the power
or authority in reference to the submission to shareholders of any action
requiring shareholder approval under the New York Business Corporation Law, the
filling of vacancies in the Board of Directors or any committee thereof, the
fixing of compensation of members of the Board of Directors, amendment or repeal
of these By-Laws or the adoption of new By-Laws and the amendment or repeal of
any resolution of the Board which by its terms shall not be so amendable or
repealable. In the absence or disqualification of any member of such committee
or committees, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. The Board of
Directors shall have the power at any time to change the membership of any
committees, to fill vacancies in their membership and to discharge any
committees. All resolutions establishing or discharging committees, designating
or changing members of committees, or granting or limiting authority of
committees, may be adopted only by the affirmative vote of a majority of the
entire Board.
SECTION 2. Records of Meetings; Quorum. Each committee shall keep
regular minutes of its proceedings and report to the Board of Directors as and
when the Board shall require. Unless the Board otherwise provides, a majority of
the members of any committee may determine its actions and the procedures to be
followed at its meeting (which may include a procedure for participating in
meetings by conference telephone or similar communications equipment by which
all persons participating in the meeting can hear each other), and may fix the
time and place of its meetings.
SECTION 3. Action Without a Meeting. Any action of a committee may be
taken without a meeting if written consent to the action signed by all the
members of the committee is filed with the minutes of the committee.
<PAGE>
ARTICLE VI
NOTICES
SECTION 1. Notice to a Shareholder. Any notice to a shareholder shall
be in writing and either given personally or by mail. Unless pursuant to an
exception recognized by law, the written notice of any meeting shall be given
not less than ten nor more than fifty days before the date of the meeting. If
mailed, a notice will be deemed given when deposited in the United States mail,
postage prepaid, directed to the shareholder at his address as it appears on the
records of shareholders.
SECTION 2. Notice to a Director. Any notice to a director may be given
personally, by telephone or by mail, telegram, cable or similar instrumentality.
A notice will be deemed given when actually given in person or by telephone, or
when deposited in the United States mails or with the communications company
through which it is given, directed to the director at his business address or
at such other address as the director may have designated to the Secretary in
writing as the address to which notices should be sent.
SECTION 3. Waiver of Notice. Any person may waive notice of any meeting
by signing a written waiver, whether before or after the meeting. In addition,
attendance at a meeting will be deemed a waiver of notice unless the person
attends for the purpose, expressed prior to the conclusion of the meeting, of
objecting to the transaction of any business because the meeting is not lawfully
called or convened.
ARTICLE VII
OFFICERS
SECTION 1. Number. The officers of the Corporation shall be a
President, a Secretary and a Treasurer, and the Board of Directors may also
elect a Chairman of the Board, Chief Executive Officer, one or more Vice
Presidents, Assistant Secretaries, Assistant Treasurers, and such other officers
as it may from time to time deem advisable. Any two or more offices (except the
offices of President and Secretary), may be held by the same person, unless the
Certificate of Incorporation or these By-Laws otherwise provide. No officer
except the Chairman of the Board need be a director of the Corporation.
SECTION 2. Election and Term of Office. Each officer shall be elected
by the Board of Directors and shall hold office until the meeting of the Board
following the next annual meeting of shareholders. Any officer may be removed at
any time, either with or without cause, by the vote of a majority of the entire
Board of Directors.
SECTION 3. Resignation. Any officer may resign at any time by giving
written notice to the Corporation. Such resignation shall take effect at the
time specified therein or, if no time is specified therein, at the time of
receipt thereof, and the acceptance of such resignation shall not be necessary
to make it effective.
SECTION 4. Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the shareholders and of the Board of Directors and
shall have the power to call special meetings of shareholders and of the Board
of Directors. In the absence of or in the event of the disability of the
President, the Chairman shall perform the duties of the President. In addition,
<PAGE>
the Chairman of the Board shall have such other duties as from time to time may
be assigned to him by the Board of Directors.
SECTION 5. President. The President shall have general charge of
management of the business and affairs of the Corporation, subject to the
control of the Board of Directors, and shall see that all orders and resolutions
of the Board of Directors are carried into effect. The President may preside
over any meetings of the shareholders or the Board of Directors at which the
Chairman of the Board is present. He may sign all certificates, contracts and
other instruments of the Corporation which may be authorized by the Board of
Directors. In general, he shall perform all duties incidental to the office of
President and such other duties as may from time to time be assigned to him by
these By-Laws, by the Board of Directors, or by law.
SECTION 6. Vice Presidents. The Vice Presidents, if any, shall assist
the President in the performance of his duties and perform such duties as shall
from time to time be assigned to them by the Board of Directors or the
President. In the absence of or in the event of the disability of the Chairman
of the Board and the President, the Vice Presidents shall, in the order
designated by the Board, perform the duties of the President.
SECTION 7. Secretary. The Secretary shall keep the minutes of all
meetings of the shareholders and of the Board of Directors and the standing
committees in books provided for that purpose. He shall attend to the giving and
serving of all notices of the Corporation. He shall affix the seal of the
Corporation to all contracts and instruments requiring the same. He shall have
charge of the seal of the Corporation and of such books and papers as the Board
of Directors may direct, all of which shall at all reasonable times be open to
examination by any director upon application at the office of the Corporation
during business hours, and shall in general perform all the duties incident to
the office of the Secretary, or which may from time to time be assigned to him
by the Board of Directors.
SECTION 8. Assistant Secretaries. The Assistant Secretaries, if any,
shall assist the Secretary in the performance of his duties and perform such
duties as shall from time to time be assigned to them by the Board of Directors
or the President. In the absence of or in the event of the disability of the
Secretary, the Assistant Secretaries shall, in the order designated by the
Board, perform the duties of the Secretary.
SECTION 9. Treasurer. The Treasurer shall have custody of all funds,
securities and other property of the Corporation, and shall keep or cause to be
kept full and accurate accounts of receipts and disbursements in books belonging
to the Corporation and shall deposit all moneys and other valuable effects in
the name and to the credit of the Corporation in such depositories as may be
designated by the Board of Directors. The Treasurer shall disburse the funds of
the Corporation as may be ordered by the Board of Directors, taking proper
vouchers for such disbursements, and shall render to the President and the Board
of Directors, when the President or the Board or Directors so requires, an
account of all his transactions as Treasurer and of the financial condition of
the Corporation. In general, the Treasurer shall perform all the duties incident
to the office of Treasurer and such other duties as from time to time may be
assigned to him by the Board of Directors.
<PAGE>
SECTION 10. Assistant Treasurers. The Assistant Treasurers, if any,
shall assist the Treasurer in the performance of his duties and perform such
duties as shall from time to time be assigned to them by the Board of Directors
or the President. In the absence of or in the event of the disability of the
Treasurer, the Assistant Treasurers shall, in the order designated by the Board,
perform the duties of the Treasurer.
SECTION 11. Compensation. The compensation of officers shall be fixed
from time to time by the Board of Directors or in such manner as it may provide.
No officer at the time serving as an officer or director of the Del E. Webb
Corporation shall receive any fee or compensation for his services as an officer
of the Corporation.
SECTION 12. Security. The Board of Directors may require any officer,
agent or employee to give security for the faithful performance of his duties.
ARTICLE VIII
SHARES AND THEIR TRANSFER
SECTION 1. Certificates. The shares of stock of the Corporation shall
be represented by certificates, in such form as the Board of Directors may from
time to time prescribe, signed by the Chairman of the Board of Directors or the
President or a Vice-President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary. The certificates shall bear legends
stating that (i) the shares are held subject to the restriction imposed by
N.J.S.A. 5:12-105 and the New Jersey Casino Control Act N.J.S.A. 5:12-1 et seq.;
(ii) the Corporation has granted an option pursuant to a certain Cross Option
Agreement between Del E. Webb Corporation ('Webb") and the Corporation to
purchase all the issued and outstanding shares of stock of The Claridge at Park
Place, Incorporated, (iii) the Corporation will furnish to any shareholder upon
request and without charge, a full statement of the designation, relative
rights, preferences and limitations of the shares of each class authorized to be
issued and (iv) the shares have not been and will not be registered under the
Securities Act of 1933, as amended (the "Securities Act"), and may not be
directly or indirectly offered or sold or otherwise disposed of (including
pledged) by the holder thereof except in reliance on an exemption from the
Securities Act.
SECTION 2. Signatures on Certificates. The signatures of the officers
of the Corporation upon a certificate may be a facsimiles if the certificate is
countersigned by a transfer agent or registered by a registrar other than the
Corporation itself or an employee of the Corporation. If any officer, transfer
agent or registrar who has signed or whose facsimile signature has been placed
upon a certificate shall cease to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he or it were such officer, transfer agent or registrar at the
date of issue.
SECTION 3. Lost, Stolen, or Destroyed Certificates. The Board of
Directors may direct that a new certificate be issued in place of any
certificate issued by the Corporation which is alleged to have been lost, stolen
or destroyed. when doing so, the Board of Directors may prescribe such terms and
conditions precedent to the issuance of the new certificate as it deems
expedient, and may require such indemnities as it deems expedient including a
bond sufficient to indemnify the Corporation against any claim that may be made
against it on account of the alleged loss, theft or destruction of the
certificate or the issuance of the new certificate.
<PAGE>
SECTION 4. Issuance of New Certificate Upon Surrender of Old
Certificate. Except as otherwise provided in the Certificate of Incorporation
and in these By-Laws the Corporation or a transfer agent of the Corporation,
upon surrender to it of a certificate representing shares, duly endorsed or
accompanied by proper evidence of lawful succession, assignment or authority to
transfer, shall issue a new certificate to the person entitled thereto, and
shall cancel the old certificate and record the transaction upon the books of
the Corporation.
SECTION 5. Record Date. The Board of Directors may fix in advance a
date as the record date for determination of the shareholders entitled to
notice of or to vote at any meeting of shareholders or any adjournment thereof,
or to express consent to, or dissent from, any proposal without a meeting, or to
receive payment of any dividend or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action. Such date shall be not less than ten
nor more than fifty days before the date of such meeting, nor more than fifty
days prior to any other action. If no record date is so fixed, the record date
shall be as provided by law. A determination of shareholders entitled to notice
of or to vote at any meeting of shareholders which has been made as provided in
this Section shall apply to any adjournment thereof, unless the Board of
Directors fixes a new record date for the adjourned meeting.
SECTION 6. Ownership. The Corporation shall be entitled to recognize
the exclusive right of a person registered on its books as the owner of shares
to receive dividends and to vote as such owner, and the Corporation shall be
entitled to hold a person registered on its books as the owner of shares liable
for calls and assessments, if any may legally be made, and shall not be bound to
recognize any equitable or other claim to or interest in shares of its stock on
the part of any person, whether or not the Corporation shall have express or
other notice thereof, except as otherwise provided by the laws of New York. A
list of shareholders as of the record date, certified by the corporate officer
responsible for its preparation or by a transfer agent, shall be produced at any
meeting upon the request thereat or prior thereto by any shareholder.
SECTION 7. Disqualification of Holders of Securities. No shareholder
may hold more than 4.9% of any shares of the Corporation or other interests in
the Corporation (such shares and interests are collectively referred to herein
as "Securities") without the prior approval of the New Jersey Casino Control
Commission (the 'Commission") and the holding of such Securities is conditioned
upon such prior approval. In addition, any and all Securities of the Corporation
are held subject to the condition that, if at any time the Commission finds that
a holder of any Securities of the Corporation must qualify under the provisions
of the Casino Control Act of New Jersey, Public Law 1977, Chapter 110, as
amended or as may hereinafter be amended (the "Casino Control Act"), to hold the
Securities of the Corporation and such holder (i) does not qualify, (ii) cannot
obtain an exemption from qualification and is unable or unwilling to qualify, or
(iii) is found unsuitable to hold the Securities, the Board of Directors shall
have the power, at its option, (a) to purchase any or all of the holder's
Securities at a price equal to the lesser of the then market price or the
purchase price of such Securities and (b) to refuse to register the transfer of
such Securities to such holder. If at any time the Commission finds that a
<PAGE>
holder of Securities is (i) unsuitable to hold such Securities, (ii) denies
continued qualification of such holder or (iii) withdraws an exemption from
qualification of such holder and such holder refuses to qualify, such holder
shall immediately tender his Securities for sale to the Corporation, at a price
equal to the lesser of the then market price or the purchase price of such
Securities, or shall immediately sell his Securities to another suitable person.
If the foregoing provision, or any portion thereof, is determined to be
unenforceable in any instance, such adetermination does not make this provision,
or any portion thereof, void. If the foregoing provision, or any portion
thereof, is found to be void by virtue of any legal decision, statute, rule or
regulation, then the Board of Directors shall promptly adopt resolutions that
in its opinion best effect the purposes of this Article, and which would not be
found void, and propose to the shareholders an amendment to the Certificate of
Incorporation implementing the provisions suggested in such resolutions. Every
Security issued by the Corporation shall bear, on both sides of the certificate
evidencing such interest, a statement that the security is subject to the
restrictions imposed by N.J.S.A. 5:12-105.
Commencing on the date that the Commission serves notice upon the
Corporation of the determination of disqualification or any holder of the
Corporation's securities, the Corporation to the extent set forth in the Casino
Control Act shall not pay any dividends or interest or make any other
distribution in respect of securities held by said holder and said holder shall
not have the right to exercise, directly or indirectly, through any trustee,
nominee or other person or entity, any right conferred by such securities or to
receive any remuneration in any form from the Corporation for services rendered
or otherwise. Any securities issued by the Corporation shall be deemed held
subject to the aforementioned limitation.
SECTION 8. Rules and Regulations. The Board of Directors shall have
power and authority to make such rules and regulations as it may deem expedient
concerning the issue, transfer and registration of certificates for shares of
stock of the Corporation.
ARTICLE IX
CASINO CONTROL ACT REQUIREMENTS
SECTION 1. Qualification to do Business. This corporation shall not be
eligible to be a holding company and/or intermediary company with respect to any
entity holding or applying for a casino license under the New Jersey Casino
Control Act, unless this corporation is qualified to do business in the State of
New Jersey and provides all information and performs any actions necessary to
fulfill the applicable requirements of the Casino Control Act.
SECTION 2. Qualification of Directors. Pursuant to the Casino Control
Act, if the New Jersey Casino Control Commission revokes or suspends the
license, if any, of or disqualifies any director, or if the license, if any,
<PAGE>
of any director expires, then that director is automatically removed as a
director, notwithstanding any provision of these By-Laws to the contrary.
Vacancies arising under this provision will be filled as provided in these
By-Laws, except that if a director who is not an affiliated director, as such
term is defined in the Certificate of Incorporation is so removed, then the
Board shall fill the vacancy with an unaffiliated replacement.
ARTICLE X
INDEMNIFICATION
SECTION 1. Indemnification. The Corporation shall, to the fullest
extent permitted by Sections 722 and 723 of the New York Business Corporation
Law or any successor to such sections, indemnify any and all persons whom it
shall have power to indemnify under said sections from and against any and all
expenses, liabilities, or other matters referred to in or covered by said
sections.
SECTION 2. Insurance for Indemnification. The Corporation may purchase
and maintain, to the fullest extent permitted by Section 727 of the New York
Business Corporation Law, or any successor to such section of insurance for
indemnification of the Corporation and of all persons it shall have the power to
insure under said section from and against any and all expenses, liabilities or
other matters referred to in or covered by said section.
ARTICLE XI
GENERAL PROVISIONS
SECTION 1. Dividends. Subject to the provisions of the Certificate of
Incorporation relating thereto, if any, dividends may be declared by the Board
of Directors at any regular or special meeting, pursuant to law. Dividends may
be paid in cash, in the Corporation's bonds or its property, including the
shares or bonds of other corporations subject to any provisions of law and of
the Certificate of Incorporation. Before payment of any dividend, there may be
set aside out of any funds of the Corporation available for dividends such sum
or sums as the directors from time to time, in their absolute discretion, think
proper as a reserve fund to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the Corporation, or for such other
purpose as the directors shall think conducive to the interests of the
<PAGE>
Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
SECTION 2. Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
SECTION 3. Corporate Seal. The corporate seal shall have inscribed on
it the name of the Corporation, the year of its creation and the words
"CORPORATE SEAL, NEW YORK", and such other appropriate legend as the Board of
Directors may from time to time determine. When so authorized by the Board or a
duly empowered committee thereof, a facsimile thereof may be affixed or
reproduced in lieu of the corporate seal.
SECTION 4. Fiscal Year. The fiscal year of the Corporation shall end
at the close of business on the 31st day of December of each year.
SECTION 5. Annual Reports. The Board of Directors will cause annual
reports to be sent to the shareholders. Such reports shall include the name of
the unaffiliated director, as well as such financial reports as may later be
deemed to provide adequate financial disclosure. The content of the reports
shall in no way be restricted to the above enumerated items.
ARTICLE XII
AMENDMENTS
SECTION 1. These By-Laws may be amended or repealed, and new By-Laws
may be adopted, amended or repealed (a) at any regular or special meeting of the
shareholders or (b) by the affirmative vote of a majority of the entire Board of
Directors at any regular or special meeting of the Board, except that no By-Law
may be adopted or amended by the Board of Directors if the By-Law or amendment
is inconsistent with a By-Law, or an amendment to a By-Law, adopted by the
shareholders.
<PAGE>
EXHIBIT 3(c)
CERTIFICATE OF AMENDMENT
OF
THE CERTIFICATE OF INCORPORATION
OF
THE CLARIDGE HOTEL AND CASINO CORPORATION
Under Section 805 of the Business Corporation Law
THE CLARIDGE HOTEL AND CASINO CORPORATION (the "Corporation"), a
corporation organized and existing under New York law
DOES HEREBY CERTIFY
FIRST: The Corporation's name is "The Claridge Hotel and Casino
Corporation".
SECOND: The Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of New York on August 28, 1983.
THIRD (A): The Certificate of Incorporation is amended for the
following purposes: (i) to cancel the Class B Stock of the Corporation, and
(ii) to eliminate the personal liability of directors to the Corporation or its
shareholders for damages for breaches of certain fiduciary duties in such
capacity.
THIRD (B): To effect the foregoing amendments,
(1) Article Fourth of the Corporation's Certificate of Incorporation is
hereby amended to read in its entirety as follows:
FOURTH: The aggregate number of shares of stock which the
Corporation shall have authority to issue is 5,062,000 shares of Class A Stock
having a par value of $.001 per share.
(2) The Corporation's Certificate of Incorporation is hereby amended to
redesignate Articles NINTH and TENTH thereof as Articles TENTH and ELEVENTH,
respectively, and to add a new Article NINTH as follows:
NINTH: To the fullest extent permitted under the Business
Corporation Law of New York, a director of the Corporation shall not be held
personally liable to the Corporation or its shareholders for damages for any
breach of duty as a director of the Corporation.
FOURTH: Upon the filing of this Certificate of Amendment, each of
the 562,500 authorized, issued and outstanding shares of Class B Stock,
<PAGE>
par value $.001 per share, of the Corporation shall be deemed to be cancelled
and no longer to represent outstanding capital stock of this Corporation, so
that the Corporation shall have no authorized, issued or outstanding shares of
Class B Stock.
FIFTH: Upon the filing of this Certificate of Amendment, the stated
capital of the Corporation shall be reduced by $562.50 (from $5,625.00 to
$5,062.50), and its capital surplus shall be increased by $562.50 to reflect
this cancellation.
SIXTH: This amendment to the Certificate of Incorporation of the
Corporation was duly authorized by vote of a majority of all outstanding shares
entitled to vote thereon at a meeting of holders of Class A Stock and by
unanimous written consent of the holder of the Class B Stock in accordance with
Section 803 of the Business Corporation Law.
IN WITNESS WHEREOF, we have signed this Certificate on the 15th day of
June, 1989, and we reaffirm the statements contained herein as true under
penalties of perjury.
THE CLARIDGE HOTEL AND CASINO CORPORATION
By: /s/ Roger P. Wagner
--------------------------
Roger P. Wagner, President
By: /s/ Gloria E. Soto
--------------------------
Gloria E. Soto, Secretary
<PAGE>
EXHIBIT 3(d)
CERTIFICATE OF AMENDMENT
OF
THE CERTIFICATE OF INCORPORATION
OF
THE CLARIDGE HOTEL AND CASINO CORPORATION
under Section 805 of the Business Corporate Law
THE CLARIDGE HOTEL AND CASINO CORPORATION (the "Corporation), a
corporation organized and existing under New York law
DOES HEREBY CERTIFY
FIRST: The Corporation's name is "The Claridge Hotel and Casino
Corporation".
SECOND: The Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of New York on August 26, 1983.
THIRD (A) - The Certificate of Incorporation is amended for the
purposeof expanding the purposes of the Corporation.
THIRD (B): To effect the foregoing amendment, Article Second of the
Corporation's Certificate of Incorporation is hereby amended to read in its
entirety as follows:
SECOND: The purposes for which this Corporation is formed are
to engage in any lawful act or activity for which corporations may be
organized under the Business Corporation Law of the State of New York, provided
that the Corporation is not formed to engage in any act or activity which
requires the consent or approval of any state official, department, board,
agency or other body of the State of New York, without such consent or approval
first being obtained.
FOURTH: This amendment to the Certificate of Incorporation of the
Corporation was duly authorized by the Board of Directors followed by a vote of
a majority of all outstanding shares entitled to vote thereon at a meeting of
holders of Class A stock.
IN WITNESS WHEREOF, we have signed this certificate on the 26th day of
June, 1991, and we affirm the statements contained herein as true under
penalties of perjury.
THE CLARIDGE HOTEL AND CASINO CORPORATION
By: /s/ Shannon Bybee
------------------------
By: /s/ Gloria E. Soto
-------------------------
Secretary
<PAGE>
EXHIBIT 10(a)
OPERATING LEASE AGREEMENT
OPERATING LEASE AGREEMENT, dated as of the 31st day of October, 1983,
by and between ATLANTIC CITY BOARDWALK ASSOCIATES, L.P., a New Jersey limited
partnership having its principal place of business at The Claridge Hotel and
Casino, Indiana Avenue and the Boardwalk, Atlantic City, New Jersey 08401
("Lessor"), and THE CLARIDGE AT PARK PLACE, INCORPORATED, a New Jersey
corporation having its principal place of business at The Claridge Hotel and
Casino, Indiana Avenue and the Boardwalk, Atlantic City, New Jersey 08401
("Lessee").
W I T N E S S E T H
ARTICLE 1
GRANT, PREMISES, TERM
1.1 Lessor, in consideration of the premises and of the rents
hereinafter reserved and of the covenants, agreements and conditions herein
contained to be kept and performed on the part of Lessee, does hereby lease and
demise to Lessee and Lessee does hereby hire and take from Lessor, that certain
property, situate, lying and being in the County and City of Atlantic, State of
New Jersey, consisting of the following:
A. The land more particularly described in Exhibit A annexed hereto and
made a part hereof (the "Land") in which Lessor has a lessee s interest pursuant
to that certain lease agreement, of even date herewith, by and between Claridge
Limited, a New Jersey limited partnership, as lessor, and Lessor, as lessee (the
"Ground Lease"), for a term of approximately Ninety-Eight (98) years commencing
on the 3!st day of October, 1983 and expiring on the 30th day of September,
2081, unless sooner terminated as therein provided;
B. All of Lessor's right, title and interest in and to the land lying
in the bed of the streets abutting the Land to the center line thereof; and
C. All of Lessor's right, title and interest in and to all
rights-of-way, easements and other appurtenances to the Land; and
D. The buildings, structures and improvements located on the Land and
any and all eauimment, furniture, fittings, fixtures and articles of personal
property affixed or attached to, installed or placed in or upon and to be used
for or usable in any present or future enjoyment, occupancy or operation thereof
as a hotel and casino or otherwise, whether located thereon or not and any and
all replacements and substitutions thereof and additions thereto to the extent
the foregoing are owned by Lessor or were acquired by Lessor from the lessor
under the Ground Lease, including, but not limited to, any and all air
conditioning machinery and equipment, elevators, escalators, furniture and
equipment, communications equipment and systems, fire protection and sprinkler
equipment and systems, surveillance equipment and systems, dishwashers, ranges,
cooking apparatus, refrigerators and mechanical kitchen equipment, laundry
equipment, partitions, vaults, safes, fire extinguishing equipment, parts and
supplies, chairs, tables, beds, bed springs, mattresses, couches, lamps, waste
baskets, desks, cabinets, curtains, draperies, carpeting, chandeliers, pictures,
radios, television sets, and other furniture and furnishings for the lobby,
halls, lavatories and other public rooms and places and for the bedrooms, baths
and other private rooms, furniture and furnishings for the offices and motor
vehicles, typewriters, dictation equipment, maintenance and engineering tools,
materials and supplies, paints, uniforms of engineering and maintenance
personnel and all supplies used in connection with the maintenance and repair
thereof (collectively the "Improvements").
E. Any FF&E Replacements (as hereinafter defined) which may be
procured by Lessor pursuant' to Article 6.
The foregoing items are sometimes hereinafter collectively referred to
as the "Property".
<PAGE>
The Property is leased subject to the liens, encumbrances and other
exceptions set forth in Exhibit B annexed hereto and made a part hereof.
1.2 The initial term of this Lease shall commence on the date hereof
and shall end on September 30, 1998 (the "Primary Term"). Thereafter, subject to
the terms and conditions hereof and if and for so long as no event of default
shall have occurred hereunder and be continuing beyond any applicable grace
period on the dates herein specified for the expiration of the Primary Term or
the first two (2) Extended Terms (as defined below), Lessee shall have the right
and option to extend this Lease on the same terms and conditions herein set
forth (excluding, however, any further right of renewal and on such rental terms
as are set forth in Section 2.lP. hereof) for three (3) consecutive terms of ten
(10) years each (the "Extended Terms") unless this Lease shall be sooner
terminated pursuant to the terms hereof. Each Extended Term shall commence on
the day immediately succeeding the expiration date of the immediately preceding
term, and shall end at midnight on the day immediately preceding the tenth
anniversary of the first day of such term. Lessee may exercise each such option
to extend this Lease by giving written notice to Lessor at least nine (9) months
prior to the end of the then term of this Lease.
In the case of any of the renewal options set forth in this Section
1.2, the giving of notice of renewal shall automatically extend this Lease for
an Extended Term, and no instrument of renewal need be executed, provided that
no Extended Term shall take effect unless this Lease is in full force and effect
immediately prior to the commencement thereof. If Lessee fails to give the
required notice of renewal, this Lease shall automatically terminate at the end
of the then term of this Lease and Lessee shall have no further option to extend
this Lease. If Lessee does not exercise any option in a timely manner, then
Lessor shall have the right during the remainder of the term of this Lease to
advertise the availability of the Property for reletting. "Term" and the phrases
"term of this Lease" and "term hereof" shall mean the Primary Term and any
Extended Terms with respect to which the right to extend has been exercised.
ARTICLE 2
RENT
2.1 Lessee agrees to pay Lessor in lawful money of the United States,
at Lessor's address set forth above, or at such other address or to such other
person as Lessor from time to time may designate, fixed rent for each calendar
year ("Basic Rent") for the Property commencing January 1, 1984 as follows:
A. For the year 1984, Fourteen Million Four Hundred Fifty Thousand
Dollars ($14,450,000) in twelve (12) equal monthly installments payable on the
first day of each month;
B. For the year 1985, Twenty-Two Million Dollars ($22,000,000) in
twelve (12) equal monthly installments payable on the first day of each month;
C. For the year 1986, Twenty-Two Million Four Hundred Fifty Thousand
Dollars ($22,450,000) in twelve (12) equal monthly installments payable on the
first day of each month;
D. For the year 1987, Twenty-Two Million Nine Hundred Twenty-Five
Thousand Dollars ($22,925,000) in twelve (12) equal monthly installments
payable on the first day of each month;
E. For the year 1988, Twenty-Seven Million Two Hundred Fifty-Five
Thousand Dollars ($27,255,000) in twelve (12) ecrual monthly installments
payable on the first day of each month;
F. For the year 1989, Thirty-Two Million Six Hundred Five Thousand
Dollars ($32,605,000) in twelve (12) equal monthly installments payable on the
first day of the month;
<PAGE>
G. For the year 1990, Thirty-Four Million Eight Hundred Fifteen
Thousand Dollars ($34,815,000) in twelve (12) equal monthly installments
payable on the first day of each month;
H. For the year 1991, Thirty-Four Million Nine Hundred Forty Thousand
Dollars ($34,940,000) in twelve (12) equal monthly installments payable on the
first day of each month;
I. For the year 1992, Thirty-Six Million Fifty-Five Thousand Dollars
($36,055,000) in twelve (121) equal monthly installments payable on the first
day of each month;
J. For the year 1993, Thirty-Seven Million Eighty Thousand Dollars
($37,080,000) in twelve (12) equal monthly installments payable on the first
day of each month;
K. For the year 1994, Thirty-Eight Million Fifty-Five Thousand Dollars
($38,055,000) in twelve (12) equal monthly installments payable on the first
day of each month;
L. For the year 1995, Thirty-Nine Million Thirty Thousand Dollars
($39,030,000) in twelve (12) equal monthly installments payable on the first
day of each month;
M. For the year 1996, Thirty-Nine Million Nine Hundred Six Thousand
Dollars ($39,906,000) in twelve (12) equal monthly installments payable on the
first day of each month;
N. For the year 1997, Forty-One Million Seven Hundred Seventy-Five
Thousand Dollars ($41,775,000) in twelve (12) equal monthly installments payable
on the first day of each month;
0. For the period January through September 1998, Thirty-Two Million
Five Hundred Thirty-One Thousand Dollars ($32,531,000) in nine (9) equal monthly
installments payable on the first day of each month; and
P. For each lease year of the Extended Terms commencing October 1,
1998, Basic Rent for each lease year shall be equal to the product of (i) the
average of the weekly auction rates or. Federal Reserve Bank of New York offered
United States Treasury Bills with a maturity of twenty-six (26) weeks for the
period covering the first six (6) months of the seven (7) month period
immediately preceding the commencement date of the lease year in question and
(ii) an amount equal to One Hundred Forty-Six Million Five Hundred Thousand
Dollars ($146,500,000) (the "Base Amount") increased by the percentage increase
in the Consumer Price Index for New York, New York-Northeastern New Jersey for
urban wage earners and clerical workers during the period from January 1, 1984
through the end of the lease vear immediately preceding the lease year in
question; provided, however, that for each lease year the amount in this clause
(ii) shall not exceed the amount set forth below:
<PAGE>
Lease Year
Commencing
10/1
---------------
1998 300,937,000
1999 315,984,000
2000 331,783,000
2001 348,372,000
2002 365,791,000
2003 384,081,000
2004 403,285,000
2005 423,449,000
2006 444,621,000
2007 466,852,000
2008 490,195,000
2009 514,705,000
2010 540,440,000
2011 567,462,000
2012 595,835,000
2013 625,627,000
2014 656,908,000
2015 689,754,000
2016 724,241,000
2017 760,453,000
2018 798,476,000
2019 838,400,000
2020 880,320,000
2021 924,336,000
2022 970,553,000
2023 1,019,080,000
2024 1,070,034,000
2025 1,123,536,000
2026 1,179,713,000
2027 1,238,698,000
Notwithstanding the limitation set forth for (ii) above, Basic Rent for
the lease year commencing October 1, 1998 shall not be more than Twenty-Nine
Million Five Hundred Thousand Dollars ($29,500,000) nor less than Twenty-Four
Million Dollars ($24,000,000), and in each lease year thereafter during each of
the Extended Terms Basic Rent shall not be greater than ten percent (10%) more
or less than Basic Rent for the immediately 'preceding lease year.
Basic Rent, as determined above, shall be payable in twelve (12) equal
monthly installments on the first day of the month.
2.2 All amounts which Lessee is required to pay pursuant to this Lease
(other than Basic Rent and amounts payable upon the purchase of Lessor's
interest in the Property pursuant to Article 16 hereto), together with every
fine, penalty, interest and cost which may be added for non-payment or late
payment thereof, shall constitute additional rent ("Additional Rent"). If Lessee
shall fail to pay any Additional Rent, Lessor shall have all rights, powers and
remedies with respect thereto as are provided herein or by law in the case of
<PAGE>
non-payment of Basic Rent. Any Additional Rent Lessee is obligated to pay
directly to Lessor hereunder shall be paid in lawful money of the United States,
at Lessor's address set forth above, or at such other address or to such other
person as Lessor from time to time may designate.
2.3 A. Lessee agrees to pay Lessor as Additional Rent during the term
of this Lease an amount equal to all general and administrative costs and
expenses of Lessor (the "Administrative Costs") for such year in excess of the
amount provided in the financial forecast of Lessor (the Financial Forecast"), a
copy of which is attached hereto as Exhibit C. Administrative Costs include but
are not limited to overhead costs, licensing costs and accounting and legal
costs.
B. Lessor may from time to time, but not more often than
once each calendar quarter, submit to Lessee a statement certified by its
managing general Partner describing in reasonable detail the Administrative
- --Costs for the period commencing on the date immediately following the last day
of the period covered by the statement last submitted to Lessee (or, in the case
of the first submission, from the date hereof). Lessee shall pay to Lessor an
amount equal to the Administrative Costs set forth in such statement within
five(5)days after receipt hereof.
2.4 If any installment of Basic Rent shall not be paid within five (5)
days after its due date, Lessee shall pay to Lessor, on demand, interest at the
rate which is three percent (301) over the rate of interest announced from time
to time by Del E. Webb Corporation's ("Webb") lead lending bank or, if there is
no such bank, by Morgan Guaranty Trust Company of New York at its main office in
New York for short-term loans (the "Prime Rate"), from the due date of such
installment until such installment is paid. Lessee shall pay to Lessor, on
demand, interest at such rate on all overdue Additional Rent paid on behalf of
or by Lessor on behalf of Lessee from the date of payment on behalf of or by
Lessor until repaid by Lessee. Lessee shall perform all its obligations under
this Lease at its sole cost and expense. All Basic Rent and Additional Rent
shall be paid to Lessor or in accordance with the terms hereof when due, without
notice or demand and without abatement, reduction or set-off of any amount
whatsoever, except as specifically provided herein.
2.5 Notwithstanding any expiration or termination of this Lease prior
to the date hereinabove set forth for the expiration of the Primary Term or any
Extended Term (the "Lease Expiration Date"), except in the case of a
cancellation by mutual agreement or Lessee's termination as oil right or by law,
Lessee's obligation to pay any and all Additional Rent under this Lease shall
continue and shall cover all periods up to the Lease Expiration Date.
ARTICLE 3
TAXES AND ASSESSMENTS
3.1 Lessee shall, (a) at its own cost and expense, pay and discharge,
or cause to be paid and discharged before any fine, penalty, interest or cost
may be added for nonpayment, all taxes, assessments, sewer rents, water rents
and charges, duties, impositions, license and permit fees, charges for public
utilities of any kind, payments and other charges of every kind and nature
whatsoever, ordinary or extraordinary, foreseen or unforeseen, general or
special (collectively "Impositions"), allocable to the term of this Lease which
shall, pursuant to present or future law or otherwise, be levied, charged,
assessed or imposed upon, or grow or become due and payable out of or for, or
become or have become a lien on, the Property or any part thereof, or the rents
and income received by Lessee from tenants, occupants, licensees or any use or
occupation of the Property or any part thereof, and such franchises as may be
appurtenant to the use and occupation of the Property and the interest.of Lessor
or of Lessee under this Lease (subject, however, to the provisions hereinafter
contained in this Article 3 which relate to the Lessee's right to contest same)
and (b) reimburse Lessor, promptly upon receipt of evidence of the amount owing,
for any and all taxes or assessments levied, assessed or imposed on Lessor on
account of Basic Annual Rent or Additional Rent, including, Without implied
limitation, any such tax or assessment imposed on Lessor by reason of Lessee's
payment, or reimbursement of Lessor for payment, of any Imposition under this
Section 3.1 ("Gross Receipts Taxes"). It is the intention of the parties hereto
that the rents reserved herein shall be received and enjoyed by Lessor as a net
<PAGE>
sum free from all Impositions except municipal, state or federal income taxes
assessed against Lessor, municipal, state or federal capital levy, franchise,
estate, succession, inheritance or transfer taxes of Lessor, and any income,
profits or revenue tax, assessment or charge imposed upon rent, as such, payable
by Lessee under this Lease or any tax or charge in replacement or substitution
of the foregoing or of a similar character. Lessee shall not be required to pay
or reimburse Lessor for the payment of any franchise, corporate, estate,
inheritance or transfer tax of Lessor or any income, revenue or profits tax of
Lessor based on its general income or revenues (other than to the extent Lessee
is required to reimburse Lessor for the payment of Gross Receipts Tax), except
to the extent, and only to the extent, such tax is specifically stated in the
legislation or otherwise clearly demonstrated by the legislative history to be
imposed, levied or assessed in substitution for, or in substitution for any
increase to, any other tax, assessment, charge or levy which Lessee is required
to pay or reimburse Lessor for the payment of pursuant to the preceding sentence
of this Section 3.1. Nothing in this Section 3.1 shall require Lessee to pay or
reimburse Lessor for the payment of any tax if Lessee's payment of such tax or
reimbursement of Lessor for the payment of such tax would violate any applicable
law. To the extent Lessor shall have paid real property taxes for any period of
time included within the term of this Lease, Lessee shall reimburse Lessor for
any such taxes applicable to such period of time.
3.2 To the extent Lessee is responsible to reimburse Lessor for the
payment of any Gross Receipts Tax, Lessor shall prepare at its own cost and
expense the required tax return and deliver a copy of same to Lessee for
approval together with such information as may enable Lessee to verify the
accuracy of the tax return (which approval shall not be unreasonably withheld or
delayed) at least thirty (30) days prior to the due date for the payment of such
tax (the "Payment Date"), provided, however, that pursuant to a written request.
of Lessor or its accountants not less than sixty (60) days prior to the Payment
Date, Lessee, not less than forty (40) days prior to the date on which such tax
is due, shall provide Lessor with any information which is in Lessee's
possession or control and otherwise unavailable to Lessor which is required for
completion of such tax return. If Lessee does not notify Lessor of its approval
or disapproval of such tax return at least fifteen (15) days prior to the
Payment Date, such return shall be deemed approved hereunder. If Lessee notifies
Lessor of its disapproval of such return and such disapproval shall not be
unreasonable (which disapproval shall contain an explanation of the reasons
therefor and a statement of the necessary changes and corrections [the
"Corrections"] to be made), such return shall be revised accordingly and
forthwith resubmitted to Lessee for approval at least seven (7) days prior to
the Payment Date. Lessee shall, at least three (3) days prior to the Payment
Date, approve such revised return so long as it is consistent with the
Corrections requested by Lessee. If Lessee does not notify Lessor of its
approval or disapproval at least three (3) days prior to the Payment Date, such
return shall be deemed approved hereunder. Following approval of such return
hereunder, Lessee shall prior to the Payment Date pay to Lessor the portion of
the tax for which Lessee is responsible hereunder. If Lessee shall fail to make
such payment to Lessor prior to the Payment Date, Lessee shall be liable for all
fines, penalties, late charges, interest and costs which may be added by such
taxing authority for nonpayment or late payment. If any tax return filed by
Lessor in connection with the foregoing is audited by the applicable taxing
authority, then, in that event (a) Lessor will afford Lessee, at Lessee's
expense, the opportunity to participate with Lessor in any audit proceedings and
(b) Lessee shall pay to Lessor any additional amount determined to be owing by
such taxing authority at least five (5) days prior to the due date for mayment
thereof. Lessor and Lessee otherwise agree to cooperate with one another in
supplying information necessary to determine, and in determining, the
responsibility for the payment of Impositions hereunder. Lessor agrees that, to
the extent permissible and consistent with Lessor's tax planning practices, it
will assert all deductions and credits which will result in the greatest
reduction in the amount of, and deferral of payment of, such Impositions.
Failure of the Lessor to perform any of its obligations pursuant to
this Section 3.2 shall in no way affect Lessee's obligations pursuant to this
Lease.
3.3 All Impositions mentioned in this Article 3 shall be paid to the
department, officer or bureau charged with the collection thereof.
3.4 Lessee shall have the right, after prior written notice to Lessor,
to seek to obtain a reduction in the assessed value of the Land by appropriate
proceedings or to contest the validity or amount of any Imposition, in the name
of Lessee or Lessor or both, without cost or expense to Lessor; provided,
however, that, if required by applicable law, payment of such Imposition shall
be made by Lessee in accordance with the provisions of this Article 3
notwithstanding any such contest. In such event Lessor shall afford to Lessee
<PAGE>
such reasonable cooperation as Lessee may request in effecting such reduction or
such contest or attacking such validity. Lessee agrees to reimburse Lessor
promptly upon demand for any expense or liability incurred by Lessor in
connection with any such proceeding. Any tax refund shall be the property of
Lessee to the extent to which it may be based on a payment made by Lessee.
3.5 Lessor shall have the right (i) to continue to prosecute the real
property tax reduction proceeding presently being prosecuted by Lessor, and (ii)
to initiate any additional real property tax reduction proceedings it may deem
appropriate, in its sole discretion, for any period of time prior to the date of
the commencement of this Lease. Any tax refund obtained in connection with any
such proceedings shall be the property of Lessor.
3.6 Lessor shall have the right to seek, by appropriate proceeding, a
reduction in the assessment of the Land and the Improvements for tax purposes
and to prosecute any such action or proceeding theretofore commenced by Lessee,
if such assessed valuation or valuations shall in whole or in part relate and
pertain to any period of time subsequent to the expiration or termination of the
term of this Lease. To the extent to which any tax refund may be based on a
payment made by Lessee or on its behalf and shall not relate to a period as to
which apportionment thereof has been made with Lessor, Lessee shall be
authorized to collect and retain the same.
3.7 An official certificate or statement issued or given by any
federal, state, county or municipal authority, or any department, bureau, board
or officer thereof or of any public utility, showing the existence of any
Imposition, together with interest and penalties thereon, the payment of which
is the obligation of Lessee as herein provided, shall be prima facie evidence
for all purposes of this Lease of the existence, amount and validity of such
Imposition. Within thirty (30) days after the due date of each Imposition Lessee
shall provide Lessor with a copy of a receipt evidencing payment of such
Imposition.
3.8 Any Imposition relating to a fiscal period of a taxing authority, a
part of which period is included within the term of this Lease and a part of
which is included in a period of time after the expiration or 'termination of
this Lease, shall be apportioned between Lessor and Lessee, at and as of the
expiration and termination of the term of this Lease. Lessee's obligation to pay
its share of any Imposition relating to a period of time which is included
within the term of this Lease shall survive the expiration and termination of
this Lease.
ARTICLE 4
INSURANCE
4.1 Lessee, at its sole cost and expense, shall keep, or cause to be
kept, the Property insured for the benefit of Lessor, Lessee, and, to the extent
required, any mortgagee, during the Term, against loss or damage by fire and
against loss or damage by other risks now or hereafter embraced by an Extended
Coverage policy, in amounts sufficient to prevent Lessor or Lessee from becoming
a co-insurer, but in any event in an amount not less than the then full
replacement cost of Improvements. Such full replacement cost shall be determined
from time to time, at Lessee's sole cost and expense (but not more frequently
than once every twelve (12) months), at the request of Lessor, or any mortgagee,
by an insurer or by an appraiser, engineer, architect or contractor designated
by Lessee and approved in writing by Lessor and any mortgagee (such approval not
to be unreasonably withheld). No omission on the part of Lessor to request any
such determination shall relieve Lessee of any of its obligations under this
Article 4.
4.2 Lessee, at its sole cost and expense, but for the benefit of
Lessor, Lessee, and, to the extent required, any mortgagee, shall maintain or
caused to be maintained by any manager of the Property:
<PAGE>
A. comprehensive general public liability insurance
against claims for bodily injury, death or property damage occurring on, in or
about the Property, in or about the adjoining streets, property and passageways,
such insurance to afford minimum protection, during the term of this lease, of
not less than One Hundred Million Do llars ($100,000,000) for each occurrence
with such deductibles or self insurance retentions as may be reasonably
acceptable to Lessor;
B. if the Property shall be located in an area designated
as a flood hazard area by the U.S. Department of Housing and Urban Development,
flood insurance in an amount equal to the maximum coverage available not to
exceed full replacement cost of the Property (as determined in accordance with
the provisions of Section 4.1 hereof);
C. general business interruption insurance in an amount
not less than Basic Rent and Additional Rent for the period of three (3) years
following the occurrence of the insured casualty; and
D. such other insurance and in such amounts as may from
time to time reasonably be required by Lessor or any mortgagee against other
insurable hazards which at the time are commonly insured against and generally
available in the case of premises similarly situated.
4.3 Lessee may effect for its own account any insurance not required
under the provisions of this Lease, but any insurance effected by Lessee on the
Property or any part thereof whether or not required under this Article 4 shall
name Lessor, Lessee, the lessor under the Ground Lease, any mortgagee and any
other lienors as their interests may appear as named insured and shall be
subject to all other provisions of this Article 4 and Article 13 hereof.
4.4 All insurance provided for in this Article 4 shall be effected
under valid and enforceable policies issued by financially responsible insurers
having an "A" rating under Best's Directory of Insurance Companies and
incorporated under the laws of the United States or any state thereof and
licensed to do business in the State of New Jersey. Upon the commencement of the
Term, and thereafter not less than thirty (30) days prior to the expiration
dates of the expiring policies theretofore furnished pursuant to this Article 4,
or any other Article of this Lease, certificates evidencing such insurance and
copies of the policies bearing notations evidencing the payment of premiums or
accompanied by other evidence satisfactory to Lessor of such payment shall be
delivered by Lessee to Lessor.
4.5 Nothing in this Article 4 shall prevent Lessee from obtaining or
causing to be obtained insurance of the kind and in the amounts provided for
hereunder under a blanket insurance policy or policies covering other properties
as well as the Property, provided, however, that any such policy or policies of
blanket insurance shall specify therein, or Lessee shall furnish Lessor with a
written statement from the insurers under such policies specifying, the amount
of the total insurance allocated to the Property, which amounts shall not be
less than the amounts required pursuant to this Article 4 and Article 8 hereof,
and such amounts so specified shall be sufficient to prevent any one of the
assureds from becoming a co-insurer within the terms of the applicable policy or
policies, and provided further, however, that any policy or policies of blanket
insurance shall, as to the Property, otherwise comply with the provisions of
this Article 4 and Article 8 hereof.
4.6 The loss, if any, under any policies provided for in Sections 4.1
and 4.2 hereof shall be adjusted with the insurance companies (i) by Lessee in
the case of any particular casualty resulting in damage or destruction not
exceeding One Million Dollars ($1,000,000) in the aggregate, and (ii) by Lessor
or Lessee, at Lessor's option, or to the extent required any mortgagee, in the
case of any particular casualty resulting in damage or destruction exceeding One
Million Dollars ($1,000,000) in the aggregate. The proceeds of any insurance
shall be payable: (x) to Lessee in the case of particular casualty resulting in
damage or destruction not exceeding One Million Dollars ($1,000,000) in the
aggregate, and (y) to Lessor, or to the extent required, any mortgagee in the
case of any particular casualty resulting in damage or destruction exceeding One
Million Dollars ($1,000,000) in the aggregate to be held for the purposes set
forth in and applied in accordance with the provisions of Article 13 hereof.
<PAGE>
Each such policy shall contain, if obtainable at no substantial additional cost,
a provision that no act or omission of Lessee shall affect or limit the
obligation of the insurance company to pay to Lessor the amount of any loss
sustained, and an agreement by the insurer that such policy shall not be
cancelled without at least thirty (30) days' prior written notice to Lessor and
to any mortgagee to whom a loss thereunder may be payable.
ARTICLE 5
LESSOR'S RIGHT TO PERFORM LESSEE'S COVENANTS
Lessee covenants and agrees that if it shall at any time fail to pay
any Imposition in accordance with the provisions of Article 3, or to take out,
apply for, maintain or deliver any of the insurance policies provided for in
Article 4 or 8 hereof, or shall fail, within the time limit set forth herein to
make any other payment or perform any other act on its part to be made or
performed hereunder, after the notice therein specified of any default has been
given, then Lessor may, but shall not be obligated to, (i) pay any Imposition
payable by Lessee pursuant to the provisions of Article 3 hereof, or (ii) take
out, pay for, maintain or deliver any of the insurance policies provided for in
Articles 4 or 8 hereof, or (iii) make any other payment or perform any other act
on Lessee's part to be made or performed as in this Lease provided, without
further notice to or demand upon Lessee and without waiving or releasing Lessee
from any obligations of Lessee hereunder.
ARTICLE 6
REPAIRS ANID MAINTENANCE OF THE PROPERTY
6.1 A. At all times during the Primary Term, Lessor, at its sole cost
and expense, shall cause to be provided by a contractor qualified under the Act
(as hereinafter defined) to provide services to a hotel and casino in New Jersey
such facility maintenance, engineering and repair services required to maintain
the Property in good repair and condition and in conformity with applicable laws
and regulations, including, without being limited to, maintenance and repair of
fire protection, sprinkler and alarm systems, surveillance systems, swimming
pool and related equipment, electrical fixtures and systems, light bulbs,
plumbing and water systems, mechanical systems, elevators and escalators,
refrigeration, cooling and heating systems, restaurant equipment, sanitary sewer
systems, public areas and grounds, floor coverings, furniture, furnishings and
fixtures, televisions and portable radios, painting, tiles and wall coverings,
uniforms of property maintenance employees, laundry facilities, equipment
rentals, building walls, foundations, floors and roofs, sidewalks, driveways and
all other service systems contained within the Property and the cost of which
facility maintenance and engineering services are not normally capitalized under
generally accepted accounting principles (collectively, the foregoing are
hereinafter referred to as the "Facility Maintenance and Engineering Services").
The obligations of Lessor under this Lease, however, shall not extend to
providing any maintenance or repair of any equipment or property used in the
conduct of gaming or which is not the property of Lessor, or to daily
housekeeping and linen services of hotel rooms located within the Property.
B. At all times during the Term, Lessee, at its sole cost
and expense, agrees it will take good care of the Property and any substitutions
or replacement thereof or alterations thereto, and the sidewalks, curbs and
vaults in or adjoining the Property, and, subject to the provisions of this
Lease, keep the same in good order and condition, excepting reasonable wear and
tear, and promptly at Lessee's own cost and expense to make all necessary and
desirable repairs, interior and exterior, structural and non-structural,
ordinary as well as extraordinary, foreseen as well as unforeseen except to the
extent that any of the foregoing items shall be the responsibility and
obligation of Lessor pursuant to Section 6.lA hereof or Section 6.3 hereof. When
used in this Article 6, the term "repairs" shall include replacements and
renewals when necessary to maintain the Property in the condition of the
Property on the date hereof and as may be required by the Act,or the Commission
(as hereafter defined) as a hotel and casino, and all such repairs made by
Lessee shall be at least equal in quality and class to the original work.
C. All improvements, repairs, alterations and all other
property of the character demised by this Lease, made or installed in the
Property by or on behalf of Lessee shall immediately upon completion or
<PAGE>
installation thereof become subject to this Lease and shall be surrendered to
Lessor upon the expiration or earlier termination of the term of this Lease.
Notwithstanding anything to the contrary contained herein, on the Lease
Expiration Date, Lessee shall be entitled to remove all existing trade fixtures
and gaming equipment of Lessee and any such items installed in the Property by
Lessee during the Term.
6.2 Except as expressly provided herein, Lessor shall not be required
to furnish any services or facilities or to make any remairs or alterations in
or to any portion of the Property. The parties agree that compliance by Del E.
Webb New Jersey, Inc. with the terms of that certain Maintenance Services
Contract of even date herewith by and between Lessor and Del E. Webb New Jersey,
Inc. shall be deemed to be full and complete compliance with the terms and
provisions of Section 6.lA. hereof.
6.3 A. At all times during the Term of this Lease upon the request of
Lessee, Lessor agrees to purchase or provide (i) replacements of furniture,
fixtures and furnishings and equipment relating to the Property ard (ii)
repairs, maintenance, alterations and improvements to the Property, the costs of
which are normally capitalized under generally accepted accounting principles
(collectively, "FF&E Replacements") such as, resurfacing building walls, floors,
roofs and parking areas and replacing folding walls and the like, major repairs,
alterations, improvements, renewals or replacements to the structure of the
Improvements or to their mechanical, electrical, heating, ventilating, air
conditioning, plumbing or vertical transportation systems. Lessee agrees not to
purchase for its own account any FF&E Replacements during the Term of this
Lease.
B. Lessee's requests to Lessor for FF&E Replacements shall
be made by the submission to Lessor of the Repairs and Equipment Estimate and
Capital Budget (as said terms are defined in that certain Management Agreement
of even date herewith by and between Lessee and Del E. Webb New Jersey, Inc.
(the "Management Agreement")) not less than thirty (30) days prior to
commencement of each calendar year beginning January 1, 1984 together with
Lesseeis written approval of such Repairs and Equipment Estimate and Capital
Budget (the "Approved Repairs Equipment Estimate").
C. The parties agree that Lessor's obligations under
Section 6.3A hereof shall be fully satisfied upon Lessor's procurement of FF&E
Replacements in accordance with the Approved Repairs and Equipment Estimate
annually.
D. Lessor agrees, pursuant to the provisions ofss.48(d) of
the Internal Revenue Code of 1954, as amended (the "Code"), to elect to treat
Lessee as the purchaser of FF&E Replacements which constitute "new section 38
property" within the meaning of ss.ss. 48(a) and (b) of the Code for the
purposes of the Investment Tax Credit, if any, allowed with respect to such
property. Lessor agrees to make any and all filings required under ss. 48(d) of
the Code and any applicable Treasury Regulations promulgated thereunder to
effectuate such election. Lessor makes no representation as to the availability
of any Investment Tax Credit with respect to the FF&E Replacements.
6.4 A. Lessee agrees to loan to Lessor any amounts necessary to fund
the cost of FF&E Replacements. Lessee also agrees to loan to Lessor any amounts
necessary to fund the cost of Facility Maintenance and Engineering Services, if,
at any time, Lessor's cash flow before payment of such costs less the amounts
available for distribution as indicated in Financial Forecast (but not to exceed
One Million Eight Hundred Thousand Dollars ($1,800,000) in any year), is
insufficient therefor.
B. Lessor will execute and deliver a separate note
("Maintenance Shortfall Note") in a form reasonably acceptable to Lessee for
each Facility Maintenance and Engineering Services borrowing made pursuant to
Section 6.4A hereof. Each Maintenance Shortfall Note shall bear interest at the
rate of ten percent (10%) per annum, which interest from the date thereof shall
be payable monthly in arrears. No principal payments shall be required under any
Maintenance Shortfall Note until September 30, 2000, at which time the entire
outstanding principal balance of all Maintenance Shortfall Notes shall become
immediately due and payable.
<PAGE>
C. Lessor will execute and deliver a separate note ("FF&E
Note") in a form reasonably acceptable to Lessee for each FF&E Remlacements
borrowing made pursuant to Section 6.4A hereof. Each FF&E Note shall have a term
of five (5) years, with interest from the date thereof payable monthly in
arrears at the rate of fourteen percent (14%) per annum. No principal payments
shall be required under any FF&E Note during the first three (3) years of the
term thereof. The original principal balance of each FF&E Note shall be due and
payable fifty percent (50%) on the last day of the fourth and fifth years
thereof; provided, however, that in the event this Lease shall terminate,
whether upon the expiration of the term hereof or any earlier termination
thereof, the entire outstanding principal balance of all FF&E Notes shall become
immediately due and payable upon the date of such termination.
D. Any FF&E Note executed and delivered on or prior to
October 1, 1995 and all Maintenance Shortfall Notes shall be secured under that
certain expandable wraparound mortgage of even date herewith by and between
Lessor, as mortgagor, and Lessee, as mortgagee, in the original principal amount
of One Hundred Twenty-Seven Million Dollars ($127,000,000) (the "Expandable
Wraparound Mortgage"); provided, however, that in no event shall the total
outstanding principal balance of all such FF&E Notes and Maintenance Shortfall
Notes secured by the Expandable Wraparound Mortgages exceed Twenty-Five Million
Dollars ($25,000,000). Any FF&E Note or Maintenance Shortfall Note which shall
not be secured by the Expandable Wraparound Mortgage as a result of the
foregoing provision and any FF&E Notes executed and delivered after October 1,
1995 shall be secured under separate security agreements is agreed to by the
parties.
E. In each year during the term of this Lease, Lessee
shall pay to Lessor as Additional Rent an amount equal to the sum of (i) debt
service (interest and principal) under all outstanding FF&E Notes, (ii) all
taxes, insurance costs and other expenses incurred by Lessor during such year
relating to FF&E Replacements, and (iii) the investment tax credit benefit
received by Lessee, if any, for FF&E Replacements acquired during such year.
During the term of this Lease, Lessee shall make Additional Rent
payments required to be made to Lessor pursuant to Section 6.4E(i) hereof one
(1) day prior to the date Lessor's corresponding payment is due under the FF&E
Notes. On the date of termination hereof Lessee shall make an additional Rent
payment to Lessor in an amount equal to all interest and principal necessary to
enable Lessor to satisfy Lessor's obligations under all outstanding FF&E Notes.
Additional Rent payments required to be made to Lessor pursuant to Sections
6.4E(ii) and (iii) hereof shall be made with respect to items described.in
Section 6.4E(ii) hereof, as incurred by Lessor, and with respect to the items
described in Section 6.4(E)(iii) hereof, on April 15th of the year following the
year in which the FF&E Replacements were acquired, upon submission of a
statement by the Lessor certified by its managing general partner.
ARTICLE 7
COMPLIANCE WITH LAWS, ORDERS, ORDINANCES, ETC.
7.1 Subject to the Provisions of Section 6.lA hereof, at all times
during the term of this Lease, Lessee, at its sole cost and expense, agrees to
promptly comply with all laws and ordinances and the orders, rules, regulations
and requirements of all federal, state and municipal governments and appropriate
departments, commissions, boards and officers thereof, and the orders, rules and
regulations of The National Board of Fire Underwriters, or any other body now or
hereafter constituted exercising similar functions which may be applicable to
the Property and the sidewalks, curbs and vaults adjoining the Property or to
the use or manner of use of the Property, foreseen or unforeseen, ordinary as
well as extraordinary, structural as well as non-structural. Lessee shall also
comply with all notes or notices of violation of law or municipal ordinances,
orders or requirements noted in or issued by any state, county or municipal
department having jurisdiction over or affecting the Property at or before the
date of the execution hereof and thereafter until the full expiration of the
Term. Lessee shall likewise observe and comply with the requirements of all
public liability policies and all other policies of insurance at any time in
force with respect to the Property.
<PAGE>
7.2 Lessee shall have the right, after prior written notice to Lessor,
to contest the validity or application of any law, ordinance, order, rule,
regulation or requirement of the nature referred to in Section 7.1 above, by
appropriate legal proceedings diligently conducted in good faith, in the name of
Lessee or Lessor or both, without cost or expense to Lessor, subject to the
following:
A. If by the terms of any such law, ordinance, order,
rule, regulation or requirement, compliance therewith pending the prosecution of
any such proceeding may legally be delayed without the incurrence or any lien,
charge or liability of any kind against the Property or Lessee's leasehold
interest therein and without subjecting Lessor to any liability, civil or
criminal, for failure to so comply therewith, Lessee may delay compliance
therewith until the final determination of such proceeding.
B. If any lien, charge or civil liability would be
incurred by reason of any such delay, Lessee nevertheless may contest as
aforesaid and delay as aforesaid, provided that such delay would not subject
Lessor to criminal liability and Lessee (i) furnishes to Lessor, and to the
extent required, any mortgagee security, reasonably satisfactory to Lessor and,
to the extent required, any mortgagee against any loss or injury by reason of
such contest or delay, and (ii) prosecutes the contest with due diligence.
Lessor will execute and deliver any appropriate papers which may be
necessary or proper to permit Lessee to so contest the validity or application
of any such law, ordinance, order, rule, regulation or requirement. Lessee
agrees to reimburse Lessor promptly upon demand for any expense or liability
incurred by Lessor in connection with any such proceeding.
ARTICLE 8
CHANGES AND ALTERATIONS BY LESSEE
8.1 Subject to the provisions of Section 8.2 hereof, Lessee shall have
the right at any time and from time to time during the term of this Lease to
make at its sole cost and expense changes and alterations in or to the Property,
subject however in all cases to the following:
A. No change or alteration involving an estimated cost of more than
Five Hundred Thousand Dollars ($500,000) shall be undertaken except after ten
(10) days' prior written notice to Lessor, and to the extent required, any
mortgagee.
B. No change or alteration involving an estimated cost of more than
Two Million Five Hundred Thousand Dollars ($2,500,000), including any
restoration required pursuant to Articles 13 or 14 hereof, shall be made without
the prior written consent of Lessor, which consent shall not be unreasonably
withheld or delayed, and any mortgagee, if required.
C. No change or alteration shall be undertaken until Lessee shall
have procured and paid for, as the same may be required from time to time, all
permits and authorizations of all municipal departments and governmental
subdivisions having jurisdiction. Lessor, at Lessee's sole cost and expense,
shall join in the application for such permits or authorizations whenever such
action is necessary.
D. Any structural change or alteration involving an estimated cost of
more than Two Million Five Hundred Thousand Dollars ($2,500,000) shall be
conducted under the supervision of an architect or engineer selected by Lessee
and approved in writing by Lessor, such approval not to be unreasonably withheld
or delayed, and no such structural change or alteration shall be made except in
accordance with detailed plans and specifications and cost estimates prepared
and approved in writing by Lessor and such architect or engineer to Lessor and
approved in writing by any mortgagee, if required.
<PAGE>
E. Any change or alteration, once commenced, shall be made promptly
(unavoidable delays excepted) and in good and workmanlike manner and in
compliance with all applicab le permits and authorizations and zoning laws and
with all other laws, ordinances, orders, rules, regulations and requirements of
all federal, state and municipal governments, departments, commissions, boards
and officers, The National Board of Fire Underwriters, or any other body
hereafter exercising functions similar to those of any of the foregoing.
F. Builder's all risks insurance or the equivalent thereof with limits
of not less than the full completed replacement cost of such work and worker's
compensation insurance, including employees' liability insurance, covering all
persons employed in connection with any work to whom death or bodily injury
claims could be asserted against Lessor, Lessee or the Property, and general
liability insurance designating Lessee and Lessor as named insureds, with
statutory limits as required by the laws of the State of New Jersey, shall be
maintained by Lessee at Lessee's sole cost and expense at all times when any
work is in process in connection with any change or alteration, including any
restoration required by Articles 13 or 14 hereof. All such insurance shall be
issued by a company or companies of recognized responsibility and all policies
or certificates therefor issued by the respective insurers, bearing notations
evidencing the payment of premiums or accompanied by other evidence satisfactory
to Lessor of such payment, and to the extent required any mortgagee, shall be
delivered to Lessor and such mortgagee.
G. The Property shall at all times be kept free of liens for labor and
materials supplied or claimed to have been supplied thereto, and any such liens
resulting from such changes and alterations shall be cancelled and discharged,
by payment or bond, as provided in Article 9 hereof.
H. Lessor shall execute or join with Lessee in executing any required
application to any governmental authority exercising jurisdiction over a change
or alteration provided that all expenses in connection therewith shall be paid
by Lessee.
I. If the estimated cost of such change or alteration shall be in
excess of Two Million Five Hundred Thousand Dollars ($2,500,000), Lessee shall
pay to Lessor, or, at Lessor's direction, to any mortgagee, if required, the
reasonable fees and expenses of any architect selected by Lessor or, to the
extent required, any mortgagee to review the plans and specifications and
inspect the work on behalf of Lessor and, to the extent required, any mortgagee.
8.2 A. Lessor and Lessee agree to comply with or to cause compliance
with the terms and provisions of that certain casino expansion agreement (the
"Casino Expansion Agreement") of even date herewith among Lessor, Lessee, The
Claridge Hotel .and Casino Corporation and Del E. Webb New Jersey Inc. Lessor
and Lessee agree that their respective rights and remedies pursuant to this
Lease are, and shall be, subject to the performance of any act necessary to
effectuate the implementation of the Casino Expansion Agreement, including, but
not limited to, the execution and delivery of any amendment or modification of
this Lease which may be necessary in connection therewith.
B. Lessee agrees to loan to Lessor any funds required by
Lessor with respect to the implementation of an expansion of the Property
pursuant to the Casino Expansion Agreement so long as and to the extent that, in
the opinion of Lessee's independent certified accountant, the making of such
loan would not adversely affect Lessee's working capital position or cause it to
utilize any line of credit dedicated to its working capital after taking into
consideration (i) Lessee's right to defer payment of certain management and
incentive fees under the Management Agreement, (ii) Lessee's right to receive
loans equal to certain previously paid management and incentive fees thereunder,
and (iii) Lessee's ability to borrow funds from unaffiliated lenders. Such loan,
if made, shall be on terms similar to that certain purchase money note of even
date herewith from Lessor, as maker, to Claridge Limited, as payee, and secured
on terms similar to that certain purchase money second mortgage of even date
herewith by and between Lessor, as mortgagor, and Claridge Limited, as
mortgagee.
<PAGE>
C. Lessee shall pay to Lessor as Additional Rent an amount
equal to the debt service payable on any loan made pursuant to Section 8.2B
hereof. Lessee shall make such Additional Rent payments to Lessor one (1) day
prior to the date Lessor's corresponding payment is due.
ARTICLE 9
LIENS
If any lien shall be filed or made against the Property or any part
thereof for any work or labor performed or purported to be performed or for any
materials furnished or purported to be furnished in, to, or for the Property or
any part thereof, Lessee shall, within forty-five (45) days after receipt of
notice of the filing of such lien, cause the same to be cancelled and discharged
of record, by bond or otherwise, and shall defend at its own expense, any
action, suit or proceeding which may be brought for the enforcement of such
lien, and shall pay any damages suffered or incurred therein by Lessor, and
satisfy and discharge any judgment entered therein, and shall save harmless
Lessor from any claim or damage resulting therefrom. In the event of the failure
of Lessee to so cancel and discharge within such forty-five (45) day period any
such lien, Lessor may pay such item, or discharge such liability by bond, or
both, and the amount expended by Lessor shall be and become immediately due and
payable to Lessor as Additional Rent hereunder.
ARTICLE 10
COVENANT AGAINST WASTE MAINTAINING CONTENTS
10.1 Except as specifically provided herein to the contrary, Lessee
covenants not to do or suffer any waste or damage, disfigurement or injury to
any portion of the Property.
10.2 Subject to the provisions of Sections 6.1.A and 6.3 hereof, Lessee
covenants throughout the term hereof to maintain the Property as a hotel and
casino in the condition, and in accordance with the operating standards in
effect, on the date hereof and with such uses as may be incidental to or
customarily related thereto.
ARTICLE 11
ASSIGNMENT, SUBLETTING AND MORTGAGES
11.1 Lessee may sublet a portion but not substantially all of the
Property provided that each sublease shall expressly be made subject to the
provisions of this Lease and to the extent required shall be approved by the
Commission (as defined in Article 27 hereof) and shall expressly state that the
same is subject to the First Mortgage (as defined in Article 25 hereof). No such
sublease shall modify or limit any right or power of Lessor hereunder or affect
or reduce any obligation of Lessee hereunder and all such obligations shall
continue in full effect during the term of this Lease as obligations of a
principal and not 'a guarantor or surety, as though no subletting had been made.
Lessee shall deliver a copy of any sublease permitted hereunder within thirty
(30) days of the execution and delivery thereof.
11.2 Lessee may not assign all or any portion of its interest
hereunder; provided, however, at such time as Webb, or any other affiliate of
Webb, shall acquire all the capital stock of Lessee or The Claridge Hotel and
Casino Corporation shall purchase the capital stock of Webb in The Claridge
Hotel and Casino Corporation this prohibition shall no longer apply.
11.3 The sale of all or substantially all of the capital stock of
Lessee shall not be deemed to be an assignment pursuant to Section 11.2 hereof.
<PAGE>
11.4 Except as provided in Section 11.1 hereof, neither the interest-
of Lessee in this Lease nor any interest of Lessee in the Property shall be
mortgaged, sold, assigned, transferred or otherwise disposed of, whether by
operation of law or otherwise. The Management Agreement and the interest of the
Manager thereunder and any security agreement in favor of the holder of the
First Mortgage (as defined in Article 25 hereof) is expressly permitted hereby.
11.5 There shall be no merger of this Lease or the leasehold interest
created hereby with the fee estate in the Property by reason of the fact that
the same person may acquire, own or hold, directly or indirectly, (a) this Lease
or the leasehold estate created hereby or any interest in this Lease or such
leasehold estate and (b) the fee estate in the Property or any interest therein.
ARTICLE 12
INSPECTION OF THE PROPERTY BY LESSOR, ETC.
12.1 Lessee agrees to permit Lessor and the authorized representatives
of Lessor to enter the Property at all reasonable times during usual business
hours for the purpose of (a) inspecting the same, (b) providing Facility
Maintenance and Engineering Services and providing FF&E Replacements and (c)
making any necessary repairs to any portion of the Property and performing any
work therein that may be necessary by reason of Lessor's obligations under
Sections 13 and 14 hereof or Lessee's default under the terms of this Lease.
Nothing herein shall imply any duty upon the part of Lessor to do any such work
which under any provisions of this Lease Lessee may be required to perform and
the performance thereof by Lessor shall not constitute a waiver of Lessee's
default in failing to perform the same. Lessor may during the progress of any
work to any portion of the Property, the provision of Facility Maintenance and
Engineering Services and FF&E Replacements keep and store upon the Property all
necessary materials, tools and equipment. Lessor shall not in any event be
liable for inconvenience, annoyance, disturbance, loss of business or other
damage of Lessee by reason of making such repairs or the performance of any such
work in or to any portion of the Property, or on account of bringing materials,
supplies and equipment into or through any portion of the Property during the
course thereof and the obligations of Lessee under this Lease shall not thereby
be affected in any manner whatsoever.
12.2 Upon reasonable notice to Lessee, Lessor is hereby given the right
during usual business hours to enter the Land and Improvements and to exhibit
the same for the purposes of sale or financing.
ARTICLE 13
EMINENT DOMAIN
13.1 If, at any time during the term of this Lease, all or
substantially all of the Property shall be taken for any public or quasi-public
purposes by any lawful power or authority by the exercise of the right of
condemnation or eminent domain or by agreement between Lessor and those
authorized to exercise such right, this Lease and the term of this Lease shall
terminate and expire on the date of such taking and the Basic Rent and
Additional Rent herein reserved and provided to be paid by Lessee shall be
apportioned as of the date of such taking. For the purposes of this Section
13.1, a taking of "substantially all" of the Property shall mean a taking of so
much of the Property as, in the reasonable judgment of Lessee, shall render the
remainder insufficient for the purpose for which Lessee was then using the
Pronerty. if the taking of any portion of the Property results in the revocation
of any license necessary for the operation of a hotel and casino on the Property
under the Act (as defined in Section 27.1 hereof), such taking shall be deemed
to be a taking of all or substantially all of the Property.
13.2 If, at any time during the term of this Lease, less than all or
substantially all of the Property shall be taken as aforesaid, this Lease and
the Term hereof shall continue and Lessee shall perform the restoration,
replacement, rebuilding, repair, alteration or demolition of the Improvements,
collectively the "Work" necessary to return the Improvements as nearly as
possible to their condition and character immediately prior to the taking in
accordance with the provisions of this Article 13.
<PAGE>
13.3 In the event of any such taking, partial, all or substantially all
of the Property, Lessor or, to the extent required, any mortgagee shall be
entitled to receive the entire award or awards. Lessor or, to the extent
required, any mortgagee shall hold the entire award or awards collected with
respect to a partial taking And the same shall be applied and paid over toward
the cost of Work, including the cost of temporary repairs or for the protection
of the Property pending the completion of the Work and shall be paid out from
time to time as the Work progresses upon the written request of Lessee if the
Work for which payment is requested has been done in a good and workmanlike
manner, in accordance with all applicable laws, rules, ordinances and orders of
any governmental authority with jurisdiction and substantially in accordance
with plans and specifications therefor previously submitted to Lessor and, to
the extent required, any mortgagee and the requirements of Article 8 hereof.
Each request shall be accompanied by the following:
A. A certificate signed by Lessee dated not more than 30 days prior to
each request, setting forth the following:
(i) That the sum then requested either has been paid by Lessee, or
is justly due to contractors, subcontractors, materialmen,
engineers, architects or other persons who have rendered
services or furnished materials for the Work therein
specified, or paid for the same, the names and addresses of
such persons, a brief description of such services and
materials, the several amounts so paid or due to each of said
persons in respect thereof, that no part of such expenditures
has been or is presently the basis, in any previous request,
for the disbursement of the award.
(ii) That the cost, as estimated by the persons signing such
certificate, of the Work required to be done subsequent to the
date of such certificate in order to complete and pay for the
same, does not exceed the award, plus any amount deposited by
Lessee to defray such cost and remaining in the hands of Lessor
or any mortgagee after payment of the sum requested in such
certificate.
B. A notice of title continuation to the effect that there has not
been filed with respect to the Property or any part thereof or upon Lessee's
leasehold interest therein any vendor's, mechanic's, laborer's, materialman's or
other lien which has not been discharged of record, except such as will be
discharged by payment of the amount then requested.
13.4 If any such Work involves expenditures in excess of Five Hundred
Thousand Dollars ($500,000), in addition to the certificate required in Section
13.3 hereof there shall also be furnished a certificate signed by the architect
or engineer in charge of the Work certifying to the facts set forth in Section
13.3A(ii) hereof.
13.5 Upon compliance with the foregoing provisions of Section 13.3
hereof, Lessor or, if applicable, any mortgagee shall pay or cause to be paid to
Lessee or the persons named in such certificate from said award proceeds the
respective amounts stated therein to have been paid by Lessee or to be due to
them, as the case may be.
13.6 If the award or awards at the time held by Lessor or, to the
extent required, any mortgagee, less the actual cost, fees and expenses, if any,
incurred in connection with the adjustment of the loss, shall be insufficient to
pay the entire cost of such restoration, Lessee will pay any deficiency.
13.7 Any portion of the proceeds of any award or awards remaining
after payment for the Work in accordance with. the terms of this Lease shall be
paid to Lessor.
<PAGE>
13.8 In the case of any taking covered by the provisions of this
Article 13, Lessor shall be entitled to reimbursement from any award or awards
of all reasonable costs, fees and expenses incurred in the determination and
collection of any such awards.
13.9 If the temporary use of the whole or any part of the Property
shall be taken at any time during the term of this Lease for any public or
quasi-public purpose by any lawful power or authority by the exercise of the
right to condemnation or eminent domain or by agreement between Lessor, Lessee
and those authorized to exercise such right, the term of this Lease shall not be
reduced or affected in any way and Lessee shall continue to pay in.full the
Basic Rent and Additional Rent and the entire award for such taking shall be
paid to Lessee.
13.10 Lessee, at Lessor's option and at no expense to Lessor, shall
appear in any condemnation proceeding or participate in any and all hearings,
trials and appeals therein on behalf of Lessor and, to the extent required, on
behalf of any mortgagee.
ARTICLE 14
DAMAGE OR DESTRUCTION
14.1 In case of casualty to the Improvements resulting in damage or
destruction, Lessee shall promptly give written notice thereof to Lessor and to
any mortgagee.
14.2 If, at any time during the Term, fifty percent (50%) or more of
the Improvements have been damaged or destroyed, Lessee shall have the option
(i) to terminate this Lease or (ii) to perform the Work necessary to return the
Improvement as nearly as possible to their condition and character immediately
prior to the occurrence of such damage or destruction. If Lessee shall exercise
its right to terminate this Lease, this Lease and the Term hereof shall
terminate and expire thirty (30) days after the date of Lessee's notice and the
Basic Rent and Additional Rent herein reserved and provided to be paid by Lessee
shall be apportioned as of the date of such termination.
14.3 If Lessee elects to perform the Work or if, at any time during the
Term, less than fifty percent (50%) of the Improvements are damaged or
destroyed, Lessee shall perform the Work necessary to return the Improvements as
nearly as possible to its value, condition and character immediately prior to
such damage or destruction. Lessee shall perform such work at its sole cost and
expense regardless of the amount of any such damage or destruction, and whether
or not the insurance proceeds, if any, shall be sufficient for the purpose. The
Work shall be commenced within a reasonable time after such damage or
destruction and prosecuted with diligence, unavoidable delays excepted. During
the period the Work is being performed, Basic Rent hereunder shall not be
apportioned or reduced.
14.4 All insurance money paid to Lessor or, to the extent required, any
mortgagee, on account of such damage or destruction, less the actual cost, fees
and expenses, if any, incurred in connection with adjustment of the loss, shall
be held by Lessor or, to the extent required, any mortgagee and applied to the
payment of the cost of the Work, including the cost of temporary repairs or for
the protection of the Improvements pending the completion of the Work in
permanent form substantially in the same manner and subject to the same
conditions as those provided in Article 13 hereof with respect to awards from
condemnation.
14.5 If the insurance money at the time held by Lessor or, to the
extent, required, any mortgagee, less the actual so cost, fees and expenses, if
any, incurred in connection with the adjustment of the loss, shall be
insufficient to pay the entire cost of the Work, Lessee will pay the deficiency.
14.6 Upon (a) the completion of all of the Work in a good and
workmanlike manner and substantially in accordance with the approved plans and
specifications therefor and (b) receipt by Lessor and, to the extent required,
any mortgagee of satisfactory evidence of the character required by Sections
<PAGE>
13.3 and 13.4 hereof, that the Work has been completed and paid for in full (or,
if any part of the Work has not been paid for, adequate security for, such
payment shall exist in form reasonably satisfactory to Lessor and any mortgagee)
and that there are no liens of the character referred to in Section 13.3 hereof,
any balance of the insurance money at the time held by Lessor or any mortgagee,
shall be applied in accordance with the terms of any mortgage then encumbering
the Property and the remainder, if any, to be paid to Lessee.
ARTICLE 15
CONDITIONAL LIMITATIONS;
DEFAULT PROVISIONS; REMEDIES
15.1 If at any time during the term of this Lease Lessee (a) shall
generally not pay its debts as they become due or shall admit in writing its
inability to pay its debts, or shall make a general assignment for the benefit
of creditors, (b)shall commence any case, oroceeding or other action seeking
reorganization, arrangement, adjustment, liquidation, dissolution or composition
of it or its debts under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors, or seeking appointment of a receiver,
trustee, custodian or other, similar official for it or for all or any
substantial part of its property, (c) shall take any corporate action to
authorize any of the actions set forth in (a) or (b) above, or if any case,
proceeding or other action against Lessee shall be commenced seeking to have an
order for relief entered against it as debtor, or seeking reorganization,
arrangement, adjustment, liquidation, dissolution or composition of it or its
debts under any law relating to bankruptcy, insolvency, reorganization or relief
of debtors, or seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of is property, and
such case, proceeding or other action remains undismissed for a period of one
hundred twenty (120) days, this Lease may, at the option of Lessor to be
exercised within a reasonable time after notice of the happening of any one or
more of such events, be cancelled and terminated and in that event neither
Lessee nor any person, firm, corporation or officer claiming through or under
Lessee by virtue of any statute or of an order of any court shall be entitled to
possession or to remain in possession of the Property or any part thereof but
shall forthwith quit and surrender the Property, and Lessor, in addition to the
other rights and remedies Lessor has by virtue of any other provision herein or
elsewhere in this Lease contained or by virtue of any statute or rule of law now
or hereafter enacted or established, may retain as liquidated damages any
prepaid Basic Rent and Additional Rent, security deposit or moneys, received by
or available to Lessor from Lessee or others on behalf of Lessee.
15.2 If Lessee shall make default in (i) the payment of any installment
of Basic Rent, or any part thereof, and such default shall continue for thirty
(30) days after Lessee's receipt of notice thereof from Lessor, or (ii) the
payment of any item of Additional Rent, or any part thereof, and such default
shall continue for forty-five (45) days after Lessee's receipt of notice thereof
from Lessor, or (iii) the performance or observance of any other covenant on the
part of Lessee to be performed or observed hereunder, and such default shall
continue for sixty (60) days after Lessee's receipt of notice thereof from
Lessor or, if such default is of a character that is incapable of being cured
within sixty (60) days, if Lessee shall fail to commence to cure such default
within such sixty (60) day period and thereafter to prosecute such cure
diligently, then Lessor may terminate this Lease at any time by giving Lessee
ten (10) days written notice of its election to terminate, and upon the
expiration of such ten (10) day period, the term of this Lease shall expire by
limitation as fully and completely as if said time were the date herein
originally fixed for the expiration of the term hereby granted, and Lessee shall
thereupon quit and peacefully surrender the Property to Lessor, without any
payment therefor by Lessor, and Lessor may re-enter the Property and remove all
persons and property therefrom, either by summary proceedings or by any suitable
action or proceeding at law, or by force or otherwise, without being liable to
indictment, prosecution or damages therefor, and may have, hold and enjoy the
Property as if Lessee's former estate and interest in the Property never
existed.
15.3 Lessor, in addition to any other rights herein reserved to it, but at its
option, shall have the right at all times during the term of this Lease and
notwithstanding the concurrent pendency of summary or other dispossess
proceedings between Lessor and Lessee, to restrain or enforce by injunction any
violation or attempted violation by Lessee of any of the terms, covenants,
conditions and agreements of this Lease.
<PAGE>
15.4 The word "re-enter", as used in this and other covenants of this
Lease, is not and shall not be restricted to its technical legal meaning, but is
used in the broadest sense.
ARTICLE 16
OPTION TO PURCHASE
16.1 Lessor hereby grants Lessee the right and option to purchase (the
"Purchase Option") fee title to the Improvements, and Lessort s interest in the
Land as lessee under Ground Lease (collectively the "Lessor's Interest in the
Property"), on either of September 30, 1998, or September 30, 2003 (an "Option
Date") (provided that the Lease is the effect on the Option Date) for a price
equal to the then fair market value of the Lessor's Interest in the Property
determined as, hereinafter provided (the "Fair Market Value"). Lessee may
exercise such option by giving written notice to Lessor of such election not
later than nine (9) months prior to the relevant Option Date.
To enable Lessee to make an informed judgment with respect to the
foregoing option, and to establish the Fair Market Value as of the Option Date,
Lessee may notify Lessor in writing not more than twenty-four (24) months prior
to the relevant Option Date stating that Lessee desires a determination of Fair
Market Value of the Lessor's Interest in the Property as of the relevant Option
Date. Thereafter, Lessor and Lessee shall consult for the purpose of determining
such Fair Market Value as of the relevant Option Date and any value agreed upon
in writing shall constitute such Fair Market Value for the purposes of this
Article 16. If Lessor and Lessee fail to agree upon such Fair Market Value prior
to sixteen (16) months before the relevant Option Date, Lessee may request that
such Fair Market Value be determined by the appraisal procedure described in
Section 16.2 below. Lessee's request for a determination of such Fair Market
Value shall not obligate Lessee to exercise the option provided in this Article
16 but, if Lessee exercises such option, Lessee and Lessor shall each pay the
fees and disbursements of any appraiser appointed by it and shall share equally
the fees and expenses of any third appraiser and any other costs and expenses of
any appraisal pursuant to this Article 16. If Lessee does not exercise such
option, Lessee shall pay all costs and expenses of any appraisal pursuant to
this Article 16.
16.2 The term "Fair Market Value" as used in this Article 16 shall mean
the fair market value of the Lessor's Interest in the Property unencumbered by
this Lease and used for its highest and best use, including, but not limited to,
use as a hotel and casino, determined using the standards then commonly used by
professional appraisers in determining fair market value of similarly improved
real property in Atlantic City, New Jersey. If the parties hereto fail to agree
under Section 16.1 hereof as to the Fair Market Value such question shall be
submitted upon Lessee's request to a board of appraisers, two (2) in number, one
(1) named by Lessor and one (1) named by Lessee, each of whom shall be a
qualified member of the American Institute of Real Estate Appraisers, or any
successor of such Institute, or if such organization or successor shall no
longer be in existence, a recognized national association or institute of
appraisers. The appraisers so appointed shall be instructed to determine the
Fair Market Value in accordance with the definition of such term contained
herein within fifty (50) days after the making of Lessee's request. If only one
(1) appraiser shall have been so appointed within twenty (20) days after the
making of Lesseels request, or if two (2) appraisers shall have been so
appointed but only one such appraiser shall have made such determination within
fifty (50) days after the appointment of both appraisers, Lessee's request, then
the determination of such appraiser shall be final and binding upon the parties.
If two (2) appraisers shall have been appointed and shall have failed to agree
as to the Fair Market Value within the fifty (50) day period set forth above,
the two (2) appraisers shall appoint a third appraiser within twenty (20) days.
If such appraisers fail to do so, then either party may request the President of
American Arbitration Association or any successor organization thereto to
appoint an appraiser within twenty (20) days of such request, and both parties
shall be bound by any appointment so made within such twenty (20) day period.
Any appraiser appointed by the original appraisers or by the President of
American Arbitration Association shall be instructed to determine the Fair
Market Value in accordance with the definition of such term contained herein
within thirty (30) days after its appointment. The determination of such
<PAGE>
appraiser shall be final and binding upon Lessor and the Lessee as the Fair
Market Value. This provision for determination by appraisal shall be
specifically enforceable to the extent such remedy is available under applicable
law, and any determination hereunder shall be final and binding upon the parties
except as otherwise provided by applicable law.
16.3 Lessor covenants and agrees that from the date hereof until the
expiration of the Purchase Option, Lessor will not sell, convey, transfer,
mortgage, assign, encumber or otherwise dispose of all or any part of Lessor's
Interest in the Property, provided, however, that Lessor shall have the right to
mortgage such property to secure any refinancing of the indebtedness described
in Section 25 hereof.
If Lessee exercises the Purchase Option, Lessor need not convey any
better title thereto than existed on the date of the commencement of the term of
this Lease, and Lessee or its designee shall accept such title and subject to
all charges, liens, security interests and encumbrances on the Lessor's Interest
in the Property created or caused to be created by Lessee and all applicable
legal requirements.
If Lessor shall be unable to give title or make conveyance as
stipulated, Lessor shall convey such title as it then has if Lessee elects to
accept the same. The termination of this Lease prior to exercise of the Purchase
Option, or prior to or after exercise of the Purchase Option if such termination
is due to Lessee's default hereunder, shall terminate all rights and obligations
of Lessor and Lessee under this Article.
In the event of Lessee's exercise of the Purchase Option, this Lease
shall not terminate, except due to Lessee's default, until the Lessor's Interest
in the Property shall have been conveyed to Lessee and the Fair Market Value and
all other sums due under this Lease shall have been paid.
Lessor and Lessee agree that Lessee shall have no right to Purchase
the fee interest in the Land pursuant to the Purchase Option, and Lessee agrees
that should Lessee purchase the Lessor's Interest to the Property, Lessee shall
assume all of Lessor's obligations under the Ground Lease. There shall be no
merger of this Lease or of the leasehold estate hereby created with the fee
estate in the Land and Improvements by reason of the fact that the same person
acquires or holds, directly or indirectly, this Lease or the leasehold estate
hereby created or any interest herein or in such leasehold estate as well as the
fee estate in the Land or any interest in such fee.
16.4 On the relevant Option Date, Lessee shall pay to Lessor an amount
equal to the Fair Market Value plus all closing costs including, without
limitation, any applicable prepayment penalty payable to any mortgagee, counsel
fees, escrow fees, recording fees, title insurance premiums and all applicable
taxes (the "Costs") together with all Basic Rent and Additional Rent to and
including the actual date of purchase, and Lessor shall deliver to Lessee a New
Jersey bargain and sale deed with covenants against grantor's acts to the
Improvements, a bill of sale for any personal property and an assignment of
Lessor's interest in the Ground Lease. On the relevant Option Date Lessee shall
pay to Lessor in cash or by certified, bank or cashier's check or Federal Funds
or wire transfer to an account designated by Lessor an amount equal to all sums
payable pursuant to the terms of this Section 16.4 other than the Fair Market
Value. Any check must be drawn on a bank which is a member of the New York
Clearinghouse Association. Lessee may pay an amount equal to the Fair Market
Value in accordance with either of the following:
A. An amount equal to the outstanding principal balance of all of the
then existing mortgage indebtedness encumbering Lessor's Interest in the
Property by Lessor executing and delivering such documentation as may be
requested by any then existing mortgagee and payment of the balance of the Fair
Market Value to Lessor in cash; or
B. An amount equal to the outstanding principal balance of all of the
then existing mortgage indebtedness encumbering Lessor's Interest in the
Property by Lessor executing and delivering such documentation as may be
requested by any then existing mortgage, payment of ten percent (10%) of the
balance of the Fair Market Value to Lessor in cash and payment of the remainder
<PAGE>
of the Fair Market Value by execution and delivery of a purchase money note in
said amount (the "Option Note"). If the Purchase Option is exercised on
September 30, 1998, the principal amount of the Option Note shall be fully
amortized over a fifteen (15) year term. If the Purchase Option is exercised on
September 30, 2003 the principal amount of the Option Note shall be fully
amortized over a ten (10) year term. In either instance, interest and equal
installments of principal shall be payable quarterly and (ii) Lessee may at the
time it delivers the Option Note choose an interest rate. Such interest rate
shall be equal to either (i) a fixed rate per annum equal to the Prime Rate or
(ii) a floating rate adjusted semi-annually to equal the Prime Rate.
The Option Note shall be secured by a purchase money mortgage in a
form acceptable to Lessor and Lessee.
If on the relevant option Date Webb shall own fifty percent (50%),
directly or indirectly, or more of Lessee, Lessee' s obligations under the
Option Note shall be fully and unconditionally guaranteed by Webb.
There shall be no closing adjustments, other than for the Basic Rent
and Additional Rent payable by Lessee hereunder, and rent and other payment
obligations of Lessor under the Ground Lease for the month in which the relevant
Option Date occurs and other accrued obligations of Lessee under the Ground
Lease.
16.5 Upon the completion of such purchase, but not prior thereto
(whether or not any delay or failure in the completion of such purchase shall be
the fault of Lessor), this Lease shall terminate, except with respect to
obligations and liabilities of Lessee hereunder, actual or contingent, which
have arisen on or prior to such date of purchase.
ARTICLE 17
INDEMNIFICATION OF LESSOR
Subject to the provisions of Article 27 hereof, Lessee shall
indemnify and save harmless Lessor from and against any and all liability, loss,
damages, expenses, costs, claims and judgments (to the extent that the same are
not paid out of the proceeds of any policies of insurance furnished by 'Lessee
to Lessor) arising from injury, or claim of injury, during the term of this
Lease to person or property of any and every nature, from any matter or thing
growing out of the occupation, possession, use, management, improvement,
alteration, or control of the Property.
ARTICLE 18
CUMULATIVE RIGHTS AND REMEDIES
All the rights and remedies of Lessor or Lessee, as the case may be,
herein mentioned or referred to, or arising hereunder, shall be deemed to be
distinct, separate and cumulative, and no one or more of them, whether exercised
or not, nor any mention of, or reference to, any one or more of them herein,
shall be deemed to be in exclusion of, or a waiver of, any of the others, or of
any rights or remedies which Lessor or Lessee, as the case may be, might have,
whether by present or future law or pursuant to this Lease. Lessor or Lessee
shall have, to the fullest extent permitted by law, the right to enforce any
rights or remedies separately, and to take any lawful action or proceedings to
exercise or enforce any rights or remedies whether at law or in equity or
otherwise, without thereby waiving, or being thereby barred or estopped from
exercising and enforcing any other rights or remedies by appropriate action or
proceedings.
ARTICLE 19
NON-WAIVER
No waiver by Lessor of any breach by Lessee of any covenant,
agreement or condition herein contained, and no failure by Lessor to make any
payment on behalf of Lessee, or to exercise any right or remedy in respect of
any breach hereunder, shall constitute a waiver or relinquishment for the future
of any such covenant, agreement or condition, or of any subsequent breach of any
such covenant, agreement or condition, or bar any right or remedy of Lessor in
respect of any such subsequent breach, and the receipt of any rent by Lessor,
<PAGE>
whether the same be that reserved and provided for herein as Basic Rent or
Additional Rent shall not operate as a waiver of the rights of Lessor to enforce
the payment of any other such rent or to require the performance of any other
covenant, condition or agreement hereof then or thereafter in default, or to
terminate this Lease or to recover the Property or to invoke any other
appropriate remedy which Lessor may select as herein or by law provided.
ARTICLE 20
PUBLIC ACCESS TO THE LAND
During such Deriod or periods of the term of this Lease as any
perimeter portion of the Property shall be unimproved by any walled structure,
fence or gate, Lessee shall not suffer or permit the same to be used by the
public, as such, without restriction or in such manner as might reasonably tend
to impair the fee title to the Land or any portion thereof, or in such manner as
might reasonably make possible a claim or claims of adverse user or adverse
possession by the public, as such, or of implied dedication of the Land or any
portion thereof.
ARTICLE 21
USE OF THE PROPERTY
Lessee agrees that without the consent of Lessor, Lessee will not use
or cause to be used the Property or any part thereof for any purpose other than
a hotel and casino in full compliance with the Act (as defined in Article 27
hereof), with uses incidental to or customarily related thereto.
ARTICLE 22
SURRENDER OF THE PROPERTY
22.1 Lessee shall and will on the last day of the term of this Lease or
other sooner termination hereof, well and truly surrender and deliver up the
Property into the possession of Lessor, its successors or assigns, and in good
order, condition and repair, except for reasonable wear and tear and damage by
fire or other casualty, free and clear of all liens, tenancies and encumbrances
other than those, if any, created by Lessor or permitted hereunder.
ARTICLE 23
MEMORANDUM OF LEASE
Lessor and Lessee shall, promptly upon the request of either, enter
into a short form memorandum of this lease, in form suitable for recording under
the laws of the State of New Jersey, in which reference to this Lease shall be
made.
ARTICLE 24
GROUND LEASE AND
COVENANT OF QUIET ENJOYMENT
24.1. Lessor will promptly pay all rents and other charges payable by
the tenant under the Ground Lease, and will at all times perform and comply with
all of the terms and conditions thereof to be performed or complied with by the
tenant thereunder and will do all things necessary to keep unimpaired the
leasehold estate created thereby and to prevent any default thereunder or
forfeiture thereof. Lessor will take, or cause to be taken, any action
consistent with the provisions of this. Lease permitted to be taken by the
tenant under the Ground Lease with respect to enforcement of the terms thereof
against the landlord thereunder. Lessee acknowledges that its rights and
remedies pursuant to this Lease are, and shall be, subject and subordinated to
the duties and obligations of the tenant under the Ground Lease And Lessee
agrees not to take any action pursuant to this Lease, or otherwise, which in any
way, either with the passage of time or the giving of notice, or both, would
constitute a default under the Ground Lease; provided, however, that none of the
duties or obligations of Lessee hereunder shall any way be reduced or diminished
as a result of this Lease being subject and subordinate to the duties and
<PAGE>
obligations of the tenant under the Ground Lease. Lessee and Lessor, as the case
may be, will deliver to the other and, to the extent required, any mortgagee,
promptly upon receipt, a copy of any notice, demand, declaration or other
communication received from the landlord under the Ground Lease including those
relating to any alleged or actual or potential default or breach on the part of
the tenant thereunder.
24.2 Lessor covenants that, so long as Lessee pays the Basic Rent and
Additional Rent, and faithfully performs and observes all covenants, conditions
and agreements herein contained on the part of Lessee to be performed or
observed, Lessee shall quietly have and enjoy the Land and every part thereof
throughout the entire term of this Lease.
ARTICLE 25
SUBORDINATION TO AND COMPLIANCE
WITH MORTGAGES
25.1 This Lease and the rights and remedies of Lessor and Lessee
pursuant to this Lease are, and shall be, subject and subordinate in all
respects to the liens of (a) that certain first mortgage and security agreement
(the "First Mortgage") of even date herewith between Claridge Limited, as
mortgagor and First National State Bank, as mortgagee, as modified, amended or
supplemented, which creates a lien for the original principal amount of Eighty
Million Dollars ($80,000,000) on the Land, the Improvements and certain other
personal property used in connection therewith and (b) that certain purchase
money second mortgage of even date herewith between Lessor, as mortgagor, and
Claridge Limited, as mortgagee, which creates a second lien of Forty-Seven
Million Dollars ($47,000,000) on the Lessor's Interest in the Proverty and any
extensions, renewals, modifications, consolidations and replacements of the
mortgages described in (a) and (b) above and to any new mortgage, mortgages,
lien or liens that may be placed upon the Property or any part thereof. Lessee
agrees not to take any action pursuant to this Lease, or otherwise, which in any
way, either with the passage of time or the giving of notice, or both, would
constitute a default under any such mortgage. Lessee and Lessor, as the case may
be, will deliver to the other, promptly upon receipt, a copy of any notice,
demand, declaration or other communication received from any mortgagee.
25.2 Such subordination shall be automatically Lessor and effective
without any further act of/Lessee, but Lessee agrees that to confirm such
subordination, Lessee will, from time to time, at the request of Lessor, execute
any instrument or instruments subordinating this Lease to any such mortgage or.
mortgages, and in the event of the failure of Lessee to execute such instrument
or instruments on demand, Lessor is hereby made Lessee's agent to execute such
instrument or instruments for and on behalf of Lessee. This agency is coupled
with an interest and is irrevocable. If Lessor shall at any time fail to pay any
installment of interest or principal upon any mortgage to which this Lease is or
may be subject or any other charge or sums not required by the provisions of
this Lease to be paid by Lessee, and the default in the payment of which would
constitute a default under the terms of any such mortgage permitting an
acceleration and foreclosure thereof, Lessee on two (2) days' notice to Lessor
shall have the right forthwith to pay the same, together with any foreclosure
costs, and deduct the amount thereof, with interest at the Prime Rate per annum,
from the Basic Rent or Additional Rent payments becoming due under the
provisions hereof, until the full amount so paid shall have been deducted. This
remedy, however, shall not prevent Lessee from recovering from Lessor by action
or otherwise the full amount of such payment to the extent that deductions have
not actually been made, or from being subrogated to the rights of the owner or
holder of any such mortgage so far as the same may be allowed by law. Lessor
agrees to provide Lessee with a copy of each such mortgage or mortgages within
ten (10) days after the execution and delivery thereof.
25.3 Lessor shall use all reasonable efforts to obtain from mortgagees
described in Section 25.2 hereof an agreement from such mortgagees wherein such
mortgagees agree in substance that so long as Lessee is not in default: (A)
Lessee will not be disturbed in Lessee's possession of the Property by any
holder of the mortgage; (B) Lessee will not be joined in any action or
proceeding to foreclose the mortgage by any holder thereof; and (C) casualty
insurance proceeds and condemnation awards to which the holder of the mortgage
<PAGE>
is entitled under the terms of the mortgage will be applied toward
restoration.of the Property. The giving of any such agreement by the mortgagee
may be conditioned by it on the reciprocal agreement by the Lessee to attorn to
the holder of the mortgage should it become vested with title to the Property.
ARTICLE 26
CERTIFICATES
26.1 Within ten (10) days after receipt of written request therefor,
Lessor will execute, acknowledge and deliver to Lessee a statement in writing
certifying that this Lease is unmodified and in full force and effect (or if
there have been modifications that this Lease is in full force and effect as
modified and stating the modifications) and the dates to which the Basic Rent
and Additional Rent have been paid and stating whether, to the best knowledge of
the signer of such certificate, Lessee is in default in the performance of any
covenant, agreement or condition contained in this Lease, and if so, specifying
each such default of which the signer may have knowledge, it being intended that
any such statement delivered pursuant to this Section 26.1 may be relied upon by
any assignee of Lessee.
26.2 Within ten (10) days after receipt of written request therefor
Lessee will execute, acknowledge and deliver to Lessor a statement in writing
certifying that this Lease is unmodified and in full force and effect (or if
there have been modifications that this Lease is in full force and effect as
modified and stating the modifications) and the dates to which the Basic Rent
and Additional Rent have been paid and stating whether, to the best knowledge of
the signer of such certificate, Lessor is in default in the performance of any
covenant, agreement or condition contained in this Lease, and if so, specifying
each such default of which the signer may have knowledge, it being intended that
any such statement delivered pursuant to this Section 26.2 may be relied upon by
any holder of a fee mortgage on Lessor's Interest in the Property or any
assignee of any such holder or any purchaser or grantee of Lessor's Interest in
the Property.
26.3 No such certification shall estop Lessor or Lessee, as the case
may be, thereafter to assert any then existing default of which it did not have
actual knowledge' on the date of the making of such certification.
ARTICLE 27
NEW JERSEY CASINO CONTROL ACT
27.1 Notwithstanding anything to the contrary contained in this Lease,
this Lease will be deemed to include all provisions required by the New Jersey
Casino Control Act, (the "Act"), and shall be conditioned upon the approval of
the New Jersey Casino Control Commission ("Commission"). To the extent that
anything in this Lease is inconsistent with the Act, the provisions of the.Act
shall govern. All provisions of the Act, to the extent required by law to be
included in this Lease, are incorporated by reference as if fully restated in
this Lease.
This Lease is subject to the terms and provisions of the Act, shall
be submitted to the Commission for approval and shall not be effective unless
and until approved, or such approval is waived, by the Commission.
27.2 Lessor, Lessee and their successors or assigns, covenant and agree
that each party shall obtain and hold throughout the term of this Lease such
license as may be required by the Commission to the extent such license or
licenses are necessary for the approval of this Lease and the operation of the
hotel and casino on the Land and in the Improvements.
If the Commission denies licensure or renewal of a license or should
attempt to revoke or suspend any license theretofore issued with respect to
Lessor or Lessee and their successors or assigns or makes a finding of
unsuitability of any of the above persons or entities or any persons or entities
associated with them or if the Division of Gaming Enforcement of the State of
New Jersey (the "Division") objects to such licensure or to such suitability (a
"Disqualification") Lessor or Lessee subject to Disqualification, its successors
<PAGE>
or assigns shall promptly take any and all actions necessary to obtain a
reversal of each Disqualification. Prior to the expiration of thirty (30) days
after any Disqualification, Lessor, Lessee, their successors and assigns
covenant and agree to take all steps and do all acts necessary which would
satisfy the Commission and/or the Division, whichever shall have been the
objector, or the Commission, notwithstanding the objections of the Division, in
order to obtain or maintain licensure by the Commission, including, but not
limited to (A) divesting itself of its interest in and to the Property; (B)
causing any disqualified person to divest himself or itself of any interest in
and to the Proverty and/or (C) severing its association with such disqualified
person to the satisfaction of the Commission and/or the Division. If Lessor is
the party subject to Discrualification and the Disqualification is not
eliminated by Lessor within such thirty (30) day period, Lessee shall purchase
the Lessor's Interest in the Property for the purchase price set forth below:
Year Purchase Price
---- --------------
1983 $146,500,000
1984 $153,825,000
1985 $161,150,000
1986 $168,475,000
1987 $175,800,000
1988 $183,125,000
The purchase price will be adjusted in 1988 to determine the purchase price for
the five (5) year period commencing 1989 and every five (5) years thereafter in
accordance with the procedure and formula set forth below:
Not later than April 1, 1988 and April 1 every five (5) years
thereafter, Lessor shall cause the President of the American Institute of Real
Estate Appraisers to appoint three (3) independent appraisers, each of whom
shall be a qualified member of the American Institute of Real Estate Appraisers
with experience in commercial real estate. Each Independent appraiser will
thereafter determine the value of the Lessor's Interest in the Property in
accordance with the standards set forth in the Code of Professional Ethics and
Standard of Professional Conduct of the American Institute of Real Estate
Appraisers by not later than August 31 of the year of his ar)zointment. If such
appraisals shall not be completed as above provided, the purchase price payable
to acquire the Lessor's Interest in the Property shall remain the existing
purchase price until such appraisal is completed. The purchase price payable to
acquire Lessor's Interest in the Property shall be determined in accordance with
the following formula:
Income Approach Method Value of Appraiser No. 1
Income Approach Method Value of Appraiser No. 2
Income Approach Method Value of Appraiser No. 3
----------------------------------------------- =Purchase Price
divided by 3
The purchase price shall be payable by the purchaser taking title to
Lessor's Interest in the Property subject to any then existing mortgage and
payment of the difference between the purchase price and such balance: (i) in
cash; or (ii), subject to the prior approval of the Commission, ten percent
(10%) in cash and the remainder of such balance by the execution and delivery of
a purchase money note in said amount, which note shall be payable over fifteen
(15) years in quarterly installments of principal; interest shall be payable at
the purchaser's option, at a fixed rate of interest equal to the Prime Rate, or
a floating Rate adjusted annually to equal the then Prime Rate.
If Lessor's Interest in the Property is acquired under this Section
27.2, this Lease shall be deemed to be terminated and all payments required to
be made upon termination hereunder shall be paid by Lessee at the time the
purchase price is paid.
<PAGE>
If Lessee is the party subject to Disaualification and the Disqualification is
not eliminated by Lessee within such thirty (30) day period, Lessor shall have
the option at its sole election, to terminate this Lease at the expiration of
the thirty (30) day period by written notice to Lessee. If Lessor exercises this
right of termination, the term of this Lease shall expire and terminate five (5)
days after Lessee's receipt of such notice and Basic Rent and Additional Rent
herein reserved and provided to be paid by Lessee shall be paid as of the date
of such expiration.
27.3 The provisions of Article 17 hereof to the contrary
notwithstanding, Lessor and Lessee shall be jointly and severally liable for all
acts omissions and violations of this Act by either party regardless of actual
knowledge of such act, omission or violation and notwithstanding any provision
in this Lease to the contrary.
ARTICLE 28
NOTICES
Any notice, document or other communication (hereinafter, "notice")
which either party may be required or may desire to give to the other party
shall be in writing, and any such notice may be given or delivered personally or
by mail.
Any such notices given or delivered personally shall be given or
delivered by hand to an officer of the entity, to which they are being given or
delivered if the entity shall be a corporation, or to the managing partner if
the entity to which they are being given or delivered is a partnership, and
shall be deemed given or delivered when so given or delivered by hand. Any such
notices given or delivered by mail shall be deemed given or delivered when
deposited in the U.S. mails, certified or registered mail, return receipt
requested, with all postage and fees prepaid, addressed to the.person or entity
in question as follows:
If to Lessor:
Atlantic City Boardwalk Associates, L.P.
The Claridge Hotel and Casino
Indiana Avenue and the Boardwalk
Atlantic City, New Jersey 08401
Attention: Managing General Partner
If to Lessee:
The Claridge at Park Place, Incorporated
The Claridge Hotel and Casino
Indiana Avenue and the Boardwalk
Atlantic City, New Jersey 08401
Attention: President
or, in either case, to such other address as either party may have Previously
notified the other pursuant to the provisions of this Article 28.
ARTICLE 29
SEVERABILITY
If and to the extent that any provision of this Lease shall be
unlawful or contrary to public policy, the same shall not be deemed to
invalidate the other provisions of this Lease. This Lease may not be changed
orally but only by an agreement in writing and signed by the parties against
whom enforcement of any waiver, change, modification or discharge is sought.
<PAGE>
ARTICLE 30
WAIVER OF TRIAL BY JURY
It is mutually agreed by and between Lessor and Lessee that the
respective parties hereto shall and they hereby do waive trial by jury in any
action, proceeding or counterclaim brought by either of the parties hereto
against the other on any matters whatsoever arising out of or in any way
connected with this Lease, the relationship of Lessor and Lessee, Lessee's use
or occupancy of the Property, and/or any claim of injury or damage.
ARTICLE 31
SUCCESSORS AND ASSIGNS
Each and all of the provisions, agreements, covenants and conditions
of this Lease shall extend to and shall bind and be obligatory upon or inure to
the benefit of (as the case may require and in each instance as though
specifically so stated) not only Lessor and Lessee, but also the successors and
assigns of Lessor and the successors and assigns of Lessee.
ARTICLE 32
LESSOR/LESSEE RELATIONSHIP
None of the terms, provisions and conditions of this Lease shall be
construed as creating or constituting either party as a co-partner or joint
venturer with the other, or constituting Lessee the agent of Lessor, it being
the intention of the parties that their relationship created hereunder is and
shall continue to be that of lessor and lessee only.
ARTICLE 33
LIMITATION OF LIABILITY
Notwithstanding anything to the contrary contained in this Lease, it
is specifically understood and agreed that the liability of Lessor hereunder
shall be limited to Lessor's interest in the Property, and Lessee hereby agrees
not seek any judgment against Lessor, or any general or limited partner of
Lessor, or any principal of Lessor, any partner or officer thereof, disclosed or
undisclosed, for any reason whatsoever.
ARTICLE 34
GOVERNING LAW
This lease shall be governed by and construed and enforced in
accordance with the laws of the State of New Jersey.
ARTICLE 35
SECURITY INTEREST PROVISION
To secure the obligation of Lessee to perform the terms and
conditions of this Lease, but subject to the rights of any mortgagee described
in Article 25 hereof, (i) Lessee does hereby grant to Lessor, as secured party,
a security interest in Lessee's option to purchase the Land pursuant to that
certain Land Option Agreement of even date herewith by and between Del E. Webb
New Jersey, Inc. and Lessee and (ii) Lessee does hereby grant to Lessor, as
secured party, a security interest in any and all trade names and trademarks of
Lessee (collectively, the foregoing are hereinafter referred to as the
"Collateral"). Lessor and Lessee have currently herewith entered into a separate
security agreement evidencing the creation of such security interests. Upon the
failure of Lessee to cure any default hereunder within the applicable grace
period, Lessor shall have the riiht to exercise any and all rights and remedies
of Lessor with respect to the Collateral set forth in such security agreement.
<PAGE>
ARTICLE 36
EFFECT OF CONVEYANCE
The term "Lessor", as used in this Lease, means only the owner for
the time being of the Improvements and the Lessor's interest under the Ground
Lease. Therefore, in the event of any conveyance of the Improvements and the
Lessor's interest under the Ground Lease, the seller shall be and hereby is
entirely freed and relieved of all covenants and obligations of Lessor
hereunder, not theretofore accrued, and it shall be deemed and construed,
without further agreement between the parties hereto or between the parties
hereto and the grantee of the Improvements and the Lessor's interest under the
Ground Lease, that such grantee has assumed and agreed to execute any and all
covenants and obligations of Lessor hereunder.
IN WITNESS WHEREOF, the respective parties hereto have duly executed
and acknowledged this instrument as of the day and year first above written.
LESSOR
ATLANTIC CITY BOARDWALK
ASSOCIATES, L.P.
By:/s/ROBERT K. SWANSON
--------------------------------------
Robert K. Swanson
Its Managing General Partner
LESSEE
THE CLARIDGE AT PARK PLACE,
INCORPORATED
By:/s/WILLIAM M. DOUGALL
------------------------------------
Name: William M. Dougall
----------------------------
Title: President
---------------------------
If on the relevant Option Date the undersigned owns fifty percent
(50%), directly or indirectly, or more of Lessee, the undersigned hereby fully
and unconditionally guarantees Lessee's obligations under the Option Note.
DEL E. WEBB CORPORATION
By:/s/ PHILIP J. DION
---------------------------------------
Name: Philip J. Dion
---------------------------------
Title: Senior Vice President
--------------------------------
<PAGE>
Exhibit A
---------
Description
-----------
ALL that certain land and premises situate in the City of Atlantic City, County
of Atlantic and State of New jersey, bounded and described as follows:
TRACT #1 - BEGINNING at a point in the Easterly line of Indiana Avenue 150 feet
Southwardly of the Southerly line of Pacific Avenue; and extending thence
(1) Eastwardly parallel with Pacific Avenue 155 feet; thence
(2) Southwardly parallel with Indiana Avenue 50.1 feet; thence
(3) Westwardly parallel with Pacific Avenue 155 feet to the Easterly line
of Indiana Avenue; thence
(4) Northwardly along the same 50.1 feet to the point and place of
beginning.
BEING known as 111 and 113 South Indiana Avenue.
TRACT #2- BEGINNING at a point in the Westerly line of Indiana Avenue 150 feet
Southwardly of the Southerly line of Pacific Avenue; and extending thence
(1) Southwardly along the Westerly line of Indiana Avenue 300 feel.; thence
(2) Westwardly at right angles to Indiana Avenue 138.10 feet to the
Easterly line of Park Place; thence
(3) Northwardly along the same 300 feet; thence
(4) Eastwardly at right angles to Park Place 138.10 feet to the Westerly
line of Indiana Avenue and point and place of beginning.
TRACT #3 - BEGINNING at a point in the Easterly line of Ohio Avenue 200 feet
Southwardly of the Southerly line of Pacific Avenue; and extending thence
(1) Eastwardly parallel with Pacific Avenue 145.6 feet to the Westerly
line of Park Place; thence
(2) Southwardly along the same 150 feet; thence
(3) Westwardly parallel with Pacific Avenue 145.6 feet to the Easterly
line of Ohio Avenue; thence
(4) Northwardly along the same 150 feet to the point and place of
beginning.
In Compliance with Chapter 157, Laws of 1977 premises situate herein are known
as Lots #8 and 9, Lot #16, in Block #31 and Lot #35 in Block #30 on the tax map
of the above City.
<PAGE>
Exhibit B
---------
(Permitted Exceptions)
1. Building restrictions as in Deed Book 46 page 29.
2. Building restrictions as in Deed Book 72 pages 655 and
658.
3. Building restrictions as in Deed Book 74 page 544; Deed Book 75 page
699 and Deed Book 84 page 474 and 476.
4. Building restrictions as in Deed Book 73 page 7.
5. Building restrictions as in Deed Book 76 page 41.
6. Rights granted to the Atlantic City Electric Company in Deed Book 969
page 124.
7. Rights granted to the Atlantic City Electric Company in Deed Book 939
page 384.
8. Rights granted to Atlantic City Electric Company in Deed Book 939
page 206.
9. License of Gift Shop to Host International dated 12/14/81.
10. License of Hair Salon to J & P Hair Studio Corp dated 10/27/83.
11. Lien of taxes not yet due and payable.
<PAGE>
EXHIBIT 10(b)
EXPANDABLE WRAPAROUND MORTGAGE AND SECURITY AGREEMENT (this "Mortgage')
dated as of October 31, 1983, made by ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.,
a New Jersey limited partnership, having an address at Indiana Avenue and the
Boardwalk, Atlantic City, New Jersey 08401 ("Mortgagor') to THE CLARIDGE AT PARK
PLACE, INC., a New Jersey corporation having an address at Indiana Avenue and
the Boardwalk, Atlantic City, New Jersey 08401 ("Mortgagee").
W I T N E S S E T H :
PREAMBLE
WHEREAS, Mortgagor holds a leasehold estate in the parcel or parcels of
land located in the City of Atlantic City, County of Atlantic and State of New
Jersey, described in Exhibit A hereto (the 'Land') pursuant to the "Ground
Lease" and is the owner of the "Improvements" on the Land (as such quoted terms
are hereinafter defined);
WHEREAS, the Ground Lease, Land and Improvements are subject to the
liens and security interests of those certain mortgages and the terms of those
certain loan agreements more particularly described in Exhibit B
hereto.(collectively, the "Superior Mortgages");
WHEREAS, Mortgagor is indebted to Mortgagee in the principal sum of one
hundred twenty-seven million dollares ($127,000,000) as evidenced by that
certain wraparound mortgage note dated as of the date hereof made by Mortgagor
to Mortgagee in said amount (the "Note') and that certain loan agreement dated
as of the date hereof between Mortgagor, as borrower, and Mortgagee, as lender
(the "Loan Agreement") the terms of which Note and Loan Agreement are
incorporated herein, and made a part hereof, by reference to the same extent and
effect as if fully set forth herein;
WHEREAS, pursuant to the "Operating Lease" (as such quoted term is
hereinafter defined), Mortgagor has subleased the Land and leased the
Improvements to Mortgagee subject to the liens of the Superior Mortgages and
Mortgagee has agreed to make certain loans (the "Operating Lease Loans") to
Mortgagor to finance the purchase of "FF&E Replacements" and to provide
"Facility Maintenance and Engineering Services" which Operating Lease Loans, if
any are to be evidenced from time to time by "FF&E Notes" and "Maintenance
Shortfall Notes" (as such quoted terms are defined in the Operating Lease); and
WHEREAS, Mortgagor desires to secure the payment of (i) all principal,
interest and other sums payable pursuant to the Note and all replacements,
renewals, extensions, supplements, modifications, and consolidations thereof,
(ii) the Loan Agreement, (iii) all amounts payable to Mortgagee pursuant to this
Mortgage (the Note, the Loan Agreement, this Mortgage, the FF&E Notes, the
Maintenance Shortfall Notes and all additional documents given as security for
any of the foregoing, being hereinafter collectively referred to as the
."Security Instruments", and all amounts payable by Mortgagor pursuant to the
Security Instruments, subject to the $25,000,000 limitation on the FF&E Notes
and Maintenance Shortfall Notes as hereinafter described, being hereinafter
sometimes referred to collectively as the "Indebtedness"); and the performance
and observance of, and compliance with, all of the terms, covenants, conditions
and provisions of the Security Instruments which Mortgagor is obligated to
perform or observe or with which Mortgagor is obligated to comply; and (iv) all
amounts payable to Mortgagee under (a) any FF&E Notes executed and delivered
prior to October 1, 1995 and (b) under any Maintenance Shortfall Notes, but in
both cases only up to an aggregate principal amount of Twenty-Five Million
Dollars ($25,000,000).
NOW, THEREFORE, Mortgagor, in consideration of the Operat.ing Lease
Loans, and for the purposes of securing payment of all principal, interest and
other sums payable pursuant to the Note; payment of all of the other
Indebtedness; and the performance and observance of all of the terms, covenants,
<PAGE>
conditions and provisions of the Security Instruments which Mortgagor is
obligated to observe and perform, does hereby give, grant, bargain, sell,
mortgage, alien, enfoeff, convey, grant a security interest in, warrant and
confirm, to Mortgagee and its successors and assigns, all of the following
property, rights and interests contained in GRANTING CLAUSES I to X inclusive
(all of which are hereinafter sometimes.collectively referred to as the
"Mortgaged Property"), in accordance with the terms, conditions and covenants
contained herein to wit:
GRANTING CLAUSE I.
Leasehold Estate. All of Mortgagor's leasehold estate under and right,
title and interest in and to, that certain ground lease, of the Land dated as of
the date hereof between Additional Mortgagor, as lessor, and Mortgagor, as
lessee (said lease being hereinafter referred to as the "Ground Lease"), a short
form of which is intended to be recorded in the office of the Clerk of Atlantic
County, New Jersey prior to the recording of this Mortgage, together with all
other, further or additional estates, rights, titles or interests which may at
any time be a ' cquired by Mortgagor by the terms of the Ground Lease, by reason
of the exercise of options thereunder or by reason of amendments, modifications,
supplements, extensions and renewals of the Ground Lease; and together with all
rights and benefits of whatsoever nature derived or to be derived by virtue of
the Ground Lease, including the rights to exercise options, to give consents, to
modify, amend or terminate the Ground Lease, to surrender the Ground Lease and
to receive any monies payable to the lessee thereunder; together with all right,
title and interest in and to the air space above the Land and development rights
attributable to the Land and all rights of way or use, servitudes, licenses,
easements, hereditaments and appurtenances belonging to the Land demised
thereunder (all of the foregoing being hereinafter referred to as the "Leasehold
Estate").
GRANTING CLAUSE II.
Improvements. The hotel, garage and office building and all other
buildings, structures and other improvements of every kind and description now
or hereafter located. on the Land, and all materials now owned or hereafter
acquired by Mortgagor intended for construction, reconstruction, repair,
alteration, addition, or improvement of or to such buildings, structures and
improvements, all of which materials shall be deemed to be improvements
immediately upon delivery thereof to Mortgagor on the Land, and all fixtures and
articles of 'Personal Property' (as such quoted term is hereinafter defined) of
every kind and description now or hereafter located on the Land or attached to
the improvements which by the nature of their attachment to the improvements
become real property pursuant to applicable law, including all additions
thereto, proceeds received upon voluntary or .involuntary disposition thereof,
and all renewals or replacements thereof or articles in substitution therefor,
it being agreed that, to the fullest extent permitted by applicable law, the
Personal Property shall be deemed to be fixtures and a part of the improvements
(all of the foregoing being hereininafter collectively called the
"Improvements").
GRANTING CLAUSE III.
Personal Proverty. Any and all machinery, equipment, furniture,
fittings, fixtures and articles of tangible, depreciable personal property
affixed or attached to, installed or placed in or upon and to be used for or
usable in any present or future enjoyment, occupancy or operation of the
Improvements as a hotel/casino or otherwise, whether located in or off the
Improvements and any and all replacements and substitutions thereof and additons
thereto, including, but not limted to, Any and all air conditioning machinery
and equipment, elevators, escalators, furniture and equipment, communications
equipment and systems, fire protection and sprinkler equipment and systems,
surveillance equipment and systems, dishwashers, ranges, cooking apparatus,
refrigerators and mechanical kitchen equipment, laundry equipment, partitions,
vaults, safes, fire extinguishing equipment parts and supplies, chairs, tables,
beds, bed springs, mattresses, couches, lamps, waste baskets, desks, cabinets,
curtains, draperies, carpeting, chandeliers, pictures, radios, television sets,
and other furniture and furnishings for the lobby, halls, lavatories and other
public rooms and places and for the bedrooms, baths and other private rooms,
furniture and furnishings for the offices and motor vehicles, typewriters,
<PAGE>
dictation equipment, maintenance and engineering tools, materials and supplies,
paints, uniforms of engineering and maintenance personnel and all supplies used
in connection with the maintenance and repair of the Improvements including
without limitation, all those items listed in Schedule I attached hereto and
made a part hereof but excluding therefrom any and all bed linen, towels,
blankets, silver, silverware, china, dishes, cutlery, glassware, kitchen
utensils, laundry and cleaning supplies, office supplies, tools, miscellaneous
office materials and supplies, and other non-depreciable equipment or materials,
all gaming equipment and related parts and supplies, and personal property owned
by tenants at the Improvements or by public utilities, (all of the foregoing,
together with the Operating Lease, Agreements, Permits and Miscellaneous
Property, being hereinafter collectively called "Personal Property").
GRANTING CLAUSE IV.
Agreements. All of Mortgagor's right, title and interest in the
agreements and other instruments described in Schedule C hereto and all other
rights of way or use, servitudes, licenses, easements, hereditaments and
appurtenances now or hereafter belonging or pertaining to the Land or
Improvements or the development, construction, reconstruction, use, management
or operation of the Land or Improvements (all of the foregoing being hereinafter
collectively called the "Agreements").
GRANTING CLAUSE V.
Operating Lease. All of Mortgagor's right, title and interest in, to
and under that certain operating lease of the Land and Improvements (the
"Operating Lease"), dated as of the date hereof, made by Mortgagor to Mortgagee,
a short form of which is intended to be recorded in the office of the Clerk of
Atlantic County, New Jersey immediately after the recording of this Mortgage
together with all renewals and extensions thereof and subleases thereunder and
tenancies following attornment, and.together with all guaranties of the
obligations of Mortgagee thereunder.
GRANTING CLAUSE VI.
Permits. All licenses, authorizations, certificates, variances,
approvals and other permits necessary or appropriate to permit the construction,
reconstruction, repair or alteration, addition, improvement, use, operation and
management of the Property (all of the foregoing being hereinafter collectively
called the "Permits").
GRANTING CLAUSE VII.
Miscellaneous Property. All of Mortgagor's permits, trademarks, names,
logos and copyrights now or hereafter owned by Mortgagor relating to the
Property (all of the foregoing being hereinafter collectively called the
"Miscellaneous Property").
GRANTING CLAUSE VIII.
Rents, Issues and Profits. All rents, royalties, issues, profits,
revenue, income, and other benefits, now or hereafter, including during any
period of redemption, accruing with respect to the Property; all rents and other
sums now or hereafter, including during any period of redemption, payable to
Mortgagor pursuant to the Operating Lease and Agreements; all other sums now or
hereafter, including during any period of redemption, payable to Mortgagor with
respect to the use, occupancy, management, operation or control of the Property;
and all other claims, rights, and remedies now or hereafter, including during
any period of redemption, belonging or accruing to Mortgagor with respect to
Property, including fixed, additional, and percentage rents, occupancy charges,
security deposits, parking, maintenance, common area, tax, insurance, utility,
and service charges and contributions, proceeds of sale of electricity, gas,
heating and air-conditioning, and other utilities and services, deficiency rents
(all of which rents and other sums described in this Granting Clause VIII are
hereinafter sometimes collectively referred to as "Rents'), and liquidated
<PAGE>
damages following default or cancellation; it being understood that the
assignment of Rents pursuant to this GRANTING CLAUSE VIII shall be effective
immediately upon the execution of this Mortgage and is not conditioned upon the
occurrence of any default hereunder or any other contingency or event, it being
further agreed, however, that there is reserved to Mortgagor, so long as
Mortgagor is not in default under any of the Security Instruments, the license
to receive and retain all such Rents assigned to Mortgagee pursuant to this
GRANTING CLAUSE VIII and Mortgagor, notwithstanding such assignment, may
exercise or enforce any such claims, rights, powers, privileges and remedies
until a default under any of the Security Instruments, whereupon the same may be
thereafter exercised by Mortgagee as hereinafter provided.
GRANTING CLAUSE IX.
Proceeds and Awards. All proceeds of any sale, transfer, financing,
refinancing or conversion into cash or liquidated claims, whether voluntary or
involuntary of any of the Mortgaged Property, including all insurance proceeds
resulting from damage to or destruction of the Property and all "Awards"
resulting from any "Taking" with respect to the Property (as such quoted terms
are hereinafter defined), all of which Mortgagor hereby irrevocably directs be
paid to Mortgagee to be held, applied and paid as provided herein.
GRANTING CLAUSE X.
Further Property. All right, title and interest of Mortgagor in and to
all property and rights, if any, which are, by the express provisions of the
Security Instruments required to be subjected to the lien hereof; and all right,
title and interest of Mortgagor in and to any additional property and rights
that may from time to time hereafter by installation, or by writing of any kind,
be subjected to the lien hereof by Mortgagor or by anyone on its behalf.
TO HAVE AND TO HOLD said Mortgaged Property, together with all rights
and claims of Mortgagor therein and all rights and appurtenances appertaining
thereto, to Mortgagee and its successors and assigns forever, subject to the
items and matters described in Schedule D hereto (the "Permitted Exceptions")
and the Ground Lease;
PROVIDED ALWAYS, and these presents are upon the express condition
that, if Mortgagor, or its successors or assigns, shall well and truly pay or
cause the Indebtedness to be paid unto Mortgagee, its successors or assigns, and
shall duly and punctually perform and observe, and comply with all of the terms,
covenants, conditions and provisions of the Security Instruments which Mortgagor
is obligated to perform and observe, and with which Mortgagor is obligated to
comply, then this Mortgage, and the lien, rights and estate hereby granted,
shall cease, determine, and Mortgagee shall furnish to Mortgagor a release of
this mortgage in proper form for recording, but Mortgagee shall not be required
to bear any expense or cost in connection with such satisfaction or the
recording thereof.
MORTGAGOR ADDITIONALLY COVENANTS, WARRANTS AND AGREES WITH MORTGAGEE
AS FOLLOWS:
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.01. Definitions. In this Mortgage, unless otherwise
specified, the following terms shall have the following meanings:
"Agreements" is defined in GRANTING CLAUSE IV.
"Award" is defined in Section 4.02.
<PAGE>
"Casino Expansion Agreement" is defined in the Loan Agreement.
"Event of Default" is defined in Section 5.01.
"First Mortgage" is defined in Schedule B.
"First Mortgage Loan Agreement" is defined in Schedule B.
"Ground Lease" is defined in GRANTING CLAUSE I.
"Impositions" means all taxes (including sales and use taxes),
assessments (including all assessments for public improvements or
benefits, whether or not commenced or completed prior to the date
hereof), water, sewer or other rents, rates and charges, excises,
levies, license fees, permit fees, inspection fees and other
authorization fees and other charges, in each case whether general or
special, ordinary or extraordinary, foreseen or unforeseen, of every
character (including all interest and penalties thereon), which at any
time may be assessed, levied, confirmed or imposed on or in respect of
or be a lien upon (a) the Property or any estate, right or interest
therein, (b) an ' y occupancy,, use or possession of or activity
conducted on the Property, (c) any interest payable under the Note, and
(d) this Mortgage or the other Security Instruments.
"Improvements" is defined in GRANTING CLAUSE II.
"Indebtedness' is defined in the PREAMBLE.
"Insurance Premiums" is defined in Section 2.10.
"Insurance Requirements" means all terms of any insurance policy
covering or applicable to the Property, all requirements of the issuer of any
such policy, and all orders, rules, regulations and any other requirements of
the National Board of Fire Underwriters (or any other body exercising similar
functions) binding upon Mortgagor orapplicable to or affecting the Property or
any use or condition of the Property.
"Land" is defined in the PREAMBLE.
"Legal Requirements" means all laws, statutes, codes, acts, ordinances.
orders, judgments, decrees, injunctions, rules, regulations, permits, licenses,
authorizations, Variances, consents, approvals, directions and requirements of,
and agreements with, all governments, departments, commissions, boards, courts,
authorities, agencies, officials and officers, foreseen or unforeseen, ordinary
or extraordinary, which now or at any time hereafter may be applicable to the
Property, or to any of the adjoining vaults, sidewalks, streets or ways, or to
any-use or condition of the Property.
"Loan Agreement" is defined in the PREAMBLE.
'Miscellaneous Property' is defined in GRANTING CLAUSE VII.
'Mortgagee" means the Mortgagee named herein and its successors and
assigns.
"Mortgaged Property" is defined in the PREAMBLE.
<PAGE>
"Mortgagor" means the Mortgagor named herein and its successors and
assigns, including its successors and assigns as owner of the Property.
"Note" is defined in the PREAMBLE.
"Operating Lease" is defined in GRANTING CLAUSE V.
"Permits" is defined in GRANTING CLAUSE VI.
"Permitted Exceptions" means the items and matters described in
Schedule D.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
governmental or political subdivision or agency or instrumentality thereof.
"Personal Property" is defined in GRANTING CLAUSE III.
"Property" means the Leasehold Estate, Improvements and Personal
Property.
"Rents" is defined in GRANTING CLAUSE VIII.
"Security Instruments" is defined in the PREAMBLE.
"Superior Mortgages" is defined in the PREAMBLE.
"Taking" means a taking or requisition of all or any part of the
Property, or any interest therein or right appurtenant thereto, or a change of
grade affecting the Property, as the result of the exercise of the right of
condemnation or eminent domain. A conveyance in lieu of or in anticipation of
the exercise of any such right of condemnation or eminent domain shall be
considered a Taking. A Taking shall be deemed to have occurred by the earliest
of the following: entry into possession by the Taking authority, date of Taking
as determined by applicable law, entry of a final order of a court of competent
jurisdiction awarding possession to the Taking authority, or delivery of a
conveyance constituting a Taking.
SECTION 1.02. Interpretation. In this Mortgage (including the PREAMBLE,
GRANTING CLAUSES and HABENDUM CLAUSE.), (a) the singular includes the plural and
the plural the singular; (b) words and terms which include a number of
constituent parts, things or elements, including the terms Land, Improvements,
Personal Property, Agreements, Operating Lease, Permits, Miscellaneous Property
and Mortgaged Property, unless otherwise specified, shall be construed as
referring separately to each constituent part, thing or element thereof, as well
as t-oall of such constituent parts, things or elements as a whole; (c) words
importing any gender include'the other genders; (d) references to statutes are
to be construed as including all rules and regulations adopted pursuant to the
statute referred to and all statutory provisions consolidating, amending or
replacing the statute referred to; (e) references to agreements and other
contractual instruments shall be deemed to include all subsequent amendments,
modifications, supplements, extensions replacements, consolidations and renewals
thereof or changes therein entered into in accordance with their respective
terms; (f) unless otherwise provided herein references to Persons include their
permitted successors and assigns; (g) the words "approve" or "consent' or
"agree" or derivations of said words or words of similar import, unless
otherwise provided herein, mean the prior approval, consent or agreement in
writing of the Person, holding the right to approve, consent or agree with
respect to the matter in question, and the words "require" or "judgment" or
"satisfy" or derivations of said words or words of similar import mean the
<PAGE>
requirement, judgment or satisfaction of the Person who may make a requirement
or exercise judgment or who must be satisfied, which approval, consent,
agreement, requirement, judgment and satisfaction, unless otherwise provided
herein, shall be in the sole, subjective discretion of the Person holding the
right to approve, consent or agree or make a requirement or judgment or who must
be satisfied; (h) the words "hereto" or "herein" or "hereof" or "hereunder" or
words of similar import refer to this Mortgage in its entirety; (i) the words
"include" or "including" or words of similar import, unless otherwise specified
herein, shall be deemed to be followed by the words "without limitation"; (i)
all references to Articles and Sections, unless otherwise specified, are to the
Articles and Sections of this Mortgage; (k) headings of Articles and numberings
and headings of Sections and paragraphs are inserted as a matter of convenience
and shall not affect the construction of this Mortgage.
ARTICLE II
CERTAIN WARRANTIES AND COVENANTS OF MORTGAGOR
SECTION 2.01. Title, Authority and Further Assurances. Mortgagor
warranty and covenants that (a-Y Mortgagor is the sole lessee under the Ground
Lease and has good and marketable title to the Leasehold Estate free and clear
of all liens, encumbrances, charaes, defects and other matters, except the
Permitted Exceptions; (b) the Leasehold Estate is a valid and subsisting
leasehold estate in the Land, for the term thereof, subject to the terms,
covenants, conditions, and provisions thereof, free and clear of all liens,
encumbrances, charges, defects and other matters, except the Permitted
Exceptions; (c) Mortgagor has good and marketable title to the Improvements free
and clear of all liens, encumbrances, charges, defects and other matters, except
the Permitted Exceptions; (d) Mortgagor has good and marketable title to the
Personal Property free and clear of all liens and encumbrances, except the
Permitted Exceptions; (e) the Ground Lease, the Operating Lease and Agreements
are in full force and effect and have not been amended, modified or assigned,
except as set forth in Schedule C hereto and there are no existing defaults, or
events which after notice or the passage of time or both would constitute
defaults, under the Ground Lease, the Operating Lease or Agreements; (f)
Mortgagor is a duly organized and validly existing limited partnership in good
standing under the laws of the State of New Jersey and has the power and
authority to own the Property and to transact the business in which Mortgagor is
engaged or presently proposes to engage; (g) the Security Instruments constitute
the legal, valid and binding obligations of Mortgagor and are enforceable
against Mortgagor in accordance with their respective terms; (h) Mortgagor has,
and until the Indebtedness has been fully repaid shall continue to have, full
power, and lawful authority to grant, bargain, sell, convey, assign and warrant
the Mortgaged Property to Mortgagee in the manner and form herein done and
intended to be done and to execute, deliver and carry out the terms and
provisions of the other Security Instruments; (i) mortgagor shall preserve its
estate and interest in the Ground Lease, Improvements and other Mortgaged
Property as aforesaid, subject only to the Permitted Exceptions and the terms,
covenants, conditions and provisions hereof, and will forever warrant and defend
the same unto Mortgagee against all claims whatsoever, other than claims caused
directly or indirectly by the acts of Mortgagee; and (j) mortgagor, at its
expense, shall do, execute, acknowledge, and deliver or cause to be done,
executed, acknowledged, and delivered all such further acts and instruments as
giving Mortgagee shall from time to time require for the better granting,
bargaining, selling, mortgaging, alienating, enfoeffing, conveying and assigning
warranting to Mortgagee of the property and interests hereby given granted,
bargained, sold, mortgaged, alienated, enfoeffed, conveyed, assigned and
warranted, or which Mortgagor may be or may hereafter become bound to give
grant, bargain, sell, mortgage, alien, enfoeff, convey or assign to Mortgagee,
or for carrying out the'intention or facilitating the performance of the terms,
covenants, conditions and provisions of this Mortgage.
SECTION 2.02. Recording. Mortgagor covenants to (a) execute,
acknowledge, deliver and cause to be filed, registered and recorded in the
manner and place or places required by any present or future law any instrument
that may be required by Mortgagee, including financing statements and
continuations thereof, to publish notice and protect the validity of the
Leasehold Estate and to publish notice, and protect the lien, of this Mortgage
upon, and the interest of Mortgagee in, the Mortgaged Property; and (b) pay all
filing, registration, and recording taxes, fees, and charges incident to the
preparation, execution, acknowledgment of any such instrument, and all federal,
<PAGE>
state and local taxes, dues, imposts, assessments and charges in connection with
execution, delivery, filing, registration or recording of any such instrument.
SECTION 2.03. Payment of Indebtedness. Mortgagor covenants to well and
truty pay the Indebtedness, punctually, as and when due, in accordance with the
Note and the other Security Instruments.
SECTION 2.04. Compliance with Security Instruments. Mortgagor covenants
to duly and punctually observe and perform all of the terms, covenants,
conditions and provisions which Mortgagor is obligated to observe and perform
pursuant to the Security Instruments.
SECTION 2.05. Compliance with Ground Lease. Mortgagor covenants (a) to
duly and punctually pay all rent and other sums required to be paid by Mortgagor
under the Ground Lease directly to the Person entitled to receive the same
thereunder; (b) to duly and punctually observe and perform all of the terms,
covenants, conditions and provisions of the Ground Lease which Mortgagor is
obligated to perform thereunder; (c) to do all things necessary to enforce,
preserve and keep unimpaired the Leasehold Estate; (d) not to enter into any
agreement amending, modifying, terminating or surrendering the Ground Lease or
the Leasehold Estate without the consent of Mortgagee (except as required by its
terms or pursuant to the Casino Expansion Agreement); (e) not to take any action
(except with respect to options exercisable under the Operating Lease) or omit
to take any action or give any notice, the taking or omission of which could
have the effect of terminating or surrendering or permitting the termination or
surrender of the Ground Lease or the Leasehold Estate; (f) to immediately notify
Mortgagee of the receipt by Mortgagor of any notice of default under the Ground
Lease and furnish to Mortgagee a copy of such notice of default, unless
Mortgagee is the lessor under the Ground Lease; (g) to immediately notify
Mortgagee upon learning of any condition that, with or without the giving of
notice or the passage of time or both, might result in a default or event of
default under the Ground Lease, unless Mortgagee is the lessor under the Ground
Lease; (h) to immediately furnish to Mortgagee counterpart originals of all
amendments or modifications to the Ground Lease entered into by Mortgagor,
unless Mortgagee is the lessor under the Ground Lease; (i) to immediately
furnish to Mortgagee copies of all notices given or received by Mortgagor
pursuant to the Ground Lease; and (j) upon Mortgagee's request, to immediately
furnish evidence reasonably satisfactory to Mortgagee that Mortgagor has
complied with its covenants hereunder with respect to the Ground Lease and, in
addition to the documents described in clauses (h) and (i) of this Section, to
furnish copies of all communications, instruments and documents sent or received
by Mortgagor with respect to the Ground Lease.
SECTION 2.06. Compliance with Agreements. Mortgagor covenants (a) to
daily and punctually make all payments required to be made under the Agreements
by Mortgagor; (b) to duly and punctually observe and perform all of the terms,
covenants, conditions and provisions of the Agreements to be observed or
performed by Mortgagor; (c) to do all things necessary to enforce, preserve and
keep unimpaired Mortgagor's estate and rights under the Agreements and the
obligations under the Agreements of the other parties thereto; (d) except as
provided in Section 6.03, not to, without the consent of Mortgagee, enter into,
or consent to, any agreement amending, modifying or terminating any of the
Agreements or surrendering any rights thereunder held by Mortgagor or reducing,
releasing or discharging any of the other parties to any of the Agreements from
any of their obligations thereunder or permitting any of said other parties to
assign or transfer any of their rights or obligations thereunder; (e) not to
take any action, or omit to take any action or give any notice, the taking or
omission of which would have the effect of reducing, releasing or discharging
any of the other parties to any of the Agreements from any of their obligations
thereunder or which would have the effect of permitting any of said other
parties to assign or transfer any of their rights or obligations thereunder; (f)
to immediately notify Mortgagee of the receipt by Mortgagor of any notice of
default under any of the Agreements and furnish to Mortgagee a copy of such
notice of default; (g) to immediately notify Mortgagee upon learning of any
condition that, with or without the giving of notice or the passage of time or
both, might result in a default or event of default under any of the Agreements;
(h) to immediately furnish to Mortgagee counterpart originals of all amendments
or modifications to any of the Agreements entered into, or consented to, by
Mortgagor; (i) to immediately furnish to Mortgagee copies of all notices given
<PAGE>
or received by Mortgagor pursuant to any of the Agreements; and (j) upon
Mortgagee's request, to immediately furnish evidence reasonably satisfactory to
Mortgagee that Mortgagor has complied with its covenants hereunder with respect
to the Agreements and, in addition to the documents described in clauses (h) and
(i) of this Section, furnish copies of all communications, plans,
specifications, instruments and documents sent or received by Mortgagor with
respect to any of the Agreements.
SECTION 2.07 Compliance with Operating Lease. Mortgagor covenants (a)
to duly and punctually observe and perform all of the terms, covenants,
conditions and provisions of the Operating Lease which Mortgagor is obligated to
perform therunder; (b) to do all things necessary to enforce, preserve and keep
unimpaired Mortgagor's estate and rights under the Operating Lease; (c) not
enter into any agreement amending, modifying, terminating or surrendering the
Operating Lease or Mortgagor's estate or rights thereunder (except as required
by its terms or pursuant to the Casino Expansion Agreement) without the consent
of Mortgagee; (d) not to take any action (except with respect to options
exercisable under the Operating Lease), or omit to take any action, or give any
notice, the taking or omission of which could have the effect of terminating or
surrendering or permitting the termination or surrender of the Operating Lease
or Mortgagor's estate or rights thereunder; (e) to immediately notify Mortgagee
of the receipt by Mortqagor of any notice of default under the Operating Lease
and furnish to Mortgagee a copy of such notice of default, unless Mortgagee is
the lessee thereunder; (f) to immediately notify Mortgagee upon learning of any
condition that, with or without the giving of notice or the passage of time or
both, might result in a default or event of default under the Operating Lease;
(g) to immediately furnish to Mortgagee counterpart originals of all ammendments
or modifications to the Operating Lease entered into by Mortgagor, unless
Mortgagee is the lessee thereunder; (h) to immediately furnish to Mortgagee
copies of all notices given or received by Mortgagor pursuant to the Operating
Lease; and (i) upon mortgagee's request, to immediately furnish evidence
reasonably satisfactory to Mortgagee that Mortgagor has complied with its
covenants hereunder with respect to the Operating Lease and, in addition to the
documents described in clauses (g) and (h) of this Section, furnish copies of
all communications, instruments and documents sent or received by Mortgagor with
respect to the Operating Lease.
SECTION 2.08. Compliance with Legal Requirements, Insurance
Requirements and Permits. Mortgagor covenants (a) subject to Section 2.14, to
duly and punctually comply with all Legal Requirements and Insurance
Requirements, whether or not compliance therewith shall require structural
changes in the Improvements or interfere with the use and enjoyment of the
Property; (b) to procure, maintain and, subject to Section 2.14, comply with all
Permits required for any construction, reconstruction, repair, alteration,
addition, improvement, use, operation or management of the Property or erection,
installation, operation and maintenance of the Improvements; (c) to immediately
notify Mortgagee of the receipt by Mortgagor of any notice that a Legal
Requirement, Insurance Requirement or Permit has not been complied with and
furnish to Mortgagee a copy of such notice of non-compliance; and (d) upon
Mortgagee's request to promptly furnish evidence reasonably satisfactory to
Mortgagee that Mortgagor has made all payments required to be made pursuant to,
and has otherwise complied with, this Section.
SECTION 2.09. Subordination to Superior Mortgages and Expansion
Financing; Compliance with the Superior Mortgages. (a) Mortgagee hereby
acknowledges that n and security interests created hereunder on the Mortgaged
Property and its rights and remedies hereunder and under the Loan Agreement are,
and shall, be subject and subordinate to (i) the liens and security interests
held by the holders of the Superior Mortgages on the Mortgaged Property, now
existing or hereafter arising or acquired, (to the extent, with respect to the
First Mortgage only, such Mortgaged Property constitutes "Collateral" (as such
quoted term is defined in the First Mortgage Loan Agreement) whether pursuant to
the First Mortgage, the "Security Agreements" (as defined in the First Mortgage
Loan Agreement), the the "Assignments" (as defined in such First mortgage Loan
Agreement or otherwise), to the full extent of the Superior Mortgage
Indebtedness (as hereinafter defined) and all rights and remedies, and any
indebtedness, obligations and liabilities now or hereafter owed to, (a) the
First Mortgagee under the First Mortgage, such Security Agreements and
Assignments, the First Mortgage Loan Agreement and the First Mortgage Note and
(b) the holder of the Second Mortgage under the Second Mortgage, the note
<PAGE>
secured directly and any and all other documents or instruments given in
connection therewith in each case as modified, renewed or supplemented from time
to time, but only to the extent such indebtedness does not exceed as to
principal $127,000,000 less an amount equal to the payments or prepayments under
the Wraparound Mortgage and applied to the Superior Mortgages in accordance with
the terms of the Loan Agreement (all such indebtedness, obligations and
liabilities to the holders of the Superior Mortgages, hereinafter, the "Superior
Mortgage Indebtedness"), (ii) any permitted mortgage refinancing or replacement
of the Superior Mortgages but only to the extent the principal amount of any
such refinancing or replacement does not exceed $127,000,000 less an amount
equal to any payments or prepayments of principal under this Mortgage and (iii)
any financing required pursuant to the terms of the Casino Expansion Agreement.
Such subordination shall be automatically effective without further act of
Mortgagee but Mortgagee agrees to confirm such subordination and at the request
of the lender of any such financing or refinancing will execute any instrument
or instruments subordinating this mortgage to any such financing or refinancing
as such lender may reasonably request. Mortgagor agrees to provide Mortgagee
with a copy of the documentation entered into in connection with such financing
or refinanciang within 10 days after the execution and delivery thereof.
Mortgagor covenants (b) to duly and punctually pay, or cause to be duly and
punctually paid, all sums to be paid under the Superior Mortgages and the notes
secured thereby directly to the Person entitled to receive the same thereunder;
and (ii) to duly and punctually observe and perform, or cause to be duly and
punctually observed and performed, all of the terms, covenants, conditions and
provisions of the Superior Mortgages and the notes secured thereby.
(b) Mortgagor covenants to comply with all of the terms and conditions
of the Superior Mortgages other than those with respect to the payment of
principal and interest due under the Superior Mortgages which payments Mortgagee
has agreed to pay pursuant to the Loan Agreement.
(c) Notwithstanding anything to the contrary contained herein, so long
as any of the Superior Mortgage. Indebtedness remains outstanding, Mortgagee
agrees that it will take no steps to enforce or exercise any of its rights or
remedies with respect to such of the Morgaged Property which constitutes
Collateral unless and until the holder of the First Mortgage has begun to
proceed with the enforcement of its rights with respect to such Mortgaged
Property; provided, however, that notwithstanding the foregoing, in the event
that Mortgagee shall be Del E. Webb New Jersey, Inc., such Mortgagee may enforce
its rights with respect to the Land and Improvements.
(d) The priorities of the security interests and liens established,
altered or specified herein are applicable irrespective of the time or order of
attachment or perfection thereof, the method of perfection, the time or order of
filing of financng statements or taking of possession, or the givng of or
failure to give notice of the acquisition or expected acquisition of purchase
money or other security intersts. The priorities of any security interests and
liens which are not established, altered or specified herein shall exist and
continue in accordance with the applicable provisions of law.
SECTION 2.10. Payment of Impositions. Subject to Section 2.14,
Mortgagor covenants (a) to duly and punctually pay or cause to be paid all
Impositions on or before the date on which any fine, penalty, interest or cost
may be added thereto for non-payment; (b) to pay all taxes of Mortgagor when and
as due, including (i) any franchise, capital stock or similar taxes of
Mortgagor, (ii) any income, excess profits or other taxes of Mortgagor
determined on the basis of its income, receipts or revenues, and (iii) any
estate, inheritance, succession, gift, capital levy or similar tax of Mortgagor;
(c) to immediately notify Mortgagee of the receipt by Mortgagor of any notice
that an Imposition has nct been paid when due and furnish to Mortgagee a copy of
such notice of non-payment; and (d) upon Mortgagee's request to immediately upon
making payments of Impositions furnish evidence reasonably satisfactory to
Mortgagee that Mortgagor has punctually paid the same as aforesaid and to
promptly after receiving receipts for its payments of Impositions furnish copies
of such receipts to Mortgagee. No owner of the Mortgaged Property shall be
entitled to any,credit against the Indebtedness or the obligations secured
hereby by reason of payment of any tax thereon.
<PAGE>
SECTION 2.11. Care of Property. Mortgagor covenants to keep and
maintain, or cause others to keep and maintain the Property in good and clear
order and condition, ordinary wear and tear excepted, and shall promptly make or
cause others to make all necessary or appropriate repairs, replacements and
renewals thereof, whether interior or exterior, structural or non-structural,
ordinary or extraordinary, foreseen or unforeseen. All repairs, replacements and
renewals shall be substantially equal in quality to those existing as of the
date hereof and shall be in good working condition.
SECTION 2.12. Alterations and Additions. Mortgagor shall not remove or
demolish or substantially alter any Improvements, except in connection with
expenditures, sales and expansion permitted under the Superior Mortgages or the
Casino Expansion Agreement, without the written consent of Mortgagee (which
consent shall not be unreasonably withheld).
SECTION 2.13. Liens. Mortgagor covenants that Mortgagor shall not
directly or indirectly create or permit to be created or to remain, and shall
discharge (except where created solely by the action or inaction of Mortgagee),
any lien, encumbrance or charge on, pledge of, or conditional sale or other
title retention agreement with respect to the Mortgaged Property, other than (a)
this Mortgage and the Operating Lease; (b) liens for Impositions not yet
payable, or payable without the addition of any fine or penalty for nonpayment,
or being contested as permitted by Section 2.14; (c) the Permitted Exceptions;
and (d) liens of mechanics, materialmen, suppliers or vendors, or rights
thereto, incurred in the ordinary course of business or in the course of
construction, alteration, addition, improvement or restoration of the
Improvements, for sums which, under the terms of the related contracts, are not
yet due or are being contested as permitted by Section 2.14.
SECTION 2.14. Permitted Contests. Mortgagor, at its expense, after
prior notice to Mortgagee may contest by appropriate legal or other proceedings
conducted in good faith and with due diligence, the amount, validity or
application, in whole or in part, of any Imposition or lien therefor, any Legal
Requirement, any Insurance Requirement or any liens of mechanics, materialmen,
suppliers or vendors, provided that (a) in the case of liens of laborers,
mechanics, materialmen, suppliers or vendors, or Impositions or liens therefor,
such proceedings shall suspend the collection thereof from the Mortgaged
Property, or any interest therein; (b) neither the Mortgaged Property nor any
interest therein would be in any danger of being sold, forfeited or lost by
reason of such proceedings; (c) in the case of a Legal Requirement, Mortgagee
would not be in any danger of any criminal liability or, unless Mortgagor shall
have furnished a bond or other security therefor satisfactory to Mortgagee, any
additional civil liability for failure to comply therewith, and the Property
would not be subject to the imposition of any lien as a result of such failure
which is not properly contested pursuant to this Section; (d) in the case of any
Insurance Requirement, no insurance coverage required to be maintained pursuant
to this Mortgage shall be cancelled or jeopardized; and (e) if reasonably
required by Mortgagee, Mortgagor shall have furnished to Mortgagee a bond or
other security satisfactory to Mortgagee.
SECTION 2.15. Inspection. Mortgagee and its authorized representatives
shall have the right to enter the Property at all reasonable times to make
inspections thereof but shall be under no obligation to make any such
inspections or to perform any act or do any thing with respect to the Property.
SECTION 2.16. Indemnification by Mortgagor. Mortgagor shall protect,
indemnify and save harmless Mortgagee from and against all liabilities,
obligations, claims, damages, penalties, causes of action, judgments, costs and
expenses (including reasonable attorneys' fees and expenses) imposed upon or
incurred by or asserted against Mortgagee or the Property during the term of
this Mortgage, unless caused solely by the willful act or negligence of
Mortgagee (except in an event where such negligence of Mortgagee occurs after
Mortgagee has entered the Property following a default of Mortgagor) and unless
caused by the acts or omissions of Mortgagee as lessee under the Operating
Lease, by reason of (a) any accident or injury to or death of persons or loss of
or damage to property occurring on or about the Property or the adjoining
sidewalks, curbs, vaults and vault space, if any, streets or ways; (b) any use
or condition of the adjoining sidewalks, curbs, vaults and vault space if any,
streets or ways; (c) any failure on the part of Mortgagor to perform or comply
<PAGE>
with any of the terms of the Security Instruments; or (d) any negligence or
tortious act on the part of Mortgagor or any of its employees, agents,
contractors, lessees, sublessees, licensees, permitees or invitees. In the event
that any action, suit or proceeding is brought against Mortgagee by reason of
any such occurrence, and upon Mortgagee's request, Mortgagor covenants to defend
such action, suit or proceeding with counsel designated by Mortgagor or its
insurance carrier and approved by Mortgagee, which approval shall not be
unreasonably withheld if such counsel was designated by an insurance carrier.
ARTICLE III
INSURANCE, DAMAGE AND DESTRUCTION
SECTION 3.01. Insurance, Damage and Destruction. Mortgagor will keep,
or cause others to keep, the Property insured against loss or damage by fire and
other hazards, with loss payable to Mortgagee, all in accordance with Section
3.3 of the Loan Agreement and will deliver certificates or copies of said policy
or policies to Mor*gagee; and in default thereof, Mortgagee may effect such
insurance. Any amount so paid by Mortgagee to effect such insurance shall bear
interest at the rate set forth in Section 2.5 of the Loan Agreement and shall be
added to the amount of the Note and secured by these presents. Mortgagor hereby
assigns to Mortgagee all right to demand and receive all money payable under any
of said policies of insurance, and the rights to settle or compromise all claims
exceeding $1,000,000 thereunder, subject to the rights of the First Mortgagee.
In the event of loss or damage to the Property ("Casualty Loss"), Mortgagor
shall give prompt notice thereof to Mortgagee. Mortgagee may make proof of loss
if not made promptly by Mortgagor, and each insurance company concerned is
hereby authorized and directed to make payment for such loss or damage directly
to Mortgagee instead of to Mortgagor and Mortgagee jointly.
Mortgagor shall notify Mortgagee within thirty (30) days after any
Casualty Loss as to whether or not it intends to repair or replace any portion
of the Property affected by a Casualty Loss. Provided (a) a notice was given
within said thirty (30) day period and (b) no Event of Default exists, any
insurance proceeds actually received by Mortgagee shall after deducting
therefrom any reasonable expenses incurred by Mortgagee in collecting or
handling of such funds be held by Mortgagee in a separate repair fund (the
"Repair Fund"), which Repair Fund shall be subject to a lien and security
interest in favor of Mortgagee and which shall be within the exclusive control
of Mortgagee, subject only to the terms of this mortgage.
So long as no Event of Default exists and so long as Mortgagor proceeds
promptly and diligently, Mortgagee shall release monies from the Repair Fund to
reimburse Mortgagor for or pay for costs and expenses incurred in connection
with any repair or replacement (such repair and replacement to restore the
Property to the same quality and condition as existed before the Casualty Loss).
Disbursement from the Repair Fund shall be made only in accordance with
procedures reasonably established by Mortgagee (including, without limitation,
requirements for the delivery to Mortgagee of lien waivers, in respect of work
performed or materials supplied and/or evidence that the remaining proceeds are
sufficient to complete such repair or replacement).
To the extent that insurance proceeds shall not be committed to the
Repair Fund, such proceeds shall be applied by Mortgagee to the prepayment of
the Note as provided in Section 2.6 of the Loan Agreement. Notwithstanding the
foregoing, if an Event of Default exists, any net proceeds of insurance or sums
remaining in the Repair Fund may at the option of the Mortgagee be applied to
the obligations secured hereby.
<PAGE>
ARTICLE IV
TAKING
SECTION 4.01. Taking. In the event of the Taking of the Property or any
part thereof, any claims by Mortgagor against the "Award" (as such quoted term
is defined in Section 4.02 hereof), or any portion of the Award, shall be
subject to the lien of this Mortgage, and all rights to damages of Mortgagor are
hereby assigned to Mortgagee to the extent of the Indebtedness, Mortgagor,
however, having the right to appeal the Award to the courts of competent
jurisdiction; Provided, however, that if (a) Mortgagee in the good faith
exercise of its discretion believes that (i) replacement improvement can be
undertaken so that the Property can be of equal utility and value before such
condemnation or (ii) in case of partial condemnation of the Property, it is
feasible to restore the remainder of the Property for comparable use, (b) can
comply in all respects with the Act, and (c) no Event of Default exists, any net
proceeds of the award received by Mortgagee shall be deposited in the Repair
Fund and disbursed in accordance with Section 3.01 hereof as if they were
insurance proceeds. If the conditions set forth in (a)(i) or (ii), (b) and (c)
above are not met, any Awards received by Mortgagee may be applied to the
Indebtedness.
SECTION 4.02. Award. As used herein, the term "Award" means any award
or payment to which Mortgagee or Mortgagor may be or become entitled by reason
of any Taking of the Property, including all amounts paid pursuant to any
agreement with any condemning authority which has been made in settlement of any
proceeding relating to a Taking, less the reasonable costs and expenses of
Mortgagee and Mortgagor in collecting such award or payment, which costs and
expenses shall be paid out of such award or payment. Subject to the rights of
the holder of the First Mortgage, all Awards shall be, and hereby are, assigned
to Mortgagee, and Mortgagor covenants to pay all Awards, or cause the same to be
paid, to Mortgagee to be held by Mortgagee, without interest or trust, except as
required by applicable law, for application as provided in Section 4.01.
ARTICLE V
DEFAULT
SECTION 5.01. Events of Default; Acceleration of Indebtedness;
Remedies. If any one or more of tt ing events (each an "Event of Default') shall
occur:
(a) Mortgagor shall fail to pay, as and when due, and after the
expiration of any grace period, any amount of the Indebtedness payable pursuant
to the Security Instruments, except for such payments of principal and interest
under the Note as Mortgagor shall suspend pursuant to Section 2.11 of the Loan
Agreement;
(b) Mortgagor shall fail to perform or comply with any term, covenant
or condition of the Security Instruments, other than those described in clauses
(a) and (c) through (k) of this Section, and Mortgagor shall not, within 60 days
after Mortgagee shall have given written notice thereof to Mortgagor, commence
with due diligence and dispatch the curing of such default, or if Mortgagor
shall, within such period, commence with due diligence and dispatch the curing
of such default and shall thereafter fail or neglect to prosecute and complete
with due diligence and dispatch the curing of such default;
(c) default by mortgagor for more than 45 days after written demand by
Mortgagee (i) in the payment, as and when due, of any Imposition for which
deposits have not been made pursuant to Section 2.09 subject to the right to
contest the same pursuant to Section 2.14; (ii) in making, as and when required,
any deposit required to be made pursuant to said Section; or (iii) after demand,
in furnishing evidence showing payment of Impositions as required pursuant to
Section 2.10;
(d) default by Mortgagor for more than 10 days after request by
Mortgagee (i) in providing, or maintaining in effect, the insurance policies and
coverage required pursuant to Article III; or (ii) in providing evidence of such
coverage as required pursuant to Section 3.01; or if, after application of
Mortgagee, two or more casualty insurance companies doing business in the state
in which the Property is located refuse to issue policies insuring the Property;
<PAGE>
(e) upon the commencement of any restoration, alteration, addition,
demolition or removal of any part of the Property except as permitted by Section
2.12;
(f) default by Mortgagor for 10 days after request by Mortgagee, in
furnishing a statement of the amount of the Indebtedness then due and whether
any offsets or defenses exist against the Indebtedness as required pursuant to
Section 6.02;
(g) the assignment by Mortgagor of any of the Rents, insurance proceeds
or Awards, or its intertest in the Operating Lease, to anyone other than
Mortgagee or the holders of the Superior mortgages;
(h) should an action be instituted for the foreclosure of any lien
prior to this Mortgage affecting the mortgaged Property (including either of the
Superior Mortgages) or for the foreclosure of any other mortgage on the
Mortgaged Property;
(i) any representation made in writing by or on behalf of Mortgagor in
connection with the Indebtedness or the Security Instruments shall be false or
incorrect in any material respect when made;
(j) a default or an event of default by Mortgagor shall occur under the
Ground Lease, the Operating Lease or the Agreements and be continuing after the
expiration of any applicable grace or cure period specifically provided therein;
(k) the Ground Lease or the Operating Lease shall be amended or
modified without the consent of Mortgagee or be terminated or expire (except for
the expiration of the Operating Lease by its terms and except as required by
their terms or pursuant to the Casino Expansion Agreement);
(l) a court of competent jurisdiction enters a decree or order for
relief in respect of Mortgagor in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or
other similar official (hereinafter collectively referred to as "receiver or
trustee") of Mortgagor or for any substantial part of Mortgagor's property, or
ordering the winding-up or liquidation of Mortgagor's affairs and such decree or
order shall remain unstayed and in effect for a period of 120 consecutive days;
or should Mortgagor commence a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or consent to the
entry of an order for relief in an involuntary case under any such law, or
consent to the appointment of or taking possession by a receiver or trustee of
Mortgagor or for any substantial part of Mortgagor's property, or make any
general assignment for the benefit of creditors, or fail generally to pay
Mortgagor's debts as they become due or take action in furtherance of any of the
foregoing;
(m) there shall be an attachment of, execution against, or other legal
process with respect to any of the Mortgaged Property which is not properly
contested as provided in Section 2.15 within 15 days of such attachment,
execution or other legal process; or
(n) Mortgagor shall transfer the mortgaged Property or any part thereof
or interest therein without the consent of Mortgagee, except as permitted or
required pursuant to the Ground Lease or Operating Lease; or
then and in any such Event of Default (regardless of the pendency of any action
or proceeding which has or might have the effect of preventing Mortgagor from
complying with the terms, covenants or conditions of this Mortgage), Mortgagee,
subject to Section 6.05(a), may at any time thereafter:
(1) (Acceleration) declare the entire Indebtedness secured hereunder or
secured hereby, without presentment, demand, protest or notice of any kind, all
of which are hereby waived, to be forthwith due and payable, whereupon the
<PAGE>
same shall become immediately due and payable, and Mortgagee may immediately,
and without expiration of any period of grace, enforce payment of all sums owed
to it under any of the Security Instruments and exercise any and all other
remedies granted to it under any of the Security Instruments or under any
applicable law.
(2) (Entry; Receiver) irrespective of whether Mortgagee exercises any
other option provided for herein, in person or by agent or by court-appointed or
other receiver enter upon, take possession of, manage and operate the Mortgaged
Property and do all things necessary or appropriate in Mortgagee's sole
discretion in connection therewith to protect the security hereof; and either
with or without so taking possession, in its own name or in the name of
Mortgagor, suing for or otherwise collecting and receiving the Rents, including
those past due and unpaid, and applying the same less costs and expenses of
operation and collection, including reasonable attorney's fees, upon any
Indebtedness and liability secured hereby, and in such order as Mortgagee may
determine. Upon request of Mortgagee, Mortgagor shall assemble and make
available to Mortgagee at the site of the real property covered hereby any of
the Mortgaged Property which has been removed therefrom. The entering upon and
taking possession of the Mortgaged Property, the collection of any Rents and the
application thereof as aforesaid shall not cure or waive any default theretofore
or thereafter occurring or affect any notice or default hereunder or invalidate
any act done pursuant to any such default or notice, and, notwithstanding
continuance in possession of the Mortgaged Property by Mortgagee, Mortgagor or a
receiver, and the collection, receipt and application of the Rents, Mortgagee
shall be entitled to exercise every right provided for in this mortgage or by
law or in equity upon or after the occurrence of a default, including the right
to exercise the power of sale. Any of the actions referred to in this Section
may be taken by Mortgagee without regard to the adequacy of the security for the
Indebtedness hereby secured. Mortgagee shall be entitled to the appointment of a
receiver without the necessity of proving either the inadequacy of the security
or the insolvency of the Mortgagor or any other person who may be legally or
equitably liable to pay monies secured hereby and the Mortgagor and each such
person shall be deemed to have waived such proof and to have consented to the
appointment of such receiver.
(3) (Judicial Action) bring an action in any court of competent
jurisdiction to foreclose this instrument or to enforce any of the covenants and
agreements hereof or any other legal or equitable remedy Mortgagee shall elect.
(4) (Power of Sale) elect to cause the Mortgaged Property to be sold
under the power of sale herein granted in any manner permitted by applicable
law. In connection with any sale or sales hereunder, Mortgagee may elect to
treat any of the Mortgaged Property which consists of a right in action or which
is property that can be severed from the real property covered hereby or any
improvements thereon without causing structural damage thereto as if the same
were personal property, and dispose of the same in accordance with applicable
law, separate and apart from the sale of real property. Any sale of any personal
property hereunder shall be conducted in any manner permitted by the New Jersey
Commercial Code. Should Mortgagee elect to sell the Mortgaged Property, which is
real property or which Mortgagee has elected to treat as real property as
provided above, Mortgagee shall give such notice of default and election to sell
as may be herein provided for and as may then be required by law. Thereafter,
upon the expiration of such time and the giving of such notice of sale as may
then be required by law, and without the necessity of any further demand on
Mortgagor, Mortgagee, at the time and place specified in the notice of sale,
shall sell real property at public auction to the highest bidder for cash in
lawful money of the United States. Mortgagee may from time to time, postpone any
sale hereunder by public announcement thereof at the time and place noticed
therefor. If the Mortgaged Property consists of several lots, parcels or items
of property, Mortgagee may designate the order in which such lots, parcels or
items shall be offered for sale or sold. Any person, including Mortgagor or
Mortgagee, may purchase at any sale hereunder, and Mortgagee shall have the
right to purchase at any sale hereunder by crediting upon the bid price the
amount of all or any part of the indebtedness hereby secured. Should Mortgagee
desire that more than one sale or other disposition of the Mortgaged Property be
conducted, Mortgagee may, at its option, cause the same to be conducted
simultaneously, or successively, on the same day, or at such different days or
times and in such order as Mortgagee may deem to be in its best interests, and
no such sale shall terminate or otherwise affect the lien of this Mortgage on
<PAGE>
any part of the Mortgaged Property not sold until all indebtedness secured
hereby has been fully paid. Upon any sale hereunder, Mortgagor and Mortgagee, if
required by applicable law, shall execute and deliver to the purchaser or
purchasers a deed or deeds conveying the property so sold, but without any
covenant or warranty whatsoever, express or implied, whereupon such purchaser or
purchasers shall be let into immediate possession; and the recitals in any such
deed or deeds executed pursuant to the power of sale of compliance with all
requirements of law regarding the mailing of copies of notices or the
publication of a copy of the notice of default or the personal delivery of the
copy of the notice of default or the posting of copies of the notice of sale or
the publication of a copy thereof shall constitute prima facie evidence of
compliance with such requirements and conclusive evidence thereof in favor of
bona fide purchasers and encumbrancers for value and without notice and in favor
of such other Persons and as to such other matters as may hereafter be permitted
by applicable law.
SECTION 5.02. Proceeds of Sale. The proceeds of any sale made under or
by virtue of this Article V, together with all other sums which then may be held
by Mortgagee under this Mortgage, whether under the provisions of this Article V
or otherwise, subject to Section 6.05(a), shall be applied as follows:
First: to the payment of the costs, fees and expenses of sale and of
any judicial proceedings wherein the same may be made, including reasonable
compensation to Mortgagee, its agents and counsel, together with interest on
each such amount for each day from the date of such advance or disbursement
until paid by Mortgagor at the rate of 14% per annum or the rate set forth in
Section 2.5 of the Loan Agreement, whichever is higher, but in no event higher
than the highest rate permitted by applicable law (the "Involuntary Rate").
Second: to the payment of any and all sums expended by Mortgagee
pursuant to the Security Instruments, not then repaid, and all other sums
required to be paid by Mortgagor pursuant to any provisions of the Security
Instruments, including all expenses, liabilities, advances and disbursements
made or incurred by Mortgagee pursuant to the Security Instruments or in
connection with the enforcement thereof, together with interest on each such
amount for each day from the date of such advance or disbursement until paid by
Mortgagor at the Involuntary Rate.
Third: to the payment of the entire Indebtedness or liability of
Mortgagor secured by the Security Instruments then due, owing or unpaid in such
order as Mortgagee may determine, including all interest thereon.
Fourth: the remainder, if any, to the Person or Persons legally
entitled thereto.
SECTION 5.03. Waiver of Marshalling. Mortgagor, for itself and for all
persons hereafter claiming through or under it or who may at any time hereafter
become holders of liens junior to the lien of this Mortgage, hereby expressly
waives and releases, to the extent permitted by applicable law, all rights to
direct the order in which any of the Mortgaged Property shall be sold in the
event of any sale or sales pursuant hereto and to have any of the Mortgaged
Property and/or any other property now or hereafter constituting security for
any Indebtedness marshalled upon any foreclosure of this mortgage or of any
other security for any of said Indebtedness.
SECTION 5.04. Remedies Cumulative and Non-Waiver. No remedy herein
conferred upon or reserved to Mortgagee is intended to be exclusive of any other
remedy herein or now or hereafter existing at law, in equity or by statute, but
each shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute. No
delay or omission of Mortgagee to exercise any right or power accruing upon any
Event of Default shall impair any such right or power or shall be construed to
be a waiver of any such Event of Default or any acquiescence therein; and every
power and remedy given by this Mortgage to Mortgagee may be exercised from time
to time as often as may be deemed expedient by Mortgagee. If there exists
additional security for the performance of the obligations secured hereby,
Mortgagee, at its sole option and without limiting or affecting any of its
rights or remedies to which it may be entitled hereunder, may exercise any of
the rights and remedies to which it may be entitled hereunder either
concurrently with whatever rights and remedies it may have in connection with
<PAGE>
such other security or in such order as it may determine. Any application of any
amounts held by Mortgagee at any time as additional security hereunder whether
pursuant to Section 3.01 or 4.01 or otherwise, to any Indebtedness shall not
extend or postpone the due dates of any payments due from Mortgagor under any of
the Security Instruments, or otherwise be construed to cure or waive any default
or notice of default hereunder or invalidate any act done pursuant to any such
default or notice.
SECTION 5.05. Interest. All payments of Indebtedness and other sums
payable hereunder not paid prior to the time that such non-payment creates any
Event of Default hereunder shall bear interest at the Involuntary Rate from
their respective due dates until paid, provided that this shall in no way limit,
lessen or affect any breach or default by Mortgagor.
SECTION 5.06. Costs of Collection and Litigation. (a) Should this
Mortgage or the Note be fore-closed or collected as provided herein, or in
bankruptcy, receivership or other court proceeding, or be referred to attorneys
for foreclosure or collection after an Event of Default, Mortgagor shall pay all
costs of collecting or attempting to collect any sums due hereunder or pursuant
to the Note, including attorneys' fees and expenses but, in any such action or
proceeding to foreclose this Mortgage or the Note, or to recover or collect the
Indebtedness, the provisions of law respecting the recovery of costs,
disbursements and allowances shall prevail unaffected by this covenant.
(b) Should any action or proceeding be commenced to which Mortgagee is
made a party or in which it becomes necessary, in the opinion of Mortgagee's
counsel, to defend or uphold the lien of this Mortgage, all sums expended by any
Mortgagee including reasonable counsel fees, shall be paid by Mortgagor,
together with interest thereon at the Involuntary Rate, and any such sum shall
be a further lien on the Mortgaged Property prior to any subsequently attaching
or accruing claim or interest and shall be deemed secured by this Mortgage.
SECTION 5.07. Waiver of Defense. In any proceeding to enforce the
rights of Mortgagee hereunder, Mortgagor will not, to the extent permitted by
applicable law, claim or take advantage of any stay or extension or moratorium
law, or any law providing for the evaluation or appraisal of Mortgagor's
interest in the Mortgaged Property prior to any sale thereof. Mortgagor waives,
to the extent that it lawfully may, all right to have the Mortgaged Property
marshalled upon any foreclosure hereof.
SECTION 5.08. Modification of Security Instruments. Without affecting
the liability of Mortgagor or any other person (except any person expressly
released in writing) for payment of any Indebtedness or for performance of any
obligation contained herein, and without affecting the rights of Mortgagee, with
respect to any security not expressly released in writing, Mortgagee may, at any
time and from time to time, either before or after the maturity of the Note and
without notice or consent: (a) release any person liable for payment of all or
any part of the Indebtedness or for performance of any obligation; (b) make any
agreement extending the time or otherwise altering the terms of payment of all
or any part of the Indebtedness, or modifying or waiving any obligation, or
subordinating, modifying, or otherwise dealing with the lien or charge hereof;
(c) exercise or refrain from exercising or waive any right Mortgagee may have;
(d) accept additional security of any kind; and (e) release or otherwise deal
with any property, real or personal, securing the Indebtedness, including all or
any part of the Mortgaged Property.
SECTION 5.09. Security Agreement. This Mortgage shall also be
considered to be and shall be construed as a security agreement with respect to
any property described herein which is not real property. Upon default hereunder
and acceleration of the indebtedness pursuant to the provisions hereof,
Mortgagee may at its discretion require Mortgagor to assemble the collateral and
make it available to the Mortgagee at a place reasonably convenient to both
parties to be designated by the Mortgagee. Mortgagee shall give Mortgagor
written notice of the time and place of any public sale of any of the collateral
or of the time after which any private sale or other intended disposition
thereof is to be made by sending notice to Mortgagor at least five days before
the time of the sale or other disposition, which provisions for notice Mortgagor
agrees are reasonable.
<PAGE>
SECTION 5.10. Compromise Without Notice. Any action, suit or proceeding
brought by Mortgagee or any other holder of the Note pursuant to this mortgage
or otherwise, and any claim made by any such person under this mortgage or
otherwise, may be compromised, withdrawn or otherwise dealt with by such person
without notice to or approval of Mortgagor.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. Notices. (a) All notices and other communications
required or permitted to be given hereunder shall be in writing and mailed by
certified or registered mail, return receipt requested, or sent by telegram, or
delivered, and addressed as hereinafter provided. Except as otherwise specified
herein, the time period in which a response to any notice must be made, if any,
shall commence to run from the date of receipt, refusal, or attempted delivery
on the return receipt of the notice. Any party listed below may change its
address under this Section by notice to the other parties listed below. Until
further notice, notices and other communications hereunder shall be addressed as
follows:
If to Mortgagor:
Atlantic City Boardwalk Associates, L.P.
The Claridge Hotel and Casino
Indiana Avenue and the Boardwalk
Atlantic City, New Jersey 08401
Attn: Managing General Partner
If to Mortgagee:
The Claridge at Park Place, Incorporated
The Claridge Hotel and Casino
Indiana Avenue and the Boardwalk
Atlantic City, New Jersey 08401
Attn: President
provided that the delivery of any notice or other communication to the
additional addressees listed for copies thereof shall not be required in order
for such notice or other communication to be effective and to be deemed
delivered.
(b) The address listed for Mortgagee above shall be the address at
which payments of Indebtedness and other sums payable to Mortgagee hereunder
shall be made. Mortgagee may change the address at which payments to Mortgagee
hereunder shall be made by notice to mortgagor, and the address of Mortgagee at
which payments to Mortgagee hereunder shall be made may be different from
Mortgagee's address for notices and other communications hereunder.
SECTION 6.02. Estoppel Certificates. Mortgagor agrees, at any time and
from time to time prior to payment in full of the Indebtedness, upon not less
than 10 days' prior notice by Mortgagee, to execute, acknowledge and deliver to
Mortgagee or any proposed assignee of this Mortgage a certificate stating (a)
that this Mortgage is unmodified and in full force and effect (or if there have
been modifications, that the same is in full force and effect as modified and
stating the modifications); (b) amount of the Indebtedness due under the Note
and the other Security Instruments; (c) whether or not to the best knowledge of
<PAGE>
the signer of such certificate mortgagor is in default in performance of any
term, covenant or condition contained in this Mortgage and, if so, specifying
each such default of which the signer may have knowledge; (d) whether or not to
the best knowledge of the signer of such certificate Mortgagor has any offsets,
counterclaims or defenses to the payment of indebtedness and other charges
payable hereunder and if so, specifying each such offset, counterclaim or
defense of which the signer may have knowledge; and (e) as to such other matters
may be reasonably requested by the party requesting such Certificate, it being
intended that any such statement delivered pursuant to this Section may be
relied upon by any prospective purchaser of interest of Mortgagee or any grantee
thereof, or any prospective assignee thereof, or by any prospective assignee of
the Mortgaged Property.
SECTION 6.03. Amendment, Modification, Acceptance or Surrender. No
amendment, modification, termination or surrender of this mortgage, any of the
other Security Instruments, the Agreements or surrender of the Mortgaged
Property or any interest therein by Mortgagor shall be valid or effective unless
agreed to and accepted in writing by Mortgagee, and no act by any representative
or agent of Mortgagee, other than such a written agreement and acceptance by
Mortgagee, shall constitute an agreement thereto or acceptance thereof.
SECTION 6.04. No Waiver by Mortgagee. No failure by Mortgagee to insist
upon the strict performance of any term hereof or to exercise any right, power
or remedy consequent upon a default under this Mortgage, and no acceptance of
Indebtedness during the continuance of any such default, shall constitute a
waiver of any such default or of any such term. No waiver of any default shall
affect or alter this Mortgage, which shall continue in full force and effect, or
the rights of Mortgagee with respect to any other then existing or subsequent
default.
SECTION 6.05. Severability; Invalidity of Certain Provisions. (a) All
rights, powers and remedies provided herein may be exercised only to the extent
that the exercise thereof does not violate any applicable law, and are intended
to be limited to the extent necessary so that they will not render this Mortgage
invalid, unenforceable or not entitled to be recorded, registered or filed under
any applicable law.
(b) If any term or provision of this Mortgage or the application
thereof to any Person or circumstance shall, to any extent, be invalid or
unenforceable, the remaining terms and provisions of this Mortgage, or the
application of such term or provision to Persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby, and each term and provision of this Mortgage shall be valid and be
enforced to the fullest extent permitted by law.
SECTION 6.06. No Merger. There shall be no merger of this mortgage with
the fee estate in the Land by reason of the fact that the same Person may
acquire, own or hold, directly or indirectly, this Mortgage and the fee estate
in the Land, or of this Mortgage with the Leasehold Estate by reason of the fact
that the same Person may acquire, own or hold, directly or indirectly, this
Mortgage and the Leasehold Estate, unless and until any such Person and all
other Persons having any interest in the Property shall join in a written
instrument effecting such merger and shall duly record the same.
SECTION 6.07. No Waste. Mortgagor covenants not to do or suffer any
waste or damage, disfigurement or injury to the Improvements or the Personal
Property.
SECTION 6.08. Intentionally omitted.
SECTION 6.09. Successors and Assigns. This Mortgage shall be binding
upon the parties hereto and their respective successors and assigns and shall
inure to the benefit of the parties hereto and their respective permitted
successors and assigns.
<PAGE>
SECTION 6.10. Right to Perform Mortgagor's Covenants. After notice to
Mortgagor and upon the occurrence of an Event of Default, Mortgagee may but
shall not be obligated to, make any payment or perform any act required
hereunder to be made or performed by Mortgagor with the same effect as if made
or performed by Mortgagor, provided that such performance by Mortgagee on behalf
of Mortgagor shall not as between Mortgagor and Mortgagee waive or release
Mortgagor from any obligation or default hereunder. Mortgagor hereby grants
Mortgagee the right to enter the Property at all reasonable times for the
purpose of performing any act which Mortgagee is entitled to perform hereunder,
provided that no entry by Mortgagee upon the Property for such purpose shall
constitute or be deemed to constitute possession of the Property by Mortgagee,
and no such entry shall waive or release Mortgagor from any obligation or
default hereunder. All sums paid, and all costs and expenses (including
reasonable attorneys' fees and expenses) incurred by Mortgagee in connection
with the making of any such payment or the performance of any such act shall be
immediately due from Mortgagor without waiver of any right of Mortgagee arising
out of Mortgagor's breach of its covenants hereunder, and shall constitute
additional Indebtedness payable by Mortgagor hereunder and bear interest to the
extent permitted by applicable law at the Involuntary Rate until paid.
SECTION 6.11. Business Purpose. It is specifically understood and
agreed that the Indebtedness is incurred solely for a business purpose and not a
personal, family, household or agricultural purpose.
SECTION 6.12. No Assumption by Mortgagee. Nothing contained in this
Mortgage shall constitute any consent or request, express or implied, by
Mortgagee (a) for the performance of any labor or services or the furnishing of
any materials or other property in respect of the Mortgaged Property, or (b) as
giving Mortgagor any right, power or authority to contract for or permit the
performance of any labor or services or the furnishing of any materials or other
property, in such fashion as would permit the making of any claim against
Mortgagee in respect thereof or any claim that any lien based on the performance
of such labor or services or the furnishing of such materials or other property
is superior to this Mortgage. Neither this Mortgage nor any action or inaction
on the part of Mortgagee shall constitute an assumption on the part of Mortgagee
of any obligation under the Agreements or under the Ground Lease or Operating
Lease.
SECTION 6.13. No Partnership. Nothing in this Mortgage shall be
construed as making the parties hereto partners, joint venturers, members of a
joint enterprise or, except as otherwise provided herein, as rendering either of
said parties liable for the debts or obligations of the other.
SECTION 6.14. Non-Recourse. Neither Mortgagor nor any partner of
Mortgagor shall be personally liable to Mortgagee for the non-payment of any
Indebtedness the Mortgagee's recourse being expressly limited to the Mortgaged
Property; provided, however, that nothing contained in this Mortgage or the Loan
Agreement shall limit, restrict or impair the rights of Mortgagee to accelerate
the maturity of the Note and all other Indebtedness upon the occurrence of an
Event of Default, to bring suit and obtain a judgment against Mortgagor or its
general partners on the Note and such other Indebtedness of Mortgagor under this
Mortgage and the Note (so long as neither the Mortgagor nor its partners shall
have any personal liability upon any such judgment except to the extent of its
interest in the Mortgaged Property and the satisfaction thereof shall be limited
to the Mortgaged Property) or to exercise all rights and remedies provided in
this Mortgage; the other Security Interests or otherwise to realize upon the
Mortgaged Property.
SECTION 6.15. Statute of Limitations. To the extent permitted by
applicable law, the pleading of any statute of limitations as a defense to any
and all obligations secured by this Mortgage is hereby waived. In the event that
the foregoing waiver has expired because of the provisions of applicable law,
Mortgagor covenants, upon the request of Mortgagee, to again waive the pleading
of any statute of limitations as a defense to any and all obligations secured by
this Mortgage to the extent permitted by applicable law.
SECTION 6.16. Consent; Delegation to Sub-agents. The granting or
withholding of consent by Mortgagee to any transaction as required by the terms
hereof shall not be deemed a waiver of the right to require consent to future or
successive transactions. Wherever a power of attorney is conferred upon
<PAGE>
Mortgagee hereunder, it is understood and agreed that such power is conferred
with full power of substitution, and Mortgagee may elect in its sole discretion
to exercise such power itself or to delegate such power to one or more
sub-agents.
SECTION 6.17. Covenants to Run with the Land and Leasehold Estate. All
of the grants, obligations, covenants, agreements, terms, provisions and
conditions herein shall run with the Land and Leasehold Estate and shall apply
to, bind and insure to the benefit of, the heirs, administrators, executors,
legal representatives, successors and assigns of Mortgagor and the endorsees,
transferees, successors and assigns of Mortgagee. In the event Mortgagor is
composed of more than one party, the obligations, covenants, agreements and
warranties contained herein as well as the obligations arising therefrom are and
shall be joint and several as to each such party.
SECTION 6.18. Intentionally Omitted.
SECTION 6.19. Counterparts. This Mortgage may be executed in any number
of counterparts, each of which shall be an original with the same effect as if
the signatures thereto and hereto were upon the same instrument.
SECTION 6.20. Governing Law. This Mortgage and the transactions
described herein shall be governed by, and construed and enforced in accordance
with, the laws of the State of New Jersey.
<PAGE>
IN WITNESS WHEREOF, Mortgagor and Mortgagee have caused this Mortgage
and Security Agreement to be duly executed as of the date first above written.
Mortgagor:
ATLANTIC CITY BOARDWALK
ASSOCIATES, L.P.
WITNESS:
By: /s/ ROBERT K. SWANSON
- --------------------------- ------------------------------------
Name: Name: Robert K. Swanson
Title: Managing General Partner
Mortgagee is executing this Mortgage for the sole purpose of
acknowledging and agreeing to the provisions of Section 2.09 hereof.
[corporate seal] CLARIDGE LIMITED
By Del E. Webb New Jersey, Inc.,
managing general partner
By /s/ WILLIAM M. DOUGALL
------------------------------------
Name: William M. Dougall
Title: President
Mortgagor hereby acknowledges receipt of a true copy of the within
instruments.
Mortgagor:
ATLANTIC CITY BOARDWALK
ASSOCIATES, L.P.
WITNESS:
By /s/ ROBERT K. SWANSON
- --------------------------- -------------------------------------
Name: Name: Robert K. Swanson
Title: Managing General Partner
<PAGE>
STATE OF NEW YORK
Ss.:
COUNTY OF NEW YORK
BE IT REMEMBERED, that on this 30th day of October, 1983,
before me, the subscriber, a Notary Public of the State of New York, personally
appeared William M. Dougall, President of Del E. Webb New Jersey, Inc., a New
Jersey corporation which is the managing general partner in Claridge Limited, a
limited partnership, and he thereupon acknowledged that he signed the foregoing
instrument as such officer, that the seal affixed to said instrument is the
corporate seal of said corporation, and that said instrument is the voluntary
act and deed of said corporation, made by virtue of authority from its Board of
Directors, and as the voluntary act and deed of Claridge Limited, a limited
partnership.
-------------------------------
Notary Public
My Commission Expires:
<PAGE>
STATE OF NEW YORK
Ss.:
COUNTY OF NEW YORK
BE IT REMEMBERED, that on the 30th day of October, 1983, before me, the
subscriber, a Notary Public of the State of New York personally appeared Robert
K. Swanson, managing general partner of Atlantic City Boardwalk Associates,
L.P., a limited partnership, who, I am satisfied, is the person who has signed
the within instrument; and having first made known to me the contents thereof,
he thereupon acknowledged that he signed, seal and delivered the said instrument
as his voluntary act and deed and as the voluntary act and deed of Atlantic City
Boardwalk Associates, L.P., a limited partnership.
--------------------------------
Notary Public
My Commission Expires:
<PAGE>
Schedule A
Description
ALL that certain land and premises situate in the City of Atlantic City, County
of Atlantic and State of New Jersey, bounded and described as follows:
TRACT #1 - BEGINNING at a point in the Easterly line of Indiana Avenue 150 feet
Southwardly of the Southerly line of Pacific Avenue; and extending thence
(1) Eastwardly parallel with Pacific Avenue 155 feet; thence
(2) Southwardly parallel with Indiana Avenue 50.1 feet; thence
(3) Westwardly parallel with Pacific Avenue 155 feet to the Easterly line of
Indiana Avenue; thence
(4) Northwardly along the same 50.1 feet to the point and place of beginning.
BEING known as 111 and 113 South Indiana Avenue.
TRACT #2 - BEGINNING at a point in the Westerly line of Indiana Avenue 150 feet
Southwardly of the Southerly line of Pacific Avenue; and extending thence
(1) Southwardly along the Westerly line of Indiana Avenue 300 feet; thence
(2) Westwardly at right angles to Indiana Avenue 138.10 feet to the Easterly
line of Park Place; thence
(3) Northwardly along the same 300 feet; thence
(4) Eastwardly at right angles to Park Place 138.10 feet to the Westerly line
of Indiana Avenue and point and place of beginning.
TRACT #3 - BEGINNING at a point in the Easterly line of Ohio Avenue 200 feet
Southwardly of the Southerly line of Pacific Avenue; and extending thence
(1) Eastwardly parallel with Pacific Avenue 145.6 feet to the Westerly line
of Park Place; thence
(2) Southwardly along the same 150 feet; thence
(3) Westwardly parallel with Pacific Avenue 145.6 feet to the Easterly line
of Ohio Avenue; thence
(4) Northwardly along the same 150 feet to the point and place of beginning.
In Compliance with Chapter 157, Laws of 1977 premises situate herein are known
as Lots #8 and 9, Lot #16, in Block #31 and Lot #35 in Block #30 on the tax map
of the above City.
<PAGE>
SCHEDULE B
The Superior Mortgages
1. The first mortgage dated as of the date hereof made by Claridge Limited to
First National State Bank in the original principal amount of $80,000,000
intended to be recorded immediately prior to the recording of this Mortgage (the
"First Mortgage") and that certain loan agreement dated as of the date hereof
made between Claridge Limited and First National State Bank in connection with
the First mortgage (the "First Mortgage Loan Agreement").
2. The purchase money second mortgage and security agreement dated as of the
date hereof made by Mortgagor to Claridge Limited in the original principal
amount of $47,000,000 intended to be recorded immediately prior to the recording
of this Mortgage and that certain purchase money loan agreement dated as of the
date hereof made between Mortgagor and Claridge Limited in connection therewith.
<PAGE>
SCHEDULE C
(the "Agreements")
I. "Licenses"
1. License Agreement dated October 27, 1983 to J&P Studio Corp.
2. License Agreement dated October 13, 1982, assigned to Host
International.
II. "Purchase Order"
1. Purchase Order #CL 34249 Craig Testing Lavoratories, Inc. weekly
lab testing of swimming pool and two whirlpools
III. "SERVICE CONTRACTS"
ITEM A - LABOR CONTRACTS
1. National Brotherhood of Painters and Allied Trades Local Union No.
277. Effective May 1, 1982 through April 30, 1987
2. Local 68-68A-68B International Union of Operating Engineers.
Effective May 1, 1982 through April 30, 1987
3. Carpenter's District Council of South Jersey Local Union No. 623.
Effective May 1, 1982 through April 30, 1987
ITEM B - SERVICE CONTRACTS
1. Airways Cleaning (commercial cleaning kitchen ductwork)
2. Atlantic County Industrial (four odor counteractants)
3. Walt Butler (electronic security and surveillance equipment)
4. Centronics Computer Corp. (6080 line printer)
5. General Electric (service contract)
6. General Elevator (elevator and escalator maintenance)
7. IBM Corporation (lease of copier, collator and maintenance
agreement on typewriters, series I computer equipment service
agreement)
8. Monroe Systems (maintenance agreement calculators)
<PAGE>
9. Moore Business Forms, Inc. (maintenance agreement decollator and
imprinter detacher)
10. Motorola Communications (service agreement for Facilities
communications equipment)
11. Orkin Exterminating (pest control)
12. Pitney Bowes (equipment maintenance postage equipment)
13. Schiff-Charney (maintenance Olympia typewriters)
14. Simplex Time Recorder (fire alarm service)
15. S-T Fire Protection (inspection service contract)
16. York Division of Borg Warner (air conditioning units maintenance)
<PAGE>
Schedule D
(Permitted Exceptions)
1. Building restrictions as in Deed Book 46 page 29.
2. Building restrictions as in Deed Book 72 pages 655 and 658.
3. Building restrictions as in Deed Book 74 page 544; Deed Book 75 page 699
and Deed Book 84 page 474 and 476.
4. Building restrictions as in Deed Book 73 page 7.
5. Building restrictions as in Deed Book 76 page 41.
6. Rights granted to the Atlantic City Electric Company in Deed Book 969 page
124.
7. Rights granted to the Atlantic City Electric Company in Deed Book 939 page
384.
8. Rights granted to Atlantic City Electric Company in Deed Book 939 page
206.
9. Mortgage dated as of the date hereof made by Grantor to First National
State Bank in the original principal amount of $80,000,000 intended to be
recorded immediately prior to the recording of this Deed of Improvements.
10. Purchase Money Second Mortgage and Security Agreement dated as of the date
hereof made by Grantee and Grantor to Grantor in the original principal
amount of $47,000,000 intended to be recorded simultaneously herewith.
11. License of Gift Shop to Host International dated 10/13/82.
12. Lease of Hair Salon to J & P Hair Studio Corp dated 10/27/83.
13. UCC-1 Financing Statement No. 640764 filed 8/24/81 for for the benefit of
American Best Coffee, Inc.
14. The Operating Lease.
<PAGE>
EXHIBIT 10(c)
EXPANDABLE WRAPAROUND MORTGAGE LOAN AGREEMENT
AGREEMENT, dated as of October 31, 1983, between ATLANTIC CITY
BOARDWALK ASSOCIATES, L.P., a New Jersey limited partnership (the "Company"),
and THE CLARIDGE AT PARK PLACE, INCORPORATED, a New Jersey corporation (the
"Lender").
Pursuant to the "Operating Lease" (as such quoted term is hereinafter
defined), the Company desires to borrow from the Lender certain sums to finance
the purchase of "FF&E Replacements" and to fund any "Facility Maintenance
Shortfalls" (as such quoted terms are defined in the Operating Lease). The
Lender is willing to lend such amounts to the Company, subject to and upon the
terms and conditions set forth herein and in the Operating Lease but only if the
Company executes and delivers the "Wraparound Mortgage" to the Lender (as such
quoted term is hereinafter defined) which mortgage secures repayment of (i) the
"Wraparound Note" (as such quoted term is hereinafter defined) and (ii) certain
advances made by the Lender under the Operating Lease to finance the purchase of
FF&E Replacements and any Facility Maintenance Shortfall.
NOW, THEREFORE, IT IS AGREED:
SECTION 1. DEFINITIONS.
For all purposes of this Agreement, unless the context otherwise
requires:
"Act" shall mean the Casino Control Act of New Jersey, as amended,
N.J.S.A. (5:12-1, et seq.)
"Affiliate" of any person shall mean (a) any other person controlling,
controlled by, or under common control with, such person and (b) any director,
officer or employee of such person.
"Basic Interest" shall mean for any Fiscal Year, interest computed at
the rate of fourteen percent (14%) per annum on the average of the Loan
outstanding as of the end of each day during such Fiscal Year (based on a
360-day year consisting of twelve 30-day months), decreased by the amount of any
Deferred Interest for such Fiscal Year.
"Business Day" shall mean any day which is not a Saturday or a Sunday
and on which banks in the State of New York or New Jersey are not authorized or
required to close.
"Capitalized Lease Obligation" shall mean all lease obligations which
have been or should be, in accordance with generally accepted accounting
principles, capitalized on the books of the lessee.
"Casino Expansion Agreement" shall have the meaning specified in the
Operating Lease.
"Claridge Company" shall mean either the Holding Company (only for so
long as it holds any capital stock of Lender) or Claridge Limited, a New Jersey
limited partnership.
"Claridge Hotel and Casino" shall mean collectively, the Claridge Land,
the Hotel Assets and the Gaming and Other Assets, and all replacements thereof,
additions thereto and proceeds thereof.
"Claridge Land" shall mean the real property described in the
Wraparound Mortgage and from and after any expansion referred to in ss.4.11
hereof, the real property, if any, required to be subjected to a lien and
mortgage in favor of Lender under such ss.4.11.
<PAGE>
"Collateral" shall mean all real, personal and intangible property
securing (or intended to be securing) the obligations of the Company hereunder
and under the Note and Wraparound Mortgage.
"Company" shall mean Atlantic City Boardwalk Associates, L.P., its
successors and assigns.
"Cumulative Deferred Interest" shall mean the accumulated total of
Deferred Interest which shall accrue without interest during the term of the
Loan, minus any prepayments of Deferred Interest pursuant to ss.2.5 hereof.
"Current Liabilities" of any person shall be determined on a tax basis
and on a consolidated basis for such person and shall include, as of the date of
determination thereof, (a) all indebtedness payable on demand or maturing within
one year after such date without any option on the part of the obligor to extend
or renew beyond such year, (b) final maturities, installment and prepayments of
indebtedness (including, with respect to the Note, not only required
prepayments, but also optional prepayments on and after notice thereof has been
given pursuant to Section 2) required to be made within one year after such date
and (c) all other items (including taxes accrued as estimated and reserves for
deferred income taxes) which, on a tax basis, would be included on a balance
sheet as current liabilities.
"DEWNJ" shall mean Del E. Webb New Jersey, Inc., a New Jersey
corporation.
"Deferred Interest" shall mean for each Fiscal Year set forth in Column
I below the corresponding amount set forth in Column II below:
Column I Column II
-------- ---------
(Fiscal Year) (Deferred Interest)
1983 $1,000,000
1984 4,000,000
1985 4,000,000
1986 4,000,000
1987 4,000,000
1988 3,000,000
"ERISA" shall mean, at any date, the Employee Retirement Income
Security Act of 1974 and the regulations thereunder, all as the same shall be in
effect at such date.
"Event of Default" shall have the meaning specified in ss.5.1 hereof.
"FF&E Notes" shall have the meaning specified in the Operating Lease.
"Financial Statements" shall mean, for any person, the balance sheet,
profit and loss statement and statement of changes in financial position of such
person as at the end of and for the applicable period.
"First Mortgage" shall mean, collectively, the mortgage loan agreement,
and any and all other agreements, instruments and documents delivered in
connection with that certain $80,000,000 loan made by First National State Bank
to the Lender of even date herewith, which loan is secured by a first lien on
the Claridge Hotel and Casino.
<PAGE>
"Fiscal Year" means each period of twelve consecutive months during the
term of the Loan and this Agreement which shall commence on January lst and end
on December 31st of each year; except that the first Fiscal Year shall be a
period ending on December 31, 1983 and beginning on the Closing Date and the
last Fiscal Year shall be a period ending on the Maturity Date and beginning on
the immediately preceding January lst.
"Gaming and Other Assets" shall mean the tangible and intangible assets
sold by DEWNJ to the Lender pursuant to an asset purchase agreement, dated of
even date herewith, between DEWNJ and the Lender.
"Government Securities" shall mean obligations of the United States
government or any agency thereof and obligations guaranteed by the United States
government or any agency thereof.
"Ground Lease" shall mean the ground lease of the Claridge Land by
Claridge Limited to the Company, dated of even date herewith, as amended,
modified or supplemented from time to time in accordance with its terms and the
terms hereof.
"hereof", "herein", "hereunder" and "hereby" and like terms shall mean
and refer to all provisions of this Agreement rather than to a particular
section, subsection, clause or portion of this Agreement.
"Holding Company" shall mean the Claridge Hotel and Casino Corporation,
a New York corporation.
"Hotel Assets" shall mean the real and personal property sold by
Claridge Limited to the Company pursuant to agreement of sale, dated of even
date herewith, between Claridge Limited and the Company.
"Indebtedness" shall have the meaning specified in the Wraparound
Mortgage.
"indebtedness" of any person shall mean all items which, in accordance
with generally accepted accounting principles, would be included (without double
counting) in determining total liabilities of such person on a consolidated
basis (whether or not such person has personal liability therefor) as shown on
the liability side of a balance sheet as.at the date Indebtedness is to be
determined and, in any event, shall include any liability secured by any
mortgage, pledge, lien or security interest in property owned or acquired
(whether or not such liability shall have been assumed), Capitalized Lease
Obligations and guarantees, endorsements (other than for collection in the
ordinary course of business) and other contingent obligations in respect of the
obligations of others.
"Limited Partnership Agreement" shall mean the Agreement of Limited
Partnership of the Company, dated the date hereof, as amended, modified or
supplemented from time to time in accordance with its terms and the terms of the
First Mortgage, among Robert K. Swanson, Everett L. Mangam, T. Edward Plant and
AC Boardwalk Partners Corporation as general partners and the limited partners
and special limited partners identified therein.
"Loan" shall have the meaning specified in ss.2.1(c) hereof.
"Maintenance Shortfall Notes" shall have the meaning specified in the
Operating Lease.
"Management Agreement" shall mean the management agreement dated of
even date herewith, as amended, modified or supplemented from time to time
between the Lender and DEWNJ.
"Maintenance Services Contract" shall mean the maintenance services
contract dated of even date herewith between the Company, as owner, and DEWNJ,
as manager, with respect to facility maintenance and engineering services.
"Maturity Date" shall mean September 30, 2000 or such earlier date as
the whole of the Indebtedness becomes due and payable.
<PAGE>
"Net Refinancing Proceeds" shall mean an amount equal to the difference
between (i)the proceeds of any mortgage financing, refinancing or borrowing by
the Company, repayment of which is secured by its interests in the Claridge
Hotel and Casino (regardless of any application of such proceeds to payment or
prepayment of indebtedness) and (ii) $80,000,000 less the amount of any
amortization of the Wraparound Mortgage.
"Notes" shall have the meaning specified in ss.2.2 hereof.
"Operating Lease" shall mean the lease and sublease of the Hotel Assets
and Claridge Land, respectively from the Company to the Lender, dated of even
date herewith, as amended, modified or supplemented from time to time in
accordance with its terms and the terms hereof, all as more particularly
described therein.
"Permitted Exceptions" shall have the meaning specified in the
Wraparound Mortgage.
A "person" shall include an individual, a corporation, an association,
a joint stock company, a business trust, a partnership, a joint venture, an
unincorporated organization, or a government or any agency or political
subdivision thereof.
"Second Mortgage" shall mean the second mortgage, dated the date
hereof, by the Company in favor of Claridge Limited, securing to the extent of
$47,000,000 the purchase price of certain assets sold by Claridge Limited to the
Company.
"Secured Subordinated Debt" shall mean Subordinated Debt secured by
liens on or security interests in the Collateral, such liens and security
interests having been subordinated to the liens and security interests in favor
of the Lender pursuant to agreements in form and substance satisfactory to the
Lender, and in any event shall include, without limitation, the indebtedness
described in clause (ii) of the definition of Subordinated Debt.
"Security Instruments" shall have the meaning specified in the
Wraparound Mortgage.
"Subordinated Debt" of the Company shall mean all indebtedness of the
Company for borrowed money, which shall have been subordinated to the prior
payment in full of such person's indebtedness to the Lender by the execution and
delivery to the Lender by the lender and the Company, prior to the creation of
such indebtedness, of agreements of subordination in form and substance
satisfactory to the Lender.
"Superior Mortgages" shall mean, collectively, the First Mortgage and
the Second Mortgage.
"Wraparound Mortgage" shall mean the expandable wraparound mortgage,
dated the date hereof, as amended, modified or supplemented from time to time in
accordance with its terms and the terms hereof, by the Company in favor of the
Lender.
SECTION 2. AMOUNT AND TERMS OF LOAN.
Section 2.1. LOAN. (a) Subject to and upon the terms and conditions
herein set forth, including, without limitation, the definitions contained in
Section 1 hereof and the Representations and Warranties in Section 6 hereof, the
Company shall become indebted to the Lender in the amount of $127,000,000. Such
indebtedness shall be incurred simultaneously with the execution of this
Agreement at the offices of Messrs. Davis Polk & Wardwell, 1 Chase Manhattan
Plaza, New York, New York and shall be evidenced by a promissory note to the
order of the Lender substantially in the form of Exhibit 2.2 annexed hereto
(together with any modification, amendment, substitution, replacement or renewal
thereof, the "Wraparound Note") which shall be dated the date hereof and duly
executed by the Company. Subject to earlier acceleration, the Wraparound Note
shall mature on September 30, 2000 and shall be subject to prepayment as
provided in this Section 2.
<PAGE>
(b) Subject to and upon the terms and conditions set forth herein and
in the Operating Lease, including, without limitation, the definitions contained
in Section 1 hereof, the Representatives and Warranties in Section 6 hereof, and
the terms and conditions in Section 6.3 of the Operating Lease, the Company may
become further indebted to the Lender in amounts and at the times provided in
the Operating Lease, shall be evidenced by either "FF&E Notes" or "Maintenance
Shortfall Notes" (as such quoted terms are defined in the Operating Lease).
(c) The aggregate outstanding principal balance, from time to time, of
the Wraparound Note and any FF&E Notes or Maintenance Shortfall Notes is
hereinafter collectively referred to as the "Loan". The Wraparound Note and any
FF&E Notes or Maintenance Shortfall Notes are hereinafter collectively referred
to as the "Notes".
Section 2.2. PRINCIPAL AND INTEREST PAYMENTS UNDER WRAPAROUND NOTE. The
Company shall pay the Lender interest on the Wraparound Note, and repay
principal of the Wraparound Note, as follows:
(a) Basic Interest shall be payable in arrears during each Fiscal Year
in equal monthly installments and shall be paid to the Lender within 10 days
after the end of the month in question.
(b) Cumulative Deferred Interest shall be due and shall be paid on the
Maturity Date.
(c) mandatory payments of principal shall be due and shall be paid as
follows:
(i) On the last day of each month in the Fiscal Year set forth in
Column I below, one-twelfth of the corresponding amount set forth in Column II
below:
Column I Column II
-------- ---------
(Fiscal Year) (Principal Payment)
1988 $1,000,000
1989 3,000,000
1990 5,000,000
1991 5,000,000
1992 6,000,000
1993 7,000,000
(ii) On December 31, 1993, the sum of $53,000,000.
(d) On the Maturity Date, the remainder of outstanding principal
balance of the Wraparound Note shall be paid, together with all accrued and
unpaid Basic Interest, if any, and all other payments due from the Company to
the Lender under the Wraparound Note, this Loan Agreement or the Wraparound
Mortgage.
Section 2.3. PRINCIPAL AND INTEREST PAYMENTS UNDER FF&E NOTES AND
MAINTENANCE SHORTFALL NOTES. The Company shall pay the Lender interest on, and
repay the principal of, the FF&E Notes and Maintenance Shortfall Notes as set
forth therein and in the Operating Lease.
Section 2.4. LATE PAYMENT. Any payment of the Loan not paid when due
shall, to the extent permitted by law, bear interest at the rate of three
percent (3%) per annum over the rate announced from time to time by Del E Webb
Corporation's lead lending bank or, if there is no such bank, by Morgan Guaranty
Trust Company of New York at its main office in New York City as its prime rate,
from the due date of such payment until such payment is made.
Section 2.5. REQUIRED PREPAYMENT. In the event, and whenever, Net
Refinancing Proceeds are available to the Company from time to time in any
Fiscal Year, the Company shall pay such Net Refinancing Proceeds to the
<PAGE>
Lender to be applied in prepayment of the Second Mortgage and the balance, if
any, to prepayment,first, of the Wraparound Note and then to prepayment of any
FF&E Notes and Maintenance Shortfall Notes, ratably in proportion to their
respective outstanding principal balances.
Section 2.6. PREPAYMENT FROM INSURANCE PROCEEDS. The Company shall,
from time to time until payment in full of the Indebtedness, and the performance
of all its other obligations hereunder and under the other Security Instruments,
within ten days following the receipt by the Company of any payment of proceeds
of any insurance required to be maintained pursuant to Section 3.3(a) hereof on
account of each separate loss, damage or injury in excess of $1,000,000 to any
Collateral, apply an amount equal to such proceeds to the prepayment of the
Loan, without premium, to the extent such proceeds (or an amount equal to the
same) shall not have been expended or committed for the repair or replacement of
such Collateral in accordance with the terms of the Superior Mortgages or
Wraparound Mortgage, and shall not have been applied to prepayment of the notes
secured by the Superior Mortgages pursuant to the terms thereof. Such
prepayments shall be applied to the Indebtedness in the following priority:
First: Cumulative Deferred Interest.
Second: accrued and unpaid Basic Interest.
Third: the principal balance of the Wraparound Note.
Fourth: accrued and unpaid interest on any FF&E Notes or
Maintenance Shortfall Notes, ratably in proportion
to their respective outstanding principal balances.
Fifth: the principal balance of any FF&E Notes, or
Maintenance Shortfall Notes, ratably in proportion
to their respective outstanding principal balances.
Section 2.7. PREPAYMENT FROM CONDEMNATION AWARDS. The Company shall,
from time to time until payment in full of the Indebtedness and the performance
of all its other obligations hereunder and under the other Security Instruments,
upon the receipt of any "Award" (as such quoted term is defined in the
Wraparound Mortgage), apply an amount equal to the Award (or such lesser amount
if the Indebtedness outstanding at such time is less than the amount of the
Award) to prepayment of the Loan, without premium, to the extent such Award (or
an amount equal to the same) shall not have been expended or committed for the
repair or replacement of Collateral in accordance with the terms of the Superior
Mortgages or Wraparound Mortgage and shall not have been applied to prepayment
of the notes secured by the Superior Mortgages pursuant to the terms thereof.
Such prepayments shall be applied to the Indebtedness in the priority set forth
in Section 2.6.
Section 2.8. OPTIONAL PREPAYMENTS. Upon not less than ten (10) days'
prior written notice to the Lender and upon compliance with the items and
conditions of the Superior Mortgages, the Company shall have the right, without
premium, to prepay the Loan from time to time in part in amounts of $100,000 or
an integral multiple thereof or at any time in whole. Upon the giving of notice
of prepayment pursuant to this Section 2.8, the amount therein specified to be
prepaid shall be due and payable on the date therein specified for such
prepayment, together with accrued interest thereon to such date at the rate of
fourteen percent (14%) per annum with respect to the Wraparound Note and any
FF&E Notes and ten percent (10%) per annum with respect to any Maintenance
Shortfall Notes. No prepayment pursuant to this Section 2.8 of less than the
entire Loan shall be credited to or relieve the Company to any extent from its
obligation to make any prepayment required by Section 2.6 or Section 2.7 hereof.
Such optional prepayments shall be applied by the Lender, first to prepayment of
the First Mortgage, second to the prepayment of the Second Mortgage and then to
the Indebtedness in the priority set forth in Section 2.6.
Section 2.9. DAY OF PAYMENT. Whenever any payment to be made hereunder
or on the Notes or Wraparound Mortgage shall become due and payable on a day
which is not a Business Day, such payment may be made in the next succeeding
Business Day and, in the case of any payment of principal, such extension of
time shall in such case be included in computing interest on such payment.
<PAGE>
Section 2.10. METHOD OF PAYMENT. The Company shall make each payment
hereunder and under the Notes or Wraparound Mortgage, not later than 1:00 p.m.
(New York City time) on the day when due in lawful money of the United States of
America to the Lender at its office at The Claridge Hotel and Casino, Indiana
Avenue at The Boardwalk, Atlantic City, New Jersey 08401 or at such other place
as the Lender may from time to time designate, in immediately available funds,
without offset, abatement or deduction except as set forth in Section 2.11
hereof.
Section 2.11. SUSPENSION OF PAYMENTS. The Company may suspend payment
of any installment of interest or principal under the Notes for so long as and
to the extent that Lender (or any affiliate of Del E. Webb Corporation) fails to
make its basic rental payments to the Company under the Operating Lease.
SECTION 3. AFFIRMATIVE COVENANTS.
The Company covenants and agrees that, until all Indebtedness is paid
in full, unless specifically waived by the Lender in writing:
Section 3.1. FINANCIAL STATEMENTS AND OTHER INFORMATION. The Company
shall furnish or cause to be furnished to the Lender:
(a) as soon as practicable and in any event within 120 days after the
close of each fiscal year of the Company, commencing with the fiscal year ending
December 31, 1983, Financial Statements of the Company and prepared on a tax
basis prepared in accordance with generally accepted accounting principles
consistently applied, as at the end of and for the fiscal year just closed,
setting forth the corresponding figures of the previous fiscal year in
comparative form, all in reasonable detail and certified by Peat, Marwick,
Mitchell & Co. or such other independent public accountants selected by the
Company and reasonably satisfactory to the Lender; and concurrently with such
Financial Statements, a written statement signed by such independent accountants
to the effect that, in making the examination necessary for their certification
of such Financial Statements, they have not obtained any knowledge of the
existence of any Event of Default or other act, condition or event which, with
the giving of notice or lapse of time, or both, as specified in ss. 5.1 hereof
would constitute such an Event of Default, or if such independent accountants
shall have obtained from such examination any such knowledge, they shall
disclose in such written statement the Event of Default or other act, condition
or event and the nature thereof, it being understood that such independent
accountants shall be under no liability, directly or indirectly, to anyone for
failure to obtain knowledge of any such Event of Default or act, condition or
event;
(b) as soon as practicable and in any event within 120 days after the
close of each such fiscal year, commencing with the fiscal year ending December
31, 1983 and promptly upon the occurrence of any Event of Default, a certificate
signed by or on behalf of the managing general partner of the Company stating
(i) that a review of the activities of the Company during such period has been
made with all due diligence in light of the purposes therefor under their
immediate supervision with a view to determining whether the Company has
observed, performed and fulfilled (or caused to be observed, performed and
fulfilled) all covenants and obligations under this Agreement, and (ii) to the
knowledge of the signatories to such certificate, that there existed during such
period no Event of Default and no act, condition or event which, with the giving
of notice or lapse of time, or both, as specified in ss. 5.1 hereof, would
constitute such an Event of Default, or if any such Event of Default, act,
condition or event existed, specifying the nature thereof, the period or
existence thereof and the action proposed to be taken, or which has been taken,
with respect thereto;
(c) promptly upon receipt thereof, copies of all financial reports if
any, submitted to the Company by its auditors in connection with each annual or
interim audit of their respective books by such auditors;
(d) promptly upon the issuance thereof, copies of all material notices,
reports or other communications submitted by (and relating or purporting to
relate to the financial condition of) the Company to, or received by the Company
from, the New Jersey Casino Control Commission or any other governmental agency,
<PAGE>
including, without limitation, the monthly, quarterly and annual reports
required under Chapter 45-1.6 of the regulations issued pursuant to the Act, and
the annual audit report required by Chapter 45-1.7 of such regulations (N.J.A.C.
19:45-1.6, 1.7), and all reports, notices or statements sent by the Company or
to the extent to which the Company has knowledge thereof and access thereto by
such Commission or such agencies to the holders of any indebtedness of the
Company or to the trustee under any indenture under which the same is issued;
and
(e) promptly upon the receipt of notice thereof, written notice of any
litigation, including arbitrations and of any proceedings before any
governmental agency which would, if successful, materially and adversely affect
the Company or where the amount involved exceeds $500,000 in excess of insurance
coverage or, in any event, which exceeds $10,000,000.
Section 3.2. TAXES AND CLAIMS. The Company shall duly pay and discharge
(a) all taxes, assessments and governmental charges upon or against the Company
or its property or assets prior to the date on which penalties attach thereto,
unless and to the extent that such taxes are being diligently contested in good
faith and by appropriate proceedings, and appropriate reserves therefor have
been established, and (b) all lawful claims, whether for labor, materials,
supplies, services or anything else which might or could, if unpaid, become a
lien or charge upon the property or assets of the Company, unless and to the
extent only that the same are being diligently contested in good faith and by
appropriate proceedings and appropriate reserves therefor have been established.
Section 3.3. INSURANCE.
(a) The Company shall (i) keep its property adequately insured at all
times with insurance carriers rated "A" under Bests Directory of Insurance
Companies and licensed to do business in New Jersey against loss or damage by
fire and other hazards, (ii) maintain adequate insurance at all times with
insurance carriers so rated against liability on account of damage to persons
and property and under all applicable workmen's compensation laws, and (iii)
maintain adequate insurance covering such other risks as the Lender may
reasonably request. For the purposes of this Section 3.3(a), insurance shall be
deemed adequate if the same is not less extensive in coverage and amount than is
customarily maintained by Del E. Webb Corporation at its other hotels and
satisfies the requirements of ss.10.01 of the Management Agreement and ss.ss.
4.1 and 4.2 of the Operating Lease. All insurance covering Collateral shall
provide that, in the case of each separate loss in excess of $1,000,000 and
subject to the rights of the holders of the Superior Mortgages, the full amount
of insurance proceeds with respect thereto shall be payable to the Lender as
mortgagee, secured party, or otherwise as its interest may appear, to be applied
in accordance with Section 2.6 hereof, and shall further provide for at least
thirty (30) days' prior notice to the Lender of the cancellation or substantial
modification thereof.
(b) The Company shall, from time to time upon request of the Lender,
promptly furnish or cause to be furnished to the Lender evidence, in form and
substance satisfactory to the Lender, of the maintenance of all insurance
required by this Section 3.3 to be maintained, including, but not limited to,
such originals or copies as the Lender may request of policies, certificates of
insurance, riders and endorsements relating to such insurance and proof of
premium payments.
Section 3.4. BOOKS AND RESERVES. The Company shall:
(a) maintain, at all times, fair and representative books, records and
accounts in which fair and representative entries shall be made of its
transactions in accordance with tax basis accounting principles consistently
applied, and
(b) by means of appropriate quarterly entries, reflect in its accounts
and in all Financial Statements furnished pursuant to Section 3.1 hereof proper
liabilities and reserves for all taxes and proper reserves for
<PAGE>
depreciation, renewals and replacements, obsolescence and amortization of its
property and bad debts, all in accordance with generally accepted accounting or
tax basis principles consistently applied, as above described.
Section 3.5. PROPERTIES IN GOOD CONDITION. The Company shall keep (or
cause to be kept) its property in good repair, working order and condition and,
from time to time, make (or cause to be made) all needful and proper repairs,
renewals, replacements, additions and improvements thereto, so that the business
carried on may be conducted at all times in accordance with prudent business
management.
Section 3.6. INSPECTIONS. The Company shall allow any representative of
the Lender to visit and inspect any of its property, to examine the books on
account and other records and files of same, to make copies thereof and to
discuss the affairs, business, finances and accounts of the Company with its
respective officers and employees, all at such reasonable times and as often as
the Lender may request.
Section 3.7. PAY INDEBTEDNESS TO THE LENDER AND PERFORM OTHER
COVENANTS. The Company shall (a) make full and timely payment of the
Indebtedness, (b) duly comply with all the terms and covenants contained in the
Security Instruments, all at the times and places and in the manner set forth
therein, and (c) at all times maintain the liens and security interests provided
for under or pursuant to this Agreement as valid and perfected liens and
security interests on the property intended to be covered thereby.
Section 3.8. COMPLIANCE WITH LAWS. The Company shall at all times
comply in all material respects with all provisions of the Act and all
regulations issued thereunder, or interpretations thereof, and all other
applicable statutes, regulations and ordinances, and do all acts, make all
applications, file all reports, make all disclosures and pay all fees necessary
to obtain and maintain all permits, licenses and construction or operation
certificates required in order to use and operate the Claridge Hotel and Casino
in accordance with the Act, such regulations and interpretations and such other
applicable laws.
Section 3.9. COMPLIANCE WITH SUPERIOR MORTGAGES. The Company covenants
to comply with all of the terms and conditions of the Superior Mortgages other
than those with respect to the payment of principal and interest under the
Superior Mortgages, which payments the Lender has agreed to pay pursuant to
Section 7 hereof.
SECTION 4. NEGATIVE COVENANTS.
The Company covenants and agrees that, until the Indebtedness is paid
in full, the Company shall not, without the prior written consent of the Lender
and the holders of the Superior Mortgages:
Section 4.1. MORTGAGES, LIENS, ETC. Create, incur assume or suffer to
exist any mortgage, pledge, security interest, encumbrance, lien or charge of
any kind upon or defect in title to or restriction upon the use of any property
or assets of any character of the Company, whether owned at the date hereof or
hereafter acquired, or upon the Claridge Land, or hold or acquire any property
or assets of any character under conditional sales, finance lease or other title
retention agreements, except:
(a) mortgages, liens, pledges and security interests in favor of the
Lender;
(b) the Operating Lease and any mortgages, liens, .pledges and security
interests in connection with an expansion of the Claridge Hotel and Casino
pursuant to the Casino Expansion Agreement;
(c) (i) liens arising out of judgments or awards in respect of which
the Company shall in good faith be prosecuting an appeal or proceedings for
review and in respect of which the Company shall have secured a subsisting stay
of execution pending such appeal or proceedings for review, provided the Company
shall have set aside on its books adequate reserves with respect to such
judgment or award; (ii) liens for taxes, assessments or governmental charges or
<PAGE>
levies, provided payment and discharge thereof shall not at the time be required
in accordance with the provisions of Section 3.2 hereof; (iii) deposits, liens
or pledges to secure payments of workmen's compensation, unemployment insurance,
old age pensions or other social security obligations, or the performance of
bids, tenders, leases, contracts (other than contracts for the payment of
money), public or statutory obligations, surety, stay or appeal bonds, or other
similar obligations arising in the ordinary course of business; (iv) mechanics',
workmen's, repairmen's, warehousemen's, vendors' or carriers' liens, or other
similar liens arising in the ordinary course of business and securing sums which
are not past due, or deposits or pledges to obtain the release of any such liens
provided payment and discharge thereof shall not at the time be required in
accordance with the provisions of Section 3.2 hereof; and (v) zoning
restrictions, easements, licenses, restrictions on the use of real property or
minor irregularities in title thereto, which do not materially impair the use of
such property in the operation of the business of the Company or the value of
such property for the purpose of such business;
(d) purchase money mortgages or other purchase money liens or security
interests (including, without limitation, finance leases) granted to the Lender
by the Company to the extent securing amounts loaned by the Lender to the
Company in excess of the aggregate amount of such loans which are to be secured
by the Wraparound Mortgage, upon any fixed or capital assets hereafter acquired,
provided that (i) no such mortgage, lien or security interest shall extend to or
Cover any other property of the Company and (ii) such mortgages, liens or
security interests have been subordinated to the lien and security interest
created under the Wraparound Mortgage, pursuant to one or more agreements in
form and substance satisfactory to the Lender;
(e) liens securing Secured Subordinated Debt;
(f) in addition to those permitted under subparagraph (d) of this ss.
4.1, purchase money mortgages or other purchase money liens or security
interests (including, without limitation, finance leases) upon any fixed or
capital assets hereafter acquired by the Company, provided that (i) no such
mortgage, lien or security interest shall (x) extend to or cover any other
property of the Company or (y) secure any indebtedness other than in respect of
the purchase price of the asset so acquired, and (ii) the principal amount of
the indebtedness secured by all such mortgages, liens or security interests, (x)
incurred in any calendar year shall not exceed $1,000,000 and (y) shall not
exceed, in the aggregate outstanding at any one time, $5,000,000; and
(g) mortgages, liens and security interest existing on the date hereof
which are described in Schedule 4.1 annexed hereto, but not the extension of
coverage to other property, extension of maturity, refunding or modification
thereof in whole or in part.
Section 4.2. INDEBTEDNESS. Create, incur, assume or suffer to exist,
contingently or otherwise, any indebtedness, except:
(a) the Indebtedness;
(b) unsecured Current Liabilities of the Company incurred in the
ordinary course of business other than those which are for money borrowed or are
evidenced by bonds, debentures, notes or other similar instruments;
(c) Indebtedness (not overdue) secured by mortgages, liens or security
interests permitted by ss. 4.1 (b), (c), (d), (f) and (g) hereof;
(d) Indebtedness under guarantees or for other contingent liabilities
to the extent permitted by ss.4.4 hereof;
(e) unsecured Suborindated Debt and Secured Subordinated Debt;
<PAGE>
(f) Indebtedness of the Company to the Lender evidenced by Maintenance
Shortfall Notes; and
(g) Indebtedness existing on the Closing Date which is described in
Schedule 4.1 annexed hereto, but not the increase, modification, refunding or
extension of maturity thereof, in whole or in part.
Section 4.3. LOANS, INVESTMENTS AND GUARANTEES. Lend or advance money,
credit or property to any person, or invest in (by capital contribution or
otherwise), or purchase or repurchase the stock or indebtedness, or all or a
substantial part of the assets or properties, of any person, or guarantee,
assume, endorse or otherwise become responsible for (directly or indirectly or
by any instrument having the effect of assuring any person's payment or
performance or capability) the indebtedness, performance, obligations, stock or
dividends of any person, or agree to do any of the foregoing, except:
(a) endorsement of negotiable instruments for deposit or collection in
the ordinary course of business;
(b) investments in (i) Government Security maturing not more than one
year after the date of acquisition thereof, (ii) open market commercial paper,
issued by any corporation organized and doing business under the laws of the
United States of America or any state thereof, with a maturity not in excess of
nine months from the date of acquisition thereof which has the highest credit
rating by either Standard & Poor's Corporation or Moody's Investors Service,
Inc., (iii) certificates of deposit issued by any bank, trust company or savings
and loan association organized under the laws of the United States of America or
any state thereof having a combined capital and surplus of not less than
$30,000,000 and maturing not more than one year after the date of acquisition
thereof, (iv) short-term repurchase agreements with commercial banks having a
combined capital and surplus of not less than $30,000,000 relating to Government
Securities, (v) shares of a money market investment company registered under the
Investment Company Act of 1940 investing primarily in one or more of the
short-term instruments specified in clauses (i) through (iv) above and having
assets in excess of $30,000,000 and (vi) any eligible 'investment' or
"cumulative investment" as defined in, or other required investment under,
ss. 144(c) of the Act;
(c) investments representing stock or obligations issued to the Company
in settlement of claims against any other person by reason of an event of
bankruptcy or a composition or readjustment of debt or a reorganization of any
debtor of the Company;
(d) investments representing the indebtedness of the Company owing as a
result of the sale by the Company in the ordinary course of business of products
or services or tangible personal property no longer required in its business;
(e) loans by the Lender to the Company secured by the Wraparound
Mortgage and liens referred to in Section 4.1(d) hereof; and
(f) guaranties in favor of the Lender;
Section 4.4. MERGER, SALE OF ASSETS, DISSOLUTION, ETC. Except as
required or permitted pursuant to the Ground Lease or Operating Lease, enter
into any transaction of merger or consolidation, or transfer, sell, assign,
lease, or otherwise dispose of (other than sales of finished products in the
ordinary course of business) any of its property or assets or any of its notes
or accounts receivable, or any stock (other than directors' qualifying shares),
or any assets or properties necessary or desirable for the proper conduct of its
business, or change the nature of its business, or wind up, liquidate or
dissolve, or agree to do any of the foregoing, except that the Company may sell,
assign or transfer any single item of tangible property having an original cost
of less than $500,000 so long as the time of any such sale or transfer there
<PAGE>
shall exist no Event of Default nor event which with the giving of notice or
passage of time would constitute an Event of Default; however, that the
aggregate amount of any such sales in any one calendar year may not exceed
$1,000,000 and the Company may sell to the Lender the Hotel Assets in connection
with any requirement under the Operating Lease that the Lender purchase same or
an election by the Lender to purchase the same.
Section 4.5. LEASE-BACKS. Prior to the payment in full of the First
Mortgage, enter into any arrangements, directly or indirectly, with any person,
whereby the Company shall sell or transfer any property, whether now owned or
hereafter acquired, used or useful in their respective businesses, in connection
with the rental or lease of the property so sold or transferred or of other
property which the Company intends to use for substantially the same purpose or
purposes as the property so sold or transferred.
Section 4.6. TRANSACTIONS WITH INSIDERS. Except for the Operating Lease
and the Maintenance Services Contract or as may be required or permitted
pursuant to the Ground Lease or operating lease, directly or indirectly
purchase, acquire or lease any property from, or sell, transfer or lease any
property to, any general or limited partner, stockholder, director, officer,
agent or employee of the Company or any Claridge Company or any relative
thereof, or any person in which any one or more of such partners, stockholders,
directors, officers, agents or employees have directly or indirectly in the
aggregate more than a 5% beneficial interest ("insiders"), on terms less
favorable to the Company or such Claridge Company than those that might be
obtained by persons not so related to such insiders, provided, however, that the
foregoing shall not prohibit complimentary food, room, beverages or
entertainment furnished to insiders in the ordinary course of business.
Section 4.7. TRANSACTIONS WITH AFFILIATES. Except for the Ground Lease,
Operating Lease and Maintenance Services Contract or as may be required or
permitted thereunder, directly or indirectly purchase, acquire or lease any
property from, or sell, transfer or lease any property to, or enter into any
other transaction with, any Affiliate of the Company or any Claridge Company, or
any relative thereof, except on terms that are no less favorable to the Company
or such Claridge Company as terms available from persons who are not Affiliates.
Section 4.8. COMPLIANCE WITH ERISA.
(a) Terminate employee benefit plans maintained by the Company, if any,
so as to incur any material liability to the Pension Benefit Guaranty
Corporation established pursuant to ERISA; allow or suffer to exist any
prohibited transaction involving any of such employee benefit plans or any trust
created thereunder which would subject the Company to a material tax or penalty
on prohibited transactions imposed under Code Section 4975 or ERISA; fail to pay
to any such employee benefit plan or to any multiemployer plan within the
meaning of Section 3(37) of ERISA any material contribution which it is
obligated to pay under the terms of such plan; or allow or suffer to exist any
occurrence of a reportable event, or any other event or condition, which
presents a material risk of termination by the Pension Benefit Guaranty
Corporation of any such employee benefit plan if such Termination would result
in any material liability of the Company to the Pensions Benefit Guaranty
Corporation.
(b) As used in this ss. 4.8, the terms "employee benefit plans" and
"reportable event" shall have the respective meanings assigned to them in ERISA,
and the terms "prohibited transaction" shall have the meanings assigned to it in
Code Section 4975 and ERISA; provided, however, that the term "employee benefit
plan" shall not include any "multiemployer plan".
Section 4.9. AMENDMENT OF CERTAIN AGREEMENTS. Except as otherwise
provided herein, the Company shall not amend the First Mortgage, Second
Mortgage, Limited Partnership Agreement or the operating Lease or Ground Lease
(except as required by their terms or pursuant to the Casino Expansion
Agreement), without the prior written consent of the Lender, which consent shall
not be unreasonably withheld, any amendment thereto without such consent being
null and void.
<PAGE>
Section 4.10. RENTAL OBLIGATIONS. The Company shall not incur, create,
assume or permit to exist, in respect of leases, including, without limitation,
Capitalized Lease obligations, of real or personal property, rental obligations
or other commitments thereunder, or make any direct or indirect payment, whether
as rent or otherwise, for fixed or minimum rentals, percentage rentals, property
taxes or insurance premiums, in any calendar year in the aggregate in excess of
the sum of One Million and 00/100 ($1,000,000.00) Dollars, plus an amount equal
to Fifty Thousand and 00/100 ($50,000,000) Dollars times the number of calendar
years elapsed since the Closing Date; provided, however, that the foregoing
limitation of this Section 4.10 shall not apply to obligations or other
commitments under (a) leases (which may be Capitalized Lease Obligations) for
(i) data processing equipment, (ii) telephone equipment, (iii) shuttle buses or
(iv) advertising signs, entered into in connection with the operation of the
Claridge Hotel and Casino, (b) leases, including, without limitation,
Capitalized Lease Obligations, which are either (i) for a term of one (1), year
or less, or (ii) cancellable by the Company on not more than sixty (60) days'
notice, or (c) the Ground Lease or Operating Lease.
Section 4.11. EXPANSION. The Company shall not borrow any funds or
acquire property in connection with, or commence construction for, any expansion
of the Claridge Hotel and Casino, without first providing or causing to be
provided to the Lender such agreements, documents and other writings, including
without limitation mortgages, security agreements, title reports, opinions of
counsel and evidence of insurance, in each case in form, scope and substance
reasonably satisfactory to the Lender, as may be requested by the Lender, in
order to create, perfect and preserve a lien on and security interest in any and
all real and personal property acquired or to be acquired in connection with
such expansion which would not otherwise become subject to the Wraparound
Mortgage, which security interest and lien shall be subject only to the First
Mortgage (or any replacement, renewal or refinancing thereof), the Second
Mortgage and any security interest and lien granted in connection with an
expansion of the Claridge Hotel and Casino pursuant to the Casino Expansion
Agreement.
SECTION 5. DEFAULTS AND REMEDIES.
Section 5.1. EVENTS OF DEFAULTS. If any one or more of the following
events (herein called "Events of Default") shall occur for any reason whatsoever
(and whether such occurrence shall be voluntary or involuntary or come about or
be effected by operation of law or pursuant to or in compliance with any
judgment, decree or order of any court or any order, rule or regulation of any
administrative governmental body), that is to say:
(a) if default shall be made in the due and punctual payment of the
principal of the Notes, when and as the same shall become due and payable,
whether at maturity or at a date fixed for prepayment pursuant to Section 2 or
by acceleration or otherwise and such default shall continue for five (5)
Business Days, unless and for so long as the Company suspends payment of any
installment of interest or principal under the Notes as permitted pursuant to
Section 2.11 hereof;
(b) if default shall be made in the due and punctual payment of any
installment of interest on the Notes, when and as such interest installment
shall become due and payable and such default shall continue for five (5)
Business Days;
(c) if default shall be made in the performance or observance of, or
shall occur under, any covenant, agreement or provision contained in this
Agreement or in any other Security Instrument or if any such instrument or
document shall terminate or become void or unenforceable without the written
consent of the Lender and such default, termination, voidness or
unenforceability is not capable of cure or if capable of cure is not cured
within twenty (20) Business Days after notice of same is given by the Lender to
the Company;
(d) if the Company shall default in the payment of any principal,
interest or premium with respect to any indebtedness of such person for borrowed
money or any obligation which is the substantive equivalent thereof (including,
without limitation, obligations under conditional sales contracts, finance
leases and the like) or under any agreement or instrument under or pursuant to
which any such indebtedness or obligation may have been issued, created, assumed
<PAGE>
or guaranteed by the Company and such default shall continue for more than the
period of grace, if any, therein specified, or if any such indebtedness or
obligation shall be declared due and payable prior to the stated maturity
thereof and, in any case, such default shall have a materially adverse impact on
the Company;
(e) if any representation or warranty or any other statement of fact
herein or in any writing, certificate, report or statement at any time furnished
to the Lender pursuant to or in connection with this Agreement, the Security
Instruments or otherwise, shall be false or misleading in any material respect;
(f) if the Company shall generally not be paying its debts as they
become due; file a petition or seek relief under or take advantage of any
insolvency law; make an assignment for the benefit of its creditors; commence a
proceeding for the appointment of a receiver, trustee, liquidator, custodian or
conservator of itself or of the whole or substantially all of its property; file
a petition or an answer to (and admitting the allegations made in) a petition
under any chapter of the Bankruptcy Reform Act of 1978, as amended (11 U.S.C.
ss. 101 et seq.); or file a petition or seek relief for the Company, or take
advantage of any other similar law or statute of the United States of America,
any state thereof or any foreign country;
(g) if a court of competent jurisdiction shall enter an order, judgment
or decree appointing or authorizing a receiver, trustee, liquidator, custodian
or conservator of the Company or of the whole or substantially all of the
property of any thereof, or enter an order for relief against the Company in any
case commenced under any chapter of the Bankruptcy Reform Act of 1978, as
amended, or grant relief under any other similar law or statute of the United
States of America, any state thereof or any foreign country; or if, under the
provisions of any law for the relief or aid of debtors, a court of competent
jurisdiction or a receiver, trustee, liquidator, custodian or conservator shall
assume custody or control or take possession of the Company or of the whole or
substantially all of its property; or if there is commenced against the Company
any proceeding for any of the foregoing relief or if a petition, is filed
against the Company under any chapter of the Bankruptcy Reform Act of 1978, as
amended, or under any other similar law or statute of the United States of
America or any state thereof or any foreign country and such proceeding or
petition remains undismissed for a period of 60 days; or if the Company by any
act indicates its consent to, approval or acquiescence in any such proceeding or
petition; or
(h) if there shall occur the filing of a lien against the Claridge
Hotel and Casino, or any part thereof, the payment and discharge of which shall
be required in accordance with Section 3.2 hereof;
(i) if any judgment against the Company or any attachment or execution
against any of its property for any amount in excess of $500,000 remains unpaid,
unstayed and undismissed for a period of more than forty-five (45) days;
(j) if any license, permit or certificate of the Company necessary for
the operation, use or occupancy of the Claridge Hotel and Casino as a hotel and
casino is denied or revoked or terminated or if the Company fails to maintain
itself as a duly organized and validly existing limited partnership under the
laws of the state of New Jersey; or
(k) if the Ground Lease shall be terminated;
then and in any such event, and at any time thereafter, if such or any other
Event of Default shall then be continuing the Lender may, at its option, declare
the Indebtedness to be due and payable, whereupon the maturity of the
Indebtedness shall be accelerated and the same, and all Interest accrued
thereon, shall forthwith become due and payable without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived,
anything contained herein or in the Note to the contrary notwithstanding.
Section 5.2. SUITS FOR ENFORCEMENT. In case any one or more Events of
Default shall occur and be continuing, the Lender may proceed to protect and
enforce its rights or remedies either by suit in equity or by action at law, or
both, whether for the specific performance of any covenant, agreement or other
provision contained herein, in the Note or in any other Security Instrument, or
to enforce the payment of the Note or any other legal or equitable right or
remedy.
<PAGE>
Section 5.3. RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein
conferred upon the Lender is intended to be exclusive of any other right or
remedy contained herein, in the Notes or in any other Security Instrument, and
every such right or remedy shall be cumulative and shall be in addition to every
other such right or remedy contained herein and therein or now or hereafter
existing at law or in equity or by statute, or otherwise.
Section 5.4. RIGHTS AND REMEDIES NOT WAIVED. No course of dealing
between the Company and the Lender or any failure or delay on the part of the
Lender in exercising any rights or remedies hereunder shall operate as a waiver
of any rights or remedies of the Lender and no single or partial exercise of any
rights or remedies hereunder shall operate as a waiver or preclude the exercise
of any other rights or remedies hereunder.
SECTION 6. REPRESENTATIONS AND WARRANTIES.
In order to induce the Lender to enter into this Agreement and to make
the Loan as herein provided for, the Company makes the following representations
and warranties which shall survive the execution and delivery of this Agreement
and the Notes:
Section 6.1. PARTNERSHIP STATUS. The Company is a duly organized and
validly existing limited partnership under the laws of the State of New Jersey,
and has the power and authority to own its property and to transact the business
in which it is engaged or presently proposes to engage.
Section 6.2. PARTNERSHIP POWER AND AUTHORITY. The Company has the power
to borrow and to execute, deliver and carry out the terms and provisions of this
Agreement, the Notes and all other Security Instruments, and the Company has
taken or caused to be taken all necessary action (including, but not limited to,
the obtaining of any consent required by the Limited Partnership Agreement) to
authorize the execution, delivery and performance of this Agreement, the
borrowing hereunder, the making and delivery of the Note, and the execution,
delivery and performance of the other Security Instruments.
Section 6.3. NO VIOLATION OF AGREEMENTS. The Company is not in default
under any indenture, mortgage, deed of trust, agreement or other instrument to
which it is a party or by which it may be bound. Neither the execution and
delivery of this Agreement, the Note or any of the other Security Instruments,
nor the consummation of the transactions herein and therein contemplated, nor
compliance with the provisions hereof or thereof will violate any law or
regulation, or any order or decree of any court or governmental instrumentality,
or will conflict with, or result in the breach of, or constitute a material
default under, any indenture, mortgage, deed of trust, agreement or other
instrument to which the Company (except in favor of the Lender or the holders of
the Superior mortgages) is a party or by which it may be bound, or result in the
creation or imposition of any lien, charge or encumbrance upon any of the
property of the Company thereunder, or violate any provision of the Limited
Partnership Agreement.
Section 6.4. BINDING EFFECT. This Agreement, the Notes and each of the
other Security Instruments constitute the legal, valid and binding obligations
of the Company, and are enforceable against the Company in accordance with their
respective terms, except to the extent that the enforceability of such
obligations may be subject to bankruptcy, insolvency, moratorium and other
similar laws affecting the rights of creditors generally.
Section 6.5. NO BURDENSOME AGREEMENTS. The Company is not a party to
any agreement or instrument or subject to any restriction not referenced herein
materially and adversely affecting its operations, business, properties or
financial condition.
<PAGE>
Section 6.6. NO LITIGATION. There are no actions, suits or proceedings
pending, or to the knowledge of the Company threatened, against or affecting the
Company before any court, arbitrator or governmental or administrative body or
agency which, if adversely determined, would result in any material adverse
change in the business, operations, properties or assets or in the condition,
financial or otherwise, of the Company. The Company is not in default in any
material respect under any applicable statute, rule, order, decree or regulation
of any court, arbitrator or governmental body or agency having jurisdiction over
the Company.
Section 6.7. GOOD TITLE TO PROPERTIES. The Company has good and
marketable title to all its property and assets reflected on its projected
Financial Statements or acquired subsequent to the respective dates thereof,
subject to no liens, mortgages, pledges, security interests, encumbrances or
charges of any kind, except the Permitted Exceptions or as would otherwise be
permitted under the provisions of this Agreement.
Section 6.8. TRADEMARKS, PATENTS, ETC. The Company possesses all the
trademarks, trade names, copyrights, patents, licenses, or rights in any
thereof, adequate for the conduct of its business as now conducted and presently
proposed to be conducted, without conflict with the rights or claimed rights of
others. No trademarks owned by or licensed to the Company is registered in the
United States Patent and Trademark Office.
Section 6.9. GOVERNMENTAL ACTION. No action of, or filing with, any
governmental or public body or authority (other than normal reporting
requirements, filing of financing statements under the Uniform Commercial Code,
recording of the Second Mortgage or obtaining of any governmental consents,
licenses or permits pursuant to the Act, all of which have been made or
obtained) is required to authorize, or is otherwise required in connection with,
the execution, delivery and performance of this Agreement, the Note, or any of
the other Security Instruments.
Section 6.10. DISCLOSURE. Neither the Schedules hereto, nor any
certificate, statement, report or other document furnished to the Lender by the
Company in connection herewith or in connection with any transaction
contemplated hereby, nor this Agreement contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements contained therein not misleading.
Section 6.11. REGULATION U. The Company does not own any "margin stock"
as such term is defined in Regulation U, as amended (12 C.F.R. Part 221) issued
by the Board of Governors of the Federal Reserve System (the "Board"). None of
the proceeds of the Loan will be used, directly or indirectly, for the purpose
of purchasing or carrying any margin stock or for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase or carry
margin stock or for any other purpose which might constitute any of the loans
under this Agreement a "purpose credit" within the meaning of said Regulation U
or Regulation X (12 C.F.R. Part 224) of the Board. Neither the Company nor any
agent acting in its behalf has taken or will take any action which might cause
this Agreement or any of the other Security Instruments to violate any
regulation of the Board or to violate the Securities Exchange Act of 1934.
Section 6.12. INVESTMENT COMPANY. The Company is not an "investment
company", or an "affiliated person" of, or "Promoter" or "Principal underwriter"
for, an "investment company", as such terms are defined in the Investment
Company Act of 1940, as amended (15 U.S.C. ss. 80a-1, et seq.) The acquisition
of the Note by the Lender, the application of the proceeds and repayment thereof
by the Company and the performance of the transactions contemplated by this
Agreement will not violate any provision of said Act, or any rule, regulation or
order issued by the Securities and Exchange Commission thereunder.
SECTION 7. PAYMENT OBLIGATIONS OF LENDER
Section 7.1. PAYMENT OF THE SUPERIOR MORTGAGES. The Lender agrees to
pay to the holders of the Superior Mortgages the unpaid principal balance
thereof, together with all interest thereon, as and when required by the terms
of the Superior Mortgages and, in the case of any prepayment permitted
thereunder and hereunder 5 days after receipt from the Company. All such
payments (other than optional prepayments) shall be made before the expiration
of the applicable grace periods provided for such payments as contained in the
Superior Mortgages.
<PAGE>
Notwithstanding the foregoing, the obligation of the Lender to make the
payments of principal and interest as and when due under the Superior Mortgages
is conditioned upon the following:
(i) the Company shall have made timely payment of all installments of
principal and interest due under the Wraparound Note and the Wraparound
Mortgage, and the Company shall not be in default under any other
provision of the Wraparound Note or the Wraparound Mortgage, which can
be complied with by the payment of monies; provided, however, the
suspension by the Company of any payment on the Notes pursuant to
Section 2.11 hereof shall not suspend the Lender's obligation to make
payments of princpal and interest as and when due; and
(ii) the Company shall not have received any notice of a default under
any of the terms of either Superior mortgage, exclusive of those
provisions dealing with payments of principal and interest due
thereunder.
The Lender does not assume any of the other obligations under the
Superior Mortgages.
Any and all expenses, including but not limited to, title company
charges, recording and filing fees, legal fees of the attorneys for the holder
of the Superior Mortgages and any tax that may be hereafter imposed by any
taxing authority in connection with the compliance by the Lender with the
provisions hereof dealing with the payments made or to be made to the holders of
the Superior Mortgages shall be paid promptly by the Company upon demand
therefor by the Lender.
Section 7.2. MANDATORY PREPAYMENTS OF THE SUPERIOR MORTGAGES. In the
event the unpaid principal balance of either of the Superior Mortgages is
reduced by the holder thereof, applying insurance proceeds or condemnation
awards in reduction of its principal sum, so that the obligations of the Lender
to pay to either holder of the Superior Mortgages the unpaid principal balance
thereof as hereinbefore provided is similarly reduced then and in such event the
Lender agrees that the Company's obligation to pay the total indebtedness to the
Lender under the Wraparound Note shall be likewise reduced by an equivalent
amount to be deducted from the final payments to be made by the Company to the
Lender in the inverse order of their due date.
Section 7.3. OFFSET. If the Lender shall default in making any required
payment of principal or interest under the Superior Mortgages, the Company shall
have the right to advance the funds necessary to cure such default, and all
funds so advanced by the Company, together with interest thereon at the rate set
forth in Section 2.4 shall be credited against the next installments of interest
and principal due under the Wraparound Note.
Section 7.4. NOTICES BY LENDER. The Lender agrees to send to the
Company, promptly after receipt thereof, copies of any notices received by it
from the holders of the Superior Mortgages. In addition, the Lender agrees to
send to the Company, at the time the Lender makes each payment provided herein
to be made by the Lender to the holders of the Superior Mortgages, an advice
that such payment has been made; a copy of the holder's check will suffice.
SECTION 8. MISCELLANEOUS.
Section 8.1. COLLECTION COSTS. In the event that the Lender shall
retain or engage an attorney or attorneys to collect or enforce or protect its
interests with respect to this Agreement, or any other Security Instrument, or
to protect the rights of any holder or holders with respect thereto, the Company
shall pay all of the costs and expenses of such collection, enforcement or
protection, including reasonable attorneys' fees, and the Lender or the holder
of Notes, as the case may be, may take judgment for all such amounts, in
addition to the unpaid principal balance of the Notes and accrued Interest
thereon.
<PAGE>
Section 8.2. MODIFICATION AND WAIVER. No modification or waiver of any
provision of the Notes or of this Agreement and no consent by the Lender to any
departure therefrom by the Company shall be effective unless such modification
or waiver shall be in writing and signed by a duly authorized signatory of the
Lender, and the same shall then be effective only for the period and on the
conditions and for the specific instances and purposes specified in such
writing. No notice to or demand on the Company in any case shall entitle the
Company to any other or further notice or demand in similar or other
circumstances.
Section 8.3. NEW JERSEY LAW. The Notes and this Agreement shall be
construed in accordance with and governed by the local laws of the State of New
Jersey applicable to contracts executed and to be performed in such State.
Section 8.4. NOTICES. All notices, requests, demands or other
communications provided for herein shall be in writing and shall be deemed to
have been given when sent by registered or certified mail, return receipt
requested, or when personally delivered, addressed, as the case may be, to the
Lender at the Claridge Hotel and Casino, Indiana Avenue and the Boardwalk,
Atlantic City, New Jersey 08401, Attention: President or to the Company at
Indiana Avenue and the Boardwalk, Atlantic City, New Jersey 08401, Attention:
Managing.General Partner, or to such other person or address as either party
shall designate to the other from time to time in writing forwarded in like
manner.
Section 8.5. [Intentionally left blank]
Section 8.6. FEES AND EXPENSES. The Company shall pay on demand all
out-of-pocket costs, fees and expenses incurred by the Lender in connection with
the transactions contemplated hereunder.
Section 8.7. STAMP OR OTHER TAX. Should any stamp or excise tax become
payable in respect of this Agreement, or the Notes, or any modification hereof
or thereof, the Company shall pay the same (including interest and penalties, if
any) and shall hold the Lender harmless with respect thereto.
Section 8.8. WAIVER OF JURY TRIAL AND SETOFF. The Company hereby waives
trial by jury in any litigation in any court with respect to, in connection
with, or arising out of this Agreement, or the Notes, or any other Security
Instrument or the validity, protection, interpretation, collection or
enforcement thereof, or any other claim or dispute howsoever arising, between
the Company and the Lender, and the Company hereby waives the right to interpose
any setoff or counterclaim or cross-claim in connection with any such
litigation, irrespective of the nature of such setoff, counterclaim or
cross-claim, except to the extent that the failure so to assert any such
set-off, counterclaim or cross-claim would preclude the prosecution if the same.
Section 8.9. CAPTIONS. The captions of the various sections and
paragraphs of this Agreement have been inserted only for the purposes of
convenience; such captions are not a part of this Agreement and shall not be
deemed in any manner to modify, explain, enlarge or restrict any of the
provisions of this Agreement.
Section 8.10. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
Section 8.11. BENEFIT OF AGREEMENT. This Agreement shall be binding
upon and inure to the benefit of the Company and the Lender and their respective
successors and assigns, and all subsequent holders of the Notes.
<PAGE>
Section 8.12. COUNTERPARTS. This Agreement may be executed by the
parties hereto individually or in any combination, in one or more counterparts,
each of which shall be an original and all of which shall together constitute
one and the same agreement.
Section 8.13. OBLIGATIONS NON-RECOURSE. Neither the Company nor its
partners shall be personally liable to the Lender for (a) the non-payment of any
principal of or interest on the Notes, (b) the non-payment of any other amount
owing to the Lender under this Agreement, or (c) damages arising out of the
failure to perform any obligation under this Agreement, the Lender's recourse
being expressly limited to the Collateral; provided, however, that nothing
contained in this Agreement shall limit, restrict or impair the rights of the
Lender to accelerate the maturity of the Notes and all other Indebtedness upon
the occurrence of an Event of Default, to bring suit and obtain a judgment
against the Company or its general partners on the Notes and such other
Indebtedness (so long as the Company or its partners shall not have any personal
liability upon any such judgment except to the extent of its interest in the
Collateral and the satisfaction thereof shall be limited to the Collateral) or
to exercise all rights and remedies provided in this Agreement or otherwise to
realize upon the Collateral. This ss.8.13 shall not be deemed to be a waiver by
the Lender of any claims in the nature of fraud or deceit arising under or in
connection with this Agreement.
IN WITNESS WHEREOF, the Company and the Lender have caused this
Agreement to be duly executed as of the day and year first above written.
ATLANTIC CITY BOARDWALK
ASSOCIATES, L.P.
By /s/ Robert K. Swanson
--------------------------------
Name: Robert K. Swanson
Title: Managing General Partner
[Corporate seal] THE CLARIDGE AT PARK PLACE,
INCORPORATED
By /s/ William M. Dougall
-------------------------------
Name: William M. Dougall
Title: President
<PAGE>
Exhibit 2.2
-----------
$127,000,000 October 31, 1983
WRAPAROUND MORTGAGE NOTE
New York, New York
FOR VALUE RECEIVED, the undersigned, ATLANTIC CITY BOARDWALK
ASSOCIATES, L.P., a New Jersey limited partnership with an address at The
Claridge Hotel and Casino, Indiana Avenue and the Boardwalk, Atlantic City, New
Jersey 08401 (the "Borrower") promises to pay to the order of THE CLARIDGE AT
PARK PLACE, INCORPORATED, a New Jersey corporation with an address at The
Claridge Hotel and Casino, Indiana Avenue and the Boardwalk, Atlantic City, New
Jersey 08401, or its successors and assigns (the "Payee"), at its address at The
Claridge Hotel and Casino, Indiana Avenue and the Boardwalk, Atlantic City, New
Jersey 08401, or at such other place as the holder hereof may from time to time
designate in writing, the principal sum of ONE HUNDRED TWENTY-SEVEN MILLION
DOLLARS ($127,000,000) in lawful money of the United States which shall be legal
tender for the payment of all debts, public and private, at the time of payment
together with interest thereon as hereinafter computed from the date hereof
until said principal sum shall have been paid in full, all as more fully
hereinafter set forth.
I. DEFINITIONS.
------------
Terms used herein which are defined in the wraparound mortgage loan
agreement of even date herewith made between Borrower and Payee (the "Loan
Agreement") and not otherwise defined herein shall have the same meanings herein
as in the Loan Agreement.
II. PRINCIPAL AND INTEREST PAYMENTS.
--------------------------------
A. Principal and interest shall be payable as follows:
1. During each Fiscal Year, Borrower shall pay to Payee Basic Interest
in monthly installments at the time and in the manner provided in the Loan
Agreement.
2. On the Maturity Date, the Cumulative Deferred Interest shall be due
and shall be paid.
3. Mandatory payments of principal shall be due and shall be paid as
follows:
(i) On the last day of each month in the Fiscal Year set
forth in Column I below, one-twelfth of the corresponding amount set
forth in Column II below:
Column I Column II
-------- ---------
(Fiscal Year) (Principal Payment)
1988 $1,000,000
1989 3,000,000
1990 5,000,000
1991 5,000,000
1992 6,000,000
1993 7,000,000
(ii) On December 31, 1993, the sum of $53,000,000.
<PAGE>
4. On the Maturity Date, Borrower shall pay to Payee the following
amounts which shall then be due and payable:
(i) accrued but unpaid Basic Interest; plus
(ii) the outstanding principal balance of the Loan; plus
(iii) any other payments due from Borrower to Payee.
Except as permitted pursuant to the Loan Agreement, Borrower shall not
be permitted to prepay the Loan or any interest.
In the event this Note or any part of the indebtedness evidenced hereby
be collected by law or through or under advice from any attorney at law, the
holder hereof shall be entitled to collect all costs of collection, including
reasonable attorney's fees.
This Note is secured by an Expandable Wraparound Mortgage of property
located in Atlantic County, New Jersey and by the other Security Instruments.
On default by Borrower in any payment due pursuant to this Note, the
Wraparound Mortgage or the Loan Agreement and the failure of Borrower to make
suph payment within the time provided in this Note, the Wraparound Mortgage or
the Loan Agreement, including any applicable grace period provided in the
Wraparound Mortgage or the Loan Agreement, or on default by Borrower in the
performance of any of the terms or conditions of the Loan Agreement, the
Wraparound Mortgage or any of the other Security Instruments, all of the terms
and conditions of which are incorporated herein by reference, beyond any period
provided therein for the curling thereof, the whole Loan and accrued interest
shall, at the option of the holder hereof, to be exercised at any time
thereafter, become due and payable at once, notice of the exercise of such
option being hereby expressly waived.
Any payment of the Loan or interest not paid when due shall bear
interest from the due date thereof until paid at the rate set forth in Section
2.4 of the Loan Agreement.
This Note shall be construed and enforced in accordance with the laws
of the State of New Jersey.
All parties to this Note, and any endorsers, sureties and guarantors
hereof or hereon, hereby waive presentment for payment, demand, protest, notice
of nonpayment or dishonor and of protest ad (except as otherwise provided in the
Loan Agreement) any and all other notices and demands whatsoever, and agree to
remain bound until the Loan and interest are paid in full notwithstanding any
extensions of time for payment which may be granted, even thought the period of
extension be indefinite, and notwithstanding any inaction by, or failure to
assert any legal right available to, the holder of this Note.
Neither the Borrower nor its partners shall be personally liable to the
Payee for (a) the non-payment of any principal of or interest on this Note, (b)
the non-payment of any other amount owing to the Payee under this Note or the
Loan Agreement, or (c) damages arising out of the failure to perform any
obligation under this Agreement, the Payee's recourse being expressly limited to
the Collateral Note, the Wraparound Mortgage or the Loan (as such quoted term is
defined in the Loan Agreement).
<PAGE>
IN WITNESS WHEREOF, this Note has been executed by Borrower the day,
month and year first above written.
ATLANTIC CITY BOARDWALK
ASSOCIATES, L.P.
By:
----------------------------
Name: Robert K. Swanson
Title: Managing General Partner
<PAGE>
SCHEDULE 4.1
EXISTING INDEBTEDNESS
---------------------
1. $5,000,000 loan made by DEWNJ to the Operating Company with a maturity date
of 10/31/83.
2. $5,000,000 working capital loan made by DEWNJ (or DEW) to the Operating
Company with a maturity date of December 31, 1984.
3. $500,000 offering expense loan made by DEWNJ (or DEW) to the Operating
Company with a maturity date of December 31, 1989.
4. Morgan Guaranty Trust Company of New York loan to the Limited Partnership in
connection with the Investor Notes (as defined in the Limited Partnership
Agreement).
5. First National State Bank slot loan to the Company.
6. Connecticut Bank and Trust, N.A. loan to the Company.
7. Citibank, N.A. loan to the Company.
<PAGE>
EXHIBIT 10(h)
EXPANSION OPERATING LEASE AGREEMENT
EXPANSION OPERATING LEASE AGREEMENT, dated as of the 17th day of March,
1986, by and between ATLANTIC CITY BOARDWALK ASSOCIATES, L.P., a New Jersey
limited partnership having its principal place of business at The Claridge Hotel
and Casino, Indiana Avenue and the Boardwalk, Atlantic city, New Jersey 08401
("Lessor"), and THE CLARIDGE AT PARK PLACE, INCORPORATED, a New Jersey
corporation having its principal place of business at The Claridge Hotel and
Casino, Indiana Avenue and the Boardwalk, Atlantic City, New Jersey 08401
("Lessee").
W I T N E S S E T H:
RECITALS
1. Claridge Limited, a New Jersey limited partnership, and Lessor
entered into that certain Ground Lease, dated as of October 31, 1983 (as
amended or modified, the "Original Ground Lease"), with respect to certain land
underlying the Claridge Hotel & Casino and located in the City of Atlantic City,
County of Atlantic, State of New Jersey (the "Original Claridge Land").
2. Lessor is the fee owner of the buildings and the improvements
located on and situated in the Original Claridge Land (the "Original Claridge
Improvements").
3. Lessor and Lessee entered into that certain Operating Lease, dated
as of October 31, 1983 (the "Original Operating Lease"), whereby Lessor leased
to Lessee its interest in the Original Claridge Improvements and subleased to
Lessee its interest in the Original Claridge Land.
4. Del E. Webb New Jersey, Inc. ("DEWNJ") has acquired in fee title
from the City of Atlantic City certain air space over the street known as Park
Place and located in the City of Atlantic City, County of Atlantic, State of New
Jersey.
5. DEWNJ is concurrently herewith leasing such air space to Lessor to
enable Lessor to construct and maintain certain buildings and other improvements
in such air space for the purpose of expanding the original Claridge
Improvements, all as provided in the Air Rights Lease (as hereinafter defined).
6. Lessor is presently completing construction of such expansion
improvements.
7. Lessor is willing to lease to Lessee its interests in such expansion
improvements and sublease its interests in such air space to Lessee, all as
hereinafter provided.
NOW, THEREFORE, in consideration of the terms and covenants herein
contained and the consideration herein stated, the parties hereto covenant and
agree as follows:
ARTICLE 1
GRANT, PREMISES, TERM
1.1 Lessor, in consideration of the premises and of the rents
hereinafter reserved and of the covenants, agreements and conditions herein
contained to be kept and performed on the part of Lessee, does hereby lease and
demise to Lessee and Lessee does hereby hire and take from Lessor, that certain
property, situate, lying and being in the City of Atlantic City and County of
Atlantic, State of New Jersey, consisting of the following:
<PAGE>
A. The air space more particularly described in Exhibit A annexed
hereto and made a part hereof (the "Air Space") in which Lessor has a lessee's
interest pursuant to that certain air rights lease agreement, of even date
herewith, by and between DEWNJ, as lessor, and Lessor, as lessee (the "Air
Rights Lease"), for a term of approximately Ninety-Five (95) years commencing on
the 17th day of March, 1986 and expiring on the 30th day of September, 2081,
unless sooner terminated as therein provided;
B. All of Lessor's right, title and interest in and to all
rights-of-way, easements and others appurtenances to the Air Space, including,
but not limited to, that certain Easement Agreement between the City of Atlantic
City and DEWNJ (the "Easement Agreement"); and
C. The buildings, structures and improvements located within the Air
Space which are presently under construction by Lessor and any and all
equipment, furniture, fittings, fixtures and articles of personal property
affixed or attached to, installed or placed in or upon and to be used for or
usable in any present or future enjoyment, occupancy or operation thereof as a
hotel and casino or otherwise, whether located thereon or not and any and all
replacements and substitutions thereof and additions thereto including, but not
limited to, any all air conditioning machinery and equipment, elevators,
escalators, furniture and equipment, communications equipment and systems, fire
protection and sprinkler equipment and systems, surveillance equipment and
systems, dishwashers, ranges, cooking apparatus, refrigerators and mechanical
kitchen equipment, laundry equipment, partitions, vaults, safes, fire
extinguishing equipment, parts and supplies, chairs, tables, beds, bed springs,
mattresses, couches, lamps, waste baskets, desks, cabinets, curtains, draperies,
carpeting, chandeliers, pictures, radios, television sets, and other furniture
and furnishings for the lobby, halls, lavatories and other public rooms and
places and for the bedrooms, baths and other private rooms, furniture and
furnishing for the offices, typewriters, dictation equipment, maintenance and
engineering tools, materials and supplies, paints, uniforms of engineering and
maintenance personnel and all supplies used in connection with the maintenance
and repair thereof (collectively the "Expansion Improvements").
D. Any Expansion FF&E Replacements (as hereinafter defined) which may
be procured by Lessor pursuant to Article 6.
The foregoing items are sometimes hereinafter collectively referred to
as the "Property".
The Property is leased subject to the liens, encumbrances and other
exceptions set forth in Exhibit B annexed hereto and made a part hereof.
1.2 The initial term of this Lease shall commence on the date hereof
and shall end on September 30, 1998 (the "Primary Term"). Thereafter, subject to
the terms and conditions hereof and if and for so long as no event of default
shall have occurred hereunder and be continuing beyond any applicable grace
period on the dates herein specified for the expiration of the Primary Term or
the first two (2) Extended Terms (as defined below), Lessee shall have the right
and option to extend this Lease on the same terms and conditions herein set
forth (excluding, however, any further right of renewal and on such rental terms
as are set forth in Section 2.1 hereof) for three (3) consecutive terms of ten
(10) years each (the "Extended Terms") unless this Lease shall be sooner
terminated pursuant to the terms hereof and provided that (a) Lessee shall
concurrently therewith exercise its option to extend the term of the Original
operating Lease for such period, and (b) any exercise by Lessee of its option to
extend the term of the original Operating Lease shall be deemed to be the
exercise by Lessee of its option to likewise extend the term of this Lease. Each
Extended Term shall commence on the day immediately succeeding the expiration
date of the immediately preceding term, and shall end at midnight on the day
immediately preceding the tenth anniversary of the first day of such term.
Lessee may exercise each such option to extend this Lease by giving written
notice to Lessor at least nine (9) months prior to the end of the then term of
this Lease.
In the case of any of the renewal options set forth in this Section
1.2, the giving of notice of renewal shall automatically extend this Lease for
an Extended Term, and no instrument of renewal need be executed, provided that
<PAGE>
no Extended Term shall take effect unless this Lease is in full force and effect
immediately prior to the commencement thereof. If Lessee fails to give the
required notice of renewal, this Lease shall automatically terminate at the end
of the then term of this Lease and Lessee shall have no further option to extend
this Lease. If Lessee does not exercise any option in a timely manner, then
Lessor shall have the right during the remainder of the term of this Lease to
advertise the availability of the Property for reletting. "Term" and the phrases
"term of this Lease" and "term hereof" shall mean the Primary Term and any
Extended Terms with respect to which the right to extend has been exercised.
1.3 Lessor shall promptly cause the construction of the Expansion
Improvements in accordance with the plans and specifications heretofore
submitted and approved by Lessee and more fully described in that certain
Standard Form of Agreement Between Owner and Contractor, dated January 6, 1986,
between Lessor and Del E. Webb Construction Services, Co., a copy of which
contract has been submitted to and approved by Lessee.
1.4 Lessor, in furtherance of the granting clauses contained in Section
1.lC hereof, shall promptly upon completion of the Expansion Improvements
purchase or provide to Lessee for lease pursuant to the terms hereof, such
furniture, fixtures and furnishings and equipment relating to the Property as
may be requested by Lessee provided however that the amount of same shall not,
when added to the cost of the Expansion Improvements, exceed the Expansion Loan
Balance (as hereinafter defined) (the "Initial Expansion FF&E").
ARTICLE 2
RENT
2.1 Lessee agrees to pay Lessor in lawful money of the United States,
at Lessor's address set forth above, or at such other address or to such other
person as Lessor from time to time may designate, fixed rent for each calendar
year ("Basic Rent") for the Property commencing on the first day of the month
immediately succeeding the completion of the Expansion Improvements, such
completion to be evidenced by the completion of construction and the opening of
the Expansion Improvements to the public for use as a casino (the "Opening
Date"). Basic Rent shall be payable as follows:
(a) From the Opening Date to December 31, 1986, Three Million Nine
Hundred Fifty Thousand Dollars ($3,950,000), per annum (the "Base Amount"), pro
rata. The Base Amount shall be adjusted as of the Opening Date as follows: (i)
the outstanding principal balance of the Expansion Wraparound Note (as defined
in the Expansion Wraparound Mortgage) shall be determined as of the Opening Date
(the "Expansion Loan Balance"), (ii) the Base Amount shall be increased by
Seventeen and 29/1000 cents ($.1729) (the "Adjustment Amount") for each One
Dollar ($1.00) the Expansion Loan Balance exceeds Sixteen Million Eight Hundred
Two Thousand Dollars ($16,802,000) (the "Target Balance"), (iii) the Base Amount
shall be decreased by the Adjustment Amount for each One Dollar ($1.00) the
Expansion Loan Balance is less than the Target Balance, and (iv) the Base Amount
shall be unchanged if the Expansion Loan Balance equals the Target Balance.
Basic Rent for the calendar year 1986 shall be pro-rated in the event the
Opening Date shall occur on a day other than the first day of the month. In the
event the Expansion Loan Balance shall be increased after the Opening Date, but
prior to June 1, 1987, the Base Amount shall be adjusted to reflect such change
in accordance with the foregoing provisions.
(b) For each calendar year beginning with the calendar year beginning
January 1, 1987 through the calendar year beginning January 1, 1998, Basic Rent
(and in 1987, the Base Amount) shall be adjusted, as of the times and in the
manner herinafter set forth:
(i) For the purposes of this Section, the following
definitions shall apply:
(A) The term "Base Year" shall mean the full calendar
year 1985.
<PAGE>
(B) The term "Price Index" shall mean the Consumer
Price Index published by the Bureau of Labor Statistics
of the U.S. Department of Labor, New York -
Northeastern New Jersey for Urban Wage Earners and
Clerical Workers (1967=100), or a successor or
substitute index appropriately adjusted.
(C) The term "Price Index for the Base Year" shall mean
the average of the monthly Price Indexes for each of
the 12 months of the Base Year.
(ii) Effective as of January 1, 1987 and each January
subsequent thereto, there shall be made a cost of living adjustment of
the Basic Rent payable hereunder. The January adjustment shall be based
on such percentage difference between the average monthly Price Index
for the preceding year and the Price Index for the Base Year.
In the event the average monthly Price Index for any calendar year
during the term of this Lease reflects an increase over the Price Index for the
Base Year, then the Basic Rent herein provided to be paid as of the January lst
next following such calendar year (unchanged by any adjustments under this
Section) shall be multiplied by the percentage difference between the Price
Index for such calendar year and the Price Index for the Base Year, and the
resulting sum shall be added to such Basic Rent effective as of January lst next
following; provided, however, that in no event shall the foregoing adjustment
cause the Basic Rent for the calendar year next following to be increased by an
amount greater than two percent (2%) of the Basic Rent for such calendar year.
Said adjusted Basic Rent shall thereafter be payable hereunder, in equal monthly
installments, until it is readjusted pursuant to the terms of this Section.
In the event that the Price Index ceases to use 1967=100 as basis of
calculation, or if a material change is made in the terms or number of items
contained in the Price Index, then the Price Index shall be adjusted to the
figure that would have been arrived at had the manner of computing the Price
Index in effect at the date of this Lease not been so altered. In the event such
Price Index (or a successor or substitute index) is not available, a reliable
governmental or other nonpartisan publication evaluating the information
theretofore used in determining the Price Index shall be used.
No adjustments or recomputations, retroactive or otherwise, shall be
made due to any revision which may later be made in the first published figure
of the Price Index for any month.
(iii) Lessor will cause statements of the cost of living adjustments
provided for in sub-division (ii) to be prepared in reasonable detail and
delivered to Lessee.
(iv) In no event shall the Basic Rent provided to be paid at any time
during the term of this Lease be reduced by virtue of any adjustment made under
this Section 2.1.
(v) Any delay or failure of Lessor, beyond January of any year, in
computing or billing for the rent adjustments hereinabove provided" shall not
constitute a waiver of or in any way impair the continuing obligation of Lessee
to pay such rent adjustments hereunder.
(vi) If the Opening Date shall occur in 1987, the Basic Rent payable
hereunder shall be determined by first adjusting the Base Amount pursuant to the
provisions of this subsection (b) and second by adjusting the amounts so
determined by the adjustment provided for in subsection (a) of this Section. The
Basic Rent payable hereunder during the Primary Term shall be determined
thereafter solely by reference to this subsection (b).
(vii) Basic Rent, as determined above, shall be payable in twelve (12)
equal monthly installments on the first day of the month.
<PAGE>
(c) For each lease year of the Extended Terms commencing October 1,
1998, Basic Rent for each lease year shall be equal to the product of (i) the
average of the weekly auction rates on Federal Reserve Bank of New York offered
United States Treasury Bills with a maturity of twenty-six (26) weeks for the
period covering the first six (6) months of the seven (7) month period
immediately preceding the commencement date of the lease year in question and
(ii) an amount equal to the Expansion Loan Balance increased by the percentage
increase in the Price Index during the period from January 1, 1987 through the
end of the lease year immediately preceding the lease year in question;
provided, however, that for each lease year the amount in this clause (ii) shall
not exceed the Expansion Loan Balance, increased by five percent (5%) per annum,
compounded annually from January 1, 1987 through the end of the lease year
immediately preceding the lease year in question (the "Adjusted Base Amount"):
Notwithstanding the limitation set forth for (ii) above, Basic Rent for
the lease year commencing October 1, 1998 shall not be more than Three Million
Dollars ($3,000,000) nor less than Two Million Five Hundred Thousand Dollars
($2,500,000), and in each lease year thereafter during each of the Extended
Terms, Basic Rent shall not be greater than ten percent (10%) more or less than
Basic Rent for the immediately preceding year.
Basic Rent, as determined above, shall be payable in twelve (12) equal
monthly installments on the first day of the month.
2.2 All amounts which Lessee is required to pay pursuant to this Lease
(other than Basic Rent and amounts payable upon the purchase of Lessor's
Interest in the Property pursuant to Article 16 hereof), together with every
fine, penalty, interest and cost which may be added for non-payment or late
payment thereof, shall constitute additional rent ("Additional Rent"). If Lessee
shall fail to pay any Additional Rent, Lessor shall have all rights, powers and
remedies with respect thereto as are provided herein or by law in the case of
nonpayment of Basic Rent. Any Additional Rent Lessee is obligated to pay
directly to Lessor hereunder shall be paid in lawful money of the United States,
at Lessor's address set forth above, or at such other address or to such other
person as Lessor from time to time may designate.
2.3 Lessee shall pay as Additional Rent hereunder, at the times and in
the amounts required thereby, all rents and other amounts required to be paid by
Lessor, as lessee under the Air Rights Lease. Lessee shall make any such
payments directly to the party or parties entitled to receive the same pursuant
to the terms of the Air Rights Lease, unless Lessor shall request that any such
payments be made to Lessor or to such other person as Lessor may from time to
time designate.
2.4 If any installment of Basic Rent shall not be paid within five (5)
days after its due date, Lessee shall pay to Lessor, on demand, interest at the
rate which is three percent (3%) over the rate of interest announced from time
to time by Del E. Webb Corporation's ("Webb") lead lending bank or, if there is
no such bank, by Morgan Guaranty Trust Company of New York at its main office in
New York for shortterm loans (the "Prime Rate"), from the due date of such
installment until such installment is paid. Lessee shall pay to Lessor, on
demand, interest at such rate on all overdue Additional Rent paid on behalf of
or by Lessor on behalf of Lessee from the date of payment on behalf of or by
Lessor until repaid by Lessee. Lessee shall perform all its obligations under
this Lease at its sole cost and expense. All Basic Rent and Additional Rent
shall be paid to Lessor or in accordance with the terms hereof when due, without
notice or demand and without abatement, reduction or set-off of any amount
whatsoever, except as specifically provided herein.
2.5 Notwithstanding any expiration or termination of this Lease prior
to the date hereinabove set forth for the expiration of the Primary Term or any
Extended Term (the "Lease Expiration Date"), except in the case of a
cancellation by mutual agreement or Lessee's termination as of right or by law,
Lessee's obligation to pay any and all Additional Rent under this Lease shall
continue and shall cover all periods up to the Lease Expiration Date.
<PAGE>
2.6. Any amounts whatsoever paid by Lessee to Lessor, whether
designated by Lessee as being paid pursuant to this Lease or the original
Operating Lease, shall be deemed to be paid by Lessee first on account of
Lessee's obligations under this Lease.
ARTICLE 3
TAXES AND ASSESSMENTS
3.1 Lessee shall, (a) at its own cost and expense, pay and discharge,
or cause to be paid and discharged before any fine, penalty, interest or cost
may be added for nonpayment, all taxes, assessments, sewer rents, water rents
and charges, duties, impositions, license and permit fees, charges for public
utilities of any kind, payments and other charges of every kind and nature
whatsoever, ordinary or extraordinary, foreseen or unforeseen, general or
special (collectively "Impositions"), allocable to the term of this Lease which
shall, pursuant to present-or future law or otherwise, be levied, charged,
assessed or imposed upon, or grow or become due and payable out of or for, or
become or have become a lien on, the Property or any part thereof, or the rents
and income received by Lessee from tenants, occupants, licensees for any use or
occupation of the Property or any part thereof, and such franchises as may be
appurtenant to the use and occupation of the Property and the interest of Lessor
or of Lessee under this Lease (subject, however, to the provisions hereinafter
contained in this Article 3 which relate to the Lessee's right to contest same)
and (b.) reimburse Lessor, promptly upon receipt of evidence of the amount
owing, for any and all taxes or assessments levied, assessed or imposed on
Lessor on account of Basic Annual Rent or Additional Rent, including, without
implied limitation, any such tax or assessment imposed on Lessor by reason of
Lessee's payment, or reimbursement of Lessor for payment, of any Imposition
under this Section 3.1 ("Gross Receipts Taxes"). It is the intention of the
parties hereto that the rents reserved herein shall be received and enjoyed by
Lessor as a net sum free from all Impositions except municipal, state or federal
income taxes assessed against Lessor, municipal, state or federal capital levy,
franchise, estate, succession, inheritance or transfer taxes of Lessor, and any
income, profits or revenue tax, assessment or charge imposed upon rent, as such,
payable by Lessee under this Lease or any tax or charge in replacement or
substitution of the foregoing or of a similar character. Lessee shall not be
required to pay or reimburse Lessor for the payment of any franchise, corporate,
estate, inheritance or transfer tax of Lessor or any income, revenue or profits
tax of Lessor based on its general income or revenues (other than to the extent
Lessee is required to reimburse Lessor for the payment of Gross Receipts Tax),
except to the extent, and only to the extent, such tax is specifically stated in
the legislation or otherwise clearly demonstrated by the legislative history to
be imposed, levied or assessed in substitution for, or in substitution for any
increase to, any other tax, assessment, charge or levy which Lessee is required
to pay or reimburse Lessor for the payment of pursuant to the preceding sentence
of this Section 3.1. Nothing in this Section 3.1 shall require Lessee to pay or
reimburse Lessor for the payment of any tax if Lessee's payment of such tax or
reimbursement of Lessor for the payment of such tax would violate any applicable
law. To the extent Lessor shall have paid real property taxes for any period of
time included within the term of this Lease, Lessee shall reimburse Lessor for
any such taxes applicable to such period of time.
3.2 To the extent Lessee is responsible to reimburse Lessor for the
payment of any Gross Receipts Tax, Lessor shall prepare at its own cost and
expense the required tax return and deliver a copy of same to Lessee for
approval together with such information as may enable Lessee to verify the
accuracy of the tax return (which approval shall not be unreasonably withheld or
delayed) at least thirty (30) days prior to the due date for the payment of such
tax (the "Payment Date"), provided, however, that pursuant to a written request
of Lessor or its accountants not less than sixty (60) days prior to the Payment
Date, Lessee, not less than forty (40) days prior to the Payment Date, shall
provide Lessor with any information which is in Lessee's possession or control
and otherwise unavailable to Lessor which is required for completion of such tax
return. If Lessee does not notify Lessor of its approval or disapproval of such
tax return at least fifteen (15) days prior to the Payment Date, such return
shall be deemed approved hereunder. If Lessee notifies Lessor of its disapproval
of such return and such disapproval shall not be unreasonable (which disapproval
shall contain an explanation of the reasons therefor and a statement of the
necessary changes and corrections [the "Corrections"] to be made), such return
shall be revised accordingly and forthwith resubmitted to Lessee for approval at
least seven (7) days prior to the Payment Date. Lessee shall, at least three (3)
<PAGE>
days prior to the Payment Date, approve such revised return so long as it is
consistent with the Corrections requested by Lessee. If Lessee does not notify
Lessor of its approval or disapproval at least three (3) days prior to the
Payment Date, such return shall be deemed approved hereunder. Following approval
of such return hereunder, Lessee shall prior to the Payment Date pay to Lessor
the portion of the tax for which Lessee is responsible hereunder. If Lessee
shall fail to make such payment to Lessor prior to the Payment Date, Lessee
shall be liable for all fines, penalties, late charges, interest and costs which
may be added by such taxing authority for nonpayment or late payment. If any tax
return filed by Lessor in connection with the foregoing is audited by the
applicable taxing authority, then, in that event (a) Lessor will afford Lessee,
at Lessee's expense, the opportunity to participate with Lessor in any audit
proceedings and (b) Lessee shall pay to Lessor any additional amount determined
to be owing by such taxing authority at least five (5) days prior to the due
date for payment thereof. Lessor and Lessee otherwise agree to cooperate with
one another in supplying information necessary to determine, and in determining,
the responsibility for the payment of Impositions hereunder. Lessor agrees that,
to the extent permissible and consistent with Lessor's tax planning practices,
it will assert all deductions and credits which will result in the greatest
reduction in the amount of, and deferral of payment of, such Impositions.
Failure of the Lessor to perform any of its obligations pursuant to
this Section 3.2 shall in no way affect Lessee's obligations pursuant to this
Lease.
3.3 All Impositions mentioned in this Article 3 shall be paid to the
department, officer or bureau charged with the collection thereof.
3.4 Lessee shall have the right, after prior written notice to Lessor,
to seek to obtain a reduction in the assessed value of the Air Space and the
Expansion Improvements by appropriate proceedings or to contest the validity or
amount of any Imposition, in the name of Lessee or Lessor or both, without cost
or expense to Lessor; provided, however, that, if required by applicable law,
payment of such Imposition shall be made by Lessee in accordance with the
provisions of this Article 3 notwithstanding any such contest. In such event
Lessor shall afford to Lessee such reasonable cooperation as Lessee may request
in effecting such reduction or such contest or attacking such validity. Lessee
agrees to reimburse Lessor promptly upon demand for any expense or liability
incurred by Lessor in connection with any such proceeding. Any tax refund shall
be the property of Lessee to the extent to which it may be based on a payment
made by Lessee.
3.5 Lessor shall have the right (i) to continue to prosecute any real
property tax reduction proceeding presently being prosecuted by Lessor, if any,
and (ii) to initiate any additional real property tax reduction proceedings it
may deem appropriate, in its sole discretion, for any period of time prior to
the date of the commencement of this Lease. Any tax refund obtained in
connection with any such proceedings shall be the property of Lessor.
3.6 Lessor shall have the right to seek, by appropriate proceeding, a
reduction in the assessment of the Air Space and the Expansion improvements for
tax purposes and to prosecute any such action or proceeding theretofore
commenced by Lessee, if such assessed valuation or valuations shall in whole or
in part relate and pertain to any period of time subsequent to the expiration or
termination of the term of this Lease. To the extent to which any tax refund may
be based on a payment made by Lessee or on its behalf and shall not relate to a
period as to which apportionment thereof has been made with Lessor, Lessee shall
be authorized to collect and retain the same.
3.7 An official certificate or statement issued or given by any
federal, state, county or municipal authority, or any department, bureau, board
or officer thereof or of any public utility, showing the existence of any
Imposition, together with interest and penalties thereon, the payment of which
is the obligation of Lessee as herein provided, shall be prima facie evidence
for all purposes of this Lease of the existence, amount and validity of such
Imposition. Within thirty (30) days after the due date of each Imposition Lessee
shall provide Lessor with a copy of a receipt evidencing payment of such
Imposition.
<PAGE>
3.8 Any Imposition relating to a fiscal period of a taxing authority, a
part of which period is included within the term of this Lease and a part of
which is included in a period of time after the expiration or termination of
this Lease, shall be apportioned between Lessor and Lessee, at and as of the
expiration and termination of the term of this Lease. Lessee's obligation to pay
its share of any Imposition relating to a period of time which is included
within the term of this Lease shall survive the expiration and termination of
this Lease.
ARTICLE 4
INSURANCE
4.1 Lessee, at its sole cost and expense, shall keep, or cause to be
kept, the Property insured for the benefit of Lessor, Lessee, the lessor under
the Air Rights Lease and, to the extent required, any mortgagee, during the
Term, against loss or damage by fire and against loss or damage by other risks
now or hereafter embraced by an Extended Coverage policy, in amounts sufficient
to prevent Lessor or Lessee from becoming a co-insurer, but in any event in an
amount not less that the then full replacement cost of Expansion Improvements.
Such full replacement cost shall be determined from time to time, at Lessee's
sole cost and expense (but not more frequently than once every twelve (12)
months), at the request of Lessor, or any mortgagee, by an insurer or by an
appraiser, engineer, architect or contractor designated by Lessee and approved
in writing by Lessor and any mortgagee (such approval-not to be unreasonably
withheld). No omission on the part of Lessor to request any such determination
shall relieve Lessee of any of its obligations under this Article 4.
4.2 Lessee, at its sole cost and expense, but for the benefit of
Lessor, Lessee, the lessor under the Air Rights Lease and, to the extent
required, any mortgagee, shall maintain or caused to be maintained by any
manager of the Property:
A. comprehensive general public liability insurance
against claims for bodily injury, death or property damage occurring on, in or
about the Property, in or about the adjoining streets, property and passageways,
such insurance to afford minimum protection, during the term of this Lease, of
not less than as is customary among prudent operators of hotel casino complexes
under comparable circumstances, with such deductibles or self insurance
retentions as may be reasonably acceptable to Lessor;
B. if the Property shall be located in an area
designated as a flood-hazard area by the U.S. Department of Housing and Urban
Development, flood insurance in an amount equal to the maximum coverage
available not to exceed full replacement cost of the Property (as determined in
accordance with the provisions of Section 4.1 hereof);
C. general business interruption insurance in an amount
not less than Basic Rent and Additional Rent for the period of three (3) years
following the occurrence of the insured casualty; and
D. such other insurance and in such amounts as may from
time to time reasonably be required by Lessor or any mortgagee against other
insurable hazards which at the time are commonly insured against and generally
available in the case of premises similarly situated.
4.3 Lessee may effect for its own account any insurance not required
under the provisions of this Lease, but any insurance effected by Lessee on the
Property or any part thereof whether or not required under this Article 4 shall
name Lessor, Lessee, the lessor under the Air Rights Lease, any mortgagee and
any other lienors as their interests may appear as named insured and shall be
subject to all other provisions of this Article 4 and Article 13 hereof.
4.4 All insurance provided for in this Article 4 shall be effected
under valid and enforceable policies issued by financially responsible insurers
having an "A" rating under Best's Insurance Reports and incorporated under
<PAGE>
the laws of the United States or any state thereof and licensed to do business
in the State of New Jersey; provided, however, that if Lessee is not able to
obtain such "A" rating, then Lessee shall obtain such insurance with, at the
option of Lessee, either insurance carriers rated "B" under Best's Insurance
Reports or foreign insurance carriers which carry the equivalent of an "A"
rating under Best's Insurance Reports, in either case licensed to do business in
New Jersey. Upon the commencement of the Term, and thereafter not less than
thirty (30) days prior to the expiration dates of the expiring policies
theretofore furnished pursuant to this Article 4, or any other Article of this
Lease, certificates evidencing such insurance or copies of the policies bearing
notations evidencing the payment of premiums or accompanied by other evidence
satisfactory to Lessor of such payment shall be delivered by Lessee to Lessor.
4.5 Nothing in this Article 4 shall prevent Lessee from obtaining or
causing to be obtained insurance of the kind and in the amounts provided for
hereunder under a blanket insurance policy or policies covering the Original
Claridge Air Space, the Original Claridge Improvements and other properties as
well as the Property, provided, however, that any such policy or policies of
blanket insurance shall specify therein, or Lessee shall furnish Lessor with a
written statement from the insurers under such policies specifying, the amount
of the total insurance allocated to the Property, which amounts shall not be
less than the amounts required pursuant to this Article 4 and Article 8 hereof,
and such amounts so specified shall be sufficient to prevent any one of the
assureds from becoming a co-insurer within the terms of the applicable policy or
policies, and provided further, however, that any policy or policies of blanket
insurance shall, as to the Property, otherwise comply with the provisions of
this Article 4 and Article 8 hereof.
4.6 The loss, if any, under any policies provided for in Sections 4.1
and 4.2 hereof shall be adjusted with the insurance companies (i) by Lessee in
the case of any particular casualty resulting in damage or destruction not
exceeding One Million Dollars ($1,000,000) in the aggregate, and (ii) by Lessor
or Lessee, at Lessor's option, or to the extent required by any mortgagee, in
the case of any particular casualty resulting in damage or destruction exceeding
One Million Dollars ($1,000,000) in the aggregate. The proceeds of any such
insurance will be payable: (x) to Lessee in the case of any particular casualty
resulting in damage or destruction not exceeding One Million Dollars
($1,000,000) in the aggregate, and (y) to Lessor, or to the extent required, any
mortgagee in the case of any particular casualty resulting in damage or
destruction exceeding One Million Dollars ($1,000,000) in the aggregate to be
held for the purposes set forth in and applied in accordance with the provisions
of Article 13 hereof. Each such policy shall contain, if obtainable at no
substantial additional cost, a provision that no act or omission of Lessee shall
affect or limit the obligation of the insurance company to pay to Lessor the
amount of any loss sustained, and an agreement by the insurer that such policy
shall not be cancelled without at least thirty (30) days' prior written notice
to Lessor and to any mortgagee to whom a loss thereunder may be payable.
ARTICLE 5
LESSOR'S RIGHT TO PERFORM LESSEE'S COVENANTS
Lessee covenants and agrees that if it shall at any time fail to pay
any Imposition in accordance with the provisions of Article 3, or to take out,
apply for, maintain or deliver any of the insurance policies provided for in
Article 4 or 8 hereof, or shall fail, within the time limit set forth herein to
make any other payment or perform any other act on its part to be made or
performed hereunder, after the notice therein specified of any default has been
given, then Lessor may, but shall not be obligated to, (i) pay any Imposition
payable by Lessee pursuant to the provisions of Article 3 hereof, or (ii) take
out, pay for, maintain or deliver an' of the insurance policies provided for in
Articles 4 or 8 hereof, or (iii) make any other payment or perform any other act
on Lessee's part to be made or performed as in this Lease provided, without
further notice to or demand upon Lessee and without waiving or releasing Lessee
from any obligations of Lessee hereunder.
<PAGE>
ARTICLE 6
REPAIRS AND MAINTENANCE OF THE PROPERTY
6.1 A. At all times during the Primary Term, Lessor, at its sole cost
and expense, shall cause to be provided by a contractor qualified under the Act
(as hereinafter defined) to provide services to a hotel and casino in New Jersey
such facility maintenance, engineering and repair services required to maintain
the Property in good repair and condition and in conformity with applicable laws
and regulations, including, without being limited to, maintenance and repair of
fire protection, sprinkler and alarm systems, surveillance systems, swimming
pool and related equipment, electrical fixtures and systems, light bulbs,
plumbing and water systems, mechanical systems, elevators and escalators,
refrigeration, cooling and heating systems, restaurant equipment, sanitary sewer
systems, public areas and grounds, floor coverings, furniture, furnishings and
fixtures, televisions and portable radios, painting, tiles and wall coverings,
uniforms of property maintenance employees, laundry facilities, equipment
rentals, building walls, foundations, floors and roofs, sidewalks, driveways and
all other service systems contained within the Property hereof, shall be deemed
to be full and complete compliance with the terms and provisions of section
6.lA. hereof.
6.3 A. At all times during the Term of this Lease upon the request of
Lessee, Lessor agrees to purchase or provide (i) replacements of the Initial
Expansion FF&E, and (ii) repairs, maintenance, alterations and improvements to
the Expansion Improvements, the costs of which are normally capitalized under
generally accepted accounting principles (collectively, "Expansion FF&E
Replacements") such as, resurfacing building walls, floors, roofs and parking
areas and replacing folding walls and the like, major repairs, alterations,
improvements, renewals or replacements to the structure of the Expansion
Improvements or to their mechanical, electrical, heating, ventilating, air
conditioning, plumbing or vertical transportation systems. Lessee agrees not to
purchase for its own account any Expansion FF&E Replacements during the Term of
this Lease.
B. Lessee's requests to Lessor for Expansion FF&E Replacements shall be
made by the submission to Lessor of the Repairs and Equipment Estimate and
Capital Budget (as said terms are defined in that certain Management Agreement
by and between Lessee and DEWNJ, dated October 31, 1983, as amended (the
"Management Agreement")) for the Expansion Improvements not less than thirty
(30) days prior to commencement of each calendar year beginning January 1, 1987
together with Lessee's written approval of such Repairs and Equipment Estimate
and Capital Budget (the "Approved Repairs Equipment Estimate").
C. The parties agree that Lessor's obligations under Section 6.3A
hereof shall be fully satisfied upon Lessor's procurement of Expansion FF&E
Replacements in accordance with the Approved Repairs and Equipment Estimate
annually.
D. Lessor agrees, pursuant to the provisions of ss. 48(d) of the
Internal Revenue Code of 1954, as amended (the "Code"), to elect to treat Lessee
as the purchaser of the Initial Expansion FF&E and Expansion FF&E Replacements
which constitute "new section 38 property" within the meaning of ss.ss. 48(a)
and (b) of the Code for the purposes of the Investment Tax Credit, if any,
allowed with respect to such property. Lessor agrees to make any and all filings
required under ss. 48(d) of the Code and any applicable Treasury Regulations
promulgated thereunder to effectuate such election. Lessor makes no
representation as to the availability of any Investment Tax Credit with respect
to the Initial FF&E and the Expansion FF&E Replacements.
6.4 A. Lessee agrees to loan to Lessor any amounts necessary to fund
the cost of Expansion FF&E Replacements. Lessee also agrees to loan to Lessor
any amounts necessary to fund the cost of Expansion Facility Maintenance and
Engineering Services, if, at any time, Lessor's cash flow before payment of such
costs less the amounts available for distribution as indicated in the Financial
Forecast contained in the Private Placement Memorandum dated September, 1983
(but not to exceed One Million Eight Hundred Thousand Dollars ($1,800,000) in
any year), is insufficient therefor.
<PAGE>
B. Lessor will execute and deliver a separate note ("Expansion
Maintenance Shortfall Note") in a form reasonably acceptable to Lessee for each
Expansion Facility Maintenance and Engineering Services borrowing made pursuant
to Section 6.4A hereof. Each Expansion Maintenance Shortfall Note shall bear
interest at the rate of ten percent (10%) per annum, which interest from the
date thereof shall be payable monthly in arrears. No principal payments shall be
required under any Expansion Maintenance Shortfall Note until September 30,
2000, at which time the entire outstanding principal balance of all Expansion
Maintenance Shortfall Notes shall become immediately due and payable.
C. Lessor will execute and deliver a separate note ("Expansion FF&E
Note") in a form reasonably acceptable to Lessee for each Expansion FF&E
Replacements borrowing made pursuant to Section 6.4A hereof. Each Expansion FF&E
Note shall have a term of five (5) years, shall be self-amortizing, shall bear
interest from the date thereof at the rate of fourteen percent (14%) per annum
and shall provide for level debt service payments over the term thereof;
provided, however, that in the event this Lease shall terminate, whether upon
the expiration of the term hereof or any Farlier termination thereof, the entire
outstanding principal balance of all Expansion FF&E Notes shall become
immediately due and payable upon the date of such termination.
D. Any Expansion FF&E Note executed and delivered on or prior to
October 1, 1995 and all Expansion Maintenance Shortfall Notes shall be secured
under that certain Expandable Wraparound Mortgage, by and between Lessor, as
mortgagor, and Lessee, as mortgagee, dated October 31, 1983, as amended (the
"Expandable Wraparound Mortgage"); provided, however, that in no event shall the
total outstanding principal balance of all Expansion FF&E Notes, Expansion
Maintenance Shortfall Notes, FF&E Notes and Maintenance Shortfall Notes (as such
terms are defined in the original Operating Lease) secured by the Expandable
Wraparound Mortgage exceed Twenty-Five Million Dollars ($25,000,000). Any
Expansion FF&E Note or Expansion Maintenance Shortfall Note which shall not be
secured by the Expandable Wraparound Mortgage as a result of the foregoing
provision and any Expansion FF&E Notes executed and delivered after October 1,
1995 shall be secured under separate security agreements in forms agreed to by
the parties.
E. In each year during the term of this Lease, Lessee shall pay to
Lessor as Additional Rent an amount equal to the sum of (i) debt service
(interest and principal) under all outstanding Expansion FF&E Notes, (ii) all
taxes, insurance costs and other expenses incurred by Lessor during such year
relating to Expansion FF&E Replacements, and (iii) the investment tax credit
benefit received by Lessee, if any, for Expansion FF&E Replacements acquired
during such year.
During the term of this Lease, Lessee shall make Additional Rent
payments required to be made to Lessor pursuant to Section 6.4E(i) hereof one
(1) day prior to the date Lessor's corresponding payment is due under the
Expansion FF&E Notes. on the date of termination hereof Lessee shall make an
Additional Rent payment to Lessor in an amount equal to all interest and
principal necessary to enable Lessor to satisfy Lessor's obligations under all
outstanding Expansion FF&E Notes. Additional Rent payments required to be made
to Lessor pursuant to Sections 6.4E(ii) and (iii) hereof shall be made with
respect to items described in section 6.4E(ii) hereof, as incurred by Lessor,
and with respect to the items described in Section 6.4(E)(iii) hereof, on April
15th of the year following the year in which the Expansion FF&E Replacements
were acquired, upon submission of a statement by the Lessor certified by its
managing general partner.
ARTICLE 7
COMPLIANCE WITH LAWS, ORDERS, ORDINANCES. ETC.
7.1 Subject to the provisions of Section 6.lA hereof, at all times
during the term of this Lease, Lessee, at its sole cost and expense, agrees to
promptly comply with all laws and ordinances and the orders, rules, regulations
and requirements of all federal, state and municipal governments and appropriate
departments, commissions, boards and officers thereof, and the orders, rules and
regulations of The National Board of Fire Underwriters, or any other body
<PAGE>
now or hereafter constituted exercising similar functions which may be
applicable to the Property and the supporting columns, the sidewalks, curbs and
vaults adjoining the Property or to the use or manner of use of the Property,
foreseen or unforeseen, ordinary as well as extraordinary, structural as well as
non-structural. Lessee shall also comply with all notes or notices of violation
of law or municipal ordinances, orders or requirements noted in or issued by any
state, county or municipal department having jurisdiction over or affecting the
Property at or before the date of the execution hereof and thereafter until the
full expiration of the Term. Lessee shall likewise observe and comply with the
requirements of all public liability policies and all other policies of
insurance at any time in force with respect to the Property.
7.2 Lessee shall have the right, after prior written notice to Lessor,
to contest the validity or application of any law, ordinance, order, rule,
regulation or requirement of the nature referred to in Section 7.1 above, by
appropriate legal proceedings diligently conducted in good faith, in the name of
Lessee or Lessor or both, without cost or expense to Lessor, subject to the
following:
A. If by the terms of any such law, ordinance, order, rule, regulation
or requirement, compliance therewith pending the prosecution of any
such proceeding may legally be delayed without the incurrence or any
lien, charge or liability of any kind against the Property or Lessee's
leasehold interest therein and without subjecting Lessor to any
liability, civil or criminal, for failure to so comply therewith,
Lessee may delay compliance therewith until the final determination of
such proceeding.
B. If any lien, charge or civil liability would be incurred by reason
of any such delay, Lessee nevertheless may contest as aforesaid and
delay as aforesaid, provided that such delay would not subject Lessor
to criminal liability and Lessee (i) furnishes to Lessor, and to the
extent required, any mortgagee, security, reasonably satisfactory to
Lessor and, to the extent required, any mortgagee, against any loss or
injury by reason of such contest or delay, and (ii) prosecutes the
contest with due diligence.
Lessor will execute and deliver any appropriate papers which may be necessary or
proper to permit Lessee to so contest the validity or application of any such
law, ordinance, order, rule, regulation or requirement. Lessee agrees to
reimburse Lessor promptly upon demand for any expense or liability incurred by
Lessor in connection with any such proceeding.
7.3 Lessee will at all times during the term of this Lease perform and
comply with the terms and provisions of the Easement Agreement and any
amendment, modification, replacement or supplement thereof or thereto.
7.4 Lessee will promptly pay all rents and other charges payable by
Lessee under the Original Operating Lease and will at all times perform and
comply with all of the terms and conditions thereof to be performed or complied
with by Lessee.
ARTICLE 8
CHANGES AND ALTERATION BY LESSEE
8.1 Subject to the provisions of article 6 hereof, lessee shall have
the right at any time and from time to time during the term of this lease to
make at its sole cost and expense changes and alterations in or to the Property,
subject however in all cases to the following:
A. No change or alteration involving an estimated cost of more than
Five Hundred Thousand Dollars ($500,000) shall be undertaken except
after ten (10) days' prior written notice to Lessor, and to the extent
required, any mortgages.
<PAGE>
B. No change or alteration involving an estimated cost of more than Two
Million Five Hundred Thousand Dollars ($2,500,000), including any
restoration required pursuant to Articles 13 or 14 hereof, shall be
made without the prior written consent of Lessor, which consent shall
not be unreasonably withheld or delayed, and any mortgagee, if
required.
C. No change or alteration shall be undertaken until Lessee shall have
procured and paid for, as the same may be required from time to time,
all permits and authorizations of all municipal departments and
governmental subdivisions having jurisdiction. Lessor, at Lessee's sole
cost and expense, shall join in the application for such permits or
authorizations whenever such action is necessary.
D. Any structural change or alteration involving an estimated cost of
more than Two Million Five Hundred Thousand Dollars ($2,500,000) shall
be conducted under the supervision of an architect or engineer selected
by Lessee and approved in writing by Lessor, such approval not to be
unreasonably withheld or delayed, and no such structural change or
alteration shall be made except in accordance with detailed plans and
specifications and cost estimates prepared and approved in writing by
Lessor and such architect or engineer to Lessor and approved in writing
by any mortgagee, if required.
E. Any change or alteration, once commenced, shall be made promptly
(unavoidable delays excepted) and in good and workmanlike manner and in
compliance with all applicable permits and authorizations and zoning
laws and with all other laws, ordinances, orders, rules, regulations
and requirements of all federal, state and municipal governments,
departments, commissions, boards and officers, The National Board of
Fire Underwriters, or any other body hereafter exercising functions
similar to those of any of the foregoing.
F. Builder's all risks insurance or the equivalent thereof with limits
of not less than the full completed replacement cost of such work and
worker's compensation insurance, including employees' liability
insurance, covering all persons employed in connection with any Fork to
whom death or bodily injury claims could be asserted against Lessor,
Lessee, the original Claridge Land, the original Claridge Improvements
or the Property, and general liability insurance designating Lessee and
Lessor as named insureds, with statutory limits as required by the laws
of the State of New Jersey, shall be maintained by Lessee at Lessee's
sole cost and expense at all times when any work is in process in
connection with any change or alteration, including any restoration
required by Articles 13 or 14 hereof. All such insurance shall be
issued by a company or companies of recognized responsibility and all
policies or certificates therefor issued by the respective insurers,
bearing notations evidencing the payment of premiums or accompanied by
other evidence satisfactory to Lessor of such payment, and to the
extent required any mortgagee, shall be delivered to Lessor and such
mortgagee.
G. The Property shall at all times be kept free of liens for labor and
materials supplied or claimed to have been supplied thereto, and any
such liens resulting from such changes and alterations shall be
cancelled and discharged, by payment or bond, as provided in Article 9
hereof.
H. Lessor shall execute or join with Lessee in executing any required
application to any governmental authority exercising jurisdiction over
a change or alteration provided that all expenses in connection
therewith shall be paid by Lessee.
I. If the estimated cost of such change or alteration shall be in
excess of Two Million Five Hundred Thousand Dollars ($2,500,000),
Lessee shall pay to Lessor, or, at Lessor's direction, to any
mortgagee, if required, the reasonable fees and expenses of any
architect selected by Lessor or, to the extent required, any mortgagee
to review the plans and specifications and inspect the work on behalf
of Lessor and, to the extent required, any mortgagee.
<PAGE>
ARTICLE 9
LIENS
If any lien shall be filed or made against the Property or any part
thereof for any work or labor performed or purported to be performed or for any
materials furnished or purported to be furnished in, to, or for the Property or
any part thereof, Lessee shall, within thirty (30) days after receipt of notice
of the filing of such lien, cause the same to be cancelled and discharged of
record, by bond or otherwise, and shal1 defend at its own expense, any action,
suit or proceeding which may be brought for the enforcement of such lien, and
shall pay any damages suffered or incurred therein by Lessor, and satisfy and
discharge any judgment entered therein, and shall save harmless Lessor from any
claim or damage resulting therefrom. In the event of the failure of Lessee to so
cancel and discharge within such thirty (30) day period any such lien, Lessor
may pay such item, or discharge such liability by bond, or both, and the amount
expended by Lessor shall be and become immediately due and payable to Lessor as
Additional Rent hereunder.
ARTICLE 10
COVENANT AGAINST WASTE-MAINTAINING CONTENTS
10.1 Except as specifically provided herein to the contrary, Lessee
covenants not to do or suffer any waste or damage, disfigurement or injury to
any portion of the Property.
10.2 Subject to the provisions of sections 6.1.A and 6.3 hereof, Lessee
covenants throughout the term hereof to maintain the Property as a hotel and
casino in the condition, and in accordance with the operating standards in
effect on the date hereof for the original Claridge Improvements and with such
uses as may be incidental to or customarily related thereto.
<PAGE>
ARTICLE 11
ASSIGNMENT, SUBLETTING AND MORTGAGES
11.1 Lessee may sublet a portion but not substantially all of the
Property provided that each sublease shall expressly be made subject to the
provisions of this Lease and to the extent required shall be approved by the
Commission (as defined in Article 27 hereof) and shall expressly state that the
same is subject to the First Mortgage (as defined in Article 25 hereof). No such
sublease shall modify or limit any right or power of Lessor hereunder or affect
or reduce any obligation of Lessee hereunder and all such obligations shall
continue in full effect during the term of this Lease as obligations of a
principal and not a guarantor or surety, as though no subletting had been made.
Lessee shall deliver a copy of any sublease permitted hereunder within thirty
(30) days of the execution and delivery thereof.
11.2 Lessee may not assign all or any portion of its interest
hereunder; provided, however, at such time as Webb, or any other affiliate of
Webb, shall acquire all the capital stock of Lessee or The Claridge Hotel and
Casino Corporation shall purchase the capital stock of Webb in The Claridge
Hotel and Casino Corporation this prohibition shall no longer apply, and
provided further that no assignment of this Lease shall be valid unless
concurrently therewith Lessor shall also assign to such assignee its interest
under the Original Operating Lease. Any assignment of the Original Operating
Lease to any assignee by Lessee shall thereupon be deemed an assignment of
Lessee's interest under this Lease to such assignee.
11.3 The sale of all or substantially all of the capital stock of
Lessee shall not be deemed to be an assignment pursuant to Section 11.2 hereof.
11.4 Except as provided in Section 11.2 hereof, neither the interest of
Lessee in this Lease nor any interest of Lessee in the Property shall be
mortgaged, sold, assigned, transferred or otherwise disposed of, whether by
operation of law or otherwise. The Management Agreement and the interest of the
Manager thereunder and any security agreement in favor of the holder of the
First Mortgage (as defined in Article 25 hereof) is expressly permitted hereby.
11.5 There shall be no merger of this Lease or the leasehold interest
created hereby with the fee estate in the Property by reason of the fact that
the same person may acquire, own or hold, directly or indirectly, (a) this Lease
or the leasehold estate created hereby or any interest in this Lease or such
leasehold estate and (b) the fee estate in the Property or any interest therein.
ARTICLE 12
INSPECTION OF THE PROPERTY BY LESSOR, ETC.
12.1 Lessee agrees to permit Lessor and the authorized representatives
of Lessor to enter the property at all reasonable times during usual business
hours for the purpose of (a) inspecting the same, (b) providing Expansion
Facility Maintenance and Engineering Services and providing FF&E Replacements
and (c) making any necessary repairs to any portion of the property and
performing any work therein that may be necessary by reason of Lessor's
obligations under Sections 13 and 14 hereof or Lessee's default under the terms
of this Lease. Nothing herein shall imply any duty upon the part of Lessor to do
any such work which under any provisions of this Lease Lessee may be required to
perform and the performance thereof by Lessor shall not constitute a waiver of
Lessee's default in failing to perform the same. Lessor may during the progress
of any work to any portion of the Property, the provision of Expansion Facility
Maintenance and Engineering Services and FF&E Replacements keep and store upon
the Property all necessary materials, tools and equipment. Lessor shall not in
any event be liable for inconvenience, annoyance, disturbance, loss of business
or other damage of Lessee by reason of making such repairs or the performance of
any such work in or to any portion of the Property, or on account of bringing
materials, supplies and equipment into or through any portion of the Property
during the course thereof and the obligations of Lessee under this Lease shall
not thereby be affected in any manner whatsoever.
<PAGE>
12.2 Upon reasonable notice to Lessee, Lessor is hereby given the right
during usual business hours to enter the Air Space and Expansion Improvements
and to exhibit the same for the purposes of sale or financing.
12.3 Lessee further agrees that Lessor, its designees, invitees,
employees and agents shall have access to enter upon and pass through the Air
Space and the Expansion Improvements if required for the purpose of assisting
with its ownership, maintenance and operation of the Original Claridge Land and
the Original Claridge Improvements.
ARTICLE 13
EMINENT DOMAIN
13.1 If, at any time during the term of this Lease, all of the Property
shall be taken for any public or quasi public purposes by any lawful power or
authority by the exercise of the right of condemnation or eminent domain or by
agreement between Lessor and those authorized to exercise such right, this Lease
and the term of this Lease shall terminate and expire on the date of such taking
and the Basic Rent and Additional Rent herein reserved and provided to be paid
by Lessee shall be apportioned as of the date of such taking. If the taking of
any portion of the Property results in the revocation of any license necessary
for the operation of a hotel and casino on the Property under the Act (as
defined in Section 27.1 hereof), such taking shall be deemed to be a taking of
all of the Property.
13.2 If, at any time during the term of this Lease, less than all of
the Property shall be taken as aforesaid, this Lease and the Term hereof shall
continue and Lessee shall perform the restoration, replacement, rebuilding,
repair, alteration or demolition of the Expansion Improvements, collectively the
"Work" necessary to return the Expansion Improvements as nearly as possible to
their condition and character immediately prior to the taking in accordance with
the provisions of this Article 13.
13.3 In the event of any such taking, partial or all of the Property,
Lessor or, to the extent required, any mortgagee, shall be entitled to receive
the entire award or awards. Lessor or, to the extent required, any mortgagee,
shall hold the entire award or awards collected with respect to a partial taking
and the same shall be applied and paid over toward the cost of Work, including
the cost of temporary repairs or for the protection of the Property pending the
completion of the Work and shall be paid out from time to time as the Work
progresses upon the written request of Lessee if the work for which payment is
requested has been done in a good and workmanlike manner, in accordance with all
applicable laws, rules, ordinances and orders of any governmental authority with
jurisdiction and substantially in accordance with plans and specifications
therefor previously submitted to Lessor and, to the extent required, any
mortgagee and the requirements of Article 8 hereof. Each request shall be
accompanied by the following:
A. A certificate signed by Lessee dated not more than 30 days prior
to each request, setting forth the following:
(i) That the sum then requested either has been paid by
Lessee, or is justly due to contractors, sub-contractors,
materialmen, engineers, architects or other persons who have
rendered services or furnished materials for the work therein
specified, or paid for the same, the names and addresses of such
persons, a brief description of such services and materials, the
several amounts so paid or due to each of said persons in respect
thereof, that no part of such expenditures has been or is
presently the basis, in any previous request, for the
disbursement of the award.
(ii) That the cost, as estimated by the persons signing such
certificate, of the work required to be done subsequent to the
date of such certificate in order to complete and pay for the
same, does not exceed the award, plus any amount deposited by
Lessee to defray such cost and remaining in the hands of Lessor
or any mortgagee after payment of the sum requested in such
certificate.
<PAGE>
B. A notice of title continuation to the effect that there has not been
filed with respect to the property or any part thereof or upon Lessee's
leasehold interest therein any vendor's, mechanic's, laborer's, materialman's or
other lien which has not been discharged of record, except such as will be
discharged by payment of the amount then requested.
13.4 If any such Work involves expenditures in excess of Five Hundred
Thousand Dollars ($500,000), in addition to the certificate required in Section
13.3 hereof there shall also be furnished a certificate signed by the architect
or engineer in charge of the Work certifying to the facts set forth in Section
13.3A(ii) hereof.
13.5 Upon compliance with the foregoing provisions of Section 13.3
hereof, Lessor or, if applicable, any mortgagee, shall pay or cause to be paid
to Lessee or the persons named in such certificate from said award proceeds the
respective amounts stated therein to have been paid by Lessee or to be due to
them, as the case may be.
13.6 If the award or awards at the time held by Lessor or, to the
extent required, any mortgagee, less the actual cost, fees and expenses, if any,
incurred in connection with the adjustment of the loss, shall be insufficient
to pay the entire cost of such restoration, Lessee will pay any deficiency.
13.7 Any portion of the proceeds of any award or awards remaining after
payment for the Work in accordance, with the terms of this Lease shall be paid
to Lessor.
13.8 In the case of any taking covered by the provisions of this
Article 13, Lessor shall be entitled to reimbursement from any award or awards
of all reasonable costs, fees and expenses incurred in the determination and
collection of any such awards.
13.9 If the temporary use of the whole or any part of the Property
shall be taken at any time during the term of this Lease for any public or
quasi-public purpose by any lawful power or authority by the exercise of the
right to condemnation or eminent domain or by agreement between Lessor, Lessee
and those authorized to exercise such right, the term of this Lease shall not be
reduced or affected in any way and Lessee shall continue to pay in full the
Basic Rent and Additional Rent and the entire award for such taking shall be
paid to Lessee.
13.10 Lessee, at Lessor's option and at no expense to Lessor, shall
appear in any condemnation proceeding or participate in any and all hearings,
trials and appeals therein on behalf of Lessor and, to the extent required, on
behalf of any mortgagee.
ARTICLE 14
DAMAGE OR DESTRUCTION
14.1 In case of casualty to the Expansion Improvements resulting in
damage or destruction, Lessee shall promptly give written notice thereof to
Lessor and to any mortgagee.
14.2 If, at any time during the Term the Expansion Improvements shall
have been damaged or destroyed, Lessee shall perform the Work necessary to
return the Expansion Improvements as nearly as possible to their value,
condition and character immediately prior to the occurrence of such damage or
destruction.
14.3 Lessee shall perform the Work at its sole cost and expense
regardless of the amount of any such damage or destruction, and whether or not
the insurance proceeds, if any, shall be sufficient for the purpose. The Work
shall be commenced within a reasonable time after such damage or destruction and
prosecuted with diligence, unavoidable delays excepted. During the period the
Work is being performed, Basic Rent hereunder shall not be apportioned or
reduced.
<PAGE>
14.4 All insurance money paid to Lessor or, to the extent required, any
mortgagee, on account of such damage or destruction, less the actual cost, fees
and expenses, if any, incurred in connection with adjustment of the loss shall
be held by Lessor or, to the extent required, by any mortgagee and applied to
the payment of the cost of the Work, including the cost of temporary repairs or
for the protection of the Expansion Improvements pending the completion of the
Work in permanent form substantially in the same manner and subject to the same
conditions as those provided in Article 13 hereof with respect to awards from
condemnation.
14.5 If the insurance money at the time held by Lessor or, to the
extent required, any mortgagee, less the actual cost, fees and expenses, if any,
incurred in connection with the adjustment of the loss, shall be insufficient to
pay the entire cost of the Work, Lessee will pay the deficiency.
14.6 Upon (a) the completion of all of the Work in a good and
workmanlike manner and substantially in accordance with the approved plans and
specifications therefor and (b) receipt by Lessor and, to the extent required,
any mortgagee, of satisfactory evidence of the character required by Sections
13.3 and 13.4 hereof, that the Work has been completed and paid for in full (or,
if any part of the Work has not been paid for, adequate security for such
payment shall exist in form reasonably satisfactory to Lessor and any mortgagee)
and that there are no liens of the character referred to in Section 13.3 hereof,
any balance of the insurance money at the time held by Lessor or any mortgagee,
shall be applied in accordance with the terms of any mortgage then encumbering
the Property and the remainder, if any, to be paid to Lessee.
<PAGE>
ARTICLE 15
CONDITIONAL LIMITATIONS;
DEFAULT PROVISIONS; REMEDIES
15.1 If at any time during the term of this Lease Lessee (a) shall
generally not pay its debts as they become due or shall admit in writing its
inability to pay its debts, or shall make a general assignment for the benefit
of creditors, (b) shall commence any case, proceeding or other action seeking
reorganization, arrangement, adjustment, liquidation, dissolution or composition
of it or its debts under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors, or seeking appointment of a receiver,
trustee, custodian or other, similar official for it or for all or any
substantial part of its property, (c) shall take any corporate action to
authorize any of the actions set forth in (a) or (b) above, or if any case,
proceeding or other action against Lessee shall be commenced seeking to have an
order for relief entered against it as debtor, or seeking reorganization,
arrangement, adjustment, liquidation, dissolution or composition of it or its
debts under any law relating to bankruptcy, insolvency, reorganization or relief
of debtors, or seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its property, and
such case, proceeding or other action remains undismissed for a period of one
hundred twenty (120) days, this Lease may, at the option of Lessor to be
exercised within a reasonable time after notice of the happening of any one or
more of such events, be cancelled and terminated and in that event neither
Lessee nor any person, firm, corporation or officer claiming through or under
Lessee by virtue of any statute or of an order of any court shall be entitled to
possession or to remain in possession of the Property or any part thereof but
shall forthwith quit and surrender the Property, and Lessor, in addition to the
other rights and remedies Lessor has by virtue of any other provision herein or
elsewhere in this Lease contained or by virtue of any statute or rule of law now
or hereafter enacted or established, may retain as liquidated damages any
prepaid Basic Rent and Additional Rent, security deposit or moneys, received by
or available to Lessor from Lessee or others on behalf of Lessee.
15.2 If Lessee shall make default in (i) the payment of any installment
of Basic Rent, or any part thereof, and such default shall continue for thirty
(30) days after Lessee's receipt of notice thereof from Lessor, or (ii) the
payment of any item of Additional Rent, or any part thereof, and such default
shall continue for forty-five (45) days after Lessee's receipt of notice thereof
from Lessor, (iii) the performance or observance of any other covenant on the
part of Lessee to be performed or observed hereunder, and such default shall
continue for sixty (60) days after Lessee's receipt of notice thereof from
Lessor or, if such default is of a character that is incapable of being cured
within sixty (60) days, if Lessee shall fail to commence to cure such default
within such sixty (60) day period and thereafter to prosecute such cure
diligently, or (iv) the performance or observance of any covenant on the part of
Lessee to be performed or observed under the Original Operating Lease and such
default shall continue beyond any applicable grace period, then Lessor may
terminate this Lease at any time by giving Lessee ten (10) days written notice
of its election to terminate, and upon the expiration of such ten (10) day
period, the term of this Lease shall expire by limitation as fully and
completely as if said time were the date herein originally fixed for the
expiration of the term hereby granted, and Lessee shall thereupon quit and
peacefully surrender the Property to Lessor, without any payment therefor by
Lessor, and Lessor may re-enter the Property and remove all persons and property
therefrom, either by summary proceedings or by any suitable action or proceeding
at law, or by force or otherwise, without being liable to indictment,
prosecution or damages therefor, and may have, hold and enjoy the Property as if
Lessee's former estate and interest in the Property never existed.
15.3 Lessor, in addition to any other rights herein reserved to it, but
at its option, shall have the right at all times during the term of this Lease
and notwithstanding the concurrent pendency of summary or other dispossess
proceedings between Lessor and Lessee, to restrain or enforce by injunction any
violation or attempted violation by Lessee of any of the terms, covenants,
conditions and agreements of this Lease.
15.4 The word "re-enter", as used in this and other covenants of this
Lease, is not and shall not be restricted to its technical legal meaning, but is
used in the broadest sense.
<PAGE>
ARTICLE 16
OPTION TO PURCHASE
16.1 Lessor hereby grants Lessee the right and option to purchase (the
"Purchase Option") fee title to the Expansion Improvements, and Lessor's
interest in the Air Space as lessee under Air Rights Lease (collectively the
"Lessor's Interest in the Property on either of September 30, 1998, or September
30, 2003 (an "Option Date") for a price equal to the then fair market value of
the Lessor's Interest in the Property determined as hereinafter provided (the
"Fair Market Value"); provided, that this Lease is in effect on the Option Date,
and further provided that (a) Lessee shall concurrently therewith exercise its
option to purchase the Original Claridge Improvements and Lessor's interest in
the Land as lessee under the Original Ground Lease, and (b) any exercise of
Lessee's option to purchase the Original Claridge Improvements and Lessor's
interest in the Land as lessee under the Original Ground Lease shall be deemed
to be the exercise of Lessee's option hereunder to purchase Lessor's Interest in
the Property. Lessee may exercise such option by giving written notice to Lessor
of such election not later than nine (9) months prior to the relevant Option
Date.
To enable Lessee to make an informed judgment with respect to the
foregoing option, and to establish the Fair Market Value as of the Option Date,
Lessee may notify Lessor in writing not more than twenty-four (24) months prior
to the relevant Option Date stating that Lessee desires a determination of Fair
Market Value of the Lessor's Interest in the Property as of the relevant Option
Date. Thereafter, Lessor and Lessee shall consult for the purpose of determining
such Fair Market Value as of the relevant Option Date and any value agreed upon
in writing shall constitute such Fair Market Value for the purposes of this
Article 16. If Lessor and Lessee fail to agree upon such Fair Market Value prior
to sixteen (16) months before the relevant Option Date, Lessee may request that
such Fair Market Value be determined by the appraisal procedure described in
Section 16.2 below. Lessee's request for a determination of such Fair Market
Value shall not obligate Lessee to exercise the option provided in this Article
16 but, if Lessee exercises such option, Lessee and Lessor shall each pay the
fees and disbursements of any appraiser appointed by it and shall share equally
the fees and expenses of any third appraiser and any other costs and expenses of
any appraisal pursuant to this Article 16. If Lessee does not exercise such
option, Lessee shall pay all costs and expenses of any appraisal pursuant to
this Article 16.
16.2 The term "Fair Market Value" as used in this Article 16 shall mean
the fair market value of Lessor's Interest in the Property unencumbered by this
Lease and used for its highest and best use, including, but not limited to, use
as a hotel and casino, determined using the standards then commonly used by
professional appraisers in determining fair market value of similarly improved
real property in Atlantic City, New Jersey, but taking into account the fact
that Lessor's Interest in the Property shall be used in conjunction with the
Original Claridge Improvements and the original Claridge Land. If the parties
hereto fail to agree under Section 16.1 hereof as to the Fair Market Value such
question shall be submitted upon Lessee's request to a board of appraisers, two
(2) in number, one (1) named by Lessor and one (1) named by Lessee, each of whom
shall be a qualified member of the American Institute of Real Estate Appraisers,
or any successor of such Institute, or if such organization or successor shall
no longer be in existence, a recognized national association or institute of
appraisers. The appraiser so appointed shall be instructed to determine the Fair
Market Value in accordance with the definition of such term contained herein
within fifty (50) days after the making of Lessee's request. If only one (1)
appraiser shall have been so appointed within twenty (20) days after the making
of Lessee's request, or if two (2) appraisers shall have been so appointed but
only one such appraiser shall have made such determination within fifty (50)
days after the appointment of both appraisers, Lessee's request, then the
determination of such appraiser shall be final and binding upon the parties. If
two (2) appraisers shall have been appointed and shall have failed to agree as
to the Fair Market Value within the fifty (50) day period set forth above, the
two (2) appraisers shall appoint a third appraiser within twenty (20) days. If
such appraisers fail to do so, then either party may request the President of
American Arbitration Association or any successor organization thereto to
appoint an appraiser within twenty (20) days of such request, and both parties
shall be bound by any appointment so made within such twenty (20) day period.
Any appraiser appointed by the original appraisers or by the President of
American Arbitration Association shall be instructed to determine the Fair
Market Value in accordance with the definition of such term contained herein
within thirty (30) days after its appointment. The determination of such
appraiser shall be final and binding upon Lessor and the Lessee as the Fair
Market Value. This provision for determination by appraisal shall be
specifically enforceable to the extent such remedy is available under applicable
law, and any determination hereunder shall be final and binding upon the parties
except as otherwise provided by applicable law.
<PAGE>
16.3 Lessor covenants and agrees that from the date hereof until the
expiration of the Purchase option, Lessor will not sell, convey, transfer,
mortgage, assign, encumber or otherwise dispose of all or any part of Lessor's
Interest in the Property, provided, however, that Lessor shall have the right to
mortgage such property to secure any refinancing of the indebtedness described
in Section 25 hereof.
If Lessee exercises the Purchase Option, Lessor need not convey any
better title thereto than existed on the date of the commencement of the term of
this Lease, and Lessee or its designee shall accept such title and subject to
all charges, liens, security interests and encumbrances on the Lessor's Interest
in the Property created or caused to be created by Lessee and all applicable
legal requirements.
If Lessor shall be unable to give title or make conveyance as
stipulated, Lessor shall convey such title as it then has if Lessee elects to
accept the same. The termination of this Lease prior to exercise of the Purchase
option, or prior to or after exercise of the Purchase option if such termination
is due to Lessee's default hereunder, shall terminate all rights and obligations
of Lessor and Lessee under this Article.
In the event of Lessee's exercise of the Purchase Option, this Lease
shall not terminate, except due to Lessee's default, until the Lessor's interest
in the Property shall have been conveyed to Lessee and the Fair Market Value and
all other sums due under this Lease shall have been paid.
Lessor and Lessee agree that Lessee shall have no right to purchase the
fee interest in the Air Space pursuant to the Purchase Option, and Lessee agrees
that should Lessee purchase the Lessor's Interest to the Property, Lessee shall
assume all of Lessor's obligations under the Air Rights Lease. There shall be no
merger of this Lease or of the leasehold estate hereby created with the fee
estate in the Air Space and Expansion Improvements by reason of the fact that
the same person acquires or holds, directly or indirectly, this Lease or the
leasehold estate hereby created or any interest herein or in such leasehold
estate as well as the fee estate in the Air Space or any interest in such fee.
16.4 On the relevant Option Date, Lessee shall pay to Lessor an amount
equal to the Fair Market Value plus all closing costs including, without
limitation, any applicable prepayment penalty payable to any mortgagee, counsel
fees, escrow fees, recording fees, title insurance premiums and all applicable
taxes (the "Costs") together with all Basic Rent and Additional Rent to and
including the actual date of purchase, and Lessor shall deliver to Lessee a New
Jersey bargain and sale deed with covenants against grantor's acts to the
Expansion Improvements, a bill of sale for any personal property and an
assignment of Lessor's interest in the Air Rights Lease. On the relevant Option
Date Lessee shall pay to Lessor in cash or by certified, bank or cashier's check
or Federal Funds or wire transfer to an account designated by Lessor an amount
equal to all sums payable pursuant to the terms of this Section 16.4 other than
the Fair Market Value. Any check must be drawn on a bank which is a member of
the New York Clearinghouse Association. Lessee may pay an amount equal to the
Fair Market Value in accordance with either of the following:
A. An amount equal to the outstanding principal balance of all of the
then existing mortgage indebtedness encumbering Lessor's Interest in
the Property by Lessor executing and delivering such documentation as
may be requested by any then existing mortgagee and payment of the
balance of the Fair Market Value to Lessor in cash; or
<PAGE>
B. An amount equal to the outstanding principal balance of all of the
then existing mortgage indebtedness encumbering Lessor's Interest in
the Property by Lessor executing and delivering such documentation as
may be requested by any then existing mortgage, payment of ten percent
(10%) of the balance of the Fair Market Value to Lessor in cash and
payment of the remainder of the Fair Market Value by execution and
delivery of a purchase money note in said amount (the "Option Note").
If the Purchase Option is exercised on September 30, 1998, the
principal amount of the Option Note shall be fully amortized over a
fifteen (15) year term. If the Purchase Option is exercised on
September 30, 2003 the principal amount of the Option Note shall be
fully amortized over a ten (10) year term. In either instance, (i)
interest and equal installments of principal shall be payable quarterly
and (ii) Lessee may at the time it delivers the Option Note choose an
interest rate. Such interest rate shall be equal to either (i) a fixed
rate per annum equal to the Prime Rate or (ii) a floating rate adjusted
semi-annually to equal the Prime Rate.
The foregoing method and amount of payments shall be adjusted by Lessor and
Lessee to reflect the fact that any then existing mortgage indebtedness may be
secured by mortgages encumbering the original Claridge Land and the Original
Claridge Improvements. The Option Note shall be secured by a purchase money
mortgage in a form acceptable to Lessor and Lessee.
If on the relevant Option Date Webb shall own fifty percent (50%),
directly or indirectly, or more of Lessee, Lessee's obligations under the
Option Note shall be fully and unconditionally guaranteed by Webb.
There shall be no closing adjustments, other than for the Basic Rent
and Additional Rent payable by Lessee hereunder, and rent and other payment
obligations of Lessor under the Ground Lease for the month in which the relevant
Option Date occurs and other accrued obligations of Lessee under the Air Rights
Lease.
16.5 Upon the completion of such purchase, but not prior thereto
(whether or not any delay or failure in the completion of such purchase shall be
the fault of Lessor), the Lease shall terminate, except with respect to
obligations and liabilities of Lessee hereunder, actual or contingent, which
have arisen on or prior to such date of purchase.
ARTICLE 17
INDEMNIFICATION OF LESSOR
Subject to the provisions of Article 27 hereof, Lessee shall indemnify
and save harmless Lessor from and against any and all liability, loss, damages,
expenses, costs, claims and judgments (to the extent that the same are not paid
out of the proceeds of any policies of insurance furnished by Lessee to Lessor)
arising from injury, or claim of injury, during the term of this Lease to person
or property of any and every nature, from any matter or thing growing out of the
occupation, possession, use, management, improvement, alteration, or control of
the Property.
ARTICLE 18
CUMULATIVE RIGHTS AND REMEDIES
All the rights and remedies of Lessor or Lessee, as the case may be,
herein mentioned or referred to, or arising hereunder, shall be deemed to be
distinct, separate and cumulative, and no one or more of them, whether exercised
or not, nor any mention of, or reference to, any one or more of them herein,
shall be deemed to be in exclusion of, or a waiver of, any of the others, or of
any rights or remedies which Lessor or Lessee, as the case may be, might have,
whether by present or future law or pursuant to this Lease. Lessor or Lessee
shall have, to the fullest extent permitted by law, the right to enforce any
rights or remedies separately, and to take any lawful action or proceedings to
exercise or enforce any rights or remedies whether at law or in equity or
otherwise, without thereby waiving, or being thereby barred or estopped from
exercising and enforcing any other rights or remedies by appropriate action or
proceedings.
<PAGE>
ARTICLE 19
NON-WAIVER
No waiver by Lessor of any breach by Lessee of any covenant, agreement
or condition herein contained, and no failure by Lessor to make any payment on
behalf of Lessee, or to exercise any right or remedy in respect of any breach
hereunder, shall constitute a waiver or relinquishment for the future of any
such covenant, agreement or condition, or of any subsequent breach of any such
covenant, agreement or condition, or bar any right or remedy of Lessor in
respect of any such subsequent breach, and the receipt of any rent by Lessor,
whether the same be that reserved and provided for herein as Basic Rent or
Additional Rent shall not operate as a waiver of the rights of Lessor to enforce
the payment of any other such rent or to require the performance of any
other covenant, condition or agreement hereof then or thereafter in default, or
to terminate this Lease or to recover the Property or to invoke any other
appropriate remedy which Lessor may select as herein or by law provided.
<PAGE>
ARTICLE 20
PUBLIC ACCESS TO AIR SPACE; OTHER ACCESS
20.1 During such period or periods of the term of this Lease as any
perimeter portion of the Property shall be unimproved by any walled structure,
fence or gate, Lessee shall not suffer or permit the same to be used by the
public, as such, without restriction or in such manner as might reasonably tend
to impair the fee title to the Air Space or any portion thereof, or in such
manner as might reasonably make possible a claim or claims of adverse user or
adverse possession by the public, as such, or of implied dedication of the Air
Space or any portion thereof.
20.2 Lessor shall be under no obligation whatsoever to provide Lessee
access or utilities to or for the Air Space or the Expansion Improvements in,
through, under or from the Original Claridge Land or the Original Claridge
Improvements, whether or not the same are owned by or under the control of
Lessor.
ARTICLE 21
USE OF THE PROPERTY
Lessee agrees that without the consent of Lessor, Lessee will not use
or cause to be used the Property or any part thereof for any purpose other than
a hotel and casino in full compliance with the Act (as defined in Article 27
hereof), with uses incidental to or customarily related thereto.
ARTICLE 22
SURRENDER OF THE PROPERTY
Lessee shall and will on the last day of the term of this Lease or
other sooner termination hereof, well and truly surrender and deliver up the
Property into the possession of Lessor, its successors or assigns, and in good
order, condition and repair, except for reasonable wear and tear and damage by
fire or other casualty, free and clear of all liens, tenancies and encumbrances
other than those, if any, created by Lessor or permitted hereunder.
ARTICLE 23
MEMORANDUM OF LEASE
Lessor and Lessee shall, promptly upon the request of either, enter
into a short form memorandum of this Lease, in form suitable for recording under
the laws of the State of New Jersey, in which reference to this Lease shall be
made.
ARTICLE 24
AIR RIGHTS LEASE AND
COVENANT OF QUIET ENJOYMENT
24.1 Subject to the provisions of Section 2.3 hereof, Lessor will at
all times perform and comply with all of the terms and conditions of the Air
Rights Lease to be performed or complied with by the tenant thereunder and will
do all things necessary to keep unimpaired the leasehold estate created thereby
and to prevent any default thereunder or forfeiture thereof. Lessor will take,
or cause to be taken, any action consistent with the provisions of this Lease
permitted to be taken by the tenant under the Air Rights Lease with respect to
enforcement of the terms thereof against the landlord thereunder. Lessee
acknowledges that its rights and remedies pursuant to this Lease are, and shall
be, subject and subordinated to the duties and obligations of the tenant under
the Air Rights Lease and Lessee agrees not to take any action pursuant to this
Lease, or otherwise, which in any way, either with the passage of time or the
giving of notice, or both, would constitute a default under the Air Rights
Lease; provided, however, that none of the duties or obligations of Lessee
hereunder shall in any way be reduced or diminished as a result of this Lease
being subject and subordinate to the duties and obligations of the tenant under
the Ground Lease. Lessee and Lessor, as the case may be, will deliver to the
other and, to the extent required, any mortgagee, promptly upon receipt, a copy
of any notice, demand, declaration or other communication received from the
landlord under the Air Rights Lease including those relating to any alleged or
actual or potential default or breach on the part of the tenant thereunder.
<PAGE>
24.2 Lessor covenants that, so long as Lessee pays the Basic Rent and
Additional Rent, and faithfully performs and observes all covenants, conditions
and agreements herein contained on the part of Lessee to be performed or
observed, Lessee shall quietly have and enjoy the Air Space and the Expansion
Improvements and every part thereof throughout the entire term of this Lease.
ARTICLE 25
SUBORDINATION TO AND COMPLIANCE
WITH MORTGAGES
25.1 This Lease and the rights and remedies of Lessor and Lessee
pursuant to this Lease are, and shall be, subject and subordinate in all
respects to the liens of (a) that certain first mortgage and security agreement,
dated October 31, 1983, between Claridge Limited, as mortgagor and First
National State Bank, as mortgagee, as amended by that certain mortgage
modification agreement, dated the date hereof, which creates a first lien upon
the original Claridge Land, the original Claridge Improvements, the Air Space,
the Expansion Improvements and certain other personal property used in
connection therewith and (b) that certain purchase money second mortgage,
between Lessor, as mortgagor, and Claridge Limited, as mortgagee, dated October
31, 1983, as amended by that certain supplemental amendment, dated the date here
of, which creates a second lien upon the original Claridge Improvements and the
Property and any extensions, renewals, modifications, consolidations and
replacements of the mortgages described in (a) and (b) above. Lessee agrees not
to take any action pursuant to this Lease, or otherwise, which in any way,
either with the passage of time or the giving of notice, or both, would
constitute a default under any such mortgage. Lessee and Lessor, as the case may
be, will deliver to the other, promptly upon receipt, a copy of any notice,
demand, declaration or other communication received from any mortgagee.
25.2 Such subordination shall be automatically effective without any
further act of Lessor and Lessee, but Lessee agrees that to confirm such
subordination, Lessee will, from time to time, at the request of Lessor, execute
any instrument or instruments subordinating this Lease to any such mortgage or
mortgages, and in the event of the failure of Lessee to execute such instrument
or instruments on demand, Lessor is hereby made Lessee's agent to execute such
instrument or instruments for and on behalf of Lessee. This agency is coupled
with an interest and is irrevocable. If Lessor shall at any time fail to pay any
installment of interest or principal upon any mortgage to which this Lease is or
may be subject or any other charge or sums not required by the provisions of
this Lease to be paid by Lessee, and the default in the payment of which would
constitute a default under the terms of any such mortgage permitting an
acceleration and foreclosure thereof, Lessee on two (2) days' notice to Lessor
shall have the right forthwith to pay the same, together with any foreclosure
costs, and deduct the amount thereof, with interest at the Prime Rate per annum,
from the Basic Rent or Additional Rent payments becoming due under the
provisions hereof, until the full amount so paid shall have been deducted. This
remedy, however, shall not prevent Lessee from recovering from Lessor by action
or otherwise the full amount of such payment to the extent that deductions have
not actually been made, or from being subrogated to the rights of the owner or
holder of any such mortgage so far as the same may be allowed by law. Lessor
agrees to provide Lessee with a copy of each such mortgage or mortgages within
ten (10) days after the execution and delivery thereof.
25.3 Lessor shall use all reasonable efforts to obtain from mortgagees
described in Section 25.2 hereof an agreement from such mortgagees wherein such
mortgagees agree in substance that so long as Lessee is not in default: (A)
Lessee will not be disturbed in Lessee's possession of the Property by any
holder of the mortgage; (B) Lessee will not be joined in any action or
proceeding to foreclose the mortgage by any holder thereof; and (C) casualty
insurance proceeds and condemnation awards to which the holder of the mortgage
is entitled under the terms of the mortgage will be applied toward restoration
<PAGE>
of the Property. The giving of any such agreement by the mortgagee may be
conditioned by it on the reciprocal agreement by Lessee to attorn to the holder
of the mortgage should it become vested with title to the Property.
ARTICLE 26
CERTIFICATES
26.1 Within ten (10) days after receipt of written request therefor,
Lessor will execute, acknowledge and deliver to Lessee a statement in
writing certifying that this Lease is unmodified and in full force and effect
(or if there have been modifications that this Lease is in full force and effect
as modified and stating the modifications) and the dates to which the Basic Rent
and Additional Rent have been paid and stating whether, to the best knowledge of
the signer of such certificate, Lessee is in default in the performance of any
covenant, agreement or condition contained in this Lease, and if so, specifying
each such default of which the signer may have knowledge, it being intended that
any such statement delivered pursuant to this Section 26.1 may be relied upon by
any assignee of Lessee.
26.2 Within ten (10) days after receipt of written request therefor
Lessee will execute, acknowledge and deliver to Lessor a statement in writing
certifying that this Lease is unmodified and in full force and effect (or if
there have been modifications that this Lease is in full force and effect as
modified and stating the modifications) and the dates to which the Basic Rent
and Additional Rent have been paid and stating whether, to the best knowledge of
the signer of such certificate, Lessor is in default in the performance of any
covenant, agreement or condition contained in this Lease, and if so, specifying
each such default of which the signer may have knowledge, it being intended that
any such statement delivered pursuant to this Section 26.2 may be relied upon by
any holder of a fee mortgage on Lessor's Interest in the Property or any
assignee of any such holder or any purchaser or grantee of Lessor's Interest in
the Property.
26.3 No such certification shall estop Lessor or Lessee, as the case
may be, thereafter to assert any then existing default of which it did not have
actual knowledge on the date of the making of such certification.
ARTICLE 27
NEW JERSEY CASINO CONTROL ACT
27.1 Notwithstanding anything to the contrary contained in this Lease,
this Lease will be deemed to include all provisions required by the New Jersey
Casino Control Act (the "Act"), and shall be conditioned upon the approval of
the New Jersey Casino Control Commission ("Commission"). To the extent that
anything in this Lease is inconsistent with the Act, the provisions of the Act
shall govern. All provisions of the Act, to the extent required by law to be
included in this Lease, are incorporated by reference as if fully restated in
this Lease.
This Lease is subject to the terms and provisions of the Act, shall be
submitted to the Commission for approval and shall not be effective unless and
until approved, or such approval is waived, by the Commission.
27.2 Lessor, Lessee and their successors or assigns, covenant and agree
that each party shall obtain and hold throughout the term of this Lease such
license as may be required by the Commission to the extent such license or
licenses are necessary for the approval of this Lease and the operation of the
hotel and casino within the Air Space and in the Expansion Improvements.
If the Commission denies licensure or renewal of a license or should
attempt to revoke or suspend any license theretofore issued with respect to
Lessor or Lessee and their successors or assigns or makes a finding of
unsuitability of any of the above persons or entities or any persons or entities
associated with them or if the Division of Gaming Enforcement of the State of
New Jersey (the "Division") objects to such licensure or to such suitability (a
"Disqualification") Lessor or Lessee subject to Disqualification, its
successors or assigns shall promptly take any and all actions necessary to
obtain a reversal of each Disqualification. Prior to the expiration of thirty
(30) days after any Disqualification, Lessor, Lessee, their successors and
assigns covenant and agree to take all steps and do all acts necessary which
would satisfy the Commission and/or the Division, whichever shall have been the
objector, or the commission, notwithstanding the objections of the Division, in
order to obtain or maintain licensure by the Commission, including, but not
limited to (A) divesting itself of its interest in and to the Property; (B)
causing any disqualified person to divest himself or itself of any interest in
and to the Property and/or (C) severing its association with such disqualified
person to the satisfaction of the Commission and/or the Division. If Lessor is
the party subject to Disqualification and the Disqualification is not eliminated
by Lessor within such thirty (30) day period, Lessee shall purchase the Lessor's
Interest in the Property for the purchase price set forth below:
Year Purchase Price
---- --------------
1986 $17,000,000
1987 $17,850,000
1988 $18,742,500
<PAGE>
The purchase price will be adjusted in 1988 to determine the purchase price for
the five (5) year period commencing 1989 and every five (5) years thereafter in
accordance with the procedure and formula set forth below:
Not later than April 1, 1988 and April 1 every five (5)
years thereafter, Lessor shall cause the President of the American
Institute of Real Estate Appraisers to appoint three (3) independent
appraisers, each of whom shall be a qualified member of the American
Institute of Real Estate Appraisers with experience in commercial real
estate. Each independent appraiser will thereafter determine the value
of the Lessor's Interest in the Property in accordance with the
standards set forth in the Code of Professional Ethics and Standard of
Professional Conduct of the American Institute of Real Estate
Appraisers by not later than August 31 of the year of his appointment;
provided, however, that such value shall take into account the fact
that Lessor's Interest in the Property shall be used in conjunction
with the original Claridge Improvements and the Original Claridge Land.
If such appraisals shall not be completed as above provided, the
purchase price payable to acquire the Lessor's Interest in the Property
shall remain the existing purchase price until such appraisal is
completed. The purchase price payable to acquire Lessor's Interest in
the Property shall be determined in accordance with the following
formula:
Income Approach Method Value of Appraiser No. 1
+ Income Approach Method Value of Appraiser No. 2
+ Income Approach Method Value of Appraiser No. 3
-----------------------------------------------
= Purchase Price
divided by 3
The purchase price shall be payable by the purchaser
taking title to Lessor's Interest in the Property subject to any then
existing mortgage and payment of the difference between the purchase
price and such balance: (i) in cash; or (ii), subject to the prior
approval of the Commission, ten percent (10%) in cash and the remainder
of such balance by the execution and delivery of a purchase money note
in said amount, which note shall be payable over fifteen (15) years in
quarterly installments of principal; interest shall be payable at the
purchaser's option, at a fixed rate of interest equal to the Prime
Rate, or a floating Rate adjusted annually to equal the then Prime
Rate. The foregoing method and amount of payments shall be adjusted by
Lessor and Lessee to reflect the fact that any then existing mortgage
indebtedness may be secured by mortgages encumbering the Original
Claridge Land and the original Claridge Improvements.
If Lessor's Interest in the Property is acquired under
this Section 27.2, this Lease shall be deemed to be terminated and all
payments required to be made upon termination hereunder shall be paid
by Lessee at the time the purchase price is paid.
<PAGE>
If Lessee is the party subject to Disqualification and the Disqualification is
not eliminated by the Lessee within such thirty (30) day period, Lessor shall
have the option at its sole election, to terminate this Lease at the expiration
of the thirty (30) day period by written notice to Lessee. If Lessor exercises
this right of termination, the term of this Lease shall expire and terminate
five (5) days after Lessee's receipt of such notice and Basic Rent and
Additional Rent herein reserved and provided to be paid by Lessee shall be paid
as of the date of such expiration.
27.3 The provisions of Article 27 hereof to the contrary
notwithstanding, Lessor and Lessee shall be jointly and severally liable for all
acts omissions and violations of this Act by either party regardless of actual
knowledge of such act, omission or violation and notwithstanding any provision
in this Lease to the contrary.
ARTICLE 28
NOTICES
Any notice, document or other communication (hereinafter, "notice")
which either party may be required or may desire to give to the other party
shall be in writing, and any such notice may be given or delivered personally or
by mail.
Any such notices given or delivered personally shall be given or
delivered by hand to an officer of the entity, to which they are being given or
delivered if the entity shall be a corporation, or to the managing partner if
the entity to which they are being given or delivered is a partnership, and
shall be deemed given or delivered when so given or delivered by hand. Any such
notices given or delivered by mail shall be deemed given or delivered when
deposited in the U.S. mails, certified or registered mail, return receipt
requested, with all postage and fees prepaid, addressed to the person or entity
in question as follows:
If to Lessor:
Atlantic City Boardwalk Associates, L.P.
The Claridge Hotel and Casino
Indiana Avenue and the Boardwalk
Atlantic City, New Jersey 08401
Attention: Managing General Partner
If to Lessee:
The Claridge at Park Place, Incorporated
The Claridge Hotel and Casino
Indiana Avenue and the Boardwalk
Atlantic City, New Jersey 08401
Attention: President
or, in either case, to such other address as either party may have previously
notified the other pursuant to the provisions of this Article 28.
ARTICLE 29
SEVERABILITY
If and to the extent that any provision of this Lease shall be unlawful
or contrary to public policy, the same shall not be deemed to invalidate the
other provisions of this Lease. This Lease may not be changed orally but only
<PAGE>
by an agreement in writing and signed by the parties against whom enforcement of
any waiver, change, modification or discharge is sought.
ARTICLE 30
WAIVER OF TRIAL BY JURY
It is mutually agreed by and between Lessor and Lessee that the
respective parties hereto shall and they hereby do waive trial by jury in any
action, proceeding or counterclaim brought by either of the parties hereto
against the other on any matters whatsoever arising out of or in any way
connected with this Lease, the relationship of Lessor and Lessee, Lessee's use
or occupancy of the Property, and/or any claim of injury or damage.
<PAGE>
ARTICLE 31
SUCCESSORS AND ASSIGNS
Each and all of the provisions, agreements, covenants and conditions of
this Lease shall extend to and shall bind and be obligatory upon or inure to be
the benefit of (as the case may require and in each instance as though
specifically so stated) not only Lessor and Lessee, but also the successors and
assigns of Lessor and the successors and assigns of Lessee.
ARTICLE 32
LESSOR/LESSEE RELATIONSHIP
None of the terms, provisions and conditions of this Lease shall be
construed as creating or constituting either party as a co-partner or joint
venturer with the other, or constituting Lessee the agent of Lessor, it being
the intention of the parties that their relationship created hereunder is and
shall continue to be that of lessor and lessee only.
ARTICLE 33
LIMITATION OF LIABILITY
Notwithstanding anything to the contrary contained in this Lease, it is
specifically understood and agreed that the liability of Lessor hereunder shall
be limited to Lessor's interest in the Property, and Lessee hereby agrees not
seek any judgment against Lessor, or any general or limited partner of Lessor,
or any principal of Lessor, any partner or officer thereof, disclosed or
undisclosed, for any reason whatsoever.
ARTICLE 34
GOVERNING LAW
This lease shall be governed by and construed and enforced in
accordance with the laws of the State of New Jersey.
ARTICLE 35
SECURITY INTEREST PROVISION
To secure the obligation of Lessee to perform the terms and conditions
of this Lease, but subject to the rights of any mortgagee described in Article
25 hereof, (i) Lessee does hereby grant to Lessor, as secured party, a security
interest: in Lessee's option to purchase the Air Space pursuant to that certain
Amended and Restated Option Agreement of even date herewith by and between DEWNJ
and Lessee and (ii) Lessee does hereby grant to Lessor, as secured party, a
further security interest in any and all trade names and trademarks of Lessee
(collectively, the foregoing are hereinafter referred to as the "Collateral").
Lessor and Lessee have currently herewith entered into a separate security
agreement evidencing the creation of such security interests. Upon the failure
of Lessee to cure any default hereunder within the applicable grace period,
Lessor shall have the right to exercise any and all rights and remedies of
Lessor with respect to the Collateral set forth in such security agreement.
ARTICLE 36
EFFECT OF CONVEYANCE
The term "Lessor", as used in this Lease, means only the owner for the
time being of the Expansion Improvements and the Lessor's interest under the Air
Rights Lease. Therefore, in the event of any conveyance of the Expansion
Improvements and the Lessor's interest under the Air Rights Lease, the seller
shall be and hereby is entirely freed and relieved of all covenants and
obligations of Lessor hereunder, not theretofore accrued, and it shall be deemed
and construed, without further agreement between the parties hereto or between
the parties hereto and the grantee of the Expansion Improvements and the
<PAGE>
Lessor's interest under the Air Rights Lease, that such grantee has assumed and
agreed to execute any and all covenants and obligations of Lessor hereunder.
ARTICLE 37
RELATIONSHIP TO ORIGINAL OPERATING LEASE
37.1 Notwithstanding anything herein contained to the contrary:
(a) If Lessor for any reason shall have the right to
terminate the original Operating Lease, Lessor shall also have the
right to terminate this Lease. If Lessor shall have the right to
terminate this Lease, Lessor may exercise such right provided that
Lessor shall concurrently therewith terminate the Original Operating
Lease. If Lessor for any reason shall terminate the original Operating
Lease, Lessor shall thereupon be deemed to have terminated this Lease.
(b) If Lessee for any reason shall have the right to
terminate the Original operating Lease, Lessee shall also have the
right to terminate this Lease. If Lessee shall have the right to
terminate this Lease, Lessee may exercise such right provided that
Lessee shall concurrently therewith terminate the Original Operating
Lease. If Lessee for any reason shall terminate the original operating
Lease, Lessee shall thereupon be deemed to have terminated this Lease.
37.2 If this Lease shall terminate pursuant to the provisions of this
Article 37, the Basic Rent and Additional Rent herein reserved and provided to
be paid by Lessee shall be apportioned as of the date of such termination.
IN WITNESS WHEREOF, the respective parties hereto have duly executed
and acknowledged this instrument as of the day and year first above written.
LESSOR
ATLANTIC CITY BOARDWALK
ASSOCIATES, L.P.
By: /s/ T. Edward Plant
-----------------------------
T. Edward Plant
General Partner
LESSEE
THE CLARIDGE AT PARK PLACE,
INCORPORATED
By: /s/ Roger P. Wagner
-----------------------------
Roger P. Wagner
President
<PAGE>
If on the relevant Option Date the undersigned owns fifty percent
(50%), directly or indirectly, or more of Lessee, the undersigned hereby fully
and unconditionally guarantees Lessee's obligations under the Option Note.
DEL E. WEBB CORPORATION
By: /s/ Donald V. Mickus
-----------------------------
Donald V. Mickus
Vice President
<PAGE>
EXHIBIT A
REAL PROPERTY
Land Description
ALL that certain land and premises situate in the City of Atlantic City, County
of Atlantic and State of New Jersey, bounded and described as follows:
TRACT #1 - BEGINNING at a point in the Easterly line of Indiana Avenue 150 feet
Southwardly of the Southerly line of Pacific Avenue; and extending thence
(1) Eastwardly parallel with Pacific Avenue 155 feet; thence
(2) Southwardly parallel with Indiana Avenue 50.1 feet; thence
(3) Westwardly parallel with Pacific Avenue 155 feet to the Easterly line
of Indiana Avenue; thence
(4) Northwardly along the same 50.1 feet to the point and place of
beginning.
BEING known as 111 and 113 South Indiana Avenue.
TRACT #2 - BEGINNING at a point in the Westerly line of Indiana Avenue 150 feet
Southwardly of the Southerly line of Pacific Avenue; and extending thence
(1) Southwardly along the Westerly line of Indiana Avenue 300 feet; thence
(2) Westwardly at right angles to Indiana Avenue 138.10 feet to the
Easterly line of Park Place; thence
(3) Northwardly along the same 300 feet; thence
(4) Eastwardly at right angles to Park Place 138.10 feet to the Westerly
line of Indiana Avenue and point and place of beginning.
TRACT #3 - BEGINNING at a point in the Easterly line of Ohio Avenue 200 feet
Southwardly of the Southerly line of Pacific Avenue; and extending thence
(1) Eastwardly parallel with Pacific Avenue 145.6 feet to the Westerly
line of Park Place; thence
(2) Southwardly along the same 150 feet; thence
(3) Westwardly parallel with Pacific Avenue 145.6 feet to the Easterly
line of Ohio Avenue; thence
(4) Northwardly along the same 150 feet to the point and place of
beginning.
In Compliance with Chapter 157, Laws of 1977 premises situate herein are known
as Lots #8 and 9, Lot #16, in Block #31 and Lot #35 in Block #30 on the tax map
of the above City.
<PAGE>
The Air Space
ALL that certain real property in the City of Atlantic City, County of Atlantic,
State of New Jersey, which lies above (but not below) the horizontal plane the
elevation of which is 26.0 above that certain Datum Level which designates as
zero an elevation equal to mean sea level at Atlantic City, as computed and
established by the United States Coast and Geodetic Survey and which lies below
(but not above) another horizontal plane the elevation of which is 71.5 above
said Datum Level, and which is bounded by and lies within that certain plot or
parcel described as follows:
ALL that certain lot, tract, or parcel of land and premises situate,
lying, and being in the City of Atlantic City, County of Atlantic, and State of
New Jersey, bounded and described as follows:
BEGINNING at a point in the westerly line of Park Place (60' wide), said point
being distant 200.00' south of the southerly line of Pacific Avenue (60' wide),
and extending from said beginning point; thence
(1) South 27 degrees 28' 00" East, in and along the westerly line of Park
Place, a distance of 150.00' to a point; thence
(2) North 89 degrees 42' 23" East, crossing Park Place, a distance of
67.44' to the easterly line of Park Place; thence
(3) North 27 degrees 28' 00" West, in and along the easterly line of Park
Place, a distance of 180.80'; thence
(4) South 62 degrees 32' 00" West crossing Park Place, a distance of 60.00'
to the point and place of BEGINNING.
CONTAINING an area of 9924 square feet.
<PAGE>
EXHIBIT B
PERMITTED EXCEPTIONS
2. (a) Building restrictions as set forth in Deed Book 46, Page 29
(affects Tract 1).
(b) Building restrictions as set forth in Deed Book 72, Page 655 and
658 (Affects the southerly 200 feet of Tract 2).
(c) Building restrictions as set forth in Deed Book 74, Page 544, Deed
Book 75, page 699 and Deed Book 84, page 474 and 476 (Affects northerly
100 feet of Tract 2).
(d) Building restrictions as set forth in Deed Book 73, Page 7 (Affects
northerly 50 feet of Tract 2).
(e) Building restrictions as set forth in Deed Book 76, Page 41
(Affects southerly 150 feet of Tract 2).
Restrictions have been violated as to the sale of spirituous, vinous
liquors. This Policy guarantees that any violation of said restrictions
shall not cause forfeiture or reversion of title and also insures
against loss by reason of enforcement of the restrictions. This Policy
also guarantees that any enforcement of the remaining restrictions
shall not cause a forfeiture or reversion of title.
3. Based upon a survey prepared by Arthur W. Ponzio Co. & Associates Inc.,
dated 12/20/84, revised to 3/14/86, the Company hereby insures against
loss or damage which the insured shall sustain by reason of any
encroachments, overlaps, boundary line disputes, or easements, except
as follows:
(1) Overhang in North wall of buildings erected on Block 30, Lot
35 encroaches on premises to North .33 feet.
(2) Overhang in South wall of buildings erected on Block 30, Lot
35 encroaches on premises to South .33 feet.
(3) Overhang in East wall of building erected on Block 31, Lot 16
encroaches on Indiana Avenue 2.00 feet.
(4) East wall of buildings erected on Block 31, Lot 16 encroaches
on Indiana Avenue .06 feet.
(5) Overhang in East wall of buildings erected on Block 31, Lot 16
encroaches on Indiana Avenue 7.00 feet.
(6) South wall of buildings erected on Block 31, Lot 18 encroaches
on Block 31, Lot 16 .11 feet.
(7) overhang in West wall of buildings erected on Block 31, Lot 16
encroaches on Park Place 7.00 feet.
(8) West wall of buildings erected on Block 31, Lot 16 encroaches
on Park Place .07 feet.
Title policy insures that the above referred to encroachments may
remain where presently located for the life of the structure.
4. Liens of taxes 1986, First One Quarter paid, Second Quarter not yet
payable.
<PAGE>
4a. Subject to Liability for additional assessment in connection with new
construction pursuant to N.J.S.A. 54: 4-63.1 et. seq.
5. Rights or claims of parties in possession not shown by the public
records as licensee only, being Final Touch Beauty Salon, Inc, and Host
International, Inc.
6. Mortgage made by Claridge Limited, a New Jersey limited partnership to
First National State Bank, dated as of October 31, 1983, recorded in
the office of the clerk of Atlantic County on October 31, 1983 as
Mortgage Book 2908, Page 178 as modified to secure the amount of
$96,500,000.
7. Mortgage made by Atlantic City Boardwalk Associates, L.P., a New Jersey
Limited partnership, dated as of October 31, 1983, recorded in the
office of the clerk of Atlantic County on October 31, 1983 as mortgage
Book 2908, Page 197 as modified to secure the amount of $47,000,000,00.
8. Mortgage made by Atlantic City Boardwalk Associates, L.P., a New Jersey
Limited Partnership to The Claridge At Park Place, Incorporated, a
Corporation of New Jersey, dated as of October 31, 1983, recorded in
the office of the Clerk of Atlantic County on October 31, 1983 as
Mortgage Book 2908, Page 246 as modified to secure up to the amount of
$152,000,000.00.
9. Subject to the ground lease agreement, Claridge Limited to Atlantic
City Boardwalk Associates L.P., dated as of 10-31-83 recorded 10-31-83,
in Deed Book 3850, Page 178 and in the operating lease Atlantic City
Boardwalk Associates L.P., to the Claridge at Park Place dated as of
10-31-83, recorded 10-31-83 in Deed Book 3850, Page 204, as modified.
10. Subject to Assignment of Lessors Interest, Claridge Limited to First
National State Bank dated October 31, 1983, recorded October 31, 1983
as Deed Book 3850, Page 123 as modified in the Clerk's Office of
Atlantic County. (Information Only).
11. Subject to Assignment of Lessors Interest, Atlantic City Boardwalk
Associates, L.P., to First National State Bank dated October 31, 1983,
recorded October 31, 1983 as Book 3850, Page 159 as modified in the
Clerk's Office of Atlantic County.
12. Subject to the Terms and Conditions of the Land Option Agreement, Del
E. Webb New Jersey, Inc., to The Claridge at Park Place, Incorporated
dated as of 10-31-83, recorded 10-31-83, in Deed Book 3850, Page 213 as
modified.
13. Subject to Financing Statement: Del E. Webb New Jersey Inc., to First
National State Bank filed October 31, 1983 as modified in File 4486 and
filed in the Office of the Secretary of State.
14. Subject to Financing Statement: The Claridge at Park Place to First
National State Bank filed October 31, 1983 as modified in File 4488 and
4489 and filed in the office of the Secretary of State.
15. Subject to Financing Statement: Atlantic City Boardwalk Associates,
L.P., to First National State bank filed October 31, 1983 as modified
in File 4487 and in the office of the Secretary of State.
16. Subject to Financing Statement: Atlantic City Boardwalk Associates,
L.P., to Claridge Limited filed October 31, 1983 as modified in File
4482.
17. Subject to Financing Statement: Atlantic City Boardwalk Associates,
L.P., to The Claridge at Park Place Incorporated filed October 31, 1983
as modified in File 4484.
<PAGE>
18. Subject to Financing Statement: Atlantic City Boardwalk Associates,
L.P., to Chemical Business Credit Corp., filed 5-22-84, in File 5309,
and file 5310; filed 6-19-84, as modified in File 5430.
19. Subject to Financing Statement: Atlantic City Boardwalk Associates,
L.P., to Germantown Savings Bank filed 12-7-84, as modified in File
6204. (copies attached).
20. The Claridge at Park Place Incorporated to Atlantic City Boardwalk
Associates, L.P., filed 10-31-83, file 4483, as modified to DEWNJ.
21. Subject to the Terms of the Deed for the Air Rights over Park Avenue:
However, Policy insures that said terms have been complied with to date
and future violation will not cause forfeiture or reversion of title.
22. Subject to the terms of the Easement Atlantic City to Del E. Webb New
Jersey, Inc. However, Policy insures that said terms have been complied
with to date and future violation will not cause forfeiture or
reversion of title.
23. As to Air Rights Parcel and Easement Agreement, Policy does not insure
same until said documents are executed and recorded.
<PAGE>
EXHIBIT 10(i)
FIRST SUPPLEMENTAL AMENDMENT
TO
EXPANDABLE WRAPAROUND MORTGAGE
AND SECURITY AGREEMENT
THIS FIRST SUPPLEMENTAL AMENDMENT (this "Supplemental Wraparound
Mortgage") is made as of this 17th day of March, 1986 to the Expandable
Wraparound Mortgage and Security Agreement dated as of October 31, 1983 from
Atlantic City Boardwalk Associates, L.P., a New Jersey limited partnership
("Mortgagor"), having an address at The Claridge Hotel and Casino, Indiana
Avenue and the Boardwalk, Atlantic City, New Jersey 08401, to The Claridge at
Park Place, Inc., a New Jersey corporation, having an address at The Claridge
Hotel and Casino, Indiana Avenue and the Boardwalk, Atlantic City, New Jersey
("Mortgagee"), and recorded on October 31, 1983, in the office of the Clerk of
Atlantic County, New Jersey, in Mortgage Book 2908 at Page 246 (the "Wraparound
Mortgage").
Capitalized terms used herein and not otherwise defined are used as
defined in the Wraparound Mortgage.
W I T N E S S E T H
PREAMBLE
WHEREAS, Mortgagor plans to build an expansion of the Claridge Hotel
and Casino;
WHEREAS, Mortgagor holds a leasehold estate in the parcel or parcels of
land located in the City of Atlantic City, County of Atlantic and State of New
Jersey described in Exhibit A hereto, and has acquired on the date hereof a
leasehold interest in the air space (the "Air Space") located in the city of
Atlantic City, County of Atlantic and State of New Jersey described in Exhibit A
hereto (collectively said parcel or parcels of land and the Air Space hereafter
called the "Land") pursuant to the "Ground Lease" and is the owner of the
"Improvements" on the Land (as such quoted terms are hereinafter defined);
WHEREAS, the Ground Lease, Land and Improvements are subject to the
liens and security interests of those certain mortgages and the terms of those
certain loan agreements more particularly described in Exhibit B hereto
(collectively, the "Superior Mortgages");
WHEREAS, Mortgagor is indebted to Mortgagee in the principal sum of up
to one hundred forty-four million dollars ($144,000,000) as evidenced by that
certain wraparound mortgage note dated as of October 31, 1983, as amended on the
date hereof, made by Mortgagor to Mortgagee in the original principal amount of
$127,000,000 and that certain expansion wraparound mortgage note (the "Expansion
Wraparound Note") dated as of the date hereof made by Mortgagor to Mortgagee in
the amount of up to $17,000,000 (collectively, the "Note") and that certain loan
agreement dated as of October 31, 1983 between Mortgagor, as borrower, and
Mortgagee, as lender, as amended on the date hereof (the "Loan Agreement"), the
terms of which Note and Loan Agreement are incorporated herein, and made a part
hereof, by reference to the same extent and effect as if fully set forth herein;
<PAGE>
WHEREAS, pursuant to the "Operating Lease", (as such quoted term is
hereinafter defined), Mortgagor has subleased the Land and leased the
Improvements to Mortgagee subject to the liens of the Superior Mortgages and
Mortgagee has agreed to make certain loans (the "Operating Lease Loans") to
Mortgagor to finance the purchase of "FF&E Replacements" and to provide
"Facility Maintenance and Engineering Services" which Operating Lease Loans, if
any are to be evidenced from time to time by "FF&E Notes" and "Maintenance
Shortfall Notes" (as such quoted terms are defined in the Operating Lease);
WHEREAS, pursuant to the "Expansion Operating Lease" (as such quoted
term is hereafter defined), Mortgagor has agreed to make certain loans (the
"Expansion operating Lease Loans") to Mortgagor to finance the purchase of
"Expansion FF&E Replacements" and to provide "Expansion Facility Maintenance and
Engineering services" which Expansion Operating Lease Loans, if any, are to be
evidenced from time to time by "Expansion FF&E Notes" and "Expansion Maintenance
Shortfall Notes" (as such quoted terms are defined in the Operating Lease); and
WHEREAS, Mortgagor desires to secure the payment of (i) all principal,
interest and other sums payable pursuant to the Note and all replacements,
renewals, extensions, supplements, modifications, and consolidations thereof,
(ii) the Loan Agreement, (iii) all amounts payable to Mortgagee pursuant to this
Mortgage.(the Note, the Loan Agreement, this Mortgage, the FF&E Notes, the
Expansion FF&E Notes, the Maintenance Shortfall Notes, the Expansion Maintenance
Shortfall Notes and all additional documents given as security for any of the
foregoing, being hereinafter collectively referred to as the "Security
instruments", and all amounts payable by Mortgagor pursuant to the Security
Instruments, subject to the $25,000,000 limitation on the FF&E Notes, the
Expansion FF&E Notes, Maintenance Shortfall Notes and the Expansion Maintenance
Shortfall Notes as hereinafter described, being hereinafter sometimes referred
to collectively as the "Indebtedness"); and the performance and observance of,
and compliance with, all of the terms, covenants, conditions and provisions of
the Security Instruments which Mortgagor is obligated to perform or observe or
with which Mortgagor is obligated to comply; and (iv) all amounts payable to
Mortgagee under (a) any FF&E Notes and the Expansion FF&E Notes executed and
delivered prior to October 1, 1995 and (b) any Maintenance Shortfall Notes and
the Expansion Maintenance Shortfall Notes, but in both cases only up to an
aggregate principal amount of Twenty- Five Million Dollars ($25,000,000).
WHEREAS, Mortgagee and Mortgagor wish to spread the lien of the
Wraparound Mortgage to cover Mortgagor's leasehold interest in the Air Space and
its fee interest in the "Expansion Improvements" (as such quoted term is
hereafter defined).
NOW, THEREFORE, Mortgagor, in consideration of the loan evidenced by
the Expansion Wraparound Note and in consideration of the Expansion Operating
Lease Loans and for other good and valuable consideration, receipt of which is
hereby acknowledged, and for the purpose of further securing payment of all
principal, interest and other sums payable pursuant to the Note; payment of all
other Indebtedness; and the performance and observance of all of the terms,
covenants, conditions and provisions of the Security Instruments which Mortgagor
is obligated to observe and perform, does hereby agree to amend the Wraparound
Mortgage as follows:
1. The Preamble is hereby deleted and replaced with the Preamble
hereto.
2. GRANTING CLAUSE I is hereby deleted and replaced with the following:
"Leasehold Estate. All of Mortgagor's leasehold estate under any right,
title and interest in and to that certain ground lease dated as of October 31,
1983 between Del E. Webb New Jersey, Inc. ("DEWNJ"), as lessor, and Mortgagor,
as lessee, a short form of which was recorded on October 31, 1983 in the office
of the Clerk of Atlantic County, New Jersey in Deed Book 3850 at Page 178 and in
that certain air rights lease dated as of the date hereof between DEWNJ, as
lessor, and Mortgagor, as lessee, a short form of which is intended to be
recorded in the office of the Clerk of Atlantic County, New Jersey, prior to the
recording of this Supplemental Wraparound Mortgage (said leases being
hereinafter referred to collectively as the "Ground Lease"), together with all
<PAGE>
other, further or additional estates, rights, titles or interests which may at
any time be acquired by Mortgagor by the terms of the Ground Lease, by reason of
the exercise of options thereunder or by reason of amendments, modifications,
supplements, extensions and renewals of the Ground Lease; and together with all
rights and benefits of whatsoever nature derived or to be derived by virtue of
the Ground Lease, including the rights to exercise options., to give consents,
to modify, amend or terminate the Ground Lease, to surrender the Ground Lease
and to receive any monies payable to the lessee thereunder; and all ' rights of
way or use, servitudes, licenses, easements, hereditaments and appurtenances
belonging to the real property demised thereunder."
3. GRANTING CLAUSE II and the term "Improvements" is hereby amended to
include the following:
"Expansion Improvements. The buildings, structures and other
improvements of every kind and description now or hereafter located in the Air
Space, and all materials now owned or hereafter acquired by Mortgagor intended
for construction, reconstruction, repair, alteration, addition, or improvement
of or to such buildings, structures and improvements, all of which materials
shall be deemed to be expansion improvements immediately upon delivery thereof
to Mortgagor, and all fixtures and articles of "Personal Property" (as such
quoted term is hereinafter defined) of every kind and description now or
hereafter located on or attached to the expansion improvements which by the
nature of their attachment to the expansion improvements become real property
pursuant to applicable law, including all additions thereto, proceeds received
upon voluntary or involuntary disposition thereof, and all renewals or
replacements thereof or articles in substitution therefor, it being agreed that,
to the fullest extent permitted by applicable law, the Personal Property shall
be deemed to be fixtures and a part of the expansion improvements (all of the
foregoing being hereinafter collectively called the "Expansion Improvements")."
4. GRANTING CLAUSE IV and the term "Agreements" is hereby amended to
include all of Mortgagor's right, title and interest in the agreements and other
instruments described in Schedule C hereto.
5. GRANTING CLAUSE V and the term "Operating Lease" is hereby amended
to include all of Mortgagor's right, title and interest in, to an under that
certain Expansion Operating Lease (the "Expansion operating Lease") dated the
date hereof made by Mortgagor to the Operating Company, a short form of which is
intended to be recorded immediately after the recording of this Supplemental
Wraparound Mortgage in the office of the Clerk of Atlantic County, New Jersey,
together with all renewals and extensions thereof and subleases thereunder and
tenancies following attornment, and together with all guaranties of the
obligations of the Operating Company thereunder.
6. GRANTING CLAUSE VIII and the term "Rents" is hereby amended to
include all rents and other sums now or hereafter, including during any period
of redemption, accruing with respect to the Property and payable to Mortgagor
pursuant to the Expansion Operating Lease.
7. The term "Permitted Exceptions" is hereby amended to include the
items and matters described on Schedule D hereto.
8. The term "Loan Agreement" is hereby amended to include any and all
amendments supplements and modifications thereto.
9. The term "Mortgaged Property" is hereby deleted and replaced with
the following: "Mortgaged Property" means all of the property, rights and
interests contained in GRANTING CLAUSES I through X inclusive.
10. The term "this Mortgage" is hereby amended to include this
Supplemental Mortgage.
11. Mortgagor hereby confirms and reaffirms as true on the date hereof
each and every warranty and covenant of Mortgagor set forth in Article II of the
Wraparound Mortgage, as amended hereby, except as set forth in Schedule E
hereto.
<PAGE>
12. Section 2.09 is hereby amended so that the dollar amount on lines
23 and 31 of page 16 are hereby deleted and replaced by the dollar amount
"$144,000,000.00".
13. The following is hereby inserted immediately following subparagraph
(d) on page 17:
"(e) Subject to the conditions hereinafter set forth in Clauses (1)
through (7) below, Mortgagee may at its sole option, at any time and from time
to time, cause to be placed on the Mortgaged Property one or more mortgages
("prior mortgages") and may at its sole option, at any time and from time to
time refinance (which shall mean extend, modify, replace, increase, refinance,
or consolidate (including without limitation a consolidation with the Wraparound
Mortgage)), any prior mortgage, including the Superior Mortgages (any such prior
mortgage so refinanced being hereinafter referred to as a "new prior mortgage"),
and this Mortgage shall be subject and subordinate to any prior mortgage and/or
any new prior mortgage. For purposes of this clause (e), the term "Principal
Balance" when used in connection with any prior mortgage or new prior mortgage
shall include the amount of any deferrals of interest thereunder and when used
in connection with this Mortgage shall include any deferrals of interest
hereunder but without regard to FF&E Notes and Expansion FF&E Notes in excess of
$5,000,000) and without regard to Maintenance Shortfall Notes and Expansion
Maintenance Shortfall Notes.
Such prior mortgage or mortgages or new prior mortgage or mortgages
shall comply with the following:
(1) All proceeds, if any, shall be the property of Mortgagee, shall not
be deemed to reduce the Principal Balance of this Mortgage, or to reduce,
abridge or postpone the obligation of Mortgagor to make the regular payments set
out in the Note evidencing the indebtedness secured hereby and shall be paid to
Mortgagee, in consideration of the covenant of Mortgagee herein contained to
make all payments of the principal and interest payable pursuant to the prior
mortgages and/or each new prior mortgage as hereinabove provided; provided
however that Mortgagee shall not at any time permit the aggregate of the unpaid
Principal Balance of any prior mortgage or new prior mortgages to exceed the
unpaid principal balance of this Mortgage.
(2) The prior mortgages and the new prior mortgages shall amortize in
such manner so that the aggregate unpaid Principal Balance thereof shall not at
any time be greater than the unpaid Principal Balance of this Mortgage.
(3) If the proceeds of any new prior mortgage are insufficient to pay
the holder of any prior mortgage being refinanced the unpaid Principal Balance
then due such holder, the deficiency shall be paid by Mortgagee.
(4) Mortgagee shall pay all expenses necessary to consummate the
closing of any prior mortgage or new prior mortgage.
(5) The aggregate unpaid Principal Balance of the prior mortgages and
the new prior mortgages, if any, shall not exceed the unpaid Principal Balance
of this Mortgage.
(6) Such prior mortgages and new prior mortgages shall mature at or
after the maturity of this Mortgage and if maturity is after the maturity of
this Mortgage, the same shall be prepayable, with or without penalty, at the
maturity of this Mortgage.
(7) So long as any Superior Mortgage shall continue as a lien upon the
Mortgaged Property, each such prior mortgage or new prior mortgage shall, by its
terms, be expressly subordinate to such Superior Mortgage.
<PAGE>
To accomplish the payment to Mortgagee of all proceeds of any such
prior mortgage or mortgages or new prior mortgage or mortgages, Mortgagor shall
direct in writing to the holder of each such prior mortgage or new prior
mortgage, that all proceeds be payable to Mortgagee, or as Mortgagee shall
direct; but in the event that such holder shall refuse to honor such direction,
then and in such event such proceeds shall be received and turned over to
Mortgagee in such manner as Mortgagee shall direct by written notice to
Mortgagor.
Mortgagor agrees without charge to promptly execute, acknowledge and
deliver any and all commitments, notes, mortgages, assignments, consents, deeds
and other documents which Mortgagee deems necessary to effectuate the placement
on the Mortgaged Property of such prior mortgages and/or new prior mortgages.
Upon Mortgagor's failure to execute such documents within ten (10) days of
Mortgagee's written request to Mortgagor therefor the whole of said principal
and interest shall become due at the option of Mortgagee. Mortgagor hereby
irrevocably appoints Mortgagee, its successors and assigns as attorney-in-fact
and grants Mortgagee the power which is coupled with an interest, to execute
such documents.
If Mortgagee has not extended, replaced or refinanced any prior
mortgage or mortgages, or any new prior mortgages by the maturity of any of
them, the Mortgagor shall have the right to secure an extension of such prior
mortgage or mortgages or new prior mortgage or mortgages or a new institutional
prior mortgage in place of the maturing mortgages subject to all of the
conditions contained in this Section 2.09(e), and this Mortgage shall be subject
and subordinate to any such extension or new prior mortgage obtained by the
Mortgagor. All expenses necessary to consummate the closing of such extension or
such new institutional prior mortgage shall be paid by Mortgagee."
14. Schedule A is hereby deleted and replaced with Exhibit A annexed
hereto.
15. Schedule B is hereby deleted and replaced with Exhibit B hereto.
16. Schedule C is hereby amended to include those Agreements listed on
Schedule C hereto.
17. Schedule D is hereby amended (i) to include .those Permitted
Exceptions set forth on Schedule D hereto; (ii) by deleting Paragraphs 9 and 10
and (iii) by replacing Paragraph 10 with the following:
"10. Purchase Money Second Mortgage and Security
Agreement dated as of October 31, 1983 made by
Mortgagor to Claridge Limited, in the original
principal amount of $47,000,000 and recorded in the
office of the Clerk of Atlantic County, New Jersey,
on October 31, 1983 in Mortgage Book 2908 at Page
197, as the same is amended on the date hereof
pursuant to that First Supplemental Amendment to
Purchase Money Mortgage, intended to be recorded
simultaneously herewith."
18. Neither Mortgagor nor any partner of Mortgagor shall be personally
liable to Mortgagee for the non-payment of any Indebtedness the Mortgagee's
recourse being expressly limited to the Mortgaged Property; provided, however,
that nothing contained in the Wraparound Mortgage, as amended and supplemented
hereby, or the Loan Agreement, as amended, shall limit, restrict or impair the
rights of Mortgagee to accelerate the maturity of the Note, as amended, and all
other Indebtedness upon the occurrence of an Event of default, to bring suit and
obtain a judgment against Mortgagor or its general partners on the Note, as
amended, and such other Indebtedness of Mortgagor under the Wraparound Mortgage,
as amended and supplemented hereby, and the Note, as amended, (so long as
neither the Mortgagor nor its partners shall have any personal liability upon
any such judgment except to the extent of its interest in the Mortgaged Property
and the satisfaction thereof shall be limited to the Mortgaged Property) or to
exercise all rights and remedies provided in the Wraparound Mortgage, as amended
and supplemented hereby; the other Security Interests or otherwise to realize
upon the Mortgaged Property.
<PAGE>
19. All obligations, terms and conditions set forth in the Wraparound
Mortgage remain unchanged and in full force and effect, except as specifically
set forth herein.
IN WITNESS WHEREOF, Mortgagor has caused this Supplemental Wraparound
Mortgage to be duly executed as of the date first above written.
Mortgagor:
ATLANTIC CITY BOARDWALK
ASSOCIATES, L.P.
WITNESS
By: /s/ T. Edward Plant
/s/Alan Wovsaniker -----------------------------------
- ---------------------------- Name: T. Edward Plant
Name: Alan Wovsaniker Title: General Partner
Mortgagee:
WITNESS
THE CLARIDGE AT PARK PLACE,
INCORPORATED
By: /s/ Roger P. Wagner
------------------------------------
/s/ Charles J. Hanlon, Jr. Name: Roger Wagner
- -------------------------------- Title: President
Name: Charles J. Hanlon, Jr.
Mortgagor hereby acknowledges receipt of a true copy of the within
instruments.
Mortgagor:
ATLANTIC CITY BOARDWALK
ASSOCIATES, L.P.
WITNESS
By: /s/ T. Edward Plant
-----------------------------------
/s/ Alan Wovsaniker Name: T. Edward Plant
- ------------------------------- Title: General Partner
Name: Alan Wovsaniker
<PAGE>
STATE OF NEW YORK
Ss.:
COUNTY OF NEW YORK
BE IT REMEMBERED, that on this 17th day of March, 1986, before me, the
subscriber, a Notary Public of the State of New York, personally appeared Roger
Wagner, President of The Claridge at Park Place, Incorporated, a New Jersey
corporation, and he thereupon acknowledged that he signed the foregoing
instrument as such officer, that the seal affixed to said instrument is the
corporate seal of said corporation, and that said instrument is the voluntary
act and deed of said corporation, made by virtue of authority from its Board of
Directors.
/s/ Karen De Maria
---------------------------
Notary Public
<PAGE>
STATE OF NEW YORK
Ss.:
COUNTY OF NEW YORK
BE IT REMEMBERED, that on the 17th day of March, 1986, before me, the
subscriber, a Notary Public of the State of New York, personally appeared T.
Edward Plant, general partner of Atlantic City Boardwalk Associates, L.P., a
limited partnership, who, I am satisfied, is the person who has signed the
within instrument; and having first made known to me the contents thereof, he
thereupon acknowledged that he signed, sealed and delivered the said instrument
as his voluntary act and deed and as the voluntary act and deed of Atlantic City
Boardwalk Associates, L.P., a limited partnership.
/s/ Karen De Maria
----------------------------
Notary Public
<PAGE>
SCHEDULE A
REAL PROPERTY
Land Description
----------------
ALL that certain land and premises situate in the City of Atlantic City, County
of Atlantic and State of New Jersey, bounded and described as follows:
TRACT #1 - BEGINNING at a point in the Easterly line of Indiana Avenue 150 feet
Southwardly of the Southerly line of Pacific Avenue; and extending thence
(1) Eastwardly parallel with Pacific Avenue 155 feet; thence
(2) Southwardly parallel with Indiana Avenue 50.1 feet; thence
(3) Westwardly parallel with Pacific Avenue 155 feet to the Easterly line
of Indiana Avenue; thence
(4) Northwardly along the same 50.1 feet to the point and place of
beginning.
BEING known as 111 and 113 South Indiana Avenue.
TRACT #2 - BEGINNING at a point in the Westerly line of Indiana Avenue 150 feet
Southwardly of the Southerly line of Pacific Avenue; and extending thence
(1) Southwardly along the Westerly line of Indiana Avenue 300 feet; thence
(2) Westwardly at right angles to Indiana Avenue 138.10 feet to the
Easterly line of Park Place; thence
(3) Northwardly along the same 300 feet; thence
(4) Eastwardly at right angles to Park Place 138.10 feet to the Westerly
line of Indiana Avenue and point and place of beginning.
TRACT #3 -BEGINNING at a point in the Easterly line of Ohio Avenue 200 feet
Southwardly of the Southerly line of Pacific Avenue; and extending thence
(1) Eastwardly parallel with Pacific Avenue 145.6 feet to the Westerly
line of Park Place; thence
(2) Southwardly along the same 150 feet; thence
(3) Westwardly parallel with Pacific Avenue 145.6 feet to the Easterly
line of Ohio Avenue; thence
(4) Northwardly along the same 150 feet to the point and place of
beginning.
In Compliance with Chapter 157, Laws of 1977 premises situate herein are known
as Lots #8 and 9, Lot #16, in Block #31 and Lot #35 in Block #30 on the tax map
of the above City.
<PAGE>
The Air Space
-------------
ALL that certain real property in the City of Atlantic City, County of Atlantic,
State of New Jersey, which lies above (but not below) the horizontal plane the
elevation of which is 26.0 above that certain Datum Level which designates as
zero an elevation equal to mean sea level at Atlantic City, as computed and
established by the United States Coast and Geodetic Survey and which lies below
(but not above) another horizontal plane the elevation of which is 71.5 above
said Datum Level, and which is bounded by and lies within that certain plot or
parcel described as follows:
ALL that certain lot, tract, or parcel of land and premises situate,
lying, and being in the City of Atlantic City, County of Atlantic, and State of
New Jersey, bounded and described as follows:
BEGINNING at a point in the westerly line of Park Place (601 wide), said point
being distant 200.001 south of the southerly line of Pacific Avenue (601 wide),
and extending from said beginning point; thence
(1) South 27 degrees 281 0011 East, in and along the westerly line of Park
Place, a distance of 150.001 to a point; thence
(2) North 89 degrees 421 23" East, crossing Park Place, distance of 67.441
to the easterly line of Park Place; thence
(3) North 27 degrees 281 00" West, in and along the easterly line of Park
Place, a distance of 180.801; thence
(4) South 62 degrees 321 00" West crossing Park Place, a distance of
60-001 to the point and place of BEGINNING.
CONTAINING an area of 9924 square feet.
<PAGE>
Exhibit B
Schedule B
----------
The Superior Mortgages
1. The first mortgage dated as of October 31, 1983, made by Claridge
Limited to First National State Bank (the "First Lender") in the original
principal amount of $80,000,000 recorded on October 31, 1983, in the office of
the Clerk of Atlantic County, New Jersey, in Mortgage Book 2908 at Page 178, as
the same was increased to $96,500,000 on the date hereof pursuant to that
certain First Mortgage Modification Agreement among Mortgagee, DEWNJ and the
First Lender intended to be recorded immediately prior to the recording of this
Supplemental Mortgage (the "First Mortgage") and that certain loan agreement
dated as of October 31, 1983, made between Claridge Limited and the First Lender
in connection with the First Mortgage, as amended and assumed by Mortgagee on
the date hereof (the "First Mortgage Loan Agreement").
2. The purchase money second mortgage and security agreement dated as
of October 31, 1983, made by Mortgagor to Claridge Limited in the original
principal amount of $47,000,000 recorded on October 31, 1983, in the office of
the Clerk of Atlantic County, New Jersey, in Mortgage Book 2908 at Page 197, as
the same was amended on the date hereof pursuant to that certain First
Supplemental Amendment to Purchase Money Second Mortgage and Security Agreement
intended to be recorded simultaneously herewith and that certain purchase money
loan agreement dated as of October 31, 1983, made between Mortgagor and Claridge
Limited in connection therewith, as the same is amended on the date hereof.
<PAGE>
SCHEDULE C
Agreements
----------
I. "Licenses"
1. License Agreement dated October 27, 1983 to J&P Studio Corp. has
been terminated and replaced with Final Touch Beauty Salon, Inc., dated
September 15, 1985.
II. "Purchase Order"
1. Purchase Order # CL 95374, American Business Computers; service
contract for ABC Computer bar System.
2. Purchase Order # CL 46609, Pitney Bowes; maintenance agreement for
mailing machine.
3. Purchase Order # CL 44254, 3M Business Products; maintenance
agreement for microfilm equipment.
4. Purchase Order # CL 46685, Friden Alcatel; equipment maintenance
agreement.
5. Purchase Order # CL 44545, Talco Cash Register, maintenance
agreement for Sweda, Sharp and DTS Cash Registers.
6. Purchase Order # CL 44296, Information Products of S.J., service
agreement for various IBM typewriters.
7. Lease agreement, 3M Business Products Sales, Inc., lease of
microfilm equipment.
8. Purchase Order # DW 4338, Simplex Time Recorder Company, maintenance
and service agreement for fire alarm system. (Note that this agreement is with
Del E. Webb New Jersey Inc. but affects a system located at the hotel.)
III. "SERVICE CONTRACTS"
ITEM A -- LABOR CONTRACTS
Union Contracts
1. International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers
of America, Local Union No. 331, effective April 15, 1984 to April 14, 1987.
2. National Brotherhood of Painters and Allied Trades, Local Union No. 277,
effective May 1, 1982 to April 30, 1987.
3. International Alliance of Theatrical Stage Employees and Motion Picture
Machine Operators, Local Union No. 917, effective June 1, 1983 to June 30, 1987.
4. Hotel Employees and Restaurant Employees International Union, Local Union
No. 54, effective October 1, 1983 to September 14, 1988.
<PAGE>
ITEM B -- "SERVICE CONTRACTS"
1. "SI Cares" Service Agreement, Software International Corp.
2. IPM maintenance Service agreement for numerous display stations.
3. Service Agreement, American District Telegraph Company, maintenance of alarm
system.
4. Software maintenance Agreement dated January 3, 1986, but effective February
1, 1986; Software Plus, Inc.; maintenance contract for Human Resources/38 and
Payroll/38 software.
IV. LEASES
1. Lease Agreement from November 15, 1983 to November 14, 1986 with Atten
Realty Corp. concerning lease of office space on Tennessee and Atlantic Avenues.
2. Lease Agreement from February 1, 1985 to January 31, 1990 with Delilah Road
Limited Partnership concerning a warehouse facility.
3. Lease Agreement from March 15, 1985 to March 15, 1990 with Youngblood
Development Co. Inc. concerning a transportation garage.
4. Lease Agreement from May 1, 1984 to April 30, 1987 with French Properties
Ltd., concerning a parking lot on Ohio Avenue.
5. Lease Agreement from March 1, 1984 to February 28, 1985 (and yearly
thereafter unless terminated on 90-days notice) with New Jersey Expressway
Authority, concerning a parking facility (327 spaces).
6. Lease Agreement from March 1, 1984 to February 28, 1985 (extended through
February 28, 1987) with Atlantic County Transportation Authority concerning a
parking facility.
7. Lease Agreements from September 15, 1984 through September 14, 1989 and from
October 15, 1984 through October 14, 1989 with U.S. Concord concerning Uniqey
Lock System.
8. Lease Agreement from July 1, 1984 through June 30, 1987 with Continental
Computer System, concerning word processors.
9. Lease Agreement from September 1, 1984 through August 31, 1989 with
Citi-Lease concerning Exterior Reader Boards.
10. Lease Agreements with American Equipment Leasing (Auden Reed) concerning
1984 Limousines with the following terms:
12/26/83 - 12/25/86
12/29/83 - 12/29/86
04/20/84 - 04/19/87
04/30/84 - 04/29/87
11. Lease Agreements from March 29, 1985 through March 28, 1988 and from April
4, 1985 through April 3, 1988 with Franklin Leasing concerning 1985 Limousines.
<PAGE>
12. Lease Agreement from January 10, 1985 through July 9, 1988 with Ford Motor
Credit Corp. concerning a 1985 Ford Ranger.
13. Lease Agreements with Transportation Leasing from May 15, 1985 through May
14, 1988 concerning a 1985 Chevy Celebrity Wagon and from April 19, 1985 through
March 18, 1988 concerning a 1985 Dodge Caravan.
14. Lease Agreements with Marty Sussman for the following terms and concerning
the following vehicles:
1984 Olds 98 10/01/83 - 11/30/86
1984 Olds 98 10/01/83 - 11/30/86
1984 Olds 98 10/01/83 - 11/30/86
1984 Olds 98 10/01/83 - 11/30/86
1984 Cadillac Brougham 11/01/83 - 12/31/86
1984 Chevy Pick-up 11/01/83 - 12/31/86
1984 Cadillac Brougham 11/01/83 - 12/31/86
1984 Cadillac Brougham 11/01/83 - 12/31/86
1984 Cadillac 12/01/83 - 01/31/87
1984 3/4 Ton Pick Up 03/01/84 - 04/30/87
1984 Olds Regency 06/01/84 - 07/31/87
1985 Olds 98 01/01/85 - 03/31/88
1985 Cadillac Fleetwood 02/01/85 - 04/30/88
15. Lease Agreements with Chem Credit, Inc. concerning System 38 Equipment for
the following terms:
01/01/84 - 12/31/88
07/01/84 - 12/31/88
07/01/84 - 12/31/88
16. Lease Agreement from November 30, 1984 through October 30, 1989 with Auden
Reed concerning interior signage.
17. Lease Agreement from April 19, 1985 through March 19, 1988 with Continental
Computer Leasing concerning system 38 CRT'S.
<PAGE>
EXHIBIT D
PERMITTED EXCEPTIONS
2. (a) Building restrictions as set forth in Deed Book 46, Page 29 (affects
Tract 1).
(b) Building restrictions as set forth in Deed Book 72, Page 655 and 658
(Affects the southerly 200 feet of Tract 2).
(c) Building restrictions as set forth in deed Book 74, Page 544, Deed Book
75, page 699 and Deed Book 84, page 474 and 476 (Affects northerly 100 feet
of Tract 2).
(d) Building restrictions as set forth in Deed Book 73, Page 7 (Affects
northerly 50 feet of Tract 2).
(e) Building restrictions as set forth in Deed Book 76, Page 41 (Affects
southerly 150 feet of Tract 2).
Restrictions have been violated as to the sale of spirituous, vinous
liquors. This Policy guarantees that any violation of said restrictions
shall not cause forfeiture or reversion of title and also insures against
loss by reason of enforcement of the restrictions. This Policy also
guarantees that any enforcement of the remaining restrictions shall not
cause a forfeiture or reversion of title.
3. Based upon a survey prepared by Arthur W. Ponzio Co. & Associates Inc.,
dated 12/20/84, revised to 3/14/86, the Company hereby insures against loss
or damage which the insured shall sustain by reason of any encroachments,
overlaps, boundary line disputes, or easements, except as follows:
(1) Overhang in North wall of buildings erected on Block 30, Lot 35
encroaches on premises to North .33 feet.
(2) Overhang in South wall of buildings erected on Block 30, Lot 35
encroaches on premises to South .33 feet.
(3) Overhang in East wall of building erected on Block 31, Lot 16
encroaches on Indiana Avenue 2.00 feet.
(4) East wall of buildings erected on Block 31, Lot 16 encroaches on
Indiana Avenue .06 feet.
(5) Overhang in East wall of buildings erected on Block 31, Lot 16
encroaches on Indiana Avenue 7.00 feet.
(6) South wall of buildings erected on Block 31, Lot 18 encroaches on Block
31, Lot 16 .11 feet.
(7) Overhang in West wall of buildings erected on Block 31, Lot 16
encroaches on Park Place 7.00 feet.
(8) West wall of buildings erected on Block 31, Lot 16 encroaches on Park
Place .07 feet.
Title policy insures that the above referred to encroachments may remain
where presently located for the life of the structure.
4. Liens of taxes 1986, First One Quarter paid, second Quarter not yet
payable.
<PAGE>
4a. Subject to Liability for additional assessment in connection with new
construction pursuant to N.J.S.A. 54: 4-63.1 et. seq.
5. Rights or claims of parties in possession not shown by the public records
as licencee only, being Final Touch Beauty Salon, Inc, and Host
International, Inc.
6. Mortgage made by Claridge Limited, a New Jersey limited partnership to
First National State Bank, dated as of October 31, 1983, recorded in the
office of the clerk of Atlantic County on October 31, 1983 as Mortgage Book
2908, Page 178 as modified to secure the amount of $96,500,000.
7. Mortgage made by Atlantic City Boardwalk Associates, L.P., a New Jersey
Limited partnership, dated as of October 31, 1983, recorded in the office
of the clerk of Atlantic County on October 31, 1983 as mortgage Book 2908,
Page 197 as modified to secure the amount of $47,000,000,00.
8. Mortgage made by Atlantic City Boardwalk Associates, L.P., a New Jersey
Limited Partnership to The Claridge At Park Place, Incorporated, a
Corporation of New Jersey, dated as of October 31, 1983, recorded in the
office of the Clerk of Atlantic County on October 31, 1983 as Mortgage Book
2908, Page 246 as modified to secure up to the amount of $152,000,000.00.
9. Subject to the ground lease agreement, Claridge Limited to Atlantic City
Boardwalk Associates L.P., dated as of 10-31-83 recorded 10-31-83, in Deed
Book 3850, Page 178 and in the operating lease Atlantic City Boardwalk
Associates L.P., to the Claridge at Park Place dated as of 10-31-83,
recorded 10-31-83 in Deed Book 3850, Page 204, as modified.
10. Subject to Assignment of Lessors Interest, Claridge Limited to First
National State Bank dated October 31, 1983, recorded October 31, 1983 as
Deed Book 3850, Page 123 as modified in the Clerk's Office of Atlantic
County. (Information only).
11. Subject to Assignment of Lessors Interest, Atlantic City Boardwalk
Adsociates, L.P., to First National State Bank dated October 31, 1983,
recorded October 31, 1983 as Book 3850, Page 159 as modified int he Clerk's
Office of Atlantic County.
12. Subject to the Terms and Conditions of the Land option Agreement, Del E.
Webb New Jersey, Inc., to The Claridge at Park Place, Incorporated dated as
of 10-31-83, recorded 10-31-83, in Deed Book 3850, Page 213 as modified.
13. Subject to Financing Statement: Del E. Webb New Jersey Inc., to First
National State Bank filed October 31, 1983 as modified in File 4486 and
filed in the Office of the Secretary of State.
14. Subject to Financing Statement: The Claridge at Park Place to First
National State Bank filed October 31, 1983 as modified in File 4488 and
4489 and filed in the office of the Secretary of State.
15. Subject to Financing Statement: Atlantic City Boardwalk Associates, L.P.,
to First National State bank filed October 31, as modified in File 4487 and
in the Office of the Secretary of State.
16. Subject to Financing Statement: Atlantic City Boardwalk Associates, L.P.,
to Claridge Limited filed October 31, 1983 as modified in File 4482.
17. Subject to Financing Statement: Atlantic City Boardwalk Associates, L.P.,
to The Claridge at Park Place Incorporated filed October 31, 1983 as
modified in File 4484.
<PAGE>
18. Subject to Financing Statement: Atlantic City Boardwalk Associates, L.P.,
to Chemical Business Credit Corp., filed 5-22-84, in File 5309, and file
5310; filed 6-19-84, as modified in File 5430.
19. Subject to Financing Statement: Atlantic City Boardwalk Associates, L.P.,
to Germantown Savings Bank filed 12-7-84, as modified in File 6204. (Copies
attached). 20. The Claridge at Park Place Incorporated to Atlantic City
Boardwalk Associates, L.P., filed 10-31-83, file 4483, as modified to
DEWNJ.
21. Subject to the Terms of the Deed for the Air Rights over Park Avenue.
However, Policy insures that said terms have been complied with to date and
future violation will not cause forfeiture or reversion of title.
22. Subject to the terms of the Easement Atlantic City to Del E. Webb New
Jersey, Inc. However, Policy insures that said terms have been complied
with to date and future violation will not cause forfeiture or reversion of
title.
23. As to Air Rights Parcel and Easement Agreement, Policy does not insure same
until said documents are executed and recorded.
<PAGE>
Schedule E
Exceptions to Article II
NONE
<PAGE>
EXHIBIT 10(j)
FIRST AMENDMENT
TO
EXPANDABLE WRAPAROUND MORTGAGE LOAN AGREEMENT
---------------------------------------------
THIS FIRST AMENDMENT (this "Amendment") is made this 17th day of March,
1986, to the Expandable Wraparound Mortgage Loan Agreement (the "Loan
Agreement") dated as of October 31, 1983, between ATLANTIC CITY BOARDWALK
ASSOCIATES, L.P., a New Jersey limited partnership (the "Company") and THE
CLARIDGE AT PARK PLACE, INCORPORATED, a New Jersey corporation (the "Lender").
Capitalized terms used herein and not otherwise defined are used herein
as defined in the Loan Agreement.
W I T N E S S E T H:
A. Pursuant to the Operating Lease the Company desired to borrow from
the Lender certain sums to finance the purchase of FF&E Replacements and to fund
any Facility Maintenance Shortfalls.
B. The Lender was willing to lend such amounts to the Company, subject
to and upon the terms and conditions set forth in the Loan Agreement and in the
Operating Lease and on the condition that the Company execute and deliver the
Wraparound Mortgage to the Lender, which mortgage secures repayment of (I) the
Wraparound Note and (ii) certain advances made by the Lender under the operating
Lease to finance the purchase of FF&E Replacements and any Facility Maintenance
Shortfall (as such terms are defined in the Operating Lease).
C. The Lender has agreed to make an additional loan (the "Expansion
Loan") for the purpose of financing an expansion of the facilities in The
Claridge Hotel and Casino, Atlantic City, New Jersey subject to and upon the
terms and conditions set forth in the Loan Agreement, as such Loan Agreement is
amended hereby, but on the condition that the Company executes and delivers the
First Supplemental Amendment to Expandable Wraparound Mortgage and Security
Agreement dated the date hereof.
NOW, THEREFORE, in consideration of the Expansion Loan and for other
good and valuable consideration, receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. The definition of "Collateral" is hereby amended by inserting on the
third line thereof the words "Expansion Notes" immediately after the word
"Note".
2. The definition of "Current Liabilities" is hereby amended by
deleting therefrom the parenthetical on the eighth, ninth and tenth lines
thereof.
3. 'The definition "First Mortgage" is hereby amended so that the words
"and any amendments and supplements thereto" shall be inserted after the words
"mortgage loan agreement" on the second line of said definition and the words
"as such loan was increased to $96,500,000 on the date of this Amendment" are
inserted at the end of said definition.
4. The definition of "Ground Lease" is hereby amended so that the words
"and the Air Rights Lease, dated as of the date of this Amendment, by DEWNJ to
the Company, as amended, modified or supplemented from time to time in
accordance with its terms and the terms hereof" are added to the end of said
definition.
<PAGE>
5. The following definitions shall be added to Section 1:
"Borrowing" shall mean a Prime Rate Borrowing or a LIBOR Rate Borrowing
under the First Mortgage.
"Expansion FF&E Notes" shall have the meaning specified in the
Expansion operating Lease.
"Expansion Maintenance Shortfall Notes" shall have the meaning
specified in the Expansion operating Lease.
"Interim Period" shall mean the period of time commencing on the date
of this Amendment and ending on the Opening Date.
"Opening Date" shall mean the date on which the Expansion Improvements
shall have been completed and opened to the public for use as a casino.
6. The definition "Net Refinancing Proceeds" is hereby amended so that
the dollar amount in clause (ii) is deleted and replaced by "$96,500,000."
7. The definition of "Operating Lease" is hereby amended so that the
words "and the Expansion Operating Lease (the "Expansion Operating Lease") dated
as of the date of this Amendment, by the Lender to the Company, as amended,
modified or supplemented from time to time in accordance with its terms and the
terms hereof" are added to the end of said definition.
8. The definition of "Second Mortgage" is hereby amended so that the
words "and any amendments and supplements thereto" shall be inserted after the
words "dated the date hereof" on the second line of said definition.
9. Section 2.1 is hereby deleted and replaced with the following:
Section 2.1. LOAN AND ADDITIONAL LOANS. (a)(i) Subject to and upon
the terms and conditions herein set forth, including, without limitation, the
definitions contained in Section 1 hereof and the Representations and Warranties
in Section 6 hereof, the Company has become indebted to the Lender in the amount
of $127,000,000. Such indebtedness was incurred simultaneously with the
execution of this Agreement at the offices of Messrs. Davis Polk & Wardwell, 1
Chase Manhattan Plaza, New York, New York and is evidenced by a promissory note,
dated October 31, 1983, to the order of the Lender and duly executed by the
Company substantially in the form of Exhibit 2.2. annexed hereto (together with
any modification, amendment, substitution, replacement or renewal thereof (the
"Wraparound Note"). Subject to earlier acceleration, the Wraparound Note shall
mature on September 30, 2000 and shall be subject to prepayment as provided in
this Section 2.
(ii) (A) Subject to and upon the terms and conditions herein set
forth, including, without limitation, the definitions contained in Section 1
hereof and the Representations and Warranties in Section 6 hereof, the Lender
shall lend to the Company one or more additional loans (each additional loan
made on any Closing Date (as defined in the First Mortgage) an "Additional Loan"
and the aggregate of such Additional Loans so made, "Additional Loans") as may
be requested by the Company at any time or from time to time on or before the
earlier of (a) the opening Date or (b) July 1, 1987, in an amount, which shall
not exceed $17,000,000 in the aggregate, provided that at no time shall the
aggregate principal balance of the Wraparound Note plus the Expansion Wraparound
Note (as hereinafter defined), including any deferrals of interest hereunder but
without regard to FF&E Notes and Expansion FF&E Notes in excess of $5,000,000
and without regard to Maintenance Shortfall Notes and Expansion Maintenance
Shortfall Notes, be less than aggregate principal balance of the First Mortgage
plus the Second Mortgage including any deferrals thereunder. The proceeds from
any such Additional Loan may be used by the Company for the purposes of (I)
paying any costs incurred by the Company in connection with the construction
<PAGE>
of the Expansion Improvements, including any interest expense incurred in
connection therewith; and'(ii) purchasing the Initial Expansion FF&E (as defined
in the Operating Lease). Whenever the Company desires to borrow an Additional
Loan, the Company shall give the Lender at its address set forth above, or such
other address as the Lender may from time to time direct, irrevocable written
notice not later than 11:00 A.M. New York time on the Business Day at least five
(5) Business Days prior to the date specified therein of its desire to borrow an
Additional Loan, together with such evidence as is satisfactory to the Bank
under the First Mortgage that the proceeds of said Additional Loan shall be
applied in accordance with the terms of the First Mortgage. Each such notice
shall specify the date on which the Company desires to borrow an Additional Loan
and the amount of such Additional Loan. Proceeds of each Additional Loan shall
be made available to the Company by delivery of a check in such amount to the
office of the Company at the address set forth in Section 8.4 or at such other
place as the Company may from time to time direct, on the date specified in the
aforementioned notice.
(B) The aggregate amount of Additional Loans provided pursuant to
Section 2.1(a)(ii)(A) hereof shall be evidenced by a promissory note to the
order of the Lender substantially in the form annexed hereto as Exhibit 2.2 in
the maximum principal amount of $17,000,000 (together with any modification,
amendment, substitution, replacement or renewal thereof, the "Expansion
Wraparound Note") which shall be dated the date hereof and duly executed by the
Company. Subject to earlier acceleration, the Expansion Wraparound Note shall
mature on September 30, 1998 and shall be subject to prepayment as provided in
this Section 2. The date and amount of each Additional Loan and the date and
amount of each payment or prepayments of principal of the Loan shall be recorded
on the grid schedule annexed to the Expansion Wraparound Note and the Company
authorizes the Lender to make such recordation; provided, however, that the
failure of the Lender to so record any Additional Loan shall not affect the
obligation of the Company to pay the same. The Expansion Wraparound Note and
grid schedule shall be prima facie evidence of the Additional Loan made by the
Lender.
(C) The Company shall pay, or shall promptly reimburse the Lender for
paying, the origination fee payable pursuant to Section 2.4 of the First
Mortgage, which amount may be included in the first Additional Loan.
(b) Subject to and upon the terms and conditions set forth herein and
in the operating Lease, including, without limitation, the definitions contained
in Section 1 hereof, the Re@Representations and Warranties in Section 6 hereof,
and the terms and conditions in Section 6.3 of the Operating Lease, the Company
may become further indebted to the Lender in amounts and at the times provided
in the Operating Lease, which shall be evidenced by either "FF&E Notes",
"Expansion FF&E Notes", "Maintenance Shortfall Notes" or "Expansion Maintenance
Shortfall Notes" (as such quoted terms are defined in the Operating Lease).
(c) The aggregate outstanding principal balance, from time to time,
of the Wraparound Note and any FF&E Notes or Maintenance Shortfall Notes is
hereinafter collectively referred to as the "Loan". The Wraparound Note and any
FF&E Notes or Maintenance Shortfall Notes are hereinafter collectively referred
to as the "Notes".
(d) The aggregate outstanding principal balance, from time to time,
of the Expansion Wraparound Note and any Expansion FF&E Notes or Expansion
Maintenance Shortfall Notes is hereinafter collectively referred to as the
"Expansion Loans". The Expansion Wraparound Note and any Expansion FF&E Notes or
Expansion Maintenance Shortfall Notes are hereinafter collectively referred to
as the "Expansion Notes".
10. Section 2.2. is hereby deleted and replaced with the following:
Section 2.2. PRINCIPAL AND INTEREST PAYMENTS UNDER WRAPAROUND NOTE
AND THE EXPANSION WRAPAROUND NOTE. (a) The Company shall pay the Lender interest
on the Wraparound Note, and repay principal of the Wraparound Note, as follows:
<PAGE>
(i) Basic Interest shall be payable in arrears during each Fiscal Year
in equal monthly installments and shall be paid to the Lender within 10 days
after the end of the month in question.
(ii) Cumulative Deferred Interest shall be due and shall be paid on the
Maturity Date.
(iii) Mandatory payments of principal shall be due and shall be paid as
follows.
On the last day of each month in the Fiscal Year set forth in
Column I below, one-twelfth of the corresponding amount set
forth in Column II below:
Column I Column II
-------- ---------
(Fiscal Year) (Principal Payment)
1988 $ 1,000,000
1989 $ 3,000,000
1990 $ 5,000,000
1991 $ 5,000,000
1992 $ 6,000,000
1993 $ 7,000,000
1994 $ 8,000,000
1995 $ 9,000,000
1996 $10,000,000
1997 $12,000,000
1998 $14,000,000
(iv) On the Maturity Date, the remainder of outstanding principal
balance of the Wraparound Note shall be paid, together with all accrued and
unpaid Basic Interest,, if any, and all other payments due from the Company to
the Lender under the Wraparound Note, this Loan Agreement or the Wraparound
Mortgage.
(b) The Company shall pay the Lender interest on the Expansion
Wraparound Note, and repay principal of the Expansion Wraparound Note, as
follows:
(i) Each Additional Loan under the Expansion Wraparound Note
outstanding during the Interim Period shall bear interest during such Interim
Period, on the unpaid principal balance of such Additional Loan at a rate per
annum equal to the rate paid by the Lender to the mortgagee under the First
Mortgage for the Borrowing corresponding with such Additional Loan. Such
interest shall be payable in arrears during such Interim Period in monthly
installments and shall be paid to the Lender within 10 days after the end of the
month in question except in the case that the Opening Date is on a date other
than the last day of a month, in which case the interest for such partial month
shall be paid within 10 days after the Opening Date. The Company agrees that if
the Lender shall incur any other or additional costs with respect to any such
Borrowing pursuant to Section 2.3 of the First Mortgage, the Company shall
reimburse the Lender therefor.
(ii) Effective the Opening Date the Company shall repay to the Lender
the aggregate outstanding principal balance of the Additional Loans plus
interest thereon at the rate of 14 percent (14%) per annum (based on a 360-day
year consisting of twelve 30-day months) as follows:
(a) On the date on which the first installment of Basic
Interest is payable under the Wraparound Note after the opening Date
(each date an installment of Basic Interest is payable shall be
hereinafter called a "Payment Date"), the Company shall pay the
interest which has accrued on the outstanding principal
balance of the Expansion Wraparound Note from the Opening Date to said
Payment Date.
<PAGE>
(b) On each Payment Date thereafter until September 30,
1998, the Company shall make level payments of principal and interest
so as to repay in full the outstanding principal balance of the
Expansion Wraparound Note on September 30, 1998.
(c) On September 30, 1998, the remainder of outstanding
principal balance of the Expansion Wraparound Note, if any, shall be
paid, together with all accrued and unpaid interest thereon, if any,
and all other payments due from the Company to the Lender under the
Expansion Wraparound Note.
11. Section 2.3 is hereby amended by adding to the end thereof the
following words: "and the Company shall pay the Lender interest on, and repay
the principal of, the Expansion FF&E Notes and the Expansion Maintenance
Shortfall Notes as set forth therein and in the Expansion Operating Lease".
12. Section 2.4 is hereby amended by inserting on the first line
thereof the words "or the Expansion Loans" immediately after the words "Any
payment of the Loan".
13. Section 2.5 is hereby amended by (i) inserting in the sixth line
thereof the words "and the Expansion Wraparound Note" immediately after the
words "of the Wraparound Note" and (ii) inserting in the seventh line thereof
the words 11, Expansion FF&E Notes, Expansion Maintenance Shortfall Notes"
immediately after the words "of any FF&E Notes".
14. Section 2.6 is hereby amended by (i) inserting in the tenth line
thereof the words "and the Expansion Loan" immediately after the words
"prepayment of the Loan"; (ii) by adding to the end of clause "Third" the words
"and the Expansion Wraparound Note"; and (iii) by inserting in clause "Fourth"
and Clause "Fifth" the words "Expansion FF&E Notes, Expansion Maintenance
Shortfall Notes" immediately after the words "FF&E Notes" in each clause.
15. Section 2.7 is hereby amended by inserting on the ninth line
thereof the words "and the Expansion Loan" immediately after the words "the
Loan".
16. Section 2.8 is hereby deleted and replaced with the following:
Section 2.8. OPTIONAL PREPAYMENTS. This Mortgage may not be prepaid
without the written consent of Mortgagee, which consent may be withheld in its
sole discretion."
17. Beginning with Section 2.9 and continuing through the signature
page of this Loan Agreement, (I) whenever the word "Note" or "Notes" shall
appear the same shall be read to include the Expansion Notes; (ii) whenever the
word Loan shall appear, the same shall be read to include the Expansion Loans;
(iii) whenever the words "Wraparound Note" shall appear, the same shall be read
to include the Expansion Wraparound Note.
18. The Company may suspend payment of any installment of interest or
principal under the Expansion Wraparound Note for so long as and to the extent
that Lender (or any affiliate of Del E. Webb Corporation) fails to make its
basic rental payments to the Company under the Operating Lease (including the
Expansion Operating Lease).
<PAGE>
19. Exhibit 2.2 is hereby amended so that (a) the following is added to
the columns in Article II. A. 3(I), respectively:
Column I Column II
-------- ---------
(Fiscal year) (Principal Payment)
1994 $ 8,000,000
1995 9,000,000
1996 10,000,000
1997 12,000,000
1998 14,000,000
(b) clause (ii) in said Article II.A.3 is deleted in its entirety; (c) the words
"Note, the Wraparound Mortgage or the Loan" are deleted from the seventh and
eighth lines of the first full paragraph on the fourth page of said exhibit; and
(d) Exhibit 1 hereto is added thereto.
20. The Company hereby represents and warrants to the Lender that each
and every representation and warranty set forth in Section 6, as amended hereby
is true on the date hereof, except as set forth on Exhibit 2.
21. Neither the Company nor its partners shall be personally liable to
the Lender for (a) the non-payment of any principal of or interest on the Notes,
(b) the nonpayment of any other amount owing to the Lender under this Amendment,
or (c) damages arising out of the failure to perform any obligation under this
Amendment, the Lender's recourse being expressly limited to the Collateral;
provided, however, that nothing contained in this Amendment, shall limit,
restrict or impair the rights of the Lender to accelerate the maturity of the
Notes and all other Indebtedness upon the occurrence of an Event of Default, to
bring suit and obtain a judgment against the Company or its general partners on
the Notes and such other Indebtedness (so long as the Company or its partners
shall not have any personal liability upon any such judgment except to the
extent of its interest in the Collateral and the satisfaction thereof shall be
limited to the Collateral) or to exercise all rights and remedies provided in
this Amendment, or otherwise to realize upon the Collateral. This Paragraph 20
shall not be deemed to be a waiver by the Lender of any claims in the nature of
fraud or deceit arising under or in connection with this Amendment.
22. All obligations, terms and conditions set forth in the Loan
Agreement remain unchanged and in full force and effect, except as specifically
set forth herein.
<PAGE>
IN WITNESS WHEREOF, the Company and the Lender have caused this
Amendment to be duly executed as of the day and year first above written.
ATLANTIC CITY BOARDWALK
ASSOCIATES, L.P.
By /s/ T. Edward Plant
-----------------------
Name: T. Edward Plant
Title: General Partner
THE CLARIDGE AT PARK PLACE,
INCORPORATED
By /s/ Roger Wagner
-----------------------
Name: Roger Wagner
Title: President
<PAGE>
EXHIBIT 10(n)
RESTRUCTURING AGREEMENT
RESTRUCTURING AGREEMENT, dated October 27, 1988, among DEL WEBB
CORPORATION, an Arizona corporation ("Webb"), DEL E. WEBB NEW JERSEY, INC., a
New Jersey corporation ("DEWNJ"), ATLANTIC CITY BOARDWALK ASSOCIATES, L.P., a
New Jersey limited partnership (the "Partnership"), THE CLARIDGE HOTEL AND
CASINO CORPORATION, a New York corporation (the "Corporation"), THE CLARIDGE AT
PARK PLACE, INCORPORATED, a New Jersey corporation ("New Claridge"), ROBERT K.
SWANSON ("Swanson"), EVERETT L. MANGAM ("Mangam"), T. EDWARD PLANT ("Plant" and,
together with Swanson and Mangam, the "Individual General Partners"), ANTHONY
ATCHLEY ("Atchley"), GERALD C. HEETLAND ("Heetland" and, together with Atchley,
the "New General Partners"), AC BOARDWALK PARTNERS CORPORATION, a New Jersey
corporation ("AC Boardwalk" and, together with the Individual General Partners,
the "General Partners") and FIRST FIDELITY BANK, NATIONAL ASSOCIATION, NEW
JERSEY (the Bank").
WHEREAS, the Bank and Claridge Limited, a New Jersey limited
partnership (the "Old Partnership"), entered into a Loan Agreement, dated as of
October 31, 1983 (as heretofore assumed, modified, amended and supplemented,
including assumption and amendment by the Assumption and Amendment Agreement,
dated as of March 17, 1986, between New Claridge and the Bank, the "Loan
Agreement"), and pursuant to the Loan Agreement, the Old Partnership granted to
the Bank a first priority mortgage dated as of October 31, 1983, as amended by a
First Mortgage Modification Agreement, dated March 17, 1986, among the
Partnership, DEWNJ and the Bank (the "First Mortgage");
WHEREAS, the Old Partnership has been liquidated and dissolved;
WHEREAS, the Partnership acquired the real property, other than the
Land, and the Hotel Assets (as such terms are defined in the Loan Agreement),
both covered by the First Mortgage subject to the lien thereof,
WHEREAS, the Partnership leased the land on which the Claridge Hotel
and Casino (the "Claridge") is situated pursuant to the Ground Lease, dated
October 31, 1983 (as heretofore amended, the "Ground Lease"), between the Old
Partnership and the Partnership;
WHEREAS, the Partnership leased certain air space located in Atlantic
City, New Jersey pursuant to the Air Rights Lease, dated March 17. 1986 (the
"Air Rights Lease"), between DEWNJ and the Partnership;
WHEREAS, upon its liquidation, certain of the other assets of the Old
Partnership, including the Land and the Gaming and Other Assets (as such items
are respectively defined in the Loan Agreement), became the property of DEWNJ,
subject to the lien of the First Mortgage;
WHEREAS, New Claridge acquired the Gaming and Other Assets from DEWNJ
on October 31, 1983;
WHEREAS, New Claridge has leased and subleased the Hotel Assets and the
land on which the Claridge is located, respectively, from the Partnership
pursuant to the Operating Lease Agreement, dated October 31, 1983 (as heretofore
amended, the "Operating Lease"), between the Partnership and New Claridge;
WHEREAS, New Claridge has leased and Subleased the property set forth
in the Expansion Operating Lease and the air space described in the Air Rights
Lease. respectively, from the Partnership pursuant to the Expansion Operating
Lease Agreement, dated March 17, 1986 ( as heretofore amended, the "Expansion
Operating Lease", and together with the Operating Lease, the "Combined Operating
Lease"), between the Partnership and New Claridge;
<PAGE>
WHEREAS, New Claridge advanced certain sums to the Partnership pursuant
to the Expandable Wraparound Mortgage Loan Agreement, dated as of October 31,
1983, between New Claridge and the Partnership, which was amended by the First
Amendment to Expandable Wraparound Mortgage Loan Agreement, dated March 17,
1986, between New Claridge and the Partnership (as heretofore modified, amended
and supplemented, the "Wraparound Loan Agreement");
WHEREAS, in connection with the Wraparound Loan Agreement, the
Partnership granted to New Claridge the Expandable Wraparound Mortgage, dated
October 31, 1983, which was amended by the First Supplemental Amendment to
Expandable Wraparound Mortgage and Security Agreement, dated March 17, 1986 (as
heretofore modified, amended and supplemented, the "Wraparound Mortgage");
WHEREAS, New Claridge guaranteed the obligations of the Old Partnership
under the Loan Agreement pursuant to the Unlimited Guaranty, dated October 31,
1983, by New Claridge in favor of the Bank (as heretofore modified, amended or
supplemented, the "Guaranty"), and confirmed that the Guaranty guarantees the
increased obligations to the Bank pursuant to the First Mortgage modification,
in the Consent and Amendment Agreement, dated as of March 17, 1986, between New
Claridge and the Bank;
WHEREAS, in connection with the Guaranty, New Claridge entered into the
General Security Agreement, dated October 31, 1983, in favor of the Bank (as
heretofore modified, amended or supplemented, the "Security Agreement");
WHEREAS, the Partnership has entered into a Maintenance Services
Contract, dated as of October 31, 1983 (such Maintenance Services Contract, as
amended by the First Amendment to Maintenance Services Contract, dated as of
March 17, 1986, is herein referred to as the "Maintenance Services Contract")
with DEWNJ, under which DEWNJ provides facility maintenance and engineering
services on behalf of the Partnership to New Claridge in accordance with the
Operating Lease;
WHEREAS, the Hotel Assets are subject to a second mortgage, dated
October 31, 1983, securing a nonrecourse note in the principal amount of
$47,000,000 given by the Partnership to DEWNJ as part of the purchase price paid
by the Partnership to DEWNJ for the Hotels Assets, as amended by the First
Supplemental Amendment to Purchase Money Second Mortgage and Security Agreement,
dated as of March 17, 1986, between the Partnership and DEWNJ, the First
Amendment to Purchase Money Loan Agreement, dated as of March 17, 1986, between
the Partnership and DEWNJ, and the First Amendment to Second Mortgage Note,
dated March 17, 1986, between the Partnership and DEWNJ (the "Second Mortgage");
WHEREAS, New Claridge and DEWNJ have entered into a Management
Agreement, dated as of October 31, 1983, as amended by First Amendment, dated
July 31, 1985, Second Amendment, dated November 1, 1985, Third Amendment, dated
January 1, 1986, Fourth Amendment, dated March 17, 1986, Fifth Amendment, dated
February 24, 1987, Sixth Amendment, dated June 30, 1987, and Seventh Amendment,
dated November 19, 1987 (the "Management Agreement");
WHEREAS, the Corporation holds all of the issued and outstanding shares
of Common Stock of New Claridge;
WHEREAS, Webb and the Corporation have entered into a Cross Option
Agreement, dated as of October 31, 1983 (the "Cross Option Agreement"), relating
to outstanding capital stock of New Claridge and the Corporation;
<PAGE>
WHEREAS. New Claridge and DEWNJ have entered into a Land Option
Agreement, dated as of October 3 1, 1983 (such Land Option Agreement, as amended
by the Amended and Restated Land Option Agreement, dated March 17, 1986, is
hereinafter referred to as the "Land Option Agreement"), relating to the Land;
WHEREAS, Webb, pursuant to a Collection Guaranty, dated October 31,
1983, as amended by Consent and Amendment Agreement. dated as of March 17, 1986
(the "Collection Guaranty"), has guaranteed collection of up to $20,000,000 of
amounts owing under the Loan Agreement as set forth in the Collection Guaranty;
WHEREAS, the parties hereto wish to provide for the restructuring set
forth below so as to insure the continued licensing, operation and financial
viability of the Claridge, to provide the Bank with improved loan-to-value
ratio, to protect the interests of the investors in the Corporation and in the
Partnership and to permit Webb and DEWNJ to fulfill, satisfy and terminate their
respective obligations and commitments with respect to the Partnership, the
Corporation, New Claridge and the Claridge;
WHEREAS, as a result of the transactions contemplated by this
Agreement, among other things, Webb and DEWNJ will be (I) releasing New Claridge
and/or the Partnership from liability for indebtedness, unpaid fees and accrued
interest aggregating in excess of $101 million at September 30, 1988, (ii)
making payments aggregating approximately $19.5 million which will reduce by the
same amount indebtedness, $14,500,000 of which is secured by the assets of the
Partnership, the Corporation and New Claridge, without Webb or DEWNJ having any
right of subrogation, and (iii) transferring to the Partnership the Land and
certain air rights which New Claridge has the option to acquire for $9 million
(which option is terminated herein) and as a result of which the payments by the
Partnership under the Ground Lease of approximately $1,300,000 per year will be
eliminated; and
WHEREAS, none of the Partnership, the Corporation or New Claridge has
the ability to pay the amounts respectively owed by each of them to Webb or
DEWNJ (which amounts total more than $101 million collectively, including the
Second Mortgage), or has any expectation of being able to make any such
payments. In addition, none of the Partnership, the Corporation or New Claridge
has the ability to pay such $19.5 million portion of their indebtedness,
$14,500,000 of which is secured by their property, which portion is being
satisfied by Webb and DEWNJ, or any expectation of being able to do so. However,
as a consequence of the transactions contemplated by this Agreement, the
financial obligations of the Partnership, the Corporation and New Claridge will
be materially reduced and restructured so that, the parties believe, they will
be financially viable entities, be left with adequate capital remaining for the
conduct of their business, loss to creditors (other than Webb and DEWNJ) will be
prevented or mitigated in whole or in part, and the value of the investment of
Limited Partners of the Partnership and holders of Class A Shares in the
Corporation, which might otherwise be zero, will be materially enhanced. In
addition, Webb and its wholly-owned subsidiary, DEWNJ, will be relieved of
continuing obligations to the Partnership and New Claridge and Webb's contingent
liability on the Collection Guaranty will be satisfied; and
WHEREAS, in order to insure the financial stability to obtain licensing
of New Claridge and the Claridge, the New Jersey Casino Control Commission has
required that the Bank and/or Webb provide additional working capital financing
to those entities in the maximum amount of $5 million and the Bank and Webb have
agreed with respect to this obligation (the obligations of the Bank and Webb
both being subject to the provisions of Section 4(f)), in order to avoid the
immediate serious financial consequences to the Claridge resulting from the loss
of its gaming license and greater losses to Webb.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Closing, Transactions to Occur at Closing.
(a) At a closing (the "Closing,"). to be held at the offices of Rogers
& Wells, 200 Park Avenue, New York, New York, commencing at 9:30 a.m. on the
Closing Date (as hereinafter defined), subject to satisfaction of the conditions
set forth in Sections 2 and 3 hereof, the parties shall take the actions set
<PAGE>
forth below in paragraph (c) of this Section I and the events set forth in
paragraph (c) of this Section I shall be deemed to have occurred at the Closing.
The "Closing Date" shall be March 31. 1989, provided that upon not less than ten
days' prior written notice to the other parties hereto, Webb may select an
earlier business day as the Closing Date, but only in the event that (i) the
conditions in Sections 2 and 3 hereof have been or will be satisfied on such
day, and (ii) such earlier Closing, Date has been approved by the New Jersey
Casino Control Commission (the "Commission"). In the event that the conditions
set forth in Section 3 shall not have been satisfied on or before the Closing,
Date, by mutual agreement of Webb and the Bank in writing, the Closing Date may
be extended from time to time to a date not later than August 1, 1989.
(b) Such actions to be taken, and events to occur, at the Closing shall
include payment of certain amounts, release of certain obligations and
termination of certain agreements or obligations. As used in this Agreement, (i)
any reference to "payment" by one party to another of a certain amount shall
mean that at the time of the Closing the party making the payment shall
wire-transfer the specified amount to the other party in immediately available
funds, ( ii ) any reference to "discharge," "satisfy" or "release" by a party of
obligations of another party shall mean that at the time of Closing, and
thereafter, and without the need to execute any other instrument or document,
the obligation of the party being, released shall be deemed discharged,
satisfied and released without liability to any person, the party being,
released shall have no further duty or obligation to pay, perform or take any
other action with respect to the obligation being released and the party
releasing the other party shall have no further right to enforce or otherwise
require performance of such obligation; (iii) any reference to "termination" of
an agreement or other obligation shall mean that the parties to such agreement
or obligation agree that at the time of Closing, and thereafter, and without the
need to execute any other instrument or document, such agreement or obligation
shall be terminated and no longer in force or of effect and none of the parties
thereto shall have any further obligation under such agreement or obligation or
any further right to enforce or otherwise require performance of such agreement
or obligation; and (iv) any reference to anything being "deemed" to occur shall
mean that, at the time of Closing, and thereafter, without the need to execute
any other instrument or document, such thing shall have occurred; provided,
however, that, notwithstanding anything to the contrary in this Agreement, if a
claim or claims of any type whatsoever is made after the Closing (relating to
periods on or prior to the Closing, and with respect to Section 4(f), relating
to periods before, on, or after the Closing) by the Corporation, New Claridge or
the Partnership or the successors, assignees, receivers, assignees for the
benefit of creditors or trustees in bankruptcy, an unsecured creditor of the
Corporation, New Claridge or the Partnership, or any similar person or entity,
or any of them upon Webb, DEWNJ or any other directly or indirectly wholly-owned
subsidiaries of Webb for the recovery of any amount or property, then all of the
obligations and amounts owed by the Partnership, the Corporation and New
Claridge to Webb and DEWNJ which are released, forgiven or paid to one or more
of the Partnership, the Corporation or New Claridge pursuant to this Agreement
(including pursuant to Sections I (c) (4), (5), (8) and (9)), or which are paid
by Webb or DEWNJ to the Bank under Section 4(f) and are the obligations of New
Claridge, shall (to the extent provided below) conclusively be deemed to be
reinstated and never to have been released or forgiven and shall be immediately
due and payable, Webb shall (to the extent provided below) have an unsecured
claim in the amount equal to the payments made by it under Section I (c)( I )
(not by subrogation to any claim of the Bank, but independent of such claim),
Webb shall (to the extent provided below) have full rights of subrogation under
Section 1(c) (2) and the release of such rights of subrogation in Section I (c)
(2) shall conclusively be deemed not to have occurred, and Webb shall have full
rights of subrogation for any sums it has paid under Section 4(f), but in each
and every case only (i) to the extent such obligations and amounts may be used
to offset fully, as a complete defense or as a full recoupment with respect to,
such claim or claims, and (ii) to the extent such offset, defense or recoupment
is not available, in an amount which, when collected, will be equal to that paid
or to be paid on and in respect of such claim or claims. In addition to the
foregoing, if a claim or claims of any type whatsoever is made after the
Closing, by Webb or its successors, assigns or trustee in bankruptcy upon the
Bank for payment or recoupment of the amount paid to the Bank under Section I
(c)(1) or Section 4(a) hereof and the Bank pays all or part of said amount by
reason of (x) any judgment, decree or order of any court or administrative body
having jurisdiction over the Bank or any of its property, or (y) any settlement
or compromise of any such claim effected by the Bank with any such claimant or
in order to permit the Bank to participate in distributions of the estate of any
debtor in a bankruptcy or similar proceeding, then, and in any such event, the
loan under the Loan Agreement shall be increased by an amount equal to the
amount so paid by the Bank as if said amount had not been received by the Bank.
<PAGE>
(c) The actions to be taken, and events deemed to have occurred, at the
Closing, are as follows:
(1) (i) Webb shall pay to the Bank, in satisfaction of Webb's
obligations under the Collection Guaranty, an amount equal to (A) $19,500,000,
minus (B) the amount (not exceeding $5,000,000) paid by Webb to Manufacturers
Hanover Bank and Trust Company, ("MHT"), under paragraph (2) of this Section
l(c), plus (C) the amount, if any, by which $10,350,000 exceeds the difference
of (x) the outstanding principal balance (as of the time immediately prior to
the Closing of working capital loans and advances made by Webb or DEWNJ to New
Claridge, minus (y) an amount equal to interest, at the respective rates
provided in the applicable governing instruments, accruing, after November 30,
1988, on $14,500,000 of the First Mortgage and on all of the MHT Line (defined
below) including Switchover Interest (defined below), less any such interest
paid directly by Webb or DEWNJ to the Bank or MHT, respectively, and for which
neither Webb nor DEWNJ has been reimbursed ( the difference of (x) minus (y)(but
not less than zero) shall be referred to as the "Closing Balance"): (ii) in
consideration of such payment, the obligation s of Webb under the Collection
Guaranty shall be released and the Collection Guaranty terminated (and Webb, by
making such payment, waives and releases any right of subrogation against the
Partnership and New Claridge, and to any collateral securing the Partnership's
or New Claridge's obligations, arising by virtue of such payment), and (iii) the
Bank shall apply the entire amount of such payment to reduce the principal
amount of the loan under the Loan Agreement.
(2) Webb shall pay MHT up to $5,000,000 (or such lesser amounts,
including letters of credit, as are then outstanding under the MHT Line) in full
satisfaction of the obligations of Webb under the Guarantee, dated June 16,
1986, by Webb to MHT (the "MHT Working Capital Guaranty"), and as satisfaction
in full of all amounts outstanding under the Promissory Note, dated June 16,
1986, between New Claridge and MHT and under the letter of credit issued by MHT
(the "MHT Line") (and Webb, by making such payment, waives and releases any
right of subrogation against New Claridge, and to any collateral securing New
Claridge's obligations, arising by virtue of such payment, but retaining such
rights of reinstatement and subrogation as are provided in the proviso at the
end of the second sentence of Section l(b) hereof).
(3) Subject to the satisfaction of all conditions to lending set forth
in the Amended and Restated Loan Agreement referred to in paragraph (7) of this
Section l(c), the Bank shall lend to New Claridge under the Revolving Credit
Facility (as that term is defined in the Amended and Restated Loan Agreement)
the amount referred to in the next sentence, which loan shall in no event exceed
(I) $5,000,000, plus (ii) an amount equal to the amount by which at the Closing
the outstanding principal balance of the loan under the Loan Agreement is
reduced to less than $75,000,000, plus (iii) the amount of the Additional
Commitment as defined in Section 4(f) hereof, plus (iv) certain additional
amounts within the Revolving Credit Facility Commitment as defined in the
Amended and Restated Loan Agreement. Whether or not such loan is made in whole
or in part, New Claridge shall pay to Webb an amount equal to the amount, if
any, by which at the Closing the Closing Balance exceeds $10,350,000, plus
interest accrued and unpaid through the Closing on that portion of the aggregate
outstanding principal balance of such working capital loans and advances which
during all or any portion of the period from July 1, 1988 through the Closing
exceeded $10,350,000 (excluding therefrom, for the computation of interest, from
time to time as applicable, amounts which would be included in (y) of Section 1
(c)(1)(I).
(4) Except as provided in the second sentence of Section 1 (c)(3) and
in the proviso at the end of the second sentence of Section 1 (b), Webb and
DEWNJ shall release New Claridge from any obligation with respect to working
capital loans or advances made by Webb or DEWNJ to New Claridge; and any
obligation of New Claridge with respect to such loans or advances shall be
terminated: and Webb and DEWNJ shall be released from any obligation to provide,
or cause to be provided, to New Claridge working capital funds under the
Management Agreement or otherwise; and any and all such obligations shall be
terminated.
<PAGE>
(5) (a) To the extent not theretofore paid under Section 4(e) hereof,
each of Webb and DEWNJ shall pay to New Claridge the following actually received
by Webb or DEWNJ. if any, as principal, fees, interest or lease payments on or
after July 1, 1988 that Webb or DEWNJ would not have received had the Closing
contemplated by this Agreement occurred on July 1, 1998: (A) management fees,
and accrued interest thereon under Articles VI and VIII of the Management
Agreement, ( B) maintenance services fees under Section 6.1 of the Maintenance
Services Contract, (C) payments of Basic Annual Rent under Section 2.1 of the
Ground Lease and Section 2.1 of the Air Rights Lease, ( D) except as provided in
the second sentence of section l(c)(3), interest on working capital loans and
(E) payments of principal and interest under the Second Mortgage. In addition to
the foregoing, Webb shall pay to New Claridge the amount, if any, by which the
amount referred to in clause (y) of the definition of Closing Balance exceeds
the amount referred to in clause (x) of such definition.
(b) Except to the extent previously paid under Section 4(d) hereof, and
subject to Section 4(f) hereof, the Partnership shall (I) pay to New Claridge
any amount actually received and retained by it, if any, as lease payments under
the Combined Operating Lease on or after July 1, 1988, that it would not have
received and retained had the transactions contemplated by this Agreement
occurred on July 1, 1988, and (ii) lend to New Claridge on a subordinated basis
against delivery by New Claridge to the Partnership of a note in the form of
Exhibit Y hereto, all other cash or cash equivalents remaining in the
Partnership after giving effect to the payment referred to in clause (I) of this
Section l(c)(5)(b), except to the extent that such amounts are actually needed
to pay expenses incurred through or at the Closing.
(6) New Claridge shall pay to the Bank an amount equal to all cash on
hand at New Claridge at the time of the Closing, other than the "Opening
Bankroll" (as such term is defined in the form of Amended and Restated Loan
Agreement referred to in paragraph (7) of this Section 1 (c) ) after giving
effect to adjustments, refunds or returns of payments to adjust the transactions
contemplated by this Agreement as if such transactions had occurred on July 1,
1988 (including, without limitation, the amounts paid to New Claridge under
Section 1 (c) (5) (b) (I) hereof and the amounts, if any, loaned to New Claridge
under Section l(c)(5)(b)(ii) hereof, except to the extent such sums were already
paid to the Bank under Section 4(f) hereof); and the Bank shall apply the entire
amount of such payments to reduction of the principal amount of the loan under
the Loan Agreement. The amount of principal paid on the loan under the Loan
Agreement from and after July 1, 1988 through the time immediately prior to
Closing shall not be adjusted to July 1, 1988.
(7) The Bank shall execute and deliver to New Claridge, and New
Claridge shall execute and deliver to the Bank, an amendment and restatement of
the Loan Agreement substantially in the form of Exhibit A hereto (the Loan
Agreement, as amended by such amendment and subsequently amended from time to
time, is herein referred to as the "Amended and Restated Loan Agreement").
(8) Subject to the proviso at the end of the second sentence of Section
l(b) hereof, DEWNJ shall release New Claridge and the Partnership from all
obligations under the Second Mortgage, and from all obligations secured thereby,
including all principal thereof and all accrued and unpaid interest thereon; the
Second Mortgage and the obligations secured thereby shall be terminated; and
DEWNJ shall deliver to the Partnership an instrument of satisfaction in the form
of Exhibit B hereto duly executed on behalf of DEWNJ and in recordable form and
such termination statements as the Partnership shall reasonably request. The
Partnership and New Claridge hereby acknowledge that the release by DEWNJ of the
Second Mortgage and the obligations secured thereby shall not reduce the
principal balance due under the Wraparound Loan Agreement and the obligations
secured thereby.
(9) Except as otherwise provided in Section 10 and in the proviso at
the end of the second sentence of Section 1 (b), DEWNJ shall release New
Claridge from any obligation with respect to all amounts then or thereafter
payable under the Management Agreement, including, without limitation, all
accrued and unpaid management fees, and interest thereon; and the Management
Agreement shall be terminated.
<PAGE>
10) Webb shall deliver to the Corporation a consent in the form of
Exhibit C hereto, in its capacity as holder of all the issued and outstanding
shares of Class B Common Stock of the Corporation, consenting to the amendment
to the Certificate of Incorporation of the Corporation in the form of Exhibit D
hereto (the "Charter Amendment"), and such delivery shall be deemed to occur
immediately prior to all payments by Webb or DEWNJ under Sections 1(c)(1),
1(c)(2) and 1(c)(5) hereof.
11) DEWNJ shall deliver to the Partnership deeds in the forms of
Exhibits E-1 and E-2 hereto, subject to such title encumbrances and warranties
as the parties shall agree, duly executed by DEWNJ, conveying all of DEWNJ's
right, title and interest in the real property described on Exhibit F hereto and
the related air rights, and an instrument in the form included in Exhibit E-3
hereto assigning, the related easement agreement, and New Claridge shall pay the
transfer and other taxes attendant to such conveyances. The Brighton Park
Maintenance Agreement (as amended to the date hereof, the "Brighton Agreement"),
shall be assigned to New Claridge pursuant to an instrument in the form of
Exhibit E-4, effective July 1, 1988, and New Claridae shall assume Webb's and
DEWNJ's obligations, if any, under the Brighton Agreement, including, but not
limited to, obligations payable on or after July 1, 1988, but excluding
obligations payable prior to July 1, 1988, and shall indemnify Webb and DEWNJ
against, hold them harmless from and promptly reimburse them for the obligations
so assumed.
12) The Partnership shall duly execute and deliver to New Claridge, and
New Claridge shall duly execute and deliver to the Partnership, an amendment to
the Operating Lease and the Expansion Operating Lease in the form attached
hereto as Exhibit G.
13) The Partnership shall execute and deliver to New Claridge, and New
Claridge shall execute and deliver to the Partnership, an amendment to the
Wraparound Mortgage and the Wraparound Mortgage Loan in the form of Exhibits H-1
and H-2 hereto, respectively.
14) Atchley and Heetland, or such other person or persons acceptable to
the Partnership, the Corporation and New Claridge, shall execute and deliver to
the Partnership an instrument in the form of Exhibit I hereto.
15) Each of the General Partners and the New General Partners shall
execute and deliver, as general partners of the Partnership, an amendment to the
Partnership Agreement in the form of Exhibit J hereto; and one of the New
General Partners shall execute such amendment as attorney in fact for the
limited partners of the Partnership. Such amendment shall provide, among other
things, that (i) the compensation payable by the Partnership to the General
Partners during the period from January 1, 1989 through the earlier of the
closing of the Golden Nugget Transaction or the Closing Date shall equal
$103,000 for each Individual General Partner, and (ii) the interests of the
Individual General Partners in the Partnership shall be converted to an
aggregate of not more than a one percent limited partnership interest in the
Partnership, and they shall thereupon cease to be general partners of the
Partnership. No payment not provided for in the Partnership Agreement shall be
made by the Partnership to the Individual General Partners (in their capacities
as such) other than the payments described above and distributions and returns
on capital provided for in the Partnership Agreement. At the earlier of the
closing of the Golden Nugget Transaction or the Closing Date (but not before the
date that the payment described in clause (I) of this paragraph (15) has been
made in full), the Partnership shall demand payment from each Individual General
Partner, and each Individual General Partner shall pay, the principal amount of
all promissory notes given by such Individual General Partner to the
Partnership. If, in the future, the Individual General Partners shall receive a
distribution from the Partnership, whether as General Partners or Limited
Partners, they shall pay to the Partnership for distribution to the partners of
the Partnership the distribution received to the extent that $103,000 exceeds
the compensation which the Individual General Partners would have received under
Section 5.2A of the Partnership Agreement from January 1, 1989 through the date
on which they ceased to be general partners of the Partnership had the
Partnership Agreement not been amended in the manner set forth above.
<PAGE>
16) Each of the Partnership, the Corporation and New Claridge shall
execute and deliver to the Bank all documents, instruments and agreements
required to be executed and delivered by it as a condition to the effectiveness
of the Amended and Restated Loan Agreement.
17) DEWNJ shall be deemed to have assigned the Maintenance Services
Contract to New Claridge, which hereby assumes the same; and DEWNJ shall be
deemed released from any obligation under the Maintenance Services Contract.
18) The Cross Option Agreement shall be terminated,
19) The Partnership and New Claridge each shall duly execute and
deliver to the other an instrument in the form of Exhibit L hereto terminating
the Land Option Agreement.
20) The Casino Expansion Agreement, dated as of October 31, 1983, among
the Corporation, the Partnership, DEWNJ and Webb, to the extent that it is any
longer of any force or effect, shall be deemed terminated.
21) Webb shall execute and deliver to each of the Individual General
Partners, and each of the Individual General Partners shall execute and deliver
to Webb, amendments in the forms of Exhibits M-1, M-2 and M-3 hereto to the
Indemnity Agreements, each made October 31, 1983, among Webb, DEWNJ and each
Individual General Partner.
22) The Undertaking, dated October 31, 1983, of Webb to New Claridge
shall he deemed terminated.
23) The Partnership or New Claridge, as the case may be, shall duty
execute and deliver to Webb or DEWNJ, as the case may be, such assignments or
termination statements as shall be reasonably necessary to reflect the
assignment or termination of obligations of Webb or DEWNJ to the other parties
hereto as contemplated by this Agreement and the Bank shall execute and deliver
to DEWNJ such termination statements with respect to liens on property of DEWNJ
released by the Bank as Webb shall reasonably request.
24) Subject to any contrary agreement in writing entered into among
Webb, DEWNJ, the Bank and its participating banks, all subordination agreements
between DEWNJ or Webb and the Bank shall be deemed terminated.
25) The Ground Lease and the Air Rights Lease shall each be terminated;
and DEWNJ and the Partnership shall duly execute and deliver instruments in the
forms included in Exhibits N-1 and N-2 hereto regarding such terminations.
26) The Guaranty and Undertaking, dated October 31, 1983, of Webb to
New Claridge shall be deemed terminated.
27) The Guaranty and Undertaking, dated October 31, 1983, of Webb to
the Partnership shall be deemed terminated.
28) Atchley shall submit his resignation as a director of the
Corporation and New Claridge, effective the Closing Date.
<PAGE>
29) New Claridge shall duly execute and deliver to the Bank,
Subordination Agreements in the forms of Exhibits 0-1 and 0-2 hereto and the
Partnership shall consent thereto.
30) To the extent any amounts are owing thereunder, DEWNJ shall release
New Claridge from any obligation under the Promissory Note, dated October 31,
1983, from New Claridge to DEWNJ, in the amount of $500,000, including any
accrued interest thereon, and DEWNJ shall deliver to New Claridge such
Promissory Note marked "canceled" or, if DEWNJ is unable to deliver such
Promissory Note, an instrument of indemnification, duly executed by DEWNJ.
31 ) Webb shall deliver to the Corporation for cancellation the
certificate(s) evidencing all of the issued and outstanding shares of Class B
Common Stock in the Corporation.
32) Each of the Individual General Partners shall resign as an officer
and director of AC Boardwalk and shall transfer to the New General Partners, in
such proportion as the New General Partners shall agree, all shares of common
stock of AC Boardwalk owned by them, for a price of $10.00.
(d) To the extent that the taking of any action or occurrence of any
event contemplated by Section l(c) would require any consent or waiver by, or
any notice to. any party to this Agreement under any other agreement relating to
the Claridge (other than the conditions precedent to the Amended and Restated
Loan Agreement), to which such party and any other party to this Agreement are
parties, or would give any right to damages or otherwise, such requirement shall
be deemed satisfied and there shall be no right to damages or other relief.
(e) New Claridge may use the name "Webb" for a period of one year from
the date of this Agreement, provided that such name may not be used on exterior
signs or stationery after the Closing Date, no new goods or supplies purchased
by or for the Partnership, New Claridge or the Corporation or their successors
or assigns after the date hereof may bear the name "Webb" and, subject to the
foregoing chips may bear the name "Webb" until December 31, 1993. New Claridge
and the Corporation jointly and severally agree to hold Webb and DEWNJ harmless
from. and defend Webb and DEWNJ against and indemnify them from, and upon demand
reimburse them for, any cost or expense ( including costs of investigation and
defense and attorneys' fees) which they incur or to which they are exposed by
virtue of the use by New Claridge of the name "Webb" after the date of the
Closing. Webb and New Claridge will each pay one-half of the cost of replacing
exterior signs and unused stationer, bearing the Webb name at the Closing, up to
a maximum payment by Webb of $55,000.
(f) The obligations of Webb under any existing loyalty agreements with
employees of the Corporation and New Clairidge are not affected by this
Agreement or any agreement or document delivered in connection herewith and
shall be obligations of Webb alone and not of the Corporation or New Claridge.
(g) For the purposes of any calculation of interest accrued or paid on
the MHT Line under this Agreement, on any day after November 30, 1988 on which
$5,000,000 exceeds the sum of the outstanding principal balance of the MHT Line
and the undrawn amount of letters of credit outstanding under the MHT Line (such
excess, the "Gap") there shall be deemed included as such interest on the MHT
Line, interest accrued on that portion of the outstanding principal under
DEWNJ's working capital line which (i) exceeds $10,350,000 on such day, and (ii)
is not in excess of the Gap ("Switchover Interest").
2. New Jersey Casino Control Act.
Notwithstanding anything to the contrary contained in this Agreement,
this Agreement shall be deemed to include all provisions required by the New
Jersey Casino Control Act (the "Act"), and shall be conditioned upon the
approval of the Commission. To the extent that anything in this Agreement is
<PAGE>
inconsistent with the Act, the provisions of the Act shall govern. All
provisions of the Act, to the extent required by law to be included in this
Agreement, are incorporated by reference as if fully restated in this Agreement.
3. Conditions.
The obligations of each of the parties hereto to take the actions at
the Closing, and the occurrence of the events to occur at the Closing, as
provided in Section 1 hereof are subject to satisfaction, at or prior to the
time of Closing, of the following conditions:
(a) Receipt from governmental authorities or agencies (including,
without limitation, federal and state securities authorities or
agencies) and continued availability of all such consents, approvals,
exemptions or authorizations as may be required with respect to the
execution and delivery of the agreements, instruments and documents,
and the taking of the actions, contemplated by this Agreement.
(b) Two-thirds in interest of the Limited Partners of the
Partnership shall have given their consent to the restructuring
contemplated herein, the amendment of Partnership Agreement described
herein, the admission of the New General Partners, and other matters
the approval of which is necessary to effect the transactions
contemplated hereby, including Section 6A(h) if applicable.
(c) The holders of two-thirds of the outstanding Class A Common
Stock of the Corporation shall have given a proxy approving the
restructuring, the Charter Amendment, and other matters the approval of
which is necessary to effect the transactions contemplated hereby,
including Section 6A(h) if applicable.
(d) Prior to the time that materials are sent to Limited Partners
and shareholders soliciting the consents and releases contemplated by
Sections 3( b) and 3(c) hereof, the General Partners and the directors
of the Corporation shall have received such legal, tax. financial and
investment banking opinions (provided that the same investment banking
firm is retained bv the Corporation and the Partnership) as they
believe necessary, including financial forecasts of the operations of
New Claridge, together with a review report of such forecasts of Zolfo,
Cooper & Co., indicating the forecasted net cash flow, after giving
effect to the transactions contemplated by this Agreement, for each
month from and including November 1988 to December 1989; and this
condition shall be deemed satisfied as to the General Partners and as
to the directors of the Corporation at such time as such materials are
sent by, the Partnership and the Corporation to the Limited Partners
and the shareholders, respectively.
(e) Opinions, dated the Closing Date, from Rogers & Wells, as
counsel to New Claridge, addressed to New Claridge, the Partnership,
the Bank, the Corporation, Webb and DEWNJ, Gibson, Dunn & Crutcher, as
counsel to Webb and DEWNJ, addressed to New Claridge, the Partnership,
the Bank, the Corporation, Webb and DEWNJ, Orloff, Lowenbach, Stifelman
& Siegel, as counsel to the Partnership, addressed to New Claridge, the
Partnership. the Bank, the Corporation, Webb and DEWNJ, Scheider &
Wiener, as counsel to the Bank, addressed to the Bank and its loan
participants and Ribis, Graham, Verdon & Curtin, as special gaming
counsel to New Claridge, the Corporation and the Partnership, addressed
to New Claridge, the Partnership, the Bank, the Corporation, Webb and
DEWNJ, shall have been delivered by such Counsel in the respective
forms attached hereto as Exhibit U. A party to whom any of such
opinions is addressed may waive delivery of such opinion as a condition
of such party's obligations under this Agreement.
(f) As a condition to the obligations of the Bank only under this
Agreement, all of the conditions set forth in paragraph (a) and
paragraphs (c) through (o), inclusive, of Section 4.1 of the Amended
and Restated Loan Agreement shall have been satisfied in full or, to
the extent not satisfied, waived by the Bank in writing.
<PAGE>
(g) MHT shall have delivered to Webb and New Claridge an
instrument in the form of Exhibit V, duly executed by MHT, releasing
Webb and New Claridge from any obligation with respect to, and
terminating, the MHT Working Capital Guaranty and the MHT Line,
respectively.
(h) Marine Midland Bank, N.A., Western Savings and Loan
Association, Security Pacific National Bank and Home Federal Savings
and Loan shall have delivered consents, duly executed by each of them,
in the form of Exhibit W hereto.
(I) As a condition to the obligations of the Bank only, upon the
occurrence of the events contemplated by Section l(c) hereof, the
principal amount of the Term Loan under the Amended and Restated Loan
Agreement shall not exceed $74,500,000. As a condition to the
obligations of the Partnership only, upon the occurrence of the events
contemplated by Section l(c) hereof, the principal amount of the Term
Loan under the Amended and Restated Loan Agreement shall not exceed
$77,500,000.
(j ) All parties hereto shall have taken the actions and executed
and delivered the documents and made the payments contemplated by
Section 1 of this Agreement.
(k) Webb, DEWNJ, the Bank and the participants in the loan
secured by the First Mortgage shall have entered into an agreement
allocating among them the risks related to the bankruptcy of New
Claridge, the Corporation and the Partnership.
(l) As a condition to the obligations of the Bank hereunder only,
Webb shall have performed its obligations under Section 4 hereof.
(m) Two-thirds in interest of the Limited Partners and the
holders of two-thirds of the Class A Stock of the Corporation shall
have executed a Release and Settlement Agreement in the form of Exhibit
R hereto, with such non-material changes as Webb may make therein and,
subject to the consent of the other parties hereto entitled to the
benefit thereof for changes which are material, which consent shall not
be unreasonably withheld.
(n) New Claridge, the Corporation and the Partnership shall have
received releases from Webb and DEWNJ in such forms as the parties
shall agree, and the Bank and the participants in the loan secured by
the Amended and Restated Loan Agreement shall have received releases
from Webb, DEWNJ, New Claridge, the Partnership and the Corporation in
such forms as the parties shall agree.
(o) As a condition to the obligations of the Corporation, New
Claridge and the Partnership only, each of the banks which is a
participant in the loan secured by the First Mortgage shall have
executed and delivered to New Claridge an inducement letter in the form
of Exhibit X hereto.
4. Certain Obligations.
(a) During the period (the "Interim Period") beginning on the date of
execution and delivery by all parties hereto of this Agreement ( the "Execution
Date") and ending at the time immediately preceding the time of the earliest of
the Closing, the closing of the Golden Nugget Transaction or termination of this
Agreement under Section 11 (m), Webb shall (i) continue to fund workin capital
advances to the extent it is obligated to do so under the Management Agreenient
(but only if, with respect to each such advance, Webb receives from New Claridge
the certificate referred to below in this paragraph ) continue to defer and
cause DEWNJ to continue to defer payment of amounts required to be paid by Webb
or DEWNJ at Closing pursuant to Section 1 (c) ( 5) hereof, to the extent that
such amounts would otherwise become due and payable during such period, and (
iii ) to the extent that New Claridge has no availability under DEWNJ's working
capital line, pay to the Bank and to MHT (or to DEWNJ for Switchover Interest),
as and when due, interest on $14,500,000 of the outstanding principal balance of
<PAGE>
the loan secured by the First Mortgage and interest on the outstanding principal
balance of the MHT Line (including Switchover Interest), to the extent such
interest both accrues and is payable from December 1, 1988 through and including
Closing; provided, however, that if there is subsequent availability under
DEWNJ's working capital line, Webb will be reimbursed for such payments to the
extent of such availability with the proceeds of drawings under such working
capital line. Working capital advances made by Webb or DEWNJ from and after the
Execution Date and until the Closing shall be included in the calculation of the
Closing Balance to the extent that New Claridge shall have certified to Webb or
DEWNJ and to the Bank in writing that the proceeds of such advance were to be
applied to purposes permitted under Section 5.12 of the Amended and Restated
Loan Agreement (assuming that such agreement were in effect) or to make such
payments of principal and interest under the loan secured by the First Mortgage
and interest on the MHT Line and the DEWNJ working capital line, and shall
otherwise be excluded from the calculation of the Closing Balance. Without
investigation, Webb shall be entitled to rely conclusively on certificates given
by New Claridge pursuant to this Section 4, which certificates shall be in the
form specified by the Bank, and shall not be obligated to make any working
capital loan until such a certificate covering the loan to be made is received.
Repayments of principal of the working capital line made by New Claridge during
the Interim Period shall be deemed to be applied first to advances which are
includible in the Ciosing Balance.
(b) During the Interim Period, any amounts that would be deferred under
the Wraparound Mortgage if the transactions contemplated hereby occur shall be
deferred from the date hereof until the date of the Closing.
(c) During the Interim Period, the Partnership shall defer payment of
all amounts it is entitled to receive from New Claridge pursuant to the Combined
Operating Lease other than amounts necessary to pay all of the Partnership's
non-deferred expenses during the Interim Period, such non-deferred expenses to
include interest on the loan under the Wraparound Loan Agreement to the extent
necessary to cover interest on the loan under the Loan Agreement, payments due
under the Maintenance Services Contract, or any notes issued thereunder, which
are not deferred under Section 4(a)(ii) hereof, payments due to DEWNJ or any
other party hereunder which are not deferred under Section 4 hereof, payments to
the General Partners under the Partnership Agreement as amended by Section 1
(c)( 15) hereof, and all general and administrative expenses, including
salaries, office rental, leaal and accounting fees and other expenses which are
required to be paid by the Partnership pursuant to existing agreements or the
terms hereof or which are necessary or desirable to effectuate the transactions
contemplated hereunder.
(d) Within five business days following the satisfaction of the
conditions set forth in Sections 3(b) and 3(c) hereof, and whether or not any
other conditions set forth in Section 3 shall have been satisfied and so long as
this Agreement shall not have been terminated in accordance with Section 11 (m)
hereof, subject to paragraph (f) of this Section 4, the Partnership shall make
the loan contemplated by Section l(c)(5)(b)(ii) hereof and shall make the
payment referred to in Section l(c)(5)(b)(i) hereof, provided that should the
Closing not occur, nor a transaction contemplated by the third sentence of
Section 6( a ) or by Section 6A(d) close, then upon termination of this
Agreement New Claridge shall repay within ten days to the Partnership the
amounts lent by the Partnership to New Claridge under this Section 4(d).
(e) On November 30, 1988, so long as this Agreement shall not have been
terminated in accordance with Section 11(m) hereof, Webb and DEWNJ shall pay to
New Claridge any. and all amounts described in Sections 1 (c)( 5)(a)(B) and 1
(c)(5)(a)(C) hereof; provided that should the Closing not occur, nor a
transaction contemplated by the third sentence of Section 6( a ) or by Section
6A(d) close, then upon termination of this Agreement New Claridge shall repay
within ten days to Webb and DEWNJ the amounts lent by Webb and DEWNJ to New
Claridge under this Section 4(e).
f) In the event that at any time during the interim Period New Claridge
shall have fully utilized all availability under DEWNJ's working capital line
and the MHT Line (DEWNJ's working capital line and the MHT Line, hereinafter
collectively referred to as the "Existing Lines"), Webb and/or DEWNJ shall have,
to the extent required under Section 4(a)(iii) of this Agreement, paid interest
on the MHT Line (including Switchover Interest) and $14,500,000 of the loan
under the Loan Agreement (such payments of interest, the "Required Interest
Payments"), and the conditions set f'orth in Section 4.2 of the Amended and
Restated Loan Agreement (assuming for such purpose that such Amended and
Restated Loan Agreement were in effect, and without regard to any default or
Event of Default under Section 7. 1 (g)( 1) thereof) is satisfied, then, subject
to the terms and conditions of lending to be provided in the Interim Bank
Agreement, the Bank shall lend to New Claridge, on a revolving loan basis
<PAGE>
(provided, that no borrowing shall be made under the Interim Bank Agreement
unless at the time of each borrowing all sums available under the Existing Lines
shall have been utilized by New Claridge, and, except as otherwise consented to
by the Bank, all Required Interest Payments shall have been made), such sums as
shall be required at such time by New Claridge for the purposes set forth in
Section 5.12 of the Amended and Restated Loan Agreement (assuming for such
purpose that the Amended and Restated Loan Agreement were in effect), other than
for amounts which are deferred under this Agreement, until the aggregate
principal amount outstanding under the Interim Bank Agreement shall be
$5,000,000, so long as, prior to making the initial advance under the Interim
Bank Agreement (without limiting the requirement that all other terms and
conditions under the Interim Bank Agreement shall have been satisfied) Webb
shall have executed and delivered to the Bank an unconditional guaranty (in
form, scope and substance satisfactory to the Bank and consistent in all
material respects with this Section 4(f)) of payment and performance of all
obligations of New Claridge under the Interim Bank Agreement incurred through
the Closing and certain borrowings incurred under the Amended and Restated Loan
Agreement to the extent set forth below (the "Webb Guaranty"), and Webb. hereby
agrees to execute and deliver the Webb Guaranty. For the purposes of this
Agreement, the term "Interim Bank Agreement" shall mean a revolving credit
agreement to be entered into between New Claridge and the Bank establishing a
revolving credit facility in favor of New Claridge for loans not exceeding
$5,000,000 in principal amount outstanding at any one time (as reduced from time
to time as described below, the "Interim Commitment"), the terms and conditions
of which shall be substantially the same as those provided for the "Revolving
Credit Facility" under the Amended and Restated Loan Agreement, with such
changes as the Bank may reasonably require. The obligations of New Claridge
under the Interim Bank Agreement shall be cross-defaulted with the Loan
Agreement, shall mature on the earliest to occur of (i) the Closing, and (ii)
the termination of this Agreement under Section 11(m) hereof, and shall be
secured by the collateral which secures the obligations under the Loan
Agreement. It is understood that the initial Revolving Advance, if any, under
the Amended and Restated Loan Agreement shall refinance the loans under the
Interim Bank Agreement, and the Revolving Credit Facility Commitment under the
Amended and Restated Loan Agreement shall be increased over the amount of the
Basic Revolving Credit Facility Commitment thereunder in an amount necessary to
accomplish such refinancing (the amount of such increase, as reduced from time
to time as set forth below, the "Additional Commitment"). Webb's liability under
the Webb Guaranty, as to principal, shall not exceed $5,000,000 under the
Interim Bank Agreement or the amount of the Additional Commitment, as
applicable, and shall apply to all borrowings under the Interim Bank Agreement
through the Closing and the amount of the initial Revolving Advance on Closing
under the Additional Commitment, to the extent that the proceeds of such initial
Revolving Advance were used to refinance such borrowings under the Interim Bank
Agreement (the amount of outstanding principal under the Interim Bank Agreement
as of the Closing (as refinanced, if applicable, with the proceeds of the
initial Revolving Advance under the Additional Commitment) covered by the Webb
Guaranty is hereinafter referred to as the "Webb Exposure"), and borrowings
thereafter under the Amended and Restated Loan Agreement to the extent that such
borrowings from time to time, (A) (i) when added to the outstanding principal
balance thereunder shall not cause the Revolving Loan thereunder to exceed (x)
the sum of the amount of the Basic Revolving Credit Facility Commitment (as
originally defined or as such definition may be amended with the consent of
Webb) in effect from time to time under the Amended and Restated Loan Agreement
plus the Additional Commitment less (y) the amount by which the outstanding
principal balance under the Interim Bank Agreement as of the Closing, and after
giving effect thereto (but without giving effect to the refinancing thereof with
the initial Revolving Advance under the Additional Commitment), exceeded the
Interim Commitment as of such time (such excess, the "Overadvance"), and (ii)
are used for the purposes set forth in Section 5.12 of the Amended and Restated
Loan Agreement, of principal of any loans under the Amended and Restated Loan
Agreement or (B) excluding the payment after August 31, 1989 and until the
outstanding principal balance of the Revolving Loan has been reduced to an
amount equal to the Webb Exposure in effect at August 31, 1989, (i) do not cause
the outstanding principal balance of the Revolving Loan to exceed the principal
balance thereof outstanding on August 31, 1989, (ii) do not exceed, in the
aggregate, to the extent that any such Revolving Advance caused the outstanding
principal balance of the Revolving Loan to exceed the Basic Revolving Credit
Facility Commitment in effect at the time of such Revolving Advance, the
aggregate amount of paymcnts received after August 31, 1989 under Section 3. 1
(c) or the Amended and Restated Loan Agreement (excluding those payments which
caused a reduction in the Webb Exposure) and (iii) are used for the purposes
<PAGE>
described in clause (A)(ii) of this sentence. In addition to principal as set
forth above, Webb shall be obligated under the Webb Guaranty for costs, fees and
expenses and, as to principal covered by the Webb Guaranty, interest on such
principal. Payments of principal under the Interim Bank Agreement (other than
(x) payments representing the proceeds of the initial Revolving Advance under
the Amended and Restated Loan Agreement and (y) payments under Section 3.1(c) of
the Amended and Restated Loan Agreement, except as otherwise provided in Section
3.1(c) or Section 3.1(e) thereof) or under the Amended and Restated Loan
A-reement shall reduce the Webb Exposure dollar for dollar to the extent that
such payments are made in respect of or due to prior or contemporaneous
reductions in the Interim Commitment or in the Additional Commitment under the
Amended and Restated Loan Agreement, as the case may be, and such reductions in
the Webb Exposure and the Webb Guaranty shall be permanent. All amounts payable
and to be loaned by the Partnership to New Claridge under this Agreement
(including, without limitation, under Section 4(d) and Section l(c)(5) hereof)
shall be paid by the Partnership directly to the Bank in permanent reduction of
the Interim Commitment to the extent of outstanding principal amounts thereunder
(as certified by the Bank) and New Claridge hereby irrevocably directs the
Partnership to make such direct payment and the excess shall be paid or loaned
to New Claridge as otherwise provided under Section 4(d) hereof. In any event
the maximum amount of the Interim Commitment shall be reduced by the amount of
$2,600,000 on the date that payment is due by the Partnership under Section 4(d)
hereof. It is contemplated that the Revolving Credit Facility Commitment under
the Amended and Restated Loan Agreement shall be permanently reduced on August
31, 1989 by the amount of the Additional Commitment as then in effect.
Additionally, (A) each payment of principal in respect of the Revolving Loan
under the Amended and Restated Loan Agreement at any time when any portion of
the Overadvance is outstanding (including, without limitation, payments under
Section 3. 1 (c) of the Amended and Restated Loan Agreement) shall first be
applied against such portion of the Overadvance, and shall permanently reduce
the Additional Commitment (as in effect immediately prior to such payment) by
the amount of such payment, and (B) each payment of principal in respect of the
Revolving Loan under the Amended and Restated Loan Agreement at any time when no
portion of the Overadvance is outstanding (including, without limitation,
payments under Section 3.1(c) of the Amended and Restated Loan Agreement) which
results in the outstanding principal balance of the Revolving Loan (excluding,
from the computation of such outstanding principal balance any portion thereof
outstanding under clause (iv) of the definition of the Revolving Credit Facility
Commitment under the Amended and Restated Loan Agreement as originally defined
or as such definition may be subsequently amended with the consent of Webb)
being less than the amount of the Additional Commitment (as in effect
immediately prior to such payment) shall permanently reduce the Additional
Commitment by the amount by which the Additional Commitment (immediately prior
to such payment) exceeds the outstanding principal balance of the Revolving Loan
(excluding such portion and after giving effect to such payment). Payments
(including, without limitation, payments under Section 3. I (c) of the Amended
and Restated Loan Agreement) received by the Bank following the commencement of
any bankruptcy or similar proceedings involving New Claridge or the Partnership
as debtor or through the enforcement of remedies (other than acceleration and
demand for payment in the absence of enforcement of other remedies) by the Bank
shall be applied first to (i) amounts of any outstanding Overadvance, ( li)
next, any outstanding, principal thereunder to the extent to which such
principal was outstanding under aggregate availability thereunder (including,
without limitation, the Term Loan) in excess of the Webb Exposure, and (iii)
next, principal thereunder in reduction of the Webb Exposure, and (iv) last,
such obligations as the Bank shall determine; provided, however, that nothing
contained in this sentence or elsewhere in this Agreement shall be deemed to
require the Bank to seek to enforce or to enforce any remedies against any
person or any property as a condition to seeking payment under the Webb
Guarantee.
(g) The Bank hereby defers until the earlier to occur of (i) the
occurrence of an Event of Default under the Loan Agreement or under tile Amended
and Restated Loan Agreement (assuming the Amended and Restated Loan Agreement
were in effect), (ii) the date on which this Agreement is terminated in
accordance with Section 11(m) hereof, and (iii) the Closing, all payments or
prepayments of principal under Section 2.5(a) of the Loan Agreement which would
otherwise be payable during the period beginning on December 1, 1988 and ending
on and including the earliest to occur of (q) March 3 1, 1989, or (r) the
earliest to occur of the dates specified in clauses (i), (ii) or (iii) above. In
the event that the Closing occurs, the amount of principal payments or
prepayments so deferred shall be part of the outstanding principal balance of
the "Term Loan" as such term is defined in the Amended and Restated Loan
Agreement and shall be subject to repayment as provided therein.
5. Post-Closing Obligations. If the Closing contemplated by Section I
hereof occurs,
(a) DEWNJ shall, from and after the Closing Date, maintain a license
from the Commission to operate a casino with respect to the Claridge unless no
longer required to do so by the Commission.
(b) Unless (i) if DEWNJ is required to hold a gaming license issued by
the Commission with respect to the Claridge, it fails to hold such license, (ii)
the Partnership and the Corporation have irrevocably paid the Trustee (as
hereinafter defined), in the aggregate, an amount sufficient to pay Webb, after
giving effect to amounts to be paid to Releasing Investors (as hereinafter
defined), $20,000,000 plus 15% interest thereon, compounded quarterly, from and
including December 1, 1988, as provided in Section 6 hereof (the "Webb
Payment"), and (iii) no person or group of persons, as defined in Section
13(d)(3) and Rule 13d-3 under the Securities Exchange Act of 1934 (hereinafter,
a "Group"), except Webb and its affiliates, holds in the aggregate more than 50%
of the outstanding shares of Class A Stock of the Corporation (or any successor
to the Corporation) or, other than the Corporation, of the outstanding shares of
New Claridge, the Corporation shall (w) give Webb at least 120 days' notice of
the date on which its next annual meeting of shareholders is to be held, (x)
recommend that, and include as a nominee in proxy solicitation materials mailed
to its shareholders in connection with that annual meeting, such person, if any,
as Webb may designate in writing to the Corporation, within 30 days of receiving
such notice, be elected as a director of the Corporation, (y) if at any time a
person so designated by Webb is not serving as a director of the Corporation and
New Claridge, give Webb the same access to information (including the right to
attend meetings of the Board of Directors) regarding the Corporation and New
Claridge as would be accorded a director of the Corporation and New Claridge
under applicable law, and (z) elect such person as Webb shall designate as a
director of New Claridge.
6. Webb's Contingent Payment.
(a) Except as provided in Sections 6A and 6(g) hereof, none of the
Corporation, New Claridge or the Partnership will make any distribution or
payment to any of its partners or shareholders in their capacities as such
(other than payments by the Partnership to the General Partners as such.
payments by New Claridge to the Corporation while the former is a wholly owned
subsidiary of the latter and distributions by the Distributing Trust in
accordance with the agreement referred to in Section 6(b) hereof), nor will any
of them engage in any merger, reverse merger, combination, consolidation, sale
of all or substantially all of its assets (including sale of stock of
subsidiaries) or other acquisition transaction, unless there has been (i)
compliance with Section 9(c) and (ii) a deposit made to the Distributing Trust
referred to below in an amount sufficient to pay to Webb the Webb Payment, and
to Releasing Investors (defined below) the amount to be paid to them under
Section 6(e) or 6A( b), whichever is applicable; provided that, subject to
Section 9(c) hereof and to any required consent of the Bank, the Corporation may
sell the stock of New Claridge and New Claridge and the Partnership may sell
substantially all of their respective assets as long as 100% of the proceeds
therefrom and from the other assets of the selling entity remaining after
payment of liabilities of the selling entity and expenses of the sale and
payments to Webb under Section 10(d), which liabilities and expenses shall be
satisfied (other than those owing to any party to this Agreement, but including,
in any event, (x) amounts payable pursuant to Section 10(d) hereof, and (y) such
amounts as are outstanding under Section 4(f) hereof which are Guaranteed by
Webb), are paid into the Distributing Trust. Notwithstanding the f'oregoing, the
maximum amount which is to be paid into the Distributing Trust is an amount
sufficient to pay Webb, after giving effect to amounts to be paid to Releasing
Investors (defined below), the Webb Payment. Notwithstanding the preceding
sentence and the provisions of Section 6(e), should a sale of assets or other
transaction permitted by this Section 6(a) (other than one covered by the
provisions of Section 6A) be closed prior to the Closing, adjustments will be
made in the amount to be distributed to the Distributing Trust so that
distributions to Webb under Section 6(e) on account of such sale of assets or
other trinsiction will not exceed the amount which would have been distributed
to Webb should the Closing have occurred before the closing of the sale of
<PAGE>
assets or other transaction permitted by this Section 6(a), in the same manner
as the adjustments provided for in Section 6A(d). In addition, if any person or
Group (other than Webb or its affiliates) by virtue of a tender offer, open
market purchases or otherwise, directly or indirectly acquires 50% or more of
the limited partnership interests in the Partnership or 50% or more of the
outstanding equity securities of the Corporation, then the Partnership, the
Corporation and New Claridge will forthwith jointly and severally irrevocably
pay to the Distributing Trust an amount sufficient so that there shall be paid
to Webb, after payment of Releasing Investors, the Webb Payment. The claim by
the Distributing Trust for the payment referred to in this Section 6(a) shall be
subordinate to all present and future claims of the Bank against the
Partnership, the Corporation and New Claridge under and in connection with the
Loan Agreement and the Amended and Restated Loan Agreement.
(b) The Distributing Trust will. be a trust maintained pursuant to an
agreement in form and substance satisfactory to Webb at a bank having a capital
and surplus of in excess of $50,000,000, which is organized under the laws of
the United States of America or the States of New York, Arizona or California
and which is selected by Webb. The Distributing Trust shall terminate at such
time as the amount payable to Webb under Section 6(e), Section 6A(c) or Section
6A(d), whichever is applicable, and the amount payable to Releasing Investors
under Section 6(e) or 6A(b), whichever is applicable, have each been paid in
full, and any fees and expenses of the trustee under the Distributing Trust (the
"Trustee") theretofore incurred have been satisfied in full.
(c) The fees and expenses of the Trustee will be paid one-half by Webb
and one-half by deduction from the amounts otherwise distributable from the
Distributing Trust to Releasing Investors (but without deduction on account
thereof from the amounts distributable to Webb).
(d) As used in this Section 6, (i) "Releases" means the releases
referred to in Section 3(m) hereof, (ii) "Claim Unit" means all rights and
claims which could be asserted with respect thereto by a person who has
continuously from October 31, 1983, held two units of limited partnership
interest in the Partnership and 10,538 shares of Class A Stock of the
Corporation (within 30 days after the execution of this Agreement, Webb, the
Partnership and the Corporation shall agree upon a method whereby investors (j)
who have interests in the Partnership and/or shares of Class A Stock of the
Corporation, but not in the proportion of Claim Units, and (k) who give
Releases, may participate in an appropriate manner in the Distributing Trust),
(iii) "Releasing Investor" means a person holding one or more Claim Units, or
any multiple or fraction of such a Claim Unit, who gives a Release with respect
thereto, (iv) "Percentage Interest" of a Releasing Investor means the percentage
obtained by dividing the number of Claim Units, or multiple or fraction thereof,
as to which such Releasing Investor gives a Release by the total number of Claim
Units, and (v) "Five Year Payment" means a payment made to the Trustee under
Section 6( a) hereof which is made within five years of the Closing, or which
represents proceeds (including interest thereon) of a sale or refinancing, of
all or substantially all of the assets of the Partnership, New Claridge or the
Corporation effected pursuant to a definitive agreement of sale (which shall not
include option agreements relating to such a sale which are not exercised within
such five year period) executed within five years after the Closing.
(e) Funds deposited in the Distributing Trust shall be invested only in
Government securities (as defined in the Investment Company Act of 1940) and,
except as provided in Section 6A, shall be distributed as promptly as reasonably
possible as follows:
(1) amounts received in the Distributing Trust which are Five Year
Payments shall be distributed:
(A) to each Releasing Investor in accordance with his Percentage
Interest, up to an aggregate distribution to Releasing Investors equal to ( x)
the amount of the Five Year Payment, times (y) the aggregate Percentage
Interests of all Releasing Investors, and
(B) the balance to Webb, until such time as distributions totalling
$10,000,000 have been made from the Distributing Trust;
(2) after distributions totalling $10,000,000 have been made from the
Distributing Trust, and with respect to all amounts received in the Distributing
Trust which are not Five Year Payments, distributions shall be made as follows:
(A) to each Releasing Investor, an amount equal to one-half of the
product of (x) his Percentage Interest, times (y) the amount of the payment
being distributed, and
(B) subject to Section 6(e)(3), the balance to Webb;
(3) The maximum amount payable to Webb under this Section 6(e) shall be
the amount sufficient to pay the Webb Payment in full.
<PAGE>
(f) Webb will pay the legal, accounting, printing, Securities and
Exchange Commission filing and blue sky costs which are incurred, and which are
in excess of those which would otherwise have been incurred, because the
transactions contemplated by this Section 6 may involve the issuance of a
security, but with it being understood that the substantive disclosures included
as to the Partnership, the Corporation, New Claridge, Webb and DEWNJ would not
be different if a security were not involved; provided that the costs of
preparing financial statements and audited financial statements which would not
have been required if a security were not involved shall be paid by Webb.
(g) The provisions of this Section 6 shall terminate and be void and of
no effect in the event that neither the Closing nor the closing of the Golden
Nugget Transaction occurs.
6A. Golden Nugget Transaction.
(a) Attached hereto as Exhibit T is a letter agreement between Golden
Nugget, Inc. and Webb (the "Letter Agreement") .
(b) The Corporation, New Claridge and the Partnership will promptly
enter into any acquisition type agreement with Golden Nugget, Inc. or its
affiliates, not materially inconsistent with the Letter Agreement or this
Agreement, as is specified by Webb in its discretion as long as:
(1) the transaction contemplated thereby (the "Golden Nugget
Transaction") will, if completed, have the following effects after
utilization of all remaining assets and cash of the Corporation, New
Claridge and the Partnership to pay their creditors, other than Webb,
DEWNJ and any other subsidiary of Webb:
(A) all creditors of the Partnership, New Claridge and the
Corporation (other than Webb, DEWNJ and any other subsidiary of
Webb) will, subject to.any special arrangement which may be made
with any such creditor, be paid in full; and
(B) no limited partner or general partner of the Partnership,
and no officer or director of New Claridge or officer, director
or holder of Class A Stock of the Corporation shall have any
personal liability under the Golden Nugget Transaction; and
(2) such agreement. and the consent to the closing thereunder, of
limited partners of the Partnership and holders of Class A Stock of the
Corporation will be conditioned upon, among other things, there being
available from whatever source upon the closing under such agreement,
after payment of all creditors of the Corporation, New Claridge and the
Partnership (subject to special arrangements which may be made with anv
creditors), to be paid to Releasing Investors an amount equal to
$13,500,000 times the aggregate Percentage Interest of all Releasing
Investors.
(c) If the Closing has occurred before the closing of the Golden Nugget
Transaction, upon the closing of the Golden Nugget Transaction, after the
payment to creditors and Releasing Investors provided for in Sections 6A(b)(i)
and (ii) and the payment required by Section 10(d), Webb will be paid all
remaining funds and assets up to an amount equal to the Webb Payment Plus (A)
interest, at the respective rates provided in the applicable governing
instruments, accruing and paid directly by Webb or DEWNJ to the Bank or MHT,
respectively, after November 30, 1988 on $14,500,000 of the First Mortgage and
all of the MHT Line (including Switchover Interest), directly or indirectly
through working capital advances, and for which neither Webb nor DEWNJ has been
reimbursed; plus (B) $350,000, plus (C) Webb's and DEWNJ's costs and expenses
related to entering into this Agreement and the Golden Nugget Transaction,
including all expenses the same as or similar to those described in Section 6
(F), plus ( D) the amount which Webb or DEWNJ has actually paid in order to make
available the sums paid to Releasing Investors under Section 6A(b)(ii); and any
additional funds available will be paid to the Corporation and the Partnership.
<PAGE>
(d) If the Closing has not occurred by the time of the closing of the
Golden Nugget Transaction, upon the closing of the Golden Nugget Transaction:
(i)after the payments required by Sections 6A( b) (i) and (ii),
Webb will receive the remaining amounts, up to, but only to the extent
if any of, the excess of (A) the Webb Payment, plus (B) $350,000, plus
(C) interest, at the respective rates provided in the applicable
governing instruments, accruing and paid directly by Webb or DEWNJ to
the Bank or MHT, respectively, after November 30, 1988, on $14,500,000
of the First Mortgage and on all of the MHT Line and for which neither
Webb nor DEWNJ has been reimbursed (including amounts of interest which
are included in (y) of the definition of the Closing Balance in Section
1 (c) (1) which have been actually paid by Webb or DEWNJ) plus (D)
Webb's and DEWNJ's costs and expenses related to entering into this
Agreement and the Golden Nugget Transaction, including all expenses the
same as or similar to those described in Section 6(f), plus (E) any
amounts which Webb or DEWNJ have actually paid in order to make
available the sums to be paid to Releasing Investors under Section
6A(b)(ii), and plus (F) any excess in the outstanding principal balance
(as of the time immediately prior to the closing of the Golden Nugget
Transaction) of working capital loans and advances made by Webb to New
Claridge in excess of $10,350,000 over (G) the amounts which Webb and
DEWNJ would have been required to pay under Sections l(c)( 1), l(c)(2)
and l(c)(5)(a) (the calculation to be ((A) + (B) + (C) + (D) + (E) +
(F)) minus (G)),
(ii) Webb and DEWNJ will forgive the amounts to be forgiven by
them pursuant to Section 1, but will not make any of the payments
required thereby (and except as provided in this Section 6A(d) no other
party shall make any payment or loan contemplated by Section I hereof),
(iii) the releases and termination of obligations of and by Webb
and DEWNJ contemplated by Sections 1 and 7 will be deemed to have
occurred,
(iv) the documents contemplated by Sections l(c)(21), 3(g) and
3(k) will be executed and delivered,
(v) the First Mortgage shall have been paid in full, the MHT Line
will be paid in full, Webb will be released from its obligations under
the Collection Guaranty and the Collection Guaranty will be terminated,
(vi) the payment required to be made by Section 10(d) will be
made, and any funds not used for the purposes for which the letter of
credit referred to in the second sentence of Section 10(d ) was
provided, and any earnings thereon, shall, notwithstanding Section
10(d), be paid over to Webb, and
(vii) any balance will be paid to the Corporation and the
Partnership.
(e) At or as soon as possible after the closing of the Golden Nugget
Transaction, the Corporation, New Claridge and the Partnership will pay in full
all of their creditors other than Webb, DEWNJ and any other subsidiary of Webb,
each of them will as promptly as possible wind up and dissolve, and none of them
will thereafter incur any obligations or liabilities except in connection with
the winding up and dissolution. To the extent the funds referred to in clause
(vil) of Section 6A(d) are insufficient, Webb will pay the reasonable expenses
of the winding up and dissolution.
(f) The funds to be distributed to Releasing Investors and Webb
pursuant to Sections 6A(b) and 6A(d) will be paid through the Distributing Trust
which will be modified to reflect the provisions of Sections 6A(b) and 6A(d).
(g) If the Golden Nugget Transaction is not accomplished because of a
higher or better offer, the proceeds of the higher or better offer or any
replacement thereof will be distributed as follows:
(i) If the higher or better offer is closed prior to the time of
the Closing, such proceeds will be distributed pursuant to and in a
similar fashion to the distributions provided in Section 6A(d); or,
<PAGE>
(ii) If the higher or better offer is closed after the time of
the Closing, such proceeds will be distributed pursuant to and in a
similar fashion to the distributions provided in Section 6A(c).
(h) Notwithstanding anything to the contrary in this Agreement (other
than the last sentence of this Section 6A(h)), after the execution of this
Agreement the Partnership will promptly submit the Golden Nugget Transaction to
its Limited Partners for approval and the Corporation will promptly submit the
Golden Nugget Transaction to its shareholders for approval, in each case, on the
basis that the Limited Partners of the Partnership and the shareholders of the
Corporation (other than the Class B Shareholders) must approve both this
Agreement and the transactions contemplated hereby and the Golden Nugget
Transaction and that approval of this Agreement and the transactions
contemplated hereby without an approval of the Golden Nugget Transaction and the
transactions contemplated by the Letter Agreement by the requisite votes
necessary to approve both of them will not constitute an approval of any of
them. The first sentence of this Section 6A(h) shall terminate in the event that
a definitive agreement of the type contemplated by Section 6A(b) hereof has not
been entered into on or before the earlier of (f) the date on which the
Corporation files with the Securities and Exchange Commission proxy solicitation
materials soliciting the proxies contemplated by Section 3(c) hereof, or (g)
December 15, 1988.
(i) In the event that the Golden Nugget Transaction closes prior to the
Closing, the Bank shall thereupon be relieved of all of its obligations under
this Agreement. The Corporation and the Partnership will use their best efforts
to cause the Golden Nugget Transaction to be approved by the requisite number of
their equityholders. In the event that the Golden Nugget Transaction is
abandoned or terminates due solely to (q) the failure to obtain requisite
approval of Limited Partners of the Partnership and Class A Shareholders of the
Corporation (unless the first sentence of Section 6(A)(h) shall have terminated)
or (r) the breach by any of the Partnership, New Claridge or the Corporation of
its obligations under this Agreement with respect to the Golden Nugget
Transaction or under the acquisition agreement described in Section 6A(b)
hereof, the parties, other than any party in breach under clause (r) of this
paragraph (i), shall be relieved of their respective obligations under this
Agreement, subject to the provisos to Section 11 (m) (i) hereof as if this
Agreement were terminated under that Section.
(j ) Subject to Section 6, notwithstanding any other provision in this
Agreement to the contrary, the Corporation, New Claridge and the Partnership
shall each have the right to enter into an agreement to sell all or
substantially all of such entity's assets and the Partnership shall have the
right to grant an option to purchase all or substantially all of its assets (any
such agreement or option being referred to as a "Disposition Agreement") if:
(i) the Disposition Agreement is executed after the earlier of
December 15, 1988 and the date on which the Corporation files with the
Securities and Exchange Commission proxy solicitation materials
soliciting the proxies contemplated by Section 3(c) hereof; and
(ii) there has not been presented to the Partnership and the
Corporation, prior to the date of execution of the Disposition
Agreement, an agreement with Golden Nugget, Inc. or its affiliates
implementing the Golden Nugget Transaction which (x) is, in all
material respects, consistent with the Letter Agreement, (y) satisfies
each of the conditions described in Section 6A(b) hereof and (z) is
accompanied by a letter, signed by Webb and DEWNJ, stating that such
parties and, to the best of Webb's or DEWNJ's knowledge, Golden Nugget,
Inc. or its affiliates are prepared to execute such agreement
contemporaneously with execution by the Corporation and the
Partnership.
All provisions of Section 6A, other than this Section 6A(j ), shall not apply
from the date of execution of a Disposition Agreement that satisfies clauses (i)
and (II) above until the date, if any, that such Disposition Agreement is
terminated.
<PAGE>
7. Termination of Obligations and Release of WEBB and DEWNJ.
(a) As used in this Section 7, the following definitions apply.
"Webb Entity" means any of Webb, DEWNJ, any other directly or
indirectly majority-owned subsidiary of Webb and Claridge Limited.
"Webb Entities" means any two or more of the foregoing.
"Claridge Entity" means any of the Partnership, the Corporation and
New Claridge. "Claridge Entities" means any two or more of the
foregoing.
"Webb Contracts" means all contracts (including, without
limitation, all contracts, agreements, leases, guarantees,
subordinations, undertakings, obligations and understandings, whether
express or implied, oral or written or any combination of any of the
foregoing) (A) to which the parties include both (i) any one or more of
the Webb Entities and (ii) any one or more of the Claridge Entities,
whether or not any other persons are parties thereto or beneficiaries
thereof, or (B) signed by one or more Webb Entities only and of which
the beneficiaries include a Claridge Entity. The Webb Contracts exclude
this Agreement and the agreements included in the Exhibits hereto.
"Webb Obligations" means, without limitation, (i) all obligations,
liabilities and indebtedness of any Webb Entity or the General Partners
(but only to the extent that they are entitled to indemnification by
Webb with respect thereto) to any Claridge Entity which exists under or
by virtue of any of the Webb Contracts or, without limitation,
otherwise, including, without limitation, at law, common law, equity or
in any other way whatsoever, and (ii) all obligations, liabilities or
indebtedness of any Webb Entity or the General Partners (but only to
the extent that they are entitled to indemnification by Webb with
respect thereto) existing by virtue of any failure to comply with
representations, warranties, covenants or conditions and any
contractual or non- contractual duties, liabilities or obligations, in
each case whether express or implied, known or unknown, suspected or
unsuspected, matured or contingent, past, present or future. Webb
Obligations being released shall not include (i) the obligations,
liabilities or indebtedness of any Webb Entity under this Agreement or
any agreement which is an Exhibit hereto or the execution of which is
contemplated hereby, or (ii) any obligation Webb may have to indemnify
the General Partners.
(b) If either the Closing or the closing of the Golden Nugget
Transaction occurs, (i) all of the Webb Contracts, other than (except as to a
Golden Nugget Transaction) the Maintenance Services Contract, which involve no
parties other than Webb Entities or Claridge Entities, or which may otherwise be
terminated hereby, are hereby terminated and (ii) as between the Webb Entities
and the Claridge Entities, all of the Webb Obligations are discharged, satisfied
and released without liability to any person.
(c) If either the Closing or the closing of the Golden Nugget
Transaction occurs, the Claridge Entities hereby forever release and discharge
all of the Webb Entities and the General Partners (but only to the extent that
they are entitled to indemnification by Webb with respect thereto) from the Webb
Obligations and from any and all claims, actions and causes of action,
including, but not limited to, claims based upon theories of alter ego, tort,
mismanagement, breach of fiduciary duty, unjust enrichment, conversion,
misappropriation, tortious interference with contractual relations or, without
limitation, otherwise, and any and all obligations, debts, liabilities, demands,
judgments, accounts, suits, expenses, costs and damages of whatever kind or
nature related thereto, whether accrued or not, known or unknown, suspected or
unsuspected, contingent or not, arising from, having their inception in or in
any way connected with the Webb Obligations, or any other matter in any way
related to Claridge.
8. Representations.
(a) Each of the parties hereto hereby represents and warrants to each
of the other parties hereto as follows:
<PAGE>
(1) Subject to receipt by such party of any consent, approval or
waiver required under any agreement or law, rule or regulation to which
such party is subject, such party has the power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated by this Agreement.
(2) If such party is a corporation, the execution and delivery of
this Agreement has been duly authorized by all necessary corporate
action of such party.
(3) This Agreement has been duly authorized, executed and delivered
by such party and will not breach or violate any provision of law,
statute, rule or regulation or any judgment, order, writ or decree of
any court or governmental or regulatory agency or body which is
applicable to such party, or result in the breach of, or constitute a
default under, any material igreement to which Such party is a party or
the charter documents of such party.
(4) Except for the consents, approvals, authorizations and
exemptions contemplated by Sections 3(a), 3(b) and 3(c) of this
Agreement, such party may execute and deliver this Agreement and
consummate the transactions contemplated hereby without the need for
any consent, approval or authorization of, or exemption by, any
governmental or public body or authority, or by any person, whether
pursuant to contract or otherwise.
(b) The Corporation represents and warrants to each of the other
parties to this Agreement that the Board of Directors of the Corporation has (i)
authorized the Charter Amendment, (ii) recommended submission, after compliance
with applicable laws, of the Charter Amendment to the shareholders of the
Corporation for approval, with a recommendation that such amendment be approved,
and (iii) directed that the proxies contemplated by Section 3(c) hereof and the
Release and Settlement Agreement in the form of Exhibit R hereto be submitted to
its shareholders.
(c) The General Partners hereby represent and warrant to each of the
other parties to this Agreement that (i) they have authorized the amendment to
the Partnership Agreement set forth in Exhibit J hereto, and (ii) they have
directed that the consents contemplated by Section 3(b) hereof and the Release
and Settlement Agreement in the form of Exhibit R be submitted to the Limited
Partners.
9. Certain Agreements.
(a) Each of the parties hereto, other than the Bank, shall use its best
efforts, as promptly as reasonably possible, to take all actions as shall be
reasonably necessary in order to permit or cause, as the case may be, the
satisfaction of the conditions set forth in Section 2 and Section 3(a) hereof,
including, without limitation, (i) the filing, if required, by Webb, the
Partnership and the Corporation of a Registration Statement with the Securities
and Exchange Commission with respect to the solicitation of the releases
contemplated by Section 3(m) hereof, and of applications for registration,
qualification or exemption with appropriate state securities (or blue sky)
authorities with respect to the security registered by such Registration
Statement, (ii) the taking of all reasonable action by Webb, the Partnership and
the Corporation to cause such Registration Statement, registrations,
qualifications and exemptions to be declared effective by the respective federal
and state securities authorities, and (iii) the taking by the Partnership and
the Corporation of all reasonable action as may be required under federal and
state securities laws to permit the solicitation of consents, proxies and
releases from Limited Partners and Class A Shareholders. Except as otherwise
permitted by this Agreement, from the date hereof to the Closing or the closing
of the Golden Nugget Transaction, the Corporation, New Claridge and the
Partnership (1) will operate only in the ordinary course of business consistent
with past practice, and (ii) except for New Claridge, as long as it is wholly
owned by the Corporation, will not make, directly or indirectly, any
distribution to their equity holders as such.
<PAGE>
(b) The Partnership and the Corporation hereby agree, subject to
compliance with applicable fiduciary duties, as promptly as possible after
receipt of the necessary registrations, qualifications, approvals and clearances
from state and federal securities authorities, to solicit from the Limited
Partners and the holders of the Corporation's Class A Common Stock,
respectively, consents (i) to this Agreement, (ii) to the Golden Nugget
Transaction (except as provided in the last sentence of Section 6A(h) ), and
(iii) after the earlier of the dates referred to in the last sentence of Section
6A( h) and while a Golden Nugget Transaction is not pending, to a sale of the
assets of the Partnership and New Claridge, the proceeds of which would be equal
to or greater than the sum of (x) the amounts necessary to pay all creditors of
the Partnership, New Claridge and the Corporation (other than, if such sale
would occur prior to Closing, Webb, DEWNJ and any other subsidiary of Webb, but
including, in any event, amounts payable to Webb or DEWNJ under Section 10(d )
or Section 4(f) ) subject to any special arrangement which may be made with any
such Creditor) ind (y) the amount needed by Releasing Investors to pay the
federal income tax liability arising from such a sale (after taking into account
any losses available to Releasing Investors in connection with their interests
in the Partnership and the Corporation).
(c) Except as provided in Section 6A, the Corporation and New Claridge
will not, without the prior written consent of Webb, engage in any merger,
reverse merger, consolidation or similar transaction, the Corporation will not
sell or otherwise dispose of the stock of New Claridge or any interest therein
and the Partnership will not engage in any merger transaction, and Ncw Claridge
and the Partnership will not sell all or substantially all of their assets;
provided that the Corporation, New Claridge and the Patnership may negotiate
with respect to any of the foregoing transactions; provided, further, that
subject to any required Bank consent, the Corporation, New Claridge and the
Partnership may, without the consent of Webb, enter into and consummate
agreements (including option agreements) permitted by Section 6A(j) hereof. This
Section 9(c) will be effective upon execution of this Agreement, but will have
no further force or effect if the Closing or the closing of the Golden Nugget
Transaction does not occur and this Agreement is terminated.
(d) (i) The Bank shall be entitled to exercise any and all rights and
remedies now or hereafter available to the Bank under the Loan Agreement and the
documents executed and delivered to the Bank in connection therewith, this
Agreement not constituting a waiver of any term or provision thereof, except as
specifically contemplated by Section l(d) hereof, (ii) except as provided or
permitted in Section l(c)( 15) hereof, the Partnership shall make no payment or
distribution to any partner except as would be permitted under Section 6.9(b) of
the Amended and Restated Loan Agreement (assuming the Amended and Restated Loan
Agreement were in effect) and (iii) this Agreement and the Interim Bank
Agreement shall, as between the Claridge Entities, on the one hand, and the
Bank, on the other hand, constitute an instrument or document delivered to and
in favor of the Bank in connection with the Loan Agreement, including without
limitation, for the purposes of Section 6. 1 (c) of the Loan Agreement.
10. Insurance Bond.
(a) Any obligation of Webb to maintain for the benefit of the
Corporation, New Claridge and the Partnership the umbrella policy of insurance
or any other policy of insurance with Liberty Mutual Insurance Company ("Liberty
Mutual") or any other insurer for their benefit (the "Insurance Policy") shall
be terminated; notwithstanding the foregoing, Sections 10(a), (b), (c) and (d)
do not apply to the obligation of Webb and DEWNJ to provide insurance for the
Individual General Partners as such. The Corporation, New Claridge and the
Partnership agree promptly to repay to Webb, to the extent not already repaid to
it:
(1) Any amount which has been or which is in the future properly
paid by Webb to the insurance carrier under the Insurance Policy to
cover the deductible portion of claims related to any of them or the
Claridge;
(2) Any amounts required to be paid out under any letter of credit
maintained by Webb to guarantee payment to Liberty Mutual under the
Insurance Policy of the deductible portion of claims and defense or
investigation costs (together, the "Deductible Portion") related to any
of them or the Claridge; and
(3) That portion of any premiums paid by Webb to maintain the
Insurance Policy and that portion of any fees paid by Webb to maintain
any letter of credit which are attributable to the maintenance of
insurance to cover claims against anv of them or the Claridge.
<PAGE>
(b) The Corporation, New Claridge and the Partnership agree that any
amounts required to be paid under the Insurance Policy as the Deductible Portion
with respect to the Corporation, New Claridge, the Partnership or the Claridge
after July 1, 1988, are the primary obligation of New Claridge and will be paid
or reimbursed by it as such amounts become due. To the extent any such amounts
are not paid or reimbursed by New Claridge as they become due, such amounts will
be pald by the Corporation and the Partnership.
(c) Effective as of October 1, 1988, for all claims arising, after
October 1, 1988, the Insurance Policy will no longer be in effect and Webb will
no longer maintain in paice a letter of credit to cover any deductible amounts
owing with respect to claims which occur or insurance policies which cover the
Corporation, New Claridge, the Partnership or the Clarldge on or after October
1, 1988.
(d) Before any distribution to the Distributing Trust, the Partnership,
the Corporation and New Claridge will (i) deposit with the appropriate
institution cash collateral sufficient to obtain the release of that portion of
the letter of credit maintained by Webb to cover the Deductible Portion with
respect to New Claridge, the Corporation, the Partnership and the Claridge,
which will thereby be released, and (ii) pay Webb the amounts set forth in
Sections 10(a)( 1), (2) and (3) above. Any such cash collateral not used for the
purposes of making the deposit or the payments provided for under this Section
10(d), shill be paid over to the Distributing Trust.
11. Miscellaneous.
(a) Notices. All notices or other communications required or permitted
to be given under this Agreement shall be in writing and shall be delivered
personally or mailed, by registered or certified mail, return receipt requested,
postage prepaid, to the parties hereto at the following addresses or to such
other address as any party hereto shall hereafter specify by notice to the other
parties hereto:
If to Webb, to it at
Del Webb Corporation
Anchor Centre III
2231 E. Camelback Rd.
Suite 400
Phoenix, AZ 85016
If to DEWNJ, to it it
Del Webb Corporation
Anchor Centre III
2231 E. Camelback Rd.
Suite 400
Phoenix AZ 85016
If to the Partnership, to it at
Atlantic City Boardwalk Associates, L.P.
3003 N. Central Ave.
Suite 1800
Phoenix, AZ 85012
<PAGE>
If to the Corporation, to it at
Claridge Casino Hotel
Indiana & Boardwalk
Atlantic City, NJ 08401
If to New Claridge, to it at
Claridge Casino Hotel
Indiana & Boardwalk
Atlantic City, NJ 08401
If to Swanson, to him at
Atlantic City Boardwalk Associates, L.P.
3003 N. Central Ave.
Suite 1800
Phoenix, AZ 85012
If to Mangam, to him at
Atlantic City Boardwalk Associates, L.P.
3003 N. Central Ave.
Suite 1800
Phoenix, AZ 85012
If to Plant, to him at
Atlantic City Boardwalk Associates, L.P.
3003 N. Central Ave.
Suite 1800
Phoenix, AZ 85012
If to AC Boardwalk, to it at
Atlantic City Boardwalk Associates, L.P.
3003 N. Central Ave.
Suite 1800
Phoenix, AZ 85012
If to the Bank, to it at
2-6 North Avenue West
Cranford, New Jersey 07016
(Attention: Henry J. Wilner)
<PAGE>
(b) Entire Agreement. This Agreement, and, as to the parties thereto,
the agreements and instruments attached hereto as Exhibits, constitute the
entire agreement among the parties hereto and thereto and supersedes all prior
agreements, understandings and arrangements, oral or written, among the parties
hereto with respect to the subject matter hereof and thereof.
(c) Binding Effect; Benefits. This Agreement shall inure to the benefit
of and shall be binding upon the parties hereto and their respective successors
and assigns. Nothing in this Agreement, express or implied, is intended to or
shall (i) confer on any person other than the parties hereto, and their
respective successors or assigns, and the Releasing Investors any rights,
remedies or benefits under or by reason of this Agreement, or ( ii) constitute
the parties hereto partners or participants in a joint venture.
(d) Amendments, Waivers and Consents. The terms of this Agreement may
be amended, modified or eliminated, and the observance or performance of a term,
covenant, condition or provision herein may be omitted or waived (either
generally or in a particular instance and either prospectively or retroactively)
by a writing of the parties hereto entitled to the benefit thereof. No omission
or waiver shall be deemed to excuse any future observance or performance or to
constitute an amendment, modification or elimination unless it expressly so
states. The waiver by any party hereto of a breach of any term or provision of
this Agreement shall not be construed as a waiver of any prior or subsequent
breach.
(e) Assignment. Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason hereof shall be
assignable by any party hereto without the prior written consent of the other
parties hereto, except that without such consent the Bank may assign its rights
hereunder to any assignee of all or any portion of the loan under the Loan
Agreement.
(f) Further Assurances. Each of the parties hereto, other than the
Bank. shall execute, acknowledge and supply such further documents, instruments
and assurances as shall he reasonible, necessary or appropriate in order to
carry out the full intent and purposes of this Agreement.
(g) Section and Other Headings. The section and other headings
contained in this Agreement are for reference purposes only and shall not be
deemed to be a part of this Agreement or to affect the meaning or interpretation
of this Agreement.
(h) Execution in Couterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be one and the same
instrument.
(i) Governing Law. This Agreement and the legal relations between the
parties hereto shall be governed by and construed in accordance with the laws of
the State of' New York without regard to the conflict of laws rules thereof.
(j) Expenses. Except as any party hereto may have otherwise agreed in
writing, each party hereto shall pay all expenses incurred by it in connection
with the negotiation, preparation and consummation of this Agreement and the
other agreements and transactions contemplated hereby, it being understood that
the Loan Agreement provides that all such costs and expenses incurred by the
Bank, Marine Midland Bank, N.A., and the other participants in the loan under
the Loan Agreement shall be paid by New Claridge, and New Claridge shall pay
same. The obligations under this Section 11(j ) shall survive the termination of
this Agreement under Section 11(m)(i) or Section 11(m)(ii) hereof.
(k) Personal Liability. Each of the parties hereto hereby acknowledges
that none of the General Partners or the New General Partners shall have any
personal liability or other obligation with respect to any agreement or
obligation of the Partnership under this Agreement or under any agreement or
instrument contemplated hereby except as specifically provided in or
contemplated by Sections 1 (c) (14), 1(c)(15), 1 (c) (21) and 1 (c)(32) hereof.
<PAGE>
(l) No Recommendation. The execution of this Agreement by the General
Partners, both individually and on behalf of the Partnership, and by the
Corporation shall constitute neither a recommendation by the General Partners
that the Limited Partners or a recommendation by the directors of the
Corporation that the holders of the Corporation's Class A Common Stock approve
the transactions contemplated hereby, nor an undertaking to make such a
recommendation.
(m) Termination. (i) In the event that as of the Closing Date the
conditions to Closing are not satisfied in full, and the Closing Date is not
extended as provided in Section l(a) hereof, each of Webb and the Bank, acting
separately or together, shall be entitled to terminate this Agreement by giving
written notice thereof to all other parties hereto, and in any case, in the
event that the Closing has not occurred by the close of business on August 1,
1989, this Agreement shall terminate. Upon any such termination under this
clause (i), each party hereto shall be relieved of all further obligations under
this Agreement; provided, however, that such termination shall not affect any
obligations incurred by New Claridge under the Interim Bank Agreement, by Webb
under the Webb Guaranty or by any party to this Agreement under any instrument
or agreement delivered in connection herewith or existing prior to the date of
execution hereof, provided,further, that such termination shall not affect any
obligations under provisions of this Agreement which specifically provide that
such obligations are to be performed upon or following termination of this
Agreement.
(ii) In the event that the closing of the Golden Nugget Transaction
occurs prior to the Closing, then notwithstanding any provision hereof to the
contrary, the parties hereto shall have no obligation to effect the transactions
contemplated to occur at the Closing, and the Bank shall have no obligation to
make further advances under the Interim Bank Agreement.
(iii) In the event that the licenses necessary to operate the Claridge
as a casino are not renewed by the Commission on or before October 31, 1988,
this Agreement shall be terminated, and each party hereto shall be relieved of
all further obligations hereunder, provided, however, that such termination
shall not affect any obligations incurred between the date hereof and such
termination bv New Clarldge under the Interim Bank Agreement, by Webb under the
Webb Guaranty or by any party to this Agreement under any instrument or
agreement delivered in connection herewith or existing prior to the date of
execution hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
DEL WEBB CORPORATION
By: /s/ D. V. MICKUS
--------------------------------
Donald V. Mickus
Vice President
and Treasurer
DEL E. WEBB NEW JERSEY, INC.
By: /s/ D. V. MICKUS
--------------------------------
Donald V. Mickus
Treasurer
ATLANTIC CITY BOARDWALK
ASSOCIATES, L.P.
By: /s/ ROBERT K. SWANSON
--------------------------------
Robert K. Swanson, as
Managing General Partner
THE CLARIDGE HOTEL AND
CASINO CORPORATION
By: /s/ ROGER P. WAGNER
--------------------------------
Roger P. Wagner
President
THE CLARIDGE AT PARK PLACE,
INCORPORATED
By: /s/ ROGER P. WAGNER
--------------------------------
Roger P. Wagner
President
/s/ ROBERT K. SWANSON
--------------------------
Robert K. Swanson
/s/ EVERETT L. MANGAM
--------------------------
Everett L. Mangam
/s/ T. EDWARD PLANT
--------------------------
T. Edward Plant
/s/ ANTHONY ATCHLEY
--------------------------
Anthony Atchley
/s/ GERALD C. HEETLAND
--------------------------
Gerald C. Heetland
<PAGE>
EXHIBIT 10(x)
LONG-TERM MANAGEMENT INCENTIVE PLAN OF
CLARIDGE HOTEL AND CASINO CORPORATION
Effective January 1, 1992
Section I
PURPOSE
The Long-Term Management Incentive Plan set forth below consists of
three components: a Treasury Stock Award and an Equity Incentive Plan. The
Treasury Stock Award and Equity Incentive Plan are intended to provide
management of the Company and its subsidiary with a long-term incentive to
increase the value of those entities and to achieve certain strategic
objectives, including obtaining more flexible mortgage financing terms, dealing
with the "Webb Payment," simplification of the financial and operational
structure of the Claridge Entities and the monetizing of the interests of
shareholders in the Company, limited partners in Atlantic City Boardwalk
Associates, L.P., or holders of contingent payment rights in any Claridge
Entity. As a result, vesting of the Treasury Share Award and the Equity Units
and, under most circumstances, payments on the Equity Units are dependent upon
achievement of those objectives. Recognizing, however, that the transaction or
event which permits achievement of these objectives may take a variety of
different forms, the Compensation Committee of the Board of Directors of the
Company will continue to retain the right to provide key management of the
Company and its subsidiary with a different form of incentive compensation in
the event these objectives are achieved under circumstances under which holders
of the Equity Units would not be entitled to payment with respect to the Units.
Section II
DEFINITIONS
"Award Agreement" shall mean the written agreement evidencing each
Incentive Award granted to a Key Employee under the Plan, the form of which is
attached hereto as Appendix A, and any exhibit thereto.
"Beneficiary" shall mean the beneficiary or beneficiaries designated
pursuant to Section 6 to receive, in the event of the death of a Participant,
any amount payable under the Plan.
"Board" means the Board of Directors of the Company.
"Claridge Entities" shall mean the Company, The Claridge at Park Place,
Incorporated, and Atlantic City Boardwalk Associates, L.P.
"Committee" shall mean the Compensation Committee of the Board.
"Company" shall mean Claridge Hotel and Casino Corporation, a New York
corporation, and its successors and assigns.
<PAGE>
"Disability" shall mean a Participant's inability as determined by the
Board of Directors to perform his or her duties in a normal manner, whether by
reason of illness or injury (physical or mental), or otherwise, for (A) a
continuous period exceeding six (6) months or (B) any noncontinuous period
exceeding six (6) months in the aggregate during any twelve (12) month period
excluding any leaves of absence approved by the Board.
"Effective Date" shall mean January 1, 1992.
"Equity Units" shall mean the Equity Units awarded to Participants in
an Incentive Award and having the terms and conditions of payment set forth in
the Award Agreement.
"Incentive Award" means a grant of Equity Units or Treasury Stock
Shares in accordance with the provisions of the Plan.
"Key Employee" means an officer or other key employee of any
Participating Company whose positions and responsibilities, in the judgment of
the Committee, enable such individual to have a significant impact on the
operating results of any Participating Company.
"Participant" shall mean each Key Employee of the Company who is
designated by the Committee to receive an award of an Incentive Award.
"Participant Account" shall be an appropriate record maintained by the
Company of the name of each Participant and the Equity Units and Treasury Stock
credited to each Participant pursuant to an Incentive Award.
"Participating Company" means the Company, The Claridge at Park Place,
Incorporated and any other subsidiary or other affiliate of the Company which
the Board has authorized to join the Plan.
"Plan" shall mean this Long-Term Management Incentive Plan of Claridge
Hotel and Casino Corporation.
"Treasury Stock" shall mean shares of Class A Common Stock of the
Company, par value $0.001 per share, held in treasury and awarded to
Participants in Incentive Awards on the terms and conditions set forth in the
Award Agreement.
Section III
GRANT OF PERFORMANCE AWARDS AND AWARD AGREEMENTS
3.1 Subject to the provisions of the Plan, the Committee shall
determine the Incentive Awards to be awarded to any Participant.
3.2 Each Incentive Award awarded under the Plan shall be evidenced by a
written Award Agreement. Such agreement shall be subject to the express terms
and conditions set forth in this Plan.
3.3 The aggregate number of Units and shares of Treasury Stock which
may be awarded under the Plan are as follows: Equity Units: 100 Units; and
shares of Treasury Stock: 273,938; provided, however, that the Committee may
award to Participants (who may be those persons who are Participants on the date
that this Plan takes effect or persons who become Participants at a later date)
Equity Units or shares of Treasury Stock forfeited by a Participant upon
termination of the employment of that Participant prior to the vesting of any
such Units or shares of Treasury Stock provided that the aggregate number of
Units and shares of Treasury Stock awarded at any time and not forfeited do not
exceed the aggregate number set forth above.
<PAGE>
Section IV
PAYMENT OF INCENTIVE AWARD
4.1 An Incentive Award shall be valued and paid, if at all, on the
terms and conditions relating to that Incentive Award as set forth in the Award
Agreement.
4.2 Following payment in full of an Incentive Award consisting of
Equity Units, that portion of the Incentive Award shall be canceled and the
Company shall have no further obligation to the Participant with respect to that
portion of the Incentive Award.
Section V
TERMINATION OF EMPLOYMENT OR DISCHARGE
If a Participant voluntarily leaves the employ of the Company or the
Participant is discharged by the Company for any reason, or for no reason, or in
the event of death or Disability of such Participant, the Participant or his
Beneficiary in the case of death shall be entitled to retain those Incentive
Awards granted to the Participant which have vested in accordance with the
vesting provisions set forth in the Award Agreement but have not yet been paid,
but the occurrence of such an event shall not, of itself, entitle the
Participant or Beneficiary to any payment at that time with respect to any
vested Incentive Award. Any nonvested portion of Equity Incentive Units or
Treasury Stock Shares in the Participant Account of such Participant shall
thereupon be forfeited and canceled (but subject to being re-awarded to another
Participant as provided in Section 3.3 hereof) , and the Company shall have no
obligation to make any payment to the Participant with respect to such forfeited
components of any Incentive Award.
Section VI
BENEFICIARY DESIGNATIONS
6.1 Each Participant shall file with the Company a written designation
of one or more persons as the Beneficiary who shall be entitled to receive any
amounts payable under the Plan upon his or her death. A Participant may from
time to time revoke or change his or her Beneficiary designation without the
consent of any prior Beneficiary by filing a new designation with the Company.
The last such designation received by the Company shall be controlling;
provided, however, that no designation, or change or revocation thereof, shall
be effective unless received by the Company prior to the Participant's death,
and in no event shall it be effective as of a date prior to such receipt.
<PAGE>
6.2 If no such Beneficiary designation is in effect at the time of a
Participant's death, or if no designated Beneficiary survives the Participant or
if such designation conflicts with law, the Participant's estate shall be
entitled to receive the amounts, if any, payable under the Plan upon his or her
death. If the Company is in doubt as to the right of any person to receive such
amounts, the Company may retain such amounts, without liability for any interest
thereon, until the Company determines the rights thereto, or the Company may pay
such amounts into any court of appropriate jurisdiction and such payment shall
be a complete discharge of the liability of the Company therefor.
SECTION VII
ADMINISTRATION OF THE PLAN
7.1 The Plan shall be administered by the Committee. Notwithstanding
the above, the members of the Board who are not employed by any Participating
Company (the "Non-Interested Members") may exercise all the powers granted to
the Committee hereunder and, solely at the request of the Committee, shall
exercise such powers.
7.2 All decisions, determinations or actions of the Committee or a
majority of the Non-Interested Members made or taken pursuant to grants of
authority under the Plan shall be made or taken in the sole discretion of the
Committee or a majority of the Non-Interested Members, as the case may be, and
shall be final, conclusive and binding on all persons for all purposes.
7.3 The Committee, or a majority of the Non-Interested Members, if
requested to do so by the Committee, shall have full power, discretion and
authority to interpret, construe and administer the Plan and any part thereof,
and interpretations and constructions thereof and actions taken thereunder shall
be final, conclusive and binding on all persons for all purposes.
7.4 The decisions and determinations of the Committee or a majority of
the Non-Interested Members, as the case may be, under the Plan need not be
uniform and may be made selectively among Participants, whether or not such
Participants are similarly situated.
7.5 The act of a majority of the members present at a meeting
duly called and held shall be the act of the Committee or the Non-Interested
Members. Any decision or determination reduced to writing and signed by all
members of the Committee or all of the Non-Interested Members shall be fully as
effective as if made by unanimous vote at a meeting duly called and held.
<PAGE>
7.6 Notwithstanding anything else herein to the contrary, the Committee
shall not be required to direct the Company to issue any Incentive Award under
this Plan.
Section VIII
AMENDMENT OR TERMINATION OF THE PLAN
Although it is the present intention of the Company to maintain this
Plan to provide an incentive to Participants to contribute to the Company's
growth and achievement of its strategic objectives, the Company by action of a
majority of the Non-Interested Members may supplement, modify, amend, or
terminate the Plan at any time without the consent of the Participants, but
without affecting the Company's obligations under any Award Agreement with
respect to the Incentive Awards made prior to any such supplement, modification,
amendment or termination.
Section IX
NOTICE
For purposes of this Plan, all communications provided for herein shall
be in writing and shall be deemed to have been duly given when personally
delivered or five (5) business days after having been mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed to the Company at its principal executive office and to a Participant
at his principal residence indicated in the Award Agreement, or to such other
address as any party may have furnished to the other in writing and in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.
Section X
WITHHOLDING
In the event the Company is required to withhold income tax on the
amount distributed to any Participant pursuant to the terms of the Plan, the
Company in its discretion shall determine the method and amount of withholding.
<PAGE>
Section XI
MISCELLANEOUS
11.1 Nothing contained in this Plan shall be construed to:
(a) give any officers or employees of any Participating
Company any right to be awarded Incentive Awards;
(b) give any Participant any rights whatsoever with respect to
shares of stock of the Company other than any shares of Treasury
Stock awarded to the Participant as provided in the Award
Agreement;
(c) confer upon any employee any right to continue in the
employ of any Participating Company or limit in any way the right
of a Participating Company to terminate a Participant's employment
with the Company at any time; or
(d) be evidence of any agreement or understanding, express or
implied, that a Participating Company will employ a Participant in
any particular position or at any particular rate of compensation.
11.2 No Incentive Award payable under the Plan shall be deemed salary
or compensation for the purpose of computing benefits under any employee benefit
plan or other arrangement of any Participating Company for the benefit of its
employees unless the Participating Company shall determine otherwise.
11.3 No right or benefits under this Plan shall be subject to voluntary
or involuntary anticipation, alienation, sale, assignment, pledge, encumbrance
or charge, and any attempt to anticipate, alienate, sell, assign, pledge,
encumber or charge the same shall be void. No right or benefit hereunder shall
in any manner be liable for or subject to the debts, contracts, liabilities or
torts of the person entitled to such benefit.
11.4 The invalidity or unenforceability of any provision of this Plan
shall not affect the validity or enforceability of any other provision of this
Plan, which shall remain in full force and effect.
11.5 To the extent that any Participant acquires a right to receive
payments from a Participating Company under this Plan, such right shall be no
greater than the right of an unsecured general creditor of the Participating
Company. All payments provided for under the Plan shall be paid from the general
assets of the Participating Company; provided, however, that such payments shall
be reduced by the amount of any payments made to the Participant or his or her
dependents, beneficiaries or estate from a trust or special or separate fund,
if any, established by a Participating Company to assure such payments.
<PAGE>
A Participating Company shall not be required to establish a special or
separate fund or other segregation of assets to assure such payments, and, if a
Participating Company shall make any investments to aid it in meeting its
obligations hereunder, the Participant shall have no right, title, or interest
whatsoever in or to any such investments except as may otherwise be expressly
provided in a separate written instrument relating to such investments.
Nothing contained in this Plan, and no action taken pursuant to its provisions,
shall create or be construed to create a trust of any kind between a
Participating Company and any Participant.
11.6 Absence on leave approved by a duly constituted officer of a
Participating Company shall not be considered interruption or termination of
employment for any purposes of the Plan; provided, however, that no Performance
Award may be granted to an employee while he or she is absent on leave.
11.7 If the Committee shall find that any person to whom any amount is
payable under the Plan is unable to care for his or her affairs because of
illness or accident, then any payment due him or her (unless a prior claim
therefor has been made by a duly appointed legal representative) may, if the
Committee so directs a Participating Company, be paid to his or her spouse, a
child, a relative, an institution maintaining or having custody of such person,
or any other person deemed by the Committee to be a proper recipient on behalf
of such person.
11.8 Captions preceding the sections hereof are inserted solely as a
matter of convenience and in no way define or limit the scope or intent of any
provision hereof.
11.9 The Plan shall be governed by and construed in accordance with the
laws of the State of New Jersey (without reference to the principles of conflict
or choice of laws thereof).
11.10 The obligation to make any payment under this Plan to a
Participant shall be a joint and several obligation of the Participating
Companies.
<PAGE>
IN WITNESS WHEREOF, this Plan has been approved by the Non-Interested
Members of the Board and executed the 12th day of February, 1992.
CLARIDGE HOTEL AND CASINO CORPORATION
By: /s/ Shannon Bybee
--------------------------
Title: Chairman
<PAGE>
Appendix A
LONG-TERM MANAGEMENT INCENTIVE PLAN
OF CLARIDGE HOTEL AND CASINO CORPORATION
Incentive Award
NOTICE, effective this day of 19_, by Claridge Hotel and Casino
Corporation, a New York corporation, with principal offices at Boardwalk and
Park Place, Atlantic City, New Jersey 08401 (hereinafter called the "Company"),
to residing at , (hereinafter called the "Participant")
WHEREAS, the Company desires to provide incentives to the Participant
to contribute to the Company's growth and achievement of its strategic
objectives by awarding to the Participant Equity Units, Treasury Stock shares,
or Long-Term Cash Incentive Units pursuant and subject to the LONG-TERM
MANAGEMENT INCENTIVE PLAN OF CLARIDGE HOTEL AND CASINO CORPORATION (the "Plan").
NOW, THEREFORE, the Company hereby awards to the Participant:
Equity Units
-------
Treasury Stock shares.
-------
The vesting, payment and other terms and conditions applicable to each Unit or
Share are set forth in Exhibit A hereto. Each such Unit or Share shall also be
subject to the terms, conditions and restrictions set forth in the Plan,
including any supplements, modifications or amendments adopted to the Plan
subsequent to the date of award. As provided in the Plan, all determinations by
the Committee or the Non-Interested Members of the Board with respect to
interpretation or construction of the Plan, including the terms and conditions
set forth in Exhibit A hereto, shall be final, conclusive and binding on all
persons for all purposes. By accepting this award, the Participant acknowledges
and agrees to be bound by the foregoing. The Plan is hereby incorporated herein
by reference. Execution of this Notice by the Participant acknowledges receipt
by the Participant of a copy of the Plan.
CLARIDGE HOTEL AND CASINO CORPORATION
By:
--------------------------
Title:
<PAGE>
EXHIBIT A
TERMS AND CONDITIONS OF UNITS AND SHARES
AWARDED UNDER THE CLARIDGE LONG-TERM
MANAGEMENT INCENTIVE PLAN
Set forth below are the terms and conditions applicable to Units and
Shares awarded under the Claridge Long-Term Management Incentive Plan pursuant
to an Award Agreement. Any term used below which is not defined shall have the
meaning as defined in the Plan. Any questions regarding interpretation or
construction of the following terms and conditions should be directed to the
Compensation Committee of the Board of Directors of the Claridge Hotel and
Casino Corporation. Determinations made by the compensation Committee, or at the
request of the Compensation Committee by the Non-Interested Members of the Board
of Directors of the Claridge Hotel and Casino Corporation, in interpreting,
construing or otherwise administering the Plan shall be final and conclusive and
binding on all parties. I. Treasury Stock Shares:
(1) Value: Number of shares awarded; shares may or may not have any
value.
(2) Vesting: Same as vesting of Equity Units.
(3) Payment: The Company will not make any Payment with respect to the
shares; however, vested shares may be disposed of in any manner desired by a
holder.
(4) Voting and Dividends: (a) Participant may vote all awarded
shares, whether or not vested.
(b) Participants are entitled to dividends, if any, only on shares
which have vested.
(5) Legend: Certificates evidencing shares of Treasury Stock awarded
under the Plan will bear a legend referring to the restrictions on transfer of
shares which have not vested. Upon vesting of all or a portion of a
Participant's shares, the Participant may obtain a certificate evidencing such
vested shares upon surrender of the legended certificate. PARTICIPANTS ARE
ADVISED THAT ANY SALE, TRANSFER OR OTHER DISPOSITION OF VESTED SHARES MUST BE
MADE IN COMPLIANCE WITH ALL FEDERAL AND STATE SECURITIES LAWS.
<PAGE>
II. Equity Units:
(1) Value: Each Equity Unit equals 0.0541% of (a) if the Transaction
occurs, the sum of (w) the excess of (i) the aggregate amount received, in cash,
securities or otherwise, by all of the Claridge Entities in connection with the
Transaction (but excluding the amount of any liabilities of the Claridge
Entities assumed by the acquirer in the Transaction) , over (ii) any liabilities
of the Claridge Entities immediately following the Transaction, after
eliminating any intra-entity liabilities, plus (x) the aggregate amount, if any,
paid by the Company and its subsidiaries to the Partnership (A) as Deferred Rent
(as defined below) under the operating Lease or (B) in excess of amounts which,
at the time of payment, were required to be paid to the Partnership pursuant to
any agreement, between January 1, 1992 and the date of the Transaction, plus (y)
the aggregate amount, if any, paid by the Company and its subsidiaries on the
loan made by the Partnership and evidenced by the Note, dated June 16, 1989,
plus (z) the aggregate amount of any dividends declared on the Common Stock of
the Company between January 1, 1992 and the date of the Transaction, or (b) upon
a Change in Control (as defined below), the Appraised Value; provided, however,
that the Committee shall reduce the number of Equity Units held by all
Participants on a pro rata basis if the Committee, in its sole discretion,
determines that the aggregate value of the Equity Units and the Treasury Shares
exceeds 5.41% of the aggregate equity value of the Claridge Entities.
(2) Appraised Value: "Appraised Value" shall mean, as of the date upon
which a Change in Control occurs, the excess of (a) the value of the assets and
business owned by the Claridge Entities as shown in an updated appraisal letter
from Landauer Associates (or any successor to Landauer Associates) provided upon
such Change in Control, over (b) the aggregate liabilities of the Claridge
Entities as shown on the most recent financial statements filed by the Claridge
Entities with the Securities and Exchange Commission, after eliminating
intra-entity liabilities.
(3) Transaction: The Transaction is 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.
(4) Vesting:
(a) Refinancing of First Mortgage: 25% of the Equity Units held
by a Participant will vest upon are financing of the existing First Mortgage,
either with the existing lender group, with another group of lenders or through
the issuance, publicly or privately, of debt securities, on terms that
represent a material improvement over those of the existing First Mortgage.
<PAGE>
The principal basis upon which it will be determined that any refinancing
constitutes a material improvement will consist of at least the following,
provided that material improvement in the following terms is not coupled with
significantly more onerous terms in other respects (such as a significantly
higher interest rate, the requirement of compensating cash balances, or
significant commitment fees): (1) extension of the term of the mortgage from the
then maturity to at least a five-year term, (2) mandatory principal payments
based on a minimum 10-year amortization schedule, and (3) increase in the amount
of available cash flow permitted to be used for capital improvements in each
year to at least $5,000,000.
(b) Acquisition or Elimination of the United Way CPR: 25% of the Equity
Units held by a Participant shall vest when all rights under the Webb Payment,
under the Restructuring Agreement, originally held by Del Webb Corporation and
now held by a trustee for the benefit of the United Way of Phoenix, Arizona, are
acquired by the Company, any Participating Company or any other person or group
of persons acting on behalf of the Company or any Participating Company or are
eliminated by agreement by the holder of the Webb Payment that such rights are
canceled.
(c) Further Restructuring or Change in Control: The Equity Units of a
Participant will vest fully upon the occurrence of (a) a transaction, such as
the Transaction, in which the financial and operational structure of the
Claridge Entities is simplified by the transfer of substantially all of the
assets and operations of the Claridge Entities to a single entity and in which
(whether occurring at the time of such a transaction or reasonably anticipated
to occur some time thereafter) Claimholders in the Claridge receive cash or
marketable securities with respect to any claims they may have with respect to
the Claridge Entities, or (b) a Change in Control.
(5) Claimholders in the Claridge: For purposes of this Plan,
"Claimholders in the Claridge" shall mean persons who are shareholders of the
Company or limited partners of the Partnership or who hold Contingent Payment
Rights with respect to any of the Claridge Entities.
(6) Change in Control: A "Change in Control" shall mean that any
person or group of persons (other than holders of Equity Units or Treasury
tock Shares) acting in concert either (a) own in excess of 50% of the
outstanding shares of the Company, or (b) own in excess of 50% of the shares
present and voting at a meeting of shareholders of the Company. For this
purpose, persons owning shares of the Company who grant a proxy to vote such
shares to any person, other than a person designated by the Board, shall be
deemed to be a group of persons acting in concert.
<PAGE>
(7) Payment: Payments with respect to the Equity Units shall only may
be made (a) upon the occurrence of the Transaction, or (b) if (i) any Change in
Control of the Company occurs and (ii) within one year after such Change in
Control occurs, a holder of Equity Units is no longer employed by the Company or
a Participating Company in the same capacity and with at least the same
responsibilities and compensation as immediately prior to such Change in
Control, in which event such holder may elect, by written notice to the Company
given within 60 days of such change in employment status, to require the Company
and the Participating Companies to make payment with respect to the vested
Equity Units of such holder, and such payment shall be made within 60 days after
the making of such election. Upon the occurrence of a Change in Control, the
Company, at its sole expense, shall request an updated appraisal letter from
Landauer Associates (or any successor to Landauer Associates). Payments will be
made only with respect to Equity Units which have vested at the time of payment.
The payment to a holder of Equity Units will be in an amount equal the Value
represented by the vested Equity Units of that holder, determined as of the time
of such payment. Payments must be made in cash or, if payment is to be made upon
the occurrence of the Transaction, payment may be made in such securities or
other property as is available to be distributed by the Company or the
Participating Companies at that time. Following payment to a holder of Equity
units upon occurrence of the Transaction or a Change in Control, the Equity
Units of such holder shall be deemed to have been paid in full.
(8) Substitution: At its discretion, the Committee may substitute
shares of Common Stock of the Company, or of some other entity which has
succeeded or is expected to succeed to the assets and business of the Claridge
Entities, for Equity Units if the Committee determines that the shares to be
issued with respect to each Equity Unit have a value reasonably related to the
Value of the Equity Unit. Upon such substitution, the Equity Units shall be
null and void.
(9) Deferred Rent: "Deferred Rent" shall have the same meaning as that
term is given in Paragraph I of the Amendment to the Operating Lease Agreement
and Expansion Operating Lease Agreement, dated June 15, 1989, between The
Claridge at Park Place, Incorporated and the Partnership.
<PAGE>
EXHIBIT 10(bc)
LONG-TERM MANAGEMENT INCENTIVE PLAN OF
CLARIDGE HOTEL AND CASINO CORPORATION
Effective January 1, 1992
Amended Effective June 5, 1995
Section I
PURPOSE
The Long-Term Management Incentive Plan set forth below consists of two
components: a Treasury Stock Award and an Equity Incentive Plan. The Treasury
Stock Award and Equity Incentive Plan are intended to provide management of the
Company and its subsidiary with a long-term incentive to increase the value of
those entities and to achieve certain strategic objectives, including obtaining
more flexible mortgage financing terms, dealing with the "Webb Payment,"
simplification of the financial and operational structure of the Claridge
Entities and the monetizing of the interests of shareholders in the Company,
limited partners in Atlantic City Boardwalk Associates, L.P., or holders of
contingent payment rights in any Claridge Entity. As a result, vesting of the
Treasury Share Award and the Equity Units and, under most circumstances,
payments on the Equity Units are dependent upon achievement of those objectives.
Recognizing, however, that the transaction or event which permits achievement of
these objectives may take a variety of different forms, the Human Resources and
Compensation Committee (the "Committee") of the Board of Directors of the
Company will continue to retain the right to provide key management of the
Company and its subsidiary with a different form of incentive compensation in
the event these objectives are achieved under circumstances under which holders
of the Equity Units would not be entitled to payment with respect to the Units.
Section II
DEFINITIONS
"Additional Equity Units" shall mean Equity Units initially available
for award as of June 5, 1995 to Participants who are Key Employees.
"Award Agreement" shall mean the written agreement evidencing each
Incentive Award granted to a Director or Key Employee under the Plan, the form
of which is attached hereto as Appendix A, and any exhibit thereto.
"Beneficiary" shall mean the beneficiary or beneficiaries designated
pursuant to Section 6 to receive, in the event of the death of a Participant,
any amount payable under the Plan.
"Board" means the Board of Directors of the Company.
"Claridge Entities" shall mean the Company, The Claridge at Park Place,
Incorporated, and Atlantic City Boardwalk Associates, L.P.
"Committee" shall mean the Human Resources and Compensation Committee
of the Board.
"Company" shall mean Claridge Hotel and Casino Corporation, a New York
corporation, and its successors and assigns.
<PAGE>
"Director" shall mean an individual who is a member of the Board.
"Director Equity Units" shall mean Equity Units awarded to Participants
who are Directors and are not Key Employees.
"Disability" shall mean a Participant's inability as determined by the
Board of Directors to perform his or her duties in a normal manner, whether by
reason of illness or injury (physical or mental), or otherwise, for (A) a
continuous period exceeding six (6) months or (B) any noncontinuous period
exceeding six (6) months in the aggregate during any twelve (12) month period
excluding any leaves of absence approved by the Board.
"Effective Date" shall mean January 1, 1992.
"Equity Units" shall mean the Equity Units awarded to Participants in
an Incentive Award, consisting of Original Entity Units, Additional Equity Units
and Director Equity Units, and having the terms and conditions of payment set
forth in the Award Agreement.
"Incentive Award" means a grant of Equity Units or Treasury Stock
Shares in accordance with the provisions of the Plan.
"Key Employee" means an officer or other key employee of any
Participating Company whose positions and responsibilities, in the judgment of
the Committee, enable such individual to have a significant impact on the
operating results of any Participating Company.
"Original Equity Units" shall mean Equity Units initially available for
award prior to June 5, 1995 to Participants who are Key Employees.
"Participant" shall mean each Director of the Company, or Key Employee
of the Company, who is designated by the Committee to receive an award of an
Incentive Award.
"Participant Account" shall be an appropriate record maintained by the
Company of the name of each Participant and the Equity Units and Treasury Stock
credited to each Participant pursuant to an Incentive Award.
"Participating Company" means the Company, The Claridge at Park Place,
Incorporated and any other subsidiary or other affiliate of the Company which
the Board has authorized to join the Plan.
<PAGE>
"Plan" shall mean this Long-Term Management Incentive Plan of Claridge
Hotel and Casino Corporation.
"Treasury Stock" shall mean shares of Class A Common Stock of the
Company, par value $0.001 per share, held in treasury and awarded to
Participants in Incentive Awards on the terms and conditions set forth in the
Award Agreement.
Section III
GRANT OF PERFORMANCE AWARDS AND AWARD AGREEMENTS
3.1 Subject to the provisions of the Plan, the Committee shall
determine the Incentive Awards to be awarded to any Participant.
3.2 Each Incentive Award awarded under the Plan shall be evidenced by a
written Award Agreement. Such agreement shall be subject to the express terms
and conditions set forth in this Plan.
3.3 The aggregate number of Equity Units and shares of Treasury
Stock which may be awarded under the Plan are as follows: Equity Units: 100
Original Equity Units, 100 Additional Equity Units and 100 Director Equity
Units; and shares of Treasury Stock: 273,938; provided, however, that the
Committee may award to Participants (who may be those persons who are
Participants on the date that this Plan takes effect or persons who become
Participants at a later date) Equity Units or shares of Treasury Stock
forfeited by a Participant upon termination of the service as a Director or
employment of that Participant prior to the vesting of any such Units or shares
of Treasury Stock provided that the aggregate number of Units and shares of
Treasury Stock awarded at any time and not forfeited do not exceed the aggregate
number set forth above.
Section IV
PAYMENT OF INCENTIVE AWARD
4.1 An Incentive Award shall be valued and paid, if at all, on the
terms and conditions relating to that Incentive Award as set forth in the Award
Agreement.
4.2 Following payment in full of an Incentive Award consisting of
Equity Units, that portion of the Incentive Award shall be canceled and the
Company shall have no further obligation to the Participant with respect to that
portion of the Incentive Award.
<PAGE>
Section V
TERMINATION OF EMPLOYMENT OR DISCHARGE
If a Participant voluntarily leaves the employ of the Company or the
Participant is discharged by the Company for any reason, or for no reason, or a
Participant who is not a Key Employee ceases to be a Director, or in the event
of death or Disability of such Participant, the Participant or his Beneficiary
in the case of death shall be entitled to retain those Incentive Awards granted
to the Participant which have vested in accordance with the vesting provisions
set forth in the Award Agreement but have not yet been paid, but the occurrence
of such an event shall not, of itself, entitle the Participant or Beneficiary to
any payment at that time with respect to any vested Incentive Award. Any
nonvested portion of Equity Incentive Units or Treasury Stock Shares in the
Participant Account of such Participant shall thereupon be forfeited and
canceled (but subject to being re-awarded to another Participant as provided in
Section 3.3 hereof), and the Company shall have no obligation to make any
payment to the Participant with respect to such forfeited components of any
Incentive Award.
Section VI
BENEFICIARY DESIGNATIONS
6.1 Each Participant shall file with the Company a written designation
of one or more persons as the Beneficiary who shall be entitled to receive any
amounts payable under the Plan upon his or her death. A Participant may from
time to time revoke or change his or her Beneficiary designation without the
consent of any prior Beneficiary by filing a new designation with the Company.
The last such designation received by the Company shall be controlling;
provided, however, that no designation, or change or revocation thereof, shall
be effective unless received by the Company prior to the Participant's death,
and in no event shall it be effective as of a date prior to such receipt.
6.2 If no such Beneficiary designation is in effect at the time of a
Participant's death, or if no designated Beneficiary survives the Participant or
if such designation conflicts with law, the Participant's estate shall be
entitled to receive the amounts, if any, payable under the Plan upon his or her
death. If the Company is in doubt as to the right of any person to receive such
amounts, the Company may retain such amounts, without liability for any interest
thereon, until the Company determines the rights thereto, or the Company may pay
such amounts into any court of appropriate jurisdiction and such payment shall
be a complete discharge of the liability of the Company therefor.
Section VII
ADMINISTRATION OF THE PLAN
7.1 The Plan shall be administered by the Committee. Notwithstanding
the above, the members of the Board who are not employed by any Participating
Company (the "Non-Interested Members") may exercise all the powers granted to
the Committee hereunder and, solely at the request of the Committee, shall
exercise such powers.
7.2 All decisions, determinations or actions of the Committee or a
majority of the Non-Interested Members made or taken pursuant to grants of
authority under the Plan shall be made or taken in the sole discretion of the
Committee or a majority of the Non-Interested Members, as the case may be, and
shall be final, conclusive and binding on all persons for all purposes.
<PAGE>
7.3 The Committee, or a majority of the Non-Interested Members, if
requested to do so by the Committee, shall have full power, discretion and
authority to interpret, construe and administer the Plan and any part thereof,
and interpretations and constructions thereof and actions taken thereunder shall
be final, conclusive and binding on all persons for all purposes.
7.4 The decisions and determinations of the Committee or a majority of
the Non-Interested Members, as the case may be, under the Plan need not be
uniform and may be made selectively among Participants, whether or not such
Participants are similarly situated.
7.5 The act of a majority of the members present at a meeting duly
called and held shall be the act of the Committee or the Non-Interested Members.
Any decision or determination reduced to writing and signed by all members of
the Committee or all of the Non-Interested Members shall be fully as effective
as if made by unanimous vote at a meeting duly called and held.
7.6 Notwithstanding anything else herein to the contrary, the Committee
shall not be required to direct the Company to issue any Incentive Award under
this Plan.
Section VIII
AMENDMENT OR TERMINATION OF THE PLAN
Although it is the present intention of the Company to maintain this
Plan to provide an incentive to Participants to contribute to the Company's
growth and achievement of its strategic objectives, the Company by action of a
majority of the Non-Interested Members may supplement, modify, amend, or
terminate the Plan at any time without the consent of the Participants, but
without affecting the Company's obligations under any Award Agreement with
respect to the Incentive Awards made prior to any such supplement, modification,
amendment or termination.
Section IX
NOTICE
For purposes of this Plan, all communications provided for herein shall
be in writing and shall be deemed to have been duly given when personally
delivered or five (5) business days after having been mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed to the Company at its principal executive office and to a Participant
at his principal residence indicated in the Award Agreement, or to such other
address as any party may have furnished to the other in writing and in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.
Section X
WITHHOLDING
In the event the Company is required to withhold income tax on the
amount distributed to any Participant pursuant to the terms of the Plan, the
Company in its discretion shall determine the method and amount of withholding.
Section XI
MISCELLANEOUS
11.1 Nothing contained in this Plan shall be construed to:
(a) give any director, officer or employee of any
Participating Company any right to be awarded
Incentive Awards;
(b) give any Participant any rights whatsoever with
respect to shares of stock of the Company other than
any shares of Treasury Stock awarded to the
Participant as provided in the Award Agreement;
(c) confer upon any employee any right to continue in the
employ of any Participating Company or limit in any
way the right of a Participating Company to terminate
a Participant's employment with the Company at any
time;
<PAGE>
(d) be evidence of any agreement or understanding,
express or implied, that a Participating
Company will employ a Participant in any particular
position or at any particular rate of
compensation; or
(e) confer upon any Participant who is a Director any
right to continue to serve as a Director or limit the
circumstances under which such Participant may be
removed as a Director.
11.2 No Incentive Award payable under the Plan shall be deemed salary
or compensation for the purpose of computing benefits under any employee benefit
plan or other arrangement of any Participating Company for the benefit of its
employees unless the Participating Company shall determine otherwise.
11.3 No right or benefit under this Plan shall be subject to voluntary
or involuntary anticipation, alienation, sale, assignment, pledge, encumbrance
or charge, and any attempt to anticipate, alienate, sell, assign, pledge,
encumber or charge the same shall be void. No right or benefit hereunder shall
in any manner be liable for or subject to the debts, contracts, liabilities or
torts of the person entitled to such benefit.
11.4 The invalidity or unenforceability of any provision of this Plan
shall not affect the validity or enforceability of any other provision of this
Plan, which shall remain in full force and effect.
11.5 To the extent that any Participant acquires a right to receive
payments from a Participating Company under this Plan, such right shall be no
greater than the right of an unsecured general creditor of the Participating
Company. All payments provided for under the Plan shall be paid from the general
assets of the Participating Company; provided, however, that such payments shall
be reduced by the amount of any payments made to the Participant or his or her
dependents, beneficiaries or estate from a trust or special or separate fund, if
any, established by a Participating Company to assure such payments. A
Participating Company shall not be required to establish a special or separate
fund or other segregation of assets to assure such payments, and, if a
Participating Company shall make any investments to aid it in meeting its
obligations hereunder, the Participant shall have no right, title, or interest
whatsoever in or to any such investments except as may otherwise be expressly
provided in a separate written instrument relating to such investments. Nothing
contained in this Plan, and no action taken pursuant to its provisions, shall
create or be construed to create a trust of any kind between a Participating
Company and any Participant.
<PAGE>
11.6 Absence on leave approved by a duly constituted officer of a
Participating Company shall not be considered interruption or termination of
employment for any purposes of the Plan; provided, however, that no Performance
Award may be granted to an employee while he or she is absent on leave.
11.7 If the Committee shall find that any person to whom any amount is
payable under the Plan is unable to care for his or her affairs because of
illness or accident, then any payment due him or her (unless a prior claim
therefor has been made by a duly appointed legal representative) may, if the
Committee so directs a Participating Company, be paid to his or her spouse, a
child, a relative, an institution maintaining or having custody of such person,
or any other person deemed by the Committee to be a proper recipient on behalf
of such person.
11.8 Captions preceding the sections hereof are inserted solely as a
matter of convenience and in no way define or limit the scope or intent of any
provision hereof.
11.9 The Plan shall be governed by and construed in accordance with the
laws of the State of New Jersey (without reference to the principles of conflict
or choice of laws thereof).
11.10 The obligation to make any payment under this Plan to a
Participant shall be a joint and several obligation of the Participating
Companies.
IN WITNESS WHEREOF, this Plan, as amended, has been approved by the
Non-Interested Members of the Board and executed as of the 5th day of June,
1995.
CLARIDGE HOTEL AND CASINO CORPORATION
By: /s/ Robert M. Renneisen
------------------------------------
Title: President/Chief Executive Officer
<PAGE>
AMENDED EXHIBIT A
(As of June 5, 1995)
TERMS AND CONDITIONS OF UNITS AND SHARES
AWARDED UNDER THE CLARIDGE LONG-TERM
MANAGEMENT INCENTIVE PLAN
Set forth below are the terms and conditions applicable to Units and
Shares awarded under the Claridge Long-Term Management Incentive Plan pursuant
to an Award Agreement. Any term used below which is not defined shall have the
meaning as defined in the Plan. Any questions regarding interpretation or
construction of the following terms and conditions should be directed to the
Human Resources and Compensation Committee (the "Committee") of the Board of
Directors of the Claridge Hotel and Casino Corporation. Determinations made by
the Committee, or at the request of the Compensation Committee by the
Non-Interested Members of the Board of Directors of the Claridge Hotel and
Casino Corporation, in interpreting, construing or otherwise administering the
Plan shall be final and conclusive and binding on all parties.
I. Treasury Stock Shares:
(1) Value: Number of shares awarded; shares may or may not have any
value.
(2) Vesting: Same as vesting of Original Equity Units.
(3) Payment: The Company will not make any Payment with respect to the
shares; however, vested shares may be disposed of in any manner
desired by a holder.
(4) Voting and Dividends:
(a) Participant may vote all awarded shares, whether or not
vested.
(b) Participants are entitled to dividends, if any, only on
shares which have vested.
(5) Legend: Certificates evidencing shares of Treasury Stock awarded
under the Plan will bear a legend referring to the restrictions on transfer of
shares which have not vested. Upon vesting of all or a portion of a
Participant's shares, the Participant may obtain a certificate evidencing such
vested shares upon surrender of the legend certificate. PARTICIPANTS ARE
ADVISED THAT ANY SALE, TRANSFER OR OTHER DISPOSITION OF VESTED SHARES MUST BE
MADE IN COMPLIANCE WITH ALL FEDERAL AND STATE SECURITIES LAWS.
<PAGE>
II. Equity Units, consisting of Original Equity Units, Additional Equity
Units and Director Equity Units:
(1) Value: Each Equity Unit equals its Percentage Share of (a) if the
Transaction occurs, the excess of (I) the sum of (w) the excess of (i) the
aggregate amount received, in cash, securities or otherwise, by all of the
Claridge Entities in connection with the Transaction (but excluding the amount
of any liabilities of the Claridge Entities assumed by the acquirer in the
Transaction), over (ii) any liabilities of the Claridge Entities immediately
following the Transaction, after eliminating any intra-entity liabilities, plus
(x) the aggregate amount, if any, paid by the Company and its subsidiaries to
the Partnership (A) as Deferred Rent (as defined below) under the Operating
Lease or (B) in excess of amounts which, at the time of payment, were required
to be paid to the Partnership pursuant to any agreement, between January 1, 1992
and the date of the Transaction, plus (y) the aggregate amount, if any, paid by
the Company and its subsidiaries on the loan made by the Partnership and
evidenced by the Note, dated June 16, 1989, plus (z) the aggregate amount of any
dividends declared on the Common Stock of the Company and distributions made by
the Company to the Distributing Trust under the Restructuring Agreement between
January 1, 1992 and the date of the Transaction over (II) the aggregate amount
paid to holders of Equity Units pursuant to clause (c) of this paragraph (1)
with respect to any such dividend or distribution or with respect to any
distribution made by the Partnership to its partners or to such Distributing
Trust, or (b) upon a Change in Control (as defined below), the Appraised Value,
or (c) if the Company pays a dividend to its shareholders or makes a
distribution to the Distributing Trust under the Restructuring Agreement or if
the Partnership makes a distribution to its partners or to such Distributing
Trust, the amount of any such dividend or distribution; provided, however, that
the Committee shall reduce the number of Original Equity Units held by all
Participants on a pro rata basis if the Committee, in its sole discretion,
determines that the aggregate value of the Original Equity Units and the
Treasury Shares exceeds 5.41% of the aggregate equity value of the Claridge
Entities.
(2) Percentage Share: "Percentage Share" shall mean, for Original
Equity Units: 0.0541%; for Additional Equity Units: 0.559%; and for Director
Equity Units: 0.04%.
(3) Appraised Value: "Appraised Value" shall mean, as of the date upon
which a Change in Control occurs, the excess of (a) the value of the assets and
business owned by the Claridge Entities as shown in an updated appraisal letter
from Landauer Associates (or any successor to Landauer Associates) provided upon
such Change in Control, over (b) the aggregate liabilities of the Claridge
Entities as shown on the most recent financial statements filed by the Claridge
Entities with the Securities and Exchange Commission, after eliminating
intra-entity liabilities.
<PAGE>
(4) Transaction: The Transaction is 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.
(5) Vesting:
(a) With respect to Original Equity Units:
(i) Refinancing of First Mortgage: 25% of the
Original Equity Units held by a Participant will vest upon a refinancing of the
existing First Mortgage, either with the existing lender group, with another
group of lenders or through the issuance, publicly or privately, of debt
securities, on terms that represent a material improvement over those of the
existing First Mortgage. The principal basis upon which it will be determined
that any refinancing constitutes a material improvement will consist of at least
the following, provided that material improvement in the following terms is not
coupled with significantly more onerous terms in other respects (such as a
significantly higher interest rate, the requirement of compensating cash
balances, or significant commitment fees): (1) extension of the term of the
mortgage from the then maturity to a least a five-year term, (2) mandatory
principal payments based on a minimum 10-year amortization schedule, and (3)
increase in the amount of available cash flow permitted to be used for capital
improvements in each year to at least $5,000,000. As of January 31, 1994, 25% of
the Original Equity Units were vested on this basis.
(ii) Acquisition or Elimination of the United
Way CPR: 25% of the Original Equity Units held by a Participant shall vest
when all rights under the Webb Payment, under the Restructuring Agreement,
originally held by Del Webb Corporation and now held by a trustee for the
benefit of the United Way of Phoenix, Arizona, are acquired by the Company,
any Participating Company or any other person or group of persons acting on
behalf of the Company or any Participating Company or are eliminated by
agreement by the holder of the Webb Payment that such rights are canceled.
(iii) Further Restructuring or Change in Control:
The Original Equity Units of a Participant will vest fully upon the occurrence
of (a) a transaction, such as the Transaction, in which the financial and
operational structure of the Claridge Entities is simplified by the transfer
of substantially all of the assets and operations of the Claridge Entities to
a single entity and in which (whether occurring at the time of such a
transaction or reasonably anticipated to occur some time thereafter)
Claimholders in the Claridge receive cash or marketable securities with
respect to any claims they may have with respect to the Claridge Entities,
or (b) a Change in Control.
<PAGE>
(b) With respect Additional Equity Units: Additional Equity
Units will vest, if at all, only if a Transaction occurs which results in the
Claimholders in the Claridge receiving cash or marketable securities having a
value equal to at least $20,000,000.
(c) With respect to Director Equity Units:
(i) Vesting Over Time: One-third of the total
Director Units held by a Participant will vest on December 31, of each of 1995,
1996 and 1997.
(ii) Occurrence of Transaction: One-half of the
total Director Equity Units will vest upon the occurrence of a Transaction which
results in the Claimholders of the Claridge receiving cash or marketable
securities having a value equal to at least $20,000,000.
(6) Claimholders in the Claridge: For purposes of this Plan,
"Claimholders in the Claridge" shall mean persons who are shareholders of the
Company or limited partners of the Partnership or who hold Contingent Payment
Rights with respect to any of the Claridge Entities.
(7) Change in Control: A "Change in Control" shall mean that any person
or group of persons (other than holders of Equity Units or Treasury Stock
Shares) acting in concert either (a) own in excess of 50% of the outstanding
shares of the Company, or (b) own in excess of 50% of the shares present and
voting at a meeting of shareholders of the Company. For this purpose, persons
owning shares of the Company who grant a proxy to vote such shares to any
person, other than a person designated by the Board, shall be deemed to be a
group of persons acting in concert.
(8) Payment: Payments with respect to the Equity Units shall only be
made (a) upon the occurrence of the Transaction, or (b) if (i) any Change in
Control of the Company occurs and (ii) within one year after such Change in
Control occurs, a holder of Equity Units who is a Key Employee is no longer
employed by the Company or a Participating Company in the same capacity and with
at least the same responsibilities and compensation as immediately prior to such
Change in Control or a holder of Equity Units who was a Director at the time of
such Change in Control is no longer a Director, in which event such holder may
elect, by written notice to the Company given within 60 days of such change in
employment status or status as a Director, as the case may be, to require the
Company and the Participating Companies to make payment with respect to the
vested Equity Units of such holder, and such payment shall be made within 60
days after the making of such election, or (c) if the Company pays a dividend to
its shareholders or makes a distribution to the Distributing Trust under the
Restructuring Agreement or if the Partnership makes a distribution to its
partners or to such Distributing Trust, no later than the date of such payment
or distribution. Upon the occurrence of a Change in Control, the Company, at its
sole expense, shall request an updated appraisal letter from Landauer Associates
(or any successor to Landauer Associates). Payments will be made only with
respect to Equity Units which have vested at the time of payment. The payment to
a holder of Equity Units will be in an amount equal the Value represented by the
vested Equity Units of that holder, determined as of the time of such payment.
Payments must be made in cash or, if payment is to be made upon the occurrence
of the Transaction, payment may be made in such securities or other property as
is available to be distributed by the Company or the Participating Companies at
that time. Following payment to a holder of Equity Units upon occurrence of the
Transaction or a Change in Control, the Equity Units of such holder shall be
deemed to have been paid in full.
<PAGE>
(9) Substitution: At its discretion, the Committee may substitute
shares of Common Stock of the Company, or of some other entity which has
succeeded or is expected to succeed to the assets and business of the Claridge
Entities, for Equity Units if the Committee determines that the shares to be
issued with respect to each Equity Unit have a value reasonably related to the
Value of the Equity Unit. Upon such substitution, the Equity Units shall be
null and void.
(9) Deferred Rent: "Deferred Rent" shall have the same meaning as that
term is given in Paragraph 1 of the Amendment to the Operating Lease Agreement
and Expansion Operating Lease Agreement, dated June 15, 1989, between The
Claridge at Park Place, Incorporated and the Partnership.
<PAGE>
EXHIBIT 10(bd)
OPTION AGREEMENT
This Agreement (the "Agreement") is made as of the 29th day of
November, 1995 by and among The Claridge Hotel and Casino Corporation, a New
York corporation (the "Buyer"), The Claridge at Park Place, Incorporated, a New
Jersey corporation and a wholly-owned subsidiary of Buyer ("CPPI"), Philip J.
Dion, as Trustee (the "Seller") for Valley of the Sun United Way (the "United
Way") under an Irrevocable Trust, dated April 2, 1990 (the "Trust Instrument"),
and Atlantic City Boardwalk Associates, L.P., a New Jersey limited partnership
(the "Partnership"). As used below, the term the "Claridge Entities" means
Buyer, CPPI and the Partnership.
WHEREAS, as more particularly described in Section 6 of the
Restructuring Agreement, dated October 27, 1988 (the "Restructuring Agreement"),
among the Claridge Entities, Del Webb Corporation ("Webb") and certain other
parties, Webb had an interest equal to $20 million plus interest from December
1, 1988 at the rate of 15% per annum compounded quarterly (the "Webb Payment");
and
WHEREAS, on April 2, 1990, Webb transferred the Webb Payment to the
Seller; and
WHEREAS, upon the terms and subject to the conditions set forth herein,
the Buyer desires to have the option to purchase and accept from the Seller, and
the Seller desires to grant to Buyer such option and, upon the exercise thereof
and the Purchase Closing (defined below) and the other matters provided for
below, to sell, assign and transfer to the Buyer, all of its right, title and
interest in and to the Webb Payment.
NOW THEREFORE, in consideration of the foregoing and the
representations, warranties and covenants set forth herein and other good and
valuable consideration, the parties hereto agree as follows:
ARTICLE I
THE OPTION
1.1 The Option. The Seller hereby grants to the Buyer an option (the
"Option"), to purchase the Webb Payment on the terms and conditions set forth in
this Agreement, which Option may be exercised by the Buyer's delivering notice
to the Seller, in the form of Exhibit 1.1 hereto, any time after the Option
Closing (as hereinafter defined) and prior to December 31, 1997.
1.2 Option Closing. The closing of the Option (the "Option Closing")
shall occur at 10:00 A.M. on the date which is five Business Days after the
later of (a) the date on which Buyer gives Seller written notice that the
conditions set forth in Section 1.3(a) hereof have been satisfied or waived, and
(b) the date on which Seller gives Buyer written notice that the conditions set
forth in Section 1.3(b) hereof have been satisfied or waived, or such other date
as the parties may agree (the "Option Closing Date"), at the offices of Rogers &
Wells, 200 Park Avenue, New York, New York 10166. At the Option Closing, the
Seller and the Buyer shall deliver to each other confirmation of the
effectiveness of the Option in the form of Exhibit 1.2 hereto and the Buyer
shall deliver to the Seller the option price (the "Option Price") in the amount
of ONE MILLION DOLLARS ($1,000,000), payable by certified or official bank
check.
<PAGE>
1.3 Conditions to Option Closing.
(a) The Option Closing shall not occur unless the Buyer, in its sole
discretion, is satisfied that each of the following conditions has been
fulfilled (or waived by Buyer):
(i) Representations and Warranties. The representations and
warranties contained in Article IV of this Agreement shall be true and correct
in all material respects on and as of the Option Closing with the same force and
effect as if they had been made on the date of the Option Closing.
(ii) Performance. The Seller shall have performed and complied
fully with all agreements and conditions contained in this Agreement to be
performed or complied with by it at or before the Option Closing.
(iii) Consent of Parties to Restructuring Agreement. The
parties to the Restructuring Agreement, other than Robert K. Swanson, Everett L.
Mangam, T. Edward Plant and First Fidelity Bank, National Association, New
Jersey, shall have consented to the sale of the Webb Payment by the Seller to
the Buyer pursuant to this Agreement, pursuant to a consent in the form of
Exhibit 1.3A hereto (and each party to the Restructuring Agreement that is also
a party to this Agreement hereby so consents).
(iv) Opinions of Counsel. Buyer shall have received opinions
of Levine, Staller, Sklar, Chan, Brodsky & Donnolly, P.A., New Jersey counsel to
the Seller, Gibson, Dunn & Crutcher, New York counsel to the Seller and of
Arizona counsel to the Seller each in form and substance satisfactory to the
Buyer in its sole discretion.
(v) Webb Assurance. The Buyer shall have received from Webb a
duly executed assurance from Webb in the form of Exhibit 1.3C that Webb does not
have any claim to the Webb Payment.
(b) The Option Closing shall not occur unless the Seller, in Seller's
sole discretion, is satisfied that each of the following conditions has been
satisfied (or waived by Seller):
(i) Representations and Warranties. The representations and
warranties contained in Articles V and V-A of this Agreement shall be true and
correct in all material respects on and as of the Option Closing with the same
force and effect as if they had been made on the date of the Option Closing.
(ii) Performance. The Buyer shall have performed and complied
fully with all agreements and conditions contained in this Agreement to be
performed or complied with by it at or before the Option Closing.
(iii) Certification. The Buyer shall have provided the Seller
with a certificate confirming the matters set forth in clauses (i) and (ii) of
this subsection (b) in the form of Exhibit 1.3D.
(iv) Consents and Approvals. All permits, consents,
authorizations and approvals of, registrations, qualifications, designations,
declarations or filings with, or notices to, and all licenses and permits of
(each an "Approval"), any person or entity or any federal or state governmental
authority (including, without limitation, the New Jersey Casino Control
Commission ("CCC") and the Division of Gaming Enforcement) that Seller
determines are necessary or appropriate to be obtained, made or submitted by or
on behalf of the Seller in connection with the execution, delivery or
performance of this Agreement and the sale, assignment and transfer of the Webb
Payment to the Buyer and the other transactions contemplated hereby shall have
been duly obtained, made or submitted and, if required, shall be effective on
and as of the Option Closing.
(v) Approval by United Way; Fairness Opinions. The
Seller shall have received from the United Way such approval of, indemnification
with respect to and opinions of counsel with respect to this Agreement and
the transactions contemplated hereby as the Seller believes are necessary,
appropriate or desirable. The Seller or the United Way shall have received such
fairness opinions, if any, as each believes are necessary, appropriate or
desirable in connection with this Agreement and the transactions contemplated
hereby.
<PAGE>
(vi) Regulatory Approval and Other Action. The Seller shall
have received from the CCC and any other New Jersey gaming authorities as may be
appropriate such Approvals of the distribution by the Seller, upon receipt, of
the proceeds to be received by the Seller from the payment of the Option Price
and the sale of the Webb Payment (including payments under Section 3.2(c)
hereof) pursuant to this Agreement to the United Way as the Seller may deem
necessary or appropriate. The Trust Instrument shall have been reformed, or the
Seller shall have otherwise received such Approvals as the Seller feels are
appropriate to permit the Seller to distribute to the United Way, upon receipt,
the proceeds of the payment of the Option Price and the sale of the Webb Payment
to the Buyer (including payments under Section 3.2(c) hereof) pursuant to this
Agreement (i) including by appropriately licensing the United Way or (ii)
notwithstanding that the United Way is not licensed by the CCC.
(vii) Opinions of Counsel. Seller shall have received opinions
of Rogers & Wells and Frank Bellis, Esq., counsel to the Buyer, in the forms
attached in Exhibit 1.3E and Exhibit 1.3F, respectively.
(viii) Financial Statements and Comfort. Seller shall have
received (A) audited financial statements of Buyer as of Buyer's most recently
completed fiscal year and (B) any publicly available unaudited financial
statements of Buyer for any period subsequent to the period covered by such
audited financial statements, in each case showing that Buyer has shareholders'
equity of at least $2,000,000, together with a letter from KPMG Peat Marwick LLP
("Peat Marwick") covering the matters set forth in Exhibit 1.3G. If any portion
of the funds used to pay the Option Price is being directly or indirectly
provided by the Partnership (including, without limitation, through abatement of
lease payments), Seller shall also have received (A) audited financial
statements of the Partnership as of the Partnership's most recently completed
fiscal year and (B) any unaudited financial statements of the Partnership for
any period subsequent to the period covered by such audited financial statements
that have been provided by the Partnership to its limited partners, in each case
showing that the Partnership has a partners' equity of at least $2,000,000,
together with a letter from Peat Marwick covering the matters set forth in
Exhibit 1.3G(2). At the time of the Option Closing, Buyer shall be deemed to
represent, without any further documents being required to be delivered by
Buyer, that, immediately prior to payment of the Option Price, (i) it has a
shareholders' equity of at least $2,000,000 determined in accordance with
generally accepted accounting principles ("GAAP") consistently applied, (ii) it
is not insolvent, (iii) after the payment of the Option Price or the
transactions to be effected in connection therewith, it will not be rendered so
insolvent, (iv) it is not then engaged in a business or transaction (or about to
engage a business or transaction ) for which its capital remaining after payment
of the Option Price and completion of the transaction to be effected in
connection therewith will be unreasonably small and (v) it does not intend to
incur, or believe it will incur, debts beyond its ability to pay as the debts
mature.
(c) "Business Day". For purposes of this Agreement, "Business
Day" means a day upon which banks are open for business in New York city.
ARTICLE II
PURCHASE TERMS
2.1 Sale, Assignment and Transfer of Webb Payment. At the Purchase
Closing described in Section 2.3, the Seller will deliver to the Escrow Agent
(as hereinafter defined) an instrument of assignment in the form of Exhibit 2.1
hereto providing for the sale, assignment and transfer to the Buyer (or its
assignee) of all of Seller's rights, title, and interest in and to the Webb
Payment (the "Assignment Instrument"), and the Buyer (or its assignee) will
deliver to the Escrow Agent a certified or official bank check in the amount of
the Purchase Price set forth in Section 2.2 hereof (as to Section 2.2(z), only
to the extent due at the time of the Purchase Closing). Notwithstanding such
<PAGE>
delivery of the Assignment Instrument and check to the Escrow Agent, the sale,
assignment and transfer of the Webb Payment to the Buyer shall not be deemed to
occur unless and until the Escrow Agent makes delivery of such instrument and
the Purchase Price pursuant to Section 4(a) of the Escrow Agreement (as
hereinafter defined). It is understood and agreed that if such delivery of the
Assignment Instrument by the Escrow Agent referred to below is to occur, (i)
within 15 days after the Purchase Closing, Buyer and/or the Partnership shall
pay to the Distributing Trust (as such term is defined in the Restructuring
Agreement) the amount required by Section 4(a) of the Escrow Agreement (defined
below); (ii) based on the Purchase Price being $10,000,000 and, as the Seller
and Buyer believe, 83.89644% in interest of investors being Releasing Investors,
the amount to be so paid to the Distributing Trust for payment to Releasing
Investors would be $7,226,001; and (iii) the amount to be so paid to
Distributing Trust will increase if interest is owed by Buyer on the Purchase
Price under Section 2.2(y) hereof, with the increase being an amount equal to
72.26001% of the interest. If for any reason the amounts to be paid to the
Distributing Trust are not so paid, the sale, assignment and transfer of the
Webb Payment to Buyer shall not be deemed to have occurred and Seller will not
have released or waived any rights in and to the Webb Payment.
2.2 Purchase Price. The purchase price (the "Purchase Price") to be
paid by the Buyer at the Purchase Closing for the Webb Payment will be TEN
MILLION DOLLARS ($10,000,000), plus any additional amounts as may then be owing
pursuant to Section 3.2(c) hereof, in each case payable by certified or official
bank check; provided, however, that, if the Purchase Price is being paid after
December 31, 1996, the Purchase Price shall be the sum of (x) TEN MILLION
DOLLARS ($10,000,000) plus (y) an amount equal to interest on TEN MILLION
DOLLARS ($10,000,000) at the annual rate of 10% for the period from January 1,
1997 to the date of Payment of the Purchase Price to Seller by the Escrow Agent
plus (z) any additional amount then payable pursuant to Section 3.2(c) hereof.
2.3 The Purchase Closing. The Purchase Closing (the "Purchase Closing")
of the purchase and sale of the Webb Payment will take place at the offices of
Rogers & Wells, 200 Park Avenue, New York, New York 10166, at 10:00 A.M., New
York City time, on the date which is ten Business Days after the Buyer gives the
Seller notice of the exercise of the Option pursuant to Section 1.1 hereof, or
such other date as the parties hereto may agree in writing (the "Closing Date").
Exercise of the Option will be irrevocable and will obligate Buyer to deliver
the Purchase Price to the Escrow Agent as provided in Section 2.1.
2.4 Escrow Agent. The Buyer and Seller hereby appoint IBJ Schroder Bank
and Trust Company to act as escrow agent (the "Escrow Agent") pursuant to an
Escrow Agreement in the form of Exhibit 2.4 hereto (the "Escrow Agreement") with
respect to the deliveries to be made pursuant to Section 2.1 hereof.
ARTICLE III
RELEASE BY SELLER; FURTHER PAYMENTS TO SELLER
3.1 Release and Waiver of Rights. The Seller in his capacity as Trustee
with respect to the Trust, agrees that, upon the occurrence of all of (i) the
Purchase Closing, (ii) the payment to the Distributing Trust of the amount
contemplated to be paid to it by the third sentence of Section 2.1 of this
Agreement and Section 4(a) of the Escrow Agreement and (iii) delivery of the
Purchase Price (except, as to the portion of the Purchase Price referred to in
Section 2.2(z), to the extent not then due) to Seller by the Escrow Agent, it
will have irrevocably released and waived any and all rights in and to the Webb
Payment.
3.2 Further Payments to Seller. If the Purchase Closing occurs:
(a) The Buyer and CPPI agree for the benefit of the Seller and
the United Way that neither the Buyer nor, except for distributions and payments
to Buyer, CPPI shall make any distributions or payment to any of its
shareholders as such until those persons who are Releasing Investors (as
that term is defined in the Restructuring Agreement) have received from the
Distributing Trust referred to below an amount equal to that amount that
Releasing Investors would have received had the Buyer not purchased the Webb
<PAGE>
Payment. The parties agree that, as of October 31, 1995, the amount that would
have been required to be received by Releasing Investors to satisfy the
preceding sentence is approximately $40,000,000, and that such amount will
increase thereafter until paid. The parties recognize that, under the "provided"
clause of the first sentence of Section 6(a) of the Restructuring Agreement the
Buyer and CPPI are permitted to engage in certain transactions (being a sale by
Buyer of the stock of CPPI or a sale by CPPI of substantially all of its assets)
that may result in the Releasing Investors receiving in the aggregate an amount
that is less than the amount referred to in the preceding sentence (including
interest compounded quarterly on that amount) without the Buyer or CPPI having
any further obligation to make any payment to Releasing Investors.
(b) The Partnership agrees for the benefit of the Seller and
the United Way that the Partnership will not make any distributions or payment
to any of its limited partners as such until those persons who are Releasing
Investors have received from the Distributing Trust an amount equal to that
amount that Releasing Investors would have received had the Buyer not purchased
the Webb Payment. The parties recognize that, under the "provided" clause of the
first sentence of Section 6(a) of the Restructuring Agreement, the Partnership
is permitted to engage in a sale of substantially all of its assets that may
result in the Releasing Investors receiving in the aggregate an amount that is
less than the approximately $40,000,000 amount referred to in Section 3.2(a)
(including interest compounded quarterly on that amount) without the Partnership
having any further obligation to make any payment to Releasing Investors.
(c) If amounts received or required to be received by the
Distributing Trust for distribution to Releasing Investors (including the amount
provided for in Section 4(a) of the Escrow Agreement) equals or exceeds
$20,000,000, as additional consideration for the purchase of the Webb Payment,
the Claridge Entity making the distribution (the Buyer and CPPI jointly and
severally if one of them is making or is required to make the distribution)
shall pay to the Seller, at the same time that the Distributing Trust receives
or should have received an amount which, when aggregated with amounts previously
received or required to have been paid to the Distributing Trust for
distribution to Releasing Investors, exceeds $20,000,000, as to the excess and
at each time thereafter that the Distributing Trust receives or should have
received amounts for distribution to Releasing Investors, an amount equal to
17.65% times such portion of such amount received by or so required to have been
paid to the Distributing Trust as, when aggregated with prior such amounts
received by or so required to have been paid to the Distributing Trust, exceeds
$20,000,000; provided, however, that the total amount to be paid to the Seller
under this Section 3.2 shall not exceed $10,000,000.
(d) For purposes of Section 3.2(c) hereof, if any amount
received or required to be received by the Distributing Trust for distribution
to Releasing Investors is in a form other than cash, such amount shall be valued
in the following manner:
(i) if any such amount consists of marketable
securities, then such amount shall be valued based on the average price at which
such security traded on the first Business Day after the day upon which any
Releasing Investor received such security from the Distributing Trust; or
(ii) if such amount consists or is expected to
consist of something other than marketable securities, then such amount shall be
valued either (A) at such value as is placed on such amount by mutual agreement
of the Buyer and the Seller, or (B) if no such agreement is reached within 20
Business Days prior to the date such amount is expected to be distributed, at
such value as is determined by the Designated Investment Banking Firm described
below, one-half of the reasonable fees of which shall be paid by each of the
Claridge Entity making the distribution (the "Relevant Claridge Entity") and the
Seller. If it is anticipated that the Distributing Trust will make a
distribution of an amount which consists of something other than marketable
securities, the Claridge Entity that expects to make such distribution shall so
notify the Seller of the date of such expected distribution at least 30
<PAGE>
business days prior thereto. If the Relevant Claridge Entity and the Seller are
unable to reach agreement on the value of the amount to be so distributed within
20 Business Days prior to the expected distribution date, the Relevant Claridge
Entity shall send to the Seller notice of the Relevant Claridge Entity's
investment banking firm. Within 5 business days after such notice, the Seller
shall notify the Relevant Claridge Entity of the Seller's investment banking
firm. The Relevant Claridge Entity's investment banking firm and, if the Seller
has so designated its investment banking firm, its investment banking firm shall
jointly designate a third investment banking firm, which shall determine the
value of the amount to be so distributed (the "Designated Investment Banking
Firm"). The Designated Investment Banking Firm shall make its determination
regarding the valuation of such amount within 5 business days after its
designation, and its decision shall be conclusive.
(e) Within 120 days of the end of each 12-month period ended
December 31, commencing December 31, 1995, each Claridge Entity will deliver to
the Seller and the United Way (i) such financial statements for the 12 months
ended such December 31, certified by the independent public accountants for such
Claridge Entity (provided that this requirement shall be satisfied as to CPPI,
as long as CCPI is wholly-owned by Buyer, by delivery of such financial
statements of the Buyer), (ii) a certification signed by the Chief Executive
Officer and Chief Financial Officer (or comparable officers or the general
partners, if applicable) of each Claridge Entity, in the form of Exhibit 3.2(e),
as to the distributions made and required to be made to the Distributing Trust
during such 12-month period and (iii) to the extent not then prohibited by the
American Institute of Certified Public Accountants, a letter from the
independent public accountants that certified each such financial statement to
the effect that, during the course of their audit and otherwise, nothing came to
their attention to indicate that the statements in the certificates referred to
in clause (ii) of this Section 3.2(e) are inaccurate in any respect or, if they
are inaccurate, specifying each inaccuracy.
(f) If (i) any amount required to be paid to the Seller by a
Claridge Entity pursuant to Section 3.2(c) is not paid when due and is not paid,
with interest at 15% per annum (but not in excess of the maximum amount
permitted by applicable law) from the date due, by 125 days after the 12 months
ended December 31 in which payment was due and (ii) there is no bona fide
dispute regarding the amount, if any, due, between the Seller and the Claridge
Entity which the Seller believes is required to pay such amount, then the entire
amount due on the Webb Payment, as if it had not been acquired by Buyer, and the
corresponding amount due to Releasing Investors, will be immediately due and
payable to Seller and the Releasing Investors. For the purpose of Section
3.2(f), a dispute by a Claridge Entity will not be deemed bona fide unless it
has substantial basis in fact and (i) to the extent the dispute is based on
legal interpretation or a question of law, at the outset of the dispute the then
primary outside counsel to the Claridge Entity renders an opinion to the Seller
that the position of the Claridge Entity is based on significant legal authority
and (ii) to the extent the dispute is based on a question of accounting or
calculation, at the outset of the dispute the then independent public
accountants for the Claridge Entity delivers to the Seller a letter to the
effect that the calculation of the Claridge Entity is correct and, if a question
of accounting is involved, that the accounting treatment is in accordance with
generally accepted accounting principles consistently applied by such Claridge
Entity.
(g) If, in addition to the Option Price, any amounts would be
due on the Webb Payment prior to the Purchase Closing, those amounts shall be
paid and shall not reduce the amounts otherwise payable to Seller under this
Agreement.
3.3 Releases. If the Buyer solicits from its shareholders, or the
Partnership solicits from its limited partners, any release, consent, waiver or
other acknowledgment with respect to the transactions contemplated by this
Agreement, the Buyer and/or Partnership, as the case may be, agrees that such
release, consent, waiver or other acknowledgment shall, by its terms, also be
for the benefit of the Seller and the United Way.
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Buyer as follows, except as
listed in Exhibit 4.1:
4.1 Authorization. The Seller has all the power and authority necessary
to enable it to execute and deliver this Agreement, and to carry out the
transactions contemplated by this Agreement. The Seller has taken all actions,
if any, necessary to authorize the execution, delivery and performance by Seller
of this Agreement.
4.2 Binding Agreement. This Agreement is the legal, valid and binding
agreement of the Seller, enforceable against the Seller in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency or
other similar laws of general application affecting the enforcement of
creditors' rights or by general principles of equity limiting the availability
of equitable remedies.
4.3 Title to the Webb Payment. The Seller has not transferred or
conveyed any of its right, title and interest in and to the Webb Payment, and,
assuming that the transfer of the Webb Payment from Webb to the Seller is legal,
valid and enforceable, holds the Webb Payment free and clear of any and all
security interests, liens, charges, encumbrances or adverse interests
whatsoever. Assuming that the transfer of the Webb Payment from Webb to the
Seller is legal, valid and enforceable, when the Buyer acquires the Webb Payment
as contemplated by this Agreement, the Buyer will receive the Webb Payment and
all rights, title and interest in and to the Webb Payment free and clear of any
security interests, liens, charges, encumbrances or claims of other persons,
other than those resulting from acts of the Buyer.
4.4 Compliance with Instruments and Law. Upon receipt of the consents
or taking of the actions contemplated by Sections 1.3(b)(iv), (v) and (vi)
hereof, neither the execution and delivery of this Agreement by the Seller nor
the consummation of the transactions contemplated by this Agreement will (i)
violate any provision of the Trust Instrument or (ii) violate, result in a
breach of, or constitute a default under or conflict with any provision of any
agreement or instrument to which the Seller is a party or by which the Seller is
bound, or any provision of any applicable local, state or federal law or any
order, judgment, writ, decree, statute, rule or regulation of any court or
governmental agency having jurisdiction over the Seller.
4.5 Consents and Approvals. Upon receipt of the consents or taking of
the actions contemplated by Sections 1.3(b)(iv), (v) and (vi) hereof, no
permits, consents, approvals or authorizations of, registrations,
qualifications, designations, declarations or filings with, or notices to any
person or entity or any federal or state governmental authority are required to
be obtained, made or submitted by or on behalf of the Seller in connection with
the execution, delivery or performance of this Agreement, or the consummation of
the transactions contemplated hereby.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND CPPI
The Buyer and CPPI jointly and severally represent and warrant to and,
as to Section 5.6, agree with the Seller as follows:
5.1 Authorization. The Buyer and CPPI each have all the power and
authority necessary to enable each of them to execute and deliver this Agreement
and to carry out the transactions contemplated by this Agreement. The Buyer and
CPPI have each taken all corporate and other actions necessary to authorize the
execution, delivery and performance of this Agreement.
<PAGE>
5.2 Corporate Status. The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of New York.
CPPI is a corporation duly organized, validly existing and in good standing
under the laws of the State of New Jersey. CPPI is a wholly-owned subsidiary of
the Buyer.
5.3 Binding Agreement. This Agreement is a legal, valid and binding
agreement of the Buyer and CPPI, enforceable against each of the Buyer and CPPI
in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency or other similar laws of general application affecting
the enforcement of creditors' rights or by general principles of equity limiting
the availability of equitable remedies.
5.4 Compliance with Instruments and Law. Neither the execution and
delivery of this Agreement by the Buyer or CPPI nor the consummation of the
transactions contemplated by this Agreement will (i) violate any provision of
their respective certificates or articles of incorporation, bylaws or other
charter or organizational documents, or (ii) violate, result in a breach of, or
constitute a default under or conflict with any provision of any agreement or
instrument to which the Buyer or CPPI is a party or by which the Buyer or CPPI
(or any of their respective assets) is bound, or any provision of any applicable
local, state or federal law or any order, judgment, writ, decree, statute, rule
or regulation of any court or governmental agency having jurisdiction over the
Buyer or CPPI (or any of their respective assets).
5.5 Consents and Approvals. No permits, consents, approvals and
authorizations of, registrations, qualifications, designations, declarations or
filings with, or notices to any person or entity or any federal or state
governmental authority (other than the CCC or the New Jersey Division of Gaming
Enforcement) are required to be obtained, made or submitted by or on behalf of
the Buyer in connection with the execution, delivery or performance of this
Agreement, or the consummation of the transactions contemplated hereby.
5.6 No Effect on Rights of Releasing Investors. Neither the purchase of
the Webb Payment by the Buyer, nor any action taken by the Buyer with respect to
the Webb Payment following such purchase will result in the Releasing Investors
receiving less, in their capacities as Releasing Investors, than they would have
received had such purchase not occurred or such action not been taken, except to
the extent that payment of the Option Price will diminish the assets of the
Buyer.
5.7 Pending Transactions. Except as set forth in Exhibit 5.7, as of the
date hereof, neither the Buyer nor CPPI has entered into any contract,
agreement, letter of intent or other written understanding or arrangement
regarding any transaction that would result in one or more of the Claridge
Entities making or being required to make any distribution to the Distributing
Trust.
ARTICLE V-A
REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP
The Partnership represents and warrants to and, as to Section 5A.6,
agrees with the Seller as follows:
5A.1 Authorization. The Partnership has all the power and authority
necessary to enable it to execute and deliver this Agreement, and to carry out
the transactions contemplated by this Agreement. The Partnership has taken all
partnership actions necessary to authorize the execution, delivery and
performance by it of this Agreement.
5A.2 Status. The Partnership is a limited partnership duly organized,
validly existing and in good standing under the laws of the State of New Jersey.
<PAGE>
5A.3 Binding Agreement. This Agreement is a legal, valid and binding
agreement of the Partnership, enforceable against the Partnership in accordance
with its terms, except as enforceability may be limited by bankruptcy,
insolvency or other similar laws of general application affecting the
enforcement of creditors' rights or by general principles of equity limiting the
availability of equitable remedies.
5A.4 Compliance with Instruments and Law. Neither the execution and
delivery of this Agreement by the Partnership nor the consummation of the
transactions contemplated by this Agreement will (i) violate any provision of
its Agreement of Limited Partnership or other organizational documents of the
Partnership, or (ii) violate, result in a breach of, or constitute a default
under or conflict with any provision of any agreement or instrument to which the
Partnership is a party or by which the Partnership (or any of its assets) is
bound, or any provision of any applicable local, state or federal law or any
order, judgment, writ, decree, statute, rule or regulation of any court or
governmental agency having jurisdiction over the Partnership (or any of its
assets).
5A.5 Consents and Approvals. No permits, consents, approvals and
authorizations of, registrations, qualifications, designations, declarations or
filings with, or notices to any person or entity or any federal or state
governmental authority (other than the CCC and the Division of Gaming
Enforcement) are required to be obtained, made or submitted by or on behalf of
the Partnership in connection with the execution, delivery or performance of
this Agreement, or the consummation of the transactions contemplated hereby.
5A.6 No Effect on Rights of Releasing Investors. No action taken by the
Partnership with respect to the Webb Payment following the purchase of the Webb
Payment by the Buyer will result in the Releasing Investors receiving less, in
their capacities as Releasing Investors, than they would have received had such
purchase not occurred or such action not been taken, except to the extent that
payment of the Option Price will diminish the assets of the Buyer.
5A.7 Pending Transactions. Except as set forth in Exhibit 5.7, as of
the date hereof, the Partnership has not entered into any contract, agreement,
letter of intent or other written understanding or arrangement regarding any
transaction that would result in one or more of the Claridge Entities making or
being required to make any distribution to the Distributing Trust.
ARTICLE VI
CONDITIONS OF SELLER'S OBLIGATIONS AT PURCHASE CLOSING
The obligation of the Seller to deliver the Assignment Instrument to
the Escrow Agent pursuant to Section 2.1 hereof and to thereupon or thereafter
sell, assign and transfer the Webb Payment to the Buyer is subject to the
fulfillment to its satisfaction prior to or at the Purchase Closing of each of
the following conditions:
6.1 Opinions of Counsel. Seller shall have received opinions of Rogers
& Wells and Frank Bellis, Esq., counsel to the Buyer, in the forms attached
hereto as Exhibits 6.1A and 6.1B.
6.2 Financial Statements and Comfort. Seller shall have received (i)
audited financial statements of Buyer as of Buyer's most recent completed fiscal
year and unaudited financial statements of Buyer for and at the end of the last
quarter end for which financial information as to Buyer is publicly available,
each showing that Buyer has shareholders' equity greater than $2,000,000, (ii)
pro forma balance sheets of Buyer at such year end and quarter end giving effect
to the purchase of the Webb Payment, the concomitant payment to Releasing
Investors and the transactions to be effected in connection with both, all using
the accounting treatment proposed to be used by Buyer for financial reporting
purposes and each showing a shareholders' equity of Buyer, after giving effect
to the foregoing transactions, greater than $2,000,000, and (iii) letters from
Peat Marwick (including a letter with respect to such pro forma balance sheet)
covering the matters set forth in Exhibit 6.2 and consistent with the greater
than $2,000,000 number in clauses (i) and (ii) of this sentence. If any portion
<PAGE>
of the funds used to pay the portion of the Purchase Price being paid at the
Purchase Closing or to make the concomitant payment to Releasing Investors is
being directly or indirectly provided by the Partnership (including, without
limitation, through abatement of lease payments), Seller shall also have
received (i) audited financial statements of the Partnership as of the
Partnership's most recently completed fiscal year and unaudited financial
statements of the Partnership for and at the end of the last quarter end for
which financial information as to the Partnership has been made available to its
limited partners, each showing that the Partnership has a partners' equity
greater than $2,000,000, (ii) pro forma balance sheets of the Partnership at
such year end and quarter end giving effect to the purchase of the Webb Payment,
the concomitant payment to Releasing Investors and the transactions to be
effected in connection with both, in each case as to the Partnership and with
respect to the funds being directly or indirectly so provided by the
Partnership, all using the accounting treatment proposed to be used by the
Partnership for financial reporting purposes and showing a partners' equity of
the Partnership, after giving effect to the foregoing transactions, greater than
$2,000,000, and (iii) letters from Peat Marwick (including a letter with respect
to such pro forma balance sheet) covering the matters set forth in Exhibit i)
and 6.2(2) and consistent with the greater than $2,000,000 number in clauses
(ii) of this sentence. The Buyer and the Partnership will each use their best
efforts to cause Peat Marwick to deliver the comfort letter that is Exhibit 6.2,
with Procedure C and Item 5 furnished as a part thereof; if any portion of the
funds used to pay the portion of the Purchase Price being paid at the Purchase
Closing or to make the concomitant payment to Releasing Investors is being
directly or indirectly provided by the Partnership (including, without
limitation, through abatement of lease payments), the Buyer and the Partnership
will use their best efforts to cause Peat Marwick to deliver the comfort letter
that is provided for in Exhibit 6.2(2), with the comparable Procedure and Item
furnished; and the Buyer and the Partnership will make available to Seller and
his representatives all information Seller reasonably requests so that Seller
can deliver to Peat Marwick the request for a comfort letter referred to in the
Note in Exhibit 6.2 and, if applicable, Exhibit 6.2(2). At the time of the
Purchase Closing and the purchase of the Webb Payment, Buyer shall be deemed to
represent, without any further documents being required to be delivered by
Buyer, that: (A) immediately prior to payment of the Purchase Price to Seller
and completion of the transactions to be effected in connection with the
purchase by Buyer of the Webb Payment (including, without limitation, making
required payments to Releasing Investors), (i) it has a shareholders' equity of
at least $2,000,000 determined in accordance with the generally accepted
accounting principles ("GAAP"), consistently applied, (ii) it is not insolvent,
(iii) after the payment of the Purchase Price, the purchase by Buyer of the Webb
Payment and completion of the transactions to be effected in connection
therewith (including, without limitation, making required payments to Releasing
Investors), it will not be rendered so insolvent, (iv) it is not engaged in a
business or transaction (or about to engage a business or transaction) for which
its capital remaining after payment of the Purchase Price, the purchase by Buyer
of the Webb Payment and completion of the transactions to be effected in
connection therewith (including, without limitation, making required payments to
Releasing Investors) will be unreasonably small and (v) it does not intend to
incur, or believe it will incur, debts beyond its ability to pay as the debts
mature; and (B) immediately after payment of the Purchase Price, the purchase by
Buyer of the Webb Payment and completion of the transactions to be effected in
connection therewith (including, without limitation, making required payments to
Releasing Investors), it will have a shareholders' equity or partners' equity,
as the case may be, of at least $2,000,000.
6.3 Certification. Seller shall have received a certificate from
Buyer and in the form attached hereto as Exhibit 6.3.
6.4 Expense Reimbursement. Buyer shall have delivered to Seller
a certified or bank check in payment of the expense reimbursement provided for
in Section 9.5 hereof.
6.5 Escrow Agreement. The Escrow Agreement shall have been
executed and delivered by the parties thereto and Buyer shall have deposited in
the Escrow Account the Purchase Price or portion thereof required to be
deposited in the Escrow Account by Section 2.1 of this Agreement and in the form
it is so required to be deposited.
<PAGE>
ARTICLE VII
TERMINATION
7.1 Termination.
(a) This Agreement may be terminated at any time prior to the Option
Closing:
(i) by mutual written consent of the Seller and the Buyer; or
(ii) by the Buyer or the Seller by written notice to the other if,
without fault of the terminating party, the Option Closing
shall not have occurred on or before January 31, 1996; or
(b) This Agreement shall terminate automatically, as to matters
occurring after December 31, 1997, without the need for either party to take any
action, if the Option Closing shall have occurred, but the notice of exercise of
the Option is not given pursuant to Section 1.1 hereof on or before December 31,
1997, no matter what the reason for such notice not having been given on or
before such date.
7.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 7.1, this Agreement shall forthwith become null
and void as to matters occurring thereafter and no party hereto (or any of their
respective shareholders, partners, beneficiaries, directors, officers or
employers) shall have any liability or further obligation to any other party
hereto as to matters occurring thereafter, except as provided in Article VIII.
Nothing contained in this Section shall relieve any party from liability for any
breach of this Agreement.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnity by the Seller. The Seller agrees to indemnify the Buyer,
the general partners of the Partnership and the Partnership on demand against,
and hold each such party harmless from, all losses, judgments, amounts paid in
settlement of actions or claims, liabilities, taxes, costs, damages and expenses
(including, but not limited to, reasonable attorneys' fees and disbursements) as
incurred, accruing from or resulting by reason of any inaccuracies of any of the
representations or warranties of the Seller in this Agreement or the breach or
non-performance by the Seller of any of the covenants or agreements made or to
be performed by the Seller pursuant to this Agreement or any claim by a third
party that, if sustained, would constitute such a breach or non-performance.
8.2 Indemnity by the Buyer. The Buyer and CPPI jointly and severally
agree to indemnify the Seller, the United Way, each director, officer and
employee of the United Way and each of the Released Parties (as such term is
defined in the Release and Settlement Agreement executed by Releasing
Investors), including but not limited to Del Webb Corporation and Del E. Webb
New Jersey, Inc., but other than the Claridge Entities (each person so entitled
to indemnification, a "Seller Indemnified Party"), on demand, against, and hold
each Seller Indemnified Party harmless from, all losses, judgments, amounts paid
in settlement of actions or claims, liabilities, taxes, cost, damages and
expenses (including but not limited to reasonable attorneys' fees and
disbursements) as incurred, (i) accruing from or resulting by reason of any
inaccuracy of any of the representations or warranties of the Buyer or CPPI in
this Agreement or the breach or non-performance by the Buyer or CPPI of any of
the covenants or agreements made or to be performed by the Buyer or CPPI
pursuant to this Agreement or any claim by a third party that, if sustained,
would constitute such a breach or non-performance, or (ii) arising from any
action or proceeding challenging the validity of this Agreement or claiming
damages arising from this Agreement commenced by any person in that person's
capacity as a Releasing Investor.
<PAGE>
8.3 Indemnity by the Partnership. The Partnership agrees to indemnify
each of the Seller Indemnified Parties, on demand, against, and hold the Seller
Indemnified Party harmless from, all losses, judgments, amounts paid in
settlement of actions or claims, liabilities, taxes, cost, damages and expenses
(including but not limited to reasonable attorneys' fees and disbursements) as
incurred, (i) accruing from or resulting by reason of any inaccuracy of any of
the representations or warranties of the Partnership in this Agreement or the
breach or non-performance by the Partnership of any of the covenants or
agreements made or to be performed by the Partnership pursuant to this Agreement
or any claim by a third party that, if sustained, would constitute such an
accuracy breach or non-performance, or (ii) arising from any action or
proceeding challenging the validity of this Agreement or claiming damages
arising from this Agreement commenced by any person in that person's capacity as
a Releasing Investor.
8.4 Procedure for Indemnification. Promptly after receipt by any of
Buyer, the Partnership or a Seller Indemnified Party (each being an "indemnified
party") under Section 8.1, Section 8.2 or Section 8.3 above of notice of
commencement of any action, such indemnified party shall, if a claim in respect
thereof is to be made against the indemnifying party under such Section, within
10 days of obtaining actual knowledge thereof, notify the indemnifying party in
writing of the commencement thereof, enclosing a copy of all papers served, but
the omission so to notify the indemnifying party shall not relieve it from any
liability that it may have to any indemnified party otherwise than under such
Section or do so if and to the extent the indemnifying party is not prejudiced
by such omission to so notify. In case any such action shall be brought against
any indemnified party, and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
in, and, to the extent that it shall wish, by delivering written notice to the
indemnified party promptly after receiving notice of the commencement of the
action from the indemnified party, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party (who shall not, except with the consent
of the indemnified party, be counsel to the indemnifying party), and, after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not, except as
provided below, be liable to such indemnified party under such Section for any
legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation. The indemnified party will have the right to employ its own
counsel in any such action, but the fees and expenses of such counsel will be at
the expense of such indemnified party unless (1) the employment of counsel by
the indemnified party has been authorized in writing by the indemnifying party,
(2) the indemnified party has been advised by counsel that there are legal
defenses available to it or other indemnified parties that are different from or
in addition to those available to the indemnifying party and which could result
in a conflict in defending the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (3) the indemnifying party
has not in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, in
each of which cases the reasonable fees and expenses of such counsel will be at
the expense of the indemnifying party or parties. All such fees and expenses
will be reimbursed promptly as they are incurred. An indemnifying party will not
be liable for any settlement of any action or claim effected without its written
consent (which consent will not be unreasonably withheld) or, in connection with
any proceeding or related proceeding in the same jurisdiction and except as
provided in the second preceding sentence, for the fees and expenses of more
than one separate counsel for all indemnified parties.
8.5 Survival. The indemnification provided for in this Article VIII
will survive the Option Closing, the Purchase Closing, the completion of the
sale of the Webb Payment to the Buyer, the payment in full of the Purchase Price
and any investigation made by any party hereto.
<PAGE>
ARTICLE IX
MISCELLANEOUS
9.1 Entire Agreement. This Agreement, including the exhibits hereto,
constitutes the entire agreement between the parties hereto with respect to the
matters covered hereby, and no party shall be liable or bound to the other under
this Agreement in any manner by any warranties, representations or covenants
except as specifically set forth herein.
9.2 Assignment. The terms and conditions of this Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
successors, however such succession is effected and whether or not such
succession is permitted by this Agreement (including any succession that may
occur by sale of securities or assets, assignment, merger, reverse merger,
consolidation, operation of law or, without limitation, otherwise), provided
that no such succession will relieve any party of its obligations under this
Agreement. Neither this Agreement, nor any of the rights or obligations
hereunder, may be assigned by any party to this Agreement without the written
consent of the other parties hereto (other than CPPI). Nothing in this Section
9.2 shall preclude the distribution or payment of amounts received by the Seller
hereunder, including to the United Way.
9.3 Titles and Subtitles. The titles and subtitles used in this
Agreement are for convenience only and are not to be considered in construing
this Agreement.
9.4 Notices and Other Communications. Any notice or other communication
required or permitted to be given under this Agreement must be in writing and
will be deemed effective when delivered in person or sent by facsimile, cable,
telegram or telex, or by overnight delivery service or by registered or
certified mail, postage prepaid, return receipt requested, to the following
addresses:
If to the Buyer or CPPI, to:
The Claridge Hotel and Casino Corporation
Boardwalk & Park Place
Atlantic City, New Jersey 08401
Attention: Frank A. Bellis, Jr., Esq.
Telephone: (609) 340-3400
Telecopier: (609) 340-3589
With a copy to:
Rogers & Wells
200 Park Avenue
New York, New York 10166
Attention: Leonard B. Mackey, Jr., Esq.
Telephone: (212) 878-8489
Telecopier: (212) 878-8375
<PAGE>
If to the Seller to Seller:
c/o Del Webb Corporation
6001 N. 24th Street
Phoenix, Arizona 85016
Attention: Philip J. Dion
Telephone: (602) 808-8000
Telecopier: (602) 808-8097
With copies to:
Robertson C. Jones, Esq.
Del Webb Corporation
6001 N. 24th Street
Phoenix, Arizona 85016
Telephone: (602) 808-8009
Telecopier: (602) 808-8097
Gibson, Dunn & Crutcher
33 South Grand Avenue
Los Angeles, California 90071
Attention: Steven A. Meiers, Esq.
Telephone: (213) 229-7356
Telecopier: (213) 229-7520
Levine, Staller, Sklar, Chan, Brodsky & Donnolly,P.A.
3030 Atlantic Avenue
Atlantic City, New Jersey 08401-6380
Attention: John M. Donnolly, P.C.
Telephone: (609) 347-1300
Telecopier: (609) 345-2473
If to the Partnership:
Atlantic City Boardwalk Associates, L.P.
2880 W. Meade Avenue
Suite 204
Las Vegas, Nevada 89102
Attention: Anthony C. Atchley
Telephone: (702) 253-7662
Telecopier: (702) 253-7663
With a copy to:
Lowenstein, Sandler, Kohl, Fisher & Boylan, P.A.
65 Livingston Avenue
Roseland, New Jersey 07068
Attention: Peter H. Ehrenberg
Telephone: (201) 992-8700
Telecopier: (201) 992-5820
<PAGE>
The parties to this Agreement may change the address to which notices or other
communications are to be sent by a notice to the other given as provided in this
Section 9.4.
9.5 Expenses. Each party to this Agreement shall bear its own expenses
incurred in connection with the negotiation, preparation, execution and
consummation of this Agreement, including the fees, expenses and disbursements
of its respective legal counsel incurred in connection herewith; provided,
however, that the Buyer shall, upon presentation of appropriate invoices
therefor, reimburse the Seller, at the time of the Purchase Closing, for any
reasonable expense incurred by the Seller, up to an aggregate of $125,000, for
legal, investment banking or other services provided to the Seller by third
parties in connection with the Seller's negotiating the terms of and entering
into this Agreement since January 1, 1993. However, if the purchase of the Webb
Payment by Buyer occurs, then Buyer will pay all amounts Webb would be obligated
to pay under the Restructuring Agreement as fees and expenses of the trustee
under the Distributing Trust.
If any proceeding is brought for the enforcement of this
Agreement or because of an alleged dispute, breach or default in connection with
any of the provisions of this Agreement, the successful or prevailing party or
parties shall be entitled to recover from the unsuccessful party or parties all
costs and expenses, including reasonable attorneys' fees and disbursements,
incurred in connection with such proceeding, in addition to any other relief to
which it or they may be entitled.
9.6 Forum. Except as otherwise provided in Section 3.2(d)(ii), the sole
forum for resolving disputes under or relating to this Agreement will be New
York state courts and federal courts located in New York City and related
appellate courts. The parties agree to the jurisdiction of those courts and to
such venue for the purposes of this Agreement.
9.7 Survival of Representations and Warranties. The representations,
warranties, covenants and agreements of the Buyer, CPPI, the Seller and the
Partnership contained in or made pursuant to this Agreement shall survive the
Option Closing, the Purchase Closing, the completion of the sale of the Webb
Payment to the Buyer, the payment in full of the Purchase Price and any
investigation made by any party.
9.8 Amendment and Waiver. Any provision of this Agreement may be
amended and the observance of any term hereof may be waived (either
prospectively or retroactively and either generally or in a particular instance)
only by a document in writing signed by the parties to this Agreement who are
entitled to the benefit thereof.
9.9 Governing Law. This Agreement will be governed by, and construed
under, the laws of the State of New York.
9.10 Counterparts. Except as provided in Section 9.11, this Agreement
may be executed in two or more counterparts, each of which will be deemed an
original, but all of which together will constitute one and the same agreement.
9.11 New Jersey Casino Control Act. Notwithstanding anything to the
contrary contained in this Agreement, this Agreement shall be deemed to include
all provisions required by the New Jersey Casino Control Act (the "Act"), and
shall be conditioned upon the approval of the CCC. To the extent that anything
in this Agreement is inconsistent with the Act, the provisions of the Act shall
govern. All provisions of the Act, to the extent required by law to be included
in this Agreement, are incorporated by reference as if fully restated in this
Agreement.
9.12 No Personal Liability. Each of the parties hereto hereby
acknowledges that (i) none of the General Partners of the Partnership shall have
any personal liability or other obligation with respect to any agreement or
obligation of the Partnership under this Agreement, any such liability or
obligation being payable solely out of any assets the Partnership may from
<PAGE>
time to time have available therefor, and (ii) Philip J. Dion shall have no
personal liability or other obligation with respect to any agreement or
obligation of the Seller under this Agreement, any such liability or obligation
being payable solely out of any assets the Seller (e.g., the Trust created by
the Trust Instrument) may from time to time have available therefor, it being
understood that payments received by Seller pursuant to this Agreement are
intended to be paid promptly by Seller to the United Way.
9.13 Time of the Essence. Time is of the essence in this Agreement
and each of its provisions.
9.14 Third Party Beneficiaries. The only third party beneficiaries of
this Agreement are the United Way, the Seller Indemnified Parties, including in
their capacities as such and, as applicable, otherwise, Philip J. Dion, Anthony
Atchley and Gerald C. Heetland.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the date first above written.
THE CLARIDGE HOTEL AND CASINO CORPORATION
By: /s/ Robert M. Renneisen
----------------------------------
Name: Robert M. Renneisen
Title: President/Chief Executive Officer
THE CLARIDGE AT PARK PLACE, INCORPORATED
By: /s/ Robert M. Renneisen
----------------------------------
Name: Robert M. Renneisen
Title: Vice Chairman/Chief Executive Officer
/s/ Philip J. Dion
----------------------------------
PHILIP J. DION, as Trustee for
VALLEY OF THE SUN UNITED WAY
ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
By: /s/ Anthony C. Atchley
----------------------------------
Name: Anthony C. Atchley
Title: General Partner
By: /s/ Gerald C. Heetland
----------------------------------
Name: Gerald C. Heetland
Title: General Partner
<PAGE>
EXHIBIT 10(be)
ESCROW AGREEMENT
This ESCROW AGREEMENT (the "Agreement") is made as of the 29th
day of November, 1995 by and among The Claridge Hotel and Casino Corporation
(the "Buyer"), Philip J. Dion, as Trustee for the Valley of the Sun United Way
(the "Seller"), and IBJ Schroder Bank & Trust Company, as escrow agent (the
"Escrow Agent").
WHEREAS, the parties thereto have entered into an Option
Agreement dated as of November 29, 1995, by and among the Buyer, The Claridge at
Park Place, Incorporated, Atlantic City Boardwalk Associates, L.P.
and the Seller (the "Option Agreement"); and
WHEREAS, the Option Agreement provides that the Seller shall
deposit with the Escrow Agent an executed instrument of assignment (the
"Assignment"), which Assignment is to be held by the Escrow Agent subject to the
terms and conditions contained in this Agreement; and
WHEREAS, the Option Agreement further provides that the Buyer
shall deposit with the Escrow Agent a certified or official bank check in the
amount of the Purchase Payment (as defined below), the proceeds thereof to be
held by the Escrow Agent subject to the terms and conditions contained in this
Agreement; and
WHEREAS, the Escrow Agent may also be the Trustee under the
Distributing Trust (as such terms are defined in the Option Agreement).
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the parties agree as follows:
1. Appointment of Escrow Agent. The Buyer and the Seller
hereby appoint the Escrow Agent to act as escrow agent for the purposes set
forth in this Agreement, and the Escrow Agent hereby accepts such appointment on
the terms set forth herein.
2. Escrow Deposit. For the purposes set forth in this
Agreement, (i) the Buyer has agreed, subject to the terms and conditions of the
Option Agreement, to deposit with the Escrow Agent, by certified or official
bank check, an amount equal to the Purchase Price as calculated in Section 2.2
of the Option Agreement, other than the portion thereof, if any, not due under
Section 2.2(z) of the Option Agreement (the amount to be so deposited by the
Buyer is referred to herein as the "Purchase Payment") and (ii) the Seller has
agreed, subject to the terms and conditions of the Option Agreement, to deposit
with the Escrow Agent a duly executed Assignment (together with the Purchase
Payment, the "Escrow Deposit"). The Escrow Agent will be provided with written
notice from the Buyer of the amount of the Purchase Payment. The Escrow Agent
agrees to accept the Escrow Deposit and to hold it, together with all earnings
if any on the Purchase Payment, in a separate account established and maintained
by the Escrow Agent. The Escrow Deposit shall be held and distributed by the
Escrow Agent as provided by the terms of this Agreement.
3. Receipt of Escrow Deposit. The Escrow Agent shall
acknowledge receipt from the Buyer and the Seller of the Escrow Deposit, if and
when the Escrow Agent receives the Escrow Deposit. Buyer confirms that the
Assignment, when delivered to the Escrow Agent, will be in a form satisfactory
to Buyer.
<PAGE>
4. Disbursement of Escrow Deposit. The Buyer and the Seller
hereby authorize, empower and direct the Escrow Agent to hold and disburse the
Escrow Deposit in accordance with the provisions set forth in this Section 4:
(a) Upon receipt by the Escrow Agent, within 15 days
after receipt by the Escrow Agent of the Escrow Deposit, of (x) if the Escrow
Agent is also the Trustee of the Distributing Trust, a distribution or
distributions in the aggregate amount of $7,226,001, plus interest to the extent
required by Section 2.1 of the Option Agreement, for the benefit of the
Releasing Investors or (y) if the Escrow Agent is not also the Trustee of the
Distributing Trust, a written notice signed by the Trustee of the Distributing
Trust that a distribution or distributions in the aggregate amount of
$7,226,001, plus interest to the extent required by Section 2.1 of the Option
Agreement, have been received by the Trustee under the Distributing Trust, for
the benefit of the Releasing Investors, the Escrow Agent promptly shall (i)
deliver to the Buyer at the address given for notices in Section 10 of this
Escrow Agreement the Assignment, and (ii) deliver to the Seller the Purchase
Payment in accordance with the payment instructions provided to the Escrow Agent
by the Seller upon deposit of the Assignment with the Escrow Agent; or
(b) If the Escrow Agent does not receive the written
notice described in Section 4(a) above (or, if the Escrow Agent is the Trustee
under the Distributing Trust, if the Trustee has not received funds in the
amount of $7,226,001, plus interest to the extent required by Section 2.1 of the
Option Agreement, as provided in Section 4(a)) within 15 days after receipt by
the Escrow Agent of the Escrow Deposit, the Escrow Agent promptly shall (i)
return to the Seller the Assignment and (ii)return to the Buyer by certified or
official bank check the Purchase Payment plus all interest accrued thereon from
the date of deposit with the Escrow Agent.
5. Investment of Escrow Deposit. All funds collected by the
Escrow Agent as part of the Escrow Deposit shall be invested in only obligations
backed by the full faith and credit of the United States government, in each
case that mature no later than 14 days after the Deposit Date, solely as shall
be directed in writing by the Buyer.
6. Liability of the Escrow Agent.
(a) The duties of the Escrow Agent under this
Agreement will be limited to the observance of the express provisions of this
Agreement. The Escrow Agent shall not be required or permitted to question the
validity of any notice or any of the claims, objections, statements or other
matters contained therein, and shall be entitled to rely on the statements
therein. The Escrow Agent will not be subject to, or be obliged to recognize,
any other agreement between the parties or directions or instructions not
specifically set forth or incorporated by reference herein whether or not the
Escrow Agent has knowledge thereof. The Escrow Agent shall not be required to
interpret the provisions of the Option Agreement. The Escrow Agent will not make
any release, payment or disbursement from or out of the Escrow Deposit that is
not expressly authorized by this Escrow Agreement. The Seller and the Buyer
agree that the Escrow Agent is acting solely as an escrow agent hereunder and
not as a trustee, and that the Escrow Agent has no fiduciary duties, obligations
or liabilities under this Agreement. The Escrow Agent will not be liable for any
action taken or not taken by it under the terms of this Agreement in the absence
of intentional breach of its obligations hereunder or gross negligence or
willful misconduct on its part.
(b) All of the terms and conditions in connection
with the Escrow Agent's duties and responsibilities, and the rights of the
undersigned or anyone else with respect to the Escrow Deposit, are contained
solely in this Escrow Agreement and the Escrow Agent is not expected or required
to be familiar with the provisions of any other writing, understanding or
agreement, and shall not be charged with the observance or non-observance of the
provisions of any such other writing, understanding or agreement whether or not
the Escrow Agent has knowledge thereof, and no implied covenant or obligation on
the part of the Escrow Agent shall be read into this Agreement; and the Escrow
Agent shall not be responsible in any manner for any depreciation in the value
of the Purchase Payment held in escrow or any of the items attempted to be
deposited therein or the proceeds thereof, nor shall the Escrow Agent have any
duty or responsibility whatsoever to take any necessary steps to preserve any
rights or enforce collection of any of the items attempted to be deposited in
the Escrow Deposit or the proceeds thereof by legal proceedings or otherwise.
<PAGE>
(c) The Escrow Agent may act or refrain from acting
in respect of any matter referred to herein in full reliance upon and by and
with the advice of independent counsel which may be selected by it, and shall be
fully authorized and protected in so acting or in refraining from acting upon
the advice of such counsel.
(d) The Escrow Agent may conclusively rely and shall
be protected in acting or refraining from acting upon any writing which may be
submitted to it in connection with its duties hereunder and which is believed by
it to be genuine and to have been signed or presented by the proper party or
parties and shall have no liability or responsibility with respect to the form,
content, execution or validity thereof and may assume and shall be protected in
assuming that any person purporting to give any notice or instructions in
accordance with this Escrow Agreement or in connection with any transaction to
which this Escrow Agreement relates has been duly authorized to do so. The
Escrow Agent shall not be obligated to make any inquiry as to the authority,
capacity, existence or identity of any person purporting to have executed any
such writing or have made any such signature or presentation or purporting to
give any such notice or instructions.
(e) The Escrow Agent is hereby authorized to comply
with all orders, judgments, decrees or writs entered or issued by any court,
and in the event the Escrow Agent obeys or complies with any such award or
decision or any such order, judgment, decree or writ of any court, in whole or
in part, it shall not be liable to any of the parties hereto, nor to any other
person or entity, by reason of such compliance, notwithstanding that it shall be
determined that any such award or decision or any such order, judgment, decree
or writ be entered without jurisdiction or be invalid for any reason or be
subsequently reversed, modified, annulled, satisfied or vacated. In the event
that the Escrow Agent shall be uncertain as to its duties or rights under this
Escrow Agreement or shall receive instructions with respect to the Escrow which,
in its sole opinion, are in conflict with either other instructions received by
it or any provision of this Escrow Agreement, it shall, without liability of any
kind, be entitled to hold the Escrow Deposit pending the resolution of such
uncertainty to the Escrow Agent's sole satisfaction, by final judgment of a
court or courts of competent jurisdiction or otherwise, or the Escrow Agent, at
its option, may, in final satisfaction of its duties under this Escrow
Agreement, deposit the Escrow Deposit with the clerk of the United States
District Court for the Southern District of New York or with the office of the
clerk of the registry of any other court of competent jurisdiction.
(f) The Escrow Agent shall not be required to
institute or defend any action or legal process involving any matter referred to
herein which in any manner affects it or its duties or liabilities hereunder or
take any other action with reference to the Escrow Deposit not specifically
greed to herein.
(g) The Escrow Agent shall not be responsible for
the performance of Buyer or Seller under this Escrow Agreement or any other
agreement or for the completeness, correctness or accuracy of the Escrow or for
any transactions between Buyer and Seller.
(h) The Buyer and the Seller agree to pay, and to
indemnify and save the Escrow Agent, its directors, officers, agents and
employees and any person who "controls" the Escrow Agent within the meaning of
Section 15 of the Securities Act of 1933, as amended (the "Indemnified
Parties"), harmless from and against, any and all claims, liabilities,
judgments, reasonable attorneys' fees and other expenses of every kind and
nature which may be incurred by the Indemnified Parties in any manner pertaining
to, connected with or emanating from this Escrow Agreement, except for fees and
expenses incurred by the Escrow Agent in connection with entering into this
Escrow Agreement, which shall be paid by the Buyer pursuant to Section 8 hereof,
and except to the extent that the amounts for which the Indemnified Parties wish
to be reimbursed are attributable solely to the intentional breach of such
Indemnified Party's obligations hereunder or to gross negligence or willful
misconduct on the part of such Indemnified Party. The Escrow Agent agrees that
Philip J. Dion shall have no personal liability or other obligation with respect
to any agreement or obligations of the Seller under this Escrow Agreement, any
such liability or obligation being payable solely out of any assets the Seller
(e.g., the Trust created by the Trust Instrument (as such term is defined in the
Option Agreement)) may from time to time have available therefor, it being
understood that payments received by Seller pursuant to this Escrow Agreement
are intended to be paid promptly by Seller to the Valley of the Sun United Way.
<PAGE>
(i) Should any controversy arise between the parties
to this Agreement or between any of them and any other person or entity with
respect to this Agreement, or with respect to the ownership of or the right to
receive the Escrow Deposit or any portion thereof, the Escrow Agent shall have
the right to institute a bill of interpleader in any court of competent
jurisdiction to determine the rights of the parties. Should a bill of
interpleader be instituted, or should the Escrow Agent become involved in
litigation in any manner whatsoever connected with or pertaining to this
Agreement or the Escrow Deposit, the Seller and the Buyer each hereby binds and
obligates itself, its successors and assigns, to pay the Escrow Agent, on
demand, reasonable attorneys' fees incurred by the Escrow Agent, and any other
disbursements, expenses, losses, costs, and damages in connection with or
resulting from such litigation, except to the extent that the amounts for which
the Escrow Agent wishes to be reimbursed are attributable solely to the
intentional breach of the Escrow Agent's obligations hereunder or gross
negligence or willful misconduct on the part of the Escrow Agent.
7. Resignation of the Escrow Agent. The Escrow Agent may
resign as escrow agent by giving each of the other parties hereto not less than
30 days' prior written notice of the effective date of such resignation. If on
or prior to the effective date of such resignation, the Escrow Agent has not
received joint written instructions from the parties hereto to deliver all cash
or property in its possession under this Agreement to any successor escrow
agent, it thereupon will return the Escrow Deposit in accordance with Section
4(b) of this Agreement. If on or prior to the effective date of such
registration, the Escrow Agent has received such joint written instructions, the
Escrow Agent will deliver all cash or property in its possession under this
Agreement to such substitute or successor escrow agent. The Seller and the Buyer
intend that a substitute or successor escrow agent will be appointed to fulfill
the duties of the Escrow Agent hereunder for the remaining term of this Escrow
Agreement in the event of the Escrow Agent's resignation, and if the Seller and
the Buyer cannot agree on a substitute or successor escrow agent, they will use
their best efforts to derive a procedure to appoint a substitute escrow agent.
Upon delivery of the Escrow Deposit pursuant to this Section 7, the Escrow Agent
shall be released from any and all liability under this Escrow Agreement. A
termination under this paragraph shall in no way change the terms of this
Agreement affecting reimbursement of expenses, indemnity and fees.
8. Fees. The Escrow Agent's fee for acting as escrow agent
under this Agreement will be payable by Buyer. The Escrow Agent shall be
entitled to the fees set forth in Schedule A hereto.
9. Termination. It is understood that the Escrow Agent on the
one hand, or the Buyer and the Seller on the other hand, may terminate this
Agreement at any time upon thirty days' written notice. Upon the effective date
of any such termination, the Escrow Agent shall deliver the Escrow Deposit to
any substitute or successor Escrow Agent as the Buyer and the Seller jointly
shall determine, or, if there is no such determination, shall return the Escrow
Deposit in accordance with Section 4(b) of this Agreement. This Agreement, with
the exception of the terms of this Agreement affecting reimbursement of
expenses, indemnity and fees, automatically shall terminate upon the delivery of
the Escrow Deposit pursuant to Section 4 or Section 7 of this Agreement.
10. Notices. All notices, requests, instructions and demands
to be given in connection with any of the terms or provisions of this Agreement
shall be in writing and shall be deemed effective when delivered in person or
sent by facsimile, cable, telegram or telex, or by overnight delivery service,
or by registered or certified mail, postage prepaid, return receipt requested,
to the following addresses:
<PAGE>
If to the Buyer:
The Claridge Hotel and Casino Corporation
Boardwalk & Park Place
Atlantic City, New Jersey 08401
Attention: Frank A. Bellis, Jr., Esq.
Telephone: (609) 340-3400
Telecopier: (609) 340-3589
With a copy to:
Rogers & Wells
200 Park Avenue
New York, New York 10166
Attention: Leonard B. Mackey, Jr., Esq.
Telephone: (212) 878-8489
Telecopier: (212) 878-8375
With a copy to:
Lowenstein, Sandler, Kohl, Fisher & Boylan, P.A.
65 Livingston Avenue
Roseland, New Jersey 07068
Attention: Peter H. Ehrenberg, Esq.
Telephone: (201) 992-8700
Telecopier: (201) 992-5820
If to the Seller to Seller:
c/o Del Webb Corporation
6001 N. 24th Street
Phoenix, Arizona 85016
Attention: Philip J. Dion
Telephone: (602) 808-8000
Telecopier: (602) 808-8097
With copies to:
Robertson Jones, Esq.
Del Webb Corporation
6001 N. 24th Street
Phoenix, Arizona 85016
Telephone: (602) 808-8009
Telecopier: (602) 808-8097
<PAGE>
Steven A. Meiers, Esq.
Gibson, Dunn & Crutcher
333 South Grand Avenue
Los Angeles, CA 90071
Telephone: (213) 229-7356
Telecopier: (213) 229-7520
John M. Donnolly, Esq., P.C.
Levine, Staller, Sklar, Chan, Brodsky & Donnolly, P.A.
3030 Atlantic Avenue
Atlantic City, New Jersey 08401-6380
Telephone: (609) 347-1300
Telecopier: (609) 345-2473
If to the Escrow Agent:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attention: Corporate Trust and Agencies Administration
Telephone: (212) 858-2529
Telecopier: (212) 858-2952
The parties to this Agreement may change the address to which notices or other
communications are to be sent by a notice to the other given as provided in this
Section 10.
11. No Set-Off. The Escrow Deposit shall not be subject to
any set-off, counterclaim or right of off-set by the Escrow Agent or its
affiliates.
12. Amendment and Waiver. Except as otherwise provided herein,
this Agreement may not be modified, amended or terminated, and the observance of
any term hereof may not be waived (either prospectively or retroactively or
generally or in a particular instance) except by an agreement in writing signed
by all of the parties hereto.
13. Governing Law. This Agreement will be governed by and
construed in accordance with the laws of the State of New York. No assignment or
transfer by any party of its rights under this Escrow Agreement or with respect
to the Escrow Deposit shall be valid as against the Escrow Agent unless (a)
written notice thereof shall have been given to the Escrow Agent and (b) the
Escrow Agent shall have consented in writing to such assignment or transfer,
which consent will not be unreasonably withheld.
14. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the date first above written.
THE CLARIDGE HOTEL AND CASINO CORPORATION
By: /s/ Robert M. Renneisen
------------------------------
Name: Robert M. Renneisen
Title: President/Chief Executive Officer
PHILIP J. DION, AS TRUSTEE FOR VALLEY OF THE SUN UNITED
WAY
------------------------------
By: /s/ Philip J. Dion
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Barbara McCluskey
------------------------------
Name: Barbara McCluskey
Title: Assitant Vice President
<PAGE>
SCHEDULE A
ESCROW AGENCY FEE SCHEDULE
<TABLE>
<CAPTION>
<S> <C>
Initial Acceptance Fee ...........................................................................................$1,500.00
For review of the documents and set up of the Escrow Account, payable upon
execution of the Agreement.
Annual Administration Fee.........................................................................................$2,000.00
For administration of the Escrow Account, payable in advance upon execution of the
Agreement and on each anniversary date thereafter as long as the Agreement remains
in effect.
ACTIVITY FEES
(To The Extent Applicable)
For each wire transfer made .........................................................................................$25.00
For processing checks returned as uncollectible......................................................................$10.00
For each investment transaction (purchase/sale/collection)...........................................................$50.00
Incidental or Extraordinary Services:
Charges for services of this nature will be based on an
analysis of the work to be provided.
</TABLE>
Out-of-Pocket Expense:
The above fees do not include out-of-pocket expenses that
include, but are not limited to, postage, stationery, fees and
expenses of counsel, telephone, messenger, overtime,
insurance, etc.
<PAGE>
EXHIBIT 10(bf)
AGREEMENT
AGREEMENT, dated as of November 29, 1995, among THE CLARIDGE
HOTEL AND CASINO CORPORATION, a New York corporation ("CHCC"), ATLANTIC CITY
BOARDWALK ASSOCIATES, L.P., a New Jersey limited partnership (the
"Partnership"), and THE CLARIDGE AT PARK PLACE, INCORPORATED, a New Jersey
corporation ("CPPI").
WHEREAS, it is proposed that CHCC, the Partnership, The
Claridge of Park Place, Incorporated ("CPPI") and Philip J. Dion, as Trustee for
the Valley of the Sun United Way (the "Seller"), enter into an Option Agreement
(the "Option Agreement"), dated as of November 29, 1995, providing for the
purchase by CHCC from the Seller of the Webb Payment (terms not defined herein
shall have the meanings given to them in the Option Agreement); and
WHEREAS, CPPI is a wholly owned subsidiary of CHCC; and
WHEREAS, CHCC desires to enter into the Option Agreement and,
upon exercise of the Option provided for therein, purchase the Webb Payment.
WHEREAS, CHCC has advised the Partnership that CHCC cannot and
will not take such actions unless the Partnership participates in such
transaction in accordance with the terms described herein.
WHEREAS, the Partnership is willing to provide such assurances
to CHCC as are provided herein.
NOW, THEREFORE, in consideration of the foregoing and the
covenants set forth herein and other good and valuable consideration, the
parties hereto agree as follows:
1. As an inducement for CHCC and CPPI to enter into the Option
Agreement, and, upon the terms and conditions set forth in the Option Agreement,
to purchase the Option granted thereby and, upon exercise of the Option in
accordance with the provisions set forth herein, to purchase the Webb Payment,
the Partnership agrees as follows:
(a) Upon payment by CHCC of the Option Price and upon
receipt of all necessary approvals, paragraph (ii) under Section 1(b) of the
Third Amendment to Operating Lease and Expansion Operating Lease, dated as of
August 1, 1991 (the "Third Amendment"), between the Partnership and CPPI shall
be amended to read in its entirety as follows:
(ii) the aggregate Abatement shall not exceed
$39,320,000 for the period commencing on January 1,
1991 and ending on December 31, 1998; and
(b) If CHCC notifies the Partnership in writing of
CHCC's intention to exercise the Option before the date upon which the Option is
exercised (and if the Partnership does not object to such exercise pursuant to
Section 3 hereof), the Partnership shall (i) pay to CHCC or at the direction of
CHCC, as the portion of the Purchase Price of the Option being paid by the
Partnership, at least one day before the Purchase Price is to be paid to the
Escrow Agent pursuant to Section 2.3 of the Option Agreement, an amount equal to
the lesser of (x) $2,000,000 and (y) such portion of the cash that the
Partnership then has on hand as is not required by the Partnership to pay its
current operating expenses (together with a reasonable reserve therefor), and
(ii) no later than 14 days after payment of the Purchase Price to the Escrow
Agent pursuant to Section 2.3 of the Option Agreement, deposit in the
Distributing Trust such portion of the cash that the Partnership then has on
<PAGE>
hand (after making the payment provided for in clause (i) of this sentence) as
is not required by the Partnership to pay its current operating expenses
(together with a reasonable reserve therefor) and does not exceed the amount to
be deposited (the "Required Amount") in the Distributing Trust pursuant to
Section 4(a) of the Escrow Agreement (the aggregate amounts so paid by the
Partnership pursuant to clauses (i) and (ii) of this sentence being referred to
as the "Contribution"); provided, however, that, if the amount to be deposited
by the Partnership pursuant to clause (ii) of this sentence is less than the
Required Amount, then the Partnership shall have no obligation to make such
deposit unless it has received from CHCC a written certification that CHCC or
CPPI has deposited with the Distributing Trust an amount equal to the excess of
the Required Amount over the amount to be deposited by the Partnership pursuant
to clause (ii) (and the Partnership and CHCC shall consult with each other to
assure that their respective deposits under this proviso are made in the
appropriate amounts and on a timely basis).
(c) If CHCC gives the Partnership the notice
contemplated by Section 1(b) and if the Escrow Agent delivers the Assignment
Instrument to CHCC pursuant to Section 4(a) of the Escrow Agreement, then
paragraph (ii) under Section 1(b) of the Third Amendment shall, upon receipt of
all necessary approvals, be amended to change the dollar amount therein, as
amended as provided in Section 1(a) hereof, from $39,320,000 to an amount equal
to the sum of (x) $39,320,000 plus (y) the excess, if any, of (i) the quotient
of (A) the sum of (1) the Purchase Price, plus (2) the Required Amount divided
by (B) two over (ii) the Contribution.
(d) If the Escrow Agent returns to CHCC any amount
supplied by the Partnership for deposit with the Escrow Agent pursuant to
Section 1(b) hereof, CHCC shall promptly return such amount to the Partnership.
2. As an inducement for the Partnership to execute the Option
Agreement, it is agreed that if the Escrow Agent delivers the Assignment
Instrument to CHCC pursuant to Section 4(a) of the Escrow Agreement, then CHCC
shall take such action as is appropriate to cancel the Webb Payment so that if
and when, after the Escrow Agent makes the delivery of the Assignment Instrument
pursuant to Section 4(a) of the Escrow Agreement, the Partnership, CHCC or CPPI
deposits any amount in the Distributing Trust, no portion of the amount so
deposited will be paid to CHCC, in its capacity as holder of the Webb Payment.
3. As an inducement for the Partnership to execute the Option
Agreement, it is agreed that, if CHCC gives the Partnership the notice
contemplated by Section 1(b) hereof, CHCC shall not exercise the Option unless
at least thirty days before the date on which CHCC intends to exercise the
Option, CHCC gives written notice of such intent to the Partnership and the
Partnership does not, within such thirty-day period, notify CHCC in writing of
its objection to such exercise.
4. As an inducement for the Partnership to execute the Option
Agreement, it is agreed that on or before December 31, 1999, CHCC and the
Partnership will engage in good faith negotiations with a view to reaching a
mutually satisfactory agreement regarding payment of the amounts due, or
extension of the time for payment of the amounts due, under the [expandable
wraparound mortgage due 2000].
5. CHCC agrees to indemnify the General Partners of the
Partnership on demand against, and hold each such person harmless from, all
losses, judgments, amounts paid in settlement of actions, all claims,
liabilities, taxes, cost, damages and expenses (including but not limited to
reasonable attorneys' fees and disbursements) as incurred, accruing from or
resulting by reason of any action, proceeding or claim arising out of the
execution and delivery of the Option Agreement or this Agreement or any
transaction contemplated by the Option Agreement or this Agreement. CPPI,
acknowledging that it is a creditor of the Partnership, consents to the payments
to be made by the Partnership hereunder.
<PAGE>
6. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof,
and no party shall be liable or bound to the other in any manner by any
warranties, representations or covenants except as specifically set forth
herein.
7. Assignment. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors, however such succession is effected and whether or not
such succession is permitted by this Agreement (including any succession that
may occur by sale of securities or assets, assignment, merger, reverse merger,
consolidation, operation of law or, without limitation, otherwise), provided
that no such succession will relieve any party of its obligations under this
Agreement. Neither this Agreement, nor any of the rights or obligations
hereunder, may be assigned by either party to this Agreement without the written
consent of the other party hereto.
8. Notices and Other Communications. Any notice or other
communication required or permitted to be given under this Agreement must be in
writing and will be deemed effective when delivered in person or sent by
facsimile, cable, telegram or telex, or by overnight delivery service or by
registered or certified mail, postage prepaid, return receipt requested, to the
following addresses:
If to the Buyer to:
The Claridge Hotel and Casino Corporation
Boardwalk & Park Place
Atlantic City, New Jersey 08401
Attention: Frank A. Bellis, Jr., Esq.
Telephone: (609) 340-3400
Telecopier: (609) 340-3589
With a copy to:
Rogers & Wells
200 Park Avenue
New York, New York 10166
Attention: Leonard B. Mackey, Jr., Esq.
Telephone: (212) 878-8489
Telecopier: (212) 878-8375
If to the Partnership:
Atlantic City Boardwalk Associates, L.P.
2880 W. Meade Avenue
Suite 204
Las Vegas, Nevada 89102
Attention: Anthony C. Atchley
Telephone: (702) 253-7662
Telecopier: (702) 253-7663
<PAGE>
With a copy to:
Lowenstein, Sandler, Kohl, Fisher & Boylan, P.A.
65 Livingston Avenue
Roseland, New Jersey 07068
Attention: Peter H. Ehrenberg
Telephone: (201) 992-8700
Telecopier: (201) 992-5820
The parties to this Agreement may change the address to which notices or other
communications are to be sent by a notice to the other given as provided in this
Section 8.
9. Amendment and Waiver. Any provision of this Agreement may
be amended and the observance of any term hereof may be waived (either
prospectively or retroactively and either generally or in a particular instance)
only by a document in writing signed by the parties to this Agreement who are
entitled to the benefit thereof.
10. Governing Law. This Agreement will be governed by, and
construed under, the laws of the State of New York.
11. Counterparts. This Agreement may be executed in two or
more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same agreement.
12. New Jersey Casino Control Act. Notwithstanding anything to
the contrary contained in this Agreement, this Agreement shall be deemed to
include all provisions required by the New Jersey Casino Control Act (the
"Act"), and shall be conditioned upon the approval of the CCC. To the extent
that anything in this Agreement is inconsistent with the Act, the provisions of
the Act shall govern. All provisions of the Act, to the extent required by law
to be included in this Agreement, are incorporated by reference as if fully
restated in this Agreement.
13. No Personal Liability. Each of the parties hereto hereby
acknowledges that none of the General Partners of the Partnership shall have any
personal liability or other obligation with respect to any agreement or
obligation of the Partnership under this Agreement, any such liability or
obligation being payable solely out of any assets the Partnership may from time
to time have available therefor.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
THE CLARIDGE HOTEL AND CASINO CORPORATION
By: /s/ Robert M. Renneisen
-----------------------------
Name: Robert M. Renneisen
Title:President/Chief Executive Officer
ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
By: /s/ Anthony C. Atchley
-----------------------------
Name: Anthony Atchley
Title: General Partner
By: /s/ Gerald C. Heetland
-----------------------------
Name: Gerald C. Heetland
Title: General Partner
THE CLARIDGE AT PARK PLACE, INCORPORATED
By: /s/ Robert M. Renneisen
-----------------------------
Name: Robert M. Renneisen
Title: Vice Chairman/Chief Executive Officer
<PAGE>
EXHIBIT 10(bg)
AMENDMENT NO. 1
Dated as of January 30, 1996
to the
OPTION AGREEMENT
Amendment No. 1 dated as of January 30, 1996 to the Option Agreement
(the "Amendment") by and among The Claridge Hotel and Casino Corporation, a New
York corporation (the "Buyer"), The Claridge at Park Place, Incorporated, a New
Jersey corporation and a wholly-owned subsidiary of Buyer ("CPPI"), Philip J.
Dion, as Trustee (the "Seller") for Valley of the Sun United Way (the "United
Way") under an Irrevocable Trust, dated April 2, 1990 (the "Trust Instrument"),
and Atlantic City Boardwalk Associates, L.P., a New Jersey limited partnership
(the "Partnership").
W I T N E S S E T H :
WHEREAS, Buyer, CPPI, Seller and the Partnership have heretofore
entered into an Option Agreement dated as of November 29, 1995 (the "Option
Agreement"); and
WHEREAS, Buyer, CPPI, Seller and the Partnership wish to amend the
Option Agreement as set forth herein;
NOW THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties hereto agree as follows:
a. Article VII, Section 7.1(a)(ii) of the Option Agreement is hereby
amended to delete the present language thereof in its entirety and to insert in
its place the following:
"(ii) by the Buyer or the Seller by written notice
to the other if, without fault of the
terminating party, the Option Closing shall
not have occurred on or before February 25,
1996; or"
b. The parties hereto agree not to appeal Resolution No. 96-2-4 of the
New Jersey Casino Control Commission, obtained by the Seller in connection with
the transactions contemplated by the Option Agreement.
c. This Amendment will be governed by, and construed under, the laws of
the State of New York.
d. Except as provided herein, all provisions, terms and conditions of
the Option Agreement shall remain in full force and effect. As amended hereby,
the Option Agreement is ratified and confirmed in all respects.
e. This Amendment may be executed in two or more counterparts, each of
which will be deemed an original, but all of which together will constitute one
and the same agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered as of the date first above written.
THE CLARIDGE HOTEL AND CASINO CORPORATION
By: /s/ Robert M. Renneisen
-------------------------------
Name: Robert M. Renneisen
Title: Chief Executive Officer
THE CLARIDGE AT PARK PLACE, INCORPORATED
By: /s/ Robert M. Renneisen
-------------------------------
Name: Robert M. Renneisen
Title:Chief Executive Officer
/s/ Philip J. Dion
-------------------------------
PHILIP J. DION, as Trustee for
VALLEY OF THE SUN UNITED WAY
ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
By: /s/ Anthony C. Atchley
-------------------------------
Name: Anthony C. Atchley
Title: General Partner
By: /s/ Gerald C. Heetland
-------------------------------
Name: Gerald C. Heetland
Title: General Partner
<PAGE>
EXHIBIT 10(bh)
AMENDMENT
AMENDMENT, dated as of February 21, 1996, to Agreement, dated as of
November 29, 1995 (the "Agreement"), among THE CLARIDGE HOTEL AND CASINO
CORPORATION, a New York corporation ("CHCC"), ATLANTIC CITY BOARDWALK
ASSOCIATES, L.P., a New Jersey limited partnership (the "Partnership"), and THE
CLARIDGE AT PARK PLACE, INCORPORATED, a New Jersey corporation ("CPPI").
WHEREAS, the parties to the Agreement desire to amend the Agreement to
reflect more accurately their intent in entering to the Agreement.
NOW, THEREFORE, in consideration of the foregoing and the covenants set
forth herein and other good and valuable consideration, the parties hereto agree
as follows:
1. The Agreement is hereby amended in the following respects:
(a) Paragraphs (b) and (c) of Section 1 of the Agreement are
hereby amended to read in their entirety as follows:
(b) If CHCC notifies the Partnership in writing of CHCC's
intention to exercise the Option before the date upon
which the Option is exercised (and if the Partnership
does not object to such exercise pursuant to Section 3
hereof), the Partnership shall (i) pay to CHCC or at the
direction of CHCC, as the portion of the Purchase Price
of the Option being paid by the Partnership, at least one
day before the Purchase Price is to be paid to the Escrow
Agent pursuant to Section 2.3 of the Option Agreement, an
amount equal to the lesser of (x) $2,000,000 and (y) such
portion of the cash that the Partnership then has on hand
as is not required by the Partnership to pay its current
operating expenses (together with a reasonable reserve
therefor) (the amount so paid by the Partnership pursuant
to clause (i) of this sentence being referred to as the
"Contribution"), and (ii) no later than 14 days after
payment of the Purchase Price to the Escrow Agent
pursuant to Section 2.3 of the Option Agreement, deposit
in the Distributing Trust such portion of the cash that
the Partnership then has on hand (after making the
payment provided for in clause (i) of this sentence) as
is not required by the Partnership to pay its current
operating expenses (together with a reasonable reserve
therefor) and does not exceed the amount to be deposited
(the "Required Amount") in the Distributing Trust
pursuant to Section 4(a) of the Escrow Agreement;
provided, however, that, if the amount to be deposited by
the Partnership pursuant to clause (ii) of this sentence
is less than the Required Amount, then the Partnership
shall have no obligation to make such deposit unless it
has received from CHCC a written certification that CHCC
or CPPI has deposited with the Distributing Trust an
amount equal to the excess of the Required Amount over
the amount to be deposited by the Partnership pursuant to
clause (ii) (and the Partnership and CHCC shall consult
with each other to assure that their respective deposits
under this proviso are made in the appropriate amounts
and on a timely basis).
<PAGE>
(c) If CHCC gives the Partnership the notice contemplated by
Section 1(b) and if the Escrow Agent delivers the
Assignment Instrument to CHCC pursuant to Section 4(a) of
the Escrow Agreement, then paragraph (ii) under Section
1(b) of the Third Amendment shall, upon receipt of all
necessary approvals, be amended to change the dollar
amount therein, as amended as provided in Section 1(a)
hereof, from $39,320,000 to an amount equal to the sum of
(x) $39,320,000 plus (y) the excess, if any, of (i) the
quotient of (A) the Purchase Price divided by (B) two
over (ii) the Contribution.
(b) Section 3 of the Agreement is hereby amended to read in
its entirety as follows:
3. As an inducement for the Partnership to
execute the Option Agreement, it is agreed
that CHCC shall not exercise the Option
unless, at least 30 days before the date on
which CHCC intends to exercise the Option,
CHCC gives written notice of such intent to
the Partnership and the Partnership does
not, within such 30-day period, notify CHCC
in writing of its objection to such
exercise.
2. This Amendment shall be governed by, and construed under, the
laws of the State of New York.
3.Except as provided herein, all provisions, terms and conditions
of the Agreement shall remain in full force and effect. As amended
hereby, the Agreement is ratified and confirmed in all respects.
4.This Amendment may be executed in two or more counterparts, each
of which will be deemed an original, but all of which together
will constitute one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered as of the date first above written.
THE CLARIDGE HOTEL AND CASINO CORPORATION
By: /s/ Robert M. Renneisen
--------------------------------
Name: Robert M. Renneisen
Title: President/Chief Executive Officer
ATLANTIC CITY BOARDWALK ASSOCIATES, L.P.
By: /s/ Anthony C. Atchley
--------------------------------
Name: Anthony Atchley
Title: General Partner
By: /s/ Gerald C. Heetland
--------------------------------
Name: Gerald C. Heetland
Title: General Partner
THE CLARIDGE AT PARK PLACE, INCORPORATED
By: /s/ Robert M. Renneisen
--------------------------------
Name: Robert M. Renneisen
Title: Vice Chairman/Chief Executive Officer
<PAGE>
EXHIBIT 22(a)
SUBSIDIARIES OF
THE CLARIDGE HOTEL AND CASINO CORPORATION
Jurisdiction of
Name Incorporation
---- ---------------
The Claridge at Park Place, Incorporated New Jersey
Claridge Gaming Incorporated New Jersey
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CLARIDGE
HOTEL AND CASINO CORPORATION'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000730409
<NAME> CLARIDGE HOTEL AND CASINO CORPORATION
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-01-1995
<EXCHANGE-RATE> 1
<CASH> 35,747,000
<SECURITIES> 0
<RECEIVABLES> 17,795,000
<ALLOWANCES> 987,000
<INVENTORY> 279,000
<CURRENT-ASSETS> 55,542,000
<PP&E> 36,848,000
<DEPRECIATION> 12,380,000
<TOTAL-ASSETS> 189,074,000
<CURRENT-LIABILITIES> 40,420,000
<BONDS> 85,000,000
0
0
<COMMON> 5,000
<OTHER-SE> 5,550,000
<TOTAL-LIABILITY-AND-EQUITY> 189,074,000
<SALES> 0
<TOTAL-REVENUES> 203,348,000
<CGS> 0
<TOTAL-COSTS> 110,539,000
<OTHER-EXPENSES> 85,731,000
<LOSS-PROVISION> (160,000)
<INTEREST-EXPENSE> 9,516,000
<INCOME-PRETAX> (2,278,000)
<INCOME-TAX> (370,000)
<INCOME-CONTINUING> (1,908,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,908,000)
<EPS-PRIMARY> (.38)
<EPS-DILUTED> 0
</TABLE>
